GMBL - eSports Entertainment Group Inc. (GMBL) - Score One For The House
Off to a good start. Fiscal first quarter revenues were on point at $16.4 million, with lower than expected Adj. EBITDA loss of $2.6 million, versus our $4.3 million loss estimate. The results were influenced by a large number of acquisitions, including the recent acquisition of BetHard. In addition, Gross Margins significantly improved from 59% in fiscal Q4 to 61% in the latest quarter.Reiterates fiscal 2022 revenue guidance. The first quarter indicates that the company is on a trajectory to achieving its fiscal 2022 revenue goal of $100 million. At this time, we are maintaining our more conservative estimate of $95.0 million. Given a more favorable Gross Margin assumption, we are lowering our adj. EBITDA loss for the year from $11.5 million to a loss of $9.0 million, which also reflects the better than expected Q1. In this report, we posted our fiscal 2023 estimates, with 29% revenue growth and positive adj. EBITDA of $1.9 million.Putting the pieces together. After a series of acquisitions, management appears focused on integrating the acquisitions and achieving both revenue and cost synergies. There has been some positive news on legalized sports and esports betting. The company is sanguine that it may have its operations up and running by year end in New Jersey, with its sights on the next State, Ohio. Furthermore, tournament play appears to be ramping up in its EGL segment. Financing to bed. The company completed a $8 million private placement of convertible notes, the proceeds which largely completed the BetHard acquisition. Currently, the company is estimated to have roughly $2 million to $3 million in cash, with a cash burn rate of roughly $1 million per month. Importantly, it has a $20 million ATM and a Shelf in place to fund it through the next few quarters, until it swings cash flow positive in Q4. Reiterating outperform rating. We reiterate our Outperform rating and maintaining our $12 price target on GMBL shares. The GMBL shares appear compelling, trading at 1.9 times Enterprise Value to our 2022 revenue, well below its peers trading at a median of 2.7 times and a mean valuation of 3.6 times. Read More >>