Low hold in Europe

EEG reports 11% quarterly drop in FY22 Q2 amid Netherlands exit, pandemic impact

Grant Johnson, CEO of Esports Entertainment Group.
Reading time 3:26 min

Esports and online gambling company Esports Entertainment Group (EEG) has reported financial results for its fiscal 2022 second quarter, ended December 31, 2021. The business posted revenue of $14.5 million for the period, up $12.2 million compared to Q2 2021. However, it was 11.4% down compared to net revenue of $16.4 million in Q1 2022.

Our fiscal second-quarter results reflect a variety of challenges largely outside of our control, which together drove our first quarter over quarter revenue decline in more than a year,” said Grant Johnson, CEO of Esports Entertainment Group.

Among these factors are significant regulatory changes in the Netherlands, which led the company to make the strategic decision to exit the country’s iGaming and online sports betting market at the start of the quarter. But additionally, the company’s online sportsbook business in Europe experienced a historically low hold which, while in line with the broader European and US market, resulted in a material decline in sportsbook revenue.

The company also claims that ongoing issues with the global pandemic and the rise of the Omicron variant during the latter part of the quarter also impacted its esports business. This led to a delay of the LANDuel product -a peer-to-peer skill-based wagering platform- launch, and a delay to the opening of the Helix esports center at UCLA in California, the first of its kind by its Helix subsidiary to launch at a college campus.

The unfavorable conditions imposed by the global pandemic also led to the cancellation or postponement of many in-person, publisher-sponsored esports events, Johnson explained. Collectively, these events “significantly impacted” the company’s fiscal second-quarter performance.

In consequence, EEG has now decided to reset its full-year revenue expectation to a range of $70 to $75 million, with year-over-year net revenue growth to be in a range of 317% to 347%. The updated guidance range contemplates growth driven by platform-building and strategic diversification acquisitions completed in calendar 2021.

During fiscal 2022 second quarter, the business posted gross profit of $8 million, up $7.2 million compared to Q2 2021, but 19.5% down quarter-over-quarter. Gross margin was also down from Q1 2022 to 55.2%, compared to 60.7%.

“Despite these challenges and the collective impact they are having on our business, we remain extremely bullish about the year ahead and in our ability to reach annualized revenue of $100 million from our current portfolio of offerings,” added EEG’s CEO.

The business feels optimistic about the recent receipt of a transactional waiver in New Jersey and the full-scale launch of its esports betting platform VIE.gg, which makes EEG “the first and only company to accept real money esports wagers in the US.”

Johnson claims EEG is also “very bullish” on the debut of LANDuel at Hard Rock in Atlantic City through the first sanctioned esports skill-based wagering event in the United States. Initially slated for January, the tournament has been moved to March 18-20, and is expected to expose EEG “to a significant and untapped market” across many US jurisdictions.

Additionally, the company has seen considerable interest in OMEGA, an esports gaming turnkey solution for businesses and entertainment venues that debuted in the quarter. EEG is confident it will soon become “a more important contributor” to its top-line results, and earlier this week, the company announced it would be installing OMEGA at a series of locations in the Netherlands through a distribution deal with Dutch gaming and esports startup GAMMAX.

Despite the revenue decline experienced during the past quarter, Johnson says the company experienced “record results and strong momentum” in recent weeks, including a record month in January, amid continued growth and expanded market position.

Looking ahead, I believe our future is exceedingly bright as our newest products and the underlying strength of our European-based iGaming and online sports betting business position us well to benefit from the organic growth potential inherent in our two targeted entertainment verticals, iGaming and esports,” reflected the CEO. 

We are confident in our ability to realize the tremendous growth potential of our business while achieving the operating leverage inherent in our portfolio of unique and powerful brands over the near- and long-term, as we move deeper into a post-pandemic recovery and fully integrate our tech stack and acquired assets,” he concluded.

Leave your comment
Subscribe to our newsletter
Enter your email to receive the latest news
By entering your email address, you agree to Yogonet's Condiciones de uso and Privacy Policies. You understand Yogonet may use your address to send updates and marketing emails. Use the Unsubscribe link in those emails to opt out at any time.