Allied Gaming & Entertainment Inc
NASDAQ:AGAE
Earnings Call Analysis
Q4-2023 Analysis
Allied Gaming & Entertainment Inc
In 2023, the company saw total revenues climb to $7.7 million, marking a significant 21% increase from the previous year. This surge was primarily fueled by renewed sponsorship deals, particularly the naming rights agreement for the HyperexArena in Las Vegas, and contributions from the newly acquired Z-Tech for two months. The fourth quarter alone boasted a remarkable 70% jump in revenues, largely thanks to heightened sponsorship revenues and Z-Tech's operations.
While revenues were on the rise, the company also managed to pare down total costs and expenses by 21% in 2023 compared to the prior year, resulting in significantly reduced net losses from $10.8 million to $3.6 million. This dramatic decrease in losses was credited to revenue growth from diversified content and mobile gaming, alongside prudent management of expenses and income from short-term investments.
As of December 31, 2023, the company's cash and short-term investments stood at $78.6 million, showing a modest decrease from the $86.8 million reported at the end of the prior year. Nonetheless, the company maintains a strong working capital surplus, ensuring financial resilience moving forward.
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Greetings, and welcome to the Allied Gaming and Entertainment Inc. Fourth Quarter and Full Year 2023 Earnings Conference Call. [Operator Instructions] And as a reminder, this conference is being recorded.
It is now my pleasure to introduce to you, Tyler Drew, with Investor Relations. Thank you, Tyler. You may begin.
Thank you, operator. Good afternoon, and welcome to the Allied Gaming Entertainment 2023 Fourth Quarter and Full Year Earnings Conference Call. Speaking on the call today are Allied Gaming and Entertainment's Chief Executive Officer, Yinghua Chen; and Chief Financial Officer, Roy Anderson.
Before I turn the call over to management, please note that our prepared remarks may contain forward-looking statements. Words such as may, will, expect, intend, plan, believe, seek, could, estimate, judgment, targeting, should, anticipate, goal and variations of these words and similar expressions are intended to identify forward-looking statements. Actual results could differ materially from those impacted by such forward-looking statements due to a variety of factors discussed in the company's public filings, including the risk factors discussed in documents filed with the Securities and Exchange Commission.
Although the company believes the expectations reflected in such forward-looking statements are based upon reasonable assumptions, it can give no assurance that its expectations will be attained. The company undertakes no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise.
In addition, certain of the financial information presented in this call represents non-GAAP financial measures. The company's earnings release, which was issued this afternoon and is available on the company's website, presents definitions of such non-GAAP financial measures, reconciliations to the appropriate GAAP measures and an explanation of why the company believes such non-GAAP financial measures are useful to investors.
And with that, it is now my pleasure to turn the call over to Allied Gaming and Entertainment CEO, Yinghua Chen. Yinghua?
Thank you, Tyler, and thank you all for joining us this afternoon. We've made substantial progress during 2023 and have entered 2024 in a position of strength. Allied Esports International, Allied Mobile Entertainment and Allied Experiential Entertainment are all poised for growth as we execute on our strategic objectives this year.
Let's begin with a review of our financial performance for the year. In 2023, total revenues of $7.7 million were up 21% from 2022, while our net loss attributable to common stockholders decreased by 68%. The improvement in net loss was from our continued commitment to reducing our expenses. General and administrative expenses improved by 30%, and we're well positioned for 2024.
Turning to Allied Esports International, or AEI, our HyperX Arena was in high demand during the fourth quarter and hosted a variety of events, with 64 events comprising 30 proprietary events and 34 third-party events. Notable events at HyperX Arena included OMEN Showcase Party, which featured over 10 different tournaments, as we unveil the exciting new lines of OMEN and HyperX equipment that visitors have the opportunity to experience while visiting HyperX Arena; World Esports Day celebration in conjunction with TwitchCon Afterparty; EA Sports F1 2023 Las Vegas Showrun, a sterling virtual race that features stars from both sports and entertainment to celebrate the inaugural Las Vegas Grand Prix and act as the official kickoff to the race; All-MLB Team Awards Show, during which Major League Baseball announced its All-MLB first and second teams and was joined by current MLB players as well as past legends of the game. The event included a celebratory player entrance and pre-show reception and was broadcast live on MLB network.
We were also honored to have HyperX Arena featured in Mark Wahlberg's hit new movie, The Family Plan, which was released in December. The well-received movie has highlighted the arena itself and all the high-tech gaming equipment in it, which opened more potential for similar production, fully utilizing the arena assets. Movie viewers are able to get a sense of the fun live action that takes place for both participants and viewers during competitions at the arena.
Finally, post quarter-end, HyperX Arena held an event hosted by HP Gaming brands, OMEN and HyperX, during CES. The event included product demos, industry panels and a sterling performance by DJ Steve Aoki. An exciting partnership was also announced as OMEN and HyperX will become Riot Games' official technology partners and will provide the expertise on global esports events across League of Legends, the VALORANT Champions Tour and Teamfight Tactics in 2024. We always appreciate when companies choose HyperX Arena as it is a testament to our world-class facility and team, which can be utilized for many reasons, either work, fun or both.
Turning to our proprietary content, following a successful first year of WANNABE, which explores the journeys of professional gamers and professional athletes who have appeared on YES Network. Season 2: Part 1 was just recently released on the YES App. We remain engaged with other potential partners to utilize our assets and expertise to create additional new and engaging content series for our viewers, and we'll update you as details are finalized.
We have now integrated Beijing Lianzhong Zhihe Technology or Z-Tech into Allied Mobile entertainment, or AME, following the closing of our strategic investment on October 31, 2023. Z-Tech, a prominent mobile games developer and operator with advanced in-game advertising strategies, has progressed our vision for AME. We expect the investment to improve our overall financial performance significantly and contribute to improving our distribution capabilities this year for our own catalog of mobile games.
During 2023, Z-Tech demonstrated strong financial results, with revenue of $17 million and positive net income. This year is off to a strong start, and we expect our financials will see a benefit at both the top and bottom lines in 2024 now that Z-Tech's financials are consolidated into ours.
Allied Experiential Entertainment, or AEE, has made remarkable progress to close out the year, which has become more evident following recent announcements. To begin, in November, we formed Skyline Music Entertainment Limited, a joint venture based in Macau that will aim to capitalize on the burgeoning and large untapped entertainment industry in Asia.
Skyline has already finalized its first upcoming event, the opening leg of the first-ever China tour of the highly acclaimed and multiple Juno Award-winning band, Walk Off The Earth, on April 4, 2024. Locals are showing great enthusiasm for the event, during which Skyline will oversee talent management, show promotion, sponsorship, marketing, ticket sales and on-site event management. Skyline also currently has a pipeline of additional events that we expect to finalize in the near future.
In December, Elite Fun Entertainment, a company with expertise in orchestrating live events across Asia, notably within China's Greater Bay, announced a significant investment into AGAE, validating their belief in our vision and the clear opportunity in the Asia market. Partnering with Elite Fun provides us with additional local expertise, which is essential in successfully planning and operating events in the region. In addition, their partnerships with companies such as Tencent and Douyin, which is Bytedance, will be an advantage as we look to further expand our reach.
Most recently, early this month, we announced a new partnership with World Poker Tour and Wynn Macau to bring World Poker Tour to Macau for the first time in its 2 decade-long history. World Poker Tour Macau, which runs from June 18 to 24, will attract poker stars from all over the world, featuring both Championship and High Roller events with buy-ins of HKD 40,000 and HKD 200,000, respectively.
We've continued to maintain a strong relationship with the team at World Poker Tour since we sold the company in 2021. And along with Wynn Macau, we are thrilled to be working with them on this inaugural event as well as future ones.
Along with WPT and Wynn, Elite Fun was integral in securing local approvals and assisting in logistics for WPT Macau, underscoring the significance of our partnership. Hosting and operating live events, especially internationally, pose formidable challenges. Yet leveraging our established relationships and expertise, we streamline the process of our partners, greatly enhancing the prospect of successful and memorable events across continents.
Before turning it over to Roy, I'd like to provide an update on our stock repurchase plan. We continue to believe our stock is undervalued and have now repurchased approximately 2.3 million shares of AGAE between the announcement of the plan in November 2022 and the end of 2023.
I will now turn the call over to our CFO, Roy Anderson, to provide updates on our Q4 financials.
Thank you, Yinghua. Good afternoon, everyone, and thank you for joining us today. Our total revenues for 2023 were $7.7 million, up $1.3 million or 21% from 2022. The increase was primarily driven by an increase in sponsorship revenue relating to the renewal of our naming rights agreement at our flagship esports facility, HyperexArena, Las Vegas, Season Two of elevated and 2 months of revenue from our recent acquisition of Z-Tech.
On a quarterly basis, revenues for the fourth quarter were $2.1 million, up $0.9 million or 70% from the prior year period. The increase from the fourth quarter of 2022 was driven by an increase in HyperX Arena sponsorship revenues and 2 months of Z-Tech operations.
Turning to expenses. In 2023, total costs and expenses were $14.3 million, a decrease of 21% compared to 2022. The decrease in costs and expenses is primarily due to a $3.2 million or 30% reduction in general and administrative expenses. For the fourth quarter, total costs and expenses of $4 million saw a slight increase of 2% compared to the fourth quarter of 2022.
Our net loss was $3.6 million in 2023, down significantly from $10.8 million in 2022. The decrease was driven by revenue growth within our multi-platform content and casual mobile gaming streams, interest income on our short-term investments and our continued focus on managing our expenses. For the fourth quarter, our net loss was $1.1 million compared to $1.7 million in the prior year period.
Our 2023 adjusted EBITDA loss of $4.6 million was down from a loss of $8.6 million in 2022. Our fourth quarter adjusted EBITDA loss of $1.2 million also improved down from a loss of $1.7 million in the fourth quarter of 2022. Our adjusted EBITDA includes adjustments for depreciation, amortization, business acquisition transaction costs, stock-based compensation and interest income.
Now on to our balance sheet. At December 31, 2023, our cash and short-term investments position totaled $78.6 million, including $5 million of restricted cash, compared to $86.8 million at December 31, 2022. The company's working capital surplus, defined as current assets minus current liabilities, was $66.4 million at December 31, 2023, compared to $79.1 million at December 31, 2022.
Also, during the quarter and under the stock repurchase program mentioned by Yinghua, we acquired 36,977 shares of our common stock in open market transactions at an average selling price of $0.83 for a total repurchase cost of $30,846, excluding broker fees. We continue to believe that our current share price does not reflect the company's intrinsic value, and we'll evaluate further repurchases based on market conditions, stock price and other factors.
I now turn the call back over to Yinghua.
Thank you, Roy. 2023 was a very busy year at Allied Gaming and Entertainment, and one that we believe set us up extremely well to capitalize in 2024 and beyond. Across the Allied ecosystem, we have made great progress advancing on our initiatives and have continued to demonstrate to our current and potential customers and partners the value and entertainment that we consistently provide.
With Z-Tech now integrated into our business, AEE finalizing events and expanding its presence in Asia and the continued demand we have for our AEI properties and content, I would like to reiterate that we're extremely excited for the year ahead and very confident in our path forward. Thank you for your time today. We look forward to speaking with you again when we release our first quarter 2024 results in May.
And ladies and gentlemen, that does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation.