Covid-19 leads to widening Q2 losses for Allied Esports

Allied Esports Entertainment, the group that includes World Poker Tour (WPT), has reported a comprehensive loss of $10.9m (£8.3m/€9.3m) for the second quarter, after its revenue was hit by the novel coronavirus (Covid-19) shutdown of certain esports events.

The second quarter struggles meant that revenue for the six months to 30 June totalled $10.6m, down 23.2% on $13.8m last year.

Total costs and expenses were up 16.3% to $23.5m, leaving it with an operating loss of $12.9, almost double the $6.6m loss it posted in 2019. After other costs, Allied Esports posted a comprehensive loss of $19.7m.

For the second quarter, revenue fell 37.0% year-on-year to $4.6m.

Allied Esports said its in-person operations – live events – were hardest hit by Covid-19 in Q2, with shelter-in-place orders meaning many events could not take place. As a result, in-person revenue dropped 78.3% from $3.2m to $699,327.

While Allied said it saw an increase in demand for its services, multiplatform content revenue also declined, falling 59.1%, to $705,251. Sponsorship revenue also fell, following the postponement of the WPT's final tables as a result of the pandemic.

These declines were partially offset by a 33.3% year-on-year rise in revenue from interactive services, which climbed from $2.4m to $3.2m. This, Allied Esports said, was driven by a strong growth in ClubWPT subscribers and virtual chip purchases as well as the launch of the new premium level of ClubWPT membership.

In terms of spending for the quarter, total costs and expenses were down 6.9% to $9.4m, with spending lower across a number of areas due to the Covid-19 shutdown.

Multiplatform costs were down 63.4% to $563,833, and in-person spending was also reduced by 40.6% to $507,112. Selling and marketing costs were cut by 71.7% to $292,485, while general and administrative costs were also lower at $3.7m.

However, as spending exceeded revenue, this left Allied Esports with a $4.8m operating loss, compared to $2.7m last year. After $6.1m in other expenses, net loss amounted to $10.9m, up from $2.8m in 2018.

When also accounting for foreign currency expenses, Allied Esports ended Q2 with a comprehensive loss of $10.9m, compared to $2.8m last year.

“Throughout the second quarter, we continued to operate in an extremely challenging environment arising from the ongoing Covid-19 pandemic,” chief executive David Ng said.

“The shelter-in-place orders that extended for the majority of the second quarter resulted in the temporary shut-down of the in-person pillar of our business activities, which negatively affected our second quarter financial performance.

“Given this reality, we quickly shifted our strategic focus to the multiplatform content and interactive services pillars in order to mitigate the impact of the pandemic on our business and continue to serve our loyal communities.”

Ng also noted that Allied Esports was able to refinance $14.0m of outstanding debt and  $3.7m of accrued interest previously scheduled to mature on August 23, 2020 in Q2.

“By extending the debt maturities for up to an additional two years, we have significantly enhanced our financial flexibility as we continue to navigate economic uncertainties during the pandemic, while working to create value and growth for the future,” Ng said.