Clubhouse Media Group, Inc. (CMGR)·Q3 2022 Earnings Summary

Executive Summary

• Q3 2022 revenue rose 22% year over year to $2.16M, with gross margin expanding to 37.2% (vs. 17.0% YoY and 28.8% in Q2), and operating loss narrowed to $0.25M; the company reported first-time net income of $0.84M, driven primarily by a non-operating gain from the change in fair value of derivative liabilities .
• Management emphasized the strategic shift away from costly content houses toward social media agency services and a technology-based creator monetization platform; Q3 results benefited from larger brand deals and the Alden Reiman agency relationship (e.g., Klay Thompson, DraftKings) .
• Balance sheet improved sequentially: derivative liabilities fell (Q2→Q3: $4.79M→$1.81M) and convertible notes, net, decreased (Q2→Q3: $6.28M→$5.12M), while cash declined ($78K→$43K); shares outstanding grew materially over the year, highlighting dilution risk .
• No formal guidance or earnings call transcript was found; potential catalysts include the August JV with The Reiman Agency (51% stake) and the November 22 debt-for-equity exchange by the CEO ($1.81M converted), both supporting the debt-reduction narrative and brand deal pipeline scale-up .

What Went Well and What Went Wrong

• What Went Well

  • “Q3 results are better than expected… we’ve simultaneously increased revenue, decreased expenses and reduced outstanding principal on our debts,” noted CFO Scott Hoey; gross margin rose to 37.2% vs. 28.8% in Q2 .
  • CEO Amir Ben-Yohanan highlighted “positive financial results” from shifting to the “social media agency business and our technology-based creator/influencer monetization platform,” plus strengthening sales with “additional sales agents” to expand brand promotional deals .
  • Revenue growth and margin gains were helped by larger-brand projects via Alden Reiman’s agency (e.g., Klay Thompson, DraftKings) and better deal negotiation, boosting gross profit percentage .

• What Went Wrong

  • Core operations remained loss-making: Q3 operating loss was $0.25M; net income was largely non-operational, driven by a $1.73M gain from derivative liability revaluation rather than underlying profitability .
  • Cash fell to $43K with negative working capital ($9.07M) and going concern disclosures persisting, reflecting sustained financing needs and liquidity pressures .
  • Dilution risk intensified: common shares outstanding reached ~1.59B by Nov 14, 2022, with heavy use of convertible notes and equity lines; subsequent debt-for-equity exchanges further increased shares outstanding .

Financial Results

KPIs and Balance Sheet Trend

Note: No segment revenue breakdown was disclosed in the Q3 filings; narrative indicates “Managed Services” and the Honeydrip subscription platform as core revenue categories .

Guidance Changes

Earnings Call Themes & Trends

No Q3 2022 earnings call transcript was found; themes below reflect press releases and 10-Q MD&A.

Management Commentary

• CFO Scott Hoey: “The Q3 results are better than expected… we’ve simultaneously increased our revenue, decreased our expenses and reduced the outstanding principal on our debts. Additionally, we’ve increased our gross profit margin to 37.2%, compared to 28.8% in Q2 of this year.”
• CEO Amir Ben-Yohanan: “Positive financial results since making the decision to shift away from the expensive content houses, and into the social media agency business and our technology-based creator/influencer monetization platform… We recently added additional sales agents and executives… to further our reach in the brand promotional deal industry.”

Q&A Highlights

• No Q3 2022 earnings call transcript was found; therefore, no Q&A highlights or analyst clarifications were available [ListDocuments: earnings-call-transcript not found].

Estimates Context

• Wall Street consensus (S&P Global) EPS and revenue estimates were unavailable for CMGR due to missing CIQ mapping; therefore, no comparison vs. estimates can be provided. Values retrieved from S&P Global were unavailable.

Key Takeaways for Investors

• Reported net income was driven mainly by a $1.73M non-operating gain from derivative liability fair value change; operating loss persisted, so core profitability remains to be demonstrated .
• Gross margin expansion to 37.26% reflects better deal terms and mix; management attributes gains to larger brand projects via Alden Reiman and improved economics of agency/platform operations .
• Liquidity remains tight (cash $43K) with negative working capital and going concern language; financing actions and debt restructuring continue to be critical near-term priorities .
• Dilution risk is high: shares outstanding grew to ~1.59B by Nov 14, 2022, and subsequent debt-for-equity exchanges (e.g., CEO conversion of $1.81M) increase supply further, though they reduce debt .
• Strategic JV (51% stake) with The Reiman Agency strengthens access to large-brand deals and is a near-term pipeline catalyst for revenue scale-up .
• Subscription platform Honeydrip moved to gross revenue recognition in April 2022 due to increased control over services and pricing; this supports reported revenue growth but requires sustained user monetization to be durable .
• Derivative liability and convertible notes decreased sequentially (Q2→Q3), signaling progress on balance sheet de-risking, albeit with ongoing default statuses noted on several notes and continued need for capital .

Sources: Q3 press release and 8-K ; Q3 10-Q financials and MD&A ; Q2 10-Q ; Q1 10-Q and press release ; JV 8-K ; CEO debt exchange 8-K .