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EI

EBET, Inc. (EBET)·Q2 2022 Earnings Summary

Executive Summary

  • Revenue accelerated to $19.00M in Q2 FY2022 (quarter ended Mar 31, 2022), up ~166% q/q on the Karamba/Hopa/Griffon Casino/BetTarget/Dansk777/GenerationVIP acquisition; gross profit reached ~$6.99M and cash was $7.05M .
  • Profitability remained pressured: operating loss widened to $9.07M and net loss to $11.84M on higher sales & marketing ($9.47M) and interest expense ($2.76M) tied to acquisition financing .
  • Liquidity tightened: working capital swung to a $(0.82)M deficit and the company obtained a senior notes covenant waiver contingent on a $3.5M equity raise by May 31, 2022 .
  • Guidance context: management had reiterated $70M revenue for the remainder of FY2022 on the prior quarter call; no numeric update was provided in Q2 materials (the May 10 webcast was scheduled to “offer forward-looking guidance”) .
  • Potential stock catalysts: acquisition-driven scale-up in iGaming revenues, upcoming esports odds-model/product rollout in Europe, and resolution of financing/covenant milestones .

What Went Well and What Went Wrong

  • What Went Well
    • Strong q/q growth from acquired brands: “Revenue…approximately $19 million, up more than 166% quarter over quarter…gross profit of approximately $7 million” .
    • Strategic focus on Gen Z/Millennial bettors with product roadmap (esports odds modeling) and geographic expansion across high-value European markets .
    • CEO tone constructive: “We are very pleased with our business results for the second quarter…a testament to our focus on creating the best experience for the Gen Z and Millennial wagering market” .
  • What Went Wrong
    • Losses expanded despite revenue growth: operating loss ($9.07M) and net loss ($11.84M) increased amid elevated sales & marketing ($9.47M) and interest burden ($2.76M) .
    • Liquidity/covenant pressure: working capital deficit of $(0.82)M and a waiver needed for senior notes covenants, contingent on raising $3.5M equity by 5/31/22 .
    • No explicit numeric guidance update in Q2 materials; revenue guidance was last reaffirmed in Q1 at $70M for the remainder of FY22 (10 months post-acquisition) .

Financial Results

MetricQ1 2021 (Dec 31, 2020)Q2 2021 (Mar 31, 2021)Q1 2022 (Dec 31, 2021)Q2 2022 (Mar 31, 2022)
Revenue ($USD)$10,794 $33,834 $7,139,927 $19,002,588
Gross Profit ($USD)$(1,466) $21,369 $2,530,840 $6,992,992
Gross Margin %(14)% 63% 35% 37%
Operating Income (Loss) ($USD)$(2,140,365) $(2,006,177) $(7,842,569) $(9,068,975)
Net Income (Loss) ($USD)$(2,750,731) $(2,375,660) $(8,881,038) $(11,841,071)
Diluted EPS ($)$(0.37) $(0.22) $(0.68) $(0.93)

Segment breakdown (consolidated):

  • EBET reports all revenue as gaming; “no disaggregation of revenue is required because all current revenue is generated from gaming revenue” .

KPIs and operating metrics

KPIQ1 2022Q2 2022
Cash and Equivalents ($USD)$11,759,541 $7,051,815
Working Capital ($USD)$6,877,221 $(0.82) million (deficit)
Total Borrowings – Carrying Amount ($USD)$33,209,522 $34,593,325
Interest Expense (Quarterly, $USD)$976,418 $2,764,819
Sales & Marketing Expense (Quarterly, $USD)$3,974,784 $9,474,087
Gross Margin %35% 37%

Context:

  • Acquisition included 1.25M deposited customers across Karamba, Hopa, Griffon Casino, BetTarget, Dansk777, GenerationVIP (closed Nov 29–30, 2021) .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent (Q2)Change
RevenueRemainder FY 2022$70M (reaffirmed on Q1 2022 release) No numeric update provided in Q2 materials (call scheduled to “offer forward-looking guidance”) No update disclosed

Earnings Call Themes & Trends

TopicPrevious Mentions (Q-2)Previous Mentions (Q-1)Current Period (Q2)Trend
Platform consolidationN/A in toolMigrated Gogawi to single platform for CRM/loyalty efficiencies Continued focus on efficiencies and scaling acquired brands Progressing
Esports productsN/A in toolOn track to launch Esports Book and Browser Bets in calendar 2022 (Europe focus) Rollout of esports odds-modeling in high-value European markets referenced On track; limited new detail
GuidanceN/A in toolReaffirmed $70M for remainder FY22 (10 months) No numeric update provided; webcast to discuss guidance Unchanged/Not updated
Liquidity/financingN/A in toolRaised ~$67.7M to fund acquisition (debt + preferred equity) Covenant waiver contingent on $3.5M equity raise by 5/31/22 Tightening liquidity focus
Market access/regulatoryN/A in toolTier-1 market access: UK, DE, IE, DK; expansion to Latin America/Asia Continued European focus with product rollout Steady execution

Management Commentary

  • CEO (Q2 PR): “We are very pleased with our business results for the second quarter, and it is a testament to our focus on creating the best experience for the Gen Z and Millennial wagering market.”
  • CEO (Q2 PR): Plans include “rollout of its esports odds modeling and wagering product across high-value European markets, as well as expanding geographical reach and investment in intellectual property.”
  • CFO (Q1 call context): “We generated $7.1 million of revenue and over $2.5 million gross margin for the quarter… execution gives us confidence that we’ll achieve… $70 million for our fiscal 2022” (10-month post-acquisition basis). Adjusted EBITDA in Q1 was $(3.9)M (non-GAAP) .

Q&A Highlights

  • Platform integration benefits: Management emphasized moving all brands (including Gogawi) to a single platform for CRM and loyalty leverage .
  • Revenue drivers: Optimization of marketing and affiliate deals under dedicated B2C ownership targeted higher run-rate revenues vs pre-acquisition .
  • Esports penetration strategy: Younger customer base expected to be more likely to bet on esports and iGaming; product design and loyalty aimed at long customer lifetimes .
  • Note: A Q2 FY2022 call was scheduled (webcast link provided), but a Q2 transcript was not available in our document set for review .

Estimates Context

  • S&P Global consensus EPS and revenue estimates for EBET’s Q2 FY2022 were unavailable via our S&P Global data connection at this time; therefore, we cannot provide beat/miss analysis versus Street consensus for this quarter. As a result, any estimate comparisons are not presented here.

Key Takeaways for Investors

  • Acquisition-driven scale is flowing through: revenues stepped to $19.0M in Q2 with gross margin ~37%, indicating the acquired B2C assets are contributing as intended .
  • Profitability hinges on cost discipline: elevated S&M ($9.47M) and interest expense ($2.76M) weighed on earnings; operating loss widened to $9.07M and net loss to $11.84M .
  • Liquidity/covenants are near-term swing factors: working capital deficit $(0.82)M and covenant waiver conditional on a $3.5M equity raise introduce financing execution risk .
  • Product roadmap could re-rate narrative: planned rollout of esports odds-modeling and continued European focus aim to differentiate and potentially improve monetization mix over time .
  • Guidance visibility: last disclosed guidance was $70M for the remainder of FY2022 (Q1); lack of a Q2 numeric update shifts focus to subsequent disclosures for trajectory confirmation .
  • Watch debt structure and cost of capital: $34.6M borrowings carrying amount and 15% senior debt coupon meaningfully impact cash flow and net income sensitivity .

Sources

  • Q2 FY2022 8-K and press release (May 10, 2022)
  • Q2 FY2022 10-Q (filed May 16, 2022) – financials, MD&A, liquidity, borrowings
  • Q1 FY2022 8-K and press release (Feb 9, 2022) – revenue and guidance context
  • Q1 FY2022 earnings call transcript (Feb 9, 2022) – integration, guidance, product roadmap
  • Corporate name change 8-K (May 5, 2022) – branding context