Executive Summary

Revenue contracted sharply as the company exited/sold non-core assets: Q3 revenue was $4.18M vs $15.70M in Q3 2022 and down sequentially from $6.41M (Q2) and $9.61M (Q1) as the UK iGaming business was wound down and Bethard/Spain were divested . Net loss narrowed year over year to $13.19M from $63.57M, helped by lapping prior-year impairments, though sequential losses remained elevated given restructuring and financing costs .
Balance sheet reset underway: management cited ~“nearly $43M” of liabilities reduced YTD, with the senior convertible note at $15.91M at quarter-end subsequently redeemed/converted to preferred (post-quarter), eliminating the note and related derivative liability from the capital structure .
Liquidity and cost actions: cash at 3/31 was $1.88M (available cash $0.38M on 5/19), followed by a $4.3M gross Series D preferred/warrants raise on 5/22; management targets >$4M annual OpEx reduction after cutting FTEs to 99 from 158 (≈36% salaries reduction) .
Strategic refocus: exited unprofitable/regulated markets, integrated Oddin.gg iFrame for esports betting, and prioritized esports-first B2C via Idefix plus a longer-term “esports-first” B2B platform and e-simulator content . Management indicated stockholders’ equity above Nasdaq’s $2.5M minimum at the time of the May updates (panel decision pending at the time) .

What Went Well and What Went Wrong

What Went Well
- Divestiture/exit execution: sold Spain iGaming license (~~$1.2M), divested Bethard (~~$1.7M cash and contingent liability elimination), and deconsolidated Argyll via bankruptcy—key steps toward a leaner footprint .
- Cost structure reset: workforce reduced to 99 from 158 and salaries reduced ~36%, with management expecting >$4M annual OpEx savings; “This phase … represents a crucial transition, a new beginning…” (Alex Igelman) .
- Product focus: completed integration of Oddin.gg iFrame for esports betting on Idefix; plan to offer “esports-first” B2C and later a B2B platform around Idefix and short-form e-simulators .
What Went Wrong
- Revenue pressure from exits: Q3 revenue fell to $4.18M (from $15.70M YoY and $6.41M in Q2) as UK operations wound down and Bethard/Spain were removed; iGaming revenue led the sequential declines .
- Liquidity constraints and going-concern risk: quarter-end cash was $1.88M (available cash $0.38M on 5/19), necessitating a $4.3M raise; management disclosed substantial doubt regarding going concern prior to the raise .
- Financing overhang (resolved post-Q3): the senior convertible note remained in default at quarter-end with a derivative liability of $1.96M (reflecting a make-whole exposure), although it was subsequently converted to Series C preferred (post-quarter) .

Financial Results

Metric	Q3 2022	Q1 2023	Q2 2023	Q3 2023
Revenue ($)	$15,699,587	$9,605,264	$6,409,405	$4,175,994
Cost of Revenue ($)	$6,282,445	$3,750,416	$2,371,655	$1,292,743
Sales & Marketing ($)	$7,074,414	$2,445,335	$1,843,557	$928,692
General & Administrative ($)	$14,339,615	$9,471,034	$7,559,402	$7,369,452
Operating Loss ($)	$(50,626,197)	$(6,061,521)	$(21,500,209)	$(9,613,255)
Net Loss ($)	$(63,569,495)	$(4,168,591)	$(14,132,682)	$(13,193,975)
Diluted EPS ($)	$(210.64)	$(0.10)	$(0.20)	$(5.76)

Segment revenue mix (disaggregated)

Revenue ($)	Q1 2023	Q2 2023	Q3 2023
Online betting & casino (EEG iGaming)	$8,595,346	$5,538,486	$3,437,387
Esports & other (EEG Games)	$1,009,918	$870,919	$738,607

KPIs and balance sheet items

KPI	Q3 2023
Cash (3/31/23)	$1,875,758
Available cash (5/19/23)	$382,037
Senior Convertible Note (3/31/23)	$15,910,000
Derivative liability (3/31/23)	$1,963,933
Gross proceeds (Series D, 5/22/23)	$4,300,000
Workforce/FTEs	99 (from 158)
Expected annual OpEx reduction	>$4,000,000
Liabilities reduced YTD	~$43,000,000

Notes: Q1 and Q2 EPS were reported prior to the February 22, 2023 reverse stock split; per-share figures are not directly comparable to Q3 which reflects split-adjusted shares in that quarter’s 10-Q .

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance/Update	Change
Revenue/EPS	FY’23/Q4	None provided	No formal revenue or EPS guidance issued	N/A
Operating expenses	Run-rate	None provided	Management anticipates >$4M annual OpEx reduction from restructuring actions	Introduced
Capital/liquidity	Near-term	N/A	$4.3M gross proceeds via Series D raised 5/22/23 to bolster liquidity	New financing
Balance sheet	FY’23 YTD	N/A	~“nearly $43M” in liabilities reduced YTD; senior note later exchanged to preferred (post-Q3)	Improved

Earnings Call Themes & Trends

(Transcript not available; themes reflect management commentary in filings/press releases.)

Topic	Previous Mentions (Q1–Q2 FY’23)	Current Period (Q3 FY’23)	Trend
Restructuring & cost actions	UK iGaming exit and NJ vie.gg exit; impairments; cost focus	Headcount to 99 (from 158); targeted >$4M OpEx reduction	Accelerating cost-down
Balance sheet repair	Senior note default; going concern; Nasdaq listing challenges	Liabilities reduced ~ $43M YTD; note at $15.91M converted to preferred post-Q3	Improving capitalization
Product/tech roadmap	Refocus on esports; exits from non-core	Oddin.gg iFrame integrated; plan to expand esports wagering, Idefix-centered B2C and B2B; e-simulators	Sharpened focus
Regulatory/legal	UK license surrendered; Finland dialogue; NJ exit	Spain license sold; Bethard divested; Argyll deconsolidated	Portfolio pruning
Nasdaq compliance	Ongoing exceptions and reverse split planning	Management asserted stockholders’ equity >$2.5M minimum; panel decision pending	Monitoring status

Management Commentary

“We’ve identified unprofitable operations and agreements that required divestment or discontinuation, paving the way for a very bright future… This phase… represents a crucial transition, a new beginning, and an occasion to move past the activities that have previously held us back…” – Alex Igelman, CEO .
“We anticipate that these measures will reduce our annual operating expenses by over $4.0 million… we have cut our workforce… to ninety-nine full-time employees… approximately 36%” .
“We have significantly enhanced our balance sheet… reduced nearly $43 million of the Company’s liabilities, resulting in a substantially debt-free balance sheet… stockholders’ equity exceeding Nasdaq’s minimum requirement of $2.5 million” .

Q&A Highlights

No Q3 FY’23 earnings call transcript was available in our document corpus; therefore, no Q&A themes or clarifications to report [ListDocuments returned none].

Estimates Context

We attempted to retrieve S&P Global consensus revenue and EPS for Q3 FY’23 and prior quarters; estimates were not available to compare due to retrieval limitations, and the company appears to have limited/absent analyst coverage. As a result, no beat/miss assessment versus Wall Street consensus can be provided at this time.

Key Takeaways for Investors

Revenue headwinds are expected near term as divestitures and exits remove legacy B2C volume; iGaming revenue fell from $8.60M (Q1) to $3.44M (Q3) while Esports & Other declined more modestly to $0.74M, underscoring the transition period .
The restructuring is tangible: >$4M annual OpEx reductions, 36% salary base cut, and removal of non-core assets should lower cash burn and simplify operations into esports-first offerings .
Balance sheet de-risking is the primary catalyst: ~“nearly $43M” liabilities reduced YTD; the senior note was $15.91M at Q3 but converted to preferred after the quarter, eliminating the defaulted instrument and its derivative overhang .
Liquidity remains a key watch item despite the $4.3M May raise; quarter-end cash was $1.88M and available cash $0.38M on 5/19, emphasizing execution on cost cuts and top-line rebuild is critical .
Strategic focus on Idefix-centered esports wagering (B2C) with a path to B2B platform and e-simulator content provides a narrower, potentially higher-ROI roadmap versus broad, regulated-market iGaming .
Regulatory and listing milestones matter for sentiment: management indicated stockholders’ equity above Nasdaq’s minimum; any final Nasdaq panel outcomes and operational updates on Oddin.gg/iFrame adoption can move the stock .
Near-term trading set-up skews to execution headlines (debt extinguishment, cost-out proof points, initial esports wagering traction); medium-term thesis rests on rebuilding a sustainable, asset-light esports-led revenue base with lower fixed cost.

Additional references: COO appointment press release (May 31, 2023) underscores board/management alignment to the new operating model and profitability focus .

ESPORTS ENTERTAINMENT GROUP, INC. (GMBL)·Q3 2023 Earnings Summary