Executive Summary

Q3 FY2022 revenue was $15.7M, up $10.3M year over year and +8.0% sequentially; gross margin improved to 60.0%. GAAP net loss to common shareholders was $(63.8)M or $(2.11) per share, driven by a $38.6M non-cash impairment and a $20.6M derivative liability charge .
Full-year revenue guidance was cut to $55–$60M (from $70–$75M), citing liquidity constraints and a sharpened focus on reaching breakeven faster via cost reductions and an asset-light esports model; management is targeting annualized breakeven by early FY2023 .
Liquidity remained tight: cash and equivalents were $9.4M at quarter-end, with sizable current obligations including a $35.0M senior convertible note and a $20.6M derivative liability; management is “actively working with [the] lender on key modifications” .
No Q3 call transcript was available in our database; Q2 Q&A indicated cash burn running ~$1.3M/month and EBITDA breakeven pushed into the first calendar quarter of 2023, context that underpins the Q3 pivot and guidance reset .
Street consensus (S&P Global) for Q3 was unavailable at time of query due to data access constraints; estimate comparisons could not be provided.

What Went Well and What Went Wrong

What Went Well
- iGaming momentum: “record-breaking quarterly revenue at Lucky Dino,” improved sportsbook hold, and “improved overall profitability” from a more efficient marketing strategy; gross margin rose to 60.0% (vs. 55.0% LY) .
- U.S. esports wagering progress: completed full launch of VIE.gg in New Jersey and LANDuel launch event drew “hundreds of registered participants and over 16,000” livestream viewers .
- Asset-light pivot outlined: simplifying esports to SaaS (ggCircuit), in-person tournaments (EGL), and peer-to-peer wagering; management expects “material savings” and a path to annualized breakeven by early FY2023 .
What Went Wrong
- Non-cash charges and leverage: $38.6M impairment (Helix, ggCircuit, EGL) and $20.6M derivative liability drove the $(63.8)M loss; equity turned negative and current liabilities ballooned, including a $35.0M senior convertible note .
- Liquidity constraints: “lack of liquidity” constrained monetization of esports assets; no “attractive profitability” seen in Helix (seeking to divest two centers) .
- Guidance cut: FY22 revenue lowered to $55–$60M (from $70–$75M) amid liquidity-driven prioritization of cost cuts and profitability over growth .

Financial Results

Key P&L metrics (oldest → newest)

Metric	Q3 2021	Q2 2022	Q3 2022
Revenue ($M)	$5.40 (implied from +$10.3M YoY to $15.7M)	$14.53	$15.70
GAAP Diluted EPS	$(0.73)	$(1.53)	$(2.11)
Gross Margin %	55.0%	55.2%	60.0%
Adjusted EBITDA ($M)	$(2.65)	$(6.76)	$(7.29)

Operational KPIs

KPI	Q1 2022	Q2 2022	Q3 2022
Gross Profit ($M)	$10.0	$8.0	$9.4
Gross Margin %	61%	55.2%	60.0%

Balance sheet and liquidity snapshot (quarter-end)

Metric	Q1 2022 (9/30/21)	Q2 2022 (12/31/21)	Q3 2022 (3/31/22)
Cash & Equivalents ($M)	$0.93	$1.04	$9.40
Senior Convertible Note (current, $M)	—	$36.84	$35.00
Derivative Liability (current, $M)	—	—	$20.57
Total Current Liabilities ($M)	$26.36	$61.07	$76.34
Stockholders’ Equity (Deficit, $M)	$73.73	$50.01	$(5.31)

Additional management-reported Q3 changes

Revenue: +$10.3M YoY to $15.7M and +8.0% QoQ .
Gross profit: +$6.3M YoY to $9.4M and +17.5% QoQ .
GAAP net loss: $(63.8)M including $38.6M impairment and $20.6M derivative liability; vs $(12.4)M LY and $(34.5)M in Q2 .

Segment breakdown

Not disclosed quantitatively in the Q3 release; management cited iGaming strength (record Lucky Dino) and recovering esports events, but no revenue split by segment was provided .

Estimates comparison

S&P Global consensus for Q3 FY2022 revenue and EPS was unavailable at time of query due to data access limits; as a result, we cannot quantify beats/misses this quarter.

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Net Revenue ($M)	FY 2022	$70–$75M (317%–347% YoY growth)	$55–$60M	Lowered
Adjusted EBITDA Breakeven	Timing	End of calendar 2022 (prior view)	Annualized breakeven by early FY2023	Pushed out

Earnings Call Themes & Trends

Note: No Q3 call transcript was available in our database; “Current Period” reflects Q3 press release commentary.

Topic	Previous Mentions (Q1 FY22, Q2 FY22)	Current Period (Q3 FY22)	Trend
NJ esports wagering (VIE.gg)	Q1: Approval “in matter of weeks”; minimal FY22 rev assumed (~$1M) . Q2: Soft-play nearing exit; adding events; two more jurisdictions in discussions .	Full launch in NJ completed; platform live post-soft play .	Improving
LANDuel (peer-to-peer)	Q1: Strong operator interest; proof-of-concept planned . Q2: Launch event rescheduled to Mar 19–20; casino interest high .	Launch event held; hundreds of participants and 16k+ livestream viewers .	Improving
OMEGA (ggCircuit B2B)	Q1: Robust pipeline; initial contracts; expansion plans . Q2: Install base targeted to scale .	Continued “healthy interest” from venues (asset-light focus) .	Improving
Esports live events/Helix centers	Q2: Omicron delays; Helix CA opening delayed .	No path to attractive profitability in Helix; intend to divest 2 centers .	Worsening (Helix)
Sportsbook hold volatility	Q2: “Historically low” hold impacted revenue; January rebounded; expect norms .	Gross margin improved; broader normalization cited .	Stabilizing
Liquidity/cash burn/capital	Q2: Burn ~$1.3M/month; evaluating financing; ATM use; breakeven pushed to 1Q’23 .	Liquidity constrained monetization; working with lender on loan modifications .	Mixed
Cost actions/asset-light shift	Q1: Integration and operating leverage focus . Q2: Continued discipline .	Aggressive cost cuts; simplify esports to SaaS/events/P2P; breakeven target early FY23 .	Improving (cost focus)
Regulatory exposure	Q2: Netherlands exit hit prior quarter; monitoring global changes -.	No new Q3 disclosure beyond pivot/US focus -.	Neutral

Management Commentary

“Our fiscal third quarter 2022 results illustrate growing top-line momentum… record-breaking quarterly revenue at Lucky Dino… improved profitability… successful launch of… peer-to-peer wagering… full launch of… VIE.gg, in New Jersey” — Grant Johnson, CEO .
“Given our lack of liquidity, we have been unable to fully monetize certain of our esports assets… taking a $38.6 million impairment… do not see a path to attractive profitability in the Helix business… working to divest our two existing centers… actively working with our lender on key modifications to the loan” .
“We are… dramatically simplifying our offering in the esports space… asset-light model… aggressively cutting costs across our seven brands… expecting [efforts] to have a significant positive impact… with a goal to achieve break-even on an annualized basis by early fiscal 2023” .
“Given… change in focus and our third quarter performance, we… update the full-year revenue expectations to… $55 to $60 million from… $70 to $75 million” .

Q&A Highlights

No Q3 FY2022 call transcript was available in our database. Key relevant themes from Q2 Q&A that informed Q3 actions:

Guidance reset drivers: Netherlands regulatory exit, low sportsbook hold, and event delays; momentum rebuilding into H2 -.
NJ VIE.gg ramp: soft play exit “imminent”; two additional NA jurisdictions under discussion; LANDuel can roll out across ~29 states (skill-based) .
Cash burn and breakeven: burn rate ~ $1.3M/month; EBITDA breakeven pushed to first calendar quarter of 2023 (later reflected as early FY2023 breakeven in Q3 commentary) .
Financing: using ATM prudently; exploring strategic financing; lender discussions on note modifications .
OMEGA pipeline: ~dozen substantial contracts under negotiation; units also mine crypto when idle .

Estimates Context

S&P Global consensus for Q3 FY2022 revenue and EPS was unavailable at time of query due to a daily request limit; we could not quantify beats/misses this quarter. We will update the estimates comparison upon access restoration.

Key Takeaways for Investors

Guidance reset and large non-cash charges overshadow improving top-line and margin mix; the pivot to an asset-light esports model and cost discipline is central to management’s path to breakeven by early FY2023 .
Liquidity is the gating factor: despite $9.4M cash at quarter-end, high current liabilities (incl. $35.0M senior convertible note and $20.6M derivative liability) necessitate lender modifications and disciplined spend; watch for financing updates .
Near-term catalysts: full commercial momentum in NJ (VIE.gg), LANDuel deployment beyond Atlantic City, and OMEGA contract wins can validate the simplified model and diversify revenue .
Risk/reward hinges on execution of divestitures (Helix), SaaS/events/P2P scaling, and sustaining improved gross margins while cutting OpEx; monitor non-core asset monetization progress and operating cash burn trajectory .
Without Street estimate context this quarter, trading may key off guidance trajectory, liquidity developments, and tangible adoption signals from NJ VIE.gg/LANDuel/OMEGA rather than headline EPS.

Citations

Q3 FY2022 8-K (press release, financials, guidance, strategy): .
Q2 FY2022 8-K and call transcript (trend/backdrop, guidance prior, operational details): -.
Q1 FY2022 8-K and call transcript (baseline, outlook, OpEx/cross-sell, cadence): - -.

ESPORTS ENTERTAINMENT GROUP, INC. (GMBL)·Q3 2022 Earnings Summary