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Hall of Fame Resort & Entertainment Co (HOFV)·Q3 2023 Earnings Summary

Executive Summary

  • Record quarterly revenue of $8.7M (+8% YoY) driven by events/rentals at Hall of Fame Village and higher DoubleTree hotel revenue; adjusted EBITDA loss narrowed to $5.5M from $7.8M YoY .
  • Net loss widened to $16.4M, primarily on higher net interest expense ($6.0M) and depreciation as assets were placed into service; cash declined to $11.8M (incl. $7.5M restricted) on operating use and ~$17M construction capex .
  • Management reiterated FY2023 guidance: revenue growth >50% vs 2022 and adjusted EBITDA in the “low-to-mid $20M range” (company did not specify sign), and long-term run-rate targets of $150M revenue and ~$50M adjusted EBITDA at stabilization .
  • Near-term catalysts: Johnson Controls arbitration decision expected by end of November, closing remaining Phase II financing (waterpark, onsite hotel), and continued sponsorship wins and media distribution (Amazon Prime, BrinxTV, ReachTV) .

What Went Well and What Went Wrong

What Went Well

  • Record revenue with cost discipline: “Our continued ability to execute…allowed us to deliver record revenue in Q3…while responsibly implementing effective ways to reduce expenses” – Michael Crawford, CEO .
  • Hotel stabilization and synergy: DoubleTree now profitable, top financial performer regionally, and nationally high service rankings; hotel revenue rose ~10% QoQ and similar YoY, benefiting from event synergy .
  • Sponsorship and media traction: Eight new sponsorship deals totaling >$1M (Diageo, Coke, Jim Beam, Ohio Lottery); media distribution expanded via Amazon Prime (NFL Alumni Academy: Next Man Up) and BrinxTV (GOAT Code) .

What Went Wrong

  • Interest burden and depreciation widened losses: Net loss increased to $16.4M as interest expense rose to $6.0M on higher debt and lower capitalized interest; depreciation higher as assets moved into service .
  • Liquidity drawdown amid construction: Quarter-end cash (incl. restricted) declined to $11.8M vs $16.9M at 6/30 and ~$29M broader cash/liquid investments prior quarter, driven by operating uses and ~$17M capex .
  • Tight credit conditions: Lending markets significantly tightened, increasing borrowing costs and extending timelines for public financing processes (waterpark, onsite hotel) .

Financial Results

Summary P&L (USD Millions and EPS)

MetricQ1 2023Q2 2023Q3 2023
Revenue ($M)$3.1 $6.1 $8.7
Net Loss ($M)$(19.6) $(13.6) $(16.4)
Adjusted EBITDA ($M)$(12.0) $(6.2) $(5.5)
EPS (Basic & Diluted)$(3.48) $(2.39) $(2.89)

Notes:

  • Revenue increased sequentially from $6.1M to $8.7M and YoY by 8% vs $8.1M in Q3 FY22 .
  • Adjusted EBITDA loss narrowed YoY and sequentially .

Margins vs Prior Periods

MarginQ1 2023Q2 2023Q3 2023
Adjusted EBITDA Margin %(−387.1%)* (−101.6%)* (−63.2%)*

*Calculated by us from cited revenue and adjusted EBITDA values.

KPIs and Balance Sheet

KPIQ1 2023Q2 2023Q3 2023
Cash balance incl. restricted ($M)$47.0 $29.2 $11.8 (incl. $7.5 restricted)
Construction Expenditures ($M)——~$17.0
Net Debt ($M)—$195 $202

Operational drivers:

  • Q3 revenue driven by event/rental at Village and higher hotel operating revenue .
  • Other income in Q3 of ~$1.3M from warrant liability and swap fair value changes and property sale gain partially offset interest burden .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Revenue Growth vs 2022FY 2023>50% >50% Maintained
Adjusted EBITDAFY 2023Low-to-mid $20M range Low-to-mid $20M range Maintained
Long-term Annual Run-Rate RevenueStabilized$150M $150M Maintained
Long-term Annual Run-Rate Adjusted EBITDAStabilized~$50M ~$50M Maintained

Management did not specify sign on the FY2023 adjusted EBITDA range; quarterly results imply negative adjusted EBITDA year-to-date .

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1/Q2 2023)Current Period (Q3 2023)Trend
Events/ProgrammingUSFL hosting, championship, WFA, ACL; building synergies Record revenue driven by events/rentals; expanding 2024 slate (sports and non-sports) Improving
Hotel OperationsDoubleTree supports events; revenue driver DoubleTree profitable, top regional performer; synergy to Village; ~10% hotel revenue increase QoQ Improving
Media ContentGOAT Code (BrinxTV), ReachTV shows; content partnerships Amazon Prime’s Next Man Up launched; highlights campus and brand; continued media pipeline Improving
Gaming/Sports BettingBetr partnership; early-stage mobile focus Mobile dominates (~90% bets, >80% revenue in Ohio); pursuing retail presence but focus remains mobile Stable with Mobile Bias
Financing & Balance SheetTax increment bonds proceeds; ongoing financing needs Tight credit; DoubleTree refinancing completed; pursuing waterpark/hotel public financing; engaged advisory firm Stabilizing (process-heavy)
Legal/Regulatory—Johnson Controls arbitration completed early Oct; decision expected by end of November Watchlist
Phase II BuildoutWaterpark/hotel development ongoing Waterpark fully enclosed by year-end; targeting Q3’24 opening; onsite hotel to trail by a couple months On Track (minor delay on hotel start)
Technology/AI—Implemented geotracking AI to analyze attendance/flow; exceeding attendance forecasts Emerging Positive

Management Commentary

  • “Our continued ability to execute and deliver against several key strategic initiatives allowed us to deliver record revenue in Q3…while responsibly implementing effective ways to reduce expenses.” – Michael Crawford, CEO .
  • “Third quarter total revenue was $8.7 million…adjusted EBITDA was minus $5.5 million…driven by decreased operating expenses related to lower event costs and reduced sponsorship expenses.” – Benjamin Lee, CFO .
  • “We are reiterating our 2023 forecast of revenue growth in excess of 50%…and adjusted EBITDA in the low-to-mid $20 million range…longer term, we continue to target $150 million of annual run rate revenue and approximately $50 million of annual run rate adjusted EBITDA.” – Benjamin Lee, CFO .
  • “Mobile betting is dominating…90% of bets…80%+ of revenue [in Ohio].…Retail presence would be more about experience than significant revenue growth for us.” – Michael Crawford .
  • “We finished the arbitration process…expect to have a ruling…by the end of this month.” – Michael Crawford (Johnson Controls) .

Q&A Highlights

  • Revenue drivers: Q3 record revenue attributed to higher event revenue and ~10% hotel revenue increase, with synergy between Village events and hotel .
  • Attendance trends: Repeat visitation rising; event attendees increasingly convert to multi-experience guests; AI tool helps optimize staffing/marketing .
  • Mobile sports betting roadmap: Betr partnership structured to scale contribution over time, with potential revenue share at thresholds; focus remains mobile; retail sportsbook pursued for experiential presence .
  • 2024 outlook: Formal guidance pending Board approval; management expects continued revenue growth, improved EBITDA, positive operating leverage; waterpark late-2024 contribution .
  • USFL/XFL uncertainty: Estimate that ~1/6 of Q2 revenue was attributable to USFL; event calendar diversification (domed indoor events, tentpole owned events) aims to backfill if necessary .

Estimates Context

  • S&P Global Wall Street consensus estimates for Q3 2023 EPS and revenue were unavailable at time of retrieval due to daily request limit. As a result, a direct comparison to consensus for Q3 2023 could not be completed. We will update when S&P Global consensus becomes accessible [GetEstimates error].

Key Takeaways for Investors

  • Sequential revenue acceleration with narrowing adjusted EBITDA loss highlights improving operating leverage as assets stabilize; however, higher interest/depreciation continues to pressure GAAP losses .
  • Liquidity tightened in Q3 amid ~$17M construction spend; pace and terms of Phase II financing (waterpark, onsite hotel) are critical to de-risking 2024 execution .
  • Mobile-first betting strategy via Betr aligns with market behavior in Ohio; retail sportsbook remains an experiential asset, not a primary revenue driver .
  • Sponsorship and media distribution provide brand and ancillary revenue boosts; continued scaling of owned tentpole events can drive higher-margin, diversified income .
  • Near-term binary catalyst: Johnson Controls arbitration outcome; a favorable ruling could aid capital flexibility or reduce friction; adverse outcome would be a headwind .
  • Long-term targets ($150M revenue, ~$50M adjusted EBITDA) require full stabilization, successful Phase II openings (waterpark Q3’24, hotel shortly thereafter), and continued synergy capture across destination, media, and gaming .
  • For trading: watch financing milestones, arbitration decision timing, and event/sponsorship announcements as potential sentiment movers; absence of consensus estimates limits near-term “beat/miss” framing but operational momentum is building .

Appendix: Prior Two Quarters’ Headlines (for trend context)

  • Q2 2023: Revenue $6.1M (+128% YoY), Adjusted EBITDA $(6.2)M, USFL championship hosted; Bill Burr show announced; cash $29.2M .
  • Q1 2023: Revenue $3.1M (+48% YoY), Adjusted EBITDA $(12.0)M; USFL hosting, Shula’s opening, media deals; cash $47.0M; TIF bond proceeds $18.1M .