EEG takes $38.6m impairment charge on failing assets
Esports Entertainment Group has posted net revenue of $15.7m for Q1 2022, up 8% sequentially. Gross profit was also up 18% at $9.4m for the first quarter of 2022.
However, the operator has been hit with a $38.6m impairment charge on several failing assets, particularly its esports assets Helix, ggCircuit and EGL, meaning its overall Q1 report is less positive.
Its CEO, Grant Johnson, has attributed the company’s inability to monetise these assets to its “lack of liquidity.” The impairment charge has affected the operator’s adjusted EBITDA, which was negative $7.3m.
Alongside the charge, Esports Entertainment’s EBITDA was hit by $20.6m for a derivative debt liability.
As a result, the operator implied that it will attempt to offload at least one of its assets.
Johnson revealed: “We do not see a path to attractive profitability in the Helix business, given its significant overhead and ongoing CapEx, and are currently working to divest our two existing centres; ggCircuit and EGL are two assets that we have not effectively been able to monetise due to liquidity constraints.
“Our team is working internally to properly forecast the long-term opportunity for these businesses, which will allow us to better establish their carrying value.”
Offloading these brands would help the operator to “dramatically simplify” its offering in the esports space.
This is something Johnson feels is necessary, to extend liquidity in the short term while simultaneously moving toward the company’s long-term “operational and profitability goals.”
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