EEG takes $38.6 million impairment charge on failing assets

Esports Entertainment Group reported net revenue of $15.7 million for the first quarter of 2022, up 8% sequentially. Gross profit also increased 18% to $9.4 million for the first quarter of 2022.

However, the operator was hit with a $38.6 million impairment charge on several failing assets, particularly its Helix, ggCircuit and EGL esports assets, meaning its overall Q1 report is less positive.

Its CEO, Grant Johnson, attributed the company’s inability to monetize these assets to its “lack of cash.” The impairment charge affected the operator’s adjusted EBITDA, which was negative $7.3 million.

Along with the charge, Esports Entertainment’s EBITDA was hit by $20.6 million for derivative debt.

As a result, the operator has hinted 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 capital expenditures, and we are currently working to divest our two existing centers; ggCircuit and EGL are two assets that we were unable to effectively monetize due to liquidity constraints.

“Our team is working internally to properly forecast long-term opportunities for these companies, which will allow us to better establish their book value.”

Unloading these brands would help the operator “significantly simplify” its esports offering.

It’s something Johnson deems necessary, to expand short-term liquidity while simultaneously moving toward the company’s long-term “operational and profitability goals.”