In the red, but satisfied – Astralis and Allied Esports reported for the year on the exchange

In March, two large eSports companies – Astralis Group and Allied Esports – published reports and appeals to investors for the fiscal year. In them, organizations reported a million losses, but still called 2019 the successful and made optimistic forecasts for 2023. What we learned from company documents, we tell in the material.

ESports Club and Tournament Organizer

Astralis Group is a familiar name for all eSports fans. The company was founded in 2019, but for the first time such a brand was registered in 2016. Then he became part of the RFRSH Entertainment holding, which also organized the BLAST Pro tournaments.

Soon, the RFRSH found itself at the center of a public discussion: the audience saw a conflict of interest in the holding business. The company – in theory – could arrange tournaments in such a way as to provide its team – Astralis – with the most comfortable conditions for participation: determine the schedule based on the state of the players, change the tournament grid or even invite only more convenient opponents for the Danish roster. Commentators, journalists, and e-sports fans have been actively discussing the potential manipulations that RFRSH had.

In 2019, the holding launched a global league under the BLAST brand, and therefore was forced to sell Astralis in order to remove all suspicions. The new holding – Astralis Group – includes three assets: the CS: GO roster of the same name, the Origen team of the League of Legends, and the Future FC cyber football club. From the indicators of these units and the management company, the financial report of Astralis Group for 2019 is formed.

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Allied Esports is a company less known in the European market. It is based in the United States and organizes e-sports tournaments and poker competitions World Poker Tour. The Allied Esports most famous eSports asset is the HyperX Esports Arena in Las Vegas. In 2019, it became the venue for 78 events dedicated to games and streaming.

Another project of the company is “e-sports trucks” with equipment and screens, allowing to quickly hold mobile games championships in any location. Allied Esports participated in the organization of the All-Star League of Legends event in 2018, as well as a series of tournaments in the Rocket League, Hearthstone, Paladins and other less popular games.

Organizational financial results

The companies ended the year with a negative balance: Astralis losses before interest, taxes and depreciation (EBITDA) from January 1 to December 31, 2019 amounted to $ 3.037 million, and at Allied Esports the same figure reached $ 8.768 million. Despite such losses, at the operational stage of the business, both companies in the reports positively evaluated the results of the year.

Astralis exceeded its own financial forecast made at the time of the IPO: the company earned $ 800 thousand more than planned. The holding’s leadership associates this result with the success of the CS: GO roster, which ended 2019 with a series of major victories, including at the BLAST Pro Series: Global Final 2019, Esports Championship Series Season 8 – Finals and StarLadder Berlin Major 2019.

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At the same time, prize teams are not the main source of income for the organization. A schedule was attached to the report, which demonstrated that the prize money won and other profit from participating in tournaments accounted for 36% of the total revenue of Astralis Group. A more important budget element is sponsorship contracts and merchandise sales – together they make up 64% of the club’s total revenue.

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The total revenue of the company for 2019 amounted to $ 6.968 million. This amount was distributed unevenly among the assets of Astralis Group: the CS: GO squad earned $ 5.619 million, exceeding management financial expectations by almost $ 700 thousand. However, the costs of maintaining the team were higher – about $ 6.345 million. Thus, the club’s negative EBITDA for the year amounted to $ 700 thousand – $ 200 thousand less than experts expected.

The League of Legends roster was more unprofitable for the Astralis Group. Origen revenue for the year amounted to about $ 1.14 million, not reaching the KPI set by management. However, operating costs for maintaining the team turned out to be lower than planned – they amounted to more than $ 3 million, but the club’s final EBITDA was in the framework of the original financial forecast.

The only lineup to end the year with a positive EBITDA was FIFA Future FC, assembled in October 2019. In two months, the cyber-football roster earned $ 200 thousand, spending less than $ 60 thousand on operating expenses. Another million dollars from the holding’s budget was spent on maintaining the management team – Astralis Group Management.

The capitalization of Astralis Group is estimated at $ 24 million. The company reported that following the IPO it was able to close all previous debts and begins 2023 with sufficient resources to continue the implementation of the three-year plan previously shown to investors.

Allied Esports entered the IPO earlier, which allows you to compare the performance of this company according to the results of the 2018 and 2019 financial years. Despite the fact that the organization is much less likely to appear in e-sports news than Astralis, its annual revenue was almost four times higher than that of the Danish holding – $ 26.1 million.

Compared to 2018, this indicator grew by 27% (or by $ 6.1 million in numerical terms). The company divides revenue sources into three groups: interactive entertainment, multi-platform content and events with a live audience. The second segment showed the largest increase from year to year – revenue from it increased from $ 3.2 million to $ 5.5 million.

However, this part of the Allied Esports business is mainly related to poker tournaments. The e-sports product of the organization falls into the group of events with an audience that also showed growth by the end of the year: $ 11.1 million in 2019 against $ 8.18 million in 2018. In percentage terms, the growth was not so rapid, but in numerical terms, e-sports was the main source of income for Allied Esports.

The company also managed to reduce costs from $ 49.4 million to $ 40 million per year. Allied Esports wrote off almost $ 18.5 million under the item “total expenses” – this is more than the organization spent on the production of all types of content that brought it revenue. Interactive entertainment, multi-platform content and live events cost Allied Esports $ 11 million.

Losses of the company before interest, taxes and depreciation amounted to $ 8.7 million – $ 13 million less than a year earlier. In an appeal to shareholders of the organization’s CEO, Frank Ng said that Allied Esports achieved significant success in 2019 and will continue to adhere to its current policy in 2023.

Position of companies on the stock exchange

Astralis Group entered an IPO in December 2019 and lost 18% of its value in the first month. On January 30, 2023, the organization almost managed to return to its previous share price, but then the decline resumed.

In March, the company, along with everyone, suffered from the financial crisis caused by the epidemic of the coronavirus COVID-19. On the 16th, Astralis’ stock price hit a record low of $ 0.58 apiece, with a starting price of $ 1.3.

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A similar drop is observed on the Allied Esports stock chart. They also reached historic lows in mid-March — roughly after the WHO announced the coronavirus pandemic — and came close in value to Astralis securities. On March 16, Allied Esports shares were sold at a price of $ 1.14 per share, although in August they were held at around $ 10 per share.

Anatoly Radchenko, co-founder of United Traders brokerage company, explained to Cybersport.ru why the shares of e-sports organizations are not popular in the stock market.

At the same time, the expert noted that, given the situation in the world – due to the coronavirus pandemic and quarantine regime – some investors may pay attention to the shares of such companies.

Radchenko said that the fall in Astralis shares is not a cause for concern, but rather a positive experience for the eSports club. According to the expert, attracting new investors is a long process, and at the moment the company is doing everything right.

2020 plans

In the financial statements, the companies also presented plans for 2023. Allied Esports limited itself to mentioning new partners – Brookfield Property Partners and Simon, with whom the organization is going to hold a series of e-sports tournaments in the USA and Australia. A major role in the company’s plans is played by the Poker World Tour, the competitions will be shown on TV.

Astralis talked about the plans in more detail. The leaders of the Danish organization expect to increase revenue to $ 8.5- $ 10 million, and negative EBITDA by the end of the year to reduce to $ 500- $ 700 thousand. This is supposed to be done by expanding the package of sponsorship contracts – it is expected that this will double the revenue.

The organization noted that it does not expect an increase in the amount of prize money won: Astralis spent a successful season in CS: GO and for most of the year was at the top of the world team table. Origen managed to take second place at the LEC, which was a success for the club.

In an appeal to shareholders, Astralis Group noted that it expects growth in maintenance costs for trains in 2023 – by about 20%. Part of the costs will be associated with the construction of a training base for teams in Copenhagen and the “arrangement” of home gaming stations for esports from Future FC. Cyber ​​football team is the only asset of the company, which is faced with the task of increasing results. From Origen and Astralis, management expects a repeat of the achievements of the previous season.

In conclusion, Astralis noted the risks for potential investors. In addition to a possible decline in the game form and potential changes in the legal aspects of eSports, the organization also noted the COVID-19 pandemic. According to the management, the company cannot predict how the situation will affect the e-sports scene, but admits that due to the epidemic it will not be able to fulfill a number of contractual obligations – in case the industry is left without major tournaments.