Guild Esports . Regulatory News (GILD)

The information contained within this announcement is deemed by the Company to constitute inside information stipulated under the Market Abuse Regulation (EU) No. 596/2014, as retained as part of the law of England and Wales. Upon the publication of this announcement via the Regulatory Information Service, this inside information is now considered to be in the public domain.

Press release

30 June 2022

Guild Esports PLC

("Guild Esports", "Guild" or "the Company")

Interim results

Board change

Guild Esports, (LSE: GILD; OTCQB: GULDF), a global teams organisation and lifestyle brand, is pleased to announce its unaudited financial results for the six months ended 31 March 2022.

Financial highlights

· Revenues increased by 195% to £1.09m (H1 2021: £0.37m), reflecting strong growth in sponsorship income

· Gross profit rose more than 6-fold to £0.71m (£0.11m)

· Loss before tax amounted to £4.96m (H1 2022: £4.28m) reflecting investment in teams and operational staff, corporate infrastructure, Guild Academy and content creation

· Net cash of £6.1m as at 31 March 2022

Operating highlights

· Signed £4.5m three-year sponsorship deal with Bitstamp, Guild's largest sponsorship deal to date

· Launched an all-female roster for Valorant

· Commenced share trading on the US OTCQB Venture Market

· Won two major esports trophies, including Fortnite Champion Series Grand Royale in November and Fortnite Champion Series EU Final in March

Post-period highlights

· Opened global headquarters and Guild Academy in London's Shoreditch on 29 June 2022

· Won sixth major esports trophy in the EA Sports FIFA eChampions League in May 2022

· Qualified for Valorant Masters Tournament in Copenhagen this July

Outlook

· On track to deliver further strong revenue growth in the second half compared with H1, driven by contracted sponsorship deals signed previously

· Annualised operational cost base to decrease by approximately 20% as a result of cost-cutting and greater efficiencies being achieved as Guild gains scale

· New business pipeline remains robust with more than 30 prospective sponsorship deals in various stages of development, of which several potential deals are in advanced discussions with a range of brand owners and advertisers from multiple sectors

Commenting on the results, Kal Hourd, Chief Executive Officer, said: "Guild has achieved strong revenue growth in the first half as we benefitted from the hard work and investment made in the business during our maiden year of operations in 2021. Our pipeline of potential partners and sponsors continues to strengthen, and the momentum gained in the first half has positioned Guild for an even stronger second half.

We have also crossed another significant milestone with the opening of our new global HQ and Academy, which will provide further commercial opportunities to drive growth and create shareholder value. Our esports teams remain at the top of their game and consistently qualify for major competitions, thereby gaining the attention and interest of fans and brands across the esports universe, and we look to the future with confidence."

For further information, please contact:

About Guild Esports:

Guild Esports PLC is a global fan-focused team organisation and lifestyle brand that fields professional players in gaming competitions under the Guild banner. Our in-house training academy aims to attract and nurture the best esports talent, and our goal is to provide the ultimate entertainment experience alongside a distinctive lifestyle brand authentic to the esports community worldwide. Guild is led by an experienced management team of esports veterans and co-owned by David Beckham. The Company is headquartered in the UK and its shares are listed on the main market of the London Stock Exchange (ticker: GILD) and on the OTCQB Venture Market in the United States (ticker: GULDF). Please visit www.guildesports.com for more information.

Interim Management Report

Overview

Good progress was made in the first half to 31 March 2022 as Guild Esports gained increasing momentum following the launch of its commercial operations and the scaling up of the business last year.

Group revenues tripled to £1.1m in the period under review, reflecting a strong contribution from contracted sponsorship deals signed last year and in January 2022. The growth in revenues is particularly pleasing as the Company terminated a £3.6m three-year sponsorship deal in October 2022, potentially impacting its expected revenues for the current year.

However, the aborted deal was more than offset with a new and significantly larger contract win in January 2022, which will generate a total of £4.5m revenues over three years. The first half result included a first-time contribution from this contract as well as from other sponsorship deals signed previously.

The loss before tax increased to £4.96m from £4.28m, attributable to a significant ongoing investment across the business to support growth and establish Guild as a leading global esports teams organisation, in line with its stated strategy.

While the Company's long-term prospects are underpinned by favourable industry fundamentals, the Board is mindful of the continuing cash requirements of the business in the light of growing global economic uncertainty and challenging capital market conditions. As a result, significant action was taken in the first half to streamline the Company's cost base. These measures include a rationalisation of suppliers and right-sizing staff numbers from an average of 45 as at 31 March 2022 to 30 at present. In addition, the Company is also generating greater efficiencies as it gains operational scale following its transition from start-up phase to becoming an established esports organisation. As a result, the Company expects to reduce its cost base by approximately 20% from the second half of 2022, without jeopardising the value offered to its sponsors and partners.

Net cash as at 29 June 2022 amounted to £3.5m, net of accruals.

Operating review

The Company signed two new sponsorship agreements in the first half, increasing the total complement of international brands backing Guild's esports teams to five. In January 2022, the Company clinched its single biggest sponsorship deal with a £4.5m three-year agreement with Bitstamp, the blue-chip crypto exchange.

This was followed by a two-year deal with Razer Gaming Chairs, the world's leading lifestyle brand for gamers.

These two sponsors joined Subway, Samsung and Hyper X, who became Guild partners last year. The Company worked closely with all five brands to help them reach esports fans worldwide with targeted content as well as compelling performances by Guild's esports teams competing in Valorant, FIFA, Fortnite and Rocket League. We decided to exit Apex Legends after evaluating that it did not offer sufficiently attractive commercial options at present.

The total contracted sponsorship revenue currently stands at £8.56m, up from £8.4m as at 31 January 2022, spread over the lifetime of contracts signed to date. Guild's pipeline of new business has also continued to expand due to keen interest from potential new sponsors and partners from many different sectors including beverages, media and telecoms, consumer electronics as well as other consumer brands. These prospects range from global brand advertisers to endemic esports companies.

As a result, the pipeline remains robust with several potential deals currently in the advanced stages of discussions, some of which have been under negotiations for several months. While there is no certainty when these prospects may get signed, the Company remains confident of its new business prospects for this year and beyond.

Audience

Guild's own audience for the period peaked at 22 million, averaging approximately 16 million during the period. The Company is broadly on track to achieve an audience network of between 25-30 million as previously announced by the end of 2022.

New head offices and Academy

The creation of a physical site for the Guild Academy and global HQ in London's trendy hi-tech area of Shoreditch became reality on 29 June 2022. A 10-year lease for the premises was announced in January 2022 and sparked much interest from fans and commercial partners alike. While the premises are now fully operational with staff due to complete their move-in by 30 June, Guild plans to hold a grand opening of the site later this year, pending the conclusion of discussions over the naming rights to the HQ and Academy with potential sponsors. A further announcement will be made in due course.

Guild has also formed partnerships with local schools and colleges, to work with talented students and demonstrate the benefits of the professional world of esports through its Academy system, including in-person sessions with Guild's professional coaches. Alongside in-game coaching, the schools Academy will also educate children on all of the factors that go into becoming a professional esports athlete, including proper nutrition and physical fitness. The digital sessions will also teach children how to stay safe online.

Esports teams

The Company's esports athletes and teams continue to delight fans and esports followers with their exciting game play and victories. Two major trophies were won in the period, including Fortnite Champion Series Grand Royale in November and Fortnite Champion Series EU Final in March.

As at 31 March 2022, the Company's total pro player roster was 21 compared with 17 at the same time last year.

Board change

The Company today also announces that David Gardner has stepped down as a non-executive director with immediate effect to pursue his other business interests. The Board would like to thank him for his wise counsel and support during the Company's formative years.

Outlook

The Company is benefitting from strong momentum driven by increasing revenue contribution from sponsorship deals signed previously. As a result, second half revenues are expected to show further strong growth compared with the first half.

Operating expenses are expected to fall significantly from the second half due to a cost reduction programme and greater efficiencies that will lower Guild's cost base by approximately 20% on an annualised basis.

The Company's pipeline of potential new sponsorship deals continues to strengthen, with approximately 30 prospective deals in various stages of development including several in advanced negotiations. Given the strong pipeline and esports industry fundamentals, the Board looks to the future with cautious optimism.

Kal Hourd

Chief Executive Officer

29 June 2022

Key risks to business

Responsibility Statement

We confirm that to the best of our knowledge:

· the Interim Report has been prepared in accordance with International Accounting Standards 34, Interim Financial Reporting, as adopted by the EU; and

· gives a true and fair view of the assets, liabilities, financial position and profit/loss of the Company; and

· the Interim Report includes a fair review of the information required by DTR 4.2.7R of the Disclosure and Transparency Rules, being an indication of important events that have occurred during the first six months of the financial year and their impact on the set of interim financial statements; and a description of the principal risks and uncertainties for the remaining six months of the year.

· the Interim Report includes a fair review of the information required by DTR 4.2.8R of the Disclosure and Transparency Rules, being the information required on related party transactions.

The Interim Report was approved by the Board of Directors and the above responsibility statement was signed on its behalf by Kal Hourd (CEO), on 29 June 2022.

CONDENSED STATEMENT OF COMPREHENSIVE INCOME

The unaudited condensed statement of comprehensive income of the Company for the six months ended 31 March 2022 is set out below.

CONDENSED STATEMENT OF FINANCIAL POSITION

The unaudited condensed statement of financial position of the Company as at 31 March 2022 is set out below.

CONDENSED STATEMENT OF CHANGES IN EQUITY

The unaudited condensed statement of changes in equity of the Company for the six months ended 31 March 2022 is set out below.

CONDENSED STATEMENT OF CASH FLOWS

The unaudited condensed statement of cash flows of the Company for the six months ended 31 March 2022 is set out below.

NOTES TO THE CONDENSED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED 31 MARCH 2021

1 Accounting policies

IAS 8 requires that management shall use its judgement in developing and applying accounting policies that result in information which is relevant to the economic decision-making needs of users, that are reliable, free from bias, prudent, complete and represent faithfully the financial position, financial performance and cash flows of the entity.

1.1 Basis of preparation

The condensed interim financial statements ("interim financial statements") have been prepared in accordance with International Accounting Standard 34 "Interim Financial Reporting" (IAS 34) as adopted by the European Union (EU). The interim financial statements have been prepared on the historical cost basis, except for assets and liabilities measured at fair value through profit and loss, and are presented in pounds sterling, which is the currency of the primary economic environment in which the Company operates. All amounts have been rounded to the nearest pound, unless otherwise stated. The financial information contained in the interim financial statements is unaudited and does not constitute statutory accounts within the meaning of section 434 of the Companies Act 2006. The accounting policies are unchanged from those disclosed in the previously filed audited financial statements for the period ended 30 September 2021.

The interim financial statements are for the six months to 31 March 2022, being six months from the financial year end for Guild Esports Plc ("Guild" or "the Company"), 30 September 2021. The interim financial information does not include all the information and disclosures required in the annual financial statements and should be read in conjunction with the Company's annual audited financial statements for the period ended 30 September 2021. The Company has disclosed comparative data for the statement of comprehensive income for the Company for the period from 1 October 2020 to 31 March 2021, being not materially different from comparative data for the six months ended 31 March 2021.

The condensed interim financial statements have not been audited, nor have they been reviewed by the Company's auditors in accordance with the International Standard on Review Engagements 2410 issued by the Auditing Practices Board. The figures have been prepared using applicable accounting policies and practices consistent with those adopted in the audited annual financial statements for the year ended 30 September 2021.

1.2 Going concern

The preparation of financial statements requires an assessment on the validity of the going concern assumption.

The interim financial statements have been prepared on a going concern basis, which assumes that the Company will continue to meet its liabilities as they fall due.

The Company has cash and cash equivalents of approximately £6.1m at 31 March 2021 and the Directors are of the view this is sufficient to fund the expenditure over the next 12 months from the date of approval of these interim financial statements.

This is further supported by a review of the Company's financial commitments and future committed outflows and hence the directors have a reasonable expectation that the Company has adequate resources to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing the interim financial statements.

1.3 New and amended standards adopted by the group

A number of new or amended standards became applicable for the current reporting period. These new standards will have a material impact on the Company reporting going forward as they adopt the changes in relation to treatment of leases (IFRS 16). The Company has adjusted its accounting policies but will not be required to make retrospective adjustments as a result of adopting these standards.

The Company is not affected materially by the effects of seasonality. Regardless of this fact comparative figures to the period ending 31 March 2021 have been included for comparability and increase the comprehensibility of the financial statements.

The directors have concluded that there are no key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year.

2 Critical accounting estimates and judgements

In the application of the Company's accounting policies, the directors are required to make judgements, estimates and assumptions about the carrying amount of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised, if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements, are disclosed below:

i) Share Based Payments: In previous periods, the Company issued warrants and the directors have applied the Black-Scholes pricing model to assess the costs associated with the share-based payments. There have been no new dilutive instruments issued in the period and the values of the Share Based Payment account have been assessed as still being materially accurate from the balance at the end of the last reporting period.

ii) Deferred revenue: as per IFRS 15 the Company has allocated amounts to the Statement of Financial Position where performance obligations within the relevant contracts have not yet been satisfied.

3 Revenue

4 Cost of sales

5 Employees

The average monthly number of persons (excluding directors) employed by the Company during the period was 45 (2021: 18).

The aggregate remuneration of employees and directors comprised:

6 Earnings per share

The basic earnings per share is calculated by dividing the profit/(loss) attributable to equity shareholders by the weighted average number of shares in issue.

The Company had in issue 37,914,360 warrants and options at 31 March 2022 (41,247,694 at 31 March 2021). The loss attributable to equity holders and weighted average number of ordinary shares for the purposes of calculating diluted earnings per ordinary share are identical to those used for basic earnings per ordinary share. This is because the exercise of warrants and options would have the effect of reducing the loss per ordinary share and is therefore anti-dilutive.

7 Trade and other receivables

The directors consider that the carrying amount of trade and other receivables is approximately equal to their fair value.

8 Trade and other payables

The directors consider that the carrying value of trade and other payables is approximately equal to their fair value.

9 Leases

The Group had the following lease assets and liabilities:

Right of use assets

A reconciliation of the carrying amount of the right-of-use asset is as follows:

Lease liabilities

A reconciliation of the carrying amount of the lease liabilities is as follows:

10 Share-based payments

The following options and warrants over ordinary shares have been granted by the Company and are outstanding:

At the grant date, the fair value of the warrants issued have been determined using the Black-Scholes option pricing model. Volatility was calculated based on data from comparable esports companies, with an appropriate discount applied due to being an unlisted entity at the grant date, if applicable. Risk-free interest has been based on UK Government Gilt rates.

11 Share capital and share premium

No shares were issued in the period from the Company's last annual report on 30 September 2021 to 31 March 2022.