Ese Entertainment (TSXV: ESE, OTC: ENTEF) is a global gaming and technology company providing a range of services to leading video game developers, publishers, and brands. The company was famous during the Covid pandemic but lost some brightness over time. Is the company still a valuable investment? Should you be wary of the company? Here is an overview of the company to enable you to have the right cards in your hands when the time comes to invest somewhere. 

Market Overview 

Like many tech sectors, the egaming industry benefitted from Covid lockdowns. According to Harvard Business Review, adapting to working from home (WFH) presented unforeseen creative hurdles for those employed in the gaming sector. Lockdowns may have converted millions of us into gamers. In 2017, video games only accounted for 6.1% of global spending in the entertainment and media sector. By 2026, however, as gaming gets even more popular, it is predicted that it will account for 10.9% of this spending. In 2021, the market was led by China and the US, accounting for roughly half of gaming and eSports income. Future expansion might, however, come from less developed nations with burgeoning populations. According to the PwC analysis, Turkey will have the fastest game sector growth, with an average annual growth of 24.1% between 2021 and 2026. Pakistan will come next, expanding by 21.9%, and India expanding by 18.3%.

While the sector was “only” worth US $120.4B in 2021, the sector is expected to grow quickly to reach $321.1B by 2026. 

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Company Overview 

ESE is a multinational entertainment and technology firm that specializes in esports and gaming. We offer technology, infrastructure, and fan interaction services to top video game developers, publishers, and brands on an international scale. ESE also runs its online stores, esports squads, and competitions for video games. Konrad Wasiela, a former professional football player, launched the business in 2019. Today, ESE has expanded to include numerous assets and top-tier players in the gaming and esports sectors. Our primary area of expertise is expanding game awareness and introducing new players and users to video game developers. To ensure the success of your game, we work closely with you and your team using our technology and approach.

Here are a few highlights that occurred over the last quarter: 

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On August 15, 2022, ESE announced that its media production division would produce two live in-person esports events, the finals of the League of Legends Ultraliga and Teamfight Tactics competitions.

On October 6, 2022, ESE announced that it had entered a USD$5 million contract to deliver its technology and user acquisition services to a European video game developer and publisher.

On October 26, 2022, ESE announced that its gaming technology division became a certified Google Partner.

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Share Structure / Financials

For the fiscal year ending October 31, 2022, the company had $812k in cash, $21M in total assets, and $19.2M in liabilities. ESE generated $58.8M in revenue, but the $51.1M in sales costs darkens the picture. The $7.6M gross profit didn’t enable the company to remain profitable. The company endured a $29.8M loss, and the most significant expenses were accounted for share-based payments ($13.2M), wages, benefits and consulting ($3.6M), and general and administration expenses ($1.8M).

Besides, we can highlight that the fiscal 2022 gross profit is 569% up versus 2021, and annual consolidated revenue increased by 417% compared to 2021. 

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“We are thrilled to announce our 2022 audited financial results, which showcase our strongest performance to date with record-breaking revenue, gross profit, and improvement in adjusted EBITDA,” said Konrad Wasiela, CEO of ESE.

79M shares are issued and outstanding, and 52M shares are part of the public float (insiders hold 34% of the share structure). The company also holds 8.9M warrants (avg. price: 1.83) and 6.8M options (avg. price: $0.68).

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Like many egaming companies, Ese’s stock price witnessed a considerable increase during covid, but now the stock has gone under the dollar range. Over the last 52 weeks, ESE fluctuated from $1.10 to the final bottom at $0.265. 

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Here are other financial events that occurred: 

• ESE completed a private placement offering of secured convertible debenture units of the company on January 16, 2023, for a gross amount of $1,250,000.
• The Company executed the $2.1 million final cash payment required under the conditions of its acquisition of GameAddik on January 20, 2023.
• ESE executed a non-brokered private placement fundraising of units in January 2023 for a total gross amount of $2,000,000 divided into three tranches.

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Bottom Line

Ese Entertainment (TSXV: ESE, OTC: ENTEF) shows promising progress but must work on some points. The company worked on its foundations, strengthened its balance sheet thanks to several private placements, and did several partnerships and innovations. We also have to highlight that its revenues and gross profits are growing rapidly. Besides, the company still struggles to return positive quarters, which could be an issue in the long run as it would mean Ese would have to constantly raise money. The stock price is close to its 52-week low and needs to gain investors’ trust. 

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