Hall of Fame Resort & Entertainment Company

Greetings and welcome to the Hall of Fame Resort and Entertainment Company second quarter 2021 earnings conference call. At this time, all participants are on a listen-only mode. A question and answer session will follow the formal presentation. If you would like to ask a question, you may press star 1 on your telephone keypad. If anyone should require operator assistance during the conference, please press star 0 on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Anne Grafis, Executive Vice President of Public Affairs. Thank you. Please go ahead.

Good morning, and thank you for joining us for our second quarter 2021 earnings conference call. Our latest press release, supplemental slides, and 10Q were posted yesterday evening after market hours. These documents can be found in the investor relations section of our website at hsreco.com. After this brief introduction, Michael Crawford, President and CEO, will give us an overview of the quarter's results and an update of our fiscal year priorities. Jason Crum, our CFO, will then provide detailed analysis of the quarter's financial results and update our fiscal 2021 outlook. During today's call, we will make forward-looking statements that reflect the company's current expectations about future plans and performance. These statements rely on assumptions and estimates, and actual results may differ materially due to risks and uncertainties. I encourage you to read the full disclosure concerning forward-looking statements in the earnings press release. Additionally, please note that the company uses non-GAAP results to evaluate performance internally, as detailed in the press release. We have posted a supplementary side deck summarizing the quarterly results. These slides can be accessed on our website and will be archived there along with a replay of this call. If you have additional questions after today's call, please contact me directly. It's now my pleasure to turn the call over to President and CEO Michael Crawford.

Thanks, Anne. Good morning, everybody. I have a few words that I'd like to just start with. The first are football is back, and it's back very strongly, and we're excited about it. Couldn't have been a greater enshrinement week for us. We hosted the game, of course, between Pittsburgh and Dallas. Just a couple of interesting stats for you. 7.3 million viewers, up 37% from 2019. It was broadcast on Fox, the largest viewed game on Fox since 2011. So two very storied programs. coming to life here at Tom Benson Hall of Fame Stadium at the Hall of Fame Village, powered by Johnson Controls. Absolutely an electric environment for those of you who watched. I'm sure you would agree. And then we went on to Entryment. And we hosted two Entryment classes. Again, I want to congratulate all of the inductees. Some fantastic speeches, really compelling, just exciting for the sport of football. But you can tell these gentlemen really want to do great things, both on the field and off the field, they've done them on the field and now it's their turn to have an impact elsewhere as well. And enshrinement, the two events that we broadcast on the NFL Network and on ESPN as well, over two million viewers in aggregate for those events. So why is that important? Well, it gave us a chance to create one of a kind experiences for our guests, things that you couldn't see in and around campus, VIP tailgate parties, balloon festivals, parades, all the types of things that you would expect to go with big events like we hosted. It gave us significant brand uplift, brand awareness as we welcomed tens of thousands of people to our campus watching these types of events and seeing all the great progress that I'll talk about around construction was really exciting and the commentary that came back to me was it was fantastic to see the progress in some of the buildings that were already coming out of the ground the things that we're going to be able to be present in the future for our guests to experience. And then lastly, of course, for our shareholders and our company, it generated multiple different types of revenue streams for us that these types of events absolutely are predicated upon. So a big week, something that is hard to replicate, but again, we've had multiple things over the last month. During that week, we also hosted our first co-produced live broadcast with World Chase Tag, the number one show on ESPN2 that day. It has since been re-aired on ESPN and on a lot of the ESPN social channels. So exciting for our media division to get out of the gate with such a successful opportunity there. Our Women's Football Alliance Championships, again, very well attended. Exciting to be able to play host to ESPN2. women who have played for decades in this sport and franchises that have been around for equally as long. I want to congratulate the Boston Renegades, the Derby City Dynamite, and the Nevada Storm. They all won their divisions, and the All-Star Game was also really an exciting game to watch. And then lastly, it was a week where we got to ring the bell for the NASDAQ closing, and being listed on the NASDAQ has been an honor. But again, more brand awareness for our company and all the great things that we've been doing across our three business units. We announced a partnership with eSports Entertainment Group. I'll talk about that in just a moment. And we also relaunched our NFT business, and I would say we've relaunched it quite successfully, and I'll talk about that as well. Let me turn to construction because I know there's been questions – being asked and a lot of thought being given around construction progress. We are no different than most out there today as it relates to challenges. Construction labor is challenging, logistics, trucking and shipping challenging, and yet our team of project managers and our partners in Turner and Hunt and Wealthy Construction Group have all done a very good job of contingency planning. We remain on course to finish our Center for Excellence. Some of you may have seen that in the background of all of those live events that I just spoke about. We remain on course to finish that in late Q3. We've continued the tenanting process there, and those tenants are expected to move in in Q4 and start generating revenue out of that facility as well, Q4. The fan engagement area at the east end zone, complete. So brand new Jumbotron, brand new area for fans to enjoy all of the different types of events, sport and non-sport, that we have in our stadium, and another way to monetize a particular area of that location. We've continued the expansion of our Village Youth Sports Complex, and we've done that for two reasons. One, we want to continue to bring great amenities for those participating in our youth sports, and two, we want to expand our capabilities to hold even larger events. This year we expect to welcome, again, hundreds of thousands of participants and fans into this area, so enhancing that was really important to us, and it's under construction and scheduled to finish in Q2 of next year. I've talked about site work, roadway realignments, all the things that we need to do from a utility point of view. That work continues. It's necessary for expanding and developing. Just in another week or two, we will be pouring foundations for our retail promenade. And then our steel arrives for that in late September, and we'll start to erect those buildings, which is really, really exciting. And then the last thing I'd say is our Center for Performance. We have done the site formation work for our Center for Performance Recall. This is our indoor facility that will allow us to expand sport to basketball and volleyball, wrestling, band and cheerleading competitions. But it will also give us a facility where we can host big events. Could be concerts, but it could be other types of festivals, home and garden shows, et cetera. Again, expanding upon our business model and creating year-round attendance to the destination, flattening out seasonality. And this work is really progressing still in a very challenged timeframe. I mean, we all understand what COVID is and where it's at with the Delta variant. But we've challenged our team and our team has responded to make sure that we are contingency planning, as I said, but also adjusting for timing, logistics timing, and making sure that we take advantage of, you know, pricing when we can. and also being pragmatic about when we want to price other items to come in. Our goal is still to finish construction by 2023 with the water park being the last destination that will be there simply because of how long that destination takes to create. That leads me into probably one of the most important topics that I'm sure is on everybody's mind. And we spoke about this at the last call, construction loan and timing of a construction loan. Let me start off by saying that construction loan itself, that actual facility, is a part of the overall construction financing that we have continued to put in place. We have several term sheets and, in fact, signed two of them this week for different types of construction financing. Not the traditional construction loan, in essence, But we're wanting to be very pragmatic about the timing of the facility that we put in place. Construction lending is expensive right now. Again, a tough environment for construction lending as evidenced by some of our peers in different industries in the leisure tourism industry. And our philosophy is we want to make a good decision versus a quick decision. As I just said, construction is continuing. If you know about creating destinations, you'll know that the actual construction loan itself is the last piece of the capital structure that gets spent. You start with your equity, you move through the other public and private financing vehicles that you put in place, and then into the construction loan. So while we have still continued a lot of conversations about the actual construction loan itself, and those conversations are continuing right now, again, we're gonna make the best decision for our shareholders and for our company. And we want a capital structure that is going to be cost effective. And so we're trying to place multiple pieces of that capital structure in place with different types of construction lending to take full advantage of that. And in fact, I would say lower cost construction financing so that when you aggregate overall, it's a much more affordable financing tool and vehicle that we have in place. I hope that helps people understand that Our goals haven't changed. The goalposts haven't moved. But we are being pragmatic, as I said, and quick is not best. Smart and timing of making that decision is really what we're focused on. So as that progresses, we will provide more updates to you on that. The other one that I'm sure is on everybody's mind, because I get asked this question a lot, Mike, what about sports betting? And where are you with sports betting? Recall that we signed a deal with Esports Entertainment Group, and we did that for two reasons. One, they are the absolute best in esports gaming, and we always made, for our gaming division, esports a priority. We were fortunate with Grant Johnson and his team to sign a deal that we think is going to bring tens of thousands of people to our destination for esports tournaments. We're building an esports helix complex There will be an educational component attached to this so we feel very good about what eSports and how eSports will be represented in our location, but if eSports were to become part of the sports betting gaming environment here in Ohio if it were to be legalized we also have a partner that has strong capabilities on the eSports betting front and so we stay very closely connected to what I would refer to as the legislators, the key legislators that are forming the bill and that are putting the bill forward for approval. I think we are well positioned as a company and as a destination to achieve our goal of having a license, a sports betting license at the appropriate time. I think the target of September is one that's been publicly articulated by the legislators And so we are continuing our conversations with key sports betting partners in hopes that we will have a sports betting partner in place as that legislation becomes law. This has not changed from the last update that I provided. I'm excited about the conversations we're having. People are excited about Ohio. I should say companies are excited about Ohio in general and the access to Ohio. And again, as a company that's at the crossroads between sports and entertainment, I think it makes complete sense for us to be in the sports betting environment, and partners, I think, are seeing that. And so we're working diligently, our entire team is, on having a partnership in place at the appropriate time. Let me move on to our Q2 overview and some of the big plays, I would say, that we made during Q2. And across all of our business units, we are really focused on creating synergy between the different business verticals that I spoke about, theme, destination-based assets, our Hall of Fame Village Media Company, and our gaming division as well. Entryment Week is a good example of that. People came, they stayed in our hotel, they hosted big events in our hotel, food and beverage sales were very high, concessions at the stadium, admissions at the stadium, a lot of outside entertainment and hosting. But the synergy between the other things that we had going on, we took advantage of that weekend to host our World Chase Tag. And World Chase Tag, as I mentioned, number one program on ESPN2 and has been reshown on ESPN platforms. We also took advantage of that platform to launch our next round of NFTs that, by the way, are selling quite well into the hundreds with our athletes that we've launched. And I would say the product that we've partnered with Dolphin and created and listed on FTX has been absolutely phenomenal, well received, easily accessed, and so we think as we listen to our investors through our first launch, we've taken significant steps forward in making this product compelling, accessible, and something that is very collectible in the digital space. In terms of our destination-based assets, As you would expect, our Doubletree, the hotel was sold out multiple times during Q2 and over-entryment weekend. ADR is improving quarter over quarter. Weekend occupancy is improving in line with industry trends. And the data is showing that the hotel industry overall is improving and reaching a more normalized state. Of course, you could ask the question about the variant and the impact. We keep a very close eye on that. But as I've stated before, we sort of provide the gas to fuel the engine ourselves. Our youth sports program, our concerts, our festivals, things that we're hosting here, Women's Football Alliance Championships, we're filling our own hotel, and that generates our own business. And more of that will be coming, and I'll talk about that as we look forward to Q3. We're already pre-wired to have a lot of occupancy in our hotel asset. I talked about the Center for Excellence on track, on time for completion. And in fact, I'm being told slightly under budget, which is a good thing. We feel very good about our ability to project manage these assets. We stay close to the commodities markets, steel and lumber. We believe things are starting to normalize a bit, even though some of the logistics challenges we're having. And then again, hosting numerous events in our Tom Benson Hall of Fame Stadium throughout Q2. Multiple more now booked in Q3 and Q4 from small to large. We had a lot of success in our east end zone that we completed. The environment we've created in our stadium really is one of a kind. You feel immersed in whatever event that you're attending between the jumbotron at the east end and our video mesh wall that is still being constructed at our west end on the Constellation Center for Excellence. Retail, we signed partnerships with multiple more groups, Starbucks, our esports entertainment group for that Helix location in our retail promenade. And that's in addition to Shula's and Topgolf Swing Suites. And then also in our Center for Excellence, the agreement we signed with NFL Alumni Health to become a tenant there to really do a lot of innovative work in the area of brain trauma. So exciting progress on partnerships as well. From a media perspective, A lot of new things going on. Existing products that we announced last year, we did make the announcement that the NFL Alumni Academy is gonna come back for a second season. Again, programming for our stadium, programming for our media division. We are out now selling that program in partnership with Sports Illustrated and Studio 101 for the second season. So really looking forward to bringing that docuseries to life. I talked about World Chase Tag co-producing that first live event for our media company. I couldn't have been more proud of the team and how that turned out. NFTs, you know, an unplanned business, but showing how nimble we could be. Listening to our investors, launching with greater quantity, slightly different product, and I think it's been very well received. We have six players out there today with multiple NFT projects. digital collectible assets, and our intention is to add more. If you think about the access that we have to the NFL, previous NFL players, the alumni players, our Hall of Famers, and the archives in the Pro Football Hall of Fame, our intention is to create great digital collectible material that our guests will come back to and look at and buy over and over again. Inspired is the show that we have begun production on, or I should say will begin production on later this year. It will air in 2022. And it really does highlight, I think, the essence we're about, inspirational stories of NFL players doing great things in their communities. And so another show that our media company is intimately involved with. And then Heisman to Hall, I spoke about last time, the 10 players ever to have been inducted into the Pro Football Hall of Fame and also won a Heisman Trophy. More men having walked on the moon than having those two distinctions bestowed upon them. Now funded, going into production, and we hope to have a partnership for distribution on that product in the very near term as well. And by the way, just to mention, that is a good example of not only is it a media project, a documentary that we can developed, but it also fueled part of our NFT program with four of those Heisman to Hall players becoming part of the NFT collectible series that we have. Our gaming division, listen, if you're excited about fantasy, you better be excited about our Hall of Fantasy League. I mean, this is a one-of-a-kind league. Draft happening this Sunday, 5 p.m. Starts with the Vegas Pocket Kings, Seattle Hays, Philadelphia Powder Kegs, New York Bodega Cats, Boston Barflies, LA Sidekicks, Ohio Goats, Chicago Hog Mollies, Texas Yollers, Atlanta Hot Wings. I mean, if you're not jazzed about those names, those logos, those brands, I mean, come on. These are great, great fantasy football franchises. But more importantly, we announced our commissioner, Terrell Davis. I could not have more respect for this guy. If you've seen some of his recent communication, I had a chance to talk with him over in Triamond. He is over the moon jazzed about this league. He asked me about his powers and his authority in the league and how he could dole those out. You know, I simply said, TD, make it happen. You're our guy. And he is a guy of integrity and a guy who has a lot of desire to make this fantasy league work. Going beyond that, we announced our front offices. And again, as we always said, the tie to us is not just brand. It's professional football expertise. And it comes in two forms in our front offices. professional fantasy football expertise with people who have played fantasy and have had great success in fantasy, comprising sort of the GM area of our front office, and then professional football players who have had great success on the field who have also been excited about the fantasy opportunity. This is a multi-billion dollar industry. And when you look at guys like Joe Thomas and Patrick Chung and Harry Douglas and others that we have put in the front offices, These are guys that have played on the field of battle and know exactly how to think about the guys that are playing today. So they're providing real expertise to those that are already staking teams. I would encourage you as the draft and leading up to the draft to go and stake a team. Our Ohio Goats team is staked out. But as we continue to stake more teams, we may reopen that. And that's a good sign that the demand is already there without even knowing the teams. because of the faith in the brand and the faith in the front offices and Terrell Davis as our commissioner. A lot of credibility around this league, but more importantly, I think we're bringing an experience that no one has ever had before. And so, even recently, our commissioner issued a challenge where we're offering sort of a match stake for a certain number of stakers coming into our ecosystem. There is a possibility, a slight possibility I've talked about before, These teams play each other virtually. The league, the schedule is out. If you go onto our app that we also launched, you'll see the games every week and how they're being played. Sports betting could become a part of our ecosystem there as well, either this year or next. And I think most importantly, it gives us another opportunity to engage with fans at our destination, potentially hosting live drafts in the future, although our draft on the 15th will be virtual. We did have our camera crew here and Jeff Eisenberg here capturing a lot of emotion from the players that will be aired during our draft this coming Sunday. So really excited to continue to build our gaming environment with our Hall of Fantasy League. And in esports I spoke about this Helix complex that we're going to have will host some of the big tournaments around the country and one of those were planning on in the near term, sort of after the construction of the facility and the completion of that sort of Q2 next year. Sports betting is still a big part of what we're doing. As I said, we're monitoring and staying diligent around partnerships. And then lastly, we added more partner sponsors. And we have found a lot of excitement across the different types of sponsorship categories that we have, American Standard, Hendrickson, you saw we just announced Anheuser-Busch as well for our music festival, and multiple others in the queue that I think are going to add great value to us in terms of our capabilities, our ability to speak to different audiences, and also to monetize and bring more revenue to the bottom line. So a lot of things going on. You can certainly look at our two new apps that we launched in partnership with One with venue ties, our Hall of Fame Village app that gives you everything you want to know, all the events, all of the construction progress updates, and then our Hall of Fantasy League that keeps you going active with our fantasy launch with our draft on the 15th. Let me now just stop, and I'll turn it over to Jason to go over our financial results.