Hall of Fame Resort & Entertainment Company

Good morning and welcome to the Hall of Fame Resort and Entertainment Company's fourth quarter 2021 earnings conference call. This conference call is being recorded and all participants are in a listen-only mode. We will open the conference up for questions and answers following the prepared remarks. I will now turn the conference over to Anne Grafis, Executive Vice President, Public Affairs.

Thank you, Kyle, and good morning. Thank you all for joining us for our fourth quarter 2021 earnings conference call. Our latest press release, supplemental slides, and Form 10-K were posted yesterday evening after market hours. These documents can be found in the investor relations section of our website at hofreco.com. After this brief introduction, Michael Crawford, our president and CEO, will give an overview of the quarter's results and an update of our fiscal year priorities. John Van Buten, vice president and corporate controller, will then provide analysis of the quarter's financial results as well as an update of our fiscal 2022 financial 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 slide 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 any additional questions after today's call, please do not hesitate to reach out to me. It's now my pleasure to turn the call over to President and CEO, Michael Crawford.

Good morning and thank you, Anne. Well, we've got a lot to talk about this morning. 21 was an incredible year on many fronts. I thought maybe I'd just start off by talking about how the professional football season went for the NFL. In December, we were concluding the regular season. You could feel the momentum build. You weren't quite sure who was going to be in the playoffs and the championship. COVID was still there. Injuries were abounding. And yet, people were tuning in every single weekend to the games because it is clearly the most popular sport in America. As we entered into the playoffs and the Super Bowl, could you have asked for any better games than what you saw? Almost every single game being decided by a last second field goal, a last second play, and then it was no different in the Super Bowl. And it was really quite incredible to know that 112 million people worldwide watched the Super Bowl. Now to put that in perspective, On average, you had 10 million viewers per game last year for the NBA Finals, and you had about 12 million viewers per game for the World Series. Both incredible sports, both with great athletes playing in each of those series, but clearly professional football and what we're doing in terms of our company building off of the popularity of the game is stronger than it ever has been before. On a macro level, it was also great for us to see things like airline travel rebounding back to the 2019 levels. Now, 2021 was an up and down year. We had COVID start the year, we took a break in the summer, and then we had Omicron come back. But as of February of this year, 2022, you see increased levels of air travel, hotel stays, and it's very encouraging for us to see as a company that's building and has already built leisure tourism assets. A couple of other things interesting for us, sports betting. The Super Bowl reached record highs in terms of sports betting. And now with the legalization of sports betting and the legislation that was passed last year in Ohio, we're very optimistic about our opportunities to bring a presence both here on campus and a virtual experience that our guests and fans will enjoy. And I'll talk about those in just a couple of moments. One of the things, though, that is really clear to us in all the difficulties that we've faced as a human race over this past year is that never bet against the consumer, and no pun intended. Never bet against our ability to desire an opportunity to escape and create the chance for ourselves to get away from the realities of the world. And that fits right into what we're doing in both creating physical and virtual environments for our guests to enjoy. You know, for us in 21, again, I would characterize the year as an investment year. We developed our physical assets, and we continue to do that. We developed our virtual environments. We clearly brought more people to campus for events. We grew revenue, as you saw in our release last evening. Attendance to those events rebounded from even the 2019 levels certainly beyond 2020, and we set records for attendance on our campus in 2021. All of that signals, you know, the momentum that we have behind us and the excitement that we feel in all of our business verticals as we continue to grow. And frankly, in 2022, we've already made some pretty significant announcements as well, creating an even stronger foundation for us to build off of as we go through this year. Before I jump into 2021 results and some of the key highlights, I did think it was important though to take a step back and put in perspective some of the recent financial transactions and happenings that we've had as a company. You saw recently that we talked about the extension of about $38 million of debt that was coming due this year. We worked very closely and negotiated with our largest shareholder, Industrial Realty Group, and our single largest shareholder, Stu Lichter, to put in place not only the opportunity to extend that over the next two to three years, but to garner additional commercial loans as well. And I'll talk about those in just a moment. Again, what that meant for us as a company is, Extending and flattening the debt profile allowed us to be an even more attractive investment or an even more attractive opportunity for other commercial lenders to come in and finalize the cap stack that we've talked about. We are now in possession of over $150 million of term sheets to finish the assets that we're building here on campus. Let me just talk about what that means. We've received a $4 million executed term sheet for our Center for Performance. We've received a $17.4 million executed term sheet for our fan engagement zone or our retail promenade. We have $75 million worth of PACE lending term sheets that we've executed, $50 million for our theme park, or sorry, our water park and hotel, and another $25 million of refinancing for our stadium. And then lastly, and probably the most difficult part of our capital stack, we've received two term sheets for $50 million of senior lending debt for our water park and hotel. What that means to everybody is we've finished the money that we need from a senior lending point. We're executing that right now. And it gives us the ability to continue to build the destination and complete the assets in phase two. and complete the cap stack with other non-traditional forms of financing that I've spoken about in the past. This just-in-time financing model that we launched last year, we were very clear that taking on $200-plus million of debt all at the same time was not the best decision for us as a company. It would be too costly, and it wasn't practical in terms of what we needed in the context of how we were building and what we were building and the timing of those assets. You know, this has been a year in 2021 that had COVID as a continuation facing all of the issues related to COVID in terms of supply chain, the volatility of the financial markets, the lending markets, and also inflation, rising inflation. The team executed. The team was able to garner the financial support that we needed. And the biggest reason for that is I think the lenders that we're working with now see the history of execution, the reliability of growth, the opportunity to invest in something that will be pretty special and unique that gives those guests and fans an escape that I just talked about from the harsh realities of the world that we're all facing today. All of that is very encouraging for us as a company, and it allows us to maintain our construction schedule as we've talked about in the guidance that we've given to complete a good majority of the assets this year, and then finishing with the hotel-water park combination in Q3 of next year. We've done all of this also, by the way, in an environment where supply chain has created difficulties for almost every company that is building an asset around the world. However, we've maintained our construction schedule. And honestly, we have now reconfigured some of the way in which we're building and the timing of assets we're building to a place that we're slightly under budget, believe it or not, from our original cost projections to build the phase two assets. That's a pretty incredible feat. And I give the team a lot of credit for being creative in the difficult environment and having the opportunity to work directly with our contractors and our suppliers to to be innovative in our solutions. So a really key year for us and start of this year in terms of obtaining that much financing in an environment where that's not necessarily been the case for many others. Lastly, we've also added great talent. We continue to do that through 2021 and you will have just seen in 2022, we added two key executives to our team. Firstly, Rob Borm, who is our executive vice president of gaming. Our gaming division has grown to a place where we needed dedicated leadership. We needed strategic leadership. And Rob has over 20 years of experience in the video game industry, esports industry, and also brand sponsorship and growth in sales. That's what we're focused on here, growing the revenue for that vertical. We now have esports. We now have fantasy sports. And we also have the opportunity to have sports betting as a part of that gaming vertical. And Rob has a history of being very entrepreneurial and growing new businesses. And so we're excited to have him start as of yesterday. The next addition to the team which was critically important to us is Ben Lee as our new CFO. And Ben is joining us from one of the largest and most prestigious financial institutions in the U.S. where he headed up several of their lines of business as CFO. He's bringing in a wealth of capital market experience, and he's evolving and growing our financial experience and expertise in a way that's going to be very relevant for us as an operating company. As we finish up our financing efforts in this year and continue to create assets both physically and virtually, Rob coming in and leading our finance team is very important for us to continue to evolve the experience and oversight there. Let me talk a little bit about each of our verticals in 2021, and I'll start with our theme destination-based assets. Our Doubletree downtown Canton hotel completed its first year of operation. Hard to believe that we opened a hotel as COVID was rearing its ugly head, but this team has done a fantastic job in operating this hotel. We ranked in the top 5% of all Doubletree hotels in terms of customer service. We won the Legacy Award for the top renovated hotel in the Doubletree chain. What that says is we have a commitment to quality in everything we do. We're going to create environments unlike others, and we're going to service our guests and fans in a way in which they would expect us to. Activity in the hotel just is on the rise. Every single weekend from now until the end of this year is completely booked with activity, events, room nights. The weekday business is coming back strong. And I think more importantly here, our business model of synergy and what we've talked about in the way in which we can develop events and we can create activity for ourselves here at the Hall of Fame Village powered by Johnson Controls will drive attendance, room nights, and revenue to our hotel in Canton and the hotel that we're preparing to build on site as well. In terms of our village, the Hall of Fame Village powered by Johnson Controls, Tom Benson Hall of Fame Stadium, the village welcomed more guests than ever before. We hosted more events than ever before. We generated more revenue out of the stadium and our sports complex than in 19, which was our highest year in the history of our company. We held numerous events in Q4 alone. We had the state high school football championships, multiple games being played here in our stadium, to thousands of guests. We kicked off the holiday season with a holiday festival. We signed multiple more events for this year. And then we also, in the start of this year, hosted the AAA national championship game in our stadium as well, continuing to build on the progress that we have made in driving events, attendance to the campus, and then monetizing that attendance through our room nights, through our food and beverage, and through our admissions. We opened our Constellation Center for Excellence. One year, the construction was on time and on budget. The tenanting process is well underway, and we expect to have that facility fully tenanted in the very near term. Now this is a difficult ask in an environment where virtual work has become the norm. Why are people so interested in coming to our Center for Excellence? because we've created an environment unlike any other. It's a one-of-a-kind asset that is there for thought partnership, incubation, a place of excellence where we've already hosted multiple events like our Authentica conference focused on brain health and development. This is not an office building. This is an integrated experience where we have best-in-class tenants coming in to do great things in sport and non-sports. Our fan engagement zone, you will have seen on our website if you look at our construction cam and the flyovers that we do on a regular basis, the core and shell of that entire facility is built. We are now starting the interior fit out of some of those spaces. We expect to have all of that tenanted by mid 2022 and open and running prior to enshrinement. So it's an exciting time to welcome our guests to a very different campus for one of the biggest events in the country with our enshrinement and the kickoff to the NFL preseason. Our Center for Performance. We broke ground on the Center for Performance in Q4. We leveled the foundation. We poured the foundation this year. The dome itself is being constructed off-site, and we have every expectation that that facility is going to be up and running prior to enshrinement. And in fact, for this year, we already have booked multiple events And we predict to have significant revenue being driven out of that asset in Q3 and Q4 of this year. And then lastly, Play Action Plaza. And I get very excited about Play Action Plaza for this year. But last year, we designed an outdoor interactive area that will really bring life to campus. It will host the only two ride attractions in Stark County. We haven't talked about those yet. We will in the future. It'll host an outdoor bar area. amphitheater, water feature. This will be a pre-function area. It'll be a tailgate area. It'll be an area that people can just enjoy a cocktail or a stroll and enjoy the outdoors. It's not just a summer activity. We'll have activity programmed in there year-round. In our media vertical, there have been multiple projects in the works and multiple that were signed over 2021. The media vertical is still in its early stages. But I will say that I'm really proud of the team there. It usually takes two to three years from the time you create content, develop it, produce it, and then distribute it. And we are already doing that in year one. If you recall, we had co-produced a special on ESPN called World Chase Tag. World Chase Tag aired live during enshrinement weekend. It has since aired multiple times, receiving a lot of popular feedback as a non-traditional sport on ESPN. Our media team did that in production partnership. NFTs, this was not a part of our original business model. We quickly pivoted and realized that digital collectibles were going to be something that not only have been popular for fans and guests to collect, but will continue to grow. It's a multi-billion dollar business and we expect to have a significant presence in that space. We launched our partnership with Dolphin, but more importantly, in Q4, we continued to expand the distribution of the NFTs that we have out for sale now. And then early this year, we signed a new relationship extending our footprint in the NFT space with the Pro Football Hall of Fame, and a company called I Got It. Now, this is very interesting for us as well because our playbooks, which are, I think, best-in-class product NFTs already out and for sale, and we will be announcing additional playbooks in the very near term. What we're doing with I Got It is taking that memorabilia that I've talked about many times, that 50 million pieces of memorabilia that we have at our disposal, and we've agreed to take 600 really unique pieces of that memorabilia and launch 200 NFTs per year for our guests to collect. We've learned a lot about this space. We continue to learn a lot about this space. It's evolving, but I'm proud of the fact that we were an early entrant and it's a new opportunity to drive revenue for us and did in 2021. In terms of other projects, I've talked about the NFL Alumni Academy. We had Whistle Studios here for the entire last season. filming these kids as they were training, filming them as they were living, filming them as they were being called up to the NFL. This is going to be a fantastic docuseries, and we expect it to launch later this year. We're in discussions with two different high-profile distribution platforms. They're very excited. We are very excited. Last year alone, we sent up 24 players to either an NFL practice squad or to an NFL team, and you saw those players playing on Monday night football or in games during the regular season and in the playoffs as well. Interestingly enough, as we announced our deal with the USFL and to host their playoffs and championships here this year, we've now also had several of those players participating in our academy being drafted by the USFL team. So it shows our model that we really have the opportunity to impact these kids' futures to grow a business that can help the game and the sport of professional football and also something we can monetize and will continue to monetize here for our company. The other big piece of media that we have out in post-production is the documentary The Perfect Ten, depicting the story of the ten men to win a Heisman Trophy and also be inducted into the Pro Football Hall of Fame. We've done this in partnership with NFL Films. They are the producer for this, along with Hall of Fame Village Media. We have continued to build that relationship and we think that the product is going to be exceptional. I can tell you I was fortunate enough to be a part of one of the tapings in Dallas where we had several of the gentlemen there together talking about who they were and what they did in their careers and some of the things that inspired them. So we're excited to be able to launch this and the goal of this is to launch in early 2023. And then lastly, we built NFTs off of this space as well. Four of our NFTs are around gentlemen that are highlighted in this Perfect 10 series. So a lot of great work going on in our media division. Gaming also became very important to us. You know that we launched our Hall of Fantasy League. We concluded it in Q4. Congratulations to the Atlanta Hot Wings on winning the first ever HOFL Championship and to all of those stakeholders that staked the Atlanta Hot Wings for getting 6X the staking that they put down. We thought it was a very engaging environment for our guests and fans to enjoy. It certainly bared out the model of combining community, making the fantasy world a community sport versus an individual sport, combining that with Hall of Famers like Terrell Davis as our commissioner, previous football players, professional football players in the front offices. And then we concluded the season with a primetime special on Twitch that was co-hosted by former NFL pro Amon Green. Now this was really a pretty interesting event for our guests and our fans. If you watched Monday Night Football this year, you probably would have seen the Manning brothers broadcasting and hosting a lot of special guests and talking about, from their perspective, what was going on in the game, having played the game at the highest levels themselves. We did this with Madden NFL football. We simulated the two teams in the Super Bowl, and then Aman and many other guests came on and gave their perspective on the Super Bowl, on fantasy, and it really just lent to an environment of integration and collaboration between some of the game's best, some of the best professional fantasy football players, And I feel like our second season is going to be even stronger. You know that sports betting legislation was passed in Ohio in December. We couldn't be more excited about that. Just yesterday we had a conversation with the Ohio Casino Control Commission. Our job is to make sure that we are completely informed every step of the way and understand the licensing process. We're very thankful for them to take the time and explain that to us. I think we're well-positioned. to obtain the two licenses that we are going to need, one for our virtual betting platform and one for the retail presence that we're going to have here. You also saw that once sports betting was legalized, within a week we announced two different sports betting partnerships, Rush Street Interactive to lead and manage the sports book that we will have here on property, the retail presence that we'll have, and then Genesis Global, that will lead and manage our virtual environment and our mobile platform. Both of these experiences are going to be fantastic for our guests to engage with. Both of these were not in our plan in terms of revenue. So both of these are creative to the growth of our company. And we're very proud of the fact that as we talked about our goal of signing sports betting relationships and getting a position where we would be successful in obtaining licenses that we feel like we've done that and we've done the necessary diligence that we need as a company to create that opportunity for ourselves this year. Lastly, I want to talk about partnerships and sponsorships, and we group those together in a category for two reasons. One, partnerships enable us to grow as a company and augment talent that we don't have internally and increase our capabilities. Those partnerships typically come with a sponsor model or a payment in terms of a sponsorship. And then there are pure sponsorships that want to have brand affiliation, that want to have an opportunity to be a part of the environments that we're creating both physically and virtually. We had a goal this year to sign 20 new sponsors, sign 26. This was amazing. In a difficult year where COVID, inflation, other macroeconomic impacts were out and working against us, our sponsor team and our partner team was able to extend that goal by another six sponsors. And in fact, of that 26, 13 of those were signed in Q4. And so what that tells us is that as we've moved through the year, companies and individuals feel much better about the opportunity to invest in these types of relationships. And I think since we've demonstrated our capabilities to grow our physical assets, to grow the number of events on campus, that we have shown and proven that we are worthy of these sponsorships and these partnerships. These deals are really important to us, and as I've said before, grow our capabilities on multiple fronts. They grow revenue for us. They open up operating capabilities that we don't have for us today in terms of internal human capital expertise. They offer different product offerings for our guests to enjoy, and they enhance our ability to construct our environments both physically and virtually. So a lot of great progress in Q4. A lot of things that I would say are incredible accomplishments on behalf of the team, and I want to thank them, and things that In the face of adversity, as we talked about at the early part of 2021, our goals, and I'll do that here in a moment for 2022, I think we not only achieved our goals, but we expanded and grew almost in every single respect. So our investors and our shareholders and our guests really should see the upside from that, given where we stand today and where we're headed as a company. Let me now turn it over to John Van Buten, our Vice President of Accounting and Corporate Controller. to give you more of a financial recap of 2021.