Hall of Fame Resort & Entertainment Company

Good morning and welcome to the Hall of Fame Resort and Entertainment Company's first quarter 2022 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 turn the conference over to Anne Grafis, Executive Vice President, Public Affairs. Please proceed.

Good morning. Thank you for joining us for our first quarter 2022 earnings conference call. Our latest press release, supplemental slides, and form 10-Q 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 on our fiscal year priorities. Benjamin Lee, Chief Financial Officer, 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 your press release. Additionally, please note that the company uses non-GAAP results to evaluate performance internally as detailed in our 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 don't hesitate to reach out to me anytime. Now my pleasure to turn the call over to Michael Crawford.

Thank you, Anne. Good morning, everybody. I hope everyone is enjoying some spring weather. I know here in Canton, finally, the weather has broken, and it's being supportive of construction here, and we're excited about the progress we're making. I thought I'd start out by just talking a little bit about some of the macro trends that I'm sure we're all seeing and reading about. Clearly, volatility in the stock market. Excuse me, I've been fighting a cold. rising interest rates, inflation, of course, an unfortunate and sad war in Ukraine, and our pandemic, you know, COVID continues. All of this has caused pressures, as you can imagine, on the work that we're doing. Supply chain disruptions continue, and we're dealing with them on a daily basis. Now, here's the good news. When we went public, a great majority of those parade of horribles that I just talked about were already in motion. And so you're talking about a company that is used to operating in a very, very difficult environment. And I think, as you've seen by this quarter and previous quarters, the success that we're having is still very encouraging, and I hope you're encouraged as much by it as I am. A couple of key things, though, that are of note. that we take away as positives. Consumer spending remains elevated. Unemployment remains low. Consumer travel, entertainment experiences, those trends are continuing to improve and be highly demanded. Airline travel is growing and growing every single day stronger. And, of course, amusement parks, themed attractions, sporting events, all of these things are becoming highly demanded as we knew and predicted they would at this time last year as social beings like to be in these environments and certainly it's been very encouraging to see the uptick in all of those things I just mentioned. I think over the last quarter professional football has taken tremendous steps forward in terms of its popularity, not that it needed to because it's already the most popular sport in America. But as you watch the Combine, a multi-day event with multi-millions of viewers watching young men with their skills testing and their interviews and really trying to achieve their dreams of becoming an NFL player, it was a very compelling television show to be seen. I had the privilege of being out at the draft in Las Vegas this year. Las Vegas did a fantastic job. of putting on one of the best drafts that I've seen in recent years. The viewership of the draft averaged about 12.6 million viewers, at least in the first round or two. Let's compare that to other sports for a moment. And I don't mean this to sound like we're knocking other sports. I'm a sports fan in general. But 12.6 million viewers compared to 10 million average viewers per game last year for the NBA Finals. 12 million viewers per game last year for the World Series. I think it says something about America's hunger and passion for the sport of professional football. And as you look ahead, there is a television show that's going to be aired with the unveiling of the season and the schedules for all of the teams. And so this continued desire to understand better who is playing, when they're playing, and how the teams are progressing and maturing is something we take great uh, courage or excitement from. And we think that as we build our company, uh, it will benefit us greatly. We've talked a little bit about, uh, the USFL and the fact that we're going to be hosting the semifinals and championships here in Canton, Ohio at our Tom Benson hall of fame stadium. That league has been doing incredibly well with viewership as well, uh, on Fox 1 million viewers per game in its inaugural season. Um, and the XFL, of course, uh, with the rock and, um, multiple others that will be launching next year. It just speaks to the fact that people want to have access to professional football year-round. And so it's incredibly exciting for us as a destination and as a company building off of the power of professional football to see the growth and the excitement around how the fans are engaging with all of these different events. I'll talk in a moment about the progress in Q1 across all our business verticals. But I'd just like to start by saying, you know, for us, success starts with adding team members or having team members, and as we put them on the field, giving them the opportunity to perform. And we were very fortunate in Q1 to hire Ben Lee as our CFO. You'll hear from Ben in just a moment, but Ben has been a tremendous add and already has contributed greatly to many of the things that we'll talk about. So it's exciting to have Ben on the call with me. To begin, I thought it was worth noting a couple of really big transactions that occurred in Q1 outside of the normal business vertical progress that we've been making, both with significant shareholders for Hall of Fame Resort and Entertainment Company. You may have seen the restructuring of and extending of debt to the tune of $38 million. This was done in partnership with our largest shareholder, Industrial Realty Group. This paid off short, near-term debt, expensive debt, and extended the debt profile for the company in a way that allows us to bring in other more reasonably priced debt and to have a payback profile that's much more manageable. So we're incredibly thankful to IRG for the support on that front. The second thing that happened is we finished a new licensing agreement with the Pro Football Hall of Fame. Again, one of our largest shareholders, and I believe this new agreement aligns our interest even more closely. Clearly, the Pro Football Hall of Fame is the cornerstone of everything we're doing here. It's an anchor attraction. It's a museum that celebrates the best that's ever played the game or contributed to the game. This new license agreement significantly reduces the cost of our annual payment to the Pro Football Hall of Fame. It expanded the fields of exclusivity, meaning our rights to use the brand and the memorabilia. And it also gave us a first right of refusal for those areas of development where we might not have had exclusive rights in the past. I think the key message or the takeaway here is the relationship with the Hall of Fame has gotten stronger and stronger over the recent months, and we are doing more and more together, and I'm excited about that, and I'll talk about that in just a few moments. Let me start with theme destination-based assets, one of our key verticals, and specifically the Hall of Fame Village. Construction is now in full swing. We had a difficult winter. The spring had a lot of rain, but let me just say this. The Center for Performance, on time, end of July, is our projection for opening that facility. Play Action Plaza, on time, substantially opened by enshrinement, certainly completed by end of summer. A brand new opportunity for guest experiences and a new opportunity to drive revenue for our destination. The expansion and enhancement facility of our sports complex on time and to be completed by early July. And then lastly, the infrastructure that has been necessary, so critical to allow us to continue to build our hotel and our water park, again, all moving and progressing on time. And we hope to be able to start our hotel water park combination over the next couple of months. And we'll talk about the financing that's going in place to support that. And then finally the fan engagement zone. We have completed that area. We are now starting the tenanting process. The tenants are starting to do their fit out in some locations and we're incredibly excited about the direction that that's going to be and how that is going to be an area that we can really energize during enshrinement. That's our goal to have that completed and up and running, at least substantially with several of the tenants serving our guests and fans during that critical weekend for us. I'll move to the Doubletree Hotel in downtown Canton. We were impacted by the COVID, the Omicron variant in January. No question about it. There was a surge. Having said that, if you look at occupancy and our ADRs year over year, both were substantially up. And so the trend line for our hotel is exactly as we had talked about before. It's headed in the right direction. This hotel remains in the top 5% of customer service for all DoubleTree hotels, which is incredible and a testament to how strong that team is there and how seriously we take the customer experience and will continue to do that. And it's a model for us. It really offered us an opportunity to prove out the synergy model. When we bring events to campus at the Village, our hotel is full. And we predict that same type of occurrence will happen as we build our second hotel onsite. The more activity events, the more assets that we create here, the more uplift we have in assets like our hotels, our food and beverage locations, and our entertainment locations. So very proud of the team at the Doubletree. The village itself, the Center for Performance, in Q1 we announced that we were going to be partnering with a local sports dome that has hosted many, many sporting events over the previous years. They're going to be closing, and we're going to be transitioning a lot of that business into our new facility here on campus. That's exciting for us because it's immediate business built in year one, and we're very fortunate to be able to transfer that business over. In addition to that, we've hired and brought on an experienced operations manager that is very savvy at attracting new business and running these types of facilities. And again, as I said, the Center for Performance is on time, and we're looking forward to opening that in late July. This gives us the opportunity to build business year-round, and that's what we've been missing in the winter months. And it expands opportunities for not only sports but entertainment as well, and it offers additional synergies, as I just mentioned, across campus. during those non-peak months. In terms of our stadium, the Tom Benson Hall of Fame Stadium, we are beginning to host many outside events. In fact, as I look out today onto the field, I see a skills test challenge going on out there. We've had multiple private bookings in Q1, 14 to be exact. We've got multiple more on the books for Q2. And so our goal is to continue to operationalize our number one asset here, which is our stadium. And you will have seen and I'll talk in a moment about the multiple different events, concerts, sporting events, et cetera. The event slate is really, really growing over the course of this year as we come back to a more normalized version of the world that was monopolized by COVID. Moving on to our media vertical. While we're still in the early stages, I think you probably have seen we have really started to build key partnerships and branded content. And media for us I think will be a significant addition in terms of our guest and fan experience, but also synergy with onsite activity and with our gaming division. And you can see from what we did last year as we broadcast a streaming show on Twitch for our Hall of Fantasy League. Our goal is to think about how we synergistically develop business and media offers us that opportunity. In Q1, we signed a partnership agreement with Rashad Jennings. The show that is in development right now is a show that we're calling What It Takes. And Rashad really goes and explores with different athletes that have excelled in different sports and what it takes physically, emotionally, mentally to be successful. We think this is going to be a really interesting show and one that sort of bridges the gap between football and other sports and talks to the commonality of the different attributes that athletes need to be successful. We've talked a lot about a couple of big shows for us, the Perfect Ten show, and the Academy. Let me give you an update what has occurred in Q1 on The Perfect Ten. We completed filming in Q4 of last year. In Q1, we've gone into post-production, and now we're in discussion on distribution over the next couple of months. We anticipate this show airing on a key distribution channel early next year. And so we're excited to highlight the story of those 10 gentlemen who've won a Heisman Trophy and gone on to be inducted into the Pro Football Hall of Fame. The Academy, the Developmental Academy, we run here in partnership with the NFL Alumni Association, finished filming its last season in Q1. And now we are wrapping post-production and starting distribution discussions. We have had those distribution discussions going on for the past couple of months. and we anticipate launching that show in parallel with this upcoming NFL season. So it's very exciting to see in a very short period of time some of this media content coming to life. You may recall the typical pipeline is about a one- to three-year process, and our media team is really hitting on all strides and getting some of this content out in partnership with other key development partners and distribution partners. We've also had a key talent acquisition hire in Q1, bringing on a new head of business development. Again, business development in any company is critical. We think we have a strong business development leader now that will come in and help garner new shows and grow our portfolio and our pipeline of content. Speaking of that, while not in Q1, Hopefully you saw the recent announcement with Hall of Fame coach Jimmy Johnson and a show that we're calling Gone Fishing with a Hall of Famer. I can tell you personally, I think this show is going to have a lot of legs. Jimmy is an incredible personality. We were very fortunate to partner with him and we look forward to getting into shooting this content in the very near future. Also in our media division is the work that we're doing on NFTs, the non-fungible tokens. And I realize that, you know, we have had multiple discussions about NFTs. That space is continuing to evolve and grow. But one significant milestone, again, strengthening our partnership with the Pro Football Hall of Fame. This is a community-based league that is focused on franchises. The feedback that we got was it would have been great to have more ongoing engagement activities. It would have been great to be able to come in throughout the season versus you had to be a part of the league at the start of the season. We've listened to all of that. And by the way, we've hired an incredibly experienced and passionate leader in Rob Borme to now take this on and evolve this product to an even higher level. More events, more fantasy challenges, more ways to win, while still maintaining the integrity of what we've established and leveraging our intellectual property that no one else has access to. By the way, look forward to the expansion of the league and an announcement of that coming very soon. We've talked a lot about sports betting. The goal for us in Q1 was to position ourselves to be fully ready and capable of the application process being successful for us. There has been a lot of discussion between our team and the Ohio Casino Control Commission, the consultants that we've had on, the legal support that we've had on, and the application window we now know opens in June, June 15th to be exact, and we've had the right advisors to best position us for success in obtaining the two necessary licenses that we will need for retail outlet and for mobile gaming. So stay tuned on that front, but we are very focused on the next month, ensuring that our application process goes well. And lastly, in gaming, we spent a lot of Q1 talking with different esports tournament hosts, and we think we're going to position ourselves quite nicely with the Center for Performance and some of the other assets that we're gonna be opening to host multiple esport tournaments here this year and in the coming years, bringing a different type of crowd to campus, allowing us again to re-energize in peak and non-peak periods. I'll conclude just by talking about partnerships and sponsorships before I turn it over to Ben. As we've spoken in the past, this is a company that has the luxury of being affiliated with professional football. It also has brands like the NFL Alumni Association and the Pro Football Hall of Fame and an indirect opportunity to partner with the NFL itself on these types of activities. In Q1, we signed five new sponsorship deals, substantial deals. And we are continuing to strategically maximize the sponsorship or partnership dollars in each category, which means we're not really inclined to engage on everything until we have the critical mass in terms of assets, media content, gaming content, and events that will allow us to maximize the revenue achieved in the partnership category. While we were thoughtful about those categories, we did sign for Everlon to a naming rights partnership for our sports complex. We signed the Cleveland Clinic, a world-class healthcare provider that will provide healthcare for our stadium and sports complex. Both of those deals were not only partnerships, but they were sponsorships that netted the company substantial revenue from those sponsors as well. And we continue to look at new opportunities to increase the volume of sponsorships with events. And I think we've done a good job of that in the past. And our team now, we have brought on team members that are very focused on creating the value that we need and outside consultants that have great experience in bringing the best possible sponsors for us to partner with that will leverage their expertise and subject matter in our end service and combine it with our intellectual property and the experiences were created. So very exciting Q1, lots of progress. And as you've seen in our financials, we continue to grow. We continue to grow revenue. We continue to build. We continue to grow in our other two business verticals with media and gaming, and I'm proud of the effort that the team has put forward. And more importantly, the trend line that we're seeing is one that's very positive and one that we look forward to driving value for our shareholders for years to come. Let me stop now and turn it over to our new CFO, Ben Lee, for our financial review, and then I'll come back and kind of talk about the next coming quarter and some exciting things that we have going on. Ben?