Hall of Fame Resort & Entertainment Company

Good morning and welcome to the Hall of Fame Resort and Entertainment Company's first quarter 2023 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'll now turn the conference over to Anne Grafis, Executive Vice President, Global Marketing and Public Affairs.

Good morning from Canton and thank you for joining us for our first quarter 2023 earnings conference call. Our latest press release supplemental slides in form 10Q 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, our president and CEO, Michael Crawford, will give an update on the company's outlook. Benjamin Lee, Chief Financial Officer, will then provide analysis of the quarter's financial results and an update on the company's fiscal year 23 financial guidance. 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 all to read the full disclosure concerning forward-looking statements in the earnings press release. Additionally, please note the company uses non-GAAP results to evaluate performance internally as detailed in our press release. We have posted a supplementary slide deck summarizing quarterly results as well. These slides can be accessed on our website and will be archived there along with the replay of this call later this morning. It is now my pleasure to turn the call over to Michael Crawford. Michael?

Thank you, Ann. Good morning, everybody. It's a really incredible day here in Canton, Ohio, and we have a fantastic week ahead of us and I'll talk about that in just a few moments if you looked at our first quarter earnings obviously you would have seen revenue growth year-over-year of 48% and I give that you know just the results have been fantastic and I give the team credit for those but you would have also seen as expected our operating expenses have increased to support the launch of things like new content in our media division creating our village destination, and really building our gaming business in general. While the expenses were expected, we do remain focused on cost control and balancing the cost appropriately against our revenue growth. That's always going to be a goal of ours. I thought it would be important to take a step back and really put in context the Q1 2023 earnings and provide a little perspective. Some of you may remember this, some of you may not, but we launched publicly as a SPAC merger in July of 2020, right in the middle of one of the worst health pandemics the world has ever experienced. The country and the world basically shut down for almost two years. It impacted supply chain, it's created inflationary conditions, and frankly, political turmoil have all continued, and we're experiencing these types of issues still today. So for a smaller startup company like the Hall of Fame Resort and Entertainment Company, we've continued to make difficult decisions to not only survive, but to grow. By the way, add in there that our largest name sponsor in Johnson Controls decided that at the point in time where construction had to slow down due to these significant milestones, that they were going to put us in default and we were going to have to react to that, creating an issue for us from a revenue point of view and from a brand point of view. So why is that all relevant to Q1 earnings? I think, you know, I could not be more proud of the team because it's demonstrating the ability to drive results in the face of adversity. And I think I've said this over and over again, you know, we have been able to not only make tough decisions, but continue to grow our business. This shows the commitment of all of our stakeholders in our community, from our largest shareholders, and all of the support that they're giving us through these difficult times. And you can full well imagine as we come out of these times, and we will come out of these times, that support will only propel us to even bigger results and greater growth. Lastly, in the quarter, approximately one full year of operation as a company, we have grown revenue. We've shown strong attendance growth. And attendance growth during non-peak periods at the village, especially in Q1, we've increased events and programming. And we've really started to show the strategy can work by driving synergies between our business verticals. I thought it'd be relevant to share some key highlights from quarter one and starting with the Village. I think the Center for Performance was probably one of the most important assets that we could have added to flatten seasonality and to really drive revenue and attendance growth into Q1 and it did exactly that. Our traffic at the Village was the highest it ever was in Q1. We hosted very unique indoor sporting and entertainment events from boxing matches to large-scale dinners to other significant private events. And we also continued our youth sports programming with league play and tournaments, this just after officially opening in November of 2020. So the team was well ahead of programming already a few months after we opened this facility. some significant announcements in Q1. We became one of the official sites for the USFL to host two regular season teams here playing regular season games, along with the playoffs and the championships, and it expanded our partnership with Fox. I remember Eric Shank saying to me during our press conference, you guys made it very difficult for us not to come back, and by the way, not to just come back, but to expand our presence in Canton, Ohio. So that was a big tribute to our team and the way in which we execute. And I could not have been more pleased to have the USFL here. And I think they're showing how having that type of event programming drives synergies through every facet of our business, food and beverage, hotel stays, private events. They were out renting our fields for training, field rental for the stadium, concessions. And then, obviously, media, with Fox being our key partner with significant numbers of nationally televised events this year and already doing extremely well in terms of viewership. PlayAction Plaza, we completed our Red Zone Giant Wheel attraction, which is now operational and adding to our overall guest experience and extending length of stay. We increased event revenue from Q1 of 2022 to Q1 of 2023 by almost 1400%. Staggering results, largely attributable to having indoor capacity, but also public and private event growth as well. USFL playing or training here in Q1, hosting meetings, gearing up for the season as an example along with things like significant other private events in more climate controlled space in a very unique setting I think has really enabled our sales team to get after it in a very big way. We have continued to grow in every facet of our business with respect to the village and we've brought in new partners. We've created new events. And just this morning you would have seen I hope the announcement of a brand-new ride attraction called Spike It, where we can give guests the sensation of being in the end zone, having just scored, and doing the dance with the player spiking the ball. It's a ritual that we see almost every time that an athlete in professional football gets into the end zone. And so this will be our third ride attraction. I think we're adding the right amount of capacity to really create Play Action Plaza as a wow place and a destination for people in and of itself. Our media group, you know, in one short year, was able to produce one of the most significant products for us yet in the Perfect 10 documentary. It was sponsored by Prudential. It was launched and aired on Fox primetime Saturday night prior to the Super Bowl, and it had an amazing viewership. It was the largest viewership, the most popular sports documentary on Fox in three years since the Brady heist. And most importantly, it allowed us to showcase our media team and their capabilities around the quality of content that we can develop. From that, we have had numerous more opportunities to sign new partnership deals with high profile retired athletes that have production companies that are really interested in doing new and innovative content with us. And we'll talk more about those in the future. We continue to launch and build our become a villager NFT digital collectible program. And we sold out of our highest level of those passes. And if you've watched over the course of this last quarter, We are adding really unique experiences, memorabilia, chances to have VIP access to events. And so the opportunity here to have a digital collectible, but to also be a part of the company's ecosystem, I think is going to be very highly demanded. And it showed already with our highest level of entitlement being sold out almost immediately. We announced a new distribution partnership with Brinks Television for the Goat Code. leveraging access to exclusive IP and access to the greatest to ever play professional football. We're developing a new type of short form content that really shows the scientific tangible and intangibles on how these greatest athletes achieved the milestones that they have both on and off the field. And I think this short form content is going to be really well received. We're talking about three minute increments here. that give guests the opportunity and viewers the opportunity to learn what it was like and what these athletes did to perform at the highest level. And then lastly, we wrapped up our first season of our newly developed vodcast, Football Heaven, 6.5 million impressions. Athletes like Warren Moon, Steve Young, big contributors, sports analysts like Chris Berman appeared on the show. And again the team did extremely well in partnership with the Pro Football Hall of Fame. Our analysts and our guests were all incredibly pleased with the outcome. Our gaming division launched our online sports betting partnership with Better. I think we're revolutionizing the new micro betting experiences in Ohio. The results are actually in line and in some cases exceeding our expectations as a company and if you'll recall We did take an ownership stake in Better, and so as they progress with their business growth in states like Massachusetts or other states obtaining sports betting licenses, we as a company will benefit from that long-term growth as well. We launched e-gaming tournaments here on campus, e-gaming tournaments bringing concessions revenue, ticket revenue, some cases hotel revenue, across pollination, but most importantly, proving out the fact that we could satisfy a very sophisticated e-gaming clientele and offer a unique product and experience and venue for them to come and enjoy. And we also received a significant commitment in Q1 from a very large-scale fantasy league to host their league draft here on campus at the Village. And what that speaks to is when you create an environment of excellence and an environment where you have multifaceted experiences, these types of leagues, these types of partners will seek you out and that's exactly what happened here. So I'm proud of what the gaming division is doing and Rob Borum after a few short months of being in his role is already starting to achieve. Now let me turn to a couple of topics that I know are probably very relevant. And while all of these updates are a tribute to the team's hard work, and I do mean the team works incredibly hard every single day of the week. And again, I want to thank the team for all of the great results in Q1. We are committed to executing our game plan still at a very high level, and we're focused on the challenges that we're facing. As I think about it, we have five key priorities that we have to deal with, and we deal with on a daily basis and have to continue to grow our capabilities around. The first is balancing expenses with revenue growth. We've learned a lot about our business. You know, I can tell you after operating and developing assets like this all over the world, it takes three to five years to really stabilize a business so that you can get through multiple cycles of events, multiple cycles of seasons to understand how to operate efficiently. And we're already doing that. And the landscape is changing for our company fairly rapidly. But we have to continue to focus on expense containment and profitability. Like any new operational company would, we made a difficult decision just over the last couple of weeks to reallocate resources. We reduced staffing in some areas and we increased staffing in other areas. And why we did that was we saw opportunity for revenue growth. And so we are being strategic and dynamic around how we're placing human capital, the right human capital, in places to realize those cost efficiencies but also to realize the progress that we've talked about and the progress that we need. The second big focus is restructuring our balance sheet, and specifically some of our debt instruments. While a large portion of our debt is of the right profile, meaning longer-term, appropriate interest rate type of debt, and recall, we have both public and private debt, and so we've taken advantage of many different programs here in the state TIF financing, PACE financing, TDD bonding, things that are unique to our destination. We have had the ability to balance the type of debt we're taking, but the reality is we also have some very costly debt. And so we're working right now, we're in discussions with lenders and our largest shareholder, IRG Industrial Realty Group, to see if we can come up with options to rebalance some of that more costly debt and to ensure we continue to optimize our debt and equity needs. And so, as we have updates on those efforts, we will provide appropriate transparency on an ongoing basis, but a very important point for us to sustain ourselves in the long term. The third point is identifying significant deals and partners. in all of our business verticals that align with our vision and further our strategy of growth and execution and creating unique experiences. Most importantly, partners that we can bring into our Center for Excellence, and we have signed some new agreements there, our fan engagement zone. I've talked about new tenants. We're getting ready to open Brew Kettle and Topgolf in the next week. You'll start to see announcements around being able to book for top golf reservations, and Brew Kettle is a fantastic new food and beverage experience that I'm excited for our guests to enjoy. And we've also talked about new distribution and production partnerships in media, new gaming partnerships in esports, in fantasy sports for our gaming division. The point here is we want the right partners. We're not looking to sign quick partnership deals that may not end the best for us or for them. And we're also not interested in signing partnership deals that don't further and enhance our capabilities as a company. Now I know some of you have talked about and wondered about our retail sports partner, Rush Street Interactive. The update I have for you is after several months of working together, Rush and we decided not to pursue the partnership together. We had different versions and different vision of what a retail sportsbook experience could be at a destination-based asset like the Hall of Fame Village. And so while Richard Swartz and his team are doing a fantastic job at what they do, and I'm very proud of our team, again, I would say not the right partnership at our time for either of us. And so we now continue to look for and are already in discussions with potential partners to backfill in our retail sportsbook. By the way, one other thing to note, we are also in discussions with food and beverage partners as a part of that overall experience. And so we will continue to champion that effort, but again, we want the right partner to help us further our mission and to expand the destination and the experiences that we're going to have here. Fourth point is continuing to develop phase two assets of the village to be on time and on budget. We are laser focused on this. You've seen the progress we're making on the water park. Weather is helping us, believe it or not. I'm encouraged by the progress that Welty and the team is making and our team is making in the construction oversight and project management. We look forward to breaking ground on the hotel in the very near term. And also, we've championed and undertaken work around our phase three master plan. One of the things I want to make clear, phase two, it was critical for us to develop a set of assets all at the same time that would create a destination. And I think we're doing that very successfully. Phase one of development was some big assets that were great at hosting events. Phase two, you could play, you could stay, you could dine, you could be entertained. And so this is really something that we felt strongly we needed to do. excuse me, all at one time. Phase three is about enhancing and furthering and being responsive to the evolution of our destination. We will not build phase three all at one time. And in fact, we'll be very strategic around the timing as our company grows, as our revenue grows and our capabilities grow, we will add assets that will enhance the guest experience, increase length of stay, and also increase profitability. So our goal is not to continue to take on extreme amounts of debt or have to go out and do large equity raises to build all of phase three at the same time. It's to be strategic around how we grow the destination after we have the destination in place. And then lastly, and probably most importantly, we have to continue to create unique experiences for our guests to enjoy. This also allows us to drive synergy opportunities from one business unit to the other two. When you create great product that is highly demanded, business results will come. And I believe we're doing just that. So now let me turn it over to Ben Lee. I want to have Ben give you a chance as our CFO to provide a more detailed financial overview. And then I'll come back and talk about some of the things that we're focused on in the upcoming months and the rest of this year.