Hall of Fame Resort & Entertainment Company

The call is being recorded, and all participants are in listen-only mode. We will open up the conference for questions and answers following the prepared remarks. I will now turn the conference over to Anne Grafis, Executive Vice President, Global Marketing and Public Affairs.

Good morning, and thank you for joining us for our second quarter 2023 earnings conference call. Our latest press release supplemental slides in Form 10-Q were posted yesterday evening after market hours. These documents can be found in the Investor Relations section of our website at hosreco.com. After this brief introduction, Michael Crawford, our President and CEO, will give an update on the company's strategy and 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 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. It is now my pleasure to turn the call over to our President and CEO, Michael Crawford. Michael?

Thank you, Ann. Good morning, everyone. I hope everybody is having a great Friday. It is a really nice day here in Canton, Ohio. I thought before I would start in on the Q2 highlights and some of the results, which, by the way, we were very pleased with and encouraged by. I'd be remiss not to talk a little bit about enshrinement week here in Canton. It was an absolutely spectacular week. I think the community did an outstanding job coming together. We had hundreds of thousands of folks descend upon us over a four or five day period of time. There are multiple things that go on here in the city and in the county from Balloon Fest to parades to fashion shows. There is just a tremendous amount of support for this event. And why not? I mean, it's one of the best events in the world and one of the best events certainly in professional sports. We had over 100 previous Hall of Famers return You can't imagine the excitement and commitment seeing that number of individuals, the greatness that returns here to Canton every single year to support the new enshrinees. And so for us, it was an opportunity, an opportunity to do several things. First of all, an opportunity to showcase an operationalized Hall of Fame village. And we did that very well. Play Action Plaza, with our three rides, a concession area, an outdoor amphitheater, really was activated. A lot of entertainment there, different opportunities for our guests to partake in beverage and food. And so it was really fun to see the thousands of guests up there sort of pre-gaming, tailgating, and just enjoying the environment. We offered a brand new first down fest. And so the Hall of Fame used to do a fan festival. We took that over this year. out in our Forever Lawn Sports Complex with so many different partners and sponsorships, really bringing that area to life and activating it as well. And our fan engagement zone. You know, we've had over this past quarter and ongoing, we've had new tenants open new experiences, and our guests really enjoyed the opportunity to have dinner at Shula's, play Topgolf, experience new product that's getting ready to open. Certainly our cookie ice cream concept with Isaac Bruce was a smash hit. There were lines for these locations all weekend long. And for me, it was just gratifying seeing a lot of hard work from the team actually being activated and come to life. Our partnership with Hall of Fame could not be stronger. We continue to do things together. I think that's going to help both of us in the long run become even more important and to the sport of professional football and the activation around what we can do here in Canton, Ohio. The other thing that was really interesting for me and completely unsolicited during the game, during enshrinement, nationally televised events, you have world-class broadcasters like Mike Tirico and Chris Collinsworth and others talking about now how this village is actually coming to life and how interesting and exciting it was for them to see it become a destination, to become a place to vacation. And that kind of promotion, that kind of brand and destination acknowledgement for us is invaluable. The other thing that was great for us was the Cleveland Browns were playing in the game. And growing up in Ohio myself, it was exciting to see. It was a really good game. You know, we had a few issues in the stadium that were quickly corrected by our team. I was very proud of the fact that the reaction was almost immediate. You know, sometimes those things happen. No maintenance difficulties, just some technical things there. But the fan experience was really one of a kind. And during... The game specifically, the acknowledgement of how our company is growing and the experiences we're creating are really having an impact on people's lives. And that's the greatest satisfaction for us. It was a record-setting weekend, both in terms of attendance and also in terms of revenue across many different events. Enshrinement, our concert for legends, and certainly the football game sold out in a matter of 30 minutes and the Browns were victorious. So that made a lot of people from Cleveland very, very happy. For us, the brand was one thing, but the marketing opportunity was another. And having what I refer to as the Hall of Fame Highway, the highway between the Rock and Roll Hall of Fame and the Professional Football Hall of Fame, just full of people coming to Canton, seeing everything that we're doing, all of the experiences coming to life. And hearing and talking to many of them saying, wow, this is really special, it's in our area, it's in our neck of the woods. We now know more about this and we're excited about coming back. That is exactly the type of marketing and branding that we were looking to have. The last thing I'll say is we got to have the ability to be a bit more scientific this weekend as well in terms of really capturing how many people were on campus. And again, record setting in terms of geotracking, the number of people that came to campus here at the Village, spent time here, and also enjoyed experiences and spent money here. And so the more of that that we can do, the more that we can get sophisticated around geo-tracking, understanding our audience, and then target marketing towards that audience, the better we're going to become at activating and growing our company. Let me turn to Q2 highlights, if I could. I would say a lot of different things have happened over this last quarter. things that we're very proud of. But the thing that I talk about a lot is just remaining focused on the five key priorities that I highlighted in Q1 on our earnings call at that point in time. The first was balancing expenses with revenue growth. And, you know, for us it's important to recognize that we're still very much in the growth phase of our company in every asset, every media content, every gaming environment that we're developing. And so we're spending money to build these environments and experiences for our guests. But it's also important that we continue to focus on the cost control side of the business. You know, we're one year into operation. It was exactly a year ago during enshrinement week that we sort of opened up the village, if you will. Not all of the experiences were ready, but we were able to showcase a lot of assets that were there and ready to become operationalized. And as you've seen, we have shown strong revenue growth over that period. In fact, you know, over 100-plus percent revenue growth quarter over quarter, year over year, and that's attributed to the team and their efforts around activating, programming, and also asset development as well. You know, the fact is Tom Benson Hall of Fame Stadium is now becoming home to many nationally televised and recognized events. We hosted USFL regular season here. We hosted playoff and championships here. We also hosted at the Forever Lawn Sports Complex many large-scale youth and adult tournaments ranging from lacrosse to soccer and to football, to flag football, and that continues to be an important attendance driver for us, but we've also realized how to monetize that attendance in a much more synergistic way. The other thing that we were able to do is, as I talked about last year, flatten seasonality. What that really means is instead of all of our attendance coming from May through, I'll call it November, with the opening of our Center for Performance, our indoor dome, we were able to attract many hundreds of thousands of folks from that non-peak period, I'll call it November through April, May. And that was really important to us. It's important for two reasons. One, driving year-round attendance and revenue. Two, being able to offer partners and sponsors the reality of a destination that is activated year-round. And so we were really happy with the number of leagues, the number of events, We hosted not only sporting events, but non-sporting events in there as well. And we continue to do that and activate that really important asset for us, which leads to a lot of great synergies as well. Play Action Plaza, we added our third ride, Spike It. If you have a chance, come out. I think the third ride gives us enough critical mass to sell day attendance passes, year-long attendance passes. And I've talked to many kids and adults out there walking around and they seem to just be thrilled with the amount of activity that we now have in that particular area. We opened multiple new facilities in our fan engagement zone. Top Golf is now open and doing incredibly well. Brew Kettle is a fantastic partner there and in fact you probably would have seen for Entryment Week and it's still obviously ongoing. We work closely with them to co-brand a beer which I think is a wonderful beer. It's a Pilsner called Grid Iron Gold and the response to that was just overwhelmingly positive during enshrinement week and now we're selling that throughout our campus and we hope to take that off campus as well. Synergy is important to us. I talk a lot about synergy. It allows us to scale experiences. It allows us to scale revenue and, you know, sort of amortize costs over multiple different things that we do. We have created experiences that I think now offer us the opportunity, and I'll talk about one that's coming up this week, this weekend I should say, where if you're bringing in a large-scale sports tournament, our hotel is full, our restaurants are now full, the Hall of Fame Museum is seeing attendance upticks, and so it's really taking the one-off guest experience that used to be a single thing and taking it and expanding it into multiple things where people are riding and buying concessions and the parking revenue and all of the different types of things where we can activate each of these verticals, crossing over into the other two verticals allows us to really grow the company. It also allows us to take guests and fans and make them into super fans. And that's a big part of what we want to do. We want to really create stickiness to our environment. And I think we're seeing that with repeat visitation. The last thing I'll say about, you know, growing revenue, we certainly have had a focus on different business opportunities. And one of those, and we're starting in a very small way, is merchandise and branded merchandise for the Hall of Fame Village in particular. I think our team has done a really good job at creating unique merchandise and that is on brand, but also in what I would call in vogue with the merchandise that people are buying today. And so it was gratifying to see people coming and saying, wow, it's really great to see that. What that does, obviously, it gives us another revenue channel, but also it creates brand ambassadors, ambassadors that are out there walking around with our logos, creating opportunities to engage with other folks around what is that? Where did you get that? What kind of experience did you have? And so I thought that was really fun to see over the last week, and that's a business that we've had ongoing for quite some time now. We're working hard to expedite the stabilization of our company, but here's what I would say, having done this for a lot of years of my career. Stabilization typically comes three to five years in to any sort of company growth or asset development. It takes time for people to understand what the experience is. It takes time for that to be part of their vacation planning cycle. And then it takes time for that to really stabilize. And stabilize means not only the revenue side of the sheet, but the cost side of the sheet as well. You become more efficient. You learn how to operate the destination more efficiently. I can tell you that our team of leaders has meetings about this every single week. We talk about where our opportunities are to become more efficient. And I think we are becoming more efficient. But we're still a young company. And, you know, we're a company, as I said earlier, that is investing in our growth. We're an early stage company that has to invest in the growth of new asset development, new content development, new environment development. And I think we're doing that really successfully. We're managing our expenses, but we're also against the outflows, but we're also managing the growth of experiences that our company is able to offer and able to offer in a very unique way. The second thing that I talked about in Q1 is our balance sheet. There's no question that a good portion of our balance sheet is very stable. And we've been very creative with both public and private partners as to the type of debt that we've taken in, longer term, very reasonable interest rate debt in an environment where inflationary conditions are taking hold. Lending is actually stopping and some of the areas in which we're still able to obtain financing. And so I'm encouraged by that side of the balance sheet. There is, though, work to do. We do have and we did have to take on debt that is shorter term, that is higher interest rate type of debt. And Ben will talk more about that and his highlights and remarks. But I would just say this. You know, it does remain top focus for us. We want a balance sheet that allows our company to grow and sustain over the long term. And so that has been a focus for us. It is more complicated by the fact that when you have several different vehicles that you're working within, every time you go to think about restructuring one, they touch pieces and parts of others. And so this is work that we'll be talking about and we'll continue to talk about over the many couple of months in the near future and provide updates to you at those points in time. The third point is identifying what I would refer to as strategic deal of business partners. I think we've shown that as we have grown, we have been very thoughtful around the types of partnerships, the types of events, the leveraging of our assets and how we do that to grow and really showcase the capabilities of our team and of our company. We tried new things. If you were here for the USFL Championships, we hosted a country concert in our fan engagement zone. First time we'd ever done that. It was absolutely spectacular. Thousands of guests there activating that part of the campus. We opened up our stadium so you could traverse back and forth. It was really seamless for our guests. And it was very productive for us. And the guest experience was incredible from what we were able to discern. People feedback was you need to do more of this but it extends past what we're doing here on campus at the village. I mean we've signed multiple new media deals as I said filling our media pipeline is really important. We have taken on relationships with Brinks TV. We've taken on relationships and signed deals in other areas with Reach TV producing multiple shows with them. These are partners that allow us to use our access to intellectual property that no one else has and distribute to hundreds of thousands, if not millions of eyes all across America in hotels, in airports, streaming, et cetera. And so this, the goat code we were advertising during enshrinement weekend, talking about how the greatest got to be great. The tech in this show is fantastic. The storyline is fantastic. It's short form content that I think everyone is going to enjoy. It's in production right now. It'll be in distribution in the very near term. And then the multiple other shows that we've continued to sign up, I think are going to be really, really wonderful for our guests and bring our brand and our product to life. We've had our NFT Paula Villager pass holder out there. I think it's been interesting to see that our highest level of annual pass has sold out and there is a demand for more of that level, we have really activated that program with unique and special access to content, to events, to merchandise, and I think the feedback has been quite positive on that front. This is really an annual pass for our company. It's not just an annual pass for the Village. And so, you know, media premieres and gaming activations, you know, these pass holders get special access to things that others do not. And so we're going to continue to look at how we evolve and restructure those to meet an even greater demand as we continue to grow our company. In our gaming division, obviously we continue with the eSports vertical. We've hosted multiple tournaments in Q2. It was fun and interesting for me to meet a lot of senior executives from e-gaming companies here during enshrinement week and their reaction to what we've done on campus and how we've continued to activate the campus in that space. Fantasy sports remains a priority for us this weekend. We have a very large fantasy football expo that is sponsored by NBC Sports Edge. also live streamed with Sirius XM Radio, their fantasy channel. And it really does, again, showcase the synergy when you bring an event that is fantasy-based or esports-based, staying in hotels, media coverage, space rental, concessions, rides, all of the things that we do now can be monetized through these types of events. And so it's one of those things where gaming starts to become an important part of what we do. Our partner at Better, you'll recall that we have taken a shareholding interest. Their percentage of handle in Ohio continues to grow. So we're encouraged by that. But more importantly, the profile of their company continues to grow as well. And Joey Levy and his team are doing a great job. And they've now been able to extend Better's reach into multiple other states. And that benefits us through our shareholding percentage. The fourth point that we talk about is just continuing to develop our phase two assets. And so I posted yesterday on my social channels the exciting news that our water park is finally going vertical. We've been doing a lot of the underground work, a lot of the work that sort of sets up the structure of the water park. We expect this to be fully enclosed by the end of this year. And so steel will start to go up next week. More of those prefab panels that create the shell of the building continue to go up today and beyond. And so the water park really is a phenomenal asset. I continue to review the drawings and the designs. It's going to surprise and delight our guests beyond their wildest dreams. And by the way, we're looking at some tech in there that's going to really enhance the guest experience as well. We're growing our on-site hotel presence with the Hilton Tapestry Hotel that we've talked about. We're anticipating this hotel to open right at around the timing of the water park. Those two assets are connected to help mitigate some of the weather considerations here in Ohio. And again, reviewing those designs and looking at what that hotel is going to represent to us, giving us an onsite presence is really important for the stay and play kind of environment that we're looking to create. Lastly, The fifth thing that we focus on is just creating unique experiences for our guests. And I talk about this all the time. We are putting the right team in place in all of our business verticals to really drive experiences, to be thoughtful about how we use our intellectual property, how we attach ourselves to professional football and other sport, how we leverage our license agreement with the Pro Football Hall of Fame to access Hall of Famers and leverage their brand for our growth. And we are on a track right now for record attendance in 23. And I'm really happy to report that because with record attendance at the village leads to record growth and revenue leads to record growth and experiences, marketing, branding. And so that's the whole goal here to continue to open assets, to continue to create environments where our guests just keep coming back to over and over and make them sticky so that they want to be a part of our ecosystem. The other thing that we're very prideful of is the experience itself and the quality of the experience. I'll reference the Doubletree Hotel, our downtown hotel, which we've now had open for nearly three years, in the top three of Doubletree's U.S. customer service. And that is absolutely fantastic when you think of the breadth of the Hilton portfolio. For us to achieve that year over year, the team there is so committed to They put on a great show. The Hall of Famers stayed there all week last week. The feedback we got was unbelievable. Can't wait to come back. The asset itself is great, but the team is what puts the life into that asset. And as we all know, when you go to a place and you feel welcome and you feel like you're taken care of, you go to that place again and again. We're seeing business travelers tick up there. We're seeing meeting and convention business tick up there. Obviously, that is probably one of the best cases for synergy for our company. Every time we're doing programming, our own hotel is full. And so, you know, it's really encouraging to hear the feedback, not only that we're opening and creating new things, but the things that we're building, the environment, are of the highest quality. You create quality, people will come, people will pay, and people will repeat. I'll just close by saying before I turn it over to Ben, you know, our long-term strategy is to deliver results. That's what we've committed to. That's what we've stayed steadfast on focusing on. And it's working. You know, when you look at the revenue growth, when you look at the attendance, when you look at the environments and the quality of the product, we are absolutely headed in the right direction. And I have confidence that we will continue to make the right decisions to grow this company and to add shareholder value. I realize that people out there want the stock to be $100. I realize people have had concerns about some choices that we've had to make in our past to preserve our ability to drive long-term success. But I think what we've tried to prove and demonstrate is transparency is critical. We've been transparent about what we've done, when we've done it, and why we've done it, and we will continue to do that. And we've highlighted the growing interest in our companies and the many leaders from different spaces that are now coming and wanting to talk to us about an opportunity to partner with us, be it in the media space, the gaming space, or even taking up residency here, creating spaces or events and things of that nature here at campus at the Village. We got a great Q3 and Q4 ahead of us. I'll talk a little bit more about that in just a few minutes, but I'll wrap by saying I viewed Q2 as a fantastic success for us. and it continued to highlight what we can do if we stay focused on our long-term strategy. Turn it over to Ben.