Hall of Fame Resort & Entertainment Company

Good morning and welcome to the Hall of Fame Resort and Entertainment Company's third 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 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 third quarter 2023 earnings conference call. Our latest press release and supplemental slides were posted yesterday evening after market hours. These documents can be found in the Investor Relations section of our website, which is hofreco.com. After this brief introduction, Michael Crawford, our President and Chief Executive Officer, 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. 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 each of you 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 the press release. I will now turn the call over to Michael Crawford. Michael?

Thanks, Anne. Good morning, everyone. It's a really nice fall day here in Canton, Ohio, so great to have the opportunity to update all of you on what's been going on with the company over the last quarter and as we think about going forward. I think we all know November 11th was Veterans Day, so we had a very nice day on campus at the Village celebrating and thanking our veterans for their service, both current and past. There's been a lot of things happening over the last quarter and progress at the village. Some of the key highlights. I'll start with attendance. And it's been very interesting for us on the attendance front. We've implemented a new tool, sort of a geo-tracking AI tool that allows us to understand guest arrival and departure patterns and also flow of guest traffic while they're on property as well. And I'll talk a little bit more about that in a moment. But what we've realized is that Attendance is growing and we're actually exceeding our attendance forecast Which is great for us because it offers us an opportunity to monetize against growing attendance in the future We hosted multiple large events. You'll recall that the USFL championship game was played here I know many folks are still very curious about the USFL and XFL merger I can tell you that I'm hopeful that we will play a role in that league in some way shape or form but as of now we don't have any relevant updates and I expect to have an update in the very near term, and of course, as we do, we'll pass that along to you as our shareholders. We also hosted a variety of different types of events, showcasing the diversity of events that we're striving to achieve here, from our Kids Bop event, of course, enshrinement, the NFL preseason game, the Concert for Legends. Zach Brown did a fantastic job. We also recently hosted... comedian Bill Burr. So a lot of different types of events, and the event slate is growing. And we're continuing to look at not only sport-related but non-sport-related events to build the slate of events for 2024. Our plan is to, prior to the end of this year, announce a more robust calendar for 2024 as well, allowing our guests the opportunity to plan for the events that they would so choose to visit and the experiences that they would have. I talked about visitor growth. We are experiencing strong growth in visitation. Our focus is now as people are coming to give them opportunities to understand what the village is about prior to arrival so that they can plan accordingly. And then also market to them while they're onsite and create movement and opportunities for guests to experience not only the thing that they came for, but the multiple other types of experiences that they can have while they're here, be it ride experiences, food and beverage, interactive sporting experiences or event experiences. And then, of course, we continue to add to the types of things asset-wise that our guests can choose to experience while they're here as well. We added new themed locations in ice cream and cookies in our Smoosh location and Pizza Oven recently opened. We've also added multiple new office tenants in our Constellation Center for Excellence. You know, those things represent lease revenue for us and revenue in terms of building out the facility, but they also represent uplift as those tenants come to life, as those office tenants are present Monday through Friday for different meals on property, potentially hotel stays and visits to the different events that we're hosting. We're expecting to open later this month our Donald Driver Driven Elite Experience. Remember, there are two different business opportunities that we've signed with Donald. One, a retail facility, fitness facility here in the Constellation Center for Excellence, and then also this higher-end training opportunity, this Driven Elite concept in our Center for Performance. And both of those we expect to be opening this month. in the next month. Heggie's Nut Shop also expected to open in the very near term, probably within the next three to four weeks. And so you can see the differences and experiences that we're creating for our guests and the opportunities for them to stay and extend and play. There were five relevant key priorities for Q3. And I would say not only Q3, but this is the focus for our team. Our team did a great job, I think, in executing as you will have seen in our Q3 numbers. We did grow revenue and we also balanced that revenue growth with expense growth. And so our goal always has been to spend the dollars where they're going to have the greatest impact for us. And we continue to manage the cost base in terms of what we're spending and how we're spending and also our staffing models to be most efficient. We also expect to close the remaining financing required for the completion of our phase two assets in the very near term. But the point I'd like to make here is related to the cost base. And as you may very well understand, that every time we close new financing, there's costs associated with that. There are legal costs, there are financing costs, placement costs. And so, those types of expenses I expect to not only be reduced in the coming months and years, but to actually go away because we won't have the need to consistently finance new assets. And so, that will also contribute to our bottom line, not having to have those types of expenditures. We've had approximately one full year of operation through Q3 as a company. And as I talked about, this new attendance intelligence is showing us that our model is really working, creating events, creating new opportunities for our guests to come and experience assets. And we're excited about what's to come. Obviously, our water park is in full swing and in development. and our on-site hotel is about ready to break ground. The reason that hasn't broken ground, we've needed that space. It's a very tight corner in the village there, the northern end. We've needed that space as a lay-down area for all of the construction equipment and all the materials for the water park. And now that that is coming to an end in terms of the outside core and shell being completed, the actual work will start on the inside of that facility and hopefully continue to allow us to build a hotel on the site just adjacent to it. We're getting smarter at how guests are arriving and the timing of those arrivals by event and for a typical Friday night or a Monday afternoon. That's allowing us to really evolve our staffing models and our expense base as well. And so, as I've always said, it takes time to stabilize a operation. I think we're actually getting there sooner than what opportunities really have afforded us to over the last year. But I think the influence that we're having now over the guests and as they arrive and expanding their thoughts around what the village can represent are all very important aspects of driving growth for the company. We are looking at increasing efficiencies in every aspect. We've brought on not only in terms of expense management, but in terms of revenue growth. We've brought on someone who has a lot of experience in revenue management, so things like packaging, pricing, all of those types of things. I think we're getting more efficient at that and we're seeing that in the context of revenue as well, day to day and in the event category as well. Many of our assets have been completed and we're continuing to evolve our tenant mix. There are a lot of tenants that we're in discussion with for the remaining boxes. The good news here is there's not a lot of remaining boxes. But we want to have a more curated experience. And so we're really focused on putting the right tenants to complement the ones that we have in place. And we think that we'll have a good set of tenants over the next couple of months to talk about as well. Synergy has been a big focus for ours continuing to influence as people arrive what they do. People are coming for an individual experience but we're now seeing them come earlier stay later. They're having ride experiences at PlayAction Plaza, they're dining, they're shopping. And so that's a very good thing for us because we want to create the synergy between the assets and between the experiences for guests to expand and have unique offerings for them to enjoy while they're here. The Doubletree is a great example of that. As we've continued to grow onsite events, onsite business travelers, Etc the Doubletree has continued to stabilize and probably even more quickly than what I had hoped for Coming from the hotel business that does take typically take three to four years as well I think we've gotten there in a couple years and it's now a profitable asset It also ranks in the top from a financial performance standpoint at the very top in this region and more importantly it ranks nationally from a customer service point of view and so I've always said everything we do is It's important to create assets that are going to drive great experiences and memorable experiences for our guests to enjoy. I want to congratulate the team there. They've recently won the Brighter Together Care Award by Hilton, which is the award that recognizes the outstanding service and guest experiences by category of brand that they have in their family. We won that for the Doubletree category. It's an absolutely fantastic achievement, and we've continued to be in the top service categories for them since we've been open. The second thing that we talk about a lot and I've talked about even on the last earnings call is restructuring our balance sheet. You know, we've had to make over the last three years decisions in terms of equity offerings, in terms of the type of debt that we've brought on to finance each asset individually in a very difficult environment, starting with the global health pandemic, but moving through an inflationary environment, wars, a lot of things have influenced how the lending environment has continued to evolve and frankly tighten up. And so we want to make sure that our balance sheet is structured in a way that it allows us for the right runway to stabilize the business but also sets up long-term success. A good example of that focus in Q3 was the restructuring of the Doubletree capital stack. We looked at the senior construction loan there. It was maturing. We talked to the lender in Erie Bank. We reduced that senior loan amount, reducing the interest rate, and we also extended that maturity to be more favorable for us. We offset that reduced loan, though, by adding other really favorable financial instruments, the property, the PACE lending that we do, the Tourism Development District bonding that we do. We added small chunks of that to the hotel cap stack allowing us to have a much more balanced sheet there and also allowing us to increase the opportunity for us to drop more to the bottom line. The refinance and the structuring of assets is really important for us, and it is something that the team will continue to focus on, not only were they doing it in Q3, but over the next couple of years. As I talked about We have brought on a consultant that will also help us in that effort taking a look at the types of debt that we have and then also thinking through how to extend those or sort of remodel those to give us that better balance sheet profile. Ben will talk a little bit more in his remarks about the process that we're working on with the water park and the hotel and the public debt financing and how that's working to date. I will say that that has taken a little longer than what we hoped, but it is the right type of debt for us. And so the process, while it has to go through the legislative process for approvals and it takes a little longer, it is well worth the wait that we get the right type of debt profile on those remaining two assets. We did do a small equity raise. We took down a portion of our existing shelf registration. are previously talked about at the market offering. And we did that for a few reasons. One, it allowed us to go back to institutions and increase their ownership in the company. Two, it provided a little more liquidity in the stock. The volume in the stock was trading at a very low volume after our reverse stock split. You'll recall we needed to do that reverse stock split at the time to meet NASDAQ trading requirements. And while I know that that was difficult for some people to understand, it was absolutely necessary for our company to have the opportunity to remain on the NASDAQ and for all of our shareholders to have access to that indice for trading purposes. And so the offering helped us increase the volume in the stock as well and provided a small chunk of additional equity for the company. We are aware that we do have a complicated capital structure. I've just talked about that. And strengthening our balance sheet and improving our financial stability is mission one, not only for the company, but to increase the types and profile of investors that we bring into our company both today and going forward. This is a company that is growing. I think we're demonstrating that quarter over quarter, year over year, but it takes time for real estate, for media, for gaming, to all have the runway for growth until it can be stabilized. And so our stock is not in need of traders. We don't need day traders coming and trying to trade in and out of the stock. We need investors. We need people who understand the business model, who buy into the business model and understand that over time there's going to be a lot of value here. I think we're trading today below asset value. And there are a lot of reasons for that. Obviously, the markets are in stress as well. But this is something that I feel very strongly about in terms of attracting the right types of investors into our company. Thirdly, we're identifying the right deal and business partners. The media vertical is a good example of that. While it's still in early stages in terms of our pipeline development, we've brought in partners like Brinks Television and we've actually produced and distributed multiple episodes of The Goat Code. This is a really cool show that talks to the aspects of being a Hall of Famer, the sort of secret sauce, if you will, as to how these greatest athletes to ever play professional football got to where they are at. It also highlights our access to unique intellectual property to create media content like that. And so, you know, a partner like Brinks, a partner like Reach Television, A partner like Amazon Prime distributing a show that we have right now, a docuseries out called NFL Alumni Academy Next Man Up. I'm very proud of the fact that that really showcased the Hall of Fame village. It also shows, if you watch it, and it's a great show talking about these kids who didn't make an NFL team and the sacrifices that they're making and training and developing and continuing to stay sharp so that if they get their chance to be called up, they're ready for it. But it shows how far the village development has actually come. This was season two of that show, and there was a lot of dirt around in Canton, and now it's a lot of buildings and experiences. It also shows the synergy, right? Because the show was being filmed here on campus in Tom Benson Hall-themed stadium. The athletes were staying in our hotel. There were a lot of meeting rooms being rented, a lot of catering. And so there was a lot of uplift created by that show, not only from a revenue point of view, but from a brand marketing point of view that you simply can't buy on a prime streaming channel like we have today. Sports betting better continues to be in line with our expectations. I think they're doing it, no pun intended, better than most in that category of online sports betting. The micro-betting has been their focus, or that prop betting, but they've now evolved their model to that more mainstream type of betting as well, and they're seeing growth quarter over quarter, and we're really proud to have them as partners. And we're also benefiting from the fact that we took an ownership stake in the company, and so as they expand, and achieve residency in multiple different states by gaining access to the licenses to allow for their platforms to exist in those states, so do we by our ownership stake. On-site, we're looking for those retail partners. We're opening new experiences. We're having discussions, as I said earlier, with many meaningful partners that will allow us to curate a great experience, a differentiated experience here in the Village versus in other places that you may visit. One key learning is onsite sports betting. You know, it's the reality of mobile betting versus retail betting. And what we're seeing in the state of Ohio, which is consistent with what's being seen across the country, mobile betting is just dominating the actual space. 90% of bets are coming through mobile betting. So 80 plus percent of revenue is also coming through mobile betting. That's not to say that a retail presence wouldn't benefit us. We're in discussion with several partners that I think would be really great for us to have here on campus and partners for the company. But the fact is, this is more about an experience than it is about significant revenue growth for us. We expect the revenue growth to come through mobile, and we're going to continue the focus there as most of you continue your focus on using that platform as betting. I think retail-wise, we are different. It is interesting. We are seeing some retail sports betting operators leave the partnerships that they have in Ohio. It is a fragmented group between sports franchises, casinos, racinos, and some of those don't have year-round attendance. Some of those don't have attendance all day and into the evening. They have them for special events. I think that's where we are very different in our business model. There is always something going on at our destination. There are always visitors here 365 days. And so that's our focus, looking at a great partnership that we can implement here at The Village, that we can add value to what they do, and they can add value to our guest experience. Sponsorship deals. We did eight new deals in Q3, totaling over a million dollars of new value to the company. That's very impressive, again, in a difficult environment where marketing dollars from companies are tight in terms of their spending. You see all across the country and the world, frankly, companies cutting back on labor, cutting back on spending because of the inflationary environment that we're living in. But we've recently announced, you know, in Q3 and at the early stage of Q4, some significant partners, Diageo, Coke, Jim Beam, Ohio Lottery. A lot of these partners not only enhance our capabilities in terms of the guest offering, But again, drive significant revenue for us long term to the bottom line. I know one thing that is on everyone's mind. I get a lot of questions about this is where are we at in the Johnson Controls arbitration process. Here's what I can tell you. We finished the arbitration process in early October. There was a three arbiter panel. We presented our case. Johnson Controls presented theirs. We expect to have a ruling on that by the end of this month. Other than that, I don't really have any updates. I'm hopeful, based on the case that we put on, that we will receive a favorable ruling. I think, as I've said before, we were in the right. We were good partners to Johnson Controls, and I think their termination of the agreement was wrong. But we'll leave that up to the arbitration panel to decide. And as I said, we will have a decision by that panel by the end of the month. The fourth thing is we continue to work and develop on new assets. The water park has been in full swing this year. We've been very lucky with weather. That asset will be completely enclosed by the end of the year. But we've also been able to parallel path some of the water work development on the inside, which is unique. We've worked a lot with our contractors be able to start that work and so we're still targeting a q3 opening of the water park next year I talked about the Hilton tapestry starting very very soon we'd like to believe that we could open that on or around the same time of the water park the reality is it's probably going to trail that by a couple of months but again we needed to slow that development down so we have the appropriate area beside the water park for lay down of materials and construction equipment Then the last thing I would say that we've done is focus on unique guest experiences. We want to put together an itinerary for guests. We don't want guests to come for an event or come for a dinner. We want them to come, stay, and play. And so we talk a lot about unique experiences, but we also need to think about how do we communicate those and how do we make those easier for our guests to access. And so we hired a new position, as I said, in charge of revenue growth, optimizing pricing, optimizing packaging opportunities, and really helping us think about growth and synergy between all of the assets that we have to sell and for our guests to experience. The other thing that this position is helping us do is build our concession business and our merchandise business. We have a small merchandise business that I'm hopeful can grow over time, meaning selling shirts and hats and hoodies and different things like that that we've I think got a really unique concept and brand and we want to be able to monetize that. And so we're hopeful that as we create more unique experiences more guests come. As I said we're seeing the attendance growth and that attendance growth is leading to revenue growth and we're managing our costs accordingly. And I'll turn it over to Ben and have him take you through our financial review.