Hall of Fame Resort & Entertainment Company

Good morning. Welcome to Hall of Fame Resort and Entertainment Company's second quarter 2024 earnings conference call. This conference call is being recorded and all participants are in a listen-only mode. We will open up the conference for question and answers following the prepared remarks. I will now turn the conference over to Ann Goffis, Executive Vice President, Global Marketing and Public Affairs. Thank you. You may begin.

Good morning, and thank you for joining us for our second quarter 2024 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 at hosreco.com. After my brief introduction, Michael Crawford, our president and CEO, will give an update on the company's strategy and outlook. John Van Buten, vice president and corporate controller, We'll then provide analysis of the quarter's financial results and an update on the company's fiscal 2024 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 each of 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 our press release. It's now my pleasure to turn the call over to Michael Crawford. Mike?

Thanks, Anne. Good morning, everyone. I thought before jumping into Q2 highlights, I'd just sort of recap a couple of thoughts that we've been having over the last few days and then over the last several weeks. You know, As I reflect on who we are as a company, three distinct business verticals, right? Regional, theme, destination-based assets, media, and gaming. And when you look at what's going on in the market and you look at companies like Disney Reporting and you look at their theme park division, you start to see some pullback in consumer spending. And that's just undeniable right now. The great thing for us is that Experiences are still at the top of consumer spending and the preferences that consumers are having are to slow down spending in certain bigger goods or commodities and not sacrifice experiences like going to entertainment venues, dining out, et cetera. I think we're well positioned with the Hall of Fame Village as a regional destination to still, during difficult macroeconomic environment times, to capture consumers, and we become an answer for them in terms of entertainment and being able to relieve themselves of a lot of the burden that they carry with them on a day-to-day basis. We just finished what I would consider to be four really incredible weeks. Our NFL flag football event, our youth event that we hosted, week-long, 2,800 participants, all of the hotel rooms within the community sold out and Stark County sold out. This was a really large event bringing our relationship with the NFL even closer, and our team executed at an incredibly high level. It was a great opportunity for us to also test what we talked about before, our synergy model. The campus was really activated. Crossover from one venue to the next, the experiences. We had record weeks in food and beverage, ride revenue at our Play Action Plaza, It was really fun to see that come to life, and frankly, one of the first large-scale events where I think we successfully moved guests from one end of the property to the other, allowing them to experience everything that we had going on. Now, we challenged ourselves not only to host that event during the weekend, we also hosted the American Cornhole League Championships. And so in our Center for Performance Dome, we had several hundred participants in there all weekend long, nationally televised on ESPN playing cornhole. And so a very different type of entertainment slash sports opportunity being hosted on our campus at the same exact time we were hosting the large-scale NFL flag event. Enshrinement, of course, was a huge success. We had a couple of rain issues that we dealt with, but again, very successfully. The Bears and the Texans, I thought the game was great. The enshrinement event was very well done. And then our concert for legends with eight-time Grammy Award winner Carrie Underwood, who I got to meet personally, very lovely lady, really put on an incredible show, sold out. The audience was into it. And so when you look at all of those events, combine that with the Women's Football Alliance Championship, add on our largest branded gaming tournament, Gridiron Gateways, The diversity of events that we're now hosting is really growing. The attendance to these events, setting record levels, revenue coming out of these events, the synergy model, really at high, high levels, it gets me very excited when you think about hotel stays, food and beverage, ride revenue, gaming revenue, all functioning now because of the types of events that we are able to garner and host. And by the way, over 70 hours of nationally televised event coverage on ESPN, NBC, ESPN2. Companies our size can't buy marketing value like that. This is an incredible opportunity for us as a sports and entertainment company, really showcase who we are from a media point of view and highlight all the great experiences that we can allow guests to have. So again, high execution, very proud of the team. The diversity events continue to grow, and I'm excited about the direction our company is headed. Having said that, it's important to remember that we're still an early-stage company. We literally launched, as we built assets in 2022, our capability of hosting these multi-diverse types of events throughout in our dome, at our Forever Lawn Sports Complex, in Tom Benson Hall of Fame Stadium, at Play Action Plaza, to feed guests, entertain guests. And so there's still some what I would call variability in our portfolio of events. And we saw that in Q2. Q2 revenue year over year was lower than the previous year and in large part because of the mix of events and the types of events that we had at our village destination. We're getting smarter about these opportunities, by the way. And so as an example, in Q2 of 23, we had a large scale single comedic act come in. And while that was a profitable event, this year we had a large scale comedic festival that was highlighted by Bert Kreischer come in and we actually made more money off of a model where we were renting our venues and partnering with them versus owning and operating the entire category of the event from the previous year. And so while revenue was down, I would say due to operational efficiencies and getting smarter at the types of events that we are bringing into our campus, we close the gap towards profitability. And you will have seen that in our results that we reported for Q2. Everything now is being reviewed. We are always looking at operational efficiency. We're always looking at leveraging the events to their fullest. We've started to now package On a higher level, you can buy hotel rooms as part of an entertainment package. You can also buy parking as a part of an entertainment package. It does two things. It increases guest satisfaction, and it also increases operational efficiency, which leads to greater profitability for our company. So we continue to gain efficiencies, and I think we're going to see that coming out of Q3 and hopefully as we continue into Q4 of this year. Our goal is to optimize every event that we do and our goal is to stabilize as a destination. Now, important to note, you'll think about destinations from an event programming point of view and you'll think of things like Live Nation and Caesars and other big entertainment programming companies. We are not an owned and operated company by one of those other entertainment programmers. And so we're a standalone facility that we now have, and I view this as a positive, the opportunity to work with everybody. And so as we're doing that and building up our reputation in the entertainment industry and, frankly, in the sports industry, there's still some volatility in timing and types of events that we're going to be hosting. The good news is we have really sort of thought about and how to balance the events to derive greater risk-reward opportunity. And what do I mean by that? We have numerous models now where we can own an event, pay for the event, and operate the event. We have a profit sharing model. We have a rental model where entertainment or sporting events come in and rent our facilities, and we have the opportunity to generate revenue out of concessions or parking or other things, but they take the gate. And so our goal is to balance the event strategy to maximize the overall return to the company And I think we're doing that already and I think that's only going to continue to grow. So those two things clearly have been highlights from Q2. The other highlight from Q2 that I think is really worth noting, you'll remember that I spoke about this in Q1 and as we ended Q4 last year, our balance sheet is something that we've been very focused on. And we understand that we've had to construct a balance sheet over the course of the last three years with a global health pandemic, with a really restricted lending environment, with a new company, early stage company profile that is very complicated. And so our goal has been to refine that complicated nature and make it simpler. And if you look at what we've done just in the recent term, we restructured five of our local community loans community, city, and county loans totaling $21 million to become much more favorable to the company. They're no longer short-term debt. They're much longer-term debt, and it's much more manageable as we stabilize revenue and grow towards profitability. We also took in an additional $11 million of financing. We were awarded almost a $10 million grant from the state and also a $500,000 grant from the Stark Community Foundation. So the balance sheet has been an extreme focus of ours, and I'll talk a little bit more about that in just a few moments. I spoke about revenue growth as a priority for 2024. And while quarter over quarter in Q2 we were down in revenue, we are clearly experiencing revenue growth in the context of synergy. Synergy allows us to create greater guest experience, but also allows our guests greater access to all of the things that we have to offer. And I just talked about, you know, hotel stays being packaged and food and beverage being packaged, parking rides and gaming also becoming packaged. Events on campus not only drive revenue directly from the event, but from that synergy model that I spoke about as well. We're focused on improving bundling. I think we're getting better. I think we have more work to do, an early-stage company. We have a campus system-wide operating system that we're putting in place that will allow us to drive greater bundling opportunities for our guests, which then in turn should drive a greater return for us as a company. And we're continuing to build towards stabilization. Again, the predictability of when events happen, win sponsors, how we open new assets, the impact of those types of things on our modeling, revenue modeling, and on our growth modeling. We're a multi-use, multi-purpose destination at The Village, and that's something that we take a lot of pride in, but it also allows us to be very diverse in the types of offerings that we're going to allow our guests to experience. We're emerging still as a premier destination, and you can see that in our calendar of events. As an example, We just added a big, what I would refer to as a bourbon beer tasting event that highlights entertainment with Shabuzy, Charlie on a Friday, great entertainment throughout the night. It's going to be the biggest party of the fall. We booked that literally a month ago. And so bookings are still very near term. And that's what we're going to hope to evolve as we entered into 2025. more advanced bookings for entertainment allows us to stabilize and also allows us to generate a much greater marketing and sales effort for each of those types of events and frankly allows us to partner with other industry experts as well to make those events even bigger and better. We do anticipate revenue for 24 to be lower than prior year, but there are still opportunities to gain back against that forecast. We're looking at other sponsorship opportunities, new event opportunities. But right now, from what we see, we're guiding towards slightly lower, and John will talk about that revenue for this year versus last, but slightly more profitable this year versus last as well. And we expect to increase the growth rates of the synergy as we bring on our Game Day Bay Waterpark and our on-site hotel. We're already gaining those synergies with our off-site hotel we full well expected to be able to drive greater synergistic revenue with those two remaining assets. Operational efficiency has been a priority for us and I think we're showing it. The investments we've made previously into equipment, into resources, are allowing us to get much better at what we're doing and to be much more efficient with our costs versus our revenue. We expect that to continue to be optimized as we stabilize and we understand how the destination fully operates at its fully built-out stage. We're learning from everything we do. If you look at over the last couple of big weekends during enshrinement, we've gotten better and better at guest service. We've gotten better and better at offering guests greater packaging opportunities. And so we believe that there is an opportunity for this to continue to grow as we grow the number of these large-scale events like NFL Flag or we grow large-scale events like what we've hosted over the last month. We're doing all of this though with an eye towards customer satisfaction. Everything we have and everything we do has to be generating a great guest experience. And so we're focused more on measurement. We're focused more on survey work so that we can continue to refine the offerings that we have. I talked a little bit about expense management. We're running a much more rigorous procurement process now so that as we're buying or contracting, We're truly evaluating not only the capabilities or the product, but the cost of that product against the revenue that we're going to generate from any asset or any event that we're going to host. It's an ROI mindset. And we're getting there, but we're not fully there yet because our environment continues to evolve and change. And so, you know, on all aspects, shifting from development to operation, shifting from revenue generation to expense management to profitability, customer satisfaction, and really trying to engage all verticals when we're fully functioning as a company in media and gaming. And hosting gaming tournaments allows for hotel stays, allows for ride revenue, food and beverage, gaming revenue. Those types of things I think we're going to be able to continue to increase. Now, let me turn to the phase two development efforts. And I realize that we've been talking a lot about finishing the water park, Game Day Bay water park and our on-site hotel. And that is priority number one. And it has continued to be priority number one. We are very close, words I've said before, to finalizing the capital stack for both of those assets. We're working closely with the state of Ohio. We're hopeful that we can complete the capital structure for both of those in the very near term. We have a 51% built Game Day Bay water park that is exciting, but we need to complete. And then the hotel can break ground. Both of these assets, we still anticipate being completed in 25, hopefully in mid-25 to late 25. As we complete the final financing, we'll focus on generating the exact timing of those things. Media. This is an area where our company is experiencing great growth. And compared to Q2 of 23, we have about 50% more projects in the pipeline being filmed, being produced, and coming out of post-production and being sold and distributed. As an example, we have Hometown Heroes. that is going to premiere in September on Reach Television with Doug Williams as the first episode. We have The Goat Code, second season of The Goat Code, featuring in 2024 the first episode featuring Dwight Freeney. We sort of previewed this during enshrinement. There was a lot of excitement around it. It will also premiere in September on Brinks Television. And we have a lot of projects in various stages. of development and production. And so we're looking forward to continuing to update you all on how that progress will continue. And frankly, I'm excited about some of our partners in the media space as well. Some very high-profile former athletes, some really high-profile production companies, and obviously companies like NFL Network, Fox, and others. Speaking of Fox, we have ended our first major run of The Perfect Ten with Fox. It was extremely successful, one of their highest all-time viewed documentaries. And we're now excited about the second window, the second opportunity for this show to be sold and shown on a different platform. Could be streaming, could be traditional. We're also excited about the chance to take this internationally as well. And so we're working right now on the partnerships that will allow us to do that. But again, a highly successful first documentary that we did with The Perfect Ten and now giving us downstream revenue opportunities as we close out Fox. And there is additional revenue coming from the Fox relationship as well that we'll be recognizing in the very near term. On the gaming front, we have brought in an outside consultant, somebody who is known globally to help sort of accelerate the growth of our gaming vertical. We have a very dedicated team there that really is focused on the right types of events, growing our brand there, I talked about Gridiron Gateway as one of our largest branded events that we've hosted. We've hosted college tournaments. We just hosted this past weekend the largest fantasy football expo in the country. Better, our mobile betting partner continues to grow. Our investment in them still remains the same, and so the value of that investment we anticipate growing as well, which is why we originally took that ownership stake there. And while not giving up on retail sports book, we really have realized that the retail sports betting opportunity is much less than what it was originally thought to be, meaning 97% of all people are placing bets mobily. And so regional sports book for me is more about creating a guest experience. And we're looking to potentially couple that with a food and beverage experience, a merchandise sales experience, something that, that generates a multi-use destination. And we continue to have conversations with potential partners, but nothing to highlight as of right now. Sponsorship deals, our strategy is working. We talked a long time ago about delaying certain categories of sponsorship until we grew as a company, until the types of product or service that they offered could be utilized more fully. And we're seeing that in the deals. The types of deals are growing. The value of the deals are growing. And the good news is several of our previous partners have signed up again because they're now seeing the growth and the advantage of continuing their partnership with us as a multi-use company in terms of destination media and gaming. And so deals are becoming longer term. The size of the deals are growing. And again, we're scratching the surface and I see a lot of growth as we continue to build our destination, our media and our gaming capabilities. Just a couple of final things on the restructuring of the balance sheet. I talked about the $21 million, but we also in Q1 extended $49 million of debt maturity to March of 2025. And something to note here, which is really important, that $49 million of debt was held by our largest shareholder, Industrial Realty Group, and one of our largest lenders. And so their interests aligning with our interests to see the company be successful long term. We have seen that, we have reported on that, and we certainly feel that on a regular basis. You would have also seen that they filed a Schedule 13D. We talked about that before. And what that does is it really notifies our shareholders in conjunction with working with the company leadership and our board, of course, that their intention is to explore all opportunities to help make our company successful. And from the largest shareholder and one of our largest lenders, that's a very big statement. And I can tell you in my conversations with Stuart Lichter, the head of IRG, he is and they are very committed to this long-term success story. That's why they have continued to support us with lending, with project completion guarantees, with extending debt, and now with going out on their own, looking for other opportunities to help bring in potentially new investors, potentially restructuring debt, and any number of other solutions that will help this company be successful. It is a testament to their belief in our business model. They've seen the execution. They've seen the growth. And so that's why they're willing to go the extra mile on this and help us in the ways that I've just spoken about. Also, it's important to note and say thank you to our city, our county, and our local community. You know, we went to them with restructuring of several millions, tens of millions of dollars worth of debt. They were very supportive of that. They understood the value, the economic growth that this destination represents to not only Canton, Ohio and Stark County, but Northeast Ohio. The state granting us $10 million as a grant, more equity coming into the company, shows their faith in what we're doing as well. The NFL bringing large-scale events. The story here is we're growing, but we're early stage. But because of the execution and because of the strategy and because of the team, the key partners that we have out there are continuing to stand behind us and invest. I talked about the development of phase two assets as being what I'll refer to as priority 1A and our balance sheet as priority 1B. The unique experiences that we can derive out of the finishing, the completion of the water park and the tapestry extend far beyond revenue. They extend into greater guest service, greater guest packaging, and I'm excited about hopefully completing the capital that we need to start the construction on the hotel and complete the construction on the water park in 2025. Look, our long-term strategy has remained the same. We've had a lot of challenges, but we've been able to be creative and execute at a high level. We've continued to overcome very difficult environments. When you look at companies our size, that are publicly traded. There have been a lot of bankruptcies over the last several years due to the very difficult environments that these companies have faced. I give a lot of credit to our team, but I give a lot of credit to our partners and our shareholders and our lenders that they understand how we've been able to overcome. We're being smart about the timing of new partnerships. We're being smart about the value proposition and having this ROI mindset while keeping the guest and the guest experience at the focus of everything that we do. And so while our revenue for Q2 is down slightly, we've closed the gap on profitability. We're managing costs. We're looking at this holistically. And I think we're well positioned for growth, even in difficult times, as I mentioned earlier, as a regional destination, as a sports and entertainment company, where people look to sports, people look to entertainment and experiences like we have to offer, one of a kind, to sort of relieve themselves of the everyday burden that they carry. So we appreciate everybody's ongoing support, certainly that of our largest shareholder. We look forward to talking about new events, new tenants, the conversion of the media pipeline, and our gaming vertical adding scale. And I'll stop there and welcome John Van Buten to give you our financial overview, and then we'll take questions and I'll come back for some closing remarks. So I'll turn it over to you, John.