FaZe Clan Needs to Play Several Eco Rounds for a Chance to Win in the Nasdaq Game

Credit: FaZe Holdings

FaZe Clan CEO Lee Trink is trying to convince investors of better days ahead based on what he calls momentum in its esports business, working through a challenging environment, and showing strong cost discipline—meanwhile, the company’s revenues shrink and losses increase. A little over a year ago, the esports, gaming, and lifestyle organization FaZe Clan went public on the Nasdaq and received $57.8M USD in net proceeds in the process, at the end of the second quarter of 2023, a cash position of $21.23M is left.

In the three-month period that ended June 30, FaZe Clan generated $11.69M in revenues, a $7.1M or 37.8% decrease compared to the same period in 2022. As the cause for the decrease, FaZe Clan cited a decline in its brand sponsorship business. Brand sponsorships revenues decreased by $8.8M due to the lack of new sponsorship deals and the delay of renewals for existing sponsorships—during the second quarter, FaZe Clan only had five significant sponsors, half the amount of sponsors that supported the organization in the same period of 2022.

As a result, FaZe Clan’s brand sponsorship business, which still contributed roughly half of the organization’s total revenues last quarter, fell behind the esports business measured by revenues generated with esports contributing $4.21M, brand sponsorships contributing $4.13M, and content contributing $3.31M. The sponsorships revenue decline was slightly offset by an increase in the company’s esports and content revenues. Esports revenues increased by $1.67M year-over-year driven by an increase in international esports revenue of $1.1M, while content revenues grew by $1.5M year-over-year driven by an increase in Google AdSense revenues of $1.1M.

As total revenues declined, FaZe Clan’s cost of revenue also decreased, however, at a significantly slower rate of $3M year-over-year due to fewer sales activities to $9.84M, leaving the company with a gross profit of $1.85M, down 68.8% compared to Q 2022. Simultaneously, operating expenses increased by 45.9% to $16.28M, resulting in a net loss for Q2 2023 of $14.36M, a 54% increase in losses compared to a net loss of $9.32M in the same period of last year.

In addition to reporting negative developments in its financials, FaZe Clan revealed that all of the key performance indicators (KPIs) it provides to investors are on the decline. The four KPIs the company reports on are total reach, aggregate YouTube subscribers, average revenue per YouTube subscriber, and the total number of significant sponsors. Total reach for all social media channels FaZe Clan is contractually allowed to directly monetize decreased from 322.7M to 301.3M and numbers for aggregate youtube subscribers also slightly decreased. A significant drop was reported for average revenue per YouTube subscriber, which dropped from $0.52 in H1 2022 to $0.19 in H1 2023, and the number of total significant sponsors, which was cut in half from 10 in Q2 2022 to 5 in Q2 2023.

Following the period, FaZe Clan’s shareholders voted to approve a reverse stock split of the company’s outstanding shares of common stock at its 2023 Annual Meeting of Stockholders on July 10. The reverse split is necessary due to the company’s failure to comply with the $1 minimum bid price required for continued listing on The Nasdaq Capital Market.