Guild Esports (LSE: GILD) is facing a liquidity crisis and looking for a short-term strategy to alleviate the situation. On Thursday, the publicly traded UK-based esports organization announced preliminary findings from an ongoing strategic review including the company’s low cash position, liabilities, and accounts receivable.
The announcement revealed that Guild had a cash position of £25K ($32K USD) as of July 31 (yesterday), and “confirmed liabilities until the end of September 2024” of £1.36M ($1.74M USD), and accounts receivable amounting to £1.52M (roughly $1.95M USD).
As a result, the company said that it was exploring options such as taking some austerity measures to cut costs, seeking additional funding, and negotiating better payment terms with creditors. The company also said that it might be open to a sale of parts of the organization or even outright finding a new owner. From its financial filing on Thursday:
“In addition to the fundraising avenues, the Board is reviewing the strategic direction of the Company, including the realization of assets to generate cash or whether the Company would be best served by being part of a larger group.”
Separately, Guild announced a new partnership on Thursday with Inspecs Ltd. eye brand REGEN, naming it the “official eyewear partner of the organization. While Guild Esports did not disclose the terms of this deal, the announcement revealed that the total contract value is payable in cash.
On June 28, the UK-based esports organization reported interim results for the six month period that ended March 31 (H1 2024), recording a loss before tax of £1.8M (around $2.3M USD) following a 38% reduction in administrative expenses; this resulted in a 21% reduction in its recorded loss of £2.28M (roughly $29.2M USD) for the same period a year ago.
Revenues from its Guild Studios operation rose 537% to £586K ($750K USD) compared to H1 2023 (£109K, or $139K USD), but overall the company reported a revenue drop of £2.1M (roughly $2.7M USD) compared to H1 2023 revenue of £3.7m ($4.74M USD).
At the time of its interim results on March 31, Guild recorded net cash of £17K ($21.8K USD), and as of June 25, it recorded approximately £110K in net cash (roughly $141K USD).
Accounts receivable could be money owed by sponsors or partners, or from the Saudi government’s incentive program(s) related to the Esports World Cup. Those partners include SKY Broadband, Subway, hummel, ENDX, Fanatec, Hyerice, Samsung Odyssey, Secretlab, and Sky Glass.
In October 2022, following participation at the Saudi government-funded New Global Sport Conference, Guild Esports was one of the first international esports organizations in the world to announce its participation in the Esports World Cup, and in May of this year, it was named an official Esports World Cup Foundation Club Support Program partnered team.
In May and June, Guild Esports began announcing new rosters in games specifically signed to compete at the Esports World Cup including a Call of Duty Warzone team, an Apex Legends team, TEKKEN player Awais Liaqat, and an ESL R1 Professional Team, among others. What is unclear is if Guild has been given any money from the partnered teams program or if that is part of the money it has listed in Thursday’s announcement.
It should be noted that we do not know what the terms of the Club Support Program are, including the timeline for when payments will be made to teams following the official conclusion of the Esports World Cup at the end of this month (e.g. net-30, net-60, etc.). From what we understand, each team negotiated separate contracts with the foundation (with different terms) and most already received a sum of money, with other payouts related to incentives coming at a later date. Given the incentives tied to the Club Program (such as extra money earned for promoting the event and creating content for social media and streaming platforms), it is likely that payouts would happen many months after the conclusion of the eight-week event.