For a company with rising debt, plummeting stock value, a major sponsor looking to pull out and a pending threat of delisting by NASDAQ, Hall of Fame Resort and Entertainment hosted a notably upbeat earnings call on Tuesday. The outfit, which is building a football-themed campus around the Pro Football Hall of Fame in Canton, Ohio, found optimism in improved Q3 revenues, a deal to finance Phase 2 of the project and its burgeoning sports betting and media operations.
“I know 2022 has been a bumpy road from a market and macro point of view but this company continues to execute and show that it can grow in every way we’ve talked about over the last year,” CEO and president Michael Crawford said on the call.
The entertainment company behind the $300 million Phase 2 project, which launched last year and is slated to open in 2024, executed a SPAC merger with Gordon Pointe Acquisition in 2020, debuting at $12.93 a share. The stock price has since fallen to 68 cents, down 69% in the last year alone; this week, the company reported a net loss of $11.1 million after posting a $8.1 million net income during the same period last year.
The report also detailed an EBITDA loss of $7.4 million during the quarter, compared to a loss of $7.3 million in the same time last year. Against that, the company said it has closed over $180 million in debt refinancing, with $64 million alone in the third quarter. Crawford said it added long-term debt at 7.4% interest, which in this economic environment he considers a “big win” for the company as it looks to continue to keep expenses low and grow profits.
The financial pain, some of it from pandemic-driven delays, contributed to the project’s biggest sponsor, Johnson Controls (NYSE:JCI), seeking to end its 18-year agreement with the Hall of Fame. JCI said that the Hall didn’t meet its contractual obligations; the Hall has disputed that claim and the companies are currently in a third-party mediation process.
The losses have also triggered the very real possibility that HOF Resort and Entertainment will be delisted from NASDAQ, as it’s no longer compliant with the exchange’s requirements. Staying on the NASDAQ is integral part of the company’s outlook as it targets $150 million in annual revenue by 2026, and it has requested a 180-day grace period to regain compliance. (A decision is expected later this month.)
Crawford reiterated that he and the board, which includes NFL Hall of Famer Marcus Allen, have shares in the company and nobody has sold. “In fact, people have added shares in this company because of the belief of where we’re at and the execution and the valuation,” he said. “We believe there’s a lot of upside, and in 2023, I believe we’ll show that.”
To his point, revenues were up to $8.7 million (149% increase) in third quarter, owing in large part to the rebound of the company’s downtown Canton DoubleTree hotel and variety of events, including USFL postseason games and a Dave Chappelle show.
Beyond that, the Hall announced that it secured $78 million in financing for Phase 2 of the project, which is highlighted by 147,000-square foot indoor waterpark and a new Hilton Tapestry hotel. The deal includes a $50 million sale leaseback agreement with Blue Owl Capital. For Blue Owl, it’s an opportunity to add a sports-related asset to its wide-ranging portfolio.
The parent company of Blue Owl’s real estate division, which owns stake in CVC Capital Partners and three NBA teams, declined to comment for this story. Blue Owl’s investment is coupled with a project completion guarantee from the Hall’s largest shareholder, Industrial Reality Group (IRG). The $28 million deal with IRG includes restructuring of existing debt.
The Hall also remains bullish on the opportunities for its media arm. The Village Media recently sold its sports documentary, The Perfect 10, to Fox (it will air during the 2023 Super Bowl), and it launched video podcast Football Heaven in partnership with the Pro Football Hall of Fame.
The Hall is expected to launch online sports betting on Jan. 1, and its retail sportsbook is slated to open in the second quarter of next year. The Hall, which has partnerships with Jake Paul’s Betr and Rush Street Interactive, also has high expectations for its gaming rollout, which will include selling memorabilia-based NFTs. With distribution and content development deals on the horizon, Crawford is hopeful that next year will be a breakout year for the media business.
“When you create exceptional experiences both physically and virtually while hosting and [engaging] audiences, you have to believe that revenue growth and bottom-line contribution will start to exponentially grow,” he said. “We’re undervalued, and we’ll correct that in 2023.”