ESL FACEIT Group Release Latest Financial Records
The Saudi Arabian owned esports company has released their financial filings for the end of 2023 providing insight into the company's direction and overall health.
The Saudi Arabian owned ESL FACEIT Group (EFG) have released their latest financial records for the end of 2023. The document contains several pieces of information that provide insight into the company’s direction and corroborates several media reports that have been published over the past twelve months.
The ESL FACEIT Group was founded in February 2022 when the two titular entities merged in a move underwritten by the Saudi Arabian Public Investment Fund via the Savvy Gaming Group brand. That purchase was reported to have cost $1.5bn, a price tag that many industry experts said was overvalued for the struggling companies. Since then Savvy have purchased more companies to fold into EFG, most notably the US based Vindex Groupin March 2023.The month prior to that they also invested in Chinese tournament operator VSPO in a move that made Savvy the single largest stakeholder in the company.
While you can view the full document for yourself, we shall summarise the details we believe of most importance below:
FACEIT Status
FACEIT is a popular website that enables members to play pick-up competitive games with other members and earn a competitive ranking. At the highest levels it has also served as a talent incubator, rewarding the best players on the platform with prize money and putting them in the spotlight for potential recruitment. It is a significant part of the portfolio’s revenue generation and currently benefits from being able to claim that it provides an environment where players are less likely to encounter cheaters and where negative interactions are policed. It seems that while the release of Counter-Strike 2, announced via this publication, did initially cause players to take a hiatus from the FACEIT platform, they eventually returned.
“In September 2023 Valve released Counterstrike 2 to replace Counterstrike: Global Offensive, the main game on the FACEIT platform. While some drop off in players and subscriptions occurred as players went to test out the Valve Matchmaking system, FACEIT ensured a seamless transition between the title for users and players on the platform.”
The document also claims that there are nearly 31 million registered users where it states “registered users increased by 11% to 30.9m compared to the previous year.” It must be noted that registered users are anyone who has created an account on “our platform,” which could also mean numbers from the ESL websites, ESEA and other parts of EFG’s portfolio that require registration are included.
Russia / Ukraine
The document also references the Russian invasion of Ukraine and explains how that has impacted on their business, specifically FACEIT subscriptions.
“Since February 2022, the impact of the Russia and Ukraine crisis has continued to have a significant impact on the FACEIT subscriptions, sponsorship and advertising revenues. Growth had been seen in both regions prior to the war, however post start of the war the revenues and have yet to recover to the prior levels. There has not yet been a full recovery of revenues in this region and the uncertainty continues.”
Vindex Purchase
A large part of the filing is dedicated to the purchase of Vindex LLC. Vindex was a company created by former Major League Gaming founders Sundance DiGiovanni and Mike Sepso. It was designed to provide data and analytics to games publishers but also had a tournament operator branch called Esports Engine. They had helped produce several successful tournaments across the United States including Twitch Rivals and the Fortnite World Cup. EFG’s purchase of Vindex seemed to fulfil the double benefit of not only acquiring their resources and staff but also to effectively remove a business rival from a significant geographical territory.
“In February 2023, the company provided additional capital to its subsidiary FaceIT Inc. in order to fund the acquisition of the entire share capital of Vindex LLC for 192.9m. Vindex provides infrastructure that helps the global gaming and esports business by connecting games and gamers and provides the video game industry and gaming consumers with solutions, technologies, and experiences. The company offers competitive operations, broadcast technology, streaming services, content creation, and a network of communities designed to meet the needs of publishers, distributors, leagues, teams, sponsors and fans.
However, an impairment of 158.3m on this investment was recorded in the financial year due to macroeconomic esport industry market conditions in 2023 where many publishers in the industry have experienced layoffs and budget cuts causing EFG revenues to decrease. EFG has launched cost saving programs to mitigate the market conditions.”
It didn’t take long for the new acquisition to be gutted, with layoffs to newly integrated staff and the closure of the Vindex analytics platform. The staff at the Esports Engine studio in Burbank, California were almost entirely let go as operations in California were cut back and people reassigned to Ohio. EFG now place the value of the company they acquired as now being £3.2m.
“Since the year end, the wider Group has undergone a reorganisation which has impacted the underlying value of the company’s investment in its indirectly owned subsidiary, Vindex LLC. Consequently the company has recognised a further impairment in 2024 reducing the value to £3.2m. This further reduction has not been reflected in these financial statements on the basis that the condition for recognition did not exist at 31 December 2023.”
New Directors
The document stated that two new directors, both Saudi nationals, had been appointed to the board of directors as of the 13th August 2024. These are namely Saleh Alfadhel who was the existing CFO and Meshal Almogbel who joins as a board member. Alfadhel’s prior experience has been working on multiple audit committees for several Saudi based companies including many airlines. Almogbel is currently the Senior Director for MENA Investment for the Kingdom’s Public Investment Fund and has also joined the board as an “audit and risk committee member.”
These appointments, coupled with the several references to cost cutting across the company, suggest that a greater focus on how the PIF money is spent is being employed after the initial flurry of purchases. This would be a continuation of policies designed to reduce outgoings that include mas layoffs in March and requesting freelance broadcast talent take paycuts in May.
Gross Margin Decrease
It is also made clear that the gross profit margin within the company is significantly down, something EFG attribute to matters beyond their control. As these are records pertaining to 2023 it would be fair to say that the phenomenon known as the “esports winter,” a market correction where esports companies finally pumped the brakes on expansion and overspending, might have played a role.
“The gross margin has declined by 38% in 2023, less than the previous year due to market conditions in esports which have reduced advertising and sponsorship revenues.”
The spreadsheets show a significant reduction in advertising revenue, which is something that aligns with what we know publicly. The energy drink company Monster, who had signed a global partnership with ESL in 2021, are no longer present on any of the EFG’s websites. Recent reporting around their Intel sponsorship also suggests that a new deal has been signed that has less presence for the tech company. For instance, the Intel Grand Slam, an extra $1million prize that is awarded to teams that win the requisite amount of Intel branded tournaments, will now be called simply the ESL Grand Slam with details of what that will entail in the future not forthcoming. A deal with Logitech announced in August 2024 also no longer seems to be mentioned on the partners page of the ESL website.
They also state that “The operating loss has increased by 14.004k to 24.028k mainly driven by quality increases in all areas, and recruitment of higher quality staff as an investment in future growth.”
Elsewhere, it also mentions that they received £20.9m directly from their “immediate parent company” towards operating costs. They also state that “the company is still considered to be in a developing stage and continuing to explore new growth opportunities, which require large cash investments” through to 2029 and that “ongoing losses” will be part of that plan.
They add “The directors have received assurances of ongoing support from Saudi Electronic Gaming Holding Company (parent company of Savvy Esports Investment Limited) should they require it. Since the year end, the company has been provided with an additional loan facility from the group of $50m / £39m.”
This, they say, renders them “confident that the company will have sufficient funds to continue to meet its liabilities as they fall due for at least 12 months from the date of approval of the financial statements.”
Cost Cutting Measures
The financial records also now serve as a primary source to several anecdotes conveyed in reporting around EFG, namely that cost cutting measures are taking place within the company. Despite the perception that the Saudi purchase would give them unlimited spending power, the reality is that they have been quite restrained in their budget allocation and are already in the process of belt-tightening. They state that “many publishers in the industry have experienced layoffs and budget cuts causing EFG revenues to decrease. EFG has launched cost saving programs to mitigate its market conditions.”
Controlling Party
While there has been some reticence to admit what is plainly obvious in their media presence since the company was purchased by the Saudi Arabian Public investment Fund, the financial report makes it unequivocal who has the final say in business matters.
“The ultimate controlling party is the Public investment Fund of the Kingdom of Saudi Arabia” it states and then provides an address of the PIF’s offices in Riyadh. This should finally put to bed any notions of abstraction when it comes to the day to day business at EFG.
The final paragraph felt so satisfying to read after all the play pretend we've been forced to witness lately...
Nice work, Richard!