Good day, ladies and gentlemen. Thank you for standing by. Welcome to the Hall of Fame Resort & Entertainment Company's Third Quarter 2020 Conference Call. [Operator Instructions] Please note that this conference call is being recorded today, November 5, 2020..

I will now turn the call over to Anne Graffice, Executive Vice President of Public Affairs. .

Thank you, operator, and good morning. By now, everyone should have access to our latest press release and 10-Q quarterly report filed with the SEC. These documents can be found in the Investor Relations section of our website at hofreco.com..

Some of our comments today will be forward-looking statements within the meaning of the federal securities laws.

Forward-looking statements, which are usually identified by the words such as will, expect, should or other similar phrases, are subject to numerous risks and uncertainties that could cause actual results to differ materially from what we expect, including, without limitation, the negative impact of the coronavirus, COVID-19, on U.S.

regional and global economies and our financial condition and results of operations. Therefore, you should exercise caution in interpreting and relying on them. We refer you to our SEC filings for a more detailed discussion of the risks that could impact our future operating results and financial conditions..

During this call, we will discuss certain non-GAAP measures, which we believe can be useful in evaluating the company's performance. These measures should not be considered in isolation or as a substitute for our financial results prepared in accordance with GAAP. Time permitting at the end of this call, we will be answering questions.

You can submit a question should you have one via e-mail to investor.relations at hofreco.com. Otherwise, we will answer questions via e-mail post-call..

Joining me hosting the call today, we have Mike Crawford, President and Chief Executive Officer; and Jason Krom, Chief Financial Officer. .

With that, I will turn the call over to Mike Crawford. .

Thanks, Anne. Good morning, everybody, and we want to welcome you to our second official earnings call as a publicly traded company. Again, I'd like to express my appreciation to our investors and our partners for their ongoing support.

We also have a great growing internal team and their work and commitment and support is continuing to lead our company in this public world through our first full quarter as a publicly traded company, and I might add, in a very difficult environment that the world and the country is facing with COVID-19..

We're a company still in our early stages of development. So the focus of our comments will primarily be regarding updates on the progress we continue to make towards our strategic goals for all of our lines of business, including theme destination-based assets, media and gaming..

First, I'd like to just take a step back and give you some high-level overviews of what we're doing to move ourselves forward. We continue to build assets and open new locations here in Canton, Ohio as part of the Village powered by Johnson Controls, and our first off-site destination as well, the Hilton DoubleTree in Downtown Canton.

We also continue to establish an integrated media and entertainment platform, along with building our gaming vertical.

We're clearly expanding our partnerships and sponsorships, and we're building what I would consider to be a very world-class team of subject matter experts that genuinely have a passion towards professional football, but equally so, have a passion for making this company successful..

I'd also like to just take a moment and comment on the fact that not only are these individuals working hard every day to make the company a success, but they're also taking personal positions by acquiring stock in the company and that's a real commitment on everyone's part. So I really appreciate their efforts on that front..

Let me start by talking about creating our destination-based assets.

As some of you may know, we broke ground on our first on-site asset here at the Hall of Fame Village powered by Johnson Controls with our Constellation Center for Excellence, we did that on September 17 of this year, a really exciting building, featuring research and development, office complex, Ted talk facility, retail dining and the focus of this is, as I said before, player care, player wellness and development, equipment development companies furthering the sport of football and sport in general.

The projected timing for the opening is late 2021. So we're excited to break ground on that and the building is coming out of the ground as we speak..

Secondly, we had a focus on really driving new partnerships in our Retail Promenade. And we started with the Shula's Group. Naming Don Shula’s as the first retail tenant in our Retail Promenade. We felt strongly but honoring the late coach, by the way, as the NFL's all-time winning as head coach was absolutely the right thing to do.

Beyond that, though, the product that Don Shula's offers, this will be a one of a kind experience, a brand-new Shula's Restaurant only featured here in Canton, Ohio at the Hall of Fame Village powered by Johnson Controls. And that also is expected to open late 2021..

We added TopGolf Entertainment Complex. We'll post multiple luxury swing suites here in the Village. This will be in a 10,000 square foot location. So we'll couple TopGolf with another high-profile food and beverage offering to be named in the future.

But really, this reinforces the company's vision from my perspective towards technology-driven, sports-focused interactive entertainment. And that's what we want to do. We want to immerse people in sport and have them really enjoy in a very aggressive and first way versus a passive experience. And that's expected to open in late 2021 as well..

I have an exciting announcement I wanted to make on this call, and you'll see a press release later today. Our first off-site destination, although only 5 minutes away from the Hall of Fame Village, will open, and that's our Hilton DoubleTree Hotel in Downtown Canton.

This is going to be a premier asset not only for the city of Canton, and by the way, the only downtown hotel in the city of Canton, but for the region in general. And I'm proud to say that, that hotel will be opening next Monday, November 9, and it will be our first revenue-generating destination asset outside of the Village.

So we're incredibly excited about that. And I do have to appreciate all of the local support from the city, the county, the state, we have felt the entire community rallied around us to get this asset open in a very difficult time for our country..

The second business vertical I wanted to talk about was our media division. And hopefully, most of you saw last night, post-market closed, we announced a really special media deal with Sports Illustrated Studios to develop an original docuseries featuring our NFL Alumni Developmental Academy.

And you'll recall that -- and I'll speak to it in a moment, that we developed a great partnership with the NFL Alumni Association and this developmental academy is helping young men accelerate their futures, getting training world-class training from head coaches, player physician coaches, strengthened condition coaches here in Canton, Ohio for them to realize their dream of getting into and playing in the NFL..

Think about this docuseries like Last Chance U, Hard Knocks, The Last Dance. So a really meaningful piece of content that will contribute to our company in the very near term. We also launched a partnership with HQ Trivia.

I'm not sure if you've heard of HQ Trivia, it's a Trivia app, a real phenomenon, every single night, 100,000-plus people tune into this. And we announced a partnership that we are going to run a program and actually have been running a program over the last couple of weeks called the Hall of Trivia.

So a football-themed Trivia contest where participants can win prizes. And they can also see maybe special appearances by Hall of Famers or famous NFL Alumni. In fact, this week will be the third week that we're airing, and it airs during the NFL season prior to the NFL football game hosted on Thursday night.

So we're again, very excited about this partnership and another way of building our media brand with a high-quality partner..

From a gaming perspective, I hope you saw that we announced the new brand of our Fantasy Sports League. And really, I think this exemplifies our brand and who we are, the Hall of Fantasy League. This is going to redefine fantasy football. I get very passionate about this product that we're going to be launching in 2021 with the NFL season.

This is a league, much like the NFL, where you're going to have geographic-based teams. Fans can root for those teams. Those teams can play each other in games. You could actually potentially bet on those games. There's going to merchandising.

So multiple points of activation and multiple revenue opportunities associated with launching this league, not to mention sponsorship, media, et cetera..

You'll see other announcements on this league in the very near term, where we're going to talk about the cities. So we're excited about talking where in the cities and the teams names, and the logos of these franchises are going to be located.

And I'd just call your attention to that the front offices of each of these franchise cities and the teams will be run by professional fantasy football players, potentially Hall of Famers, marketing and sales specialists and so we think this will really have an impact on our company in the very near term..

In my opening statement, I talked about growing partnerships and sponsorships. From our perspective, while we've continued to build a world-class team internally, we've also continued to look for partners and sponsors that will not only bring us great content, will increase our capabilities on execution and delivery against our strategic plan.

So I spoke about the NFL Alumni Academy. I'd be remiss if I didn't say we are incredibly fortunate to coaches like Mike Tyson and Jay Haas and Steve Smith, Hall of Famers like Anthony Muñoz, other coaches, Chuck Smith, Mo Williams, Jermon Bushrod and Dean Dalton. And then Chip Smith as a world-class performance and conditioning coach.

I mean these are all folks that have dedicated their lives to the game and are incredibly passionate about taking these players, developing them and getting them into the NFL..

So we're proud to partner with the NFL Alumni Association to bring these world-class athletes, it too can help them develop and get them into the NFL. Now remember that part of our model here in addition to announcing that media deal that I just spoke about with Sports Illustrated.

As these players come in, we provide them with a stipend for living and as they transition inside contracts into the NFL, they pay back to the academy itself a piece of their contract. And so that is an immediate revenue stream we should start to recognize in Q4 of this year..

We signed a partnership with Spectra Partnerships. I'm excited about this as well because we have not only built a strong internal sponsorship partnership team, but now we've put in place an external partner consultant, if you will, that will help maximize the value of our assets and our events in building strong partnerships and sponsorships.

And you'll recall that sponsorships, both now and in the near term, represent significant revenue for us as a company. So a great partnership for us to sign up and already working together very collaboratively. We indeed signed 2 small partnerships with local Northeast Ohio businesses, the MC Group and GBS Corp.

The predominant focus of these partnerships was to help us maintain a slightly more efficient construction cost through our printing and signage businesses that will help support the growth of the destination here in Canton..

I spoke about the world-class team. Let me just talk a little bit about the players that we added over this last quarter. Tara Charnes who has come on as our General Counsel, great public company experience; Erica Muhleman, as our Executive Vice President of New Business Development, Marketing and Sales.

Erica, having worked for the Buffalo Bills, the Cleveland Browns, IMG, we think really brings great expertise on our sponsorship and partnership front. Olivia Steier and Scott Langerman, we just announced last night, building our capabilities in our media division through content development and distribution and new business development.

And I think as you've read in those announcements, they bring a ton of experience in sports and a ton of experience in the media business in general. So we're excited to add Scott and Olivia to sort of solidify growth capabilities of that media division..

I can again tell you that everyone joining our team, including the many that I haven't mentioned today, believe wholeheartedly in what we're trying to accomplish here in Canton and beyond.

And this has always been a company that I talked about where we're building destination-based assets here in Canton, on-site at the Hall of Fame Village powered by Johnson Controls and also off-site, but we're also creating and diversifying how we're going to generate revenue and how we're going to create experiences for fans and guests to enjoy in other business verticals..

Financing for our development is underway, and it's important to talk about that. And I'm going to ask Jason to discuss that further, but understand that our goals are long term. And with a long growth profile ahead of us, financing is incredibly important to enable that growth to begin. We focus on the future, we execute on the near term..

From the beginning, we have been very clear on our strategy. We have made great strides over the past few months in progressing our goals. And we're gearing up towards achieving that long-term success, but keeping a very close eye on the near-term wins.

And some of the things that I just referenced in each of those business verticals should give you great confidence that even through a very difficult time, we have been executing against that plan but it takes time to manifest in earnings.

And although we expect revenue to start to come back over the next couple of months and certainly into 2021 in a more significant way, the time now that we're investing in infrastructure, partnerships, content will really pay dividends for us and our shareholders in the future..

Our company is really in the process of establishing itself, and we're executing on everything I just talked about now. We're building our platforms, both physically and virtually in content and in our partnerships. We've executed on all 3 of the spaces we're trying to enter with destination-based assets, media and gaming.

And again, I'd just like to say, I do believe we're demonstrating success during one of the most difficult times our country has ever faced in recent memory.

The breaking ground on the destination, signing key partnerships for the Village, opening the DoubleTree next Monday on the 9th, that wonderful NFL Alumni Developmental Academy, the deal with Sports Illustrated, the sponsorship extension with Spectra, and bringing the whole of Fantasy League and really redefining fantasy for everyone and launching that HQ partnership are just, again, examples of all the great things that this team has worked hard to do over this last quarter.

I do believe people are starved for this kind of entertainment. And we have and positioned ourselves to be a one of a kind company to really execute on that, both near and long term with the prospects that we're realizing already in delivering against our vision..

Let me now turn the call over to Jason, who will give you an update on our financial position and discuss our financial results.

Jason?.

All right. Thanks, Mike, and good morning, everyone. We filed our third quarter 10-Q yesterday evening post-market. That document can be found on the SEC website as well as our Investor Relations site. I'll focus my comments today on a few highlights from that document.

From a financial metrics perspective, our cash balance as of the end of Q3 is $23.8 million, which is inclusive of our restricted cash balance.

Our debt balance, net of cash, is about $100 million, including the senior term loan which we refer to as our bridge loans of $34.5 million, related party subordinated loan of $13.8 million and private convertible financing of $21.2 million..

While discussing that, I'd also like to just take a moment to comment on a nonbinding term sheet that we signed on October 6 for a 12-month loan for up to $45 million with a potential 12-month extension. We're currently negotiating a definitive loan agreement with that lender.

The name intended use of the proceeds of this facility would be to pay the remaining balance of our bridge loan which is due on November 30. The interest rate on that facility is 10% for the initial 12 months and then it would be 12.5% for the extension.

The loan would be secured by a first lien position on our properties and this lender would have the right of first offer for our construction loan financing as well. One condition for this loan would be the successful close of our equity offering in the amount of either $30 million or enough to receive a construction loan.

I'll provide a bit more context on this in a bit..

Our shares outstanding as of the end of Q3 are 32.7 million shares. And as of quarter end, we have a net book value of $4.58 per share. There are also currently 17.4 million warrants which equate to 24.7 million shares.

In terms of the additional financing streams, we filed a registration statement with the Securities and Exchange Commission for a follow-on offering of common stock and warrants to raise approximately $25 million at closing. The aim is to close this offering in mid- to late November around the same time as the 12-month loan I just referenced. .

as mentioned, about $300 million for Phase 2 campus development; about $28 million for corresponding Phase 2 financing costs; the $20 million plus for the DoubleTree renovation that I just referenced; and $34.5 million to repay the bridge term loan. And we're also targeting about $25 million of cash on the balance sheet for working capital purposes..

By the time construction on Phase 2 is complete and operational, we continue to target $150 million of annual run rate revenue and $50 million of annual run rate adjusted EBITDA across the key pillars that Mike talked about earlier in our call, specifically the destination-based assets, our media platforms and our gaming vertical..

I'll now turn the call back to Mike for some closing remarks.

Mike?.

Great. Thank you, Jason, very much. As you can see, a lot going on on the financing front, and we're focused on executing that in the very near term. I'd like to just close by reemphasizing the 6 key pillars of our investment thesis because it's important for everyone to understand.

We are building a very experienced leadership team to lead us through not only the next few months, but the next several years. We believe we have to create assets, both here in Canton and off-site, and we're already starting to execute against that..

Live events and use sports are coming back, I'm proud to say, and that plays a very important part of revenue growth, sponsorship growth and activity on-campus, but we also run these types of events, especially use sports, off-campus as well around the country.

Media content development, as we announced this morning, an important part of the growth of our media division, we want to be a content development company and gaming and continuing to grow our gaming capabilities with our Fantasy League and beyond potentially into e-gaming and sports betting will be a primary focus..

And last but not least, partnerships and sponsorships that enable us to continue to deliver and execute at a very high level and continue to drive revenue to the bottom line for our company. We believe we have a really unique investment profile and are excited about our progress.

Executing against these key pillars we've mentioned throughout our call today, we'll continue to develop into the horizontally and vertically integrated company that we articulated many months ago to our investors and are starting to prove that out now. And I'll give you one small example of that.

As we open our Hilton DoubleTree in Downtown Canton, our participants and coaches for the NFL Alumni Academy will immediately move into that asset, giving us room revenue, food and beverage revenue, et cetera. We look forward to providing an update on our continued progress when we report our fourth quarter earnings and our full year results..

And I want to thank everybody for joining the call this morning, and I'll now turn it back over to Anne to see if we have any questions. .

Thank you, Mike. We do have several questions.

The first of which is why are you increasing authorized common shares by 200 million additional shares?.

That's a good question. First, let me just say that it is very common for companies to increase the number of authorized shares. And the main purpose of that is always to provide management flexibility over the long run to grow and develop its business. And we're effectively laying that groundwork. We want to secure our future growth potential.

We want to make sure, even though we're raising only $25 million in new equity with this round, but we do have flexibility that as we enter into Phases 3 or 4 or new business verticals that we have the ability to issue additional shares in such needs, and in connection with potential financings, business combinations or other corporate purposes.

And we do so in the best interest of our shareholders. But to be clear, we have no plans in the near term to issue all of those additional shares that we have authorized. .

Why issue equity at current pricing? Wouldn't it be incredibly dilutive to current shareholders?.

Let me start by saying this. We felt very fortunate in July to be able to take the public and to merge with Gordon Pointe, a great publicly traded SPAC at the time. But make no mistake. We did it in the middle of the worst global health pandemic the world has seen.

And so as we emerge from that public process, we only were able to retain 31 million in trust. And so we knew that we were going to have to initial -- initiate another equity raise. And it was necessary to ensure the right capitalization mix between debt and equity..

We always intended to do this raise. And the focus for us really is on the ability to execute over the long term. Again, I'd say, long-term execution, near-term focus, right? And the equity raise allows us to do that. It allows us to complete the Phase 2 development of our destination here in Canton.

It allows us to grow our businesses in media and gaming. And we are very focused on raising only the equity that we need in this round to continue to support the company and give it maximum flexibility to grow for its shareholders. .

Next question submitted.

How does the company intend to pay the upcoming maturity of the bridge loans?.

I'll take this one. So it's a good question. And I point everyone to our filed S1 document as well as some of our earlier comments. We said in our S1 that we are going to raise equity. We also filed an amended S1 with a reference to that nonbinding term sheet that I talked about earlier. So just as a reminder, we signed that on October 6.

It's for a 12-month debt facility for up to $45 million. That loan is conditional on our equity raise, achieving the greater of either $30 million or an amount sufficient for construction financing. And again, we intend to use the proceeds from that loan say, the outstanding balance on our bridge loan.

And also just reinforce that we really want to target a very balanced capital structure and I feel that our equity raise as well as this nonbinding term sheet are both evidence of that. .

The company shared operating expense this quarter of $12 million.

Is this what we should expect as a run rate?.

Well, I'd say, as a practice, we're not going to really be providing quarterly guidance at this point. But I will say that Q3 should give everyone at least a decent idea of our expense run rate. And I'll also call out a few notes on operating expenses. There is an increase year-over-year.

The main drivers of that are incremental headcount as well as the cost of just being a publicly traded company. And both of those are really essential for us to deliver on our long-term targets and our long-term strategy..

And also, looking at it sequentially quarter-over-quarter, we also see an increase between Q2 and Q3 expenses.

And the main driver there was the impact of COVID-19 in the second quarter, which really drove us as a management team to make decisions to both minimize expense and preserve cash as we work through the impact of the pandemic and also pre-merger. .

The next question is, is timing for markets to allow for an equity rate due to external circumstances such as COVID-19, what's next? What if you can't raise enough equity?.

Well, two things. One, as Jason said, we're working multiple streams here, and we have great confidence in our investment banking group in Maxim to have that equity raise be successful. Having said that, we are in uncertain times.

And if that equity raise isn't as successful as what we hope it to be, IRG, one of our original shareholders, has agreed they will assume the note and extend the maturity of that into November of next year. So we do have a backstop there to protect us. .

Okay.

Next question is, if there's a second COVID wave this winner or in the spring of '21, how might that impact the company? Seems like Ohio was peaking in cases again, does that impact your development plans and time line towards profitability?.

Yes. Look, it's very sad, right? And I guess the question is worded as second wave. I'm not sure there's been anything other than the continuation of a very horrible situation related to this virus for the country. We took immediate action when COVID hit and everyone realized the severity of this virus. We furloughed staff. We cut expenses.

We renegotiated a lot of our payables. In fact, we reduced a lot of our payables and partners were very understanding and understood that this is a long-term play. And so we would expect to continue to be very focused on our cash flow, while still being mindful of laying the foundation and building infrastructure for long-term success..

I've often said, we're building in a downmarket, and we're going to be opening in an upmarket. So years from now with our on-site destination-based assets and our off-site assets. Having said that, I think it does prove out our model of diversifying our business.

Remember, themed destination-based assets, gaming and media, all of which are in very high demand, you see Twitch and other channels constantly streaming gaming tournaments. You see docuseries, streaming, constant updating on the potential media that's out there for people to view.

We're taking steps to diversify and make sure that we're not just reliant on one of our business verticals, but we're growing the other. So it's a balance, and we're going to continue to monitor and we'll report against that progress in the months and years to come. .

Is the company still on track to be EBITDA positive by the end of 2021?.

Well, I think I'd frame it up as 2021, I'd best describe as a development year for us. Our goals are consistent, and it continues to be really setting the stage for us as a company to be successful.

And that gets to the point that Mike raised earlier in terms of being both horizontally integrated, vertically integrated and really building for long-term success. We'll continue to expand our partnerships.

As we've announced Spectra, TopGolf and Shula's recently, so while I'd say COVID has delayed us, we remain confident in our strategy and we're really going to be looking to diversify our business across those different verticals. Again, destination-based assets, our media platforms and gaming.

But I'll remind everyone, identifying the opportunities and taking full advantage of them really does take time. And I'd also, again, reinforce for everyone, our long-term targets of $150 million of run rate revenue and $50 million of adjusted EBITDA in terms of a run rate, we still feel are within our sights. .

Have events resumed at the stadium or around the Village? Do you have any time lines or programming or when they will begin?.

Well, first and foremost, the safety and the security of athletes, family members, other participants coming to our destination or tournaments that we may run anywhere else is the primary focus, bar none. And we have to be very careful here. But yes, we have brought events back. Some of them under restrictions in attendance. Youth sports have come back.

We hosted big cross tournaments and soccer tournaments and high school football and other non-sport events as well..

What I'm really excited about, and if you think about this year, how many concerts have you gone to? How many festivals have you gone to? These are things that are going to be in incredibly high demand in 2021 and the requests that are coming in for us already have been, quite frankly, overwhelming.

And we're excited about the potential to offer a large slate of events next year..

Now my crystal ball is as good as anyone else's, right? And so into the early part of 2021, still winter here in Ohio, we'll see how coronavirus continues to progress. Knock on wood, hopefully, there's a vaccine and a treatment that helps everyone feel safe and secure.

But we have great confidence that not only have they come back, they will continue to come back into the next year and beyond in a very strong way, and we're positioning ourselves to capitalize on that. .

Through the first half of the NFL season, how many players have been called out from the Alumni Academy? Have they provided fees to the Hall of Fame Resort & Entertainment Company? And if so, how much, what is the structure?.

Well, I won't talk about the fees because that's between the players and our academy, but what I will say is, yes, there have been many players called up. It's a difficult year with COVID. The NFL is absolutely the best with their COVID protocols.

And so as players get called out, they quarantine for a period of time before they actually have the ability to work out for the team. And then there's also week-to-week injury. So as some players have been quarantined and teams have different needs, we've actually had some players come back..

And so that's the interesting dynamic here in this developmental academy, but we've had several players called up to NFL rosters. And yes, they will pay back that stipend that we've granted them and a percentage greater than that, and that's revenue that will be coming into the company on an immediate basis starting in Q4. .

Your speculation around Director Officer commitment to the company, can you comment on insiders selling?.

Yes. I mean I can comment on it directly, that's not happening.

We have a management team, and I would go even further with an incredible Board of Directors that exhibits on a daily basis their commitment to the success of this company for our shareholders and increasing value for those who have chosen to believe in us and our mission and our vision and what we can create near and long term.

No one has sold shares. In fact, it's been quite the opposite. We've had several Board members and officers of the company take personal shares on and increase their positions. Our window for doing that has been closed for quite some time because of movement in the company.

But I can assure you that the commitment of the management team and the directors of our company is very strong and will continue to be so. .

How does this company intend to generate revenue in the near term?.

Well, it goes back to what I was talking about earlier, the diversified portfolio that we're building, right? So our Fantasy League, our deal on media with Sports Illustrated, sponsorships, events, creating assets like the Hilton DoubleTree Downtown opening Monday, November 9, that will immediately start to generate revenue even in a difficult time because of the synergy around us putting our own programming into that hotel.

Remember, 164-room hotel in Downtown Canton, we have the ability to fill that and add revenue gaining groups and activities that potentially other companies can't do because of our horizontal and vertical integration..

And so we really do believe that while near-term revenue will be coming from things like our Academy and Hall of Fame -- the Hall of Fame events that we'll host and the Hilton Downtown and the media deals that we've struck, that long term, we're going to generate more because we're building the right infrastructure today.

We're signing the right partnerships. And we're putting in place the right management team to really execute on this vision. We are positioning and building the company in a very diversified way for long-term success. .

Thank you, Mike, and thank you, Jason. At this time, we have no other questions, and that will conclude our question-and-answer session. Additional questions that come in will be answered via e-mail. Operator, I turn it back over to you. .

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect..