GAME - NASDAQ

Good afternoon, and thank you for joining us for the GameSquare Holdings 2024 First Quarter Conference Call. On the call today, we have Justin Kenna, GameSquare's CEO; Lou Schwartz, President; and Mike Munoz CFO. [Operator Instructions]. Before management discusses the results, I'd like to remind everyone that certain statements on this call may be forward-looking in nature. These include statements involving known and unknown risks, uncertainties and other factors that could cause actual results to differ materially from those expressed or implied in our forward-looking statements. For information about forward-looking statements and risk factors, please see our 10-Q for the quarter ended March 31, 2024, which is available on the company's website or with the Securities and Exchange Commission. I would now like to turn the call over to GameSquare's CEO, Justin Kenna. Justin, please go ahead.

Thank you, and good afternoon to everyone joining us on today's call. I'm extremely excited to review the progress we're making at GameSquare as we pursue strategic priorities aimed at creating a fast-growing, highly profitable next-generation media business. Activity across our business is extremely high, and we're making significant progress optimizing our business model, investing in long-term growth and improving profitability. While we still have work to do, we believe our pro forma results demonstrate the meaningful accomplishments we are making to create lasting value for our shareholders. With all the actions we've taken over the past 1.5 years or a year's time today to review our recent M&A activities, our vision for Fa

Thanks, Justin. Before we look at our 2024 first quarter financial results in more detail, it's important to note that our GAAP financial statements include 24 days of Fa

Thanks, Mike. Before we open the call to questions, I want to review our expectations for the remainder of the year. After a solid first quarter, we believe we are extremely well positioned to achieve well over $100 million in revenue annually with an annual gross margin to range between 22.5% to 27.5%. It should be noted that Q1 is our seasonally lowest quarter and with $23.5 million pro forma, we're well and fully on track. We anticipate revenue growth to accelerate in the third and fourth quarters. In addition, we remain committed to pursuing strategies that expand gross margin, reduce SG&A expenses and ultimately drive profitability. As we look to the seasonally strong second half of the year, we believe we are very well positioned to achieve our guidance and benefit from dramatic improvements in profitability. I believe our strong first quarter financial and operating performance supports our initial success in creating a fast-growing, highly profitable next-generation media business. I look forward to updating investors on our success on our second quarter call in August. So with this overview, Lou, Mike, and I are happy to take any questions. So throw it over to you operator.

[Operator Instructions]. Our first question is from Sean McGowan with ROTH Capital Partners.

I have a couple of questions, if I may. Can you be a little bit more specific about what is in Fa

Yes, absolutely, Sean. So Fa

Okay. So in terms of that burn that you referred to and the income statement impact. So if I hear you correctly, you'd still expect Fa

Yes, I can take that one. Yes, that's right. Yes, 49% of Fa

And Sean, to add to that, just to be clear, I think it's been pretty sort of widely publicized the burn that existed at Fa

Right I did assume that. And then to drill down a little bit more, is the $18 million in cost -- I know probably you've asked this before, it's just like more of an update, the $18 million in cost reductions. Is that net of any other growth spending that you might see in other parts of the business other than where you you're cutting here? Are you -- is that net of any additions you're making somewhere else?

Yes. So I think the biggest upside of this transaction has been the fact that -- because there are so many heads on the GameSquare side that have experienced one in the endemic esports space, but 2 more specifically within the Fa

Right. Okay. That's helpful. And then last question, kind of along the same lines. Do you think the -- do you think that cost reduction and revenue growth opportunities will be enough for the company. I mean you didn't say this, and I don't want to read into it what I shouldn't be reading into it. But do you think this will be enough to get EBITDA positive by the fourth quarter of this year?

Yes, we do. I think that we’ve been pretty transparent about some of the macro issues that we endured obviously in the back part of ‘22 and into ‘23, and we’re starting to see that shift. And we are starting to see the return of real spend in the space, which is really promising. We’re very confident in our revenue targets. And obviously, we’re being very aggressive on the cost front. So yes, we do. Obviously, the – we need to execute and hit our revenue numbers for that to take place. But we are obviously controlling the controllables right now and reducing and pulling out costs and we’ll continue to get efficient. And all signs indicate that, yes, we will be able to get there. And – it is somewhat revenue dependent. But again, the costs are coming out. We feel really good about the pipeline. So we’re definitely on track.