GAME - NASDAQ

Good afternoon, and thank you for joining us for the GameSquare Holdings 2024 Fourth Quarter Conference Call. On the call today, we have Justin Kenna, GameSquare's CEO; Lou Schwartz, President; and Mike Munoz, CFO. During the call, all participants are in listen-only mode. Following the presentation, we will conduct a question-and-answer session. Before management discusses the results, I'd like to remind everyone that certain statements in 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 September 30, 2024, which will be available on the company's website or with the Securities and Exchange Commission. I will now 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. Since our founding in August of 2020, we have followed a strategic plan focused on quickly building a diverse set of media, agency, technology and esports assets, to help global brands engage with hard to reach esports and youth audiences at scale. Our 2024 financial results, reflect the success of the first phase of our plan, driven by the differentiated platform we have created, and the organic and M&A growth strategies we have pursued. In less than four years, GameSquare has achieved $100 million in pro forma revenue, through our team's efforts to develop next generation solutions, and drive connections between the world's largest video game publishers, top tier brands and global gaming, and esports communities. As we have stated on prior calls, our operating plan for '24 was focused on three main components. First, to complete the integration of the Fa

Thanks, Justin. As a reminder, 2024's financial results include multiple corporate actions, most significantly the March 7, 2024 acquisition of Fa

Thanks, Mike. We expect annual pro forma revenue in 2025, of $100 million to $105 million. Our revenue guidance for 2025, does not include $27 million of annual revenue from Fa

Thank you. [Operator Instructions] The first question comes from Greg Gibas with Northland Securities. Please go ahead.

Hi, good afternoon Justin, Lou and Mike, thanks for taking the questions. Wanted to just follow-up, on kind of your growth expectations for 2025. Could you maybe kind of highlight the primary drivers there? I mean it sounds like world building, looking strong, SaaS and managed services as well, and then the agency business. And then you mentioned some pretty big deals for, licensing deals for Fa

Yes, absolutely. I can kick-off and then Lou, Mike feel free to jump in. Yes, great. It is a really healthy mix, I think across the businesses. Since sort of acquiring Fa

Great, that's helpful, Justin. And I wanted to follow-up. You beat me a little bit to it, but some incremental color I guess on your expectations for profitability, and cash flow improvement this year. It sounds like in the back half you are expecting profitability. You mentioned possibly in Q2 depending on maybe the timing of some of those seven figure deals. One, I guess could you maybe provide kind of a little bit clarity in terms of the level of costs or expenses that, are removed from the business in relation, or that are kind of tied to that Fa

Yes. So if you look at sort of operating system, so we touched on a little bit in the script. We expect in 2025, our OpEx to improve by around $15 million. So obviously a material amount there, with the reduction obviously the divestiture of Fa

Great. Well hi, congrats on the momentum you're seeing so far this year. I'll pass it on. Thanks for the color.

The next question comes from Jack Vander Aarde with Maxim Group. Please go ahead.

Okay. Great. Thanks for the update, guys, and thanks for taking my questions. Justin, maybe just to follow-up on that, to better understand the guidance, there's a lot of moving parts here, obviously, so really robust organic growth outlook, and margin upside baked into that. Just so I'm clear, the 2025 revenue guidance of 100 plus million $100 million to $105 million, that's all organic revenue. And is that all from continued operations only, meaning it excludes first quarter '25 from Fa

Yes, so I think the easiest way to think about that, Jack, is that Fa

Okay. Great. I appreciate all that extra color, and that's definitely encouraging to hear, in terms of maybe the order book as well. I'd be curious to know just, because you have so many distinct segments here and with Fa

Yes, for sure. So we have an enterprise sales team that, is going to market as GameSquare, which it's really been a focus of ours over the last 12 months, and I think we're starting to see, really see the results. So we have obviously specialists within that team, but we are seeing a lot more opportunities come into the group, and I think what it does is, it's taking maybe smaller six figure transactional type opportunities into longer term seven figure plus opportunities that provide cross-sell across the business, right. Because we're going to brands as GameSquare, with a complete end-to-end solution, and helping them solve whatever problem that might be, and whether that's data and analytics, whether it's a media need, whether it's a live campaign event and so forth, we're finding that that is really resonating. We do have specialists within the three areas, and we certainly have a really robust pipeline I would say across those three businesses. The easiest way, to probably think about that, I think as I kind of touched on within the SaaS business, we've seen really healthy kind of growth year-on-year, nice margin business. The challenge there is, how do you get to scale? I think we're solving for that. I think, you'll see that this year with deals like Capcom. There's a couple of others, I think you'll see sort of announced the market over the coming months that are going - to really sort of pour gasoline on that part of the business. That pipeline is really strong, and we've brought in a couple of guys, Rick and Bobby and our managed services team, are doing a fantastic job. We actually have a couple of other hires that we're looking at, just really bolster our commercial team and continue growing there. But you'll certainly see a lot of growth there. I think our agency and events businesses really work hand-in-hand. So our experiences team that, we touched on has really benefited from our agency team, and their sort of in depth relationship with Epic Games, with ESPN and what we're doing now, instead of just creating sort of strategy and content, and campaigns for these brands, we're now also developing and building and producing live events. So we're seeing the combination of those business units, as being really fruitful and we expect that to continue. And then finally Fa

Excellent. And maybe just one more. I'd like to get your thoughts just, this is a big year for the gaming industry as a whole. Just any color, anything you can touch on that, you see opportunities or catalysts, with some of these kind of flagship launches that are coming out. We just had Nintendo Switch come out, the latest one, and GTA and is on is on track. Just any of these big announcements, or anything in the industry that you're looking at and saying, hi, that that's an opportunity for upside, or that gets you excited, or that's not baked into your plan, or things that are just, you know, that you're just thinking about that'd be great to know? Thanks.

Yes, it's a great question. I think there's been a little bit of a lull, right, in terms of, new game launches and certainly I think that this year is going to be an exciting one with GTA, as you mentioned. I think for us, the way that we're looking at it is opportunity, I think is around a lot of the IP pieces. So we're continuing to provide great services, to publishers and brands, when they want to connect with audience. But something that we've seen really develop for us, is the opportunity to co-own IP that we can really generate incremental revenue from. And some examples of that is NFL for the fans, right? Like a piece of IP that we own with the NFL. I think the other one is SpongeBob SquarePants, is a piece of IP that, we're working on with Paramount to take over the license there. From a gaming perspective, I think for us the opportunity, is to continue to grow that part of our business to take advantage of things, like GTA and like these metaverse-style opportunities, to build out games that we can directly monetize and drive audience, to rather than just providing services. I think the gaming space more broadly, is probably crying out for some of these big launches. So I think it is a really exciting year. To your point there, we're continuing to see, just a lot, a lot more sort of indie publishers coming to the space, which I think again provides more opportunity, continued growth within blockchain gaming, and really I think a major comeback for esports, right. I think there's been a lot of negative press around esports, because of some of the large valuations that existed coming out of COVID. But, we're seeing audience numbers continue to rise. We're seeing continued investment, certainly with Esports World Cup, we touched on the amount of prize money that exists, but even just more broadly and globally. So we see a big opportunity there as well. I think, it's going to be a major year for the space. The numbers all indicate that. I think we're really well positioned, to sort of take advantage of a lot of dollars that are floating into the ecosystem.

Excellent. Well, I appreciate the color. I guess we'll talk again in May, when you report the first quarter. Thank you.

This concludes the question-and-answer session. I would like to turn the conference back over to Justin Kenna, for any closing remarks. Please go ahead.

Thank you, Jan. Thanks everyone for joining today's call. I think it's been a challenging period in the markets, and certainly from our perspective, we're very appreciative of our shareholders, and the patience that they have and have showed. And we're certainly extremely bullish that 2025, is a major inflection point for our business. We touched on the fact that we've really cleaned up our balance sheet, and that we are really knocking on the door here of profitability. Which I think we haven't sort of shied away from the fact that, we know that that is extremely important and again, sort of a major inflection point for us as a business. So we're certainly looking forward, to getting a few of these announcements out to the market. We're certainly looking forward to continuing to sort of get some runs on the board here, and certainly share with you our progress throughout 2025, and provide a lot of value for shareholders. So just want to really genuinely thank everybody for their support. And yes, we're really excited for 2025 and what's ahead for GameSquare. So thanks everybody.