Enthusiast Gaming Holdings Inc.

Thank you for standing by. This is the conference operator. Welcome to the Enthusiast Gaming Holdings Inc. Fiscal Fourth Quarter and Full Year 2021 Financial Results Conference Call. As a reminder, all participants are in a listen-only mode and the conference is being recorded. After the presentation, there will be an opportunity to ask questions. To join the question queue, you may press star, then one on your telephone keypad. Should you need assistance during the conference call, you may signal an operator by pressing star and zero. I would now like to turn the conference over to Eric Bernofsky, Chief Corporate Officer. Please go ahead.

Thank you, Charisse. Good afternoon, everyone, and thank you for joining Enthusiast Gaming's fourth quarter and year-end 2021 financial results call. My name is Eric Bernofsky, Chief Corporate Officer of Enthusiast Gaming. With me today is our Chief Executive Officer, Adrian Montgomery, our Chief Financial Officer, Alex McDonald, and our Chief Operating Officer, Thumba Thummerlingham. We'll begin with some prepared remarks from Adrian and Alex before opening the floor to questions. Before we begin, I'd like to remind everyone that today's presentation contains forward-looking information that involves known and unknown risks and uncertainties and other factors that could cause actual events to differ materially from current expectations. These statements should not be read as assurances of future performance or results. Such statements involve known and unknown risks, uncertainties, and other factors that may cause actual results, performance, or achievements to be materially different from those implied by such statements. A more complete discussion of the risks and uncertainties facing the company appears in the company's management discussion analysis for the three and 12-month periods ending December 31, 2021, which are available under the company's profiles on CDAR and EDGAR, as well as on the company's website, EnthusiastGaming.com. You are cautioned not to place under reliance on these forward-looking statements which speak only as of the date of this presentation. The company disclaims any intention or obligation except to the extent required by law to update and revise any forward-looking statements as a result of new information, future events, or for any other reason. Now, it's my pleasure to turn the call over to Adrian Montgomery, CEO of Enthusiast Gaming. Adrian. Thank you, Eric.

Thank you, Eric. Good afternoon and welcome to our fourth quarter and year end 2021 financial results conference call. I'm very pleased to share with you today the details of another record quarter and fiscal year. I will also share some key operational highlights and milestones. Lastly, I'll let you in on how 2022 is going before turning it over to Alex to share more details on the financial metrics. 2021 was a pivotal year for Enthusiast Gaming. We maintained a clear focus on building the largest media and entertainment platform for video game and esports fans to connect and engage worldwide. And I'm proud to say that our team continues to deliver. Let me share some of the highlights. First, we have been telling shareholders that the steps we took in 2020 would consistently deliver quarter-over-quarter revenue and margin growth through 2021. I'm pleased to update shareholders today and to tell you that we are delivering on this commitment. Revenue in 2021 grew 130% to a record $167.4 million from $72.8 million in 2020. In Q4, revenue grew 34% to a record 56.9 million from 42.5 million in Q4 of 2020. Gross profit grew to a record 37.8 million in 2021, up from 18.6 million in 2020. And in Q4, gross profit reached 13.7 million, up nearly 40% sequentially. Gross margin improved in each quarter of 2021 We're reaching 24.1% in Q4, up more than 500 basis points from the same quarter in 2020. We told shareholders that the investments we made in 2020 by investing and focusing on shifting the business model to an integrated entertainment company, in part by staffing and resourcing a direct sales and customer success team, would bear fruit in 2021. I'm pleased to again report that Direct Sales continues to make significant progress and give kudos to our incredible teams that are driving the change in conversation every day among Fortune 100 marketers, Fortune 100, 500, 1,000 marketers, helping them redefine their go-to-market strategies on how to reach Gen Zs and Millennials. Direct Sales revenue grew to a record $22.2 million in 2021. up more than fourfold from just $5 million in 2020. In Q4, direct sales grew to a record $8.8 million and accounted for 16% of total revenue, compared with only 8% in Q4 of last year. I want to reiterate again that one, by building the largest media and entertainment platform for video game and esports fans to connect and engage, two, by connecting with hundreds of millions of gamers each month, Three, by being ranked by Comscore as a top 100 internet property in the U.S. and one of only two gaming companies to make the list, we offer more touch points to our Gen Z and millennial audiences for marketers to reach than any other gaming entertainment company. And I might be so bold as to say any company in any category targeting Gen Zs. But it now goes so much beyond offering more touch points. Our proprietary content continues to grow and evolve. As you may recall, we have developed our own IP and custom content capabilities that when combined with unmatched reach really does create a sustainable competitive advantage. Some of those franchises include Gamers Greatest Talent, Rising Stars, Illuminosity Academy, Illuminosity Live, EGLX, Pocket Gamer Connects, Launchpad. And all of these properties, in addition to our media reach, are all being sold directly via sponsorship or custom content integrations. In 2021, we worked with many new partners, and I have spoken about several of them on past calls. We also noted in early 2021 that our direct sales team was going to commit itself to successfully unlock a new category for us in Hollywood studio films. This category proved to be one of our best in 2021 as we partnered with 17 film releases in the year compared to zero in the prior year. Some of the partners we worked with include Amazon Originals, Disney, Elevation Pictures, Paramount Pictures, United Artists, and Universal. This is one particular category we are very bullish on for 2022. Another point I want to focus on this quarter is the increasing success we're seeing on renewals as a percentage of overall direct sales. These are the partners that came back to us throughout the year on additional media and content activations. We often get asked about repeat business, about whether our partners are just testing the waters with us or if we are providing real sustainable value to them. So I thought I would highlight the mix of renewals versus new business as we exited 2021. I'm particularly proud to say that in Q4, 42% of direct sales revenue was from renewals, from partners we had previously worked with. And further, we are seeing deal size on average amongst renewals to be larger than new customers. That's a very telling metric and bodes very well for our direct sales business line as, again, it is another proof point that our flywheel of services we offer brands is winning market share. Some of these renewal partners include AB InBev, Activision, Best Buy, Bethesda, Disney, Elevation, FX Network, G Fuel, HBO Max, Lego, Microsoft, Nintendo, Procter & Gamble, Square Enix, State Farm Insurance, TikTok, Tracfone, Truth Initiative, Universal Pictures, and Warby Parker. And I think it goes without saying, but it bears repeating, that if you're going to win multiple rounds of business with something like Disney Plus or HBO Max, It's for one reason and one reason only. It's because the solutions that we offer are converting subscribers for them. Turning to paid subscribers, we ended the year with 220,000 subs, up 80% from a year ago. Similar to direct sales, we're seeing many of the seeds we planted in 2020 bear fruit in 2021. And despite the marked success this year, we believe we are still in the early innings of both direct sales and subscriptions. From a combined revenue perspective, the growth areas of direct sales and subs total 12 million in Q4 or about 21% of total revenue compared to just 5 million or 12% in Q4 of 2020. This shift in revenue mix has helped lift margins and we plan to continue to invest in these high growth, high margin areas of our business. On the content licensing and distribution side, We took significant steps in 2021 in the areas of premium content, and 2022 has started off very well. We have also been encouraged with the success to date we have seen on new distribution platforms like Snap and TikTok that are now starting to generate real recurring revenue. While it's still a bit early to share numbers, we have and will continue to make the investments needed that I believe in the next two plus years will catapult Enthusiast Gaming's into a leadership position in gaming and internet culture from a premium content perspective. I look forward to sharing more with you in the coming quarters. Turning to Luminosity Gaming, our esports organization had a successful 2021. Luminosity is now head and shoulders above any other professional esports organization when it comes to time watched. We continue to build our roster of competitive players and content creators and remain excited about continuing to grow our market share in esports. And I would also point out that when we talk about our proprietary IP, the rising stars, the gamers' greatest talent, the Luminosity Academy that we created in partnership with Lego, Luminosity Gaming esports athletes and content creators are a fixture in all of those content activations. In 2021, we successfully closed five acquisitions, including Addicting Games and U.GG later in the year, and they are integrating extremely well into our flywheel. In November, we acquired the U.GG, one of the largest League of Legends fan communities in the world. The team in Austin has not skipped a beat since the deal closed, and we believe there are many exciting things to come in 2022. One example is the launch of a new app last November, which as of this week has been downloaded over half a million times and which also demonstrates the strength of offering and experiences that U.GG delivers for the League of Legends community. Last quarter, I spoke about exploring NFT opportunities and gave some examples of flywheel integrations with Addicting Games, a casual and mobile games developer we acquired in September of last year. Subsequent to the year end, We announced a unique partnership between Enthusiast Gaming and HUD-8 Mining, one of North America's most innovative digital asset miners. This is a textbook flywheel deal. HUD-8 becomes a sponsor of Luminosity Gaming. Their logo is proudly displayed on our jerseys, and fans should look for the HUD-8 Luminosity merch drop coming soon. It also uses our media inventory and influencer roster, which will be used to cross-promote addicting games as EV.io and HUD-8. But it goes even further. While the HUD-8 deal covers the flywheel, its main component is a game called EV.io, a first-person shooter available for anyone with a web browser. You'll see our creators and esports athletes playing the game with their fans online to cross-promote EV and HUD-8. HUD-8 skins. HUD 8 bosses and HUD 8 tournaments are coming to EV through this partnership. Players will pick up HUD 8 weapons and play on HUD 8 levels. We recently announced that we are releasing custom NFTs via partnership with the Fractal Marketplace, which is led by one of the founders of Twitch, inside EV.io to engage with fans in a new way. This will enhance gameplay and drive further in-game purchases. we're plugging into Web 3.0 opportunities with the right partners at the right time because of our unique and deliberately assembled flywheel of assets. We're the only ones capable of this type of activation. Last year, the CEO of Epic Games said the metaverse would be about car companies putting you in the car rather than advertising a picture of a car on a billboard. This is how we've designed the partnership with HUD-8 and Fractal, utilizing assets across our flywheel to produce content and experiences that lead to deeper engagement and new purchasing opportunities for fans. So in conclusion, we delivered on our promise in 2021 of growing revenue more than 30%, while also meaningfully improving margins and continuing to invest in new growth opportunities. 2022 is off to a great start. and I see a similar pattern unfolding with sequential revenue and margin growth throughout the year. I am confident we have the right team and strategy in place to continue executing and to continue to drive long-term shareholder value. As you see, we've had a busy year, but we're just getting started. I will now turn the call over to our CFO, Alex McDonald, for further commentary on our financial results. Alex.