Enthusiast Gaming Holdings Inc.

Thank you for standing by. This is the conference operator. Welcome to the Enthusiast Gaming Holdings Inc. Fiscal First Quarter 2022 Financial Results Conference Call. As a reminder, all participants are in 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 1 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, Ariel. Good afternoon, everyone, and thank you for joining Enthusiast Gaming's first quarter 2022 financial and operating results call. My name is Eric Bernofsky, Chief Corporate Officer of Enthusiast Gaming. With me today is our Chief Executive Officer, Adrian Montgomery, and our Chief Financial Officer, Alex McDonald. 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 appear in the company's management discussion and analysis for the three-month period ended March 31, 2022, which are available under the company's profiles on CDAR and EDGAR, as well as on the company's website, enthusiastgaming.com. Your caution 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... I'd like to turn the call over to Adrian Montgomery, CEO of Enthusiast Gaming. Adrian. Thank you, Eric.

Good afternoon and welcome to our first quarter 2022 financial results conference call. 2022 is off to an incredible start, and I'm excited to share with you the details of yet another strong quarter. I will share with you why we are winning in the marketplace and why we are confident that our business model is well-positioned to continue to deliver rapid revenue growth, outsize margin growth, and deliver profitability in the short run. As always, I will also share some key operational highlights and milestones before handing the call over to Alex to share more details on the financial performance in the quarter. Our Q1 2022 results demonstrate that our flywheel model centered around communities, content, creators, and experiences continues to drive long-term value for all stakeholders, including our audience, our brand partners, and, of course, our shareholders. This quarter, we accelerated our revenue growth and delivered substantial margin expansion. And to be able to do that in a quarter that is seasonally the slowest is a strong sign for what's to come for the rest of the year. We're confident that the trends we are seeing will allow us to meet profitability objectives in the short term. Let me share some of the highlights of the quarter. Revenue in Q1 grew 57% to $47.2 million, up from $30 million last year in 2021. The year-over-year increase was driven largely by, one, higher views across our content channels, two, stronger monetization across both web and video platforms, three, growth in our direct sales channels, And four, continued growth in subscriptions. Five, and lastly, growth from the addicting games and U.GG properties. Gross profit grew to $13.5 million in Q1, up 127% from $5.9 million this time last year. Q1 gross profit was particularly strong and effectively equal to Q4 2021 gross profit of $13.7 million, despite a strong seasonal difference between the two periods. Gross margin expanded to 28.6% in the quarter, an increase of 880 basis points versus gross margin of 19.8% in Q1 of 2021. The increase in gross margin is driven by the strong performance of Addicting Games and U.GG, as well as the higher direct sales and subscription revenues. On direct sales, I am pleased to report that this area of the business is off to a strong start for the year. Direct sales grew 136% to $5.2 million in Q1 compared to $2.2 million in Q1 of last year. Last quarter, I spoke about the success we are having converting new customers into returning customers. This quarter, renewals and additional business with existing customers accounted for 65% of direct sales. That's up from 42% last quarter. And deal size among our renewals, on average, is larger than deal size for new customers. Again, this is a very important metric for us to watch as it continues to demonstrate to us the value that our flywheel of services we offer brands is helping them convert their spend with us into new customers for them. Some of the larger renewal partners we work with in the quarter include the United States Navy, HBO Max, The Truth Initiative, DoorDash, Elf Cosmetics, and H&R Block, while some of the new partners include HUD-8, the FDA, Coca-Cola, Toyota, Puma, Wendy's, Fidelity, Kijiji, Lionsgate, and Red Bull. Turning to subscriptions, revenue grew 83% to $3.3 million. with paid subscribers increasing 70% from a year ago to end the quarter at 233,000. One point I'd like to emphasize here is that revenue grew faster than subscribers, meaning the ARPU, the average revenue per user on those subscribers, increased slightly in the quarter. This proves the value of our subscription offerings to our audiences and the ability for us to maintain pricing power. Again, to reiterate, Two of the main reasons we have been able to grow margins at twice the rate of revenue growth is the contribution coming from higher margin areas of the business, like direct sales and subscriptions. And at this point, I would be remiss to talk about the exemplary leadership on the operational side of our Chief Operating Officer, Thamba Tharmalingam, who every day drives efficiencies across the organization as well as the strong growth that is reflected in these results. Samba would normally be with us tonight, but he's waving the enthusiast flag at AdWeek Europe, which has emerged as a priority growth area for the company. On my last CEO update, I talked about how we are taking tangible steps towards the goal of increasing our content vertical of the business. Last quarter, I spoke about making the right investments and the decisions for the company to position ourselves at the intersection of gaming culture. As audience preferences evolve and grow, we are taking a hard look at how we create content, asking viewers what is important to them. What product enhancements, features, formats would they like to see? We asked a lot of questions. And of course, how can we monetize that new content? One thing we have witnessed as I'm sure many of you have, is the speed at which TikTok is growing. It is the fastest growing social network in the world. Over the past year, we have dedicated resources to TikTok. We now have 16 enthusiast gaming owned and operated TikTok channels, generating 50 million monthly views and growing. The content we are producing is extremely diverse, but relevant to our fans and our audience. We have shows that focus on news, guides, culture, entertainment, streaming, top 10 lists, as well as game clips. We believe there is tremendous opportunity for brand partners to have a much greater presence on TikTok, and we are already engaging with leading brands and organizations on this. And in fact, we have already begun monetizing on this platform via a recent custom integration we did with DoorDash. It's amazing to see the innovation happening in real time with our content and sales teams being able to ideate and execute on an idea that brings value to audiences and can be monetized with our brand partners. Turning to Luminosity Gaming, the most watched esports organization on Twitch, Luminosity continues to move forward. Luminosity is a cornerstone in our asset portfolio, and we are focused on continuing to grow market share. Subsequent to the quarter end, we announced that we have entered two new game titles, including our return to Halo and our new Apex Legends teams. In conclusion, we delivered a very strong Q1 in the face of seasonal weakness and a difficult global economic and geopolitical environment. We accelerated our revenue growth and grew gross profit at twice the rate of revenue. I would leave you with four key messages for 2022. One, we will continue to focus on strong revenue growth. Two, we also expect margin growth to continue to significantly outpace revenue growth as seen both in this quarter and in 2021. Number three, with the surge in gross profit, we have the available capital to execute our business plan. And finally, given the operating leverage of the business, we are on an accelerated path to positive EBITDA in the latter stages of this year. I will now turn the call over to Alex for further commentary on our financial results. Alex.