Enthusiast Gaming Holdings Inc.

Thank you for standing by. This is the conference operator. Welcome to the Enthusiast Gaming Holdings Inc. Second 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 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, Sachi. Good afternoon, everyone, and thank you for joining Enthusiast Gaming's second quarter 2022 financial 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 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 June 30th, 2022, which are available under the company's profiles on CDAR and EDGAR as well as the company's website, enthusiastgaming.com. Your caution not to place undue 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'm happy to turn the call over to Adrian Montgomery, Chief Executive Officer of Enthusiast Gaming. Adrian? Thank you, Eric.

Good afternoon and welcome to our second quarter 2022 financial results conference call. I'm pleased to share with you the details of yet another strong quarter, particularly in light of the macroeconomic backdrop we are in. I'll provide some context around our key performance metrics, including revenue growth, and in particular, direct sales growth, subscription growth, Gross profit growth, which reached the highest in the company's history this quarter. And lastly, I'll talk about how we see the second half of the year shaping up, which we will expect to be a continuation of the same performance trends we have delivered in previous quarters, led by strong revenue and margin growth. But first, I want to address a topic that has been on a lot of shareholders' minds. Shortly after reporting an extremely strong Q1 this year, in what is typically the seasonally slowest period in our business, a shareholder group spoke out and sought change. While this was an unfortunate and costly distraction, which took up the bulk of the second quarter, we respect the voices and opinions of all shareholders and we listened. Today, we are aligned and we have already moved forward with a number of changes that we believe are the right ones for our business. Our annual general meeting last month saw the election of four new, highly qualified directors, Angela Ruggiero, David Goldhill, Jannie Lee, and Scott O'Neill, whose diversity of experiences will help guide our business forward and open up new growth opportunities that will drive lasting shareholder value. As you know, the new board is conducting a CEO search and pending completion of that I will be moving to chair the board and continue to focus on strategy and growth. Last week, we announced that Bill Cara, CEO of Indicting Games, which we acquired late last year, is being appointed as president of Enthusiast Gaming and will bring an enhanced gamer-focused vision to the day-to-day operations of the business. As a lifelong gamer and entrepreneur, Bill, who is based in Los Angeles, has been in the gaming industry for over 20 years with a passion and love for blending gaming, education, technology, and the emerging Web3 space. I look forward to continue to work closely with Bill in his new role. During the first half of 2022, we delivered our strongest half-year results to date, led by accelerated revenue growth and substantial gross margin expansions. Q2 2022 was impressive, with revenue up 38% year-over-year to $51.1 million. The year-over-year increase in revenue was driven by increased direct sales, including both new and repeat customers, higher subscription revenue, the acquisitions and growth of both Addicting Games and U.GG properties, and higher RPMs across both web and video. Gross profit grew to an all-time record high of $15.3 million, up 91% from $8 million at this time last year. Q2 gross profit was not just a record high for any Q2, but for any quarter in Enthusiast history, and we still have the seasonally strong second half to come. Gross margin expanded to 30% in the quarter, versus gross margin of 21.6% in Q2 of 2021. The increase in gross margin continues to be driven by the strong performance of Addicting Games and U.GG, as well as growth in the higher direct sales and subscription revenue streams. On direct sales, I am pleased to report yet another strong quarter. Direct sales grew 111% to 9.3 million in Q2 compared to 4.4 million in Q2 last year. Renewals and additional business with existing customers accounted for 71% of direct sales revenue. At Enthusiast, we have the largest scaled media offering in gaming, and in Q2, some of our partners included Adidas, the United States Navy, State Farm, HBO Max, Lego, Universal Pictures, Procter & Gamble, FanDuel, Toyota, Logitech, the Food and Drug Administration, and RBC. We are a one-stop solution for these companies' gaming and esports strategies. A few activations I would like to highlight are the following, which continue to speak to the bespoke solutions that we create for brands looking to connect with the most coveted audience, Gen Zs and millennials. First, Top Gun. In May, over Memorial Day weekend, Paramount Pictures released Top Gun Maverick. In the weeks leading up to the movie release, we partnered with one of the largest streamers in North America, Ludwig, to create a four-week competition to find the next big streamer called Ludwig's Flying Aces. Contestants took part in weekly creator challenges and the winner was able to secure a coveted spot on Ludwig's stream for an entire hour, giving that individual a once-in-a-lifetime opportunity. Second, Adidas' Ozworld map. Adidas wanted a cool way to enter the metaverse and drive awareness of Ozworld, a unique platform for self-expression, enabling users to create their own avatars to be used around the web. As part of this campaign, we dropped a custom Fortnite map with three mini games inspired by Osworld that delivered 200,000 plus organic plays within the first few days of being alive. Three, the RBC Gaming Grant. One of the things we pride ourselves on at Enthusiast is helping the next generation of gamers by arming them with the tools they need to pursue a career in gaming. In partnership with RBC, We invited qualified gamers ages 18 to 29 to apply for $75,000 in grants, as well as mentorship to help gamers advance toward careers in marketing and other related professions. Smirnoff Saturdays. In partnership with Smirnoff, we launched a 12-week series of live streams where each Saturday our influencers will stream, interact with their chat, and toast their communities every time something cool happens. And subsequent to the quarter, we are excited about some meaningful new work we are doing with Amazon around their back-to-school marketing. There are many others to mention, but the point is to demonstrate the many ways we are working with brands to integrate our communities, content, creators, and experiences. Turning to subscriptions, Subscription revenue grew 75% year-over-year to $3.5 million in Q2. The increase in subscription revenue is driven by an increase in paid subscribers and pricing optimization. Paid subscribers were 258,000 as of June 30, 2022, a 66% increase versus paid subscribers of 155,000 as at June 30, 2021. Again, To reiterate, two of the main reasons we continue to grow margins at a substantially higher rate than revenue is the growing contribution coming from higher margin areas of the business, like direct sales and subscriptions. You've heard us speak a lot about the importance of our addicting games and U.GG acquisitions last year, and how their content has become a meaningful part of our flywheel. It's also our way of using some of the assets as we explore commercial opportunities around NFTs and Web3. One of the most talked about topics in gaming right now is in-game advertising. As you know, we developed EV.io, a first-person shooter game, which is our way of tackling this important and valuable industry theme. Most similar to Microsoft's mega hit Halo, the beta for EV launched in January 2021 and already has over a million monthly active users. This game's key differentiator is the ability for users to acquire actual tradable NFTs just by playing the game. The more they play, the more they earn. Not only is it one of the only games incorporating rewards through NFTs, but brands have the ability to get involved in a variety of different ways. Something as simple as an in-game billboard or more in-depth like adding a custom element to a game featuring their product. This is what our launch partner, HUD-8, tapped into to great success. We are excited to see what EV.io can do, but the early days have been promising as we engage with fans in a meaningful new way. Turning to U.GG, we are pleased with its performance since the acquisition and believe there are a lot of product synergies still to come. Just recently, U.GG passed 1 million downloads for its desktop application that was launched last fall. This is in addition to the millions of daily views visiting the U.GG website for stats and insights on how to become a better League of Legends player. The product teams have been working hard over the summer to build out our new content pipeline for the remainder of 2022. Turning to Luminosity Gaming, our esports organization continues to grow. One of our franchise teams, the Seattle Surge that competes in the Call of Duty League, had a major milestone winning their first ever championship at Call of Duty League's Major 3. The Surge were flawless at the event, not dropping a single series the whole way and concluded their perfect tournament with a win over Atlanta FaZe. We are extremely proud of our team and want to congratulate the players and staff on this exciting milestone. On the events and entertainment side, we have resumed live events within our Pocket Gamer series. In Q2, we returned to Seattle and subsequent to the quarter, our Pocket Gamer team hosted its first ever event in Toronto, Canada, expanding its reach once again of sponsors and attendees. Later this month, we look forward to hosting events at Gamescom in Germany and next month in Helsinki, Finland. In conclusion, We delivered another extremely strong quarter, delivering on our key priorities in the face of a weakening economic backdrop. As for the outlook of the balance of the year, I would say the following. One, we will continue to focus on strong revenue and margin growth. Two, we have the available capital to execute our current business plan. Three, we remain on an aggressive path to positive EBITDA. And now I will turn over the call. to my CFO, Alex, for further commentary on our financial results.