Enthusiast Gaming Holdings Inc.

Hello and welcome to the Enthusiast Gaming Holdings fiscal fourth quarter and full year 2023 financial results. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad. And to withdraw from the question queue, please press star then two. As a reminder, this conference is being recorded. I would now like to hand the call to J.B. Elliott, EVP, Strategy, and General Counsel. Please go ahead.

Thank you, operator. Good afternoon, everyone, and welcome to the Enthusiast Gaming Fourth Quarter 2023 Results Conference Call. I'm J.B. Elliott, EVP, Strategy, and General Counsel. With me today is Interim Chief Executive Officer Adrian Montgomery and Chief Financial Officer Felicia De La Fortuna. We'll begin with some prepared remarks and then open 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 and analysis for the three-month period ending December 31, 2023, which will be available on the company's profile on CDAR+, as well as on the company's website at enthusiastgaming.com. We are cautioned 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 statement 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. Adrian, the call is yours.

Thank you, JB, and welcome, everyone. I stepped back into the role of interim CEO of Enthusiast Gaming in early January following the resignation of our prior CEO. It has indeed been an eventful year, but what has not changed is that Enthusiast Gaming continues to have highly engaged communities of gamers and esports fans, and that makes us one of the leading media and entertainment companies for gamers in North America. With over 50 million monthly unique visitors, our audience attracts world-class marketing brands that want to reach them and an enviable set of strategic partners such as the National Football League. Across our diverse portfolio of gaming and esports assets, we are prioritizing our strategy and resources around community engagement, and we find engagement, significant engagement, across the span of our business. Engagement in U.GG, our data-driven player insights platform, which is one of the top League of Legends fan communities in the world. In fact, U.GG is listed as a trusted partner of Riot Games and is one of three sites, only three sites, with a link on the official League of Legends website. We have introduced our proprietary desktop app only this summer, this past summer, which has already attracted over 2.1 million downloads and expanded into new titles like World of Warcraft and Valorant, driving even higher levels of engagement. Time spent per user in December was five times from the same month a year ago. For all these reasons, U.GG is a market leader that is extremely well positioned for continued growth. We have engagement in the Sims resource, the largest and longest running Sims fan community and content repository in the world. Interest in the game remains remarkably strong, and fans continue to flock to our site to access our 5 million plus pieces of custom Sims content. The TSR community is also far more engaged than those of our competitors, with time spent per user on TSR being nearly triple that of our next largest competitor. We therefore believe that when we bring users to the Sims resource, they will stay for the long run. We also expect the recently announced Sims movie, spearheaded by Margot Robbie, to have a very positive impact on the Sims and on the Sims resource, much as she and it did for Barbie, leading to continued growth and new heights for this fan community. The current trends of TSR support this thesis. Engagement in Icy Veins, which is one of the largest independent Activision Blizzard fan communities in the world, generating over 100 million views of content in 2023 alone. The platform provides news and strategy guides for leading franchises like World of Warcraft, Diablo, Heroes of the Storm, Path of Exile, Final Fantasy, Icy Veins had an exemplary 2023 as it quickly became the primary destination for fans of newly launched blockbuster titles like Diablo 4 and expansions like World of Warcraft Season of Discovery. As an example, in the month of July, Icy Veins set a record of 5.9 million unique users. It is yet another growing and profitable market-leading community for us. Engagement in Luminosity, our esports division, which operates professional teams competing in Apex Legends, Rocket League, Super Smash Brothers Ultimate, Pokemon Unite, amongst several other titles. Luminosity won 33 championships in 2023, up from 22 total championship wins over the prior seven years combined. In 2023, this included our first ever world championship, which was achieved by our Pokemon Unite team. We have been working directly with Pokemon to document that team's run to becoming back-to-back world champions. This past year, we also launched a new owned and operated Smash channel, which has quickly gained over 30,000 subscribers and over 15 million lifetime views. The average monthly views for this Smash channel puts it on par with the largest esports teams in the world. Alongside this, Luminosity launched its live in-person Smash event series with a license from Nintendo and will be returning for events in Toronto, New York, and Miami. The success of Luminosity's Smash event and expansion into coverage of their RLCS team on the Luminosity Twitch channel led to us being the seventh highest esports channel by average daily chat engagement throughout January and February of 2024, competing with professional publisher broadcasts and being the only esports team in the top 10. Engagement in Pocket Gamer, which hosts the Pocket Gamer Connects B2B industry events and is celebrating its 10th anniversary in 2024. We hosted the largest ever PGC conference in London in January. It was a must-attend event that attracted over 150 sponsors and was attended by over 2,600 delegates and 1,300 companies. Looking ahead, we have a long lineup of additional PGConnects conferences ahead of us as part of our 10th anniversary year, including Dubai in May and Helsinki in October. Helsinki is now our second largest event behind London, and it's now going to be a central part of Finland Games Week. We also have upcoming events such as the new Middle East and North Africa Games Awards in May, the Mobile Games Awards being held along Gamescom in August, and the Top 50 Game Developers, which is running for its 15th year in October. Engagement in Fantasy Football Scout, the world's leading fantasy football or soccer community, which provides award-winning editorial, video, newsletters, podcasts, and social media, plus premium data, tools, and features to over 275,000 subscribers, including many paid subscribers. We also provide a variety of content, tools, and services direct to the Premier League and UEFA, among others, for their market-leading fantasy games. This season, we've broken records for podcast downloads on FFS with over 5.5 million podcasts across our direct channel and our network, and we crossed the 500,000 mark for social media followers. FFS continues to grow its revenue and subscriber base. Across all of these assets lies a coveted community of gaming audiences, and we remain focused on those communities as our most valuable properties. Despite maintaining our focus on our communities and our audiences, it was immediately clear to me that we needed to move much faster and more decisively in order to position the company for sustainable profitability. We are doing just that. We have taken immediate and significant steps to focus on our core, which is building communities and creating and curating incredible content and experiences that engage our gamers and our esports fans. We are immediately focused on three key areas. One, profitable revenue. Two, gross margin expansion. And three, right-sizing the cost structure. The $10 million restructuring program announced in March was an important part of that effort, and Felicia will walk you through that in greater detail in a moment. We have more work to do to get enthusiast gaming to where it needs to be. We have liquidity, but we need to strengthen our balance sheet. We have compelling assets, but we need to streamline our cost structure and focus on our best opportunities for durable success. The efforts to put us back on that right path are already underway and are not reflected in the fourth quarter results, but we are moving quickly and taking immediate and decisive action. On March 7th, we announced the $10 million cost reduction program. On the 28th of March, we announced an advertising technology partnership with PlayWire in order to allow a global leader in monetizing sites to help us increase our yield and drive beneficial growth to our bottom line. And this morning, we announced the sale of a small subset of certain non-core, non-profitable casual gaming assets for a purchase price of over $4 million. These actions have led to the business regaining its focus. We are focusing on our most profitable revenue streams, specifically around our owned and operated properties and the most highly engaged communities that we serve. This focus is expected to lead to significant gross margin expansion and allows us to deprioritize areas of business that have lower gross margins and where profitability is less certain or non-existent. This focus means being disciplined on where we are spending our money. The underlying strategy remains the same, though, leveraging a large and highly engaged audience to move toward a higher percentage of direct sales and robust brand solutions with less reliance on programmatic sales, which, however, are also expected to grow significantly in our owned and operated communities as a result of our recent partnership with Playwire. At Enthusiast, we believe we have the assets to execute this strategy, but the first step is to ensure a sustainable business model. We've turned our direct sales into a material business from not even having a workforce in 2020 to a $40 million vertical in 2023. This is the key advantage of the portfolio in that it allows us to continue to demonstrate that the total of Enthusiast Gaming is much greater than the sum of its parts. And of course, one of the key cornerstones of our direct sales involves NFL Tuesday Night Gaming, our weekly gaming competition series in partnership with the National Football League. NFL TNG uniquely represents the intersection of gaming and sports culture, building the bridge between two distinct communities to create one unified viewing experience. Our collaboration on this proprietary content showcases how two leaders can come together to create the template for highly engaged user experiences in a brand safe environment. We are looking forward to doing it all over again with the NFL for an upcoming successful season, as well as to extend NFL-like collaborations to other professional sports leagues in the short term. We've increased our subscriber base, which is our highest margin revenue stream and therefore a direct contributor to profitability. and following a comprehensive organizational review initiated at the beginning of the year, we are expecting to operate with a streamlined and simplified cost structure at perhaps lower revenue, but with a significant reduction in our burn rate as we move towards sustainable profitability and conserving cash on an accelerated timeline. Enthusiast Gaming is a media and entertainment company for gamers. We are rooted in our highly engaged communities. We happen to own brands that are the best in their respective verticals in the world. We are built on servicing our enthusiast audience. It has always been strong, and we will focus on making it larger than ever and more highly engaged than ever. With that simple focus, the monetization opportunities will be significant. more programmatic advertising than ever, more subscribers than ever, more creative packaged solutions for clients than ever, and much more discipline in our spend. That's the recipe to make this a high-margin, sustainably profitable growth company. We have more work to do, but we are on the right focus track. Let me now turn the call over to Felicia.