GameSquare Holdings, Inc.

Greetings and welcome to the Engine Gaming and Media second quarter conference call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note this conference is being recorded. Before we begin, I would like to caution listeners that comments made by management during this call may include forelicking statements within the meaning of applicable security laws. These statements involve material risks and uncertainties, and actual results could differ from those projected in any forward-looking statement due to numerous factors. For a description of these risks and uncertainties, please see Engin's financial statements and MD&A for its second quarter for fiscal year 2022 and in February 28, 2022. available on CDAR and EDGAR. Important qualifications regarding forward linking statements are also contained in Engin's earnings release, distributed early this afternoon, and also available on CDAR and EDGAR. Furthermore, the content of this conference call contains time-sensitive information, accurate only as of today, April 14, 2022. And Engin undertakes no obligation to revise or otherwise update any statements to reflect events or circumstances after the day of this call. I would now like to turn the conference over to Mr. Lou Schwartz, Chief Executive Officer, and Tom Rogers, Executive Chairman of Engine Gaming and Media. Please go ahead.

Thank you, Operator, and thanks to everyone for joining us on our fiscal second quarter earnings call. To begin, total revenue for the second quarter of fiscal 2022 increased 20.3% to $9.3 million from $7.7 million in the same period a year ago. and down 24% from fiscal 2022 first quarter. $3 million of the quarter-over-quarter revenue decline is directly tied to the seasonality in our advertising business. As we've guided in the past, we typically see the highest yield and peak revenue during the last few months of the calendar year and the lowest during the first few months of the calendar year when brands complete their annual planning and reset their budgets. It's also important to note that our second quarter results exclude any revenue contribution from Eden Games, our gaming development company that was recently sold and is currently reflected in our financial statements as a discontinued operation in both current and historical periods for accurate representation. The two key revenue segments of our business are SaaS, also known as software as a service, and advertising. Fast revenue for this second quarter of fiscal 2022 was $1.8 million, up from $1.4 million in the first quarter of fiscal 2021, an increase of 25.4% year-over-year. Secondly, advertising revenue grew to $7.1 million in this quarter. This is an 18.6% increase from the same year-ago period. Total expenses in the fiscal second quarter of 2022 decreased by 39.3% to $16.9 million, compared to $27.8 million in the same year-ago quarter. The decrease in expenses was primarily due to non-cash charges. For the second quarter, adjusted EBITDA loss was $6.4 million, a $2 million increase in adjusted EBITDA loss year over year. Although it may not be significantly reflected in our latest quarterly financials, the company has been taking aggressive action to reduce costs and most substantially to our B2C gaming businesses. These expense reduction initiatives will be more apparent in the second half of the calendar year as the full impact of these cost reductions are realized. Additionally, we will continue to rationalize all spending across the company with an eye toward achieving cash flow breakeven on a run rate basis in fiscal 2023. while continuing to narrow our focus on a core set of assets with predictable streams of revenue and significant growth characteristics. We are certainly mindful of the current headwinds in the US and Canadian capital markets and fully appreciate the importance of preserving and allocating cash in a manner that maximizes shareholder value and returns. Between our cash on hand at the end of the last quarter and the proceeds from the recently completed Eden transaction, we now have sufficient cash to meet our operating needs for the foreseeable future as we drive shareholder value and become a much larger profitable company. To that end, we believe that our current collection of assets provides the company with a bright future. It's no secret that the influencer and creator economy is evolving with the speed of social media. If you pay close attention, you'll quickly see how many of the same business models that succeeded in the transition from analog to digital are now shifting again to meet more targeted, hard-to-reach audiences in the live streaming and social sphere where influencers, along with their loyal followers, have the ability to drive brand awareness, e-commerce transaction revenue, as well as other types of services and offerings. Engine sits at the epicenter of this groundswell. through a combination of our data, discovery, influencer, and audience watch tools from Stream Hatchet, where gaming publishers, agencies, and brands need up-to-date, accurate, reliable audience and advertising data through live streaming platforms, including Twitch, YouTube, Meta, and many other live streaming platforms throughout the world. At the same time, selecting and measuring influencers is key to building an impactful marketing strategy that drives real ROI. The link between top-performing creator content and commerce is stronger than ever. Leveraging the platform tools and features from Sidekick across those channels with real-time data differentiates social marketing campaigns to ensure business success. And that's how we've become an invaluable partner to the many companies navigating this complex pipeline. In fact, even our news and media programmatic advertising partners are now using influencers to help drive traffic and awareness for new OTT content offerings, which helps to fuel additional advertising inventory. As these platforms evolve, we will continue to see substantial room for further growth and differentiation through platform integration. We're excited for the opportunities to stand before us. encouraged by the results of this quarter, and confident in our growth plan. To speak further on our overall strategy going forward, I would like to pass it off to our Executive Chairman, Tom Rogers. Tom?

Thanks, Lou. The question I want to address is, how do we think about Engine Now and the businesses that we will most focus on, and how do they relate to each other going forward? There is no doubt that there are substantial growth opportunities in the areas of video game and esports engagement, social influencer marketing, and programmatic advertising. The question for Engine is, how do we uniquely add value to those areas of substantial growth in ways that are differentiated and can further ignite our financial performance? Our focus on, frankly, Sidekick and Stream Hatchet He emphasizes our B2C gaming endeavors at this time, increasingly defining the company as one that is data-driven, guiding gaming industry companies, brand sponsors, and performance marketers, as well as media sellers, when it comes to their data analytic, digital advertising, and marketing needs. We are finding a unique role for our stream hatchet services when it comes to not only measuring game play on live streaming platforms, but how sponsors can effectively drive their marketing programs through the increasingly important influencer community inside and outside the gaming world. Sidekiq has a substantial market opportunity given the increasing focus of creator marketing campaigns across enterprise and SMB clients. Being able to provide a depth of unique expertise along with enhanced insights related to the gaming creator community through its relationship with Stream Hatchet, allows Sidekick to provide a high degree of differentiation. In support of this opportunity, we are further investing in Sidekick's end-to-end discovery, commerce, and measurement capabilities. When it comes to programmatic advertising, we have developed a successful approach for handling advanced programmatic advertising needs of legacy media companies. We are also finding that our role in selling programmatic inventory can be enhanced by being able to offer digital marketing and promotion capabilities to, frankly, advertising clients, such as through social media and gaming live streaming platforms, as a combined expertise that is unique in the market. The market continues to demand improvement in key areas of measurement, analytics, commerce, and global reach across a variety of platforms. Our business units continue to enhance their offerings to meet these needs, both individually and in the aggregate. As the platforms evolve, we see substantial room for further growth and differentiation through further integration of the platforms. And I think now we'll take a few questions. Thank you.