GameSquare Holdings, Inc.

Greetings and welcome to the Engine Gaming and Media Fiscal Fourth Quarter and Full Year 2022 Conference Call. Please note that this conference call is being recorded, and if anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Before we begin, I would like to caution listeners that comments made by management during this call may include forward-looking statements within the meaning of applicable securities 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 fiscal fourth quarter and full year 2022, ended August 31st, 2022, available on CDER and EDGAR. Important qualifications regarding forward-looking statements are also contained in Engin's earnings release distributed early this afternoon. and also available on Cedar and Edgar. Furthermore, the content of this conference call contains time-sensitive information, accurate only as of today, November 29, 2022. Engine undertakes no obligation to revise or otherwise update any statements to reflect events or circumstances after the date of this call. And 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, Thank you, gentlemen. Please go ahead.

Thank you, Operator, and thanks to everyone for joining us on our fiscal fourth quarter and full year 2022 earnings call. We had very substantial revenue growth when looked at on an annual and sequential basis for the quarter. To begin, total revenue for the full year ended August 31, 2022, increased 25.6% to a record $41.9 million. from 33.3 million in the same year-ago period. Total revenue for the fourth quarter increased 24.4% to 11.5 million from 9.2 million in the fiscal third quarter of 2022. The increases were a function of substantial growth in advertising revenue and an increase in SaaS revenue, the two key revenue streams of our business. For the full year of fiscal 2022, advertising revenue increased 28.6% to $32.7 million from $25.4 million in the prior year. Advertising revenue for the fourth quarter of fiscal 2022 was $9 million, increasing 29.2% from the fiscal third quarter of $7 million. Franklin Media supports this growth by continuously optimizing its 50-plus demand partner network to deliver higher-yielding advertising revenue for its customers. frankly increased both CPMs and RPMs during the 2022 fiscal period as compared to previous fiscal year by 33%, despite increasingly challenging market conditions and algorithmic changes to search methodologies. For the full year, SAS revenue increased 15.9% to $9.2 million from $8 million in the prior year. The increase was primarily due to the full year impact of revenue recognized from the Sidekick acquisition and increased SAS revenue from the Stream Hatchet business. SAS revenue for the fourth quarter was $2.4 million, 9.4% higher sequentially when compared to $2.2 million in the third fiscal quarter of 2022. As a result, we exit Q4 with an annualized SAS run rate of approximately $10 million. When the full year ended August 31, 2022, net loss improved significantly to 14.5 million compared to a net loss of 40.7 million in the full fiscal year 2021, an improvement of 26.2 million. Adjusted EBITDA, including discontinued operations, improved 23.3% sequentially to a loss of 4.3 million when compared to a loss of 5.6 million in the fiscal third quarter of 2022. Exclusive of discontinued operations, adjusted EBITDA was a loss of $4 million for the fourth quarter. When removing accounting estimate charges relating to certain financial assets and liabilities of approximately $400,000, which is the best way to assess our cost reduction efforts relating to operating performance, the revised improvement to adjusted EBITDA is 11.9% when compared to fiscal third quarter 2022 adjusted EBITDA. Evident in our sequential analysis of our adjusted EBITDA is our pathway to profitability and sustainable growth. In line with this trend, our first fiscal quarter of 2023 is seeing further reduced operating expenses leading to ongoing improvement in adjusted EBITDA. Additionally, we are continuing to streamline spending across the company with our stated goal of cash flow break-even on a run rate basis in fiscal 2023 resulting in part from narrowing our focus on our core set of assets. We believe our collection of assets, which Tom will speak to in a moment, provide the company with a continued growth trajectory as evident in our recent client wins and contract extensions. Our platforms immerse in the gaming, social influencer, and creator content spheres continue to benefit from the growing adoption of marketers and product enhancements that enhance their value proposition. These businesses become progressively important to game publishers, agencies, advertisers, and sponsors reaching the increasingly hard to reach younger demographics. I'll now pass the call to our executive chairman, Tom Rogers.

Thanks, Lou. Let me focus in for a minute on our very strategically important gaming and social influencer units. Our results continue to define the company as one that, through our data and analytics platforms, we have the ability to guide companies in marketing to gaming audiences, as well as addressing a broader array of brand sponsors, performance marketers, and media sellers needs. We provide highly valuable tech platforms so that marketers can navigate the gaming and social influencer communities with extremely reliable data and analytics that can result in the most productive marketing programs. As targeting challenges have continued to grow in the advertising market, utilizing social influencers as a targeting approach works to our strength in providing both the workflow tools and more direct communications enablement. As marketing programs look to increasingly use social influencers at great scale, and affiliate marketers look to expand their programs in this realm, these trends play very favorably to product enhancements we have developed. We've begun to see in the gaming world an increasing number of clients beginning to utilize the services of both Stream Hatchet and Sidekick. The combined growth of Stream Hatchet and Sidekick, fourth quarter over quarter, is approximately 27%. demonstrating the particular value of both services to sponsors that want to access gaming audiences. To this point, as outlined in Stream Hatchet's third quarter video game streaming report, the data our platforms are able to capture and collect is extremely actionable for marketers, researchers, and analysts as these platforms develop actionable insights how to best tap into the Gen Z and millennial highly prized 18 to 35 demographic. This is an industry with consistent growth over the last four years, and the insights our assets capture become more valuable as the market continues to expand. The marketing reach of esports continues to be an area that advertisers and sponsors want to have greater exposure to, And this creates significant opportunity for our growing the number of brand clients we serve. Our precise and reliable audience analytics are particularly vital to navigating where gaming and media meet in social influencer communities and our necessary analytics enabling the marketer to determine how best to leverage the ever-expanding creator communities. The traction of our platforms is evident in Stream Hatchet's signed contract extensions with Microsoft, Activision, Ubisoft, while expanding its list of clients with the addition of Monumental Sports, PUBG, FIFA, Logitech, NVIDIA, and Octagon. Employing the platform tools and features from Sidekick's offerings, make it an invaluable partner to the many companies navigating the complex social influencer sphere. Sidekick added Food Panda, Blizzard, Fanatics, and BenQ to its growing list of blue chip companies, leveraging their suite of influencer marketing and social commerce technology. Renewals and extensions included Nike, Universal Music Group, Virgin Voyages, and Riot Games. Turning to the company more broadly, we are executing very well on our plan of focusing on our key strengths in a tough environment, evident in our strong sequential quarter-over-quarter results. The cost reductions have certainly demonstrated, as we have indicated in prior calls, that we could substantially reduce EBITDA losses, a trend that will continue into the first quarter, as Lou mentioned. As we have previously stated, we feel this is an environment that is ripe for discussions with various parties that are also assessing how to create greater scale. We continue to rapidly narrow the focus of our strategic process and are confident that our efforts will result in a significant opportunity for the company to deliver on our stated goals in initiating this process of increasing scale, catalyzing further growth, and finding cost and revenue synergies. We look forward to providing an update as this process progresses. I think we'll now take a few questions. Thank you.