GameSquare Holdings, Inc.

Greetings, and welcome to the Engine Gaming and Media Fiscal First Quarter 2023 Conference Call. Please note this conference is being recorded. Before we begin, I'd like to caution listeners that comments made by management during this call may include forward-looking statements within these meetings 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 description of these risks and uncertainties, Please see Engines' financial statements and MD&A for the fiscal first quarter 2023 and November 30, 2022, available on SADAR and EDGAR. Important qualifications regarding forward-looking statements are also contained in Engines' earnings release distributed early this afternoon and also available on SADAR and EDGAR. Furthermore, the content of this conference call contains time-sensitive information occurring only as of today, January 17, 2023. Engine undertakes no obligation to revise or otherwise update any statements to reflect events or circumstances after the date of this call. And now let's 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 first quarter 2023 earnings call. To begin, total revenue for the fiscal first quarter of 2023 was $10.3 million compared to $11.5 million in the fiscal fourth quarter of 2022. The decrease in total revenue was largely due to short-term headwinds impacting our advertising segment of the business, driven by Google algorithm changes, which affected traffic to our largest legacy media client and was not a function of overall advertiser demand. We anticipate these headwinds to be short term and expect to gradually improve in the coming quarters. Despite these short-term advertising headwinds, we continue to see heightened demand for our influencer marketing platform and data insights offerings for game publishers, agencies, and brands looking to drive revenue through targeted audiences while managing influencer relationships at scale. For the fiscal first quarter of 2023, SaaS revenue remained relatively flat at 2.4 million due to the declines in legacy content management-related SaaS revenues. Importantly, revenues from our influencer and data technology SaaS businesses are up 35% year-over-year, driven by the demand I just mentioned. This is a welcoming trend heading into our merger with GameSquare, further supporting our merger transaction thesis. of driving expanded revenue from game publishers and brands looking to reach youth audiences with a comprehensive set of creative capabilities that leverage our software platforms. We're also very excited by the recent accomplishments of our product and software development teams delivering feature enhancements across all of our platforms that enable customers to efficiently analyze, find, activate, monetize, and report against hard-to-reach audiences. Whether it's managing communications and workflows with influencers at scale, analyzing billions of live streaming data records, or tracking and managing affiliate performance marketing payouts, our platforms continue to evolve to meet the needs of complex brand marketers and game publishers. During the quarter, we continued to make notable improvement in our near-term goals of achieving a cash flow positive position. Importantly, adjusted EBITDA improved 32% sequentially to negative 2.7 million when compared to negative 4.1 million in the fiscal fourth quarter of 2022. When compared to the year-ago quarter, adjusted EBITDA improved 17%. Evident in our sequential analysis of our adjusted EBITDA is our pathway to profitability and sustainable growth. Additionally, net loss improved by nearly 10 million to a net loss of 5.4 million, compared to a net loss of 15.2 million in the fiscal fourth quarter of 2023, despite the restructuring charges related to discontinued operations. We believe in the company's growth trajectory and look forward to completing the recently announced merger with GameSquare, which Tom will speak to in a moment. Our platforms that are immersed in the gaming social influencer and creator content spheres continue to benefit from the growing demand among marketers for the data and analytics we provide to enable marketers to better navigate those spaces. These businesses have become increasingly important to advertisers and sponsors desiring to reach younger demographics and are extremely complementary to the GameSquare offerings. I'll now pass the call to our Executive Chairman, Tom Rogers.

Thanks, Lou. We indicated in our last earnings call six weeks ago that we had high confidence our strategic process would conclude with a great opportunity for the company. That certainly did occur in entering into a definitive merger agreement between Enjin and GameSquare. Our stated goals of finding a strategic solution which would increase scale catalyze further growth, and unleash both cost and revenue synergies are all realized through this transaction. We believe this merger provides strong potential returns for our shareholders by allowing engine stockholders to participate in the value creation of the combined company. Since the transaction's announcement, our stock price, in fact, has risen about 120%. The central thesis of the merger is that traditional media companies are no longer able to deliver millennial and Gen Z audiences at anywhere near the scale that they used to. Moreover, digital media companies are increasingly inhibited in their ability to target audiences because of the new privacy restrictions of the major tech platforms. This has had a particularly adverse consequence when it comes to targeting gaming audiences. The combined company can provide solutions to both of these major marketing problems. Moreover, the combined assets of the two companies not only will provide a solution, but one that has enormous audience scale behind it. Beyond the scale it will provide, the fact that the combined company offering is an end-to-end one-stop shop approach to satisfying the needs of sponsors who want to reach youth audiences at scale. The company will provide a very efficient path to doing so that takes a great deal of friction out of the process where today's sponsors need to deal with multiple smaller companies. The ability for the combined company to engage a brand by what Game Square brings to the table. One, providing an overall young audience focused campaign strategy. And two, providing content development and production capability. And three, being able to activate advertising both through a publisher network, a broad influencer channel, and the substantial reach of a major e-sports team. Then add number four, that that reach can be amplified by the tech platforms that Enjin brings to the table, InStream Hatchet, Sidekick, and Frankly, each of which uses data and analytics to enable navigating distribution more broadly across various live streaming gaming and content platforms and social media content creator sites and programmatic advertising network. And then lastly, five, the measurement and assessment analytics of the engine assets enable further refinement and optimization of marketing campaigns to continually increase efficiency for advertisers and sponsors. Put all that together with the historical top line growth of each company and the progress each has made in moving toward cash break even this year. And the combined company creates a powerful new entrant into a highly sought after media sector, especially with the revenue and cost synergies to be realized. Moreover, taking the current combined market caps of the two companies The two companies in our mind are priced now at deep discounts to both marketing and gaming peers. We expect to close the deal during the first quarter of the calendar year. We appreciate investor support while we move toward closing the deal. Thank you, and we'll now turn the call back to the operator for questions.