East Side Games Group Inc.

Ladies and gentlemen, thank you for standing by and welcome to the LEAF Mobile 2020 Fourth Quarter Results Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star zero. I would now like to hand the conference over to your speaker today, Mr. Darcy Taylor. Thank you. Please go ahead, sir.

Thank you, Daphne, and welcome everyone to LEAF's fourth quarter full year 2020 results call. I'm Darcy Taylor, Chief Executive Officer of LEAF Mobile Inc., and also with me today is Jim McCallum, our Chief Financial Officer. On today's call, I will begin by sharing highlights on our performance from Q4 and full year 2020, in addition to giving an update on our strategy and key events that have taken place since December 31st, 2020. Jim will go into greater detail on our financial results for the period before turning it back to myself for some final remarks before we open it up to analyst questions. Before we get started, please note that certain statements made on this call are forward-looking within the meaning of applicable securities laws. This call includes references to non-GAAP measures. Please refer to our fourth quarter press release and MD&A for cautionary statements related to the forward-looking information and reconciliations on non-GAAP measures to GAAP results. If you'd like to request an audio replay of this call, please contact our investor relations team at ir.leafmobile.io to request the audio replay. Let me begin by highlighting LEAF's fourth quarter and full year 2020 results and our strong finish to what was an extremely busy an unprecedented year in 2020. I'm proud of our team at Leaf for executing on our vision even as the world navigated uncharted territory. Leaf remains relentlessly focused on our three pillar strategy of organic growth from games development and publishing via both IP driven franchises and in-house development franchises, distributed growth with our core technology platform IDLE kit and NFT kit and acquired growth through mergers and acquisition as a disciplined buyer looking to increase our competitive advantage scale and unit economics. This strategy has been carrying momentum we built in 2020 into the new year, and we have no plans of slowing down as Canada's leading free-to-play mobile game group. Leaf continues to show solid growth as we report our figures for the last quarter of an eventful and defining year for Leaf. On February 5, 2021, the company acquired Eastside Games, and due to its significance, the majority of my comments will be focused on the combined company of Leaf and Eastside Games. Our financial highlights are as follows for 2020 and Q4. On a combined pro forma basis, Leaf and Eastside Games generated revenue of $80.5 million in 2020. This was a 116% increase over the $37.2 million recorded in 2019. Adjusted EBITDA. was $11.2 million, and 187% increase compared to the $3.9 million delivered in 2019. Our Q4 revenue was $23 million, a record quarter, and an 104% increase versus the $11.3 million delivered in Q4 2019. This was in a transformational year. LEAF doubled revenue, nearly tripled our adjusted EBITDA, and more than doubled our Q4 revenue versus 2019 on a combined basis. As we enter the new year, we are excited about the opportunities ahead. We've had a positive start to the year with strong performance across our game portfolio in 2021. Going forward, we expect continued positive momentum. Since January 1st, 2021, we have already announced that we've closed a public offering of gross proceeds of $23 million, which included the full exercise of the over allotment option. We completed our acquisition of Eastside Games for $150 million, as I had mentioned previously. We graduated to the TSX from the TSX Venture Exchange. We've entered into a non-binding letter of intent to acquire Truly Social Games, a developer and publisher of mobile games headquartered in Vancouver, Canada. We have entered into a multi-year partnership with World of Wonder Productions for the exclusive mobile game rights to an Emmy award-winning competition series, RuPaul's Drag Race. Announced NIDAO applications and also announced IdleKit publishing partnerships with the likes of Night Garden Studios, Bigfoot Gaming, Mighty Kingdom Games, as well as Tiny Rex Games. We have also launched newly developed NFT kit and partnerships with Wax Blockchain to support Leaderly's new NFT game, Butt Farm Nifty Stash. Leaf. is uniquely positioned to continue to grow our business and I look forward to another incredible year for LEAF in 2021 as the recent announcements continue to build on our strong foundational business momentum. Before I turn over the call to LEAF Mobile's new CFO, Jim McCallum, to further discuss LEAF's fourth quarter and full year 2020 financial results, I'd first like to thank Jim for being such a quick study and would like to provide everyone with a brief introduction to Jim's background. Jim has more than 20 years of international financial and operational executive experience with multinational public companies and big four accounting firms, as well as extensive capital markets, acquisitions, financial reporting experience in Canada, the US and Europe. We are excited to have Jim. on the Leaf team, where we feel he complements our strong performance-oriented culture, and we believe his impressive reputation for execution and achieving results makes him the right choice to lead our finance function. Now, I'd like to hand over to Jim McCallum.

Thank you, Darcy, for the welcoming introduction. I am pleased to join Leaf Mobile, one of the largest mobile gaming companies in North America. at this exciting time for the company. The acquisition of Eastside Games is pivotal for Leaf Mobile, giving it scale and profitability as it recently graduated to the Toronto Stock Exchange, and the acquisition was a compelling reason for me to join the company. In our MD&A and our press release that we filed today, we have provided detailed breakdowns of revenue, net income, and adjusted EBITDA for Leaf as reported under IFRS, which in the MD&A we refer to as our Schedule 1s, LEAF pro forma, which includes financial results for Leaderly, assuming that the Leaderly acquisition occurred on January 1, 2020, which we refer to as our Schedule 2s, and on a combined basis with LEAF pro forma plus e-cite gains, which we refer to as our Schedule 3s. We believe that the most relevant way to analyze our go-forward business and future results is on a combined basis, and like Darcy, I too will speak to these Schedule III results. Individual company performance is also provided in our press release and MD&A for interested readers. The completion of the Eastside Games acquisition in February effectively doubles lease revenues and just as importantly, significantly improves our profitability. While the Leaderly Studio publishes four games, on a combined basis, our two studios together now publish 10 games with several new games in the pipeline to be introduced later this year. Recently, we have announced a number of IP, publishing, and idle kit agreements, which we expect to drive future revenue growth in addition to our in-house initiatives. We are also working towards entering a definitive agreement for the acquisition of Truly Social. As Darcy mentioned, we delivered record revenue performance for Q4 on a combined LEAF and Eastside Games basis. On a combined basis, revenue more than doubled to $23 million this quarter versus Q4 last year of $11.3 million, and with a slight increase over the $22.8 million generated in Q3 2020. For the full year of 2020, revenue increased 116% to $80.5 million, increasing by $43 million as compared to revenue for 2019 of $37 million. A revenue mix was 79% in-app purchases and 21% from advertising revenue in 2020, which was consistent with the 2019 mix. Approximately 80% of our revenue is derived from North American users, with the remaining 20% from the rest of the world. The combined company recorded significant increases in net income and adjusted EBITDA during 2020 as compared to 2019. The increase is primarily driven by the 116% revenue growth during the year. Proforma adjusted EBITDA for the combined company was $11.2 million for 2020 as compared to $3.9 million in 2019. Key profitability and efficiency metrics that we will continue to report on are gross profit margin, which was 62% in 2020, and adjusted EBITDA margin, which was 14% in 2020, up from 10.5% in 2019. This EBITDA margin provides us with the growth capital to continue to invest in our business. From a balance sheet perspective, at December 31st, 2020, LEAF had $7 million in cash and no debt. We will provide additional cash flow information for the combined company at our upcoming first quarter 2021 earnings call, which is in just over two weeks. It has been a pleasure meeting with some of you during my short time with LEAF Mobile. And I look forward to connecting with many more investors and analysts in the weeks to come. I will now turn it back to Darcy for some closing remarks before Q&A.