East Side Games Group Inc.

Good day and thank you for standing by. Welcome to the LEAF Mobile first quarter 2021 earnings call. At this time, all participants are in the listen-only mode. After the speaker presentations, 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 0. I would now like to hand the conference over to your speaker today, Mr. Darcy Taylor. Thank you. Please go ahead.

Thank you, operator, and welcome everyone to LEAF's first quarter 2020 results call. On the call with me today is Jim McCallum, our Chief Financial Officer. On today's call, I will begin by sharing highlights on our performance from the first quarter 2020 In addition to giving an update on our strategy and key events that have taken place since we have reported on our Q4 full year 20 results on April 29th. 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 endless questions only. Before we get started, Please note that certain statements made on this call are forward-looking within the meaning of applicable securities law. This call includes references to non-GAAP measures. Please refer to our first quarter press release and MD&A for cautionary statements related to forward-looking information and reconciliations of non-GAAP measures to GAAP results. Additionally, materials can be found in the investor section of our website under financial information and an audio replay of this call will also be available on the website in the coming days in the same section if you have any questions please email ir leafmobile.io let me begin our call by highlighting that we delivered record q1 results and an excellent start to the year building on the momentum from the previous year and last quarter of 2020. We completed our transformational acquisition of each side's games and made significant progress executing on our three-pillar growth strategy in the first quarter of this year. By the end of 2021, we expect our game portfolios to have doubled from both in-house and idle kit partner game launches, including the highly anticipated mobile title from the Emmy Award-winning competition series, RuPaul's Drag Race. We also remain laser-focused on our three-pillar growth strategy of organic growth from games development and publishing via both IP-driven franchises and our own in-house developed franchises, distributed growth through our licensing of our software technology platform and game development framework, IdleKit, and acquired growth via mergers and acquisitions as a disciplined buyer of accretive revenue and or EBITDA-driven companies to increase our competitive advantage, scale, and unit economics. As mentioned, we've built upon a strong growth in 2020, and our strategy has delivered continued momentum into the first quarter of the year across all our key financial measures as follows. On a performant basis, LEAF generated record Q1 2020 revenue of $25.3 million, a 95% increase over the $13 million in revenue of Q1 2020. On a sequential basis, Q1 2020 revenue increased by $2.3 million over Q4 2020 revenue of $23 million, according to a 10% increase versus the previous quarter. Our adjusted EBITDA with $3 million in Q1 2021 compared to a loss of $1.4 million in Q1 2020. In the first quarter, we have been incredibly active across all of our strategic growth pillars to fuel future returns. We have announced game development and publishing agreements for a multi-year partnership with Worldwide Productions for the exclusive mobile gaming rights to the Emmy Award-winning competition series, RuPaul's Drag Race, hosted by the global icon in the LGBTQ plus community, RuPaul. We've expanded our Idlekit technology platform partnerships to further build our distributed growth model with the announcement of two Idlekit partnerships with Kano Applications and Nightgarden Studios for a total of six new games of which we will publish the first of which will launch this year. We've also innovated within our Idle Kit platform with the introduction of NFT Kit to allow the ability to offer non-fungible tokens across our select games in our portfolio and to offer players true ownership over in-game rewards and increase engagement. Additionally, our acquired growth and M&A pillar saw us complete the $150 million acquisition of Canada's largest independent studio, Eastside Games, as I mentioned previously, as well as enter into a non-binding letter of intent to acquire Truly Social Games for up to $37 million linked to earn-out performance criteria. A privately held Vancouver-headquartered mobile game developer and IdolKit partner with studios in Portland, Oregon, and Minx, Belarus. further capitalizing on the opportunity to increase our competitive advantage, scale, and unit economics. We're also pleased to have graduated to the TSX from the TSX Venture Exchange in early February to improve investor accessibility. Subsequent to March 31st, we've also announced a number of new idle kit and publishing partnerships, including Mighty Kingdom Games of Australia, Bigfoot Gaming out of Argentina, Vancouver-based Tiny Rex, and U.S.-based Game Masons, and have also partnered with WAX, the Worldwide Asset Exchange, known as the king of NFTs, as the world's leading decentralized wallet on the blockchain to support our NFT game, Bud Farm Nifty Stash, which we launched on 4.20. Leaf has been executing against its strategy and is uniquely positioned for growth. And I'm looking forward to an incredible year for 2021. Now I'll turn over the call to LEAP Mobile CFO, Jim McCallum, to further discuss our first quarter results. Now over to Jim.

Thank you, Darcy. I would like to start by giving a brief overview of the acquisition of Eastside Gains and the resulting accounting treatment. Because Eastside Games shareholders own 58% of the combined company, Eastside Games is considered the continuing company with LEAF leaderly results included for the period from February 5th to March 31st. The comparative financials for 2020 are also Eastside Games, which included their ownership of leaderly from January 1st to April 17th of 2020. In our MD&A and our press release, we have provided detailed breakdowns of revenue, net income, and adjusted EBITDA for the company, as reported under IFRS, which we refer to as our Schedule 1s, and pro forma financial information, which includes financial results for the company, assuming that the acquisition occurred on January 1st, 2021, our Schedule 2s. The completion of the Eastside Games acquisition in February is a major milestone for the company. B-Site Games has been developing and monetizing mobile games for over 10 years and has established IdleKit, a software platform for game development. As Darcy highlighted, we delivered record revenue performance for Q1 on a pro forma basis. Nearly doubled to $25.3 million versus Q1 2020 of $13 million. and Q4 revenue of 25.3 million in Q1 2021 was 10% higher than the 23 million recorded in Q4 2020. Approximately 70% of our revenue is generated in the U.S. The Canadian dollar has increased 6% against the U.S. dollar in Q1 2021 as compared to Q1 2020, which resulted in a 4% decrease to our revenue. This Canadian dollar strength has continued into Q2. On a pro forma basis, we recorded significant increases in net income and adjusted EBITDA during Q1 2021 as compared to Q1 2020. The increase is primarily driven by the strong revenue growth during the year. Pro forma adjusted EBITDA for the combined company was 3 million for Q1 2021 as compared to negative 1.4 million in Q1 2020. Key profitability and efficiency metrics to highlight are gross profit percentage, which was 62% in Q1 2021, which was consistent with 2020, and adjusted EBITDA margin was 3 million during Q1 2021, representing a 12% adjusted EBITDA margin, down from the 14% average realized during 2020. On a sequential basis, our adjusted EBITDA was down from 5.2 million in Q4 2020. Approximately $1.8 million of this is due to the recognition of full year 2020 research and development tax credits being recorded in the fourth quarter of 2020. From a balance sheet perspective, at March 31st, 2021, LEAF had $10 million in cash with no debt and access to $13 million in credit facilities. The proceeds from the share issuance in February were used for the purchase of Eastside Games. And now I will turn it back over to Darcy for some closing remarks before Q&A.