East Side Games Group Inc.

ladies and gentlemen thank you for standing by and welcome to the east side gains group formerly leaf mobile inc first quarter 2022 results conference call at this time all participants are in a listen only mode after the speaker's presentation there will be a 30-minute question and answer session for analysts only i would now like to hand the conference over to your speaker today mr jason bailey board chair, CEO, and founder of Eastside Games Group. Please go ahead.

Thanks, operator, and welcome everyone to Eastside Games Group's first quarter 2022 results call. On the call today with me is Jim McCallum, our chief financial officer. I'll begin by sharing highlights from our first quarter ended March 31st, 2022. I will be also giving an update on our strategy and key events that have taken place since we last reported on March 10th, 2022. Before we get started, please note, on December 6th, Leap Mobile began operating under the trade name Eastside Games Group and announced its intention to change its name and will seek shareholder approval at the AGM next week. Effective December 8th, 2021, shares started trading under the ticker EAGR on the Toronto Stock Exchange. And effective December 10th, shares started trading on the OTCQB under the new symbol EAGRF. Additionally, certain statements made on this call are forward-looking with the meaning of applicable to securities laws. This call includes references to non-GAAP measures. Please refer to our first quarter press release and MD&A precautionary statements relating to the forward-looking information and reconciliations of non-GAAP measures to GAAP results. References to all figures are in Canadian dollars on an IFRS basis unless otherwise noted. ESAC Games Group are pleased to report yet another record quarter. We did $35.6 million in top-line revenue and the largest quarter player audience yet. We captured a full quarter of RuPaul's Drag Race superstar revenue, and we started to build an audience for our newly launched title, The Office Somehow We Manage. The Punkle Pop Blitz game acquisition also added to our roster of successful titles in Q1. The revenue result is a 55% increase year-over-year and a 24% increase quarter-over-quarter. Monthly active users was also at a record high, clocking in at an average of $1.8 million in quarter one. This was primarily driven by new game launches and the marketing investments in them. Adjusted EBITDA in quarter one was $3 million. Our mature titles, such as Trailer Park Boys Greasy Money, Bud Farm Idle Tycoon, and others continue to drive EBITDA, which allows us to grow aggressively while still being cash flow positive. Strong EBITDA was assisted by some one-time events from several deals such as Netflix and Applevin. We remain committed to our goal of maximizing growth while maintaining a strong balance sheet. Cash on hand at the end of the quarter was $6.1 million. We also have $15 million in available credits. In quarter one, we fully paid the continued compensation resulting from the achievement of hitting over $100 million in revenue in our first year as a TSX-listed company. Our current debt is $1.9 million. Given our strong balance sheet, we are fully funded to achieve significant organic growth with existing liquidity available to the company and without the access to equity capital markets. Last quarter, we introduced operating metrics that we believe best outline the collective health of our business. daily active users, monthly active users, and average revenue per daily active user. DAO, MAO, and ARPDO. Full definitions can be found in our MD&A. We finished the first quarter with a record DAO of 407K, up 47% year-over-year, and an average MAO of 1.75 million, up 74% year-over-year. First quarter ARPDO was 94 cents, an increase of four cents over last quarter. GameKit is our development framework which allows us and our third-party development partners to build games faster with less capital investment and with a higher probability of success. With GameKit, we enable creators to successfully deliver memorable mobile gaming experiences that engage players every day. RuPaul's Drag Race Superstar continued to scale effectively despite the introduction of a software bug in March which took several weeks to properly address and resolve. Significant stability improvements have been made as well as additional processes which will help our entire portfolio and future titles. The Office, somehow we manage, debuted worldwide at the end of January. The Office is following a similar trajectory as RuPaul's Drag Race Superstar on iOS and marketing spend on Android platform is ramping up for Q2. Our recently announced Super Marquee titles, Doctor Who, our first game with BBC, and Star Trek Lower Decks, in partnership with CBS Viacom, are scheduled to worldwide launch in second half of 2022. We acquired the Funko Pop Blitz game in January. The acquisition of Funko Pop Blitz is accretive in three ways. Additional revenue, access to a deep set of IP relationships, and an added genre to the game kit in Blitz-style games. We are actively scaling partnerships with developers all over the world. B-side Games Group now has signed agreements with developers in Brazil, Vietnam, Australia, Finland, and Argentina, as well as Canada and the U.S. Mighty Kingdom, No Power Up, and Zaibatsu are three samples of newly signed and expanded partnerships in Q1. Possibly the most exciting news of all is our Netflix announcement. Eastside Games' Dragon App mobile game will be available to play exclusively on Netflix in May. This is a testament to the strength of our game platform. We're being recognized by leaders in technology as an ideal solution for iterative game deployment. This game is published with no monetization hooks, no ads, and no in-app purchases. Our upfront compensation for this contributed to our strong EBITDA in Q1. We see Netflix revolutionizing the game distribution platform as it revolutionized the way we consume TVs and movies. We're excited to be part of the early entry into the $100 billion a year mobile games industry. Now I'll turn the call over to Jim to discuss our first quarter results.

Thank you, Jason. Q1 was a strong quarter on all fronts, revenue, profitability, and cash flow. As Jason highlighted, we delivered record revenue in Q1 of $35.6 million. This is a 55% increase on the prior year and a 41% increase on a pro forma basis. User acquisition costs were significantly higher than the prior year quarter as a result of the launches of RuPaul and the Office Games. However, user acquisition costs were consistent with Q4, but lower as a percentage of revenue. For Q1, the company recorded net income of $0.5 million due to strong operating performance partially offset by non-cash amortization, accretion, and stock-based compensation. This compares to net income of $1.3 million in the prior year quarter, which benefited from a $5 million gain due to the Eastside gains acquisition. De-profitability and efficiency metrics to highlight are gross profit percentage was 69% in Q1 2022, an increase over prior quarters, primarily due to the higher revenue and the license revenue that Jason highlighted. Adjusted EBITDA was $3 million during Q1 2022, representing an 8% adjusted EBITDA margin. From a balance sheet perspective, at March 31, 2022, Eastside Games Group had $6.2 million in cash. Including the $1.9 million drawn against the credit lines, net cash was $4.3 million, compared to $9.2 million at December 31, 2021. The decrease in cash of $4.9 million resulted from the $10 million earn out pay in full in March offset by cash generated from operations of $5 million during Q1 2022. This was our strongest cash flow from operations quarter as a TSX listed company. During Q1 2022, the company expanded its bank credit facility from $3.5 million to $7.1 million increasing its overall credit facilities to 17.1 million. At March 31st, 2022, the company had undrawn credit facilities of 15.2 million compared to 13.5 million at December 31st, 2021. The year is off to a strong start, and we look forward to the Star Trek and Doctor Who game launches later this year. And now I will turn the call back to Jason for some closing remarks before Q&A.