East Side Games Group Inc.

Good afternoon, ladies and gentlemen, and welcome to the Eastside Games Group Q1 2026 earnings call. At this time, all lines are in listen-only mode. Following the presentation, we will conduct a question-and-answer session. If for any time during this call you require immediate assistance, please press bar zero for the operator. This call is being recorded on Thursday, May 14, 2026. And I would now like to turn the conference over to Mr. Jason Bailey. Thank you. Please go ahead.

Thank you. Welcome, everybody, to the Eastside Games Group Q1 2026 earnings call. I'm Jason Bailey, Board Chair and CEO of Eastside Games Group. Today, we will share highlights from the first quarter ended March 31st, 2026, and I'd like to remind you that certain statements made on this call are forward-looking within the means of applicable securities laws. This call includes references to non-GAAP measures, and please refer to our fourth quarter press release in our first quarter press release in MD&A for cautionary statements relating to 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. Additional materials can be found in the investor section of our website at www.eatsidegamesgroup.com under the financial information section. G1 2026 was focused on improving adjusted EBITDA and maintaining disciplined cash management across the business. During quarter, we significantly reduced user acquisition spend as part of a broader strategy to prioritize efficiency and preserve cash. We are now targeting a 30-day return on ad spend, which allows us to focus on acquiring the most profitable player cohorts while improving overall capital efficiency. At the same time, we remain very focused on cash generation and debt repayment, with the goal of eliminating our bank debt by the end of 2026. Overall, we believe these changes position the company well for a stronger and more disciplined remainder of 2026. I will now pass it over to Mr. Chan for some financial highlights.

Thank you, Jason. Today, we reported our results for the company's first quarter, ended March 31st, 2026. As a reminder, all these amounts are in Canadian dollars. Our financial results for the quarter reflect the decisive strategic shift we announced in Q4, which was prioritizing cash flow generation and profitability over top-line growth. Revenue for Q1 was $12.45 million, a decrease of 32% year-over-year, which is a direct result of the discipline cuts to our user acquisition spend. More importantly, we achieved adjusted EBITDA of $1.74 million, down 11.3% year-over-year, but driving a strong adjusted EBITDA margin of 14%. which is 32% improvement year over year and on pace with our guidance. The margin expansion shows that our pivot is taking effect in successfully creating a structurally leaner and more profitable business. The user metrics illustrate the outcome of focusing on quality over volume as well. We are taking a more disciplined 30-day approach on ad spend. While our daily active user count has decreased to 145,581 and average revenue per user was 95 cents, We maintained a strong, high-quality user base, particularly our Dow over miles fakeness rate, which increased to 28.1%, which is up 14.7% year-over-year, demonstrating the improved engagement and retention of the core audience as we cut inefficiencies in spending. From a capital structure perspective, as anticipated, we saw a temporary increase in debt in Q1-2026 to fund necessary one-time expenditures, including severance and litigation costs. However, we remain intensely focused on strengthening our balance sheet, and our definitive goal is to pay down our bank debt by the end of 2026. We have made strong progress in managing this process and are actively executing financial arrangements to support this goal, including a private placement of up to $3.6 million this month. Overall, Q1 was a disciplined quarter of execution, confirming that our strategic reset is yielding positive margin and profitability improvements. We are confident this foundation will ensure long-term, stable, and profitable growth for Eastside Gains Group. I will now pass it on to Mr. Wagner, our Chief Product Officer.

Thank you, Mr. Shin. As we focus on maximizing profitability and cash generation, I'll be highlighting our success in some key initiatives. Growing our direct-to-consumer revenue, leveraging our long-tail revenue from our live service portfolio, and the launch of our newest title, Trailer Park Doors Match. Direct-to-consumer, or D2C, revenue continues to climb quarter-over-quarter through our work in rolling out D2C options into more titles and A-B testing, UX improvements, and player incentives. I'm happy to report in Q1, we increased our revenue coming from D2C from 3% to 11% quarter-over-quarter. As a reminder, currently any revenue coming from D2C is not subject to the 30% platform fee, but rather a much lower 5-10% fee from our payment providers. the result is a significant increase in net profit. By rolling out successful A-B test results across the entire portfolio, we expect this number to further increase in Q2. In addition, we continue to work toward compliance with the recently announced program from Google, which will result in a reduction in its platform service fees from the historical 30% rate to a more flexible tiered structure ranging from 10% to 25%, depending on transaction type and billing model. All games are currently working on this and are on track to be compliant well in advance of the changes which will take effect beginning June 30th, 2026. The company expects the revised fee structure to contribute approximately half a million dollars in incremental annual profit. Our live service titles continue to generate stable revenue and profit for the company, and we're excited to announce that in March, we launched Trader Park Boys Match Worldwide. Early numbers are encouraging, with paid cohorts hitting above 40% D1 retention and ARPDAR averaging roughly 60 cents. The game builds on the long-term success of Trailer Park Boys Greasy Money, which has attracted more than 10 million players and remains profitable nearly a decade after launch. We believe Trailer Park Boys Match can benefit from that same loyal fan base, strong retention, and long-tail monetization potential. Overall, we believe these changes and new product launches position the company well for a stronger and more disciplined remainder of 2026. With that, I'll pass it to Ms. Lisa Sheck.

Thank you, Mr. Wagner. A major milestone in Q1 was transitioning RuPaul's Drag Race Superstar to our internal LiveOps team. Originally launched in November of 2021, the title continues to perform and cater to a very loyal audience base. and this move allows us to optimize operations and focus on the player experience. Operating the game directly, we're able to better leverage our shared expertise in idle game mechanics, streamline execution, and apply consistent best practices across all our games. This transition is already contributing to improved efficiency, faster iteration cycles, and a stronger overall player experience. while reinforcing our broader strategy of selectively owning more of the value chain where we see clear operational advantage. We also continue to invest in our next wave of growth, working with our trusted IT partners on two unannounced titles funded through operating cash flow. Both are tracking towards launches in late 2026 and early 2027, reinforcing our focus on disciplined partner-driven development and a strong learning long-term content pipeline. Back to you, Jason.

Please continue to stand by your conference for the game moment.

Thank you, everyone, and thanks to everyone for joining the call today. We will now take any questions from analysts or shareholders who wish to ask them.

Thank you, ladies and gentlemen. We will now begin the question and answer session. If you wish to ask a question, please press star followed by the one on your telephone keypad. and she do wish to cancel your request, please press star for ability. If you are using a speakerphone, please lift the handset before pressing any keys. Once again, that is star and 1 to ask a question. Once again, that is star and 1 to ask a question, and please lift your handset before pressing any keys. No question at this time. I will now hand the call back to Mr. Jason Beeney for any closing remarks.

Thanks for joining us, everyone. We appreciate it. You can always reach out to us directly. I'm Jason at eastsidegames.com. Feel free to reach out. Thank you for joining us today and happy to answer any questions anybody might have in the future. Thank you.

This concludes today's call. Thank you for participating in All This Connects.