OverActive Media Corp.

Hey everyone, and welcome to Overactive Media's 4th quarter and full year 2021 conference call. At this time, participants are in a listen-only mode. A question and answer session will follow management's remarks. This conference call is being recorded and a replay of today's call will be available on the Investor Relations section of Overactive Media's website and will remain posted there for the next 30 days. I will now hand the call over to Mr. Babik Pedram. Investor Relations for Overactive Media for introductions and the reading of the Safe Harbor Statement. Please go ahead, sir.

Thank you, Sylvie. Good morning, everyone, and welcome to Overactive Media's fourth quarter in 2021 year-end earnings conference call. A copy of the company's earnings press release is available on the Investor Relations section of our website at overactivemedia.com. With us on today's call are Chris Overholtz, Overactive Media's President and Chief Executive Officer, and and Rikesh Shah, Chief Financial Officer. Today, we'll review the highlights and financial results for the fourth quarter and full year 2021, as well as recent developments. Please note that, unless otherwise specified, all amounts mentioned on today's call are in Canadian dollars. I would also like to remind everyone that today's call will contain forward-looking statements. made within the meaning of applicable security laws, including statements regarding the plans, intentions, beliefs, and current expectations of overactive media with respect to future business activities and operating performance. Words such as may, would, could, should, will, intend, plan, anticipate, believe, estimate, expect, and variations of such words and similar expressions are intended to identify forward-looking statements and include information regarding the anticipated financial and operating results of overactive media in the future. These statements are not based on historical facts, but instead overactive media's management expectations, estimates, or projections concerning future results or events based on the opinions and assumptions and estimates of management considered reasonable at the date of statements are made. The forward-looking statements involve known and unknown risks and are based upon a number of assumptions and estimates, which are inherently subject to significant uncertainty and contingencies, many of which are beyond companies' control. Actual results may differ materially from those expressed or implied by such forward-looking statements. Factors that could cause actual results to differ materially include, but are not limited to, the risk factors described in the company's most recent filing with CDAR. Except to the extent required by law, overactive media assumes no obligation to update statements as circumstances change. Now at this time, it is my pleasure to introduce Chris Overholz, President and CEO of Overactive Media. Chris, please go ahead.

Thanks Patrick and good morning everyone. It's great to have you with us today as we share our fourth quarter and year-end 21 earnings report. This marks our first quarterly earnings call as a public company and so gives Rick and I an opportunity not only to share our financial results, to give you a better understanding of how we think about our broader industry, how we see it evolving to where we are today, and Overactive Media's position within that broader ecosystem. We got a solid year and made significant progress in a number of areas, and we remain extremely excited about the company we're building, its prospects for leadership in our industry, and its corresponding financial success over time. As this is our first earnings call, and for the benefit of context, I'd like to take just a few moments to tell you who we are, highlight a few of our accomplishments on our journey so far, and provide some insight into how we're positioning our business for the future. Following that, our Chief Financial Officer, Ritesh Shah, will review our financial results. We'll then open the call for questions to give you some additional color and perspective. But before I get started, I'd like to offer a particular thank you to all of those investors who joined us early and who continue to share our vision for building a 21st century sports media and entertainment company. As traditional sports franchises have shown us over years, this is not a sprint. In 2003, the Chelsea Football Club was purchased for $233 million. Most expect they'll be sold in the months ahead for something north of $3 billion. We'd like to thank or we'd like to think, rather, we have our arms around several of these types of opportunities in our business with the esport franchises that we hold. Others in professional sport, like Robert Kraft of the New England Patriots and Peter Gruber of the LA Dodgers, feel the same and sit at the Board of Governors table with us in the leagues that we represent. We're very excited to be on this journey with all of you, and thank you for your early commitment and the long view that we clearly share to this industry and our companies. So we've got some ground to cover this morning, so let's get going. To understand where we're going, it's important to understand where we began. In 2018, it was our thesis that times were changing and that a new generation of fans were looking for more ways to engage and connect with each other and their shared interests in meaningful and decidedly different ways. Looking at the landscape, it was clear that this new generation attuned out traditional media channels and were starting to make different sports, media, and entertainment choices. They were connecting in new ways through gaming, streaming mediums, and of course on social media platforms. And they were also increasingly turning to eSports to watch the best players in the world compete in their favorite games at the highest levels. Viewership was exploding. We looked at the emerging esports landscape and formed a premise about how to best capitalize on this nascent opportunity with three fundamental beliefs. First, that partnering directly with the publishers that own the game IP would provide the best monetization opportunities for team owners. Second, that in due course, greater viewership would lead to growing revenue share payments from those league partners and game publishers that developed a franchise league model akin to professional sports leagues as we know them today. And finally, that improving league economics over time, alongside the scarcity of these unique team assets, would result in asset appreciation on the balance sheet for those who acquire teams in franchise leagues. And so from the earliest days of the company, we've worked to build a strong and scalable business built on these fundamentals. We acquired franchises in the biggest and best publisher-owned leagues. We recruited industry-leading sports media and brand marketing executives to lead the charge every day. And we set out to attract the best talent in the business. We built out a model for our business that we believed could scale globally and soon thereafter have established operations in Toronto, Madrid, and Berlin. And so today, as we like to say, We're building a 21st century sports media and entertainment company in the tradition of Madison Square Garden or maybe sports and entertainment, but for today's generation of fans. So who is our audience and why is this segment of the market so important to our business and our future? Today's generation of fans are generally 18 to 28 years old, either in fact or like me, in spirit. They are digitally native, media-savvy, global in their orientation, and disconnected from traditional media or sports. They can be highly cynical and skeptical at times, since they've grown up in an environment where algorithms and pervasively looking in to invade their privacy or to sell them something or worse from their perspective to tell them how to think or what to believe. Our business model is to connect authentically with this generation by creating a meaningful relationship with them. We validate them and their interests by showing them through our products and services and actions that they matter. We are the anti-algorithm. Rather than a faceless machine, our fans see people and players that they recognize and smiling faces at our events, along with content across our media channels that speaks to them. This is our focus and what we do every day. Remaining authentic in the products and services that we provide is top of mind for everyone at Overactive Media. We are relatable, we are authentic, and we are valuable in this context, both to our fans and to those that are seeking to connect to our fans. Our sponsors and partners recognize that machine algorithms are not generating the goodwill they need. In fact, they usually do the opposite. By partnering with us, And in sponsoring our teams, players, events, and content, brands become partners with us and our leagues in connecting to this key demographic where they are to bring enjoyment and foster passion in a curated and professional manner. Our premium roster of marketing partners, both traditional sponsors and those endemic to gaming, are illustrations of this point. Brands are highly focused on reaching Gen Z consumers as they form consumption behaviors and preferences. The gaming and esports ecosystem provide an opportunity for authentic engagement on platforms where these communities live. 2021 was a breakout year for Overactive Media. Our vision for this organization and the fundamental business thesis that supports our proposition is becoming a reality. In a few moments, Rick will share some of the financial highlights that we believe serve as a strong indication that we are on the right track and that the industry is manifesting as we had imagined. And we're only really just getting started. But before we get to the particulars, let me take a moment to highlight only a few of the significant milestones and key accomplishments achieved by this passionate and dynamic group of industry leaders. As mentioned, we think of our business today in three key verticals, sports, media, and entertainment. The sports vertical forms the bulk of our business at this stage in our development, and during the year we benefited from our strategic partnerships with two of the largest gaming publishers in the world, Riot Games and Activision Blizzard. We own franchises in every franchise league offered by Riot and Activision, and just last week we announced our entry into Valorant. More on that exciting step in a moment. Our esports franchise team holdings are obviously central to this strategy. Indeed, this is sport for today's generation. I'm so proud of what we've accomplished in 2021. Let me share just a few highlights. The Mad Lions, or the Madrid Lions, is our franchise team operating in the League of Legends European Championship, or LEC for short. We market this team with a Spanish flair and position our brand as a lifestyle choice for passionate English and Spanish-speaking esports fans around the world. Armada Lions won historic back-to-back League of Legends European Championships in 2021. This is the first expansion team since the launch of the LAC to win a championship, and we did it twice. For more than 25 years, I've been personally seeking my first championship ring, and in 2021, the Mad Lions delivered for me and all of our fans a moment and a memory none of us will soon forget. The same team also advanced to the semifinals of the League of Legends Mid-Season Invitational, a global tournament of top teams, and finally, in the fall this past year, and for the third year in a row, went all the way to Worlds, reaching the quarterfinal of the 2021 League of Legends World Championship, the Super Bowl of Esports. It was during this time that our MAD Lions reached peak concurrent viewership of over two and a quarter million, the highest among all Western-based teams last year. By the end of the year, Mad Lions has aggregated over 56 million total viewing hours watched in 2021, and they've grown to become the second most watched esport team in the Western world and the sixth most viewed in the world over the course of the year. These are simply incredible accomplishments for a team still new on this global scene and just three years young. And our Toronto-based teams were also notable in a collection of ways, both on the stage and in the boardroom. Our Call of Duty League's Toronto Ultra secured close to 500,000 new followers and a 454% year-over-year growth across its respective social media channels. In just two seasons, Toronto Ultra has become the most followed team in the Call of Duty League on TikTok and the second most followed team across all other social media channels. Toronto Ultra was named Property of the Year at the 2021 Sponsorship Marketing Awards here in Canada, a first for an esport property. Toronto Ultra joined other notable winners over the years like the Toronto Raptors, Toronto FC, the National Hockey League, and the Canadian Olympic Committee. And on the stage, these guys were formidable, winning Call of Duty Major 2 and appearing in the Call of Duty League Championship Grand Final, finishing second. And overall, in just its second full season, the Call of Duty League's had viewership records in 2021, and 2022 is already shaping up to continue this arc. Regarding the Overwatch League, the Toronto Defiant completed its best season to date in 2021, qualifying for the World Championship Play-In Tournament in North America. Overwatch League showed year-over-year games in regular season viewership in 21 and hosted the most watched Overwatch League grand final in the history, according to Forbes. It's important to note that Overwatch League is rebasing the game to Overwatch 2 for the 2022 season. Overwatch 2 is the highly anticipated sequel to Overwatch and will be launching in open beta later this month. And finally, as I mentioned earlier, Overactive has recently entered the Valorant ecosystem. Published by Riot Games, Valorant is an exciting new entrance into the first-person shooter space that we believe is quickly becoming one of the biggest esports in the world. Riot has not moved into the franchising model with Valorant as yet, but looking forward, we believe that franchising is a strong possibility. We want to be there and active when it happens. As a result, we've taken the decision to exit the game of Counter-Strike and turn our attention to what we believe is a game with better audience and financial prospects for growth for team organizations. We're looking forward to sharing more with you in the weeks and months ahead as we formally announce our Valorant plans, including team, league, and of course, our branding intentions. Now let's shift to the media vertical, where we deliver content, social media influencers, players, and promotional campaigns that we design and deliver to our partners through our media distribution channels. We are a media company for today's generation of fans, bringing connection and building relationships that are unique, real, and tangible, leveraging our team brands for authentic connection. We believe that this is a great place to be, and it is validated by our growth, reach, and now well-established marketing partnerships business. As Rick will share in more detail in just a moment, OverActive Media delivered strong year-over-year revenue growth for both the fourth quarter and full year of 2021. This growing and increasingly predictable revenue stream is anchored to a significant extent by our innovative media content delivery for our marketing partners. A growing roster, which this past year included such blue chip brands as Bell, Canon, Imagine Bank, Kappa, Scuf Gaming, Skip the Dishes, TD Bank, and Universal Music Canada. These seminal partners were further bolstered in 2021 by new brands that signed with us during the year, including AOC, Bud Light, Kraft Frozen Foods, Porte Ingles, Epos, GLS, Goico, Jack Links, M&P, Razor, Red Bull, Seat, and Warner Music Spain. These key additions, in part, helped to drive 109% year-over-year increase in business operations revenue. We are very excited by the progress we're making in this area of our business, and I look forward to expanding on the role and the impact that media and marketing partnerships vertical has on our business over the next few quarters. And finally, our focus on developing our entertainment vertical has never been more determined, underscored by our vision to build a world-leading performance venue that will in many ways shape our audience growth and engagement our first-party data strategy, and over some measure of time, we believe, our reach to the metaverse. Over the last year, we've produced live and digital live events for game publishers, marketing partners, and fans all over the world. We hosted numerous events, including six Call of Duty Warzone tournaments, two Red Bull events, along with live broadcast events for other esports teams and professional sport organizations. In addition, we opened our Red Bull Gaming Studio in our downtown Toronto facility, where our professional teams played online matches and we produced live broadcasts. And there'll be more to come in 2022. With the easing of pandemic restrictions, we are poised to host our first live in-person Call of Duty League and Overwatch League major events in June and September, respectively. These events will feature the highest expression of our Toronto Ultra and Toronto Defy brands, and we expect to be key drivers to our audience growth and engagement in Canada and a lever to growth for our marketing partnerships division. But the biggest news in the entertainment space is of our intention to build a performance venue that will all at once allow us to compete for the biggest music and entertainment acts that lands in Toronto marketplace, while also serving to create a permanent home for our two Toronto-based esports franchises and establish Toronto as a global hub for esports meetings and events conferences, and championships. In February of last year, we announced our intention to build a new 7,000-seat performance venue in Toronto that will serve as a key pillar for OAM in the entertainment vertical. This state-of-the-art theater-style entertainment venue is ultimately expected to play host to as many as 180 to 200 events per year, creating opportunities within the area for diverse employment and economic activities. The venue is designed to be a destination at its core, driven primarily by premium music and entertainment bookings, in addition to major city-wide conventions, corporate events, and product launches, award shows, and of course, a full slate of esport events increasing over time. It will be home for our fans, and a venue experience that we expect will redefine Toronto as a global music and entertainment destination. All of these factors contributed to our growth in 2021, and we expect they will continue to do so in 2022 and beyond. Earlier, I described our thesis and referenced the fact that we believe that when partnered with key publishers, we would realize the best opportunity for monetization for team owners. We still believe this today, and in fact, we believe our supposition is becoming a reality. Our business model offers a tremendous amount of operating leverage when delivered at scale, driven by the league revenue share model we are invested in and the strength of our media content and strong marketing partnership revenue focus. To illustrate this point, in 2021, of the $5.8 million increase we recorded in total revenues, $3.8 million, or approximately 65%, contributed directly to an improvement in our adjusted EBITDA. Simply stated, based on all we know and have learned over these past three years, we believe our company provides the best business model for scalability compared to other esport organizations. In addition, one of our original beliefs was that esports franchises would increase in value over time due to scarcity economics, as we typically see in traditional sport over many years now. And in 2021, we saw direct evidence of this with the first sale in the secondary market of an LEC franchise for a reported price of 26.5 million euro, or 39 million Canadian. This secondary sale reflects a potential 231% premium to Overactive's purchase price of 8 million euro, or 12 million Canadian, in December 2018. Please note that we carry our team assets at cost on our balance sheets. so the increase in potential market value is not reflected in our number. In closing, we've accomplished a great deal since we started this journey in 2018. In less than a handful of years, we've already proven the viability of our business thesis and strategy and operating model, demonstrated by our substantial revenue growth. We continue to focus on generating high-quality, long-term, and recurring revenue streams that provide strong and we believe stable operating leverage and scalability with time. We are using this momentum to continue to build a global company that will redefine the future of sports, media, and entertainment. I look forward to connecting with you throughout the year and to update you along the way as we continue to build on Overactive Media's progress against our key strategic pillars. This concludes my opening remarks. Now I'll pass on to Rakesh, who will provide a more detailed review of our financial results. Rakesh?