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spk09: Good day, everyone, and welcome to the Overactive Media's first quarter 2022 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 would now like to hand the conference call over to Mr. Babak Pedram, Investor Relations for Overactive Media, for introductions and the reading of the safe favor statement. Please go ahead, sir.
spk03: Thanks very much, and good morning, everyone. Welcome to Overactive Media's first quarter 2022 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 Overholt, Overactive Media's President and Chief Executive Officer, and Rakesh Shah, Chief Financial Officer. Today, we'll review the highlights and financial results for the first quarter of 2022, as well as recent developments. Please note that unless otherwise specified, all amounts mentioned on today's call are in Canadian dollars. Before we begin, I will read our cautionary note regarding forward-looking information. Certain information to be discussed during this call contains forward-looking statements within the meaning of applicable security laws, including, among others, statements concerning the company's 2022 objectives, the company's strategy to achieve those objectives, as well as statements with respect to management's belief, plans, estimates, and intentions, and similar statements concerning anticipated future events, results, circumstances, performance, or expectations that are not historical facts. Such overlooking statements reflect management's current beliefs and are based on information currently available to management and is subject to a number of significant risks and uncertainties that could cause actual results to differ materially from those anticipated. Also, our commentary today will include adjusted financial measures which are non-GAAP measures. These should be considered as a supplement to and not as a substitute for GAAP financial measures. Reconciliations between the two can be found in our MD&A, which is available on CDAR.com and our website. Now, at this time, it is my pleasure to introduce Chris Overholt, President and CEO of Overactive Media, to go over the company's operational highlights. Chris, please go ahead.
spk01: Thanks, Patrick, and good morning, everyone. It's great to have all of you with us today as we share our first quarter 2022 earnings report. As we only just recently held our last conference call a little over three weeks ago, today's call will be naturally brief. As I speak to you this morning, I can say with confidence that we are executing our plan for the fiscal year 2022 with precision and as we predicted. Our marketing partnerships business remains strong, our leagues are underway, our teams are progressing nicely within the season, and we continue to enjoy the momentum we witnessed as we wrapped up in 2021. Our focus remains on our core business and executing the fundamentals central to our strategy. First, build strong and enduring relationships with our game publisher partners, driving greater viewership and increased revenue share. Second, leveraging our relationship and authentic connection to the unique generational audience that love these sports to drive marketing partnerships at scale. And finally, focus our investments on these closed franchise leagues and the scarcity opportunity of the franchise model creating significant market appreciation of these core assets over time. These factors remain the key drivers of our business today and are central to our continued growth. As Rakesh will share in more detail in a moment, our business is off to a solid start in Q1. Our total revenue has grown by 62% when compared to the same period last year, driven primarily by our strategic marketing partnerships business. In particular, the addition of Zilliqa, a blockchain solutions provider with a focus on gaming strategies for the metaverse, represents not only a financial boon for the company, but a key strategic partner for Overactive Media as we seek to establish our brands and our broader business offering in this brave new world. Zilliqa will deliver us an opportunity to deliver enhanced fan partner engagement experiences in the digital realm, while tapping into a new audience in the metaverse. Together, we're unlocking the future potential and power of community engagement as the gaming, esports, and entertainment industry evolves. With respect to our team's business, we're focused on talent identification and coach development. As an organization, our goal is to build and deliver consistently top performing teams that compete at the highest levels. And as such, we made some strategic roster changes that will not only improve our overall performance on the stage, but also offer an improved bottom line when compared to Q1 of last year. And of course, looking ahead, we're incredibly excited to bring Canada's first ever Call of Duty League tournament to Canada. The Toronto Ultra Major 3 tournament, powered by Bell, is taking place from June 2nd to 5th at the Matinee Athletic Centre. Formerly known as Maple Leaf Gardens, this historic building will pioneer the new generation of sports with a major esports tournament featuring the best Call of Duty players in the world competing for half a million dollars U.S. in prize money. Major III is expected to attract esports, gaming, sports and entertainment fans alike to an action-packed four-day festival, furthering the city's position as a global leader and in the industry. And so, our momentum continues. We remain keenly focused on our vision for building a sports, media, and entertainment company for today's generation of fans. Thanks once again for joining us today and at this time I'll pass the call on to Rakesh who will provide a more detailed review of our financial results.
spk04: Thank you Chris and good morning everyone. Today I'll review our first quarter 2022 financial results. Please note the financial information we discussed today is prepared in accordance with international financial reporting standards and is in Canadian dollars unless otherwise indicated. For the first quarter of 2022, we reported total revenue of 2.1 million, a 62% year-over-year increase driven primarily by higher sponsorship revenue. We also expect OAM seasonality pattern for league share to continue, resulting in revenues under team operations in the third and fourth quarters of 2022. In addition, for the first quarter of 2022, we reported an adjusted EBITDA loss of approximately $2.1 million. That's a 15% improvement compared to an adjusted EBITDA loss of approximately $2.4 million during the comparative prior year period. The improvement is attributable to higher other income driven from team performance activities, as well as the growth we previously noted in the sponsorship revenue. which helped offset increases in the operating costs, including the accrual of bonuses of 0.5 million in the quarter, which is a change from where these costs were accrued in 2021, which was in the fourth quarter. We started off the year strong and looked to capitalize on our opportunities leading into our inaugural live event for both the Toronto Ultra and Define in Q2 and Q3. As I mentioned just last month, our ability to generate long-term recurring revenues combined with our capital resources will help to support a continued growth as we continue to execute our strategic plan. Additionally, our cash position will give us added flexibility to pursue targeted strategic acquisition opportunities in line with our long-term goals. These will increase our industry presence and capabilities as well as enhance our already considerable growth trajectory. We are extremely excited for the year as well as the future and look forward to sharing the progress with you in the coming days and next quarter. That concludes our prepared remarks. I would like to open the call for questions. Operator, please go ahead.
spk09: Thank you. Ladies and gentlemen, we will now begin the question and answer session. If you have a question, please press star followed by one on your touchtone phone. You will hear a three-tone prompt acknowledging your request and your questions will be pulled in the order they are received. Should you wish to decline from the polling process, please press star followed by two. And if you're using a speakerphone, please lift your handset before pressing any keys. One moment for your first question. Your first question comes from Tawaki Dejima with TD Securities. Please go ahead.
spk08: Good morning, everyone. Great results. I had a quick question on Valorant. I know it hasn't been too long since our last earnings call, but there's been some media reports that Riot has reached out to certain esports organizations, and so an update on that process would be greatly appreciated.
spk01: Hey, good morning, Tawaki. Yeah, Valorant, as I think we mentioned last time, is of interest to us. And you might note that, again, we secured a roster earlier this year, and that team started competition, I think, in just the last several weeks to some measure of success, I believe. So we're pleased with that step that we've taken. Yeah, we've been in regular conversations with Riot. I think they've announced publicly their intention to, to continue to grow Valorant community and have made some indication that they'll be looking to maybe reestablish the competitive landscape over the next six or eight months, and we're certainly going to be in continued discussion with Ry about all of that. So we're excited about the potential of Valorant, and we're going to wait and see how it takes shape, but we're at least curious.
spk08: And is there any timeline on when teams will be announced and what the league formats will be, or is that still up in the air?
spk01: I can't speak for Riot, and I don't remember that I've read anything that would indicate their timeline as yet, so I'll have to punt on that, I'm afraid.
spk08: Good. And switching over to the two leagues that you are in, CDL, which I'm very... promising, looking forward to the event in June, as well as OWL. But in terms of running these live events, what does the cadence of live event OpEx look like? I think in the past years, live events were in there, but it's not the exact same as running a real live event, an in-person live event. CDL is going to be held in Q2. I think OWL, an event might be coming in Q3. And so just kind of, can you level set us on what kind of live event OVEX run rate we should be expecting in the year coming forward?
spk01: Yeah, I think your question was cadence. I think that's the word I may have missed. But yeah, so as you point out, we're hosting major three this year for the Call of Duty event. season, and that'll be coming up June 2nd to 5th, as I mentioned. We are intending to also play host to, I think, the third tournament in the season related to Overwatch as well, and that, we expect, is in September. Both will be held at Mattamy, and we're excited about that venue. We love what it represents, kind of new meets old, and certainly the The potential for the experience for both our fans and our marketing partners, I think, is going to be tremendous in that space. So the team's been working hard on all of that, and we're excited about the progress remaining with ticket sales and, again, with marketing partnership engagement broadly. As to the cadence in future years, I think we'll have to wait and see how this takes shape. Obviously, it'll depend on how these leagues grow and expand in the coming years. And the frequency of opportunity for overactive media will be in large part driven by that. But I think two things are true. First of all, the reputation of this organization's ability to deliver for its partners is well established. We are frequently called upon by Activision Blizzard to play host to various online opportunities, our live event production capabilities, And again, just this team's ability to execute at a high level is well known. And we really believe in the live event experience for our fans and for our marketing partners is central to our business thesis and strategy. And so we'll be looking to take more of those types of opportunities on as circumstances provide.
spk02: I'll pass the line. Thanks for the answer, guys. Thanks, Tawaki.
spk09: Your next question comes from David McFadden with Cormark Securities. Please go ahead.
spk06: Oh, yeah. Hi. Yeah, a couple questions. First of all, just on the new sponsors that you announced today, I was wondering if you can give us a couple more details about them, and are they multi-year sponsorship deals or just one-year deals?
spk01: Well, first of all, good morning, David. Nice to hear your voice. And Zilliqa is actually not newly announced this morning. I think the press release on Zilliqa was early March, to my recollection, but it was significant enough for us both strategically and financially that we felt compelled to make sure that in case anyone missed it, we were able to highlight it. So I can tell you that the Zilliqa deal is our biggest deal yet for Mad Lion's brand and could be characterized fairly as a multi-year, multi-million dollar opportunity for overactive media. This is a partnership where we spent quite a bit of time looking in on the space, looking at various players. There were many interested in our Madeline's position in Europe. We settled on Zilliqa because we were optimistic about their plans and their platform. They have a very particular strategy for gaming that is not unique to them, but we think of them as a leader in that context. Again, this deal is limited to our Mad Lions brand at the moment. And because of the way we structure our business and our geographical approach to partnerships, that makes sense for now. But what we're excited about in this space is, again, identifying partners that will have a strategic pillar around gaming, which Zilliqa certainly does. And we think there's an opportunity to scale similarly here in North America around our core teams as well. We'll continue to work on that opportunity, but obviously this is a big step. There's lots happening in the discussion around the metaverse. There's going to be lots of opportunity, we believe, for organizations like ours in this space, and Zilliqa positions us well around our Mad Lions brand to take a big, bold step. So pretty exciting time for us, and I'm glad you brought it up because we were looking for the opportunity to highlight it again. It's very important.
spk06: Okay, great. And then just the other question I have is I noticed that The leagues have agreed to sort of a deferred payment schedule and those franchise payments, and I was just wondering what was the rationale for that?
spk02: Good morning, David. This is Rakesh.
spk04: The league from time to time defers payments. We're not at liberty to talk about it any further, but it is disclosing our financial statements and the impact that it has. That's also described in the MD&A. These are usually payments that are pushed out into future periods for a variety of reasons that are negotiated between all of the teams within the league and the league itself.
spk05: Okay. All right. Thanks, guys. Thanks, David.
spk09: Ladies and gentlemen, as a reminder, if you do have any questions, please press star 1. Your next question comes from Rob Goff. with Echelon. Please go ahead.
spk07: Good morning, and thank you for taking my question. Morning, Roshli. Good morning. I'm glad to give you a second opportunity to highlight Zilliqa. I know it's pretty macro, but could you talk to the timeline and how you might see the benefits of the Zilliqa partnership, how that will be unfolded?
spk01: Well, you're right. It's probably too early to map it out entirely for you. But look, I mean, there's plenty of opportunities. I was reading just this morning and, man, we're approached, I'd say, just about every week with somebody in the space who proclaims to have a solution related to brand development or the opportunity for fans to engage in different ways around our brands and those of our marketing partners. You know, I think it's fair to say that if anybody is telling you that they know exactly how the metaverse is going to play out for organizations like ours or broadly in the economic space of sports and entertainment, then they're not telling you necessarily the whole truth. But I can tell you that we've been working on strategies for NFT development. We've been looking at what opportunities we might have to contribute with our brands into Zilliqa's build-out of their expression of the metaverse. Again, as a sports media and entertainment company, over time we will have various opportunities for ownable IP to be expressed in those ways. More than that, with the strong marketing partnership relationships that we enjoy, I really feel like we're going to be on the leading edge of delivering solutions for our partners in partnership with Zilliqa in creative and new ways that we've not seen before. So again, it's too early to show you or share with you a roadmap that we've laid out with Zilliqa. As I said, it's specific to our Mad Lions brand at this moment, but as we think forward into our work in the development opportunity around the venue, as one example, certainly we would imagine that we will have a blockchain partner that will help us express our venue experience in these ways as well. So I would say stay tuned and watch this space. There's going to be a lot more to develop and share as this industry takes shape.
spk07: And perhaps sticking with the macro, and you did mention venue, could you talk to how your new venue may change the attendee experience and also your own economics in terms of first party data strategies, etc.
spk01: Well, again, you find us right in the middle of those conversations. We actually spent a better part of a day last, an entire day last week talking about those types of opportunity with some of those that are around and helping us to advise. I mean, it starts obviously first with a great technology build out and we feel so privileged and frankly excited for the potential that Bell is our key strategic partner in the space will offer us. Whether it's their 5 technology or their reach into the 5G space, certainly along with various technology providers supporting Bell, we expect to build out a really high technical delivery that will have the potential to change the experience We're also in the unique position, of course, to be imagining all these things long before we have a shovel in the ground. I can remember, you know, early days with Bob Hunter and Tom Anselmi, Richard Petty, Ian Clark, talking about, you know, strategies, to your point, for first-party data. In those days, often referred to as CRM solutions. And, of course, we were having to do that after we had opened the doors in the building. We were having to imagine what that strategy might be, you know, three years, four years into the operation of then the Air Canada Center. Here we have the opportunity to imagine what those business solutions can be for the benefit of our business and our partner's business before we set a single shovel in. And so I think that's a unique opportunity to, again, engage with new thinking and innovative partners in the space. And so we're doing that. We're engaged with a number of folks that think they can help that storyline. And, again, I do expect it will be not only a point of difference for our fans and their experience in the venue, but also for our marketing partners and the value that we can realize to that partnership over time.
spk05: Thank you, and good luck. There are no further questions at this time. Please proceed.
spk02: Okay.
spk01: Well, thank you for those questions and for always tuning in. We appreciate that. I'd like to thank everybody for joining us on today's call and, again, for your continued interest in overactive media. If you're based in Toronto or within a reasonable drive, I'd certainly encourage you to take the time and come out and check out Major 3 in person. Again, choose second to fifth. We'd love to see you down there and certainly show you firsthand what it means to attend a live event in the esports space. This will be, again, the first time Toronto Ultra will have the opportunity to play live in front of its hometown fans. Esports is a spectacular live event that offers a unique and entertaining in-person experience. So, again, one that we're really looking forward to sharing with our fans and our potential fans to come who will see it for the first time. This team has done an incredible job getting ready for that moment, and we think it's going to be very impactful and very exciting. So, again, if you're inclined, please do plan to join us. But otherwise, we'll wrap it up there, and thanks, everybody, and let's have a great day.
spk09: Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines. Have a great day.
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