OverActive Media Corp.

Good day, everyone, and welcome to Overactive Media's fourth quarter 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. It will remain posted there for the next 30 days. I will now hand the call over to Mr. Bhattacharya Pedram, Investor Relations for Overactive Media, for introductions and reading the Safe Harbor Statement. Please go ahead, sir.

Thank you, and good morning, everyone. Welcome to Overactive Media's fourth quarter 2024 earnings conference call. A copy of the company's earnings press release is available on investor relations section of our website at overactivemedia.com. With us on today's call are Adam Adamu, Chief Executive Officer, and Rakesh Shah, Chief Financial Officer. Today, we'll review the highlights and financial results for the fourth quarter and full year 2024 and recent developments. Unless otherwise specified, all amounts mentioned on today's call are in Canadian dollars. Before we begin, I will read our cautionary notes 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 2025 objectives, the company's strategy to achieve those objectives, as well as statements with respect to management's beliefs, plans, estimates, and intentions, and similar statements concerning anticipated future events, results, circumstances, performance, or expectations that are not historical facts. Such forward-looking statements reflect management's current beliefs and are based on information currently available to management. and are subject to several 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 a supplement, not a substitute for GAAP financial measures. Reconciliations between the two can be found in our MD&A, which is available on cedarplus.ca and our website. At this time, it is my pleasure to introduce Mr. Adam Adamu, Chief Executive Officer of Overactive Media. Adam, please go ahead.

Thank you, Bhavik. Good morning, everyone, and thank you for joining us. Q4 marked the close of a transformative year for Overactive Media. In 2024, we set out to build a more efficient, more diversified business, and we delivered. We completed two strategic acquisitions, entered new markets, launched new revenue streams, and I'm pleased to share that both acquisitions exceeded the high end of our expectations for revenue and adjusted EBITDA. We reported record Q4 revenue of $9.9 million, contributing to full-year revenue of $27 million, which increased by 72% year-over-year. For the full year, adjusted EBITDA improved by 42%, and we reduced our net loss by 9% and realized comprehensive net income of $311,000. Both acquisitions, Koi and Riders, were accretive immediately, and we're proud of the progress we've made and the success of the teams now part of the Overactive platform. But the story goes well beyond the numbers. The last 12 months were a year of scaling, capability, deepening our global presence, and delivering on the ambition we set for ourselves over the past few years. Let me highlight a few areas that defined our momentum. First, our live events business delivered globally. In November, we hosted our first Koi Con in Madrid, our first annual fan event. In January, we welcomed over 12,000 fans to CDL Major 1. In June, we're preparing to host the 2025 CDL Championship Weekend in Canada, a first for the League. And in just a few days, we'll make League of Legends history by hosting the first ever LEC Road Trip event in Madrid. welcoming 18,000 fans over two days in one of the most ambitious team-led league events ever staged. Second, we expanded into new high-growth markets. We launched our Free Fire team in Mexico, marking our official entry into Latin America, and announced our expansion into China with localized movie star Koi content, now live on platforms like Weibo and Bilibili. Third, our commercial momentum continued to build, We signed the first naming rights deal in LEC history with Telefonica, renewed major partnerships with AMD, Bell, Scuf Gaming, and added new partners in Monster Energy and Cupra. Fourth, we strengthened our position inside the leagues. We restructured our LEC franchise agreement, eliminated all future franchise obligations, and secured full ownership of our slot. These changes not only improved our balance sheet, that increased our strategic control over core competitive assets. Each of these achievements reflects our long-term strategy, deal with purpose, diversify revenue, and build a business that lasts. We're not just chasing growth. We're laying the foundation for a global, sustainable company in one of the most exciting industries in the world. As we look to 2025, our focus is clear. scalability through digital and high-margin verticals, growth and markets where our brands and teams already resonate, profitability through discipline, efficiency, and focused execution. We've laid the groundwork. Now it's about impact, delivering for our fans, our partners, and our shareholders. With that, I'll hand it over to Rakesh to walk you through the financials in more detail.

Thank you, Adam, and good morning, everyone. Today, I'll briefly review our fourth quarter financial results and our performance for the first 12 months of 2024. Please note that the financial information we discuss today is prepared in accordance with international financial reporting standards and is in Canadian dollars unless otherwise indicated. In the fourth quarter of 2024, Overactive Media delivered record revenues of $9.9 million. representing a 134% increase compared to $4.2 million in the same period last year. This exceptional growth was driven by a combination of expanded league revenue share, strengthened commercial partnerships, and the successful launch of our influencer agency operations, one of several new revenue streams introduced following our acquisitions of movie star writers Ann Coy. The performance of this quarter demonstrates the growing strength of our platform and the successful execution of our strategic expansion. Looking at the full year, revenue reached $27 million, a 72% increase from $15.7 million in 2023. This year-over-year growth was largely powered by the strategic acquisitions we completed in Q1 of 2024, which significantly broadened our geographic footprint in Europe and Latin America. diversified our offerings across merchandise, brand partnerships, influencer activations and live events, and brought high-performing teams into our portfolio. This result is a more globally integrated and resilient business model. In Q4, our gross profit rose to $5.3 million, up from $3.4 million in the last year. The gross margin came in at 54% compared to the 80% in Q4 2023. The year-over-year decline in margin was anticipated and primarily reflects the integration of lower-margin business lines, such as influencer services and live event production, which were not part of our operations a year ago. Importantly, despite the shift in margin, the absolute increase in gross profit highlights the strength of our revenue engine and validates the scalability of our expanded platform. On a full-year basis, gross profit totaled $16.8 million, representing a 62% increase over the $10.4 million we reported in 2023. The gross margin for the year was 62% compared to 66% in the prior year. Again, the decline in percentage was expected given our evolving business mix. That said, the margin remains healthy and demonstrates the continued profitability of our core operations, especially as digital merchandise and brand partnerships grew meaningfully over the years. Operating costs for the fourth quarter were $6.6 million, up 54% from $4.3 million in the same period last year. The increase was primarily driven by additional staffing, infrastructure, and content production expenses tied to the full integration of the Movistar writers and COI businesses. We also continued investing in the systems and people needed to support our influencer agency and live event functions, key pillars of our future growth strategy. For the full year, total operating costs reached $23.4 million, which represents a 37% increase compared to the $17.1 million in 2023. This increase reflects the step-up in headcount, production, and operational costs that come with expanding our global footprint. It also includes $2.3 million in one-time restructuring and business development expenses that are related to the acquisitions and organizational realignment initiatives. These were purposeful investments aimed at building operational capacity for long-term scalability. While expenses increased in 2024, they were closely aligned with our strategic priorities. Every major investment was tied directly to revenue-generating initiatives or long-term infrastructure that supports scale. At the same time, we continue to track efficiency opportunities across the organization, ensuring our cost base evolves in parallel with top-line growth. This balance between disciplined cost management and aggressive business expansion remains a core part of our operating philosophy as we work towards sustainable profitability. Suggested EBITDA for Q4 2024 was a loss of $554,000 compared to a loss of $699,000 in the same quarter last year. representing a 21% year-over-year improvement. This quarter-over-quarter progress was driven by improved revenue mix, continued top line growth, and early signs of operating leverage as we integrated and scaled new lines of business. On a full year basis, adjusted EBITDA loss was $3.6 million, a 42% improvement over the $6.2 million loss reported in 2023. This performance reflects our ability to absorb integration costs while significantly improving our financial trajectory. It also demonstrates the strength of our revenue model and validates our long-term margin expansion plan. As we continue to optimize operations and scale high margin segments, we expect continued progress on EBITDA going forward. We reported a comprehensive loss of $1.3 million in Q4 compared to a loss of $768,000 last year, mainly due to foreign currency translation. For the full year, we delivered positive, comprehensive income of $311,000 and a strong improvement from the $12.2 million loss in 2023. This turnaround reflects solid revenue growth, cost discipline and an $11.5 million gain from eliminating franchise obligations, highlighting the structural progress we've made. Our cash balance at the end of the year was $6.8 million, while net working capital also totaled $6.6 million. While these numbers are slightly lower than the $8.6 million reported at the end of 2023, the year-over-year change primarily reflects the short-term obligations from our acquisitions. and investments in working capital. Importantly, our liquidity position remains strong and we remain committed to prudent capital allocation, maintaining flexibility as we scale. We also made a significant structural improvement to our balance sheet during the quarter by restructuring our League of Legends EMEA Championship Agreement. This move eliminated all future franchise obligations tied to our LEC slot. In addition to removing long-term liabilities, the restructuring also secured full ownership of our franchise, strengthening our control over core assets and giving us more financial agility as we pursue growth opportunities globally. To wrap up, our fourth quarter and full year 2024 results demonstrate strong momentum across all key areas of the business. We've materially grown revenue, significantly improved EBITDA, expanded our operational footprint in key global markets all while maintaining discipline and laying the foundation for future profitability we have now entered 2025 with a more diversified business a clear roadmap for margin improvement and the infrastructure to scale efficiently we remain confident in our strategy and our ability to deliver long-term value to shareholders that concludes our prepared remarks i will hand the call over to Adam for his closing remarks.

Thank you, Rakesh, and thank you for joining us today and for your continued support of Overactive Media. This quarter marked the close of a transformative year for our company. We successfully integrated two acquisitions, restructured our league obligations, and expanded into key global markets. These efforts delivered record revenue, improved EBITDA, delivered positive comprehensive income, and reinforced the operational and strategic foundation of our business. With full ownership of our franchises, growing international reach, and a more diversified revenue base, we are well positioned to lead the next phase of growth in global esports. Our priorities remain clear. Gale with purpose, operate with discipline, and deliver long-term value to our shareholders, partners, and fans. We have momentum, and we're focused on turning that into lasting success. Before I close, I want to thank Stuart Johnson for his service to our board. Stuart stepped down this year to pursue a new opportunity, and we are grateful for his contributions and guidance over the years. Thank you again for your time and continued support.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect. Have a good day.