from GameSquare Holdings, Inc. (NASDAQ:GAME)
GameSquare Holdings Reports 2024 First Quarter Results
FRISCO, TX / ACCESSWIRE / May 20, 2024 / GameSquare Holdings, Inc. (NASDAQ:GAME), ("GameSquare", or the "Company"), today announced financial results for the first quarter ended March 31, 2024.
"Our first quarter proforma financial performance reflects the progress we are making integrating the FaZe Clan acquisition, optimizing our business model, investing in our long-term growth opportunities, and improving profitability. While proforma revenue declined slightly primarily due to a $4.2 million year-over-year decline of revenue at FaZe Clan, GameSquare and Engine Gaming's revenue increased by $3.6 million. In addition, the $6.4 million, or 45% year-over-year improvement in proforma adjusted EBITDA, was primarily due to the benefits of cost synergies associated with the April 2023 Engine acquisition and the initial synergies of the March 2024 FaZe Clan acquisition. We believe there are $18 million of cost synergies as a result of the FaZe Clan acquisition and expect the majority of these savings to be realized during the 2024 second and third quarters. As a result, we expect to show meaningful improvements to profitability throughout 2024 as we focus on expanding gross margin and reducing operating expenses, while continuing to drive revenue growth and make strategic investments in our business," said Justin Kenna, CEO of GameSquare.
"The recent announcement of an $11 million investment from Matt Kalish for a 49% interest in FaZe Media, a business with approximately $30 million of revenue in 2023, is a significant moment for GameSquare. Matt joins GameSquare's other strategic investors including Jerry Jones the owner of the Dallas Cowboys and John and Travis Goff who have made significant investments in GameSquare because of the disruptive potential of the next-generation media business we have created. In addition, Matt has a proven track record, incredible networks, and understands the creator economy and media businesses as well as anyone. His investment and leadership as a board member of FaZe Media will add tremendous value as we return FaZe Clan back to its roots by empowering its creators and developing powerful connections with its fans. In fact, when FaZe Clan relaunched the brand on April 27, 2024, it experienced unprecedented engagement across social media platforms and was the #1 trending topic on X in the U.S.," Mr. Kenna continued.
"We are excited by the direction GameSquare is headed and we expect 2024 to be a transformative year for the Company. We believe we are clearly on track to meeting our 2024 financial guidance as we complete our business optimization initiatives, expand revenue and improve profitability going forward. As a result, we expect to see accelerated revenue growth in the second half of the year, with sequential improvements in profitability throughout 2024. I want to thank our team members for all their hard work and continued dedication," concluded Mr. Kenna.
Reported first quarter results for the quarter ended March 31, 2024, compared to March 31, 2023
- Revenue of $17.7 million, compared to $2.8 million
- Gross profit of $3.4 million, compared to $1.3 million
- Net loss of $5.3 million, compared to a net loss of $4.3 million
- Adjusted EBITDA loss of $4.1 million, compared to a loss of $1.5 million
GameSquare's GAAP financial statements include 24 days of FaZe Clan's results. In addition, Complexity, which was sold in March 2024 has been treated as a discounted operation and Complexity's results has been reclassed into discontinued operations in the Company's 2024 and 2023 first quarter financial statements.
Proforma* first quarter results for the quarter ended March 31, 2024, compared to March 31, 2023
- Revenue of $23.5 million, compared to $24.1 million
- Gross profit of $3.7 million, compared to $4.0 million
- Adjusted EBITDA loss of $7.9 million, compared to a loss of $14.3 million
- Adjusted EBITDA loss was 34% of revenue versus 59% of revenue last year
* Proforma financial results removes Complexity from GameSquare's financial statements, includes a full quarter contribution of FaZe Clan in the 2024 period, and includes a full quarter contribution of Engine and FaZe Clan in the 2023 period.
2024 Annual Guidance
- Management expects over $100 million in annual revenue and annual gross margin to range between 22.5% to 27.5% for 2024
- 2024's annual guidance is based on a proforma basis and includes a full 12 months of contribution from FaZe Clan, which was acquired on March 7, 2024.
- $18 million of annualized cost savings associated with the FaZe Clan acquisition are expected, with the majority of these costs anticipated being removed during the second and third quarters of 2024
- Management anticipates continual quarterly improvements to profitability throughout 2024 supported by sales growth, gross margin improvement, and the benefit of cost saving initiatives
Conference Call Details
Justin Kenna, CEO, Lou Schwartz, President, and Mike Munoz CFO are scheduled to host a conference call with the investment community. Analysts and interested investors can join the call via the details below:
Date: May 20, 2024
Time: 5:30 pm ET
Webcast: https://services.choruscall.ca/links/gamesquare2024q1.html
Corporate Contact
Lou Schwartz, President
Phone: (216) 464-6400
Email: ir@gamesquare.com
Investor Relations
Andrew Berger
Phone: (216) 464-6400
Email: ir@gamesquare.com
Media Relations
Chelsey Northern / The Untold
Phone: (254) 855-4028
Email: pr@gamesquare.com
About GameSquare Holdings, Inc.
GameSquare's (NASDAQ: GAME) mission is to revolutionize the way brands and game publishers connect with hard-to-reach Gen Z, Gen Alpha, and Millennial audiences. Our next generation media, entertainment, and technology capabilities drive compelling outcomes for creators and maximize our brand partners' return on investment. Through our purpose-built platform, we provide award winning marketing and creative services, offer leading data and analytics solutions, and amplify awareness through FaZe Clan, one of the most prominent and influential gaming organizations in the world. With an audience reach of 1 billion digitally native consumers across our media network and roster of creators, we are reshaping the landscape of digital media and immersive entertainment. GameSquare's largest investors are Dallas Cowboys owner Jerry Jones and the Goff family.
To learn more, visit www.gamesquare.com.
Forward-Looking Information
This news release contains "forward-looking information" and "forward-looking statements" (collectively, "forward-looking statements") within the meaning of the applicable securities legislation. All statements, other than statements of historical fact, are forward-looking statements and are based on expectations, estimates and projections as at the date of this news release. Any statement that involves discussions with respect to predictions, expectations, beliefs, plans, projections, objectives, assumptions, future events or performance (often but not always using phrases such as "expects", or "does not expect", "is expected", "anticipates" or "does not anticipate", "plans", "budget", "scheduled", "forecasts", "estimates", "believes" or "intends" or variations of such words and phrases or stating that certain actions, events or results "may" or "could", "would", "might" or "will" be taken to occur or be achieved) are not statements of historical fact and may be forward-looking statements. In this news release, forward-looking statements relate, among other things, to: the Company's and FaZe Media's future performance, revenue, growth and profitability; and the Company's and FaZe Media's ability to execute their business plans. These forward-looking statements are provided only to provide information currently available to us and are not intended to serve as and must not be relied on by any investor as, a guarantee, assurance or definitive statement of fact or probability. Forward-looking statements are necessarily based upon a number of estimates and assumptions which include, but are not limited to: the Company's and FaZe Media's ability to grow their business and being able to execute on their business plans, the Company being able to complete and successfully integrate acquisitions, the Company being able to recognize and capitalize on opportunities and the Company continuing to attract qualified personnel to supports its development requirements. These assumptions, while considered reasonable, are subject to known and unknown risks, uncertainties, and other factors which may cause the actual results and future events to differ materially from those expressed or implied by such forward-looking statements. Such factors include, but are not limited to: the Company's ability to achieve its objectives, the Company successfully executing its growth strategy, the ability of the Company to obtain future financings or complete offerings on acceptable terms, failure to leverage the Company's portfolio across entertainment and media platforms, dependence on the Company's key personnel and general business, economic, competitive, political and social uncertainties including impact of the COVID-19 pandemic and any variants. These risk factors are not intended to represent a complete list of the factors that could affect the Company which are discussed in the Company's most recent MD&A. There can be no assurance that forward-looking statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on the forward-looking statements and information contained in this news release. GameSquare assumes no obligation to update the forward-looking statements of beliefs, opinions, projections, or other factors, should they change, except as required by law.
GameSquare Holdings, Inc.
Condensed Consolidated Balance Sheets
(unaudited)
March 31, 2024 | December 31, 2023 | |||||||
Assets | ||||||||
Cash | $ | 7,173,871 | $ | 2,945,373 | ||||
Restricted cash | 647,610 | 47,465 | ||||||
Accounts receivable, net | 25,844,156 | 16,459,684 | ||||||
Government remittances | 1,347,305 | 1,665,597 | ||||||
Contingent consideration, current | 207,673 | 207,673 | ||||||
Prepaid expenses and other current assets | 2,995,649 | 916,740 | ||||||
Total current assets | 38,216,264 | 22,242,532 | ||||||
Investment | 2,673,472 | 2,673,472 | ||||||
Contingent consideration, non-current | 293,445 | 293,445 | ||||||
Promissory note receivable | 7,125,628 | - | ||||||
Property and equipment, net | 795,560 | 2,464,633 | ||||||
Goodwill | 22,789,949 | 16,303,989 | ||||||
Intangible assets, net | 27,898,454 | 18,574,144 | ||||||
Right-of-use assets | 2,071,328 | 2,159,693 | ||||||
Total assets | $ | 101,864,100 | $ | 64,711,908 | ||||
Liabilities and Shareholders' Equity | ||||||||
Accounts payable | $ | 30,238,124 | $ | 23,493,472 | ||||
Accrued expenses and other current liabilities | 13,561,775 | 5,289,149 | ||||||
Players liability account | 47,545 | 47,465 | ||||||
Deferred revenue | 4,193,032 | 1,930,028 | ||||||
Current portion of operating lease liability | 375,155 | 367,487 | ||||||
Line of credit | 4,232,425 | 4,518,571 | ||||||
Warrant liability | 62,818 | 102,284 | ||||||
Arbitration reserve | 333,499 | 428,624 | ||||||
Total current liabilities | 53,044,373 | 36,177,080 | ||||||
Convertible debt carried at fair value | 8,394,207 | 8,176,928 | ||||||
Operating lease liability | 1,898,247 | 1,994,961 | ||||||
Total liabilities | 63,336,827 | 46,348,969 | ||||||
Commitments and contingencies (Note 14) | - | - | ||||||
Preferred stock (no par value, unlimited shares authorized, zero shares issued and outstanding as of March 31, 2024 and December 31, 2023, respectively) | - | - | ||||||
Common stock (no par value, unlimited shares authorized, 30,316,256 and 12,989,128 shares issued and outstanding as of March 31, 2024 and December 31, 2023, respectively) | - | - | ||||||
Additional paid-in capital | 116,786,455 | 91,915,169 | ||||||
Accumulated other comprehensive loss | 421,915 | (132,081 | ) | |||||
Accumulated deficit | (78,681,097 | ) | (73,420,149 | ) | ||||
Total shareholders' equity | 38,527,273 | 18,362,939 | ||||||
Total liabilities and shareholders' equity | $ | 101,864,100 | $ | 64,711,908 | ||||
GameSquare Holdings, Inc.
Consolidated Statements of Operations and Comprehensive Loss
(unaudited)
| Three months ended March 31, | ||||||||
| 2024 | 2023 | |||||||
Revenue | $ | 17,728,224 | $ | 2,790,061 | ||||
Cost of revenue | 14,335,067 | 1,511,217 | ||||||
Gross profit | 3,393,157 | 1,278,844 | ||||||
Operating expenses: | ||||||||
General and administrative | 4,918,630 | 2,641,680 | ||||||
Selling and marketing | 2,221,653 | 741,028 | ||||||
Research and development | 685,153 | - | ||||||
Depreciation and amortization | 755,449 | 140,480 | ||||||
Restructuring charges | - | 283,898 | ||||||
Other operating expenses | 1,093,420 | 484,309 | ||||||
Total operating expenses | 9,674,305 | 4,291,395 | ||||||
Loss from continuing operations | (6,281,148 | ) | (3,012,551 | ) | ||||
Other income (expense), net: | ||||||||
Interest expense | (435,128 | ) | (23,097 | ) | ||||
Change in fair value of convertible debt carried at fair value | (106,601 | ) | - | |||||
Change in fair value of warrant liability | 37,257 | - | ||||||
Arbitration settlement reserve | 95,125 | - | ||||||
Other income (expense), net | (117,270 | ) | (932 | ) | ||||
Total other income (expense), net | (526,617 | ) | (24,029 | ) | ||||
Loss from continuing operations before income taxes | (6,807,765 | ) | (3,036,580 | ) | ||||
Income tax benefit | - | 5,027 | ||||||
Net loss from continuing operations | (6,807,765 | ) | (3,031,553 | ) | ||||
Net income (loss) from discontinued operations | 1,546,817 | (1,313,881 | ) | |||||
Net loss | $ | (5,260,948 | ) | $ | (4,345,434 | ) | ||
Comprehensive loss, net of tax: | ||||||||
Net loss | $ | (5,260,948 | ) | $ | (4,345,434 | ) | ||
Change in foreign currency translation adjustment | 553,996 | (6,649 | ) | |||||
Comprehensive loss | $ | (4,706,952 | ) | $ | (4,352,083 | ) | ||
Income (loss) per common share attributable to GameSquare Holdings, Inc. - basic and assuming dilution: | ||||||||
From continuing operations | $ | (0.39 | ) | $ | (0.55 | ) | ||
From discontinued operations | 0.09 | (0.24 | ) | |||||
Loss per common share attributable to GameSquare Holdings, Inc. - basic and assuming dilution | $ | (0.30 | ) | $ | (0.78 | ) | ||
Weighted average common shares outstanding - basic and diluted | 17,368,512 | 5,557,690 | ||||||
Management's use of Non-GAAP Measures
This release contains certain financial performance measures, including "EBITDA" and "Adjusted EBITDA," that are not recognized under accounting principles generally accepted in the United States of America ("GAAP") and do not have a standardized meaning prescribed by GAAP. As a result, these measures may not be comparable to similar measures presented by other companies. For a reconciliation of these measures to the most directly comparable financial information presented in the Financial Statements in accordance with GAAP, see the section entitled "Reconciliation of Non-GAAP Measures" below.
We believe EBITDA is a useful measure to assess the performance of the Company as it provides more meaningful operating results by excluding the effects of expenses that are not reflective of our underlying business performance and other one-time or non-recurring expenses. We define "EBITDA" as net income (loss) before (i) depreciation and amortization; (ii) income taxes; and (iii) interest expense.
Adjusted EBITDA
We believe Adjusted EBITDA is a useful measure to assess the performance of the Company as it provides more meaningful operating results by excluding the effects of expenses that are not reflective of our underlying business performance and other one-time or non-recurring expenses. We define "Adjusted EBITDA" as EBITDA adjusted to exclude extraordinary items, non-recurring items and other non-cash items, including, but not limited to (i) share based compensation expense, (ii) transaction costs related to merger and acquisition activities, (iii) arbitration settlement reserves and other non-recurring legal settlement expenses, (iv) restructuring costs, primarily comprised of employee severance resulting from integration of acquired businesses, (v) impairment of goodwill and intangible assets, (vi) gains and losses on extinguishment of debt, (vii) change in fair value of assets and liabilities adjusted to fair value on a quarterly basis, and (viii) gains and losses from discontinued operations.
Reconciliation of Non-GAAP Measures
A reconciliation of Adjusted EBITDA to the most directly comparable measure determined under US GAAP is set out below.
| Three months ended March 31, | ||||||||
| 2024 | 2023 | |||||||
Net loss | $ | (5,260,948 | ) | $ | (4,345,434 | ) | ||
Interest expense | 435,128 | 23,097 | ||||||
Income tax benefit | - | (5,027 | ) | |||||
Amortization and depreciation | 755,449 | 140,480 | ||||||
Share-based payments | 419,228 | 565,380 | ||||||
Transaction costs | ||||||||