The following is a transcription of the above video, and The Market Online has edited it for clarity.
Our next company is GameSquare Holdings Inc. (TSXV:GAME), a vertically integrated, international digital media entertainment and technology company.
We recently caught up with CEO Justin Kenna, who provided insight into GameSquare’s operations and recent activity.
TMO: For members of our audience who may not be familiar with GameSquare, can you please provide an overview of the company as well as your personal background?
Kenna: For sure. I’m Australian. I moved over to the U.S. about nine years ago. Actually, I was formerly the CFO of FaZe Clan, which has been a bit of a full circle moment for me with the recent acquisition of FaZe Clan.
I left Faze Clan as the CFO a little over three and a half years ago to come into GameSquare. At the time, GameSquare was just an influence agency in the U.K.
We were listed on the Canadian Stock Exchange doing around $3 million in annualized revenue. Very excited to say that in the last three and a bit years we’ve grown that north of $70 million of revenue annualized, and now even more so with the FaZe acquisition, listed on NASDAQ and really continuing to grow.
GameSquare is an end-to-end next-gen media platform that connects game publishers and tier one brands with the gaming and e-sports community.
Our focus is really on the high-margin area within the gaming space and really helping game publishers and brands navigate the tricky ecosystem, which is reaching this really highly engaged audience that is quite fragmented.
TMO: The company recently announced the sale of Complexity Gaming for more than US$10 million. Can you walk us through the journey the company went on with Complexity and ultimately the decision to proceed with the sale?
Kenna: Really proud of the work we’re able to do with Complexity. We acquired Complexity around two and a half years ago.
At the time, Complexity was majority owned by Jerry Jones, the owner of the Dallas Cowboys and John Goff. The Goffs and Joneses are the biggest shareholders of GameSquare today and actually recently just led the financing that we did in conjunction with closing the FaZe transaction.
The sale of Complexity really came about with the acquisition of FaZe Clan. FaZe Clan is the largest brand in the gaming space. We saw a real opportunity there.
FaZe was a brand that went through a SPAC and was listed on NASDAQ and actually traded north of a billion dollars, sort of only 12 months ago, and we were able to pull off a transaction, all stock for around $15 million. Very happy with that transaction, being able to bring that in.
As a result, obviously it was going to become more and more difficult to have two gaming brands in the same ecosystem and so ultimately it led to the sale of Complexity. Again, happy to be leaving that asset and brand in a much better place than where we met it and found it.
Plugging that brand into the GameSquare ecosystem, we were able to take it from an aggregate audience of around 10 million to around 150 million and importantly, grew revenue from around $3 million to around $12 million in two years.
We reduced burn and got that business on a really good runway to profitability. Really proud of the work that we’re able to do with Complexity. I think the sale represents real value for our shareholders and really sets a great roadmap and blueprint for what we’re now going to be able to do with FaZe Clan, which from a pure audience perspective has far bigger reach in audience.
TMO: As you mentioned, GameSquare recently merged with FaZe Clan becoming one of the largest gaming and e-sports organizations in the world. Based on the company’s audience reach, what inspired the merger and what does it mean for shareholders?
Kenna: I was the CFO of FaZe and obviously understood the brand really well. It is an incredibly powerful brand, sort of a New York Yankees-esque where every kid grows up, from a gaming perspective, wants to be a part of FaZe or knows what that brand is.
There is a lot of value and opportunity there. FaZe had gone through a lot of changeover in their exec team and had a bit of a falling out with the founders.
We have a great relationship with the founders of FaZe. And we’ve been able to bring them back into the mix, and conversations went on for around 12 months.
We were doing a lot of content and merch and product for FaZe Clan. They were already a client and it seemed like a really natural fit. So, we saw the opportunity there. We have the infrastructure and ecosystem through our media network, through our data and technology platforms as well as our agency services that we think combining that infrastructure with the power of the FaZe brand, the upside’s really material.
TMO: From what I understand, the company celebrated multiple world-building activations during the first quarter of this year. What does this mean for the company?
Kenna: We’re able to launch through our creative studio Moonlight, which is really sitting at the cutting edge of new kind of technology innovation within the gaming space.
This studio has really been focused on world building within UEFN, doing some really incredible stuff, working with brands like Samsung, Mastercard, McDonald’s and also most recently Prime Energy Drink. We were able to create the Prime Energy map of world, which had a huge amount of participation and audience.
So, it’s really exciting. I think it’s just a real live example of what a next gen digital media company is. It sounds great but I think the digital media map building is one really good example, as well as our content strategies across newer platforms like TikTok, Instagram shorts, YouTube, where we can connect with digital media brands really authentically to help them reach this new audience through new forms of media. It’s really exciting.
The world building has been a real emphasis for us and a great area of growth for our business.
TMO: In terms of investment value, what can you share with our audience concerning the year ahead?
Kenna: I think if you look at trailing revenue or FaZe, plus engine, plus GameSquare, the businesses we’ve been able to put together quickly, I think 2022 trailing revenues well in excess of a hundred million.
So, we’re starting to get to scale. You touched on audience size that we have in gaming, which is really unparalleled.
So, we think there’s a huge amount of upside, not only getting to revenue scale on this aggressive path to profitability in digital media, we’ve identified a lot of cost synergies that we can pull out of FaZe.
Obviously having two public companies, there’s a lot of costs that can be extracted quickly, so we’re going to be aggressively pursuing digital media profitability. I think if you look by any metric, looking at our multiple on trailing revenue and so forth, we’re a pretty cheap buy right now.
We feel really bullish about the industry, about our company, and I think as markets start to turn, we’re going to see some real ratings.
You can find GameSquare Holdings Inc. on the TSX.V under the symbol GAME or head to its website at gamesquare.com for more information.
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