The following is a transcription of the above video, and The Market Online has edited it for clarity.
GameSquare Holdings (NDAQ:GAME) is an international digital media, entertainment and technology company that enables global brands to connect with gaming and youth culture audiences. The company has achieved significant milestones recently, showcasing its growing influence in the gaming and esports industry.
CEO Justin Kenna recently sat down with The Market Online to discuss GameSquare’s recent $2 million win, its record breaking Q2 2024 results, the acquisition of FaZe Clan, and what investors can expect for the rest of 2024 and into 2025.
TMO: Let’s dive right into the company’s progress and outlook. First off, your news release on the Esports World Cup. This event brought together the world’s best esports clubs who competed for over $60 million in prizes. This is the largest prize pool in the history of esports. FaZe Clan finished in sixth place in the club championships out of over 500 teams. A huge congratulations; can you give us the rundown of this?
Kenna: It was a hugely successful tournament for us. We had four top 10 placings. The largest prize pool to date for FaZe esports, taking on approximately $2 million in prize money. We’re really excited by some of the progress of our teams.
We’ll be going back next year and hopefully doing a little bit better. All things considered, the PubG team came very close and were leading going into the last lap. In the end they finished third. They played really well and we were very close to getting third in the club championship.
TMO: Let’s continue with this good news with GameSquare reporting a record-breaking Q2 overview and earnings. Justin, give us a scoop.
Kenna: We are really happy by the revenue progress. Notably, we came out to market to talk about hitting $100 million in revenue for the year. Consequently, we are starting to get to real scale.
There is a bit of seasonality involved in our business. Generally 60-40 is how we look at second half of the year compared to the first half of the year. So to be pro forma above $50 million in revenues through the first half of the year is great progress. Really, from a revenue perspective, probably slightly ahead of where we thought.
I think something to really look for in the second half of the year is really around margin expansion. While our revenue has been a little higher, our margin (has been) slightly lower than we expected. That is due to some of the larger revenue growth in programmatic revenue, which does drag down our blended margin a little bit.
We expect a lot of growth in the second half of the year. With our owned and operated IP business from our agency business, we expect margins to grow. Something we have been really pleased with is cost improvements. Again, something to look for. I think you’ll see continued improvements there with a bit of work to do there still to get to profitability.
From a bottom line perspective, adjusted EBITDA, we got that down to a 5 million loss for Q2. This is a two-and-a-half million improvement on Q1. We expect that trend to continue and show a really clear path to break even profitability by the end of the year.
TMO: There has been a lot of movement and progress at GameSquare so far this year. Take us on a bit more of a deep dive on all of the M&A, the funding, and the partnership activity.
Kenna: There’s definitely been a lot going on. Probably most famously, starting off the year with our sale of Complexity Gaming and obviously the acquisition of FaZe Clan. FaZe Clan is the largest gaming brand in the world.
I think that what we’ve been able to bring through the infrastructure is real cost discipline, number one. This is really important to give us runway.
Number two is really, the refresh around the brand and we’ve been really pleased with that. We’ve tripled engagement and viewership from fans in a short period of time on the FaZe Media front. Now the monetization’s really starting to come. We stripped our costs. We’ve been really disciplined. We’re growing the brand, we’re getting a lot of engagement from fans. Now we are really starting to see some of these large brand deals in the pipeline resonate. Some of these large seven figure deals and longer term deals are something to look for in the back half of this year.
I think that that’s an exciting part for us. This is only really, year four. We’re going to start 2025 with a lot more locked-in revenue and a lot of longer-term, higher-margin deals. We’ve divested some non-core assets and we’ve been able to bring on a 30 million largely non-diluted capital. In these markets it’s really going to put us in a good state for future growth.
TMO: One of the areas you did talk about in earnings was the accomplishments that you made with the FaZe Clan asset. The company was able to turn that around so quickly after completing that acquisition in March. The strategy behind the progress is one that should definitely be highlighted. So let’s chat about that and of course the significance of what this progress means for the future upside.
Kenna: I think that’s really important because FaZe Clan has been a really strong brand for some time. From a business perspective, there was some real question marks. It was burning a lot of cash when we acquired it, and we obviously saw the opportunity.
I was formerly the CFO of FaZe Clan, so understood the asset really well. I think for us, again, it was less about the sexy side of the story and the brand and all the upside. It was about two main things that we knew if we took care of those two main things that were in our control, that the third part would come around growth. And again, number one being around real cost discipline. We’ve been able to pull our annualized cost to $18 million of costs. From staffing to IT and subscription costs to a new office.
Secondly, bringing back the founders to really lead the brand. From a content, a talent, and a creative perspective. It’s been absolutely integral.
(FaZe) Banks has really been leading the way for the talent side. Their viewership, their numbers, they are quadrupling. It’s really exciting to see. So the brand is really hot right now.
A bit of a recap, GameSquare has split FaZe Clan into FaZe eSports. Obviously, FaZe eSports had the recent win at the Esports World Cup. Some really strong brand deals are excited about that.
Then FaZe Media really is the lifestyle content arm of FaZe Clan. We’re really pleased with the progress. Again, that’s something to look for as a real catalyst in the back half of the year. What’s helping us get to profitability quickly is, some of these large seven figure deals that are in the pipeline and will be translating to wins very soon.
TMO: We are now well underway into the second half of this year. So let’s talk key areas of growth for GameSquare that will enable you to deliver on your 2024 guidance. What is it investors should be watching for?
Kenna: When we talk about our business, we talk really about the three main streams. One being technology and SaaS.
Two being our full service agency business. This includes not just creative and strategy but, also media, content, merchant, consumer, and product. A real end-to-end, full-service agency approach.
Third is our owned and operated IP, which is our live events business. Where FaZe Clan lives in FaZe eSports and FaZe Media. Bucket number one, we’re really pleased with our progress on the technology SaaS managed services side. It’s a great business. We have really high retention, high margin, that kind of SaaS model that public markets love. We are under complete ruthless pursuit of getting the profitability we know we need to get there quickly.
Bucket two and bucket three I think are the two areas you’ll see a lot of growth from. They’re really the catalyst I think in the back half of the year. High margin areas that are going to get us there.
If you look at our agency business, we had a recent release mentioning around $3 million of recent wins. There’s a number of others in the pipeline that will be closing here imminently.
We’re working with tier one brands on that side. I mean, Five Hour Energy, Topgolf, Dairy Max are names that are huge. There’s a few other really exciting ones that we’ll be able to talk about here pretty soon. So that’s one area that’s higher margin again, seven-figure deals that can really get us to profitability quickly.
Again, touching on FaZe Media, FaZe eSports, we’re seeing a lot of growth out of both of those businesses. Lastly, our events business. We were able to pull off a really successful creator roadshow with Epic Games. We’re in the process, recently we announced the news with the NFL creator series. That’s one area that is certainly a big area of growth for us.
TMO: Justin, inquiring investors want to know what’s the inside scoop concerning the year ahead then? You spoke a little bit about it, but we need a little bit more. The platform is yours.
Kenna: GameSquare is truly on track/ahead of track to get there and surpassed that a hundred million revenue. Getting to scale here is important, we are on this path of ruthless pursuit of getting the profitability.
I think that we targeted end of year, we’re on track there. We’re making really great progress.
When we acquired FaZe, there were a lot of queries. This was a business that was trading north of a billion dollars at one time. I think there’s a lot of upside value there.
The question mark was really around, can you pull cost out and can you actually give yourself runway to get to profitability? And I think we’re proving that out. That’s what is key. Getting there. Showing the continued progress along the way.
As the market starts to turn, we’re going to get a real re-rating. GameSquare has yet to get the credit for some of the work we’ve done in the M&A world and some of the progress we’ve done with Engine Gaming with FaZe. We are very much a new market leader in this space and we look forward to updating the market on our continued progress.
You can find GameSquare Holdings Inc. on the Nasdaq under the symbol “GAME,” and if you want more information on the company head to gamesquare.com.
Join the conversation: Find out what everybody’s saying about this stock on the GameSquare Holdings Inc. Bullboard investor discussion forum, and check out the rest of Stockhouse’s stock forums and message boards.
The material provided in this article is for information only and should not be treated as investment advice. For full disclaimer information, please click here.