GameSquare Holdings Reports Record 2024 Second Quarter Results

Q2 2024 proforma revenue increased 24% YoY and expanded 22% QoQ to a quarterly record of $28.6 million, reflecting value of operating enhanced platform and success of growth initiatives

Q2 2024 proforma adjusted EBITDA loss improves significantly YoY and QoQ to $5.4 million, demonstrating benefits of growth strategies and cost reduction initiatives

$2.5 million sequential improvement in proforma adjusted EBITDA, supports efforts to reach profitability by the fourth quarter of 2024 as the Company expects further revenue growth, higher gross margin and additional operating cost reductions to benefit Q3 and Q4 results

FRISCO, TX / ACCESSWIRE / August 14, 2024 / GameSquare Holdings, Inc. (NASDAQ:GAME), ("GameSquare", or the "Company"), today announced its financial results for the three and six-months ended June 30, 2024.

Justin Kenna, CEO of GameSquare, stated, "GameSquare delivered strong growth and record quarterly revenue, demonstrating the benefits of the next generation media platform we have created. Second quarter revenue of $28.6 million increased 22% over proforma revenue for the 2024 first quarter, as we continue to focus on integrating the FaZe Clan acquisition, and benefit from accelerating momentum across many areas of our business. Highlights for the quarter include expanding demand for our Unreal Editor for Fortnite (UEFN) world building creative services, and FaZe Media's reboot and new creator roster, which garnered over 1.2 billion views during the quarter, a 28% increase over the past three months. FaZe Clan's engaged community, combined with GameSquare's technology assets, and media and creative services, has developed a powerful platform that provides global brands with significant value. As a result, we are seeing more demand for our offerings and expect to achieve between $55 and $60 million in higher-margin revenue during the second half of 2024."

"During the second quarter, we pursued initiatives aimed at optimizing our business model and driving efficiencies across our business, which resulted in a $2.5 million improvement over the past three months in proforma adjusted EBITDA. In addition, throughout 2024, we have strengthened our balance sheet by raising over $36 million of non-dilutive capital, raised $6.5 million of capital through a paid advance agreement with Yorkville Advisors Global, and repaid the balance of our $5.7 million senior secured convertible note. We believe GameSquare has never been in a stronger financial position. As we look to the second half of the year, we are extremely excited by the direction GameSquare is headed. We believe our recent results reflect a clear path to reach positive adjusted EBITDA by the fourth quarter, supported by additional revenue growth, higher gross margin, and further operating cost reductions in the second half of the year," concluded Mr. Kenna.

Reported results for the second quarter ended June 30, 2024, compared to June 30, 2023

  • Revenue of $28.6 million, compared to $11.4 million

  • Gross profit of $4.2 million, compared to $2.8 million

  • Net loss of $12.0 million, compared to a net loss of $4.1 million

  • Adjusted EBITDA loss of $5.4 million, compared to a loss of $3.3 million

Proforma* results for the second quarter ended June 30, 2024, compared to June 30, 2023

(unless otherwise noted)

  • Revenue of $28.6 million, compared to $23.1 million

  • Gross profit of $4.2 million, compared to $4.6 million

  • Operating expenses of $10.0 million, or 35.1% of revenue, compared to $14.7 million or 63.6% of revenue last year

  • Adjusted EBITDA loss of $5.4 million, compared to a loss of $10.0 million last year, and a loss of $7.9 million for the quarter ended March 31, 2024

  • Adjusted EBITDA loss was 18.9% of revenue versus 43.5% of revenue last year, and 33.7% of revenue for the quarter ended March 31, 2024

* Proforma financial results includes a full quarter contribution of FaZe Clan in the 2024 periods, and includes a full quarter contribution of Engine and FaZe Clan in the 2023 periods.

Reported results for the six months ended June 30, 2024, compared to June 30, 2023

  • Revenue of $46.3 million, compared to $14.2 million

  • Gross profit of $7.6 million, compared to $4.1 million

  • Net loss of $17.3 million, compared to a net loss of $8.4 million

  • Adjusted EBITDA loss of $9.5 million, compared to a loss of $4.8 million

Proforma* results for the six months ended June 30, 2024, compared to June 30, 2023

  • Revenue of $52.1 million, compared to $47.2 million

  • Gross profit of $7.9 million, compared to $8.6 million

  • Operating expenses of $21.6 million, or 41.5% of revenue, compared to $32.9 million or 69.8% of revenue last year

  • Adjusted EBITDA loss of $13.3 million, compared to a loss of $24.3 million

  • Adjusted EBITDA loss was 25.6% of revenue versus 51.5% of revenue last year

* Proforma financial results includes a full year-to-date contribution of FaZe Clan in the 2024 period, and includes a full year-to-date 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

  • When comparing the second quarter of 2024 and 2023 results of Faze Clan, the Company has removed approximately $18 million of annualized costs, and expects to remove additional costs during the second half 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: August 14, 2024
Time: 5:00 pm ET
Webcast: https://event.choruscall.com/mediaframe/webcast.html?webcastid=Lcd9n9z4

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 one of the largest gaming media networks in North America, as verified by Comscore, 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. 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)

June 30,
2024

December 31,
2023

Assets

Cash

$

13,895,483

$

2,945,373

Restricted cash

647,615

47,465

Accounts receivable, net

27,217,541

16,459,684

Government remittances

1,274,994

1,665,597

Contingent consideration, current

293,445

207,673

Promissory note receivable, current

378,878

-

Prepaid expenses and other current assets

2,737,688

916,740

Total current assets

46,445,644

22,242,532

Investment

2,673,472

2,673,472

Contingent consideration, non-current

-

293,445

Promissory note receivable

8,753,884

-

Property and equipment, net

618,272

2,464,633

Goodwill

22,783,315

16,303,989

Intangible assets, net

22,272,577

18,574,144

Right-of-use assets

1,981,105

2,159,693

Total assets

$

105,528,269

$

64,711,908

Liabilities and Shareholders' Equity

Accounts payable

$

31,411,550

$

23,493,472

Accrued expenses and other current liabilities

13,844,503

5,289,149

Players liability account

47,535

47,465

Deferred revenue

2,244,965

1,930,028

Current portion of operating lease liability

375,155

367,487

Line of credit

5,284,771

4,518,571

Warrant liability

46,547

102,284

Arbitration reserve

289,999

428,624

Total current liabilities

53,545,025

36,177,080

Convertible debt carried at fair value

7,840,442

8,176,928

Operating lease liability

1,807,344

1,994,961

Total liabilities

63,192,811

46,348,969

Commitments and contingencies (Note 14)

Preferred stock (no par value, unlimited shares authorized, zero
shares issued and outstanding as of June 30, 2024 and
December 31, 2023, respectively)

-

-

Common stock (no par value, unlimited shares authorized,
30,990,847 and 12,989,128 shares issued and outstanding as of
June 30, 2024 and December 31, 2023, respectively)

-

-

Additional paid-in capital

117,388,594

91,915,169

Accumulated other comprehensive loss

(118,898

)

(132,081

)

Non-controlling interest

15,360,410

-

Accumulated deficit

(90,294,648

)

(73,420,149

)

Total shareholders' equity

42,335,458

18,362,939

Total liabilities and shareholders' equity

$

105,528,269

$

64,711,908

GameSquare Holdings, Inc.
Consolidated Statements of Operations and Comprehensive Loss
(unaudited)

Three months ended June 30,

Six months ended June 30,

2024

2023

2024

2023

Revenue

$

28,586,965

$

11,361,904

$

46,315,189

$

14,151,965

Cost of revenue

24,352,762

8,573,785

38,687,829

10,085,002

Gross profit

4,234,203

2,788,119

7,627,360

4,066,963

Operating expenses:

General and administrative

7,134,618

4,228,666

12,053,248

6,870,346

Selling and marketing

2,432,939

1,740,694

4,654,592

2,481,722

Research and development

881,516

660,969

1,566,669

660,969

Depreciation and amortization

954,746

583,217

1,710,195

723,697

Restructuring charges

123,846

10,388

123,846

294,286

Other operating expenses

994,717

1,013,672

2,088,137

1,497,981

Total operating expenses

12,522,382

8,237,606

22,196,687

12,529,001

Loss from continuing operations

(8,288,179

)

(5,449,487

)

(14,569,327

)

(8,462,038

)

Other income (expense), net:

Interest expense

(192,257

)

(122,227

)

(627,385

)

(145,324

)

Change in fair value of convertible debt carried at fair value

563,360

455,009

456,759

455,009

Change in fair value of warrant liability

15,643

1,710,878

52,900

1,710,878

Arbitration settlement reserve

43,500

739,644

138,625

739,644

Other income (expense), net

(3,948,274

)

38,826

(4,065,544

)

37,894

Total other income (expense), net

(3,518,028

)

2,822,130

(4,044,645

)

2,798,101

Loss from continuing operations before income taxes

(11,806,207

)

(2,627,357

)

(18,613,972

)

(5,663,937

)

Income tax benefit

-

-

-

5,027

Net loss from continuing operations

(11,806,207

)

(2,627,357

)

(18,613,972

)

(5,658,910

)

Net income (loss) from discontinued operations

(196,934

)

(1,456,666

)

1,349,883

(2,770,547

)

Net loss

(12,003,141

)

(4,084,023

)

(17,264,089

)

(8,429,457

)

Net loss attributable to non-controlling interest

389,590

-

389,590

-

Net loss attributable to attributable to GameSquare
Holdings, Inc.

$

(11,613,551

)

$

(4,084,023

)

$

(16,874,499

)

$

(8,429,457

)


Comprehensive loss, net of tax:

Net loss

$

(12,003,141

)

$

(4,084,023

)

$

(17,264,089

)

$

(8,429,457

)

Change in foreign currency translation adjustment

(540,813

)

(104,704

)

13,183

(111,353

)

Comprehensive loss

(12,543,954

)

(4,188,727

)

(17,250,906

)

(8,540,810

)

Comprehensive loss attributable to non-controlling interest

389,590

-

389,590

-

Comprehensive loss

$

(12,154,364

)

$

(4,188,727

)

$

(16,861,316

)

$

(8,540,810

)


Income (loss) per common share attributable to GameSquare
Holdings, Inc. - basic and assuming dilution:

From continuing operations

$

(0.38

)

$

(0.22

)

$

(0.76

)

$

(0.61

)

From discontinued operations

(0.01

)

(0.12

)

0.06

(0.30

)

Loss per common share attributable to GameSquare Holdings,
Inc. - basic and assuming dilution

$

(0.38

)

$

(0.34

)

$

(0.71

)

$

(0.91

)

Weighted average common shares outstanding - basic and diluted

30,442,837

12,131,409

23,905,674

9,283,340

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, (viii) gains and losses from discontinued operations, and (ix) net income (loss) attributable to non-controlling interest.

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 June 30,

Six months ended June 30,

2024

2023

2024

2023

Net loss

$

(12,003,141

)

$

(4,084,023

)

$

(17,264,089

)

$

(8,429,457

)

Interest expense

192,257

122,227

627,385

145,324

Income tax benefit

-

-

-

(5,027

)

Amortization and depreciation

954,746

583,217

1,710,195

723,697

Share-based payments

602,139

317,005

1,021,367

882,385

Transaction costs

1,037,044

1,013,672

2,130,464

1,497,981

Arbitration settlement reserve

(43,500

)

(739,644

)

(138,625

)

(739,644

)

Restructuring costs

123,846

10,388

123,846

294,286

Legal settlement

-

183,724

-

183,724

Change in fair value of contingent consideration

(42,327

)

-

(42,327

)

-

Change in fair value of warrant liability

(15,643

)

(1,710,878

)

(52,900

)

(1,710,878

)

Change in fair value of convertible debt carried at fair value

(563,360

)

(455,009

)

(456,759

)

(455,009

)

Gain on disposition of subsidiary

-

-

(3,009,891

)

-

Loss on disposition of assets

3,764,474

-

3,764,474

-

Loss from discontinued operations

196,934

1,456,666

1,660,008

2,770,547

Net loss attributable to non-controlling interest

389,590

-

389,590

-

Adjusted EBITDA

$

(5,406,941

)

$

(3,302,655

)

$

(9,537,262

)

$

(4,842,071

)

SOURCE: GameSquare Holdings, Inc.



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