GameSquare Q4 2024 Earnings Report

GameSquare EPS Results

• Actual EPS: -$0.81
• Consensus EPS: N/A
• Beat/Miss: N/A
• One Year Ago EPS: N/A

GameSquare Revenue Results

• Actual Revenue: $23.47 million
• Expected Revenue: N/A
• Beat/Miss: N/A
• YoY Revenue Growth: N/A

GameSquare Announcement Details

• Quarter: Q4 2024
• Date: 4/15/2025
• Time: After Market Closes
• Conference Call Date: Wednesday, April 16, 2025
• Conference Call Time: 5:00PM ET

GameSquare (NASDAQ:GAME), Inc. operates as a vertically integrated digital media, entertainment, and technology company. Its platform to connect with gaming and youth culture audiences. The company's end-to-end platform includes Code Red Esports Ltd., an esports talent agency; GCN, a digital media company focusing on the gaming and esports audience; Zoned, a gaming and lifestyle marketing agency; Complexity Gaming, a esports organization operating; Fourth Frame Studios, a creative production studio; and Mission Supply, a merchandise and consumer products business; Frankly Media, programmatic advertising, Stream Hatchet, live streaming analytics, and Sideqik a social influencer marketing platform. The company also engages in providing marketing and creative services, offering leading data and analytics solutions. The company was formerly known as Engine Gaming & Media, Inc. GameSquare Holdings, Inc. is headquartered in Frisco, Texas.

GameSquare Q4 2024 Earnings Call Transcript

Presentation

[Operator]

Good afternoon, and thank you for joining us for the GameSquare Holdings twenty twenty four Fourth Quarter Conference Call. On the call today, we have Justin Kenna, GameSquare's CEO Lou Schwartz, President and Mike Munoz, CFO. During the call, all participants are in a listen only mode. Following the presentation, we will conduct a question and answer session. Before management discusses the results, I'd like to remind everyone that certain statements in this call may be forward looking in nature.

[Operator]

These include statements involving known and unknown risks, uncertainties and other factors that could cause actual results to differ materially from those expressed or implied in our forward looking statements. For information about forward looking statements and risk factors, please see our 10 Q for quarter ended 12/31/2024, which will be available on the company's website or with the Securities and Exchange Commission. I will now turn the call over to GameSquare's CEO, Justin Kenna. Justin, please go ahead.

[Justin Kenna, CEO & Executive Director at GameSquare Holdings]

Thank you, and good afternoon to everyone joining us on today's call. Since our founding in August of twenty twenty, we have followed a strategic plan focused on quickly building a diverse set of media, agency, technology and esports assets to help global brands engage with hard to reach esports and youth audiences at scale. Our 2024 financial results reflect the success of the first phase of our plan, driven by the differentiated platform we have created and the organic and M and A growth strategies we have pursued. In less than four years, Gamescom has achieved $100,000,000 in pro form a revenue through our team's efforts to develop next generation solutions and drive connections between the world's largest video publishers, top tier brands and global gaming and esports communities. As we have stated on prior calls, our operating plan for 2024 was focused on three main components: First, to complete the integration of the Faze acquisition and significantly reduced our cost structure second, to strengthen our balance sheet and divest non core assets and third, to leverage our platform of owned and operated IP, agency and media and SaaS advertising assets to drive profitable growth.

[Justin Kenna, CEO & Executive Director at GameSquare Holdings]

I believe our recent performance demonstrates the progress we've made throughout the year. With these efforts successfully behind us, we are excited to begin the next phase of our multiyear strategic plan and focus on reaching positive adjusted EBITDA and cash flow in 2025. Given the rapid pace of our growth over the past four plus years, we understand there have been a lot of moving parts to our business. I want to use the rest of my prepared remarks to outline the recent Faze Media divestiture and our go forward platform, the strategies we pursued to optimize our model in 2024 and why we believe we are positioned for a strong year of organic growth and profitability in 2025. So let me start by providing an overview of our 2024 FaceTime acquisition and integration.

[Justin Kenna, CEO & Executive Director at GameSquare Holdings]

As a reminder, in March, we completed the acquisition of Faze Clan in an all stock transaction value of $14,000,000 Since completing the acquisition, we strategically split Faze Clan into two assets: Faze Clan Esports, which is one of the world's best and most recognized esports organizations and Faze Media, which we regard as one of the largest followed gaming brands in the world. As part of our strategy, we understood that for Faze Media to be successful, Faze's founders and creators had to be at the helm, have an ownership stake in the organization and be empowered with creative direction. Since March 2024, we focused on rebooting the Faze brand, reducing operating costs and positioning Faze Media for success as a standalone creator led business. The reboot of Faze Media happened faster than expected and we successfully divested Faze Media on 04/01/2025 versus our original expectation of 12/31/2025. The divestiture of Just Faze Media was valued at over $39,000,000 compared to the original purchase price for both Faze Esports and Faze Media of $14,000,000 in stock.

[Justin Kenna, CEO & Executive Director at GameSquare Holdings]

BaseClare in total had pro form a revenue of nearly $45,000,000 and pro form a adjusted EBITDA loss of $32,000,000 in 2023. BaseClare had pro form a revenue of $38,000,000 and pro form a adjusted EBITDA loss of $9,300,000 in 2024. The majority of the revenue and EBITDA loss of Faze Clan was due to Faze Media. And with the April 1 divestiture, Faze Media is no longer consolidated in GameSquare's financial statements. It is also important to note that with the April 1 divestiture of Media, we have eliminated approximately $10,000,000 of debt that was on our balance sheet as at 12/31/2024.

[Justin Kenna, CEO & Executive Director at GameSquare Holdings]

In addition, since separating FaZe Clan Esports and FaZe Media in the second half of twenty twenty four, FaZe Clan Esports had revenue of $7,300,000 and was EBITDA positive. We still own 100% of FaZe Clan Esports. Finally, GameSquare will remain the agency of record for Faze Media, which we expect to contribute $500,000 to our agency business in 2025. Today, our platform consists of SaaS and managed services, agency and media and owned and operated IP assets as well as our esports team based on esports. It is important to note that from a financial reporting standpoint, we break out our segments by teams, agency and SaaS and advertising.

[Justin Kenna, CEO & Executive Director at GameSquare Holdings]

Going forward in 2025, we expect to adjust our segment reports to align with how we view our business. Overall, we believe we have created a differentiated platform at scale that supports relationships with the world's largest game publishers and brands. In addition, positioned to help our customers engage with hard to reach gaming youth audiences. As brands look to drive market share in the current economic environment, we believe we are well positioned to grow organically. Our confidence is supported by recently signed partnerships and a robust order book and pipeline that we expect to really start to accelerate revenue in the second quarter.

[Justin Kenna, CEO & Executive Director at GameSquare Holdings]

With the successful divestiture of Faze Media, we are focused on executing the next phase of our strategic plan and profitably growing our business. For 2025, we believe we can grow sales organically by 20% to 25 from annual pro form a sales in 2024 as a result of new and existing customer relationships and cross sell opportunities. Our growth strategy for 2025 is focused on pursuing managed service opportunities within our SaaS and advertising business, leveraging the growing success of our agency, media and experiences business and accelerating the growth of base cloud esports. Our core SaaS business delivered strong performance in 2024 with gross margins exceeding 70%. SpringHatchet continues to lead with cutting edge analytics and business intelligence solutions tailored to the live industries.

[Justin Kenna, CEO & Executive Director at GameSquare Holdings]

Long standing client relationships, including multiyear agreements with Riot Games, Epic Games, Tencent, TikTok and many others underscore the platform's strategic value. In 2024, Streamhatchet launched a proprietary AI powered influencer discovery tool, which leverages data from more than 50,000,000 creators to match brands with optimal partners for campaign success. The tool was initially soft launched in partnership with Scopely, the publisher of Monopoly Go and StumbleGuide to validate its performance. Following a successful pilot, we plan to roll out the solution to our global customer base throughout 2025. A key growth initiative in this segment is focused on expanding our managed services offering, which is a high touch solution designed for customers looking to outsource the entire influencer marketing lifecycle.

[Justin Kenna, CEO & Executive Director at GameSquare Holdings]

From discovery and vetting of creators to full campaign activation, our managed services cater to the complex needs of game publishers and Tier one brands. This model combines our proprietary technology with hands on execution, allowing us to deliver turnkey progress with measurable impact. Providing managed services also has the potential to drive cross selling opportunities across GameSquare's ecosystem. In early twenty twenty five, Streamhatch has signed the largest contract in its history with Capcom to support the launch of Monster Hunter Wilds. This engagement demonstrates the value of our managed services model and the strength of our integrated platform.

[Justin Kenna, CEO & Executive Director at GameSquare Holdings]

By adding managed services to our portfolio, we have unlocked multiple 7 figure opportunities in our pipeline and expect to see significant growth in this area through 2025 and beyond. We also see accelerating momentum at Sidekick, our influencer marketing and creator relationship management platform. Sidekick has quickly become the platform of choice for the world's largest game publishers and Tier one brands. With over 50% of game publisher revenue now attributed to influencers and creators, managing these relationships with the same rigor as enterprise customer data has become a strategic imperative. Sidekick is now finely tuned to meet the highly specialized needs of game publishers, including capabilities to key software distribution for prerelease titles, integrated Discord channels for creative communications and DocuSign enabled contract workflows.

[Justin Kenna, CEO & Executive Director at GameSquare Holdings]

This focused product positions Sidekiq as a critical system of record for managing influencer programs at scale. In addition to signing a multiyear partnership with eFuse in 2024 to support expanded marketing efforts in gaming and esports, Sidekick has developed a strong sales pipeline and expects to see above average growth in 2025 and beyond as demand for scalable creator relationship tools accelerate. To further enhance customer value, we are actively integrating Streamhatcher and SideKick into a unified platform. Single Sign On is now available across both systems and all product roadmap planning is centered on delivering a seamlessly integrated experience. By combining analytics reporting and influencer relationship management into platform, we are creating a powerful data driven solution for brands and publishers to manage every aspect of their creative strategy from a single interface.

[Justin Kenna, CEO & Executive Director at GameSquare Holdings]

Moving to our agency and media business. We experienced strong growth across our agency and media assets led by a year over year revenue increase of 115% at ZONE. ZONE is our creative agency that is experiencing success from in game world building campaigns and providing top tier brands with strategic marketing and activation solutions. For 2024, we launched custom worlds inside metaverse style games like Fortnite for brands including Topgolf, DairyMax, ESPN and SpongeBob SquarePants. Our world building campaigns drove over one hundred and twenty five million minutes of gameplay and generated $3,900,000 in revenue in 2024.

[Justin Kenna, CEO & Executive Director at GameSquare Holdings]

We have a really strong pipeline and expect revenue from world building projects to increase over 100% in 2025. In addition to 2025, we are pursuing opportunities to license IP and build in game worlds where we can capture more of the revenue we generate within activations. We are finalizing an agreement with Paramount to license SpongeBob SquarePants to develop additional in world games and expand on last year's success. We plan to launch several custom worlds of popular brands that we have licensed during the year. In addition to world building campaigns, our agency and media assets are seeing demand for broader opportunities in the digital age.

[Justin Kenna, CEO & Executive Director at GameSquare Holdings]

Our agencies continue to grow their capabilities outside of gaming and are quickly becoming the go to experts for all things Internet and youth culture. This includes new collaboration opportunities within mainstream cultural staples, new community focused initiatives and crossover opportunities to leverage GameSquare's technology assets for brand clients. Cross selling is an important growth initiative, highlighting the end to end capabilities of GameSquare's next generation platform. Nowhere is this more impactful than within our own and operated IP strategy as it touches all aspects of our business, including in game world building, experiences and technology assets. GameSquare Experiences combines all of this together by connecting our owned and operated IP, content, live events and consumer product assets under one team to highlight the connectivity of experiences.

[Justin Kenna, CEO & Executive Director at GameSquare Holdings]

The growth strategy for Gamescomer Experiences is aligned with emerging trends that we are seeing across our markets as interest is growing for Immersion's talent led and brand owned experiences that connect with audiences through compelling storytelling, digital engagement and unforgettable in real life or IRL touch points. To support our efforts in customer demand, we added Paul Iopam as our geniem of gamescore experiences in late twenty twenty three. Since then, we have created world class events such as Ninjas New Year's Eve and the NFL for the Fans Live, creator led events for Epic Games as well as successful activations for Tesla, Interscope Records, the Dallas Cowboys and ESPN. The 2024 GameSquare's Experiences business was a multimillion dollar revenue division and saw a 150% increase in revenue from Q3 'twenty four to Q4 'twenty four. We expect annual revenue from our Experiences business to increase year over year by 5x in 2025 as a result of existing and new partners and achieve over 30% in gross margin.

[Justin Kenna, CEO & Executive Director at GameSquare Holdings]

In 2025, we added proven lifestyle multicultural marketing, gaming and entertainment executives. Our experiences team has the know how to produce, manage and organize large scale activations supported by the capabilities of GameSquare's platform. Based on market interest and our sales pipeline, we recently announced the expansion of our Experiences business. This includes delivering moments for fans and consumers by partnering with top tier brands, gaming communities and major festivals across The U. S.

[Justin Kenna, CEO & Executive Director at GameSquare Holdings]

This includes the recently announced strategic partnership with GG Tech to bring the premier global esports festival, Gamergie, to Dallas in March of twenty twenty six. Gamergie is one of the world's largest esports and gaming events tailored for video game enthusiasts of all ages and backgrounds. Since its inception in 2016, Gamergie has successfully organized over 20 global additions, including festivals in Spain, Argentina, Egypt, Panama, El Salvador and Mexico. Gamescom will leverage our full platform of capabilities to provide strategy, event design, talent recommendations, marketing and operations for Gamergie twenty twenty six. I'm excited to provide additional details on Gamergie twenty twenty six as the event develops.

[Justin Kenna, CEO & Executive Director at GameSquare Holdings]

In addition, Gamesquare is launching a new collegiate esports initiative aimed at building community and engagement across university campuses. As part of our strategic partnership with GG Tech, we will bring new experiences to students in The U. S. Through GG Tech's leading university esports IP. GG Tech's esports new experiences sorry, me, GG Tech has partnered with over 2,000 global universities, 9,000 teams and 100,000 users to provide gaming experiences for students, scaling to meet the demands of global market global gaming markets.

[Justin Kenna, CEO & Executive Director at GameSquare Holdings]

As a result, University Esports has become one of the top collegiate esports organizations in the world. Our expanding Events and Experiences division is a key pillar of the company's strategic vision. We believe events can drive cross selling opportunities across Gamescom's business, and we look forward to additional announcements as these events are formalized. Turning to our Esports business. After a strong 2024, we are extremely excited by the potential of FaceClan Esports in 2025.

[Justin Kenna, CEO & Executive Director at GameSquare Holdings]

FaceClan Esports had a strong showing in the twenty twenty four Esports World receiving points in six games and two podium finishes. In total, Faceland Esports won approximately 2,000,000 prize winnings in the twenty twenty four Esports World Cup, the largest ever tournament winnings. Ace Klan Esports will return to Riyadh, Saudi Arabia for the twenty twenty five Esports World Cup. This year's event will offer the largest prize pool in Esports history of over $60,000,000 in total cash prizes and feature 24 of the most popular esports titles across all major gaming genres. Not only will FaceTime Esports be participating at this marquee event, but other GameSquare businesses will be supporting this massive activation, and I look forward to updating investors in future calls.

[Justin Kenna, CEO & Executive Director at GameSquare Holdings]

I'm also pleased to announce that on 02/16/2025, FaceTime Esports won the sixth Invitation of 2025 in Boston, taking home $1,000,000 in prize money. This was FaceTime Esports' largest ever Rainbow Six winnings. As you can see, FaceTime Esports is one of the world's top performing esports teams, and we believe we can significantly elevate and monetize the team in 2025. This year, we have plans to leverage our corporate headquarters at The Star in Frisco, Texas by creating a performance hub and home to FaceTime Esports. This includes adding partners who see the value in the FaceTime brand and location at the headquarters of the Dallas Cowboys.

[Justin Kenna, CEO & Executive Director at GameSquare Holdings]

We are following a proven strategy that saw GameSquare increase sales of our prior esports team by over 220% in just two years. As a result, we believe we have the right asset and formula to grow FaceTime esports and to hit profitability in 2025 and beyond. We are currently finalizing 2 7 figure licensing deals within our FaceTime Esports business that depending on the timing may see the company get to profitability sooner. As you can see, 2024 was a transformative year for GameSquare. Looking forward, we are excited to begin the next phase of our multiyear strategic plan and focus on reaching positive EBITDA and cash flow in 2025.

[Justin Kenna, CEO & Executive Director at GameSquare Holdings]

Before I review our financial expectations in more detail, I'd like to turn the call over to Mike to review our 2024 financial results.

[Michael Munoz, CFO at GameSquare Holdings]

Thanks, Justin. As a reminder, twenty twenty four's financial results include multiple corporate actions. Most significantly the 03/07/2024 acquisition of Faze Clan and the 03/01/2024 sale of Complexity Gaming, which have been treated as a discontinued operation in our 2024 and 2023 results. We also further divested non core assets during the year on 05/31/2024. As a result, we believe it's best to look at our business on a pro form a basis, which includes a full year to date contribution of Phase Plan for both 2024 and 2023.

[Michael Munoz, CFO at GameSquare Holdings]

Comparing our 2024 pro form a results to the prior year, total revenue was $102,000,000 compared to $94,800,000 The 7.6% year over year increase in revenue was primarily driven due to growth across our agency segment. Gross margin on a pro form a basis for the 2024 full year was $15,600,000 or 15.3% of sales compared to $13,900,000 or 14.7% of sales for the same period last year. We expect gross margin to improve going forward supported by a more profitable revenue mix in 2025 and additional actions underway to improve gross margin. On a pro form a basis, adjusted EBITDA loss for the 2024 full year was $19,800,000 compared to a loss of $46,100,000 last year, an improvement of $26,300,000 We expect that EBITDA trend will continue to improve throughout 2025 with positive EBITDA and cash flow in the second half of twenty twenty five as Justin will outline. So with this overview, I'll turn the call back over to Justin to review our guidance in more detail.

[Justin Kenna, CEO & Executive Director at GameSquare Holdings]

Thanks, Mike. We expect annual pro form a revenue in 2025 of $100,000,000 to $105,000,000 Our revenue guidance for 2025 does not include $27,000,000 of annual revenue from Faze Media that occurred in 2024. This implies year over year pro form a revenue growth of at least 33% in 2025. As I mentioned earlier, we are seeing current deals in our pipeline close across our SaaS and managed services, agency and media and owned and operated IP assets. Momentum is strong within our pipeline, and we expect to see additional high margin 7 figure deals announced throughout the remainder of the year.

[Justin Kenna, CEO & Executive Director at GameSquare Holdings]

In particular, the second quarter is shaping up ahead of schedule as we expect to sign multiple 7 figure contracts over the next two months. First, we expect to announce a deal from a major endemic sponsor for the Fate Esports Performance Center, which is also home to GameSquare's headquarters. Second, we are finalizing a multimillion dollar licensing partnership with the next generation blockchain network. And finally, we are working to close a deal with a major game publisher. If all these deals are closed over the next two months, we believe we will achieve positive adjusted EBITDA within the second quarter.

[Justin Kenna, CEO & Executive Director at GameSquare Holdings]

Potential winnings from FaceTime Esports during the remainder of 2025 are not included in our upside expectations for 2025. We expect a natural lift to gross margin as a result of a more profitable mix of revenue as well as overall improvements in margin and the divestiture of Faze Media. For 2025, we currently expect gross margin to grow 20% to 25% of annual sales. We expect annual cash operating expenses in 2025 to improve by approximately $15,000,000 from cash operating expenses in 2024 of $35,000,000 The estimated 40 plus percent reduction in annual cash operating expenses is a result of the Fade Media divestiture and recent actions to reduce full year operating expenses by approximately 10%. Organic revenue combined with higher gross margin and lower operating expenses are expected to improve profitability in 2025.

[Justin Kenna, CEO & Executive Director at GameSquare Holdings]

As we have mentioned historically, seasonality will impact first quarter revenue and profitability, but we expect improving trends starting in the second quarter, which is shaping up to be ahead of schedule. In addition, we currently expect to achieve positive cash flow and adjusted EBITDA in the second half of twenty twenty five. These are really important milestones, and I look forward to reporting on our success during the year. So with this overview, Lou, Mike and I are happy to take your questions. Operator, please open the call to questions.

[Operator]

Thank you. We will now begin the question and answer session. The first question comes from Greg Gibas with Northland Securities. Please go ahead.

[Greg Gibas, Vice President & Senior Research Analyst at Northland Securities, Inc]

Hey, good afternoon, Justin, Lou and Mike. Thanks for taking the questions. Wanted to just follow-up on kind of your growth expectations for 2025. Could you maybe kind of highlight the primary drivers there? I mean, it sounds like world building looking strong, SaaS and managed services as well and then the agency business.

[Greg Gibas, Vice President & Senior Research Analyst at Northland Securities, Inc]

And then you mentioned some pretty big deals for licensing deals for Faze Esports. So just wanted to get a little bit more color on what gives you confidence in that outlook. Is it pretty much well rounded? And it did sound like even though Q1 is seasonally slower, it was off to a pretty solid start. And if you could touch on that as well, that'd be helpful.

[Justin Kenna, CEO & Executive Director at GameSquare Holdings]

Yes, absolutely. I can kick off and then Lou and Mike feel free to jump in. Yes, great. It is a really healthy mix, I think, across the businesses. Since sort of acquiring Faze Clan earlier in 2024, we've seen really impressive growth from the Faze Esports business.

[Justin Kenna, CEO & Executive Director at GameSquare Holdings]

And as you mentioned, we have two to three sort of 7 figure deals there that are either LOI stage or sort of have the verbal there. So we're moving forward really well within the Phase Esports business, as you mentioned. And then we're seeing a lot really healthy organic growth from our SaaS and Managed Services business, as you mentioned, and then also within our Agency and Experiences business continuing to grow their relationship with Epic Games and Paramount and so forth. I think to the second part of your question, what gives us great confidence is, I think many people listening will understand sort of the challenges in the market. I think what has pleasing is some of these deals in Q4 that we were hoping would close have started to close.

[Justin Kenna, CEO & Executive Director at GameSquare Holdings]

They've just been a little slower to get pipered and finalized, but they've either closed within Q1 or are closing within Q2. So I'd say, all that sort of ambitious sort of revenue growth targets, they're not as ambitious as it may seem because a lot of that revenue is already locked in and papers and or committed. So we feel really, really good about that number. We've talked about the importance of getting to breakeven certainly EBITDA positivity and then generating cash flow. But this is the first time that we've actually given guidance to EBITDA positivity and generating cash.

[Justin Kenna, CEO & Executive Director at GameSquare Holdings]

So we have great confidence in our ability to hit these numbers. We certainly believe the back half of the year will represent that. But certainly, with a couple of these deals that we are finalizing at the moment, Q2 may be a little better than expected. We may hit this a little earlier and we certainly believe it will be a real inflection point for us. So really healthy growth across the business.

[Justin Kenna, CEO & Executive Director at GameSquare Holdings]

I'd say the area that's we're probably not investing in currently as much and probably not seeing as much growth is really our media programmatic business. We've talked to this before. It is still an area of business that generates top line for us, but it is lower in margins. So I think you'll see that mix of revenue and the margins increase, but yes, really healthy growth from SaaS managed services, our agency and experience business and certainly from phase e sports. And I think the confidence really comes from verbal commitments, LOI signed, recurring revenue locked in longer term relationships and certainly think that you'll see that translating to our financials this year.

[Greg Gibas, Vice President & Senior Research Analyst at Northland Securities, Inc]

Great. That's helpful, Justin. And I wanted to follow-up. You beat me a little bit to it, but some incremental color, I guess, on your expectations for profitability and cash flow improvement this year. It sounds like in the back half, are expecting profitability.

[Greg Gibas, Vice President & Senior Research Analyst at Northland Securities, Inc]

You mentioned possibly in Q2 depending on maybe the timing of some of those 7 figure deals. One, guess could you maybe provide kind of a little bit clarity in terms of the level of costs or expenses that are removed from the business in relation or that are kind of tied to that Faze Media divestiture? And kind of based on your commentary, fair to assume EBITDA positivity expected for the full year 2025?

[Justin Kenna, CEO & Executive Director at GameSquare Holdings]

Yes. So, if you look at sort of operating expenses, so we touched on a little bit in the script. We expect in 2025, our OpEx to improve by around 15,000,000 So obviously, a material amount there with the reduction. Obviously, the divestiture of Faze Media a part of that with the burn that existed at Faze Media for the year. However, we've also undertaken a project within Q1 to reduce a further 10% of OpEx.

[Justin Kenna, CEO & Executive Director at GameSquare Holdings]

So I think you'll start to see that throughout the year. And yes, we believe that we will be EBITDA positive for the year, but certainly the exit run rate from Q3 and Q4 will be substantial. We've touched on the fact Q1 does represent seasonality for us. It is generally a little lighter on in terms of the sort of ad brand media spend. But certainly, as kind of touched on, we think that Q2 is going to be a major inflection point for us, Q3 and Q4, certainly representing not only sort of adjusted EBITDA positivity, but cash flow and certainly for the year.

[Justin Kenna, CEO & Executive Director at GameSquare Holdings]

And our exit run rate will be quite substantial. So yes, and it's not just, I guess, the divestiture of Faze Media in terms of the reduction of OpEx. We've also taken on we had a sort of project earlier in the year to find another sort of 10% of annualized OpEx, which we've been sort of executing and pulling out throughout Q1. And I think you'll start to see the results of that certainly in our Q1 results and as touched on in our Q2 financials.

[Greg Gibas, Vice President & Senior Research Analyst at Northland Securities, Inc]

Great. Well, congrats on the momentum you're seeing so far this year. I'll pass it on. Thanks for the color.

[Operator]

The next question comes from Jack Vander Aarde with Maxim Group. Please go ahead.

[Jack Vander Aarde, SVP, Senior Research Analyst at Maxim Group]

Great. Thanks for the update guys. Thanks for taking my questions. Justin, maybe just to follow-up on that to better understand the guidance. There's a lot of moving parts here, obviously.

[Jack Vander Aarde, SVP, Senior Research Analyst at Maxim Group]

So really robust organic growth outlook and margin upside baked into that. Just so I'm clear, the 2025 revenue guidance of $100 plus million, dollars 1 hundred million to 105,000,000 that's all organic revenue? And is that all from continued operations only, meaning it excludes first quarter twenty twenty five from Faze Media?

[Justin Kenna, CEO & Executive Director at GameSquare Holdings]

Yes. So I think the easiest way to think about that, Jack, is that Faze Media contributed $27,000,000 to the

[Justin Kenna, CEO & Executive Director at GameSquare Holdings]

sort

[Justin Kenna, CEO & Executive Director at GameSquare Holdings]

of pro form a number in 2024. And I think not only certainly from a revenue perspective, which we'll touch on, but I think the areas for us of lower margin really are media programmatic business that we talked about and certainly phased media that was kind of reflecting sort of some of the burn that existed. So I do think that the divestiture certainly helps that priority that we talked about around getting to EBITDA positivity and certainly generating cash. So the mix of the revenue, I think, is also really important. But that is to represent that we believe this year that we can certainly meet or exceed the number that we hit in 2024.

[Justin Kenna, CEO & Executive Director at GameSquare Holdings]

Obviously, the pro form a number for 2024 was $102,000,000 of full year revenue. And certainly for 2025, we've given guidance of 100,000,000 to $105,000,000 in revenue without phased media. So obviously, you're removing the burn, but you are removing some top line, which is around $27,000,000 in revenue for the year, which in terms of where that is coming from, we certainly expect substantial growth from FaZe Esports. I think the reality is that FaZe Media and Esports prior to us acquiring Faze Clan was really one P and L and Faze Esports really didn't have a dedicated commercial team that was sort of selling specifically against the esports business. We've done that.

[Justin Kenna, CEO & Executive Director at GameSquare Holdings]

We're doing that in terms of we've moved the esports business to the headquarters in Dallas. We're selling a sort of 7 figure 90 right deal currently. We have a number of sponsorship opportunities, licensing opportunities. We're about to launch FazE Sports' own merchandise line and the list goes on. So we see really substantial growth from FazE Sports and certainly expecting real profitability from that part of the business.

[Justin Kenna, CEO & Executive Director at GameSquare Holdings]

Kind of touched on our SaaS managed services business starting to close some major deals. I think Capcom was what we announced earlier in the year. Made some hires in this part of the business and we're really focusing on sort of tailored customizable managed services project solutions for big brands. And so I think you're going to see a number of 7 figure deals come into this part of the business, which is great, right? I think you've seen this part of the business is obviously really high margin, great recurring revenue, but it's probably been harder to scale in prior years and that's certainly a focus for us.

[Justin Kenna, CEO & Executive Director at GameSquare Holdings]

So I think you'll see a number of really large 7 figure deals coming there that are sort of being finalized at the moment. There's a really strong pipeline there. And then lastly, I'd sort of touch on a little bit, but our agency and events business, they're working hand in hand. We've never had more locked in revenue there. These are multiyear deals.

[Justin Kenna, CEO & Executive Director at GameSquare Holdings]

We're continuing to grow in scale. So we certainly think that we will more than make up for that delta from the phased media business. Certainly, obviously, dollars 27,000,000 of top line is nothing to be seized at. We have a lot of that already accounted for in early wins in the year locked in revenue and certainly see a lot more upside, not only in accounting for that top line that we mentioned to get to the 100,000,000 and $105,000,000 this year without phased media, but certainly what is most important is increasing our gross margin and certainly seeing that reflect in the bottom line. So again, just to reiterate, guidance is 100,000,000 to $105,000,000 revenue without phased media.

[Justin Kenna, CEO & Executive Director at GameSquare Holdings]

A lot of that revenue is locked in for the year. There's certainly additional upside in deals that we're working on, but we're expecting to hit profitability in the back half of the year. But certainly, with a couple of these deals where we're finalizing here currently, it could be sooner. We think Q2 is going to be a major inflection point for us.

[Jack Vander Aarde, SVP, Senior Research Analyst at Maxim Group]

Okay, great. I appreciate all that extra color and that's definitely encouraging to hear. In terms of maybe the order book as well, I'd be curious to know just because you have so many distinct segments here and with Faze Media being removed now, what is the do you have an order book and a pipeline kind of metrics and just sort of philosophy built out for each of your segments? So for teams, agency and then the SaaS and advertising lines, which of those do you have the most visibility into? And do you actually have a pipeline that goes out that extends multiyear for all three segments?

[Jack Vander Aarde, SVP, Senior Research Analyst at Maxim Group]

Or are some of those more events driven and as we go? Just help me understand the order book between the segments.

[Justin Kenna, CEO & Executive Director at GameSquare Holdings]

Yes, for sure. So we have an enterprise sales team that is going to market as GameSquare, which has really been a focus of ours over the last twelve months, and I think we're starting to really see the results. So we have, obviously, specialists within that team. But we are seeing a lot more opportunities come into the group. And I think what it does is it's taking maybe smaller 6 figure transactional type opportunities into longer term 7 figure plus opportunities that provide cross sell across the business, right, because we're going to brands as game square with a complete end to end solution and helping them solve whatever problem that might be and whether that's data and analytics, whether it's a media need, whether it's a live campaign event and so forth, we're finding that, that is really resonating.

[Justin Kenna, CEO & Executive Director at GameSquare Holdings]

We do have specialists within the three areas and we certainly have a really robust pipeline, I would say, across those three businesses. The easiest way to probably think about that, I think as I kind of touched on within the SaaS business, we've seen really healthy kind of growth year on year, nice margin business. The challenge there is how do you get to scale. I think we're solving for that. I think you'll see that this year with deals like Cap There's a couple of others.

[Justin Kenna, CEO & Executive Director at GameSquare Holdings]

I think you'll see sort of announce to market over the coming months that are going to really sort of pour gasoline on that part of the business. That pipeline is really strong. We've brought in a couple of guys, Rick and Bobby and our managed services team are doing a fantastic job. We actually have a couple of other hires that we're looking at just really bolster our commercial team and continue growing there. But you'll certainly see a lot of growth there.

[Justin Kenna, CEO & Executive Director at GameSquare Holdings]

I think our agency and events businesses really work hand in hand. So our experiences team that we touched on has really benefited from our agency team and their in-depth relationship with Epic Games, with ESPN and what we're doing now instead of just creating strategy and content and campaigns We're now also developing and building and producing live events. So we're seeing the combination of those business units as being really fruitful and we expect that to continue. And then finally, FaZe Sports, I think the secret sauce there has really just been focusing on the value that, that eSports business brings.

[Justin Kenna, CEO & Executive Director at GameSquare Holdings]

I touched on it a little bit before, but prior Faze Esports was a bit of a secondary thought within the Faze ecosystem, right, because it was one business and a lot of the focus was really around the talent rather than the Esports business. We've had a lot of success and we had a lot of growth. Our commercial team really focusing on the growth of Complexity, which is a much smaller brand than FaZeGlen. We achieved 220% of revenue growth over the three years that we own Complexity. We took it from quite a large burn to breakeven in that time.

[Justin Kenna, CEO & Executive Director at GameSquare Holdings]

And we're already seeing the success of that within PhaseClient, right? And that is our commercial team really going out and focusing on that segment, and bringing large opportunities. And I certainly think that our headquarters in Dallas, bring a lot of commercial opportunities as well, right? We've got a lot of brands that are interested in certain programming opportunities. I mentioned the naming rights deal.

[Justin Kenna, CEO & Executive Director at GameSquare Holdings]

We're building out podcast studio and really a hub for innovation and content creation. And there's a lot of opportunities to really monetize there as well. So, overall, GameSquare, we have a really robust pipeline. I think the pleasing part of it is it's not all pipeline, right? We have more locked in revenue than ever.

[Justin Kenna, CEO & Executive Director at GameSquare Holdings]

And as I mentioned, I feel really confident as we talked about that Q2 is going to be really outsized and a major inflection point for us because of the deals that are Ally or beyond, that I think we'll be able to announce the market here really soon.

[Jack Vander Aarde, SVP, Senior Research Analyst at Maxim Group]

Excellent. And maybe just one more. I'd like to get your thoughts just this is a big year for the gaming industry as a whole. Just any color, anything you can touch on that you see opportunities or catalysts with some of these kind of flagship launches that are coming out. We just saw Nintendo Switch come out, the latest one, and GTA is on track.

[Jack Vander Aarde, SVP, Senior Research Analyst at Maxim Group]

Just any of these big announcements or anything in the industry that you're looking at and saying, hey, that's an opportunity for upside or that gets you excited or that's not baked into your plan, or things that are just that you're just thinking about? I mean, great to know. Thanks.

[Justin Kenna, CEO & Executive Director at GameSquare Holdings]

Yes, it's a great question. I think there's been a little bit of a lull, right, in terms of new game launches. And certainly, think that this year is going to be an exciting one with GTA, as you mentioned. I think for us, the way that we're looking at it is opportunity, I think, is around a lot of the IP pieces. So we're continuing to provide great services to publishers and brands when they want to connect with audience.

[Justin Kenna, CEO & Executive Director at GameSquare Holdings]

But something that 've seen really developed for us is the opportunity to co own IP that we can really generate incremental revenue fraud. And some examples of that is NFL for the fans, like a piece of IP that we own with the NFL. I think the other one is SpongeBob SquarePants is a piece of IP that we're working on with Paramount to take over the license there, from a gaming perspective, I think for us, the opportunity is to continue to grow that part of our business to take advantage of things like GTA and like these metaverse style opportunities to build out games that we can directly monetize and drive audience to rather just providing services. I think the gaming space more broadly is probably crying out for some of these big launches. So I think it is a really exciting year to your point there.

[Justin Kenna, CEO & Executive Director at GameSquare Holdings]

We're continuing to see just a lot more sort of indie publishers coming to the space, which I think again provides more opportunity, continued growth within blockchain gaming. And really, think a major comeback for esports, right? I think there's been a lot of negative press around esports because of some of the large valuations that existed coming out of COVID. But we're seeing audience numbers continue to rise. We're seeing continued investment certainly with Esports World Cup, we touched on the amount of prize money that exists, but even just more broadly and globally.

[Justin Kenna, CEO & Executive Director at GameSquare Holdings]

So we see a big opportunity there as well. I think it's going to be a major year for the space. The numbers all indicate that. I think we're really well positioned to sort of take advantage of a lot of dollars that are floating into the ecosystem.

[Jack Vander Aarde, SVP, Senior Research Analyst at Maxim Group]

Excellent. Well, I appreciate the color. I guess we'll talk again in May when you report the first quarter. Thank you.

[Operator]

This concludes the question and answer session. I would like to turn the conference back over to Justin Kenner for any closing remarks. Please go ahead.

[Justin Kenna, CEO & Executive Director at GameSquare Holdings]

Thank you again. Thanks everyone for joining today's call. I think it's been a challenging period in the markets. And certainly from our perspective, we're very appreciative of our shareholders and the patience that they have and have shown. We're certainly extremely bullish that 2025 is a major inflection point for our business.

[Justin Kenna, CEO & Executive Director at GameSquare Holdings]

We touched on the fact that we've really cleaned up our balance sheet and that we are really knocking on the door here of profitability, which I think we haven't sort of shied away from the fact that we know that, that is extremely important and again, sort of a major inflection point for us as a business. So we're certainly looking forward to getting a few of these announcements out to the market. We're certainly looking forward to continue to sort of get some runs on the board here and certainly share with you our progress throughout 2025 and provide a lot of value to shareholders. So just want to really genuinely thank everybody for their support. And yes, we're really excited for 2025 and what's ahead for GameSquare.

[Justin Kenna, CEO & Executive Director at GameSquare Holdings]

So thanks, everybody.

[Operator]

This concludes GameSquare's twenty twenty four fourth quarter financial results conference call. You may now disconnect your lines. Thank you for participating, and have a pleasant day.

Participants

Executives

• Justin Kenna, CEO & Executive Director
• Michael Munoz, CFO

Analysts

• Greg Gibas, Vice President & Senior Research Analyst at Northland Securities, Inc
• Jack Vander Aarde, SVP, Senior Research Analyst at Maxim Group