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GameSquare Esports Inc. (CSE: GSQ; FRA: 29Q1) (" GameSquare ", " GameSquare Esports " or the " Company "), an international gaming and esports company, today announced its results for the second quarter ended May 31, 2021 (all amounts in CDN dollars, unless otherwise indicated). The Company has scheduled a conference call to discuss its Q2 FY2021 financial results and provide a business update on July 29, 2021, at 8:00am ET (5:00am PT). A complete set of Financial Statements and Management's Discussion & Analysis for the three and six-months ended May 31, 2021 are accessible on SEDAR at www.sedar.com under GameSquare's profile.
Q2 FY2021 Highlights
- GameSquare reported revenue of $1.1 million as Code Red's influencer vertical had another strong quarter, and was up nearly 60% from Q1 FY2021, while talent management revenue grew by 15% versus Q1 FY2021;
- Ended the quarter with $4.3 million of cash on hand;
- Closed an upsized $7.0 million bought deal private placement in March;
- Closed the acquisition of Reciprocity, which includes earn outs for performance of up to US$7 million of revenue and US$1.4 million of EBITDA in the 12 months following the closing of the transaction;
- Announced select customer wins including production of the largest NCAA esports tournament with Van Wagner, The Drew League, and Dexerto;
- Named Tony Hawk and Jordan Belfort as advisors to the Company;
- Announced the passing of board member, Maurice J. Colson; and
- Appointed Paul LeBreux to the Board of Directors.
Subsequent Events to Quarter End
- Acquired 100% of NextGen Tech, LLC. (dba. as Complexity Gaming) (" Complexity "), a leading esports organization and one of only four esports organizations to have an exclusive partnership with Twitch;
- Closed a private placement for US$7.0 million, which was subscribed to and filled by the Jerry Jones family and Goff Capital, the former majority shareholders of Complexity;
- Closed a bought deal financing of $8.5 million led by Canaccord Genuity, Eight Capital, Haywood Securities and Echelon Wealth Partners;
- As at July 26, 2021, the Company had a record cash balance of nearly $15 million;
- Completed the acquisition of Swingman LLC (dba. Cut+Sew and Zoned) (" Cut+Sew/Zoned "), a digital lifestyle marketing agency;
- Appointed Paradigm Sports to GameSquare's advisory board.
Management Comments and Outlook
"Code Red, our esports agency, had another strong quarter, with its ongoing focus on the influencer segment leading to growth of 57% over Q1 FY2021, and its talent management business growing more than15% versus the prior quarter," said Justin Kenna, CEO of GameSquare. "We made rapid progress on our acquisition strategy in Q2 and into Q3. In Q2, we closed the Reciprocity acquisition and have focused on integration and advancing substantial commercial opportunities. The strength of our balance sheet and rapidly expanding platform capabilities has given large customers like Van Wagner the confidence to award us major contracts, including the production of the largest NCAA esports tournament. We expect these internal media, content and execution capabilities to accelerate the monetization of our recently acquired Complexity unit, an outstanding team-based organization."
"The acquisition of Complexity post quarter-end is transformational for GameSquare," added Mr. Kenna. "Adding the Jones and Goff families as major investors and signing an agency of record deal with the Dallas Cowboys is an incredible milestone for GameSquare. As a top tier organization with a world-class CS:GO team, Complexity is a media entity unto itself, generating more than 3.2 billion viewer minutes annually with 3.4 million monthly active unique visitors. While the team is world-class, we are only starting to monetize Complexity's tremendous potential. We believe that the outstanding talent at Code Red, GCN, and Cut+Sew/Zoned, our most recent acquisition, are equipped to accelerate our business objectives of revenue growth and profitability."
"Since going public in October 2020, we have successfully sourced, financed, purchased, and integrated accretive businesses," said Kevin Wright, President of GameSquare. "We have acquired outstanding strategic assets that position us to capitalize on the accelerating growth of esports audiences. We are confident that we have the right mix of businesses and people to be a leader in bridging the gap between global brands and the massive esports audience through our unique blend of digital agency and team-based assets. With a record cash balance of nearly $15 million as of July 2021, we have the capability to invest in the monetization of our core asset portfolio. For the remainder of 2021, our focus will be on operational execution within our portfolio of companies. However, we will continue to look for opportunistic M&A of great companies that operate in the digital agency vertical or are complementary to what we view as one of the most attractive areas of the esports ecosystem."
Financial Review
GameSquare's revenues were $1,106,816 for the three months ended May 31, 2021, and $2,152,071 for the six months ended May 31, 2021. The core business of Code Red showed strong sequential results as the influencer component of the business posted quarterly revenue of $714,808, a sequential increase of 57% over Q1 FY2021 revenue, and talent management revenue grew to $202,571, an increase of over 15% compared to Q1 FY2021.
| Three months ended | Three months ended | Six months ended | Six months ended | |||||||||||
| ($ Canadian) | May 31, 2021 | May 31, 2020 | May 31, 2021 | May 31, 2020 | ||||||||||
| Revenues | ||||||||||||||
| Talent management service | $ | 202,571 | $ | - | $ | 378,356 | $ | - | ||||||
| Influencer promotional fees | 714,808 | - | 1,170,843 | - | ||||||||||
| Consulting fees | 88,520 | - | 501,955 | - | ||||||||||
| Prize income and player revenue | 86,886 | - | 86,886 | - | ||||||||||
| Production revenue | 14,031 | - | 14,031 | - | ||||||||||
| Total Revenues | 1,106,816 | - | 2,152,071 | - | ||||||||||
| Cost of sales | 835,535 | - | 1,761,770 | - | ||||||||||
| Gross profit | 271,281 | - | 390,301 | - | ||||||||||
| Other income | ||||||||||||||
| Interest income | 536 | - | 963 | - | ||||||||||
| Total other income | 536 | - | 963 | - | ||||||||||
| Expenses | ||||||||||||||
| Consulting and management fees | 1,319,870 | 102,419 | 1,844,082 | 186,632 | ||||||||||
| Professional fees | 369,885 | 26,310 | 420,051 | 33,810 | ||||||||||
| General office expenses | 392,946 | 1,294 | 466,710 | 2,258 | ||||||||||
| Travel expenses | 122,582 | - | 122,843 | - | ||||||||||
| Shareholder communications and filing fees | 65,228 | 8,865 | 121,899 | 10,000 | ||||||||||
| Interest expense | 2,418 | 5,773 | 2,452 | 5,773 | ||||||||||
| Bad debt expense | 58,151 | - | 58,151 | - | ||||||||||
| Foreign exchange loss | (26,154 | ) | - | (4,740 | ) | - | ||||||||
| Change in provision for reclamation deposit | - | - | (95,288 | ) | - | |||||||||
| Share-based compensation | 664,961 | - | 758,310 | - | ||||||||||
| Transaction costs | 9,141,820 | - | 9,141,820 | - | ||||||||||
| Amortization | 724,637 | - | 848,141 | - | ||||||||||
| Total expenses | 12,836,344 | 144,661 | 13,684,431 | 238,473 | ||||||||||
| Loss for the period before income taxes | (12,564,527 | ) | (144,661 | ) | (13,293,167 | ) | (238,473 | ) | ||||||
| Income tax (recovery) | (186,285 | ) | - | (225,329 | ) | - | ||||||||
| Loss for the period | (12,378,242 | ) | (144,661 | ) | (13,067,838 | ) | (238,473 | ) | ||||||
| Other comprehensive income | ||||||||||||||
| Items that will subsequently be reclassified to operations: | ||||||||||||||
| Foreign currency translation | (337,283 | ) | - | (220,664 | ) | - | ||||||||
| Total comprehensive loss for the period | $ | (12,715,525 | ) | $ | (144,661 | ) | $ | (13,288,502 | ) | $ | (238,473 | ) | ||
| (Loss) profit for the period attributable to: | ||||||||||||||
| Owners of the parent | (12,383,998 | ) | (144,661 | ) | (13,073,594 | ) | (238,473 | ) | ||||||
| Non-controlling interest | 5,756 | - | 5,756 | - | ||||||||||
| $ | (12,378,242 | ) | $ | (144,661 | ) | $ | (13,067,838 | ) | $ | (238,473 | ) | |||
| Basic and diluted net loss per share | $ | (0.12 | ) | $ | (0.01 | ) | $ | (0.16 | ) | $ | (0.01 | ) | ||
| Weighted average number of common shares outstanding - basic and diluted | 106,555,112 | 20,000,000 | 79,659,921 | 20,000,000 | ||||||||||
Conference Call Details
CEO Justin Kenna and President Kevin Wright are scheduled to host a conference call for the investment community to discuss the financial results for the three months ended May 31, 2021. Analysts and interested investors can join the call via the details below:
Date: Thursday, July 29, 2021
Time: 8:00am ET (5:00am PT)
Phone: 1-800-319-4610 (Toll-free, USA and Canada); 604-638-5340 (Canada); 0808-101-2791 (UK)
A replay will be available until August 12, 2021 by dialing 1-800-319-6413 or 1-604-638-9010 and entering passcode 7460.
About GameSquare Esports Inc.
GameSquare Esports Inc. is an international gaming and esports company headquartered in Toronto, Canada. The Company is seeking to acquire additional assets and entities serving the gaming and esports markets and, more broadly, in sports and entertainment. GameSquare owns a portfolio of companies including Code Red Esports Ltd. (" Code Red "), an esports talent agency serving the UK, Reciprocity Corp. (" Reciprocity "), which provides the Company access to Asia, Latin America and North America, NextGen Tech, LLC (dba as Complexity Gaming), a leading esports organization operating in the United States, and, most recently, Swingman LLC (dba Cut+Sew and Zoned), a gaming and lifestyle marketing agency based in Los Angeles, USA. Reciprocity's gaming and esports assets include: a CrossFire franchise in China that it owns with its partner LGD Gaming, a 40% interest in a League of Legends team that competes in Latin America, and its wholly owned subsidiary corporation, GCN, Inc. (" GCN "), a digital media company focusing on the gaming and esports audience based in Los Angeles, USA.
Contact
For further information, please contact Nikhil Thadani, Investor Relations for GameSquare Esports Inc.:
Nikhil Thadani
Email: IR@gamesquare.com
Phone: (416) 930-2949
Forward-Looking Information
This news release contains "forward-looking information" and "forward-looking statements" (collectively, " forward-looking statements ") within the meaning of the applicable Canadian 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 ability to integrate and monetize its core asset portfolio, particularly Complexity, to accelerate its business objectives of revenue growth and profitability, to capitalize on the accelerating growth of esports audiences, to be a leader in bridging the gap between global brands and esports audiences, and to continue to build a pipeline of strategic acquisition targets in esports and sports and entertainment more broadly; the content of the conference call; the business and operations of the Company; and the Company's ability to execute its business plan. Forward-looking statements are necessarily based upon a number of estimates and assumptions that, 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: general business, economic, competitive, political and social uncertainties. There can be no assurance that such 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.
Neither the Canadian Securities Exchange (" CSE ") nor its Market Regulator (as that term is defined in the policies of the CSE) accepts responsibility for the adequacy or accuracy of this release.
