GameSquare Holdings, Inc. Q3 FY2024 earnings call

• Completed acquisition of FaZe Clan in March 2024 and made key transactions with FaZe Media, including forming it as a standalone entity, selling a stake, and a new convertible note deal.
• FaZe Clan's subathon in September 2024 was successful with over 1.1 billion impressions, etc.
• Implemented cost reduction efforts, removing ~$17 million of annualized costs and expecting more in Q4 2024.
• Growth strategies include leveraging owned IP, agency, media, and SaaS technology assets, with growth in retainer customers, average contract value, and new campaigns and product launches like Stream Hatchet's AI-powered influencer discovery tool.

On a pro forma basis, revenue increased 10% year-over-year to $26.4 million in the third quarter. FaZe Esports had revenue of $4.8 million in Q3 2024 and contributed positive adjusted EBITDA. FaZe Media is part of the overall business with various transactions and initiatives to drive its success. Gross margin for Q3 2024 was $5.2 million or 19.8% of sales, improving from prior periods.

• Expect to end 2024 with record revenue, backlog of committed revenue, and more retainer customers.
• Believes 2025 will be a strong year for revenue growth and significantly improved profitability.
• Has over $11 million in cash on balance sheet and used part of the new convertible note proceeds to pay down debt and accelerate growth.

Certain statements in the call may be forward-looking with known and unknown risks, uncertainties, and factors that could cause actual results to differ from forward-looking statements, as mentioned in the 10-Q.

Q: Can you speak a bit further into the record backlog you mentioned? Just kind of like what type of revenues does this include? And sort of just get a sense of the margin profile as you guys make strides to increase that gross margin overall?

A: Justin Kenna mentioned that much of the revenue growth in backlog comes from longer-term multiyear deals in agency business, which are higher margin. Growth in SaaS business also contributes to margin expansion.

Q: You mentioned seeing additional opportunity for cost reductions in Q4. Wondering if you could maybe expand on the opportunities you see? And are you able to quantify them in any way?

A: Justin Kenna said it's continued efficiencies, with more cost reductions expected but not at the same rate as Q2/Q3. Profitability will come from increased revenue and margin, with growth in higher-margin areas like agency and SaaS.

Q: Regarding the record backlog and current pipeline, those larger number of 7-figure deals that are entering the pipeline, what segments or categories are you seeing them in?

A: Justin Kenna said it's a healthy mix across the business, including FaZe Esports with exciting opportunities, FaZe Media, and agency business, with opportunities to expand with existing clients and cross-sell/upsell within client groups.