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GameSquare Holdings Reports 2025 First Quarter Results

1. GAME reported Q1 revenue of $21.1 million, up from $17.7 million. 2. Gross margin rose to 22.8% after completing divestiture of FaZe Media. 3. Adjusted EBITDA loss improved to $3.4 million from $4.1 million year-over-year. 4. Expectations for annual revenue are between $100 million and $105 million in 2025. 5. Anticipating cash operating expenses to reduce by $15 million in 2025.

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Why Bullish?

Increasing revenue and improving gross margins reflect better operational efficiency, similar to past rallies after reducing debt.

How important is it?

Significant improvements in margins and expenses indicate operational recovery, likely enhancing stock attractiveness.

Why Short Term?

Immediate investor reactions to quarterly results suggest a likely short-term price impact.

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FAZEESPOATVI
Thursday, 15 May 2025 04:05 PM First quarter 2025 gross margin, excluding FaZe Media of 22.8%Significant year-over-year improvement in first quarter 2025 adjusted EBITDACompleted remaining divestiture of FaZe Media on April 1, 2025, which is expected to expand gross margin and eliminate approximately $2.5 million in quarterly cash burn going forwardImproved first quarter profitability in line with expectations and supports GameSquare's strategic focus on achieving positive cash flow and adjusted EBITDA in 2025 FRISCO, TEXAS / ACCESS Newswire / May 15, 2025 / GameSquare Holdings, Inc. (NASDAQ:GAME), ("GameSquare", or the "Company"), today announced financial results for the three-months ended March 31, 2025.Justin Kenna, CEO of GameSquare, stated, "Our first quarter financial results were in line with expectations and reflect both the final quarter of FaZe Media's impact on profitability and typical seasonal trends within our agency and programmatic advertising businesses. With the April 1, 2025 divestiture of our remaining 25.5% stake in FaZe Media, we eliminated $10 million in convertible debt from our balance sheet and anticipate an improvement in gross margin and reduction of over $2 million in quarterly operating expenses beginning in the second quarter of 2025. We continue to own 100% of FaZe Clan Esports, which contributed to revenue and was accretive to gross margin in the first quarter of 2025. As one of the top global esports teams, we are excited to capitalize on FaZe Clan Esports success and leverage the brand to drive profitable revenue opportunities.""Our SaaS business segment is well positioned for strong growth in 2025, driven by an expanded managed services offering and the integrated capabilities of the broader GameSquare platform. We are also seeing strong momentum in our creative agency business, particularly from successful world-building campaigns and in-person activations," Mr. Kenna continued."As we continue to optimize our operating structure, achieving profitability remains a core objective of our 2025 strategy. In the first quarter, we significantly improved proforma, adjusted EBITDA from the same period a year ago reflecting a significant reduction in operating expenses. We expect to benefit from higher gross margin and additional cost-saving measures throughout the year. Based on the progress made in the first quarter, we believe we are on track to organically grow sales, and improve profitability in 2025 and beyond," concluded Mr. Kenna.Three months ended March 31, 2025, compared to March 31, 2024Revenue of $21.1 million, compared to $17.7 millionGross profit of $3.3 million, compared to $3.4 millionNet loss attributable to GameSquare of $5.2 million, compared to a net loss of $5.3 millionAdjusted EBITDA loss of $3.4 million, compared to a loss of $4.1 millionAdjusted EBITDA loss was 16.1% of revenue, versus 23.3% of revenue last yearReported results for the three months ended March 31, 2025, compared to proforma* results for the three months ended March 31, 2024Revenue of $21.1 million, compared to $23.5 millionGross profit of $3.3 million, compared to $3.7 millionOperating expenses of $8.6 million, or 40.7% of revenue, compared to $11.6 million or 49.3% of revenue last yearAdjusted EBITDA loss of $3.4 million, compared to a loss of $7.9 million last yearAdjusted EBITDA loss was 16.1% of revenue, versus 33.7% of revenue last year* Proforma financial results for the three months ended March 31, 2024, removes Complexity from GameSquare's financial statements and includes a full quarter contribution of FaZe Clan2025 Annual GuidanceAnnual proforma revenue in 2025 between $100 million to $105 millionAnnual gross margin of approximately 20% to 25% benefiting from a more profitable mix of revenue and the April 1, 2025, FaZe Media divestitureGameSquare expects annual cash operating expenses in 2025 to improve by approximately $15 million from cash operating expenses in 2024 of $35 million, as a result the FaZe Media divestiture and a continual focus on reducing operating expenses and driving efficienciesEBITDA and cash flow to improve throughout 2025 with positive EBITDA and cash flow in the second half of 2025Conference Call DetailsJustin 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: May 15, 2025Time: 5:00 pm ETWebcast: https://event.choruscall.com/mediaframe/webcast.html?webcastid=BU7rSscHCorporate ContactLou Schwartz, PresidentPhone: (216) 464-6400Email: [email protected]Investor RelationsAndrew BergerPhone: (216) 464-6400Email: [email protected]Media RelationsChelsey Northern / The UntoldPhone: (254) 855-4028Email: [email protected]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 Esports, 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 InformationThis 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.Consolidated Balance Sheets(Unaudited)March 312025December 31,2024AssetsCash$4,675,226$12,094,950Restricted cash1,137,7351,054,030Accounts receivable, net18,305,78621,330,847Government remittances150,529119,721Promissory note receivable, current475,994379,405Prepaid expenses and other current assets1,060,9821,493,619Total current assets25,806,25236,472,572Investment2,199,9092,199,909Promissory note receivable9,307,9799,212,785Property and equipment, net266,548303,950Goodwill12,704,97912,704,979Intangible assets, net15,099,76515,265,736Right-of-use assets2,394,4322,570,516Total assets$67,779,864$78,730,447Liabilities and Shareholders' EquityAccounts payable$23,559,503$27,349,372Accrued expenses and other current liabilities10,647,15413,694,179Players liability account47,53547,535Deferred revenue2,734,0632,726,121Current portion of operating lease liability756,524748,916Line of credit2,851,1753,501,457Promissory note payable, current2,786,083-Convertible debt carried at fair value1,641,9546,481,704Warrant liability8,99114,314Arbitration reserve143,791199,374Total current liabilities45,176,77354,762,972Convertible debt carried at fair value10,217,8089,908,784Operating lease liability1,871,0092,054,443Total liabilities57,265,59066,726,199Commitments and contingencies (Note 14)Preferred stock (no par value, unlimited shares authorized, zero shares issued and outstanding as of March 31, 2025 and December 31, 2024, respectively)--Common stock (no par value, unlimited shares authorized, 38,825,619 and 32,635,995 shares issued and outstanding as of March 31, 2025 and December 31, 2024, respectively)--Additional paid-in capital124,962,870119,441,634Accumulated other comprehensive loss(46,091)(208,617)Non-controlling interest12,924,15514,942,287Accumulated deficit(127,326,660)(122,171,056)Total shareholders' equity10,514,27412,004,248Total liabilities and shareholders' equity$67,779,864$78,730,447GameSquare Holdings, Inc.Consolidated Statements of Operations and Comprehensive Loss(Unaudited)Three months ended March 31,20252024Revenue$21,109,659$17,728,224Cost of revenue17,776,60514,335,067Gross profit3,333,0543,393,157Operating expenses:General and administrative5,757,6134,918,630Selling and marketing2,023,3752,221,653Research and development768,966685,153Depreciation and amortization581,795755,449Restructuring charges577,871-Impairment expense--Other operating expenses745,3771,093,420Total operating expenses10,454,9979,674,305Loss from continuing operations(7,121,943)(6,281,148)Other income (expense), net:Interest expense(49,558)(435,128)Loss on debt extinguishment--Change in fair value of convertible debt carried at fair value333,477(106,601)Change in fair value of investment--Change in fair value of warrant liability5,34737,257Arbitration settlement reserve55,58395,125Other income (expense), net(73,780)(117,270)Total other income (expense), net271,069(526,617)Loss from continuing operations before income taxes(6,850,874)(6,807,765)Income tax benefit--Net loss from continuing operations(6,850,874)(6,807,765)Net income (loss) from discontinued operations(322,862)1,546,817Net loss(7,173,736)(5,260,948)Net loss attributable to non-controlling interest2,018,132-Net loss attributable to attributable to GameSquare Holdings, Inc.$(5,155,604)$(5,260,948)Comprehensive loss, net of tax:Net loss$(7,173,736)$(5,260,948)Change in foreign currency translation adjustment162,526553,996Comprehensive loss(7,011,210)(4,706,952)Comprehensive income attributable to non-controlling interest2,018,132-Comprehensive loss$(4,993,078)$(4,706,952)Income (loss) per common share attributable to GameSquare Holdings, Inc. - basic and assuming dilution:From continuing operations$(0.13)$(0.39)From discontinued operations(0.01)0.09Loss per common share attributable to GameSquare Holdings, Inc. - basic and assuming dilution$(0.14)$(0.30)Weighted average common shares outstanding - basic and diluted36,719,71217,368,512Management's use of Non-GAAP MeasuresThis 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 EBITDAWe 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 MeasuresA reconciliation of Adjusted EBITDA to the most directly comparable measure determined under US GAAP is set out below. (Unaudited)Three months ended March 31,20252024Net loss$(7,173,736)$(5,260,948)Interest expense49,558435,128Amortization and depreciation581,795755,449Share-based payments28,998419,228Transaction costs745,3771,093,420Arbitration settlement reserve(55,583)(95,125)Restructuring costs577,871-Change in fair value of warrant liability(5,347)(37,257)Change in fair value of convertible debt carried at fair value(333,477)106,601Gain on disposition of subsidiary298,382(3,009,891)Loss from discontinued operations24,4801,463,074Net loss attributable to non-controlling interest2,018,132-Net loss attributable to non-controlling interest (adjustment for NCI share of add backs to Adjusted EBITDA)(164,561)-Adjusted EBITDA$(3,408,111)$(4,130,321)SOURCE: GameSquare Holdings, Inc.

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