Earnings Call Transcript - GAME Q1 2026

Operator, Operator

Good afternoon, and thank you for joining us for the GameSquare Holdings 2026 First Quarter Conference Call. On the call today, we have Justin Kenna, GameSquare's CEO, and Mike Munoz, CFO. Before management discusses the results, I would like to remind everyone that certain statements on this call may be forward-looking in nature. 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-K for the quarter ended March 31, 2026, 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

Thank you, and good afternoon to everyone joining us on today's call. GameSquare is off to a solid start in 2026. Our first quarter results were in line with our expectations during what is typically the seasonally slowest period of the year, and we're excited by the momentum we're seeing across our platform. Our performance reflects the organic contribution of the integrated business that we've built as well as the early benefits of recent acquisitions, including Click, our creator marketing and talent business and TubeBuddy, our AI-enabled software and workflow platform for creators and brands. We believe these acquisitions have meaningfully expanded our position in the creator economy, providing our customers with a single entry point for reaching these audiences. Click gives us a deeper ability to identify, manage, deploy and monetize high-value creators for brand and publisher campaigns, while TubeBuddy adds a scaled technology layer that supports creators and digital publishers with workflow analytics, optimization and AI-enabled tools. Together, these capabilities strengthen our ability to connect brands, creators, publishers and audiences through a more complete and differentiated platform. We are seeing clear evidence that GameSquare's platform is resonating with larger clients and driving bigger opportunities. Within GSX and our broader agency business, average deal size is increasing with 70% of programs now over $200,000, and we've doubled the number of $1 million-plus opportunities. These are larger programs and larger clients, and they are increasingly pulling in multiple parts of our ecosystem, including creators, content, media, data, experiential production and live activations. Importantly, we believe that this validates GameSquare's strategy to serve as a gateway into the creator economy, combining proprietary data, technology, creator relationships and gaming expertise to help brands reach digital native audiences in more authentic, measurable and scalable ways. We are also continuing to execute a disciplined capital allocation strategy focused on driving growth, improving profitability and creating long-term shareholder value. That includes investing behind the areas of the business where we see the greatest return potential, pursuing strategic M&A and evaluating opportunistic share repurchases when we believe that the market is not appropriately valuing our business. We continue to expand the talent, technology and capabilities that make GameSquare unique. The recent addition of Justin Miclat as Chief Growth Officer of Click, together with the signing of leading creators such as Steak and others, further strengthens our position at the center of the creator economy. Combined with Click and TubeBuddy, these additions enhance our ability to scale high-value talent, create new monetization opportunities and deliver more integrated solutions for brand partners. We are excited with the direction that we're headed and believe that GameSquare is increasingly well positioned to deliver against our 2026 plan. With that as a background, I'll use my time today to review our first quarter performance, discuss the progress that we're making across the business and provide an update on our expectations for the year ahead. During the first quarter, we executed against several important strategic priorities and delivered strong financial results that were in line with our expectations. Reported revenue on a year-over-year basis increased by 95% and gross profit dollars expanded year-over-year by nearly 77% or by $2.4 million. The combination of revenue growth and higher gross profit continues to support the development of a more scalable financial model. Along these lines, we also improved our first quarter adjusted EBITDA loss year-over-year on a pro forma basis. Including the contribution from TubeBuddy, our adjusted EBITDA loss was just $656,000, which was consistent with our expectations for the seasonally slowest quarter of the year. Importantly, these results demonstrate the continued progress that we're making toward a full year of profitability. As a reminder, in February 2026, we announced the acquisition of TubeBuddy from BetLabs in an all-stock transaction. TubeBuddy provides powerful search engine optimization, workflow analytics and productivity tools powered by proprietary AI, which are used by creators and digital publishers to grow, manage and monetize their content. The acquisition adds a scale creative technology layer to our technology platform, which we believe will accelerate our strategy to build an integrated ecosystem, spanning content, community, data and performance marketing. Importantly, the accretive acquisition of TubeBuddy demonstrates the evolution of our M&A strategy. As our scale increases and our capabilities expand, we are focused on pursuing compelling operating assets that we expect to be accretive to earnings. Just this morning, we announced the appointment of Justin Miclat as Chief Growth Officer of Click and added several major creators to Click's roster, including Steak, the second largest Roblox creator. The newly added talent is expected to generate more than $5 million of incremental annualized revenue while enhancing GameSquare's ability to connect leading creators with global brands through its integrated platform spanning talent management, data analytics, creative services and experiential activations. These additions provide several important benefits to GameSquare. First, Steak and other recently added creators expand our reach. Secondly, Justin brings a proven track record of scaling and monetizing leading digital talent. Thirdly, these additions create profitable creator-driven revenue streams with attractive operating leverage. And finally, they reinforce GameSquare's ability to consistently attract and retain top-tier talent in an increasingly competitive market. Adding high-impact creators materially expands our presence and enhances our ability to drive higher-value brand partnerships, increase campaign volume and improve monetization across our platform. These positive trends reflect the strength of our platform and our ability to consistently attract and retain top-tier talent in an increasingly competitive market. Our integrated platform is driving strong momentum as we provide valuable solutions that connect brands, creators and consumers at scale. One of the clearest examples of this progress was the performance of our GameSquare Experiences division, or GSX, which generated record first quarter 2026 bookings of more than $10 million. This performance was driven by continued demand from leading video game publishers and global brands seeking to connect with Gen Z and digital-first audiences through authentic measurable campaigns. Importantly, GSX currently serves many of the largest video game publishers in the world, underscoring the relevance of our platform within the global gaming ecosystem. GSX is a strong example of how GameSquare's integrated platform is translating into real commercial momentum. The division brings together creators, content data, media strategy, consumer products and large-scale experiential execution to help bridge digital influence with real-world engagement. During the quarter, GSX executed a range of live events, hybrid experiences and digital-first campaigns designed to connect online and offline communities. Other recent customer and partnership wins further validate the growing momentum we are seeing across GameSquare's ecosystem. During the quarter, we announced the fourth annual renewal of Zoned's long-standing partnership with Dairy Max, reflecting the continued value we are delivering to recurring brand partners. We also expanded our partnership with Capcom to support the global launch of Resident Evil Requiem, the newest title in the globally recognized Resident Evil franchise. In addition, we continue to see strong execution across FaZe Esports. FaZe won the Six Invitational 2026, paying over $1 million in prize money, which contributed to revenue in the first quarter. This marks the second consecutive year that FaZe Esports has earned the title of World Champion, and we believe it is powerful validation of FaZe's position at the top of global competitive gaming. Now, on to Q2. Positive first quarter trends recently accelerated, and we are encouraged by the growing momentum we are seeing early in the second quarter and the visibility we are building for the balance of the year. We believe our integrated platform is resonating with brands and publishers as they increasingly look for measurable creative-led solutions that combine digital reach, real-world engagement and authentic connections with Gen Z, Gen Alpha and millennial audiences. Recent wins include the continued expansion of our work with several leading global video game publishers. We've already started multiple new programs that are expected to contribute to second quarter sales, while also building a broader pipeline of opportunities for the second half of the year. These programs reflect the increasing demand we see for GameSquare's ability to combine creative content, live experiences, media, data and production into integrated campaigns that engage both digital and IRL audiences. In addition to the momentum we are seeing with individual publisher programs, we are also building a strong track record helping leading game publishers and brands launch, promote and extend engagement around major titles and gaming communities. This includes identifying and procuring the right creators, developing the creative strategy and helping deploy campaigns across content, media, live experiences and community channels. During the first quarter of 2026, this area of the business generated approximately $2.2 million of revenue. This includes recent programs for Capcom, Ubisoft and other leading game publishers. We expect this to be a major contributor into Q2 and certainly in the back half of 2026. We are also gaining strong traction in what we view as an important IP creation opportunity for brands and publishers. Programs such as Into the Zone for Epic Games and the Roblox creator Showdown demonstrate our ability to develop original repeatable formats that can be monetized across multiple aspects of the GameSquare ecosystem. These properties bring together creators, publishers, brands, content media, live experiences, sponsorships, production and community engagement in a way that creates multiple high-value revenue opportunities across our platform. Importantly, these programs are a strong proof of our land and expand strategy. Across Into the Zone and Roblox creator Showdown, we have developed multiple pieces of IP with our clients, supporting approximately 10 events globally in 2026 and generating approximately $5.5 million of revenue to date. We have already locked in events in the U.S., Germany and London with an event in Brazil coming, highlighting both the global production capabilities we have built and the opportunity to expand successful programs into additional markets, formats and commercial relationships over time. We are also seeing strong momentum at Click. With the recent addition of several high-profile creators, Click is positioned to deliver, what we expect in Q2, to be the largest quarter in its history. The timing of these additions, combined with the appointment of Justin Miclat gives us added confidence in our ability to scale talent, improve monetization and drive higher-value brand partnerships with a focus on the U.S. market. A recent example of Click's growth is the expansion of hungryboy Hot Sauce, the viral hot sauce brand from YouTube Collective of The Boys, which launched in November of 2025 across H-E-B grocery stores and has since expanded to Spencer's and nearly 300 World Market stores. This success highlights our ability to convert creator influence into scalable consumer products, retail distribution and incremental monetization opportunities. We expect to add additional commercially relevant creators to our platform during the second quarter, further expanding a talent ecosystem built to drive brand partnerships, consumer products, content and experiential revenue. Within Stream Hatchet, we recently launched Creative Communities, which is a new way of handling the entire creator marketing process in one place from creative discovery and onboarding to activation and reporting. As campaigns become more data-driven and performance-focused, companies are looking for platforms that can manage creator discovery, drive positive campaign execution and provide performance analytics in a single workflow. Creator Communities represents the next step in Stream Hatchet's evolution from a data analytics platform into a broader creator marketing platform. We expect this new AI-enabled platform to begin generating revenue in the back half of 2026. Finally, we are seeing growth from brands and video game publishers across the globe. This includes meaningful opportunities across the Middle East and Asia within our agency business. As I mentioned before, our events business is producing multiple activations globally that coincide with some of the year's biggest cultural events. In addition, GameSquare will once again be well represented at this year's esports World Cup, which will take place from July to August and will feature a record-breaking $75 million prize pool. As you can see, we believe that we are well positioned for a strong second quarter and an even bigger second half of 2026. We are attracting and retaining leading brand and publisher relationships, scaling creator-led and experiential offerings and converting our position in gaming and youth culture into measurable commercial opportunities. With increasing visibility into the second quarter and the back half of the year, we remain extremely confident in our ability to execute against our full year sales and profitability outlook. Before I turn the call over to Mike, I want to briefly mention our upcoming Annual Meeting of Stockholders, which will be held virtually on June 18, 2026. Stockholders of record as of April 23, 2026, are eligible to vote. Your vote is important. In addition to the routine matters being voted on, stockholders are being asked to approve a proposal that would allow us to restate our certificate of incorporation and make several governance and corporate structure updates. These include eliminating supermajority voting requirements, to amend our certificate of incorporation, declassifying our Board of Directors, increasing the number of authorized shares and making other nonmaterial changes. I want to emphasize that we believe this proposal is important to GameSquare's continued evolution as a public company. Importantly, we understand there may be some misconceptions around the proposal, particularly as it relates to the increase in authorized shares. Increasing authorized shares does not mean these shares are being issued nor does it mean the company is automatically diluting stockholders. Rather, it is intended to provide GameSquare with appropriate flexibility to support our long-term strategy, including potential strategic opportunities, growth investments, balance sheet management and other corporate purposes that may create value over time. We are asking shareholders to take a few minutes to review the proxy materials and vote their shares. Whether you own a large position or a small position, your vote matters and helps ensure your shares are represented at the annual meeting. We appreciate the continued support of our stockholders and encourage everyone eligible to vote to do so as soon as possible. So with this overview, I'd like to turn the call over to Mike to review our 2026 first quarter financial results. Mike?

Michael Munoz, CFO

Thanks, Justin. Our reported results for the first quarter of 2026 reflect the successful strategies underway to drive profitable growth. Comparing our 2026 first quarter reported results to the prior year, total revenue was $14.5 million compared to $7.4 million. The 95% year-over-year increase in revenue was primarily due to the acquisition of Click and TubeBuddy as well as large growth in our marketing agency operating segment. Reported gross margin for the 2026 first quarter was $5.6 million or 38.4% of sales compared to $3.2 million or 42.5% of sales for the same period last year. The slight year-over-year decline in gross margin was due to the change in revenue by product mix. Adjusted EBITDA for the 2026 first quarter was $1.1 million loss compared to $0.6 million loss for the same period last year. The $1.5 million improvement reflects the strategies we are pursuing to drive profitable sales. On a pro forma basis, which includes a full quarter contribution of TubeBuddy, revenue was $15.8 million and pro forma adjusted EBITDA loss was just $0.7 million or 4.2% of pro forma revenue. We believe pro forma sales and adjusted EBITDA demonstrate the accretive contribution TubeBuddy will have on our financial performance. As of March 31, 2026, we had cash and cash equivalents and digital asset treasury assets of $35.9 million. GameSquare has a strong financial position with excellent liquidity to pursue strategic initiatives, invest in our operating platform and return capital to shareholders. With that overview, I'll turn the call back over to Justin.

Justin Kenna, CEO

Thanks, Mike. We continue making progress scaling our business, growing sales and improving profitability. We also remain focused on balancing investment in growth with disciplined actions to create long-term shareholder value. In April, we completed our largest monthly repurchase to date, buying back nearly 2.3 million shares for approximately $1 million at an average price of approximately $0.44 per share. Since initiating the program in October of 2025, we repurchased 3 million shares for approximately $3.5 million at an average price of approximately $0.47 per share. Following April's repurchase activity, we had approximately $11.4 million remaining under our current authorization, which was expanded on April 14, 2026. We believe recent repurchases reflect both the strength of our balance sheet and our conviction that at current trading levels, GameSquare's share price does not reflect the underlying value of the business that we are building. As a result, we expect to remain opportunistic and disciplined in using our authorization while continuing to invest behind the growth opportunities across our platform. We are also positioning the company for our next phase of accelerating growth. We are advancing our talent strategy with the addition of meaningful creator relationships that will add $5 million of incremental annualized revenue to our business. We plan to extend our agency and platform capabilities to drive growth in the U.S. and internationally while pursuing opportunities to expand our reach into some of the largest, most high-profile gaming markets. We believe these actions will drive new revenue streams in 2026 and beyond and further establish GameSquare as a scaled leader in the global creator economy. Based on the momentum we see across the platform, our confidence in the year is increasing, and we are encouraged by how the second quarter is shaping up. On a pro forma basis, which reflects our plans for the TubeBuddy business, we are reiterating our previously announced annual guidance for fiscal year 2026. We expect revenue in the range of $85 million to $90 million with gross margins of 35% to 40% and adjusted EBITDA of over $5 million. Our outlook reflects continued organic growth and improving year-over-year profitability. With the structural efficiencies we have implemented and the operating discipline now embedded across the organization, we believe we are well positioned to scale profitability as the business grows. We are excited about the opportunities ahead and confident in our ability to deliver sustained value for our shareholders. So with this overview, Mike and I are happy to take questions. Operator, please open the call up to questions. Thank you.

Operator, Operator

The first question comes from Jack Vander Aarde with Maxim Group.

Jack Vander Aarde, Analyst

Okay. Good to see all the moving pieces seem to be coming together and congrats on the maintained pro forma outlook. Justin, you covered a lot of ground there. I'm trying to figure out where I want to start. In terms of the events side of the business, it sounds like there are quite a few things mapped out for the rest of this year, with the World Cup coming up as well. With all the new businesses you've acquired, including your agency pipeline, how are you looking at capitalizing on and making the most of your events pipeline, including maybe the World Cup and other major flagship game releases such as GTA down the road?

Justin Kenna, CEO

Yes. I think it's a great question, Jack. GSX was really formed in 2025, and the growth of the GSX business has been incredibly pleasing. It was borne out of an extension of Zoned, our agency business, and the two partners work hand-in-hand: being able to mix digital strategy with in-real-life (IRL) activations has been extremely important. To be able to have multiple locked-in events with Epic Games and Roblox and doing new IP with them on both fronts, not only in the U.S. but also internationally, is incredibly pleasing. To your point around how we think about moving forward, we have a lot of locked-in revenue between those two major publishers, which is exciting. It also includes some activations around the World Cup. That hasn't been announced yet, so it's more of a 'watch this space,' but we certainly do have activity there. We're bolstering our commercial team and getting out in market proactively around many of these large cultural tentpole moments. From the gaming space that includes events like GDC, TwitchCon and other big opportunities, but also outside gaming with the World Cup, NFL, Super Bowl and the Olympics. We've been proactive with inventory in pitching not only our current client base but also new clients, and that's starting to translate into a really healthy revenue pipeline. We're really pleased with how that's progressing. The GSX team working hand-in-hand with Zoned and being able to build out digital strategy and bring it to life with experiential and large IRL activations is very encouraging. I would reiterate that our Q1 numbers are in line with expectations, but there is real seasonality in our business. Much of the activity is picking up into Q2 and the back half of the year. What's really pleasing and why we're so confident is a lot of that revenue is locked in. We're seeing increased activity and a lot of RFPs at the moment, so we think there's real upside. We have healthy locked-in revenue not just around game launches and publisher work, but also around the World Cup and other large cultural moments.

Jack Vander Aarde, Analyst

Okay. Great to hear there. And maybe if I could just shift gears, the digital asset strategy. I'm not sure if you've had a chance to digest, but there was some progress made on the Clarity Act in the news today. Can you maybe just touch on your overall digital asset strategy with Dialectic and kind of any thoughts on looking at digital assets to be integrated throughout your core business?

Justin Kenna, CEO

Absolutely. There have been a few catalysts recently. Towards the end of last year and the start of this year, the markets were hit, and for anybody reviewing the financial statements, the unrealized losses from the fluctuation in those crypto numbers are the large majority of the net loss. We haven't been selling it. As we talked about last time, we sold early on some of our position to pay off our long-term debt. To reiterate, from a long-term debt perspective, we have a very clean balance sheet now. We are bullish on the space and see a number of indicators pointing up. That said, we don't consider ourselves a crypto native holder in the traditional sense. Some entities have acquired Bitcoin and are holding indefinitely. For us, from a balance sheet perspective, it's a cash management strategy. We generate yield off of what we hold through Dialectic. We have a clear strategy to diversify into stablecoins that generate yield and into cash for repurchases or investment in growth assets. Our priority is the operating business while remaining bullish in digital assets. That flywheel approach has benefited the core operating business: we've yielded close to $8 million in revenue and new deals since we launched partnerships with Zuki and other Web3 companies that are trying to access Web2 audiences. We remain bullish. There's a lot of opportunity for our operating business to drive revenue. We have a great relationship with Dialectic, which returns higher-than-market yields. We'll continue to be opportunistic and look at ways to drive value for our shareholders, and we have shown that with repurchases and accretive M&A transactions. We remain bullish in the space, but our priority is the operating business, and we're extremely bullish about our ability to scale that.

Jack Vander Aarde, Analyst

Okay. Great. And maybe if I could just ask one more. And this could be for Mike as well. Just kind of looking at — as your business scales, you're definitely a global business now, and you have a lot of events, a lot of different verticals that you're involved with, especially with these acquisitions now. You touched on the Middle East and Asia. Just curious to get a sense of how material are these other regions in the world? Are we in the early innings of this kind of ramp-up? Just touch on all the different things you're involved with in the Middle East and Asia or just a highlight of a couple.

Justin Kenna, CEO

I can touch on that and Mike can add any color if you'd like. There will be news to come in the near term. We have a strategic partnership in the Middle East with more details to be announced, and I would expect revenue to flow into Q2 and certainly into the back half of the year. Our opportunities in the Middle East are more advanced than those in Asia currently. We are early stage in Asia but actively having discussions with partners on the ground in China, and there are opportunities across multiple facets of our business from esports and partnering with FaZe to licensing that brand into our event capability, which has grown organically through Roblox and Epic and many of the clients we work with who want to activate globally. In terms of meaningful revenue flow and how advanced discussions are, the Middle East is much more advanced than Asia at this stage. We're in very active talks with some of the biggest automotive brands in Riyadh and in the Kingdom, trade shows and airlines. There's a real pipeline there, active conversations, and we expect that to be upside revenue into Q2 and certainly in the back half of the year. I think there are a lot of opportunities in Asia as well, and realistically, I would expect that to be a Q4 and 2027 impact on the P&L.

Jack Vander Aarde, Analyst

Okay. Great. And I said that was my last question. Just one more for clarity. Going forward now, starting with the second quarter, are we now on a steady kind of apples-to-apples basis now given all the acquisitions that have been integrated and divestitures? Is now Q2 a clean compare for the rest of this year?

Michael Munoz, CFO

Q2 will have a full quarter contribution of TubeBuddy, but it's still year-over-year. Q2 of 2025 results will exclude Click and TubeBuddy, so comparisons should take that into account.

Operator, Operator

The next question comes from Greg Gibas with Northland Securities.

Gregory Gibas, Analyst

Justin, you spoke to the broader pipeline of opportunities you're seeing heading into the second half of the year. In terms of maybe annual revenue cadence, is the 40%, 60% split between first half, second half expectations still pretty fair? And maybe tied to that, could you speak to the overall brand campaign spend environment or outlook as we move into your seasonally stronger quarters, perhaps as it relates to demand trends you saw in 2025?

Justin Kenna, CEO

High level, that's the right way to think about things: roughly 40% first half and 60% second half is historically been correct, and we would expect it to be similar. We expect Q2 to be materially larger than Q1 and can confidently say that we've already exceeded revenue for Q1 and Q2 with about six weeks to go. So we're in really good shape. There might be a misconception that the company has gone backwards from a profitable Q4 into Q1. As anyone following the story knows, there's seasonality — Q1 is historically the lowest quarter. We're making progress and a lot of that revenue is locked in. Activity is picking up aggressively. The start of the year was a little slow with some uncertainty in brand spend, but we've seen that pick up enormously over the last couple of months. RFP inflow is up, and there are a lot more activations and campaigns, a lot more activity than this time last year. That is a combination of macro conditions and us growing our team and capabilities. Q2 is shaping up well and the back half of the year is shaping up well. We're on track to hit our numbers. On M&A and capital allocation, our key focus is the core business and getting it to scale. We're proving out the profitability thesis. We will continue repurchases because we believe the shares are undervalued, but getting our operating business to profitable scale is the priority. That said, we're getting a significant amount of inbound on the M&A front. It's very much a buyer's market right now, particularly in our space. There are interesting medium-sized assets in the $10 million to $40 million range that could fit within our ecosystem. We're looking at accretive deals that don't dilute shareholders unfairly. We prefer equity currency in deals given our balance sheet and the market environment, but deals have to be relative value and accretive. We'll remain opportunistic on M&A while being very cognizant of dilution and shareholder value.

Operator, Operator

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

Justin Kenna, CEO

Thank you. I just want to say thanks, everyone, for joining. Q1 is very much in line with where we expected to be. Q2 activity is really pleasing and, if anything, we're a little ahead of where we thought we might be. We are very much on track. We're making great progress, and we're excited to provide updates to all of you. We appreciate the support. Thanks, everyone, for dialing in. Cheers.

Operator, Operator

This brings to a close GameSquare's 2026 First Quarter Financial Results Conference Call. You may disconnect your lines. Thank you for participating, and have a pleasant day.