Release Date: August 22, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- 71% increase in revenue relative to the same quarter in 2023.
- 52% improvement in adjusted earnings driven by strong revenue growth and strategic cost management.
- Successful acquisitions of Movistar Riders and KOI, enhancing market presence and financial performance.
- Strong partnerships with leading esports publishers and tournament organizers, providing industry influence.
- Significant expansion in strategic partnerships with global brands like Monster Energy and CUPRA.
Negative Points
- 31% increase in operating expenses, primarily due to one-time integration expenses and ongoing operational costs.
- Adjusted EBITDA still shows a loss of $1.2 million, despite improvements.
- Ongoing discussions with Riot Games for a new model for the League of Legends esports ecosystem, indicating potential uncertainties.
- Dependence on digital merchandise sales and sponsorships for revenue growth, which may be volatile.
- High competition in the esports industry, requiring continuous innovation and investment.
Q & A Highlights
Q: Can you elaborate on the revenue growth drivers for this quarter?
A: (Rikesh Shah, CFO) The 71% increase in revenue was driven by the full-quarter contribution from the acquisitions of Movistar Riders and KOI, strong performance from our Movistar KOI team in the VALORANT Champions Tour EMEA, and increased fan engagement and viewership.
Q: What impact did the new Call of Duty League agreement have on your financials?
A: (Adam Adamou, CEO) The new agreement eliminated over $35 million in outstanding entry fees and resulted in a $2.7 million cash termination payment. This significantly strengthened our financial position and opened new revenue opportunities, particularly through digital in-game merchandise and licensed third-party tournaments.
Q: How are the recent acquisitions contributing to your financial performance?
A: (Adam Adamou, CEO) The acquisitions of KOI and Movistar Riders have expanded our operational capabilities and contributed meaningfully to our financial results. These acquisitions have positively impacted our revenue and adjusted earnings, and we expect continued positive returns in the second half of the year.
Q: Can you provide more details on your cost management strategies?
A: (Rikesh Shah, CFO) Operating costs increased by 31% due to one-time integration expenses for the acquisitions and ongoing operational costs for the newly acquired teams. However, we continue to manage overall costs to drive efficiencies and support revenue growth, resulting in a 52% improvement in adjusted EBITDA year over year.
Q: What are your future plans regarding the League of Legends esports ecosystem?
A: (Adam Adamou, CEO) We are currently in discussions with Riot Games to finalize a new model for the League of Legends esports ecosystem. We expect these discussions to be completed by the end of the year and will provide more updates soon.
Q: How is your digital merchandise strategy performing?
A: (Adam Adamou, CEO) Our digital merchandise strategy is performing exceptionally well. Toronto Ultra leads all Call of Duty League teams in digital merchandise sales by units and revenue in 2024. Our percentage share of this revenue stream is set to grow in 2025 and 2026.
Q: What are the key achievements of your esports teams this quarter?
A: (Adam Adamou, CEO) Our teams have performed exceptionally well. Toronto Ultra placed third in the Call of Duty League, Toronto Defiant is virtually undefeated in North America, and our League of Legends team, MAD Lions KOI, is set to compete in the LEC championship. Additionally, our Counterstrike 2 team qualified for the first-ever Counterstrike 2 major.
Q: Can you discuss the impact of new strategic partnerships?
A: (Adam Adamou, CEO) We secured new collaborations with global brands like Monster Energy, CUPRA, MOUZ, and OWO. These partnerships are a testament to the strength of our brand and our ability to attract leading companies, enhancing our market presence and fan engagement.
Q: What is your current cash position and how does it support your strategy?
A: (Rikesh Shah, CFO) Our cash position as of June 30, 2024, stood at $9.2 million. This ensures we have the financial flexibility to continue executing our strategy with fiscal discipline. Additionally, the $9.8 million gain from the termination of the Call of Duty League franchise obligation further strengthens our financial position.
Q: What are your expectations for the second half of the year?
A: (Adam Adamou, CEO) We expect continued positive returns from our strategic acquisitions and strong performance from our core business operations. Our focus will remain on driving revenue growth, managing costs efficiently, and expanding our market presence through strategic partnerships and digital merchandise sales.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
