GameSquare Holdings, Inc. (NASDAQ: GAME) announced a record third-quarter revenue of $26.4 million for 2024, marking a 10% year-over-year increase compared to pro forma results from the same period last year. The esports and digital media company reported significant improvements in adjusted EBITDA losses.
“GameSquare delivered strong third-quarter financial results that were in line with our pre-announcement,” said Justin Kenna, CEO of GameSquare. “These results reflect the strategies underway to drive organic sales growth, complete the integration of our recent acquisitions, and build a profitable organization.”
Financial Highlights
- Revenue: Increased to $26.4 million from $24.0 million in Q3 2023 on a pro forma basis.
- Gross Profit: Rose to $5.2 million, up from $3.4 million in the prior year.
- Gross Margin: Improved to 19.8%, compared to 14.0% last year.
- Operating Expenses: Reduced to $8.9 million, or 33.8% of revenue, down from $13.8 million, or 57.4% of revenue.
- Adjusted EBITDA Loss: Narrowed to $2.2 million from a loss of $10.4 million in Q3 2023.
The company also reported a 500 basis-point expansion in gross margin and an 11.1% reduction in operating expenses sequentially. Adjusted EBITDA loss improved by $3.2 million compared to the previous quarter.
Strengthened Financial Position
GameSquare announced a new $10 million convertible note with an entity controlled by Matt Kalish, co-founder and President of DraftKings North America. “This new capital, combined with over $11 million of cash on our balance sheet at September 30, 2024, provides us with increased flexibility to pay down our existing equity line facility and take advantage of opportunities to accelerate revenue growth in the fourth quarter and beyond,” Kenna explained.
Operational Momentum
The company expects 2024 to be a record year, forecasting annual pro forma revenue between $105 million and $110 million. GameSquare anticipates ending the year with:
- Record Revenue
- Record Backlog of Committed Revenue
- Higher Number of Customers on Retainer
- Growing Pipeline
“Positive momentum is growing across our business as more brands recognize the value of our next-generation media platform,” Kenna stated. “Our interconnected media, creative, and technology capabilities continue to provide brands with best-in-class solutions to connect and engage with youth audiences at scale.”
Strategic Moves and Cost Reductions
Since acquiring FaZe Clan in March 2024, GameSquare has removed approximately $17 million of annualized costs when comparing the third-quarter results year-over-year. The company expects to eliminate additional costs during the fourth quarter.
Challenges and Outlook
Despite the positive trends, GameSquare acknowledged ongoing challenges, including an accumulated deficit of $95.8 million as of September 30, 2024. The company has not yet realized profitable operations and had a working capital deficiency of $16.6 million.
However, management remains optimistic. “We believe 2025 will be a strong year of growth and significantly improved profitability,” according to Kenna.
Recent Developments
On November 13, 2024, GameSquare entered into agreements to issue senior secured promissory notes totaling $13.25 million, aimed at repaying existing obligations and providing working capital. Additionally, the company entered into a standstill agreement with YA II PN, Ltd. to manage outstanding shares and payments, further strengthening its financial position.