Q2 2025 Earnings Conference Call Transcript

Chief Executive Officer

Chief Financial Officer

Good afternoon and thank you for joining us for the GameSquare Holdings 2025 Second Quarter Conference Call.

On the call today, we have Justin Kenna, GameSquare's CEO; Lou Schwartz, President; and Mike Munoz, CFO.

During the call, all participants are in listen-only mode. Following the presentation we will conduct a question-and-answer session.

Before Management discusses the results, I'd like to remind everyone that certain statements in 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-Q for the quarter ended June 30, 2025, 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.

Thank you and good afternoon to everyone joining us on today's call.

Twenty twenty-five is on track to be a transformative year for GameSquare as we aggressively execute against a bold vision aimed at building a leading digital-first platform at the intersection of media, technology, gaming and onchain finance. While our roots are in media, technology and gaming and those businesses continue to deliver strong revenue and operational performance, we have also recently launched a differentiated crypto-native treasury management strategy.

Since its official launch in July using the August 13, 2025, closing price, our treasury strategy has already generated over $19 million in unrealized gains, and we now hold 15,630 ETH with a current market value of $74.3 million. We believe GameSquare is one of only a few companies globally that combines a proven high-performing operating business with a large-scale, actively managed Ethereum

treasury. This unique model positions us to capture meaningful appreciation and yield from our crypto strategy while leveraging the financial and operating performance of our core businesses.

Our operating businesses and onchain treasury management strategy are complementary. In fact, our growing onchain presence is beginning to fuel new opportunities in our operating business, creating the potential for a powerful growth flywheel.

Our strategy is also designed to smooth the volatility of the crypto market by balancing it with consistent diversified revenue streams. Over time, the cash flow and value creation from our treasury activities are expected to fund additional ETH purchases, opportunistic share repurchases, and reinvestment in our core businesses. With over $71.5 million in trailing 12-month revenue and a scalable onchain model built for both growth and resilience, this structure sets GameSquare apart and creates an extremely compelling value proposition for our shareholders.

With this, I'll jump into our operating performance before I share our early observations from the launch of our treasury management strategy in the third quarter.

As we stated on our first quarter earnings call, our priorities this year are focused on achieving profitability, streamlining operations and driving higher-margin revenue opportunities across our core media, technology and gaming businesses. I'm pleased with our progress. On a consolidated basis, we've reduced SG&A expenses by 15% and expanded gross margin by 120 basis points, driving a 16% improvement in Adjusted EBITDA year-over-year.

Additional restructuring efforts are underway, and we've identified a further $5 million in annualized savings and are expected to begin contributing in the third quarter. We also anticipate stronger gross margin in the second half of the year, supported by higher seasonal revenue and a more profitable mix of business.

During the second quarter, we completed the divestiture of FaZe Media, selling our remaining 25.5% stake back to its founders. This valued FaZe Media at over $39 million compared to our original $14 million stock-based acquisition of both FaZe Esports and FaZe Media and further simplifies our business while reducing working capital requirements.

Today, GameSquare operates across four focus areas: SaaS and managed services, agency and media, owned and operated IP, and FaZe Clan Esports. We believe this differentiated end-to-end platform enables deep partnerships with top game publishers and global brands. Our reach into gaming and Gen Z audiences is unmatched, and as brands compete for share in a challenging economic environment, we are confident in our ability to grow organically, supported by recent partnerships and a robust sales pipeline.

While consolidated revenue in the second quarter was slightly below expectation due to extended closing timelines of several last deals, we're entering the seasonally strongest part of our year with significant momentum. The demand environment in our agency business is accelerating. Our pipeline is the strongest it's been all year, and many of the opportunities that shifted out of Q2 are now on track to close in the coming months. We expect meaningful sequential growth with Q3 revenue higher than Q2 and Q4 building further on that growth, supported by both new wins and expansion with existing partners. This momentum positions us for a powerful finish to 2025 and a strong launch into 2026.

We are also advancing multiple growth initiatives across the portfolio, including scaling our Managed Services business, launching new products, and expanding owned and operated relationships.

Highlights here include Stream Hatchet saw its largest contract to date, supporting the launch of Monster Hunter Wilds. This week, it also announced a new managed services agreement with Ubisoft to support the launch of Tom Clancy's Rainbow Six Siege. These wins underscore Stream Hatchet's transformation from a pure data analytics provider into a full-service marketing engine, delivering measurable value for customers on a global scale.

During the quarter, Stream Hatchet launched a proprietary AI-based solution that helps game publishers, global brands and agencies connect with Gen Z and Millennial audiences across leading live-streaming and social platforms. This engine uses machine learning to decode creator content, audience sentiment and engagement patterns, enabling brands to identify high-performing influencers and design campaigns with surgical precision.

Within GameSquare Experiences, we've launched a collegiate esports program to engage campuses nationwide in partnership with a national retail chain. In July, GameSquare Experience has successfully produced and managed 100 Thieves' Summer Block Party, further showcasing our ability to execute large-scale high-profile events.

Importantly, the strength of our operating momentum complements our onchain treasury strategy. The same relationships, reach and capabilities driving wins in media, technology and gaming are opening doors with crypto-native companies that see value in our expertise and our access to audience. We are currently in active discussions with more than 15 crypto-native organizations, representing eight-figures of potential deal value that are seeking partners with proven capabilities to help them reach and engage audiences at scale. GameSquare's established operating platform positions us uniquely to meet this demand.

We believe these relationships will not only deepen our presence in the onchain ecosystem but also generate incremental high-margin revenue streams. Based on our current pipeline, we expect initial wins to begin in the third quarter, like our recently announced $2.5 million agency of record win with Azuki and building further into the fourth quarter, creating another powerful growth driver for our business.

Our operating momentum makes this the perfect time to review our emerging onchain treasury strategy, which we officially launched on July 1. Our goal is straightforward: to build one of the most sophisticated yield-generating Ethereum strategies of any public company and to do so alongside a high-performing operating platform. Unlike pure crypto plays, our model is designed to compound value while buffering against volatility. We are pursuing a three-pronged crypto-native growth strategy, which includes: firstly, an Ethereum-based treasury strategy through Dialectic's onchain yield platform targeting annualized yields of 8% to 14%. This kicked off, and we're excited to provide yield results at the end of the month.

Secondly is our financialized art and culture asset strategy that looks to acquire culturally significant digital assets and NFTs targeting 6% to 10% annualized stablecoin yields.

Third and finally, a Web3 operating strategy, leveraging GameSquare's creative agency and gaming businesses to help crypto-native organizations grow global audiences while also adding high potential digital assets and yield opportunities to our treasury. This has already resulted in $2.5 million of high-margin revenue for the back half of the year for our agency of record deal with Azuki.