OverActive Media Corp. (OAM) Earnings Call Transcript & Summary

_Good day, everyone, and welcome to OverActive Media's Fourth Quarter Conference Call. [Operator Instructions] This conference call is being recorded, and a replay of today's call will be available on the Investor Relations section of OverActive Media's website. It will remain posted there for the next 30 days. I will now hand the call over to Mr. Babak Pedram, Investor Relations for OverActive Media, for introductions and reading the safe harbor statement. Please go ahead, sir.

Thank you, and good morning, everyone. Welcome to OverActive Media's Fourth Quarter 2024 Earnings Conference Call. A copy of the company's earnings press release is available on Investor Relations section of our website at overactivemedia.com. With us on today's call are Adam Adamou, Chief Executive Officer; and Rikesh Shah, Chief Financial Officer. Today, we'll review the highlights and financial results for the fourth quarter and full year 2024 and recent developments. Unless otherwise specified, all amounts mentioned on today's call are in Canadian dollars. Before we begin, I will read our cautionary note regarding forward-looking information. Certain information to be discussed during this call contains forward-looking statements within the meaning of applicable securities laws, including, among others, statements concerning the company's 2025 objectives, the company's strategies to achieve those objectives as well as statements with respect to management's beliefs, plans, estimates and intentions and similar statements concerning anticipated future events, results, circumstances, performance or expectations that are not historical facts. Such forward-looking statements reflect management's current beliefs and are based on information currently available to management and are subject to several significant risks and uncertainties that could cause actual results to differ materially from those anticipated. Also, our commentary today will include adjusted financial measures, which are non-GAAP measures. These should be considered a supplement, not a substitute for GAAP financial measures. Reconciliations between the two can be found in our MD&A, which is available on sedarplus.ca and our website. At this time, it is my pleasure to introduce Mr. Adam Adamou, Chief Executive Officer of OverActive Media. Adam, please go ahead.

Thank you, Babak. Good morning, everyone, and thank you for joining us. Q4 marks the close of a transformative year for OverActive Media. In 2024, we set out to build a more efficient, more diversified business, and we delivered. We completed two strategic acquisitions, entered new markets, launched new revenue streams, and I'm pleased to share that both acquisitions exceeded the high end of our expectations for revenue and adjusted EBITDA. We reported record Q4 revenue of $9.9 million, contributing to full year revenue of $27 million, which increased by 72% year-over-year. For the full year, adjusted EBITDA improved by 42%, and we reduced our net loss by 9% and realized comprehensive net income of $311,000. Both acquisitions, KOI and Riders were accretive immediately, and we're proud of the progress we've made and the success of the teams being part of the OverActive platform. But the story goes well beyond the numbers. The last 12 months were a year of scaling capability, deepening our global presence and delivering on the ambition we set for ourselves over the past few years. Let me highlight a few areas that define our momentum. Our Live Events business delivered globally. In November, we hosted our first KOIKON in Madrid, our first annual fan event. In January, we welcomed over 12,000 fans to CDL Major I. In June, we're preparing to host the 2025 CDL Championship weekend in Canada, a first for the League. And in just a few days, we'll make League of Legends history by hosting the first ever LEC Roadtrip event in Madrid, welcoming 18,000 fans over 2 days in one of the most ambitious team-led league events ever staged. Second, we expanded into new high-growth markets. We launched our Free Fire team in Mexico, marking our official entry into Latin America and announced our expansion into China with localized Movistar KOI content now live on platforms like Weibo and Bilibili. Third, our commercial momentum continued to build. We signed the first naming rights deal in LEC history with Telefónica, renewed major partnerships with AMD, Bell, SCUF Gaming and added new partners in Monster Energy and CUPRA. Fourth, we strengthened our position inside the leagues. We restructured our LEC franchise agreement, eliminated all future franchise obligations and secured full ownership of our slot. These changes not only improved our balance sheet, but increased our strategic control of the core competitive assets. Each of these achievements reflects our long-term strategy, scale with purpose, diversify revenue and build a business that lasts. We're not just chasing growth. We're laying the foundation for a global sustainable company in one of the most exciting industries in the world. As we look 2025, our focus is clear. Scalability through digital and high-margin verticals, growth in markets where our brands and teams already resonate, profitability through discipline, efficiency and focused execution. We've laid the groundwork. Now it's about impact, delivering for our fans, our partners and our shareholders. With that, I'll hand it over to Rikesh to walk you through the financials in more detail.

Thank you, Adam, and good morning, everyone. Today, I'll briefly review our fourth quarter financial results and our performance for the first 12 months of 2024. Please note that the financial information we discuss today is prepared in accordance with International Financial Reporting Standards and is in Canadian dollars unless otherwise indicated. In the fourth quarter of 2024, OverActive Media delivered record revenues of $9.9 million, representing a 134% increase compared to $4.2 million in the same period last year. This exceptional growth was driven by a combination of expanded lead revenue share, strengthened commercial partnerships and the successful launch of our influencer agency operations, one of several new revenue streams introduced following our acquisitions of Movistar Riders and KOI. The performance of this quarter demonstrates the growing strength of our platform and the successful execution of our strategic expansion. Looking at the full year, revenue reached $27 million, a 72% increase from $15.7 million in 2023. This year-over-year growth was largely powered by the strategic acquisitions we completed in Q1 of 2024, which significantly broadened our geographic footprint in Europe and Latin America, diversified our offerings across merchandise, brand partnerships, influencer activations and live events brought high-performing teams into our portfolio. This result is a more globally integrated and resilient business model. In Q4, our gross profit rose to $5.3 million, up from $3.4 million in the last year. The gross margin came in at 54% compared to the 80% in Q4, 2023. The year-over-year decline in margin was anticipated and primarily reflects the integration of lower-margin business lines such as influencer services and live event production, which were not part of our operations a year ago. Importantly, despite the shift in margin, the absolute increase in gross profit highlights the strength of our revenue engine and validates the scalability of our expanded platform. On a full year basis, gross profit totaled $16.8 million, representing a 62% increase over the $10.4 million we reported in 2023. The gross margin for the year was 62% compared to 66% in the prior year. Again, the decline in percentage was expected given our revolving business mix. That said, the margin remains healthy and demonstrates the continued profitability of our core operations, especially as digital merchandise and brand partnerships grew meaningfully over the year. Operating costs for the fourth quarter was $6.6 million, up 54% from $4.3 million in the same period last year. The increase was primarily driven by additional staffing, infrastructure and content production expenses tied to the full integration of the Movistar Riders and KOI businesses. We also continued investing in the systems and people needed to support our influencer agency and live event functions, key pillars of our future growth strategy. For the full year, total operating costs reached $23.4 million and represents a 37% increase compared to the $17.1 million in 2023. This increase reflects the step-up in headcount production and operational costs that come with expanding our global footprint. It also includes $2.3 million in onetime restructuring and business development expenses that are related to the acquisitions and organizational realignment initiatives. These were purposeful investments aimed at building operational capacity for long-term scalability. While expenses increased in 2024, they were closely aligned with our strategic priorities. Every major investment was tied directly to revenue-generating initiatives or long-term infrastructure that supports scale. At the same time, we continue to track efficiently efficiency opportunities across the organization, ensuring our cost base evolves in parallel with top line growth. This balance between disciplined cost management and aggressive business expansion remains a core part of our operating philosophy as we work towards sustainable profitability. Adjusted EBITDA for Q4 2024 was a loss of $554,000 compared to a loss of $699,000 in the same quarter last year, representing a 21% year-over-year improvement. This quarter-over-quarter progress was driven by improved revenue mix, continued top line growth and early signs of operating leverage as we integrated and scaled new lines of business. On a full year basis, adjusted EBITDA loss was $3.6 million, a 42% improvement over the $6.2 million loss reported in 2023. This performance reflects our ability to absorb integration costs while significantly improving our financial trajectory. It also demonstrates the strength of our revenue model and validates our long-term margin expansion plan. As we continue to optimize operations and scale high-margin segments, we expect continued progress on EBITDA going forward. We reported a comprehensive loss of $1.3 million in Q4 compared to a loss of $768,000 last year, mainly due to foreign currency translation. For the full year, we delivered positive comprehensive income of $311,000, a strong improvement from the $12.2 million loss in 2023. This turnaround reflects solid revenue growth and cost discipline and an $11.5 million gain from eliminating franchise obligations, highlighting the structural progress we've made. Our cash balance at the end of the year was $6.8 million, while net working capital also totaled $6.6 million. While these numbers are slightly lower than the $8.6 million reported at the end of 2023, the year-over-year change primarily reflects the short-term obligations from our acquisitions and investments in corporate operations. Importantly, our liquidity position remains strong, and we remain committed to prudent capital allocation and maintaining flexibility as we scale. We also made a significant structural improvement to our balance sheet during the quarter by restructuring our League of Legends EMEA Championship agreement. This move eliminated all future franchise obligations tied to our LEC slot. In addition to removing long-term liabilities, the restructuring also secured full ownership of our franchise, strengthening our control over core assets and giving us more financial agility as we pursue growth opportunities globally. To wrap up, the fourth quarter and full year 2024 results demonstrate strong momentum across all key areas of the business. We've materially grown revenue, significantly improved EBITDA and expanded our operational footprint in key global markets, all while maintaining discipline and laying the foundation for future profitability. We have now entered 2025 with a more diversified business, a clear road map for margin improvement and the infrastructure to scale efficiently. We remain confident in our strategy and our ability to deliver long-term value to shareholders. That concludes our prepared remarks. I'll hand the call over to Adam for his closing remarks.

Thank you, Rikesh, and thank you for joining us today and for your continued support of OverActive Media. This quarter marks the close of a transformative year for our company. We successfully integrated two acquisitions, restructured our legal obligations and expanded into key global markets. These efforts delivered record revenue, improved EBITDA, delivered positive comprehensive income and reinforced the operational and strategic foundation of our business. With full ownership of our franchises, growing international reach and a more diversified revenue base, we are well positioned to lead the next phase of growth in global esports. Our priorities remain clear: scale with purpose, operate with discipline and deliver long-term value to our shareholders, partners and fans, we have momentum, and we're focused on turning that into lasting success. Before I close, I want to thank Stewart Johnston for his service to our Board. Stewart stepped down this year to pursue a new opportunity, and we are grateful for his contributions and guidance over the years. Thank you, again, for your time and continued support.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect. Have a good day.