OverActive Media Corp. ($OAM)

Good day, everyone, and welcome to OverActive Media's Fourth Quarter and Full Year 2025 Earnings 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 over the call to Ms. Kelly Healey, Senior Director of Global Operations at OverActive Media, for introductions and cautionary note. Please go ahead.

Thank you, and good morning, everyone. Welcome to OverActive Media's Fourth Quarter and Full Year 2025 Earnings Conference Call. A copy of the company's earnings press release audited consolidated financial statements and management's discussion and analysis for the year ended December 31, 2025, are available on the Investor Relations section of our website at www.overactivemedia.com and under the company's profile on SEDAR+ at sedarplus.ca. With us on today's call are Adam Adamou, Chief Executive Officer; and Louis Zhang, Chief Financial Officer. Today, we will review the highlights and financial results of the fourth quarter and full year 2025, 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 2026 objectives, the company's strategy to achieve those objectives, the company's ability to secure additional financing and continue as a growing concern 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 a number of significant risks and uncertainties that could cause actual results to differ materially from those anticipated. For a description of these risks, please refer to the company's public disclosure documents filed under its profile at sedarplus.ca. Our commentary today will also include adjusted financial measures, which are non-IFRS measures. These should be considered a supplement, not a substitute for IFRS financial measures. Reconciliations between the 2 can be found on our management's discussion and analysis and our earnings press release, both of which are available on SEDAR+ and our website. At my time, it's my pleasure to introduce Adam Adamou, Chief Executive Officer of OverActive Media. Adam, please go ahead.

Thanks, Kelly, and good morning, everyone. It's good to be on the call with you today. Let me say that 2025 was a year of challenges and a year that showed the resilience of this organization. I'm very proud of what this team is building. We carried a year of integration into our first full year as a combined company. We layered 3 of the biggest live events in our history on top of it, launched 2 new platforms, listed on a new exchange and rebranded one of our most important franchises. It was a lot of work and the team delivered. The headline is that full year revenue reached a company record of $28.5 million, up 5% over 2024. Business Operations revenue grew 34% to $22 million. We did all of that while taking $1.6 million of operating expenses out of the business, even as we absorbed the full year of post-acquisition costs from the March 2024 acquisitions of KOI and Movistar Riders. That's a new operating leverage starting to come through. Live events were a real high point for us in 2025. We hosted 3 major productions, all first of their kind, for the company. In Madrid, we held the first-ever Call of Duty League Major in mainland Europe, drawing more than 12,000 fans. Also in Madrid, we delivered the first-ever LEC on the Road event at Madrid Arena, which drew more than 18,000 fans over the weekend. And in Kitchener Canada, we hosted the Call of Duty Championship Weekend, the first ever champ in Canada, which set an all-time Call of Duty League viewership record of 353,000 peak concurrent viewers. I put what our production team pulled off this year up against anything in the industry. On the commercial side, our partners showed up for us in a big way. Toronto KOI renewed Bell Canada as our exclusive telecommunications partners through 2027, alongside renewals with Monster Energy, AMD, Blacklyte, Red Bull and SCUF Gaming. And we welcomed Little Caesars as a new partner. Movistar KOI signed a new partnership with Ilusiona. Our 2:10 agency signed Pepsi as a key influencer agency partner in Europe, and we launched a North American agency offering anchored by Stonefire. To every one of our partners, thank you for the trust you've placed in this company. We don't take it for granted. We also set up what's next. Our 2:10 influencer agency in its first full year as part of OEM showed strong growth. In Mira, our events and production company expanded its footprint with the launch of San Diego Comic-Con Malaga, where we hold the production rights and manage the gaming arena. On the platform side, Fenix Club Gaming, our first direct-to-consumer subscription product, went live in 2025. It gives our most engaged fans access to merchandise, discounts, early ticketing and exclusive community channels, and it's a really important step in deepening our direct relationship with our audience. ActiveVoices, our AI-powered content localization platform, launched in August. ActiveVoices opened up a recurring high-margin software revenue line that lets creators and brands share content globally with instant translation, authentic dubbing and multi-platform publishing. Both platforms are still very early on in their commercial cycle, but the engagement we're seeing tells us that we're on to something. On the league side, revenues contracted across many of the major leagues we compete in, along with the Esports World Cup. The termination of our VCT EMEA participation agreement during the year added losses tied to contract and player terminations. And our 2024 exit from CS2 meant a sticker revenue from that ecosystem didn't recur in 2025. The increase in our adjusted EBITDA loss for the year is primarily tied to this underperformance on league revenue and game-related micro transactions or MTX. We see upside in 2026 versus 2025 in both league revenue and MTX, but our planning assumes flat growth year-over-year. That makes our push to diversify revenue streams even more important. Having said that, Movistar KOI continues to be our largest line of business, and we remain optimistic about its prospects for growth and profitability. We believe there are opportunities for growth in -- with publishers and leagues, but those opportunities must come with minimum guarantees that deliver a risk-adjusted return on capital for our shareholders. On the corporate side, we listed on the Borse Frankfurt under the ticker 0RB in November 2025, giving European investors a euro-denominated way into the stock. We rebranded Toronto Ultra to Toronto KOI to operate as one team under one global brand, and we strengthened our balance sheet with $2 million in promissory note financing in October, followed by approximately $908,000 in gross proceeds from a private placement in December. The continued backing from our shareholders during a year of build-out means a great deal to me personally and to the team. On the servers, our teams kept showing up in the biggest stages. Movistar KOI captured the LEC Spring Split Championship title and qualified for the 2025 League of Legends World Championship in China, our seventh consecutive world appearance. Toronto KOI placed third at Call of Duty Major 2 in Texas, Major 3 in Florida and the Esports World Cup in Riyadh. To our players and our coaching staff, thank you for the way you represent these brands. You make us all very proud. Now I'll turn the call over to Louis, our CFO, to walk through the financial results in more detail.

Thank you, Adam, and good morning, everyone. The financial information I'll discuss today is prepared in accordance with International Financial Reporting Standards, and all figures are in Canadian dollars unless otherwise stated. I will start with the fourth quarter, then walk through the full year and finish with cash and liquidity. For the 3-month period ended December 31, 2025, total revenue was $7.3 million compared to $9.9 million in the same period in 2024. The decline reflects 2 main drivers. First, Team Operations revenue was lower because the prior year quarter included elevated Call of Duty League team pack sales tied to a specific in-game event that did not reoccur in Q4 2025. Second, Business Operations revenue was lower in the quarter with Q4 2024 having included our KOI Con event in Spain that was not repeated in the current period. Despite the revenue decline, gross margin in the fourth quarter expanded to 61% from 54% in Q4 2024, reflecting a higher share of league-related revenue recognized in the quarter. Operating costs in the fourth quarter were $6.2 million, which is a 6% decrease from $6.6 million in Q4 2024. Savings came from lower Team Operations payroll following the wind-down of Toronto Defiant and our exit from the Counter-Strike ecosystem, partially offset by higher SG&A costs. Adjusted EBITDA loss in the fourth quarter was $1.2 million compared to a loss of $0.6 million in Q4 2024. The Q4 2024 comparable benefited from a onetime $1.7 million noncash gain on the decrease in net present value of franchise obligations tied to the forgiveness of the LEC franchise fee, which again did not reoccur in Q4 2025. Now turning to the full year. Total revenue for the 12-month period ended December 31, 2025, was $28.5 million, a company record, which is a 5% increase compared to $27 million in 2024. Within that, Business Operations revenue grew 34% to $22 million, driven by 3 major live events that Adam had mentioned, growth in our agency business, including the addition of Pepsi and the launch of our North American agency offering, as well as the launch of Fenix Club. Team Operations revenue was $6.5 million, down from $10.6 million in 2024. This was primarily reflected from lower Call of Duty League team pack sales, the elimination of Counter-Strike sticker sales following our exit from that ecosystem, as well as lower Esports World Cup revenue. Full year gross profit was $15.2 million compared to $16.8 million in 2024. Gross margin was 53% for the year compared to 62% in 2024. The decline reflects a mix shift toward Business Operations where live events and agency work carried lower gross margins than league-related Team Operations revenue. Operating costs for the full year were $21.8 million, a 7% decrease from $23.4 million in 2024. The reduction came from cost discipline in Team Operations as well as lower restructuring and business development costs following the integration of KOI and Movistar Riders. This was partially offset by increase in SG&A costs and corporate payroll. Importantly, fiscal year '25 absorbed a full year of operating costs from the acquired businesses compared to only 10 months in fiscal year '24, yet we still delivered a lower operating cost base year-over-year. Loss from operating activities before other items was $6.6 million, essentially flat year-over-year. Adjusted EBITDA loss for the full year was $5.8 million compared to a loss of $3.6 million in 2024. The increase in loss is primarily attributable to lower Team Operations gross profit, which historically carries higher margins. Net loss for the full year was $11.4 million compared to a net loss of $0.6 million in 2024. The much smaller prior year net loss reflected a $11.5 million noncash gain on the decrease in net present value of franchise obligations following the termination of our Call of Duty participation agreement and the forgiveness of our remaining LEC entry fee. Fiscal year '25 does not include a comparable noncash item, which accounts for the majority of the year-over-year change in net loss. Comprehensive loss for the full year was $8.6 million compared to comprehensive income of $0.3 million in 2024. Turning to the balance sheet and liquidity. Cash and cash equivalents at December 31, 2025, were $4.4 million compared to $6.8 million at December 31, 2024. Cash used in operating activities for the year improved meaningfully to $2.4 million compared to $7.7 million in 2024. The lower cash use reflects working capital improvements, including stronger receivable collections. During 2025, the company strengthened liquidity through 2 financing actions. On October 22, the company secured $2 million in gross proceeds through secured promissory notes with entities controlled by members of the Board of Directors. On December 30, the company closed a private placement with gross proceeds of approximately $908,000. Additionally, the company's listing on the Borse Frankfurt in November broadens our access to international capital markets and complements our existing TSXV and OTC listings. Based on the company's current trajectory, management expects that additional funding will be required during the second quarter of 2026 to support working capital needs and to fund expansion across our agency, live events and ActiveVoices business. As disclosed in our audited financial statements and MD&A, these conditions represent a material uncertainty that may cast significant doubt on the company's ability to continue as a going concern. Management is actively pursuing a range of financing options, including operating lines of credit, equity and debt financing and has a track record of successfully raising capital to fund operations and growth. With that, I'll hand the call back to Adam for closing remarks.

Okay. Thanks, Louis. 2025 was a year of operational execution and strategic build-out. We hit record revenue. We grew business operations 34%. We hosted 3 first-of-the-kind live events. We launched 2 new platforms, and we listed on the third exchange to broaden our investor base. I'm proud of what this team accomplished, and I'm even more excited about where this positions us. Looking ahead, 2026 is about margin and cash. We've taken meaningful cost out of the business. Our newer revenue lines are scaling, and we have stronger commercial visibility heading into the year than we've had at this point in any prior year. We expect that combination to drive a step change in operating performance with the goal of putting OverActive on a clear path to profitability. We've already started to build that momentum. We were selected as the official national team partner for Canada and Movistar KOI as the official co-team partner for Spain at the Esports Nations Cup in Riyadh. Movistar KOI signed Idealo and Philips for the 2026 season. And we're bringing LEC -- and we brought LEC Versus to Barcelona with additional Spring and Summer Roadtrip events in Madrid, building on the momentum of our 2025 Madrid Arena event. I want to close with some thank yous because none of what we did in 2025 happens without the people behind it. To our employees in Toronto, Madrid, Barcelona and Berlin, thank you for the work you put in this year. You carried a lot and you delivered. To our players and coaches, thank you for the way you represent these brands at the highest level. You're the reason millions of fans tune in. You make us all very proud. For our partners, thank you for believing in what we're building and for being on this journey with us. And to our shareholders, thank you for your continued support and for the patience you've shown as we execute this plan. We'll continue to do everything we can to earn that trust. I look forward to updating you on our progress after the first quarter of 2026. Operator, that concludes our prepared remarks. I'll turn it back to Kelly to close out the call.

Thank you, Adam, and thank you all for joining us this morning. A replay of today's call will be available on the Investor Relations section of our website at overactivemedia.com for the next 30 days. Our audited consolidated financial statements and management's discussion and analysis are available on our website and on SEDAR+. For any media inquiries, please contact Adam Adamou directly. For investor inquiries, please contact me directly at [email protected]. Operator, back to you.

Thank you. This concludes today's call. Thank you for participating. You may all disconnect.