OverActive Media Corp. ($OAM)

Good day, everyone, and welcome to OverActive Media's First Quarter 2026 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 website. It will remain posted there for the next 30 days. I will now hand the call over to Kelly Haley, Senior Director of Global Operations at OverActive Media for introductions and a cautionary note. Please go ahead.

Thank you, Jenny, and good morning, everyone. Welcome to OverActive Media's First Quarter 2026 Earnings Conference Call. A copy of the company's earnings press release, unaudited condensed consolidated interim financial statements and management's discussion and analysis for the 3 months ended March 31, 2026, 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 for the first quarter of 2026 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 going 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 in our management's discussion and analysis and our earnings press release, both of which are available on SEDAR+ and on our website. At this 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. I'll get straight to it. This was the strongest first quarter we've ever reported on both revenue and adjusted EBITDA. Revenue came in at $5.4 million, up 7% over the same quarter last year and a first quarter record for the company. Our adjusted EBITDA loss narrowed by close to $1 million or 43% to $1.3 million, the best quarter -- the best first quarter result we've ever posted. We're still running a loss in the seasonally lightest quarter of our year, but the direction is clear, and it's the right one. What I like most is how we got here. This wasn't one lucky line item. Our Business Operations segment grew 13% and now makes up a majority of our revenue. Our gross profit grew faster than our revenue, and gross margin improved to 59% from 52% a year ago. At the same time, our operating costs came down. That's growth and discipline showing up in the same quarter, which is exactly what we've said we'd focus on in 2026. On the commercial side, our partners are leaning in. Movistar KOI signed a new full year partnership with Idealo and Philips for the 2026 season, and we grew our European agency business across a deeper set of clients. We were also named the official National Team Partner for Canada in conjunction with Esport Canada with Movistar KOI as the official co-team partner for Spain at the Esports Nations Cup in Riyadh. That's the kind of recognition that says a lot about where these brands sit in the global game. Live events stayed a strength for us. Movistar KOI hosted LEC Versus in Barcelona in front of roughly 15,000 fans. After the quarter closed, we brought the Spring Roadtrip to Madrid with another 12,000 fans in the building over the weekend. We keep proving we can fill arenas and put on a show, and we keep getting better and more efficient at it each time. On the servers, our teams kept us on the big stages. Movistar KOI finished third at LEC Versus in Barcelona, Toronto KOI placed third at Call of Duty Major 2 and after quarter end, third again at Major 3. Movistar KOI has locked in a top 3 finish in the LEC Finals, which will be concluded next week in Berlin. To our players and coaching staff, thank you for the way you represent these brands. 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 will discuss today is prepared in accordance with International Financial Reporting Standards, and all figures are in Canadian dollars unless otherwise stated. I will talk through revenue and gross profit, followed by operating costs and earnings and then finish with cash and liquidity. For the 3-month period ended March 31, 2026, total revenue was $5.4 million compared to $5 million in the same period in 2025, which is an increase of 7% and a first quarter record for the company. Within that, Business Operations revenue grew 13% to $4.5 million, driven by higher commercial activity across a number of areas: sponsorships, partnerships, agency services, content production and live events. This also includes new European partnerships and expanded scope of agency work. Team Operations revenue was $0.9 million, decreased slightly by $0.1 million compared to a year ago, which is primarily reflecting the timing of revenue recognition and our exit from VCT. Gross profit was $3.2 million compared to $2.6 million in the same -- in the first quarter of 2025, which is an increase of 22%. Gross margin expanded to 59% from 52% a year ago. The improvement was driven by 2 factors: higher revenue from business operations, which carries stronger margin contributions as well as lower cost of sales from improved efficiencies. Operating costs were $4.8 million compared to $4.9 million in the first quarter of 2025. Lower corporate payroll, roster and team payroll and team operation costs more than offset against higher SG&A expenses tied to increased commercial activity and restructuring costs recorded during the quarter. Adjusted EBITDA loss for the quarter was $1.3 million compared to a loss of $2.3 million in the first quarter of 2025. This represents an improvement of roughly $1 million or 43%. The improvement was driven by higher gross profit from business operations and lower operating expenses alongside improved operating efficiency during the quarter. Net loss for the quarter was $2.5 million compared to a net loss of $3.7 million in the first quarter of 2025, an improvement of $1.2 million. The improvement was primarily driven by higher gross profit, lower operating expenses and reduced share-based compensation. And now turning to cash and liquidity. Cash and cash equivalents at March 31, 2026, were $5.1 million compared to $4.4 million at December 31, 2025. The company generated positive cash flow from operating activities of $1.4 million during the quarter. As of March 31, 2026, the company had a working capital deficit of $3.6 million. Subsequent to quarter end, on April 30, 2026, the company completed a secured debt financing for aggregate gross proceeds of approximately $1.95 million, consisting of secured promissory notes and common share purchase warrants. The note bears 12% per annum and mature 2 years from issuance. Proceeds will be used for general working capital purposes and a portion was applied to repay and replace amounts outstanding under our October 2025 promissory notes. As disclosed in our interim financial statements and MD&A, management is actively pursuing a range of measures to support liquidity, including additional financing arrangements and continues to implement operational efficiency and restructuring initiatives that we expect to reduce operating costs beginning in the second quarter of 2026. And with that, I'll hand the call back to Adam for closing remarks.

All right. Thanks, Louis. Okay. I told the market that 2026 would be about margin and cash, and the first quarter is early proof that we're doing what we said. Record first quarter revenue, our best first quarter adjusted EBITDA, wider margins and a lower cost base. That's the shape of the turn we're after. We strengtehen the balance sheet again with the financing we closed at the end of April, and the continued backing of our largest shareholders matters to me and to the team. The restructuring work we did this quarter starts to show up in our costs from the second quarter forward, and our newer revenue lines keep building. We have more commercial visibility heading into the back half of the year than we've had at this point ever before. We've already kept the momentum going after quarter end. With the Spring Roadtrip in Madrid, another strong finish for Toronto KOI at Major 3, there's more to come, and we'll keep our heads down and execute. One more from this week. Last summer, we brought the Call of Duty League Championship to Canada for the first time in League history, hosted at the Kitchener Memorial Auditorium with our title partner, Bell and our host partner, Explore Waterloo Region. On Tuesday, in New York, broadcast coverage of that event won Outstanding Esports Championship Coverage at the 47th Annual Sports Emmy Awards. Congratulations to ESL FACEIT Group and the Call of Duty League on the recognition. I'm proud of what this team has built. I want to close with some thank yous. To our employees in Toronto, Madrid, Barcelona and Berlin, thank you for the work and the discipline you brought to this quarter. It's showing up in the numbers. To our players and coaches, thank you for the way you represent these brands at the highest level. There's a reason millions of fans tune in and you make us all proud. To 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. We'll keep doing everything we can to earn that trust. I look forward to updating you again after the second quarter. 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 interim financial statements and management's discussion and analysis are available on our website and on SEDAR+. For media inquiries, please contact Adam Adamou directly. For investor inquiries, please contact me directly at [email protected]. Jenny, back to you.

Thank you. Ladies and gentlemen, this concludes today's conference call. Thank you all for joining. You may now disconnect your lines.