GameSquare Surges Towards Profitability After FaZe Clan Acquisition -

GameSquare Surges Towards Profitability After FaZe Clan Acquisition

Sep 05, 2024Jeremy ParkinsonFinance, No picture0

GameSquare Holdings (GAME) is making waves in the Esports and gaming media sectors. With the acquisition of FaZe Clan (formerly traded under FAZE) and several new strategic partnerships, the company is positioning itself as a key player in the rapidly growing Esports and digital entertainment space. On August 20th, GameSquare’s CEO, Justin Kenna, joined a panel discussion on X Spaces hosted by Wolf Financial and StoryTrading (see full video below), where he shared insights into the company’s growth strategy, financial outlook, and future potential. Subsequent announcements of major partnerships further validate GameSquare’s trajectory toward profitability and market dominance.

Video Length: 00:38:46
The FaZe Clan Acquisition: A Game-Changer for GameSquare
One of the central themes of the panel discussion was GameSquare’s acquisition of FaZe Clan, one of the largest and most recognizable Esports organizations in the world. Reflecting on the acquisition, Kenna shared personal anecdotes, noting that he had previously served as Chief Financial Officer at FaZe Clan and helped the organization raise $60 million in debt and equity. “This was a full-circle moment for me,” he said. “FaZe is not only one of the largest Esports organizations but also one of the most powerful gaming lifestyle brands globally.”

The acquisition, completed in an all-stock deal valued at $14 million, brings FaZe Clan under the GameSquare umbrella and opens the door for monetizing FaZe’s massive audience. “FaZe has a unique position in the gaming ecosystem,” Kenna explained. “At one point, the company was valued at over $1 billion, and while we recognize that the fundamentals didn’t justify that valuation, the brand itself remains incredibly strong.” He added that the acquisition allows GameSquare to tap into FaZe’s global fanbase and deliver high-margin business opportunities.Kenna also provided updates on FaZe’s operational progress, noting that GameSquare has been able to significantly reduce costs while boosting audience engagement. “We’ve tripled engagement in just three months and pulled out about $18 million in annualized costs. We’re excited about where this is headed,” Kenna shared.

GameSquare’s Business Model: A Multi-Faceted Approach to Growth
During the panel, Kenna laid out GameSquare’s broader vision, explaining how the company is working to become a next-generation media company by bridging the gap between gaming, Esports, and top-tier brands. GameSquare’s business is divided into three key segments:1. Technology and SaaS: This includes a data analytics company that serves nine of the top ten global game publishers. GameSquare leverages these analytics to drive brand partnerships and targeted advertising campaigns within the gaming community.2. Creative Agency and Media Network: GameSquare owns a full-service creative agency that helps brands reach fragmented gaming and Esports audiences. This network guarantees brand visibility and is increasingly becoming a significant revenue driver.3. Owned and Operated IP: This segment includes FaZe Clan, along with GameSquare’s live experience and events business. FaZe’s reach and influence in the Esports world make it a valuable asset for content, merchandise, and event-driven revenue streams.

Kenna expressed confidence that these three pillars provide GameSquare with a competitive advantage. “Our competitors are focused on individual verticals, but we offer an end-to-end platform that resonates with brands. We’re able to connect game publishers and tier-one brands directly with the gaming and Esports communities,” Kenna explained.
Path to Profitability: Focused on Cost Management and Scaling
One of the key takeaways from the panel was Kenna’s emphasis on profitability. In today’s higher interest rate environment, small-cap companies like GameSquare must demonstrate a clear path to positive earnings to win over investors. “For us, getting to scale is the number one priority, but profitability is a close second,” Kenna noted. GameSquare has given top-line revenue guidance of $100 million for 2024. Pro forma revenue for the first six months of the year reached $52 million, and the company expects to see a significant boost in the second half, driven by holiday ad spending and gaming-related events. Historically, GameSquare sees a 60-40 revenue split in favor of the latter half of the year, with Kenna stating, “We’re tracking well, and we feel confident in surpassing the $100 million mark for 2024.”Kenna also addressed the importance of cost control, noting that FaZe Clan’s expenses had been a significant drag on profitability. “When we acquired FaZe, they were burning around $5 million per month, with a headcount of 100. We’ve since reduced that to 30 employees and have made significant improvements to reduce our cash burn,” he said.The company’s adjusted EBITDA loss Pro forma revenue for the first six months bringing the total to $5.4 million. Kenna is optimistic that GameSquare will achieve adjusted EBITDA profitability by Q4. “We’re ruthless in our pursuit of profitability, and we believe the pieces are in place to hit that target,” he remarked.
Strategic Partnerships Fuel Future Growth
Following the August 20th panel discussion, GameSquare Holdings has continued to make significant strides, announcing a series of key events that highlight the company’s aggressive growth strategy. These developments, which encompass high-profile partnerships and record-breaking Esports performances, showcase GameSquare’s ability to capitalize on its recent acquisition of FaZe Clan and drive revenue growth across multiple verticals.On August 26, FaZe Clan made headlines by securing its largest-ever Esports tournament winnings of $2 million at the Esports World Cup. FaZe’s performance at this prestigious global event, held in the Middle East, solidified its reputation as a dominant force in competitive gaming. The company’s PUBG Mobile team played a pivotal role, finishing third overall in a tournament with a $60 million prize pool. This victory not only strengthens FaZe Clan’s competitive credentials but also provides a direct boost to GameSquare’s top-line revenue. As CEO Justin Kenna noted, “FaZe’s ability to compete and win on the global stage is a testament to the strength of our brand and talent, and this win further enhances our reputation in the Esports world.”

Just days later, on August 29, FaZe Clan announced a multi-million-dollar, multi-year sponsorship deal with Rollbit, marking one of the most significant Esports sponsorships in history. This partnership reflects FaZe’s growing influence beyond traditional gaming, as Rollbit is a prominent cryptocurrency platform. The deal will enable Rollbit to leverage FaZe’s vast audience to promote its services, while FaZe benefits from a lucrative sponsorship that taps into the rapidly expanding crypto market. Kenna highlighted the significance of this partnership, stating, “This collaboration exemplifies the flexibility and strength of the FaZe brand. By aligning with Rollbit, we’re pushing the boundaries of what Esports sponsorships can look like, further positioning FaZe as a leader in the gaming and digital finance ecosystems.”

Continuing this momentum, on September 3, FaZe Media, a division of GameSquare, secured another landmark deal: a multi-million-dollar, multi-year sponsorship and licensing agreement with G FUEL, one of the most well-known energy drink brands in the gaming industry. The renewed partnership between FaZe and G FUEL, which has long been a staple of Esports sponsorships, will feature exclusive FaZe-branded products and promotions that target FaZe Clan’s massive global audience. “Our partnership with G FUEL has been a cornerstone of FaZe’s success in the consumer product space,” Kenna explained. “This new multi-year agreement underscores the power of FaZe as both a brand and a business, enabling us to deepen our engagement with fans while driving high-margin revenue.”

These developments reflect GameSquare’s commitment to leveraging FaZe Clan’s brand power and monetizing its growing audience through strategic partnerships. Each deal highlights the company’s ability to navigate both traditional and emerging sectors, from Esports and consumer products to cryptocurrency, and reflects GameSquare’s broader strategy of expanding its high-margin, long-term revenue streams.Kenna’s vision for GameSquare, as articulated in the August 20th panel, is taking shape through these key milestones. As the company builds momentum through strategic partnerships and tournament success, it is well-positioned to capitalize on the continued growth of the gaming and Esports markets.
A Clear Path Forward
During the panel, Kenna was asked about GameSquare’s runway to profitability and its cash position. He reassured investors that the company is well-capitalized, with $14 million in cash on the balance sheet as of June 30, 2024, and an additional $4.75 million from a recent divestment. “We have ample runway to get to profitability,” Kenna asserted. He also pointed out that GameSquare had recently paid off its senior secured notes, which strengthens its financial position. “We’ve gotten rid of our major debtor, and we feel we’re in really good shape.”The company’s strategic focus on cost management, scaling high-margin revenue streams, and leveraging its brand power through partnerships sets the stage for continued growth. “We’ve been in a knife fight for the past three years in microcap land, but we’ve come out stronger,” Kenna said during the panel. He added that GameSquare’s ability to navigate a challenging macroeconomic environment while improving its balance sheet demonstrates the company’s resilience.
Future Catalysts: Esports and Content Creation at the Forefront
Looking ahead, Kenna outlined several key catalysts that could drive GameSquare’s growth. Among these are continued expansion in Esports tournaments, brand collaborations, and digital content monetization. “The gaming and Esports communities are enormous and continue to grow. We’re well-positioned to capture that growth by offering an all-in-one solution for brands,” he said.GameSquare’s involvement in live Esports tournaments has also provided significant revenue opportunities. Kenna pointed to a major Esports competition in the Middle East with a $60 million prize pool, where FaZe Clan’s PUBG team is currently competing. “This event is a perfect example of the opportunities that exist in Esports. We’re aiming for a podium finish, which would generate millions in top-line revenue for FaZe,” Kenna shared. (Subsequent to this commentary, FaZE Clan did indeed win $2M as highlighted above)He also touched on GameSquare’s recently launched partnership with the NFL. The company is rolling out a creative roadshow that features major gaming personalities like TimTheTatman and Ninja, combined with NFL events, to attract younger audiences. “This is just the beginning” Kenna said, hinting that the company’s partnership with the NFL could expand in the future, potentially reaching every NFL city.

A Bright Future Ahead
GameSquare Holdings is building a formidable presence in the Esports and gaming industries through strategic acquisitions, cost discipline, and high-profile partnerships. The acquisition of FaZe Clan has given the company a powerful platform to drive audience engagement and monetize digital content. With a clear path to adjusted EBITDA profitability and a growing portfolio of brand partnerships, GameSquare is well-positioned to capture the expanding gaming and Esports markets.As Justin Kenna noted during the panel, “We have the cash, the runway, and the brand. Now, we’re focused on executing our vision and delivering value to our shareholders.” With profitability on the horizon and new catalysts driving revenue, GameSquare Holdings is a company to watch in the coming months.