GameSquare Holdings Reports Standalone First Quarter 2023 Results for GameSquare Esports and Provides First Quarter Pro-Forma Income Statement

Record pipeline and recent contract wins expected to accelerate revenue growth in second half of 2023

Merger integration underway with $8 million of annualized cost savings expected in 2023

Company initiates 2023 guidance reflecting pro-forma sales of $75 to $80 million, and annual gross margins of 30% - 35%

TORONTO, ON / ACCESSWIRE / May 18, 2023 / GameSquare Holdings, Inc. ("GameSquare", or the "Company") (NASDAQ:GAME)(TSXV:GAME) announced that GameSquare Esports, Inc. has filed its standalone financial results for its first quarter ended March 31, 2023. As a result of the April 11, 2023 merger of GameSquare Esports and Engine Gaming and Media, Inc. ("Engine Gaming"), GameSquare provided a pro-forma income statement for the 2023 first quarter. The Company expects to file its second quarter 2023 consolidated financial statements for the combined entity, in August of 2023. The Company also provided 2023 guidance as a consolidated company.

"With the merger now behind us, our business momentum is accelerating, driven by a record pipeline, increasing ad spend, and the benefits of the merger. In addition, we believe advertising partners are already recognizing the value of our combined company's assets. We recently have signed several significant brand deals across numerous verticals, including healthcare, automotive, and CPG, with average expected contract values north of seven figures. We believe that our record pipeline and recent wins indicate that global brands see the value of GameSquare's leading end-to-end media platform and our success helping companies connect with gaming and youth audiences. As a result of the merger, GameSquare now serves approximately 350 brands, 1,500 creators, and has an aggregate audience reach over 500 million," said Justin Kenna, CEO of GameSquare.

"Since our inception in late 2020, we have invested heavily in our business to build industry leading capabilities, create new and innovative revenue opportunities, complete a transformational merger, and assemble a team of experienced, motivated, and passionate leaders, talent, and influencers. With a solid foundation, we are focused on successfully integrating the merger, scaling our business, and pursuing a path to profitability. As we look forward, we believe pro-forma annual sales of the combined company in 2023 will be between $75 and $80 million. In addition, we have identified approximately $8 million of annualized cost savings and other opportunities to streamline and optimize the combined company. We expect annual gross margin in 2023 will range between 30% and 35%. As a result, we believe we will see significant improving trends towards profitability starting in the second half of 2023," continued Mr. Kenna.

"I am encouraged by the growing momentum underway, as we focus over the near-term on integrating the merger, growing sales, and accelerating our path to profitability. I am excited by the direction we are headed, and I look forward to updating you on the progress we are making as we convert our growing pipeline into profitable sales," concluded Mr. Kenna.

First Quarter 2023 GameSquare Esports Standalone Highlights (Comparisons are to Prior Year Period)

• Revenue of $5,050,713, compared to $5,040,074

• Gross margin increased to 40.2%, compared to 32.6%

• Net loss of $4,258,273, compared to a net loss of $3,993,629

• Adjusted EBITDA loss of $2,255,835, compared to a loss of $2,742,172

First Quarter 2023 Pro-Forma Highlights

• Revenue of $13,843,347, compared to $12,897,929 in the prior year period

• Gross margin of $4,267,983 or 30.8% in Q1 23

• Net loss of $12,150,604 in Q1 23

• Adjusted EBITDA loss of $5,045,947, compared to loss of $7,333,281 in the prior year period

Conference Call Details

Justin Kenna, CEO, Lou Schwartz, President, Paul Bozoki, former CFO of GameSquare Esports, and Mike Munoz CFO of GameSquare Holdings, are scheduled to host a conference call with the investment community. Analysts and interested investors can join the call via the details below:

Date: Thursday, May 18, 2023
Time: 5:00 pm ET
Webcast: http://services.choruscall.ca/links/gamesquare2023q1.html

Media and Investor Relations

Andrew Berger
Phone: (216) 464-6400
Email: IR@gamesquare.com

About GameSquare Holdings, Inc.

GameSquare Holdings, Inc. (NASDAQ:GAME | TSXV:GAME) is a vertically integrated, digital media, entertainment and technology company that connects global brands with gaming and youth culture audiences. GameSquare's end-to-end platform includes GCN, a digital media company focused on gaming and esports audiences, Cut+Sew (Zoned), a gaming and lifestyle marketing agency, USA, Code Red Esports Ltd., a UK based esports talent agency, Complexity Gaming, a leading esports organization, Fourth Frame Studios, a creative production studio, Mission Supply, a merchandise and consumer products business, Frankly Media, programmatic advertising, Stream Hatchet, live streaming analytics, and Sideqik a social influencer marketing platform. www.gamesquare.com

Forward-Looking Information

This news release contains "forward-looking information" and "forward-looking statements" (collectively, "forward-looking statements") within the meaning of the applicable securities legislation. All statements, other than statements of historical fact, are forward-looking statements and are based on expectations, estimates and projections as at the date of this news release. Any statement that involves discussions with respect to predictions, expectations, beliefs, plans, projections, objectives, assumptions, future events or performance (often but not always using phrases such as "expects", or "does not expect", "is expected", "anticipates" or "does not anticipate", "plans", "budget", "scheduled", "forecasts", "estimates", "believes" or "intends" or variations of such words and phrases or stating that certain actions, events or results "may" or "could", "would", "might" or "will" be taken to occur or be achieved) are not statements of historical fact and may be forward-looking statements. In this news release, forward-looking statements relate, among other things, to: the Company's future performance and revenue; continued growth and profitability; the Company's ability to execute its business plan; and the proposed use of net proceeds of the Offering. These forward-looking statements are provided only to provide information currently available to us and are not intended to serve as and must not be relied on by any investor as a guarantee, assurance or definitive statement of fact or probability. Forward-looking statements are necessarily based upon a number of estimates and assumptions which include, but are not limited to: the Company being able to grow its business and being able to execute on its business plan, the Company being able to complete and successfully integrate acquisitions, the Company being able to recognize and capitalize on opportunities and the Company continuing to attract qualified personnel to supports its development requirements. These assumptions, while considered reasonable, are subject to known and unknown risks, uncertainties, and other factors which may cause the actual results and future events to differ materially from those expressed or implied by such forward-looking statements. Such factors include, but are not limited to: the Company's ability to achieve its objectives, the Company successfully executing its growth strategy, the ability of the Company to obtain future financings or complete offerings on acceptable terms, failure to leverage the Company's portfolio across entertainment and media platforms, dependence on the Company's key personnel and general business, economic, competitive, political and social uncertainties including impact of the COVID-19 pandemic and any variants. These risk factors are not intended to represent a complete list of the factors that could affect the Company which are discussed in the Company's most recent MD&A. There can be no assurance that forward-looking statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on the forward-looking statements and information contained in this news release. GameSquare assumes no obligation to update the forward-looking statements of beliefs, opinions, projections, or other factors, should they change, except as required by law.

Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

GameSquare Esports Standalone First Quarter Financial Results

		Three months ended				Three months ended
($ U.S. dollars)		March 31, 2023				March 31, 2022
Revenue		$	5,050,713			$	5,040,074
Cost of sales			3,021,210				3,394,873
Gross profit			2,029,503				1,645,201
Other income
Interest and other income			84				3,020
Total other income			84				3,020
Expenses
Salaries, consulting and management fees			2,934,311				2,660,889
Player compensation			499,402				439,685
Professional fees			855,368				393,243
General office expenses			378,356				330,216
Selling and marketing expenses			176,386				282,438
Travel expenses			119,498				255,685
Shareholder communications and filing fees			80,612				21,321
Interest expense and financing fees			82,602				90,105
Bad debt expense			8,680				-
Foreign exchange loss			932				3,896
Share-based compensation			565,380				500,143
Amortization			591,360				682,558
Total expenses			6,292,887				5,660,179
Loss for the period before income taxes			(4,263,300	)			(4,011,958	)
Income tax (recovery)			(5,027	)			(18,329	)
Loss for the period			(4,258,273	)			(3,993,629	)
Other comprehensive (loss) income
Items that will subsequently be reclassified to operations:
Foreign currency translation			(6,649	)			103,775
Total comprehensive loss for the period		$	(4,264,922	)		$	(3,889,854	)
(Loss) for the period attributable to:
Owners of the parent			(4,258,273	)			(4,007,347	)
Non-controlling interest			-				13,718
		$	(4,258,273	)		$	(3,993,629	)
Basic and diluted net loss per share		$	(0.01	)		$	(0.02	)
Weighted average number of common shares outstanding - basic and diluted			310,027,875				244,381,900

GameSquare Holdings, Pro-forma First Quarter Financial Results

		GameSquare Esports Inc.				Engine Gaming & Media Inc.				Proforma Combined
		Three months ended				Three months ended				Three months ended
($ U.S. dollars)		March 31, 2023				March 31, 2023				March 31, 2023
Revenue		$	5,050,713			$	8,792,634			$	13,843,347
Cost of sales			3,021,210				6,554,154				9,575,364
Gross profit			2,029,503				2,238,480				4,267,983
Other income
Interest and other income			84				-				84
Total other income			84				-				84
Expenses
Salaries, consulting and management fees			2,934,311				3,355,312				6,289,623
Player compensation			499,402				-				499,402
Professional fees			855,368				312,519				1,167,887
Office and general			587,146				1,007,214				1,594,360
Selling and marketing expenses			176,386				154,233				330,619
Technology expenses			-				156,208				156,208
Interest expense and financing fees			82,602				161,605				244,207
Foreign exchange loss			932				43,106				44,038
Share-based compensation			565,380				823,185				1,388,565
Amortization and depreciation			591,360				276,169				867,529
Transaction costs			-				1,107,175				1,107,175
Arbitration settlement reserve			-				1,096,096				1,096,096
Restructuring costs			-				327,212				327,212
Change in fair value of warrant liability			-				221,165				221,165
Change in fair value of convertible debt			-				977,595				977,595
Total expenses			6,292,887				10,018,794				16,311,681
Loss for the period before income taxes			(4,263,300	)			(7,780,314	)			(12,043,614	)
Income tax (recovery)			(5,027	)			-				(5,027	)
Loss for the period from continuing operations			(4,258,273	)			(7,780,314	)			(12,038,587	)
Loss from discontinued operations			-				112,017				112,017
Loss for the period			(4,258,273	)			(7,892,331	)			(12,150,604	)

GameSquare Holdings, Inc. had approximately 12.9 million common shares outstanding at April 11, 2023 following completion of the Consolidation, the Arrangement and the conversion of the Subscription Receipts.

GameSquare Holdings, Pro-forma First Quarter Adjusted EBITDA Loss Reconciliation

We believe Adjusted EBITDA is a useful measure to assess the performance of the Company as it provides more meaningful operating results by excluding the effects of expenses that are not reflective of our underlying business performance and other one-time or non-recurring expenses. We define "Adjusted EBITDA" as EBITDA adjusted to exclude extraordinary items, non-recurring items and, other non-cash items, including, but not limited to (i) share based compensation expense, (ii) non-recurring arbitration settlement costs (iii) intangible and goodwill impairments and loss on disposal of assets (iv) loss from discontinued operations (v) transaction costs related to merger and acquisition activities, (vi) change in fair values on warrants and convertible debt and (vii) restructuring costs.

Reconciliation of Non-IFRS Measures

A reconciliation of EBITDA and Adjusted EBITDA to the most directly comparable measure determined under IFRS is set out below for the three months ended March 31, 2023. The pro forma combined column combines GameSquare and Engine effective January 1, 2023.

		GameSquare Esports Inc.				Engine Gaming & Media Inc.				Proforma Combined
		Three months ended				Three months ended				Three months ended
		March 31, 2023				March 31, 2023				March 31, 2023
Net loss as reported			(4,258,273	)			(7,892,331	)			(12,150,604	)
Adjustments:
Interest expense (net)			82,518				161,605				244,123
Amortization and depreciation			591,360				276,169				867,529
Income Tax (recovery)			(5,027	)			-				(5,027	)
EBITDA Loss			(3,589,422	)			(7,454,557	)			(11,043,979	)
Adjustments:
Share based compensation			565,380				823,185				1,388,565
Transaction costs			484,309				1,107,175				1,591,484
Arbitration settlement reserve			-				1,096,096				1,096,096
Restructuring costs			283,898				327,212				611,110
Change in fair value of warrant liability			-				221,165				221,165
Change in fair value of convertible debt			-				977,595				977,595
Loss from discontinued operations			-				112,017				112,017
Adjusted EBITDA Loss			(2,255,835	)			(2,790,112	)			(5,045,947	)

SOURCE: GameSquare Holdings, Inc.

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