Earnings call transcript: Overactive Media Q4 2024 sees record revenue growth

Overactive Media Corp (OAM), currently valued at $21.29 million in market capitalization, reported a substantial increase in its fourth-quarter revenue for 2024, achieving a record $9.9 million, a 34% year-over-year increase. The company also posted a full-year revenue of $27 million, marking a 72% rise compared to the previous year. According to InvestingPro data, the company has maintained strong revenue momentum with a 38.7% growth in the last twelve months. Despite these gains, the company’s gross margin decreased from 80% in Q4 2023 to 54% in the latest quarter. The adjusted EBITDA loss showed a 21% year-over-year improvement, standing at $554,000. Overactive Media’s stock remained stable in after-hours trading with no significant change in its price.

Key Takeaways

• Overactive Media achieved record Q4 revenue, up 34% year-over-year.
• Full-year revenue increased by 72%, reaching $27 million.
• Gross margin fell from 80% to 54% compared to Q4 2023.
• Adjusted EBITDA loss improved by 21% year-over-year.
• The company expanded its global footprint with strategic acquisitions and new market entries.

Company Performance

Overactive Media Corp’s performance in the fourth quarter of 2024 showcases a robust growth trajectory, highlighted by significant revenue increases. The company’s expansion into new markets and strategic acquisitions have played a crucial role in driving this growth. However, the decline in gross margin indicates potential cost pressures or changes in the revenue mix, which may need addressing in future quarters.

Financial Highlights

• Q4 Revenue: $9.9 million (34% increase YoY)
• Full Year Revenue: $27 million (72% increase YoY)
• Q4 Gross Profit: $5.3 million (up from $3.4 million)
• Gross Margin: 54% (down from 80% in Q4 2023)
• Adjusted EBITDA Loss: $554,000 (21% improvement YoY)
• Full Year Adjusted EBITDA Loss: $3.6 million (42% improvement)
• Comprehensive Income: $311,000 (compared to a $12.2 million loss in 2023)

Outlook & Guidance

Looking ahead, Overactive Media is focusing on scalability through digital and high-margin verticals. The company aims to leverage its existing brands to drive growth and achieve profitability. With a cash balance of $6.8 million and a healthy current ratio of 2.01, Overactive Media maintains a strong liquidity position, supporting its strategic initiatives. InvestingPro data shows the company’s liquid assets exceed short-term obligations, though analysts don’t anticipate profitability this year.

Executive Commentary

CEO Adam Adamu emphasized the company’s strategic focus, stating, "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." CFO Rakesh Shah highlighted the importance of revenue-generating initiatives, noting, "Every major investment was tied directly to revenue generating initiatives or long-term infrastructure that supports scale."

Risks and Challenges

• Declining gross margins may indicate rising costs or a shift in revenue mix.
• Expansion into new markets like China and Mexico could face regulatory and competitive challenges.
• Dependence on partnerships and sponsorship deals may expose the company to market volatility.
• The esports industry is highly competitive, requiring continuous innovation and investment.
• Economic uncertainties could impact consumer spending on esports and related activities.

By maintaining a strategic focus on growth and profitability, Overactive Media is positioning itself strongly for the future, despite the challenges it faces. For comprehensive analysis of OAM and 1,400+ other stocks, including detailed Fair Value assessments and expert insights, explore the full range of tools available on InvestingPro.

Full transcript - Overactive Media Corp (OAM) Q4 2024:

Conference Operator: Good day everyone and welcome to Overactive Media’s Fourth Quarter Conference Call. At this time, participants are in a listen only mode. A question and answer session will follow management’s remarks. 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 thirty days.

I will now hand the call over to Mr. Badak Pedram, Investor Relations for Overactive Media, for introductions and reading the Safe Harbor statement. Please go ahead, sir.

Badak Pedram, Investor Relations, Overactive Media: Thank you, and good morning, everyone. Welcome to Overactive Media’s fourth quarter twenty twenty four 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 Adamu, Chief Executive Officer and Rakesh 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 strategy 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 and A, which is available on sedarplus.ca and our website. At this time, it is my pleasure to introduce Mr. Adam Adamu, Chief Executive Officer of Overactive Media. Adam, please go ahead.

Adam Adamu, Chief Executive Officer, Overactive Media: Thank you, Babik. Good morning, everyone, and thank you for joining us. Q4 marked 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 expectations for revenue and adjusted EBITDA.

We reported record Q4 revenue of $9,900,000 contributing to full year revenue of $27,000,000 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, COI and Riders, were accretive immediately and we’re proud of the progress we’ve made and the success of the teams now part of the Overactive platform. But the story goes well beyond the numbers. The last twelve 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 the momentum.

First, our live events business delivered globally. In November, we hosted our first COI Con in Madrid, our first annual fan event. In January, we welcomed over 12,000 fans to CDL Major One. In June, we’re preparing to host the twenty twenty five 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 road trip event in Madrid, welcoming 18,000 fans over two 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 movie star 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 Telefonica, 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 over 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

Conference Operator: not

Adam Adamu, Chief Executive Officer, Overactive Media: 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 to 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 Rakesh to walk you through the financials in more detail.

Rakesh Shah, Chief Financial Officer, Overactive Media: Thank you, Adam, and good morning, everyone. Today, I’ll briefly review our fourth quarter financial results and our performance for the first twelve months of twenty twenty four. Please note that the financial information we discussed today is prepared in accordance with international financial reporting standards and is in Canadian dollars unless otherwise indicated. In the fourth quarter of twenty twenty four, overactive media delivered record revenue of $9,900,000 representing a 34% increase compared to 4,200,000.0 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 MovieStar Riders and COI. The performance of this quarter demonstrates a growing strength of our platform and the successful execution of our strategic expansion. Looking at the full year, revenue reached $27,000,000 a 72% increase from $15,700,000 in 2023. This year over year growth was largely powered by the strategic acquisitions we completed in Q1 of twenty twenty four, 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 $5,300,000 up from $3,400,000 in the last year. The gross margin came in at 54% compared to the 80% in Q4 twenty twenty three. 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 $16,800,000 representing a 62% increase over the $10,400,000 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 evolving 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 were $6,600,000 up 54% from $4,300,000 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 MovieStar Writers and COI 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 23,400,000.0 represents a 37% increase compared to the $17,100,000 in 2023. This increase reflects the step up in headcount production and operational costs that come with expanding our global footprint. It also includes $2,300,000 in one time 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, it will closely align 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 twenty twenty four 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 $3,600,000 a 42% improvement over the $6,200,000 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 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 $1,300,000 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 and a strong improvement from the $12,200,000 loss in 2023. This turnaround reflects solid revenue growth and cost discipline and $11,500,000 gain from eliminating franchise obligations, highlighting the structural progress we’ve made. Our cash balance at the end of the year was $6,800,000 while net working capital also totaled $6,600,000 While these numbers are slightly lower than the $8,600,000 reported at the end of twenty twenty three, The year over year change primarily reflects the short term obligations from our acquisitions and investments in working capital. Importantly, our liquidity position remains strong and we remain committed to prudent capital allocation, 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, our 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 roadmap 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.

Adam Adamu, Chief Executive Officer, Overactive Media: Thank you, Rakesh, and thank you for joining us today and for your continued support of Overactive Media. This quarter marked the close of a transformative year for our company. We successfully integrated two acquisitions, restructured our league 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 Stuart Johnson for his service to our Board. Stuart 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.

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

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