Stonegate Capital Partners Updates Coverage on GameSquare Esports Inc. (OTCQB: GMSQF)

DALLAS, TX -- November 22nd, 2022 -- GameSquare Esports Inc. (OTCQB: GMSQF): Stonegate Capital Partners updates coverage on GameSquare Esports Inc. (OTCQB: GMSQF). The full report can be accessed by clicking on the following link: https://stonegateinc.com/reports/GSQ_22Q3.pdf

COMPANY DESCRIPTION

GameSquare Esports Inc. is a vertically integrated, digital media and entertainment company enabling global brands to connect and interact with gaming and esports fans. GameSquare has a reach of 220+ million and targets FY2022 revenue of US$27.5-$30M, with an additional US$45.0M-$50.0M in FY2023 revenue, from its lines of business that include digital agencies, media network, competitive teams, production studio, and merchandise businesses. GameSquare is one of the fastest growing esports orgs and has emerged as a leader in gaming and esports in only two years as a public company. GameSquare Esports trades on the OTCQB (GMSQF) and is listed on the Canadian Securities Exchange under the ticker GSQ.

SUMMARY

• Large growth opportunity in esports – The global esports business is growing at a rapid pace. According to a report by NewZoo, the esports industry will have an estimated global audience of 600M viewers by 2023, consuming over 100B hours of programming and generating revenue of US$200B. Growth drivers include gaming popularity in mainstream culture, technological advancements improved infrastructure, and the emergence of professional esports teams and leagues. During 3Q22 GameSquare further pushed the boundaries of growth opportunities in the esports market by hosting the inaugural TimTheTatman Tailgate, which was the first ever live event hosted by an individual creator.
• Multi-year esports and gaming partnerships – GameSquare works with more than 150 brands, including multi-year deals with Lenovo, Dairy MAX, streaming platform Twitch, and the Dallas Cowboys. The Company entered into a multi-year agreement with Roc Nation Sports, a full-service management and sports agency founded by Jay Z. Fourth Frame Studios is represented by United Talent Agency (UTA), one of the largest and most successful talents agencies in the world. We believe that GameSquare will expand its brand relationships as it continues to grow its revenue.
• Large and engaged audience base – GameSquare knows how to build a large social presence. By reaching an audience of more than 220 million, the Company is one of the largest esports and gaming platforms, which helps attract brands and talent to the company’s platform. This diversified niche audience also gives GameSquare the competitive advantage of having access to a large market that most other advertising agencies do not have access to.
• Significant financial progress already made – GameSquare grew revenue significantly from 3Q21 of US$1.9M to 3Q22 of US$10.1M, an increase of over 5.25x. The company has reported that the number and size of RFPs continue to grow and that its sales pipeline is its largest to date. Revenue guidance was increased twice in 2022 to a range of US$27.5M to US$30M. 2023 Guidance was also given as a range of US$45.0M to US$50.0M with a gross margin range of 35% to 40%.
• Recent US$3.0 million private placement – The Company has announced another US$3.0M private placement, further proving the ability to raise capital as needed. This recent placement values the company at C$0.14, a healthy premium to the current stock price. While the investors of this most recent placement have yet to be announced the investors are considered long term and strategic in nature.
• Experienced management team keeps growing – After the end of Q3 GameSquare announced the appointment of Jeremi Gorman, President of Worldwide Advertising at Netflix, as an independent director. Jeremi brings with her experience from Snap, Netflix, Amazon, and Yahoo! to a team that will be able to leverage her skills to accelerate revenue growth.
• Valuation – We use a comparative analysis to frame valuation. Using an FY2023 Sales forecast, we arrive at a valuation range of US$0.37 to US$0.55 with a midpoint of US$.46.