FRISCO, TX - GameSquare Holdings, Inc. (NASDAQ:GAME), a company specializing in connecting brands with gaming audiences, has reported a preliminary revenue of $26.5 million for the third quarter ended September 30, 2024. This represents a substantial increase from previous quarters, as the company also announced an improvement in its adjusted EBITDA loss to approximately $2.4 million, a $3.0 million enhancement compared to the second quarter of 2024.
The improved financial performance has prompted GameSquare to revise its 2024 annual proforma revenue guidance upward from $100 million to a range of $105 million to $110 million. The company attributes this growth to effective strategies that have driven organic sales, successful integration of recent acquisitions, and efforts towards building a profitable organization.
According to CEO Justin Kenna, the third quarter's performance signifies the company's progress and momentum. Kenna highlighted the company's achievements, including an increase in the number of customers on retainer, a 46% growth in average contract value, and a tripling of UEFN world building campaigns deployed. August 2024 saw record monthly contract wins, contributing to the quarter's robust revenue and a higher gross margin.
GameSquare's gross margin for the third quarter is estimated at approximately 18%, up from 14.8% in the previous quarter. The margin benefited from a favorable revenue mix, despite being partially offset by start-up costs for new programs and relationships expected to contribute to revenue and profitability in the fourth quarter of 2024.
The company's financial closing procedures for the third quarter are not yet complete, and final results may vary. GameSquare plans to release its final third quarter financial results after the market closes on November 14, 2024, followed by a conference call to discuss the results and business outlook.
GameSquare is recognized for its next-generation media, entertainment, and technology capabilities, driving outcomes for creators and maximizing return on investment for brand partners. The company, whose largest investors include Dallas Cowboys owner Jerry Jones and the Goff family, operates one of North America's largest gaming media networks.
This financial update is based on a press release statement from GameSquare Holdings, Inc. and is subject to change upon the finalization of the company's quarterly results.
In other recent news, GameSquare Holdings has reported significant financial improvements and strategic advancements. The company saw a 24% rise in pro forma revenue for Q2 2024, reaching $28.6 million, and a substantial improvement in profitability with a pro forma adjusted EBITDA loss of $5.4 million, a significant decrease from a $10 million loss in the same period last year.
Furthermore, GameSquare's subsidiary, Zoned, has announced a partnership with esports platform Clout, intended to increase engagement within the esports community. GameSquare also extended its sponsorship agreement with Rollbit, focusing on FaZe Clan's Counter-Strike team outside the United States.
Maxim Group initiated coverage on GameSquare with a Buy rating and a price target of $3.00, citing the company's compelling valuation. Roth/MKM has reiterated its Buy rating for GameSquare, reflecting confidence in the company's recent achievements and future prospects.
GameSquare has also announced new brand partnerships worth $3 million with Topgolf, 5-hour ENERGY, and Dairy MAX, contributing to an anticipated annual revenue exceeding $100 million with a gross margin between 22.5% and 27.5%. The company successfully raised $36 million through non-dilutive capital, intended to support organic growth, despite a decline in gross margin due to a less profitable mix of sales.
InvestingPro Insights
GameSquare Holdings' preliminary Q3 2024 results show promising growth, but InvestingPro data reveals a more complex financial picture. While the company reported a significant revenue increase, InvestingPro data indicates a market capitalization of just $21.77 million, suggesting investors may be cautious about the company's valuation despite its growth trajectory.
The company's impressive revenue growth is confirmed by InvestingPro data, which shows a 175.59% increase in the last twelve months as of Q2 2024. This aligns with GameSquare's upward revision of its 2024 annual revenue guidance. However, an InvestingPro Tip notes that the company is "quickly burning through cash," which could be a concern for long-term sustainability despite the revenue growth.
Another InvestingPro Tip highlights that GameSquare "suffers from weak gross profit margins." This is particularly relevant given the company's reported improvement in gross margin to approximately 18% in Q3 2024. While this represents progress, it suggests there's still room for improvement in profitability.
For investors seeking a more comprehensive analysis, InvestingPro offers 11 additional tips for GameSquare Holdings, providing a deeper understanding of the company's financial health and market position.
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