Good day, everyone, and welcome to OverActive Media's third quarter conference call. At this time, all participants are in a listen-only mode. A question and answer session will follow management's remarks. This 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 30 days. I will now hand the call over to Mr. Babak Pedram, investor relations for OverActive Media, for introductions and reading the safe harbor statement. Please go ahead.
Thank you very much, and good morning, everyone. Welcome to OverActive Media's third quarter 2023 earnings conference call. A copy of the company's earnings press release is available on the investor relations section of our website at overactivemedia.com. With us on today's call are Adam Adamou, Chief Executive Officer, and Rikesh Shah, Chief Financial Officer. Today, we'll review the highlights and financial results for the third quarter 2023 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 security laws, including, among others, statements concerning the Company's 2023 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&A, which is available on SEDAR+.ca and our website.
At this time, it is my pleasure to introduce Adam Adamou, Chief Executive Officer of OverActive Media. Adam, please go ahead.
Thank you, Babak. Greetings, everyone, and welcome to today's conference call. Let me start by thanking the board for the opportunity to lead OverActive as CEO. I'm eager to steer our focus toward growth and innovation in 2024 and beyond. The third quarter saw groundbreaking progress. Revenue growth was strong at 56% sequentially and 3.5% year-over-year. We've accomplished this while reducing team and business costs annually and sequentially. I'm immensely proud to report that we generated almost CAD 800,000 in Adjusted EBITDA in the quarter, our first quarter of operating profitability as a public company. We have been executing a well-thought-out plan to lead us toward a successful, scalable, and sustainable business model, and we are proud to report this as tangible evidence of our progress.
Our cash at the end of the second quarter was CAD 9.7 million, up from CAD 9.3 million in the previous quarter. A solid balance sheet with sufficient working capital puts us in a unique position relative to many of our peers, and we are getting stronger. At the end of the quarter, we reached an agreement with the Overwatch League to eliminate over CAD 8 million in current liabilities, which will be reflected in the fourth quarter. We will also receive a payment from the Overwatch League of an additional CAD 7 million, expected in the fourth quarter, which will, with everything else being equal, increase our cash position to over CAD 16 million. We are very satisfied with how these discussions were resolved and look forward to similar discussions with our other league partners with optimism.
We are in an enviable position with cash, growth, and positive EBITDA in the quarter. Our ability to self-fund gives us a tremendous competitive edge, allowing us to take advantage of opportunities that may arise from industry consolidation while unlocking organic growth initiatives. Our strategic patience is serving us well. Moving on to our operational highlights, we have identified further areas to reduce costs without impacting the quality of our overall experience for fans or sponsors or sacrificing our growth. These changes are yielding incremental benefits in the quarter and into the future. Turning to our teams. In Europe, our MAD Lions League of Legends team competed in the LEC 2023 finals, placing third in front of a live audience of over 10,000. The team also qualified for the League of Legends World Championship for a record fifth consecutive year.
The world championship just wrapped up this weekend with record viewership in every playoff round, including the grand finals. While the official numbers are not yet in, on an unofficial basis, we can say with confidence that this event realized the highest peak viewership of any esports event ever, an impressive result that surpassed even the highs of the COVID era. Our Call of Duty team, the Toronto Ultra, is in-market, gearing up for the 2024 Call of Duty League season, which launches on December 8th. In July, we signed Call of Duty champion and All-Star team member Dylan "Envoy" Hannon to our 2024 roster. We have finished as runners-up in the CDL championships twice out of the last three years, and we are hopeful that this season we can break through with a world championship title.
We also announced that OverActive will host the Call of Duty League Major III Tournament in Toronto from May 16-19, 2024. We're thrilled to host this event for the third consecutive year... We wrapped up the 2023 Overwatch League season by hosting the Overwatch League Grand Finals in Toronto from September 28 to October 1. The first championship event of its kind in Canada closed out the season and the current league format in front of a sold-out crowd. We expect to be a key force in competitive Overwatch in 2024 and beyond, with more information coming soon. Live events will always be an important complement to our business. We are eager to host more events here in Toronto and in our markets in Spain, where the demand is incredibly strong. We are also making progress on our venue projects.
We expect more information on that in the first quarter of 2024. Finally, let me congratulate our staff on exceeding expectations with everything they touch. In the last three months, we have delivered an impactful grand final to the Overwatch League, to our fans and partners in Toronto. We brought home a gold at the 2023 Sponsorship Marketing Awards, our second in three years. We unleashed an exclusive first-of-its-kind loyalty program for MAD Lions, which is already exceeding expectations for membership. We restructured league partnership agreements to vastly improve our cash position, and we reduced costs and overhead while on track to achieve record revenue through fully organic growth and reached operating profitability for the first time as a public company. This is a testament to the quality of this team and your dedication to our values. Thank you. My appreciation for your hard work is boundless.
I will now turn it over to Rikesh Shah, our Chief Financial Officer, to review our third quarter results.
Thank you, Adam, and good morning, everyone. Today, I'll briefly review our third quarter financial results. Please note that the financial information we discuss today is prepared in accordance with IFRS, International Financial Reporting Standards, and as is in Canadian dollars, unless otherwise indicated. For the three-month period ended September 30, 2023, we reported total revenue of CAD 6 million and an Adjusted EBITDA increase of CAD 1.2 million to positive CAD 0.8 million, versus a loss in the comparative prior quarter of CAD 0.4 million. Our Q3 results are further strengthened by decisive actions that we have taken to reduce operating expenses by CAD 1.9 million year-to-date, and we expect the savings trend to continue in the remaining quarter.
Further, as Adam noted, our cash position as of quarter-end September 30, 2023, is CAD 9.7 million. That provides us with a strong balance sheet to pursue our strategy prudently and with fiscal discipline top of mind. That concludes our prepared remarks. I'd like to open up the call for questions. Operator, please go ahead.
Thank you. Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press the star followed by the number 1 on your telephone keypad. You will hear a three-tone prompt acknowledging your request, and your questions will be pulled in the order they are received. Should you wish to decline from the polling process, please press the star followed by the number two. If you're using a speakerphone, please keep the handset before pressing any keys. One moment, please, for your first question. Your first question comes from the line of Towaki Dojima from DG Securities. Your line is open.
Morning, everyone. Thanks for taking the questions, and congratulations on the promotions, Adam. So let's start with the OWL. Understanding that the current iteration of Overwatch is now not nonexistent anymore, it sounds like, based on your commentary, that the competitive scene will continue, but there's no announcement on that, and I don't think you can provide any more detail. But when we think about what happens on the revenue call, let's say, the sponsorship agreements that you had for the Overwatch teams and league revenue share, how does that look going forward, or at least for 2024, while the competitive scene is in flux? And are there any cost reductions that can offset any potential revenue reductions from the OWL?
Well, look, I don't want to get into the specifics of, of, you know, contract and partnership discussions and so forth, but, you know, here. But as you know, we've mentioned, we believe Overwatch esports will be stronger than ever next year and then into the future beyond that. So from our perspective, you know, the name of the league may have changed, but we believe that the competitive scene and viewership will be improved year-over-year based on what we have seen and have been informed so far. So from our perspective, we're in a position where we will be able to deliver on the assets to our partners and to our fans. And we'd also be very happy to provide an additional live event in Overwatch in 2024.
So I see this as a bit of a transition, but, you know, the name of the league is not, is not the competitive scene, and, and we believe that the competitive scene will be improved as a result of this change.
Thank you. You're welcome. Okay, that makes sense. So it's fair to assume that Overwatch revenues aren't just going to fall off a cliff and evaporate. It's a fair assumption that some sort of ecosystem will exist in where both sponsors can exist and maybe a league revenue share, but it's not going to go fully to zero in 2024.
That's not my expectation, no. I expect that in 2024, we are going to have a better experience than in 2023. That's what I can tell you. And, you know, we'll see how that turns out. But, you know, look, my view is that the current version of the Overwatch League had to be terminated, okay? It. There were things that, you know, were holding us back in the TPA that, you know, required were very difficult to change. And so by eliminating the TPA, we've basically opened up the ecosystem now to changes that I think can improve the experience for both fans and players and partners and teams. So, you know, if I sound excited about it, it's because I am. And, you know, it's not yet completed or announced, but those are my expectations at this point.
Yeah, good to hear. And so I guess kind of related to that, based on the notes on the statements, I think even after the reduction in franchise payables related to the Overwatch, I think in the next year, there's around CAD 7- CAD 8 million of franchise payables to be paid. You can clearly cover that with your cash on hand, especially with the seven or eight million coming in in Q4. But I guess, have there been any conversations related to the CDL or in League of Legends, where a similar, call it, a delay, an extinguishment of franchise fees? Have those discussions been had, I guess, is the question. I know you can't comment on specifics.
Or is it fair to assume that whatever's in the next 12 months is gonna be cash out the door 100%?
Sure. Look, I don't... These are forward-looking statements, so these are my opinions, okay? And this is, you can take this as our, as our position more than as any kind of agreement that has been in place. But we do not expect to make any payments on any of those franchises in 2024. So we, you know, they are, they are there, and they're reported, and, of course, you know, there's, you know, the standards and the obligations and so forth. But my expectation is that we will not have to make them.
And that's based on the conversations you've had with the game developers and the league operators?
That's my expectation.
Yeah.
Mm-hmm.
So, it's Rikesh. You know, we've just had a strong history of deferring and extinguishing payments over the past years. And I think, you know, our expectation is that we - that trend is gonna continue.
Got it. And I guess a little bit more fun question, broad level. Adam, new CEO in place, I guess there's been a few changes to leadership and senior management. Can you just comment kind of on your mid to long-term outlook? And have there been any, any material shifts in strategy or, or is it no changes in strategy, kind of keep your head down and, and do what you've been doing? Or is there other places of focus that you want to, to shift in the coming years?
Well, look, we've been doing this, I guess, the current iteration of esports for five years, and certainly, five years is a long time in a fast-moving industry. And so, you know, there are pivots that take place, and we are pivoting, you know, kind of as required. You know, with respect to, you know, reductions and so forth, you know, they're never easy. And, you know, anybody that has left or is no longer with us is, you know, they're missed. You know, the rest of us are picking up the slack, and so it makes it harder for the people to stay. But, you know, the industry, I think, as a whole needs to right size.
And the expenses, I would say, industry-wide, were higher than what was sustainable. Maybe the expectations were too high as well. So I think we right-sized. I think the restructuring process is generally complete for us. I think we're kind of at the right cost base here, and the focus going forward is to drive revenue. You know, you can't grow a business by just cutting costs, right? And while we've done that over the course of the year, we are on track to also hit record revenue. And it hasn't been the easiest macro environment, but the fact that we can grow while cutting is, I think, a great tribute to the team and everything that we've done.
With respect to strategic kind of pivots and shifts, you know, there's things that are ongoing. I think I'll leave that maybe for the next conference call. But we do see some kind of changes, and we also see many opportunities that have evolved over the period of time that we've been looking out there. And being in a position where we have probably among the strongest balance sheet of companies in our sector positions us, I think, very well.
Makes sense. Sorry, just to tack on one more. You mentioned your the venue project, which hasn't come up in a little while. Understanding that you said you're gonna give more information in the future, are we fair to expect that there won't be a huge cash outlay in order to fund that venue project, and there will be some sort of agreement with a third party that minimizes the cash requirements to fund that project?
Well, if I was to answer that, then I wouldn't have said that there's gonna be more information in the first quarter. So,
All right.
Yeah.
Yeah, fair enough.
But look, the project. We're still excited about the project. You know, we're working on it. You know, these things take time, and like I said, we believe there's a place for that in this market. We believe there's a big opportunity in this market, and we're excited to provide more information in the first quarter.
Fair enough, then I will be waiting patiently. Thanks, guys.
Okay. Thank you.
Thanks, Towaki.
Thank you. I show no further questions in the queue. At this time, I'd like to turn the call over to Mr. Adam Adamou, Chief Executive Officer, for closing remarks.
Okay. Thank you to all for attending and listening. We're very excited about our prospects, our future, and our present. So, looking forward to providing our next update at the end of the fiscal year. Thank you.
Thank you. And ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.