Complexity parent company Gamesquare posts $20.9M loss in 2021

Gamesquare Esports, the parent company of North American esports organization Complexity Gaming, has published its financial results for 2021.

The basics: Gamesquare has a growing portfolio in esports.

• Gamesquare, which is public on the Canadian Securities Exchange and OTCQB market, has made plenty of moves since acquiring the esports org. It launched a production studio with former FaZe Clan VP Oluwafemi “Femi” Okusanya in February.
• The company acquired Cut+Sew and Zoned, marketing agencies founded by Matt Hilman, Devon Woodruff, and Sean Maher, for $7.85M in July 2021. It also owns talent agency Code Red Esports and defunct organization Team Reciprocity (which still owns a CrossFire franchise in partnership LGD Gaming, 40% of Latin American League of Legends franchise Rainbow7, and Gaming Community Network).
• It counts veteran skateboarder Tony Hawk, Jordan Belfort of Wolf of Wall Street fame, and Conor McGregor's agency Paradigm Sports — led by Audie Attar — as advisors.

Brass tacks: Gamesquare acquired Complexity for $27M in June 2021.

• For the thirteen-month period ending December 31, 2021, the company's overall revenue totalled $10.8M ($13.7M CAD). Its competitive business unit generated total revenue of $2.36M ($3M) from sponsorships, prize winnings, and player-related activity; its agency business unit generated $8.4M ($10.7M).
• The competitive business unit generated a gross loss of $65,776.67 ($83,777 CAD), while its agency business unit made a gross profit of $2.67M ($3.4M CAD).
• In the same period, Gamesquare collectively made a loss of $20.9M ($26.6M CAD). Excluding non-cash expenses and one-time costs totalling $13.7M ($17.4M CAD), the loss would be $7.1M ($9.1M CAD).
• Major expenses for the company included salaries, consulting, and management fees of $6M ($7.6M CAD), share-based compensation of $2.8M ($3.6M CAD), and transaction costs of $7.6M ($9.7M CAD).

A wider lens: The esports industry is proving to be less financially lucrative than many have claimed.

• Following the trend of esports companies going public over the past couple of years, we have more insights into the financial performance of some of the industry's more popular businesses.
• In the past couple of months alone, Astralis posted a $5.2M loss for 2021, Enthusiast Gaming (Luminosity, Seattle Surge, Vancouver Titans) posted a $41.6M loss in 2021, OverActive Media (MAD Lions, Toronto Defiant, Toronto Ultra) posted a $15.4M loss in 2021, and esports betting company Rivalry posted a $19.2M loss in 2021.
• A new annual report from Newzoo recently estimated that the esports industry would generate $1.38B in revenue in 2022. It also states that sponsorships are still the primary revenue source for organizations and the global esports audience — including both enthusiasts and casual viewers — will total 532M people by the end of the year.