Alex Macdonald: Of course. My pleasure. Yes. Seasonality in Q1, I mean, the short answer is we’re targeting for each quarter in the back half of the year. That’s what we’re planning towards. Which is not atypical for digital media company, of course, to make their money in the back half of the year. But that’s what we’re planning for an improvement Q2 over Q1. And if there is any earlier than expected, I know some analysts are calling for earlier. I mentioned we expect decreased CPMs year-over-year until at least and including Q3, some analysts are calling for an earlier recovery. If that occurs, it’s a benefit to us. We are not planning for it. So right now, we’re targeting both quarters in the back half of the year Q3 and Q4. And on an operating adjusted EBITDA basis.
Robert Young: Okay. And then you said you expect RPMs to be a headwind until Q3. And so do you have any –what are the primary levers in OpEx if the market doesn’t come back the way that you plan?
Alex Macdonald: What we pull them, we do expect them, some continued headwinds, it’s slightly has bottomed, but that’s how long we take, expect the recovery period to be as far as levers, I mean we continue to run as efficiently as possible. We never stopped, in Q3 and in Q4, we cut out over $2 million of recurring quarterly OpEx through both the divestiture of the legacy assets as well as through headcount reductions and through cuts in our technology and content expense. So we haven’t stopped doing that. In fact, some of that will continue to normalize into Q1. So with or without where CPMs go, we’re still running as efficiently as we can, just given the environment that carries on into 2023.
Operator: The next question is from Gianluca Tucci with Haywood Securities.
Gianluca Tucci: Hi, guys, and congrats on joining the team, Nick. I’m just curious at a high level, it’s been almost now 30 days since the announcement of your joining Enthusiast. In your first couple of weeks in the team, how are you thinking about the strategy at the company longer term and how it’s positioned in the industry for that outsized growth that you talk about?
Nick Brien: Yes, that’s a very good question. I mean, a lot of the thinking around the strategic opportunity I did when I was considering the opportunity when it came to me and I recognized that the gaming media sector, the gaming entertainment sector is presents itself with huge diversity across, as we know, 3 billion gamers across the planet and continuing to grow. And I saw that the opportunity with an organization that had its primary focus on satisfying the opportunity for the communities of gamers and fans that its breadth of proposition was not just the one thing whether it be its advertising, its own sites, its partner network, its MCN, the esports teams that they have, but the opportunity to really pull together and create bespoke marketing solutions that so many brands are looking forward to on an ongoing basis to evolve beyond a conventional push based advertising model.
That’s part of it. And I think the other part was to see the opportunity where we have so much subscription data and so much opportunity to leverage our first party data to enhance not only the creativity of our brand solutions, but how we continue to grow our audiences and our partnerships in the face of cookies going away. So I really loved the fact that this was an organization that extremely thoughtfully acquired some very strong assets and different capabilities, and really looking forward to continue to both direct where we apply those by looking at verticals whether we’re looking at CPG or finance or transportation and starting to really approach some of the biggest brand advertisers about why and how they can work with us for the benefit and the practicality to deliver true ROI and creative impact.
So I’m most excited about that. I think there’s a number of areas around all things data and the leverage of technology and technology partnerships that could even enable us to be more attractive to the huge growing amount of independent gaming, fan and community sites that exist across North America. So I’m very excited to be working in, but it’s hard for me to say again, I look at the strategy of a company when I’m coming in through the lens of my two eyes. What do we do better and what do we do differently? And obviously, what we do differently innovation, opportunity around the kind of conversations we can have with brands who are really looking to differentiate in highly commoditized and competitive categories with very creative and engaging partnership solutions.
So that’s what we’re very excited about. It’s not about a sale, it’s about building relationships where we become embedded for those brands as a very consistent and proven part of their brand building strategy. So as I sit here 20 days in, it continues to reassure me that this organization has made some very, very smart acquisitions and how the whole is going to be even stronger than the sum of the parts when I’m able to pull these together and build on the kind of success we’ve talked about with the NFL program, with some of the biggest advertising in the world win and continuing to return. So, John, I hope that gives you a sort of general perspective without providing, again, specifics on things that will change or things we’re going to invest in.
Because again, I haven’t finalized those and I haven’t even discussed those with the board.
Gianluca Tucci: That’s excellent color. Thanks, Nick. I appreciate that. And then Q4 showed continued strength in your margin profile on gross margins. It sounds like you continue to expect margin growth to outpace revenue growth in 2023. Is that fair to assume?
Gianluca Tucci: Yes.
Gianluca Tucci: Okay, great. And Alex, I think you mentioned this in your comments, but how much onetime expenses did Enthusiast’s book in Q4 non-recurring in nature?
Alex Macdonald: Well, what I mentioned was the, we said non-recurring, we had the total between Q3 and Q4, OpEx I said that was $2.2 million. About half of that divestiture. So I guess it became nonrecurring. And then the net investment for the NFL was $3.7 million. But the NFL program is recurring. But of course that’s a net investment. That program is going to continue. I would not expect those level of OpEx going forward as recurring. But those are the numbers I highlighted, the $2.2 million from the cost cutting measures and the divestiture. And then the $3.7 million net investment in Q4 for NFL TNG.
Gianluca Tucci: Okay, that’s perfect. Thank you. And then how are you thinking about the balance sheet in the context of your growth plans? Is it well positioned?
Alex Macdonald: Well, it’s well positioned for two reasons. One, of course, we have, like all companies in our sector, we’ve been spending the last few quarters really focused on the efficiencies of our operations. So we’re much leaner, also the NFL TNG program that needed to build a book of receivables and a pipeline of deals. And we didn’t have that when we started in September. Now we have that. So there’s a working capital investment that needs to occur. So we’re lucky that way. We have some receivables flowing after year end in relation to NFL. And equally or more important, we got a pipeline of contracts. So that really some, that sets us up nicely from a working capital perspective. And as I mentioned, subsequent to the year end, NFL TNG has run profitable episodes.
And then of course, I believe I mentioned it, of course the operating facility, which has also, by the way, now been extended subsequent to the year end. So working capital is in a very healthy position. Another little fun fact, if you look at the trade receivables over the payables, it’s in a very healthy position. So there’s extra working capital on top of cash available to put to use as well. So there’s a couple of angles there. It makes us feel pretty comfortable.
Gianluca Tucci: Okay. Great color. Thanks guys. And congrats again, Nick, on hopping aboard the Enthusiast train.
Operator: The next question comes from Mike Crawford with B Riley.
