See ESE Entertainment (ESE:TSXV; ENTEF: OTCQX) announce a US$5 million contract this morning to a very large, European based gaming company.
The two things that excited me most about the company when I started learning about them last month was:
- They are winning a lot of new business after extensive testing by some of the largest gaming companies in the world
- The size of their contracts are getting bigger and bigger, and for longer durations
The un-named customer is using ESE to help get more players (i.e. customers) for their flagship video game. This is a global contract, good until June 2023. And it’s the first Big One with this game developer—who is marketing the game in FIVE languages and looking to target players in over 20 countries.
CEO Konrad Wasiela says ESE can do this better than most—because translating video games worldwide is where he got his start, and how he figured out how to land these big contracts.
“Before ESE, I was previously involved with a company that successfully provided one service for these big game developers in the localization market,” Wasiela explained.
“We would localize a game, which means translate games into different languages and we’d scale them from one language to 40 languages, which typically meant we’d be entering into 40 new countries or regions.”
“We had specialized, localized translators that would actually work with the strings of the game, the embedded strings of the game and translate the game play throughout the game. Like I said, up to 40 different languages.”
“For example, a big contract of ours was with FIFA, for EA Sports. We did the transcription, the language translation, the voiceovers, anything related to the messaging and language around the game. We did that.”
Folks, EA’s FIFA game is often the largest in the world—in 2021 that one game generated over US$1.6 billion in revenue. Wasiela has since moved into ESE, but he says that success was a key driver of his success with ESE.
“That experience got me to really understand what the developers wanted—how they were entering into new markets, their marketing plans, their financial statements. We were translating everything in all these languages.”
“And once you’re embedded into that ecosystem, you quickly realize not only is that a huge market, but you also see all the other things that they need. They needed groups to do specialty services, like distribute the games, bring on new customers, create community. That wasn’t their core competency.”
“So when I realized there was a massive opportunity, we jumped on it and created that full, 360-solution for them at ESE ”
To generate that total solution, Wasiela went out and acquired five companies, each with a complementary but slightly different niche. His biggest M&A deal was buying Montreal’s GameAddik, whose customer acquisition software meshed perfectly with Wasiela’s tech platform and business model.
He did all of this in under two years and only raising about CAD$15 million in equity. With this, Wasiela has been able to
- grow ESE to a CAD$60 million PLUS revenue run-rate
- have positive adjusted EBITDA for the last nine-months
- Win business from some of the Top-10 gaming companies in the world, including Electronic Arts, Riot Games, Epic Games, and Opera GX
With many one-time costs now gone—going public and each of the five M&A deals costs hundreds of thousands of dollars in fees and closings—Wasiela says he’s excited to show shareholders what his business can do.
“This next quarter, shareholders will get financial statement that more accurately reflect just the business with no M&A,” he says. A new CFO, with senior management experience at Great Canadian Gaming (over $3 billion market cap and acquired by Apollo Global Management, Inc. (NYSE: APO) last year) will help do that.
And this US$5 million contract is that kind of business. Wasiela said that the contract will not be a linear/even US$416,000 a month (CAD$566,667), but rather start a bit more slowly and work up to peak revenue over the first year.
“Our goal with this new customer is to perform and showcase our technology, and to work with them for a long time and with multiple games,” he said.
He adds that ESE is continuing to win these contracts—they won over 24 different contracts over the past year—because they know how to acquire customers in many locations better than, well, maybe anyone else.
“If a customer says to me – ‘I need 14-to-60 year olds in Philadelphia, this demographic, this age, this background–we’ll get it for them,” he says.
“And the players we find for our customers, they’re sticky,” Wasiela explains. “We target players that stay on platforms longer, and continue to play games. These high value players continue to buy in-game purchases.”
“With our big data play, we can actually track player data alongside the video game publishers. They’re coming back to us, and they’re saying, “You guys have the sticky users, your retention is 30% higher than other groups in certain cases.”
That transparency and effectiveness is creating a win-win for customers and ESE shareholders. Their fiscal Q4 ends October 31, with with new contracts like today’s news starting to ramp up.
With no anticipated drag from M&A costs, and enough revenue to show positive adjusted EBITDA on the fiscal year so far, every new dollar of revenue has the potential to be more profitable than before. But investors will have to wait until next month at least to see the hard numbers.
DISCLOSURE–ESE Entertainment has been a paying client of the OGIB Corporate Bulletin in the last 12 months