Q4 2021 NeoGames SA Earnings Call
Yeah.
Okay.
Okay.
Good day, ladies and gentlemen, and thank you for standing by.
Good day, ladies and gentlemen, and thank you for standing by.
Welcome to the New Year Games 4th Quarter 2021 Earnings Conference Call.
Welcome to the knee of games fourth quarter 2021 earnings conference call.
At this time, all participants are in listen-only mode.
At this time, all participants are in listen only mode.
A question and answer will follow the formal presentation.
And answer will follow the formal presentation.
Please note that this conference call is being recorded today, March 10, 2022.
Please note that this conference call is being recorded today March 10 2022.
I will now turn the call over to Mr. Jack Scorning with ICR.
I will now turn a nickel lose weight and Mr. Jacques Cornet with ICR.
Thank you operator and.
Hello, everyone.
Jack Scorning: By now, you should all have access to our fourth quarter and full year 2021 earnings release, which is available on the NEO Games website at www.neogames.com in the investor relations section.
By now you should all have access to our fourth quarter and full year 2021 earnings release, which is available on the Neo games website at Neo game at Www Dot D O games Dot com in the Investor Relations section.
Jack Scorning: Before we begin our formal remarks, we need to remind everyone that the discussion today will include forward-looking statements.
Where we begin our formal remarks, we need to remind everyone that the discussion today will include forward looking statements. These forward looking statements, which are usually identified by use of words, such as will expect anticipate should or other similar phrases are not guarantees of future performance.
Jack Scorning: These forward-looking statements, which are usually identified by use of words such as will, expect, anticipate, should, or other similar phrases, are not guarantees of future performance. These statements
These statements are subject.
Jack Scorning: to numerous risks and uncertainties that could cause actual results to differ materially from what we expect. And therefore you should exercise caution when interpreting and relying on.
Numerous risks and uncertainties that could cause actual results to differ materially from what we expect.
And therefore, you should exercise caution when interpreting and relying on them.
Jack Scorning: We refer all of you to our recent SEC filings for a more detailed discussion of the risks that could impact our future operating results and financial conditions.
We refer all of you to our recent SEC filings for a more detailed discussion of the risks that could impact our future operating results and financial condition.
Jack Scorning: We encourage investors to review our regulatory filings, including the Form 20-F for the year ended December 31st, 2021, when it is filed with the SEC.
We encourage investors to review, our regulatory filings, including the form 20-F for the year ended December 31, 2021, when it is filed with the SEC.
Jack Scorning: During today's call, we will discuss non-IFRS financial measures, which we believe can be useful in evaluating the company's financial performance.
During today's call, we will discuss non <unk> financial measures, which we believe can be useful in evaluating the company's financial performance. These measures should not be considered in isolation or as a substitute for our financial results prepared in accordance with I F. R. S. A.
Jack Scorning: These measures should not be considered in isolation or as a substitute for our financial results prepared in accordance with IFRS.
Jack Scorning: A reconciliation of these measures to the most directly comparable IFRS measure is available in our earnings release on the neogames.com website.
A reconciliation of these measures to the most directly comparable I FRS measure is available in our earnings release on the Neo games Dot Com website.
Jack Scorning: Hosting the call today, we have Moti Malul, Neo Games Chief Executive Officer, and Raviv Adler, Chief Financial Officer of the company.
Hosting the call today, we have multi modal neo games, Chief Executive Officer, and Rajiv Adler Chief Financial Officer of the company.
Jack Scorning: They will provide some opening remarks, and then we will open the call to questions. And with that, I'll turn the call over to Moti.
They will provide some opening remarks, and then we will open the call to questions with that I'll turn the call over to mochi.
Yeah.
Thank you Chuck and good morning, everyone.
Moti Malul: Last night, we released our fourth quarter and full year 2021 results.
Last night, we released our fourth quarter and full year 2021 results.
Moti Malul: Before touching on the fourth quarter result, I will highlight some of the accomplishments we are proud of.
Before touching on the fourth quarter results I will highlight that won't be accomplishment well problems.
Moti Malul: as we wrap up our first full year as a publicly traded company.
As we wrapped up our first full year as a publicly traded company.
Moti Malul: I will then provide an update on the fourth quarter as well as the trends we are seeing in the market.
I will then provide an update on the fourth quarter.
The trends, we're seeing in the market.
Moti Malul: before turning the call over to Raviv to run through our financials, business performance, and 2022 guidance.
Before turning the call over to Rajiv to run through our financials.
Business performance.
Thank you <unk>.
Raviv Adler: However, before I begin, I would like to dedicate a few words to our teammates and colleagues in Ukraine.
Yeah.
However, before I begin I would like to dedicate a few words to our teammates and quality in Ukraine.
Raviv Adler: On behalf of myself, our management team and board, as well as the entire Neogims family, our thoughts and actions are with our colleagues based in Ukraine and our families.
Behalf of Mike Gill our.
<unk> team and board.
What is the tone yoga family, our thoughts and actions are with our colleagues based in Ukraine and for families.
Raviv Adler: They are enduring an unprecedented and unspeakable crisis in their nation, and their safety and well-being is of prime concern. They have shown unparalleled...
We are enjoying good precedent.
We speak about their nation.
Their safety and well being is a prime concern.
They've shown unparallel determination and briefly.
Raviv Adler: and they have our wholehearted support in their justified cause. We continue to provide assistance to the...
And then you have our wholehearted support in there just if I called it.
We continue to provide it is the best of our ability to support the relocation safely.
Raviv Adler: to support the relocation efforts to safe areas in and outside Ukraine. And we pray for this difficult time to end swiftly.
Ian outside your clean and we pay for these difficult times to end suites.
Raviv Adler: I will provide further explanation in a few minutes about our business continuity efforts and impact. Looking back, it has been a very exciting year for Neogen.
I will provide further explanation in a few minutes about their business when can you hear me.
Pat.
Looking back it has been a very exciting year for Nicky.
Our first full year as a publicly traded company.
Raviv Adler: we remain concentrated on our vision to help drive iLottery customers to reach their full potential by empowering them with the best technology combined with powerful game experiences and the full complement of market-leading expertise and insights.
We remain concentrated on our vision to help drive customers to reach their full potential by empowering them with the best technology combined with powerful game and.
And the full complement of market leading it.
Ted.
Raviv Adler: In the U.N., according to Ehler and Krejcik, the top three states for all of 2021, as measured by gross iLottery sales per capita, were Michigan, New Hampshire, and Virginia. All Neogames customers. And this makes
In the U S. According to <unk> in great shape, the top three states for all of 2021.
As measured by gross.
For capital.
Hampshire Penn Virginia.
All games customers and it makes it very probable.
Raviv Adler: Furthermore, while our customer state account only represents 33% of the population of states with iLottery,
Furthermore, while our customers state accounts only represents 33% of the population of states with I lottery.
The neo gains.
Raviv Adler: Powered states generate 67% of iLottery GGR generated in the entire U.S. market. In Alberta,
Howard States generate 67% or Basel, III CAGR generate within the entire U S market.
Alberto.
Investments in expanding gaming vertical.
Raviv Adler: powers PlayAlberta to a record year with a full rollout of draw-based games, live dealers, and online portals.
Solidly, Alberta to a record year with.
For the full rollout of draw based games like dealer and all 94 days.
Raviv Adler: More broadly, we launched multi-game progressive jackpots with instant content for three customers already, as well as innovative on-premises solutions.
More broadly we launched multi game progressive jackpot with instant content for three customers already.
As well as.
Innovative online rapidly acknowledging we have launched several successful product innovation.
Raviv Adler: We have launched several successful collective innovations through our NeoGeo studios, titles which continue to be the cornerstone to the revenue growth we've seen across our key economies.
Yoga Studios.
Titles, which continues to be the cornerstone.
Our revenue growth.
Across our key accounts.
Raviv Adler: We entered into content deals with several national lotteries across Europe , including Austria, Italy, and most recently, Turkey, through our partners.
We entered into content deal with several national lottery across Europe , including Austria, Italy, and most recently Turkey.
Our partnership with them.
Raviv Adler: We also announced the first new Beam Studio content deal in Canada with Atlantic Lottery Corporation.
We also announced the first neo teams did your constant beta in Canada with Atlantic Lottery Corporation.
Raviv Adler: While the revenue benefits from big are currently modest, we view them...
While the revenue benefit from Big are currently modest we view them.
Raviv Adler: As important fundamental investments in relationships that may grow with other future products and services,
As important fundamentals fundamental investments in relationship with other future products and services, we may be able to provide.
Raviv Adler: We're also proud of our strong partnership with Sears Entertainment.
We're also proud of our strong partnership with Caesars Entertainment.
Raviv Adler: 2021, as part of the Liberty Solution, we went live with five more states, and including New York, which launched in early January , and Illinois, which launched this week, bringing the total number of states that we support their online sports betting or iGaming offering to 12,000.
2021 .
Part of the solution, we went live with five more states, including New York, which launched in early January and Illinois.
Which launched pizza week, bringing the total number of states that we support the online sports betting lighting offering to 12 states.
Raviv Adler: As a result, revenue contributions from this strong partnership have grown by almost 20% in 2021 compared to 2020. We ended 2021 with strong momentum.
Results revenue contributions from the strong partnership has grown by almost 20% in 2021 compared to 2020.
We ended 2021 with strong momentum.
It carried over into the start of 2022.
Raviv Adler: As I'm sure most of you are aware, in January , we announced our offer to acquire a SPARC local account.
As I'm sure. Most of you are aware in generally we announced our offer to acquire as far as global.
Raviv Adler: This transaction represents a major strategic step forward for us and will create what we believe is a global leader across all interactive gaming verticals, including online lottery and the gaming industry.
This transaction represents a major strategic step forward for us and it will create what we believe is a global leader across all interactive gaming verticals, including online luxury and the gaming industry.
Raviv Adler: As I mentioned in our investor call held in January , when we announced the transaction, we view the combination with SPIRE as a natural strategic progression of our company.
As I mentioned on our Investor call in January when we announced the transaction we view the combination would expire as a natural strategic progression of our company.
Raviv Adler: The transaction will enhance our scale and competitive position across all big players.
The transaction will enhance our scale and competitive position across all business lines.
Raviv Adler: The transaction process continues to progress in line with our timing expectations, and we still expect it to close in the first half of 2020.
The transaction process continues to progress in line with our timing expectations and we still expect it to close in the first half of 2022.
Raviv Adler: Looking at our results, we continue to significantly grow our business year over year and outperform the market.
Looking at our adult we continue to significantly grow our business year over year and outperformed the market.
Raviv Adler: for the fourth quarter, our revenues, combined with our share of NPI revenue.
For the fourth quarter, our revenues combined with our share of NPI revenues was $21 $3 million, representing approximately 15% of year over year growth.
Raviv Adler: was $21.3 million, representing approximately 15% of year-over-year growth.
Raviv Adler: For the full year, this number was 84.5.
For the full year. This number was $84 5 million, representing an increase of about 44.
Raviv Adler: representing an increase of about 44% year-over-year. We're incredibly proud of this result and will continue to execute our growth strategy as we take this momentum into 2020.
<unk> year over year, we're incredibly proud of these results and will continue to execute our growth strategy.
Take this momentum into 2022.
Raviv Adler: looking closer at the recent trends we're seeing across our customer base.
Looking closer at the recent trends, we're seeing across our customer base.
Raviv Adler: As reflected in our prior guidance, we saw single-digit sequential decrease in Michigan high literacy.
As reflected in our prior guidance, we felt digit sequential decrease in Michigan I Love, what we see.
Raviv Adler: However, with the momentum we saw during the latter part of Q4.
However, with the momentum we saw during the latter part of Q4.
Raviv Adler: As we begin 2022, we believe trends are beginning to stabilize in the market as we anticipate the day May, and we hope to return to modest growth at some point during 2022.
And then as we begin 2020 Q, we believe trends are beginning to stabilize the markets as we anticipate that they made.
We hope to return to modest growth at some point during 2022.
Raviv Adler: We continue to work closely to support the measures and discipline approach demonstrated by the space altering with the silotering program.
We continue to work closely to support the measure of the disciplined approach demonstrated by the state Lottery, we did title III program.
Raviv Adler: and remain confident that the foundations our joint teams have built in this state will lead to sustainable long-term growth as we have seen other markets with similar lens.
And remain confident that the foundation of our joint teams have built.
<unk> will lead to sustainable long term growth.
We have seen in other markets with similar landscapes.
Raviv Adler: Keep in mind, however, that year-over-year comps for the fourth quarter were partially impacted by the significant double jackpot run which started in December 2020.
Keep in mind, however that year over year comps for the fourth quarter were partially impacted by the significant double Jack let's run which started in December 2020.
And when you wouldn't.
Raviv Adler: particularly evident in the year-over-year comparison next quarter.
Particularly evident in the year over year comparison next quarter.
Raviv Adler: Outside of Michigan, our North America accounts continue to benefit from robust growth due to the rollout of our platform and introduction of new content throughout the year.
Well side of Michigan are North America accounts continued to benefit from robust growth due to the rollout of our platform the introduction of new content throughout the year.
Raviv Adler: As a result, most of our accounts have more than doubled in the revenue contribution during 2021 compared to 2020.
As a result, most of our accounts have more than doubled in the revenue contribution during 2021 compared to 2020.
Raviv Adler: And specifically, both Alberta and Virginia have excelled beyond our expectations. In Alberta, for example, following the rollout of online sports betting, live dealer, and draw-based games, we have driven the market to become our second-largest player.
Specifically, both Alberta, and Virginia is beyond our expectation.
Alberta for example, following the rollout of online ordering.
Either and draw based games, we have driven the market to become our second largest accounts. Despite the fact that we only launched a little over a year ago.
Raviv Adler: despite the fact that we only launched it a little over a year ago. We are very proud of that.
We are very proud of the performance of this account.
Raviv Adler: and see it as a model of where we can add significant value to new accounts that make full use of our platform as we implement the widest range of offerings from ILO 3 to I-Gaming and Sparketing, driving significant revenue growth.
He did the model.
We can add significant value.
New accounts.
We'll use the lock platform, how do we implement the widest range of offering for myeloid three dry gain against our bidding driving significant revenue growth.
Raviv Adler: Our relationship with SAFCA has also proven to be highly beneficial.
Our relationship with Samsung has also proven to be highly beneficial.
Raviv Adler: as they grew online GGR to be about 39% of their total GGR generated in the Czech Republic. Another great example of our tech's driving growth.
<unk> online <unk> to be about 39% of their total GTR generated in the Czech Republic.
A great example of our driving growth.
Raviv Adler: for lottery operators expanded into a wider range of gaming.
For lottery operators expanded into a wider range of gaining critical.
Raviv Adler: The regulatory environment and state authorization in U.S. for iLottery continues to evolve in the states which we have discussed on prior calls.
The regulatory environment and state authorization in Europe for I Lottery continues to evolve and get states, which we have discussed on prior calls.
Raviv Adler: Among others, we see certain progression in ILO legislative discussions in Ohio and we continue to monitor for an RFP in West Virginia as a further step to the process it commenced late last year.
Among others, we keep those in progression and I looked at the legislative discussions in Ohio, and we continue to monitor for analysis for <unk>.
Is it further steps through the process to commence late late last year.
Raviv Adler: Outside of the U.S., we see continued movement of lotteries formation and deregulation in the Brazilian market, which we believe will provide for our lottery opportunities in the years to come.
Outside of the U S. She continued movement of lotteries formation on deregulation in the Brazilian market, which we believe will provide for I look at the opportunities in the years to come.
Raviv Adler: With that, I want to come back to the conflict in Ukraine.
With that I want to come back to the conflict in Ukraine.
Raviv Adler: As many investors are aware, we have a portion of our employees based in Ukraine.
Many investors are aware, we have a portion of our employee base in the brain.
Raviv Adler: It's important to note that our revenues from ILO 3, which represents the vast majority of our revenue base, are driven from long-term recurring revenues, which are not impacted by the crisis. To that end, a little bit of a background.
First it's important to note that our revenues from idled rigs, which.
Which represent the vast majority of our revenue base.
<unk> from long term recurring revenues, which are not impacted by the crisis.
To that end a little bit of a background.
Over the first part of the year.
Raviv Adler: we have been planning for and are now implementing a business continuity program, which includes several critical elements.
We have been planning for.
Now implementing a business continuity program, which includes several critical element.
Raviv Adler: By working with all of our global teams, we have successfully ensured that there has been no service or system disruption throughout our customers.
<unk>.
I'm working with all of our global teams.
We have successfully ensured.
And there has been no service or assistance disruption throughout our customer base.
Raviv Adler: Second, we redeployed ongoing development efforts across our global teams, including many members of our...
Second we redeployed ongoing development efforts across our global teams, including many members of our Ukrainian themes.
Raviv Adler: who are currently operating from six locations, both outside and inside Ukraine.
We're currently operating from six locations, both outside and inside Ukraine.
Raviv Adler: Third, in order to mitigate the potential for future impact to development and product innovation for our customer base, we have stepped up our recruitment activities in other locations where we have existing business relationships.
Third in order to mitigate the potential for future impact to development and product innovation for our customer base.
We have stepped up our recruitment activities in other locations, where we have existing business relationships, such as Poland, Bulgaria, and others and so whether it's supporting the relocation efforts are all Ukrainian nimbly to safer regions, such as in the Czech Republic as well.
Raviv Adler: such as Poland, Bulgaria, and others, as well as supporting the relocation efforts of our Ukrainian enemy to safer regions, such as in the Czech Republic.
Raviv Adler: Indeed, certain portions of our revenues within the fee-for-services segment is revenue that was partially tied to our Ukrainian workforce, providing such development services.
Indeed, certain portions of our revenues within the fee for services segment with revenues that was partially tied to our Ukrainian and workforce, providing such development services, we are working to mitigate.
Raviv Adler: Our guidance, which Raviv will cover in greater detail, is a bit wider than normal, as among other items.
Guidance, which rajiv will cover in greater detail.
It would be wider than normal.
Among globalize it takes into consideration all the possible outcomes related to the Ukrainian crisis.
Raviv Adler: takes into consideration all the possible outcomes related to the Ukrainian crisis.
Raviv Adler: I would like to also mention in this regard that our entire customer base in North America and Europe has been extremely accommodating and extending additional assistance.
I would like also mentioned with regard did our entire customer base in North America, and Europe has been extremely accommodating.
And extending additional assistant he never like Yodlee.
Raviv Adler: For example, Salka in the Czech Republic has been very helpful in our rapid efforts to create a safe harbor for our employees to relocate to. And for this, we are very grateful.
For example in.
In the Czech Republic has been very helpful. In a rapid effort.
The safe Harbor for employees to relocate to introduce we are very grateful.
Raviv Adler: This is such a great demonstration for the strong relationships we have developed through the years with our customers. With that, I'll now turn...
Such a great demonstration of pretty strong relationships, we have developed through the years with our customers.
With that I'll now turn the call over to Rubens.
Thank you <unk>.
Speaker Change: Before I get into the results, as a reminder when we discuss our results, I would point out that all of our iLottery business in North America operates through our 50-50 joint venture Neopolity Interactive, or NPI, except in Michigan, which is reflected.
Before I get into the results as a reminder, when we discuss our results I would point out that all our Idaho dairy business in North America operates through our 50 50 joint venture renewable at interactive or NPI.
Except in Michigan, which is reflected in our topline revenues.
Speaker Change: Contracts in Virginia, New Hampshire, North Carolina, and the province of Alberta run through NPI. Except for the NPI contract
Contracts in Virginia, and New Hampshire, and North Carolina in the province of Alberta run through NPI.
Except for the MTA contract, we conduct all of our business through Neo games.
Speaker Change: As a result, from an accounting standpoint, as many of you know, we generate revenues and earnings through our wholly owned operations and through our equity interest in NPI.
As a result from an accounting standpoint, as many of you know, we generate revenues and earnings through our wholly owned operations and through our equity interest in NPI.
Speaker Change: Now turning to the results, our revenues as reported on the income statement which excludes our share in NPR revenues was $12.3 million during the fourth quarter of 2021.
Now turning to the results while revenues as reported on the income statement, which excludes our share in NPR revenues was $12 3 million during the fourth quarter of 2021.
Speaker Change: down 3.9% over the same period last year, primarily due to the decline in Michigan results and as we've explained during the year.
Three 9% over the same period last year.
Primarily due to the decline in Michigan results as we've explained during the year.
Speaker Change: Our share of NPI revenue was $9 million during the fourth quarter of 2021, compared with $4.5 million last year.
Our share of NPI revenue was nine mill during the fourth quarter of 2021, compared with $4 5 million last year.
Speaker Change: Sum total of these two numbers was 21.3 million during the fourth quarter, representing an increase of about 15% year over year.
Sum total of these two numbers was $21 3 million during the fourth quarter, representing an increase of about 15% year over year.
Speaker Change: For the full year, reported revenues were $50.5 million, up 2.6% compared to 2020.
For the full for the full year reported revenues were $50 5 million up two 6% compared to 2020.
Speaker Change: Our share of NPI revenues was $34.1 million for the year, compared with $9.5 million in 2020.
Sheriff NPI revenues was $34 1 million for the year compared with $9 5 million in 2020.
Speaker Change: Sum total of these two numbers was 84.5 million, representing an increase of a bit below 44% year-over-year.
Total of these two numbers was $84 5 million, representing an increase of bid below 43, 44% year over year.
Speaker Change: Generally speaking, fourth quarter earnings were impacted by few one-time items.
Generally speaking fourth quarter earnings were impacted by a few one time items. This nonrecurring.
Speaker Change: These non-recurring items impact include approximately $3.8 million as acquisition-related expenses related to our pending acquisition of Aspire Global and about $2.6 million related to our employee stock-based compensation plan.
Calling items impact include approximately $3 8 million as acquisition related expenses related to our pending equity acquisition of <unk> global and above $2 6 million related to employee stock based compensation plan.
Speaker Change: Both of these items were adjusted in Calculating our Adjusted EBITDA for the quarter.
Both of these items were adjusted in calculating our adjusted EBITDA for the quarter.
Speaker Change: For the quarter, our adjusted EBITDA was $7.9 million, which is down 13.9% compared with $9.1 million last quarter.
For the quarter, our adjusted EBITDA was $7 9 million, which is down 13, 9% compared with $9 1 million last year.
Speaker Change: Overall, we're comfortable with where margins are and where they will be as the business matures.
Overall, we're comfortable with where margins are and what they will be as the business matures.
Speaker Change: Diversifying and growing not only the customer base, but also product types is an important element of our growth strategy.
Diversifying and growing not only the customer base, but also product types is an important element of our growth strategy.
Speaker Change: Turning to our balance sheet, we ended this quarter with about $66.1 million worth of cash and cash equivalents, our outstanding debt at the quarter end was approximately $33.6 million, at a weighted average interest rate of 1%.
Turning to our balance sheet. We ended this quarter with about $66 1 million worth of cash and cash equivalents are extending that to the quarter end was approximately $33 6 million at a weighted average interest rate of 1%, leaving us in a net cash position of $32 5 million with.
Speaker Change: leaving us in a net cash position of 32.5 million.
Speaker Change: with 25.5 million shares outstanding at the quarter end.
With 25 5 million shares outstanding at quarter end.
Speaker Change: Few words about guidance. We see the growth trends bolstered in 2021, primarily with the launches of new accounts to follow through in the growth from our existing customer base into 2022, although obviously with more modest growth rates.
Few words about guidance, we see the growth trends bolstered in 2021, primarily with the launches of new accounts to follow through and the growth from our existing customer base into 2022.
Obviously with more modest growth rate.
Speaker Change: Therefore, we're initiating 2022 revenue balance of between 90 to 97 million. At the midpoint, this would represent year-over-year revenue growth of approximately 11%.
Therefore, we're initiating 2022 revenue guidance of between $90 million to $97 million at the midpoint at the midpoint. This would represent year over year revenue growth of approximately 11%.
Speaker Change: Keep in mind that the revenue guidance does not include the launch of any new turnkey contracts nor presumes the close of the merger with Aspire Global, after which we are expecting to provide the market with a revised guidance.
Keep in mind that the revenue guidance does not include the launch of any new turnkey contracts, nor presumes. The close of the merger would aspire global after which we're expecting to provide the market with a revised guidance.
Speaker Change: It also assumes the full range of possible outcomes from the Ukraine crisis, which is as Moti mentioned, is why the range is wider than typical. With that, I will turn the
It also assumes the full range of possible outcomes from the Ukraine crisis, which is multi mentioned.
Why the range is wider than typical.
With that I will turn the call back to multi.
Thanks for that.
Speaker Change: 2021 has been a transformational year for us. We grew significantly in all our cases.
Turning 21 has been a transformational year for us.
Most significantly in all of our Kpis.
Speaker Change: and we solidified our leadership position even further as the leading adultery provider in the market, which drives consistent and solid success to our customer population.
We solidified our leadership position, even further as the leading provider in the market describes consistent and solid success.
Our customer partners.
Speaker Change: And we have entered 2022 with a strategic announcement on our planned acquisition of Spark Global, which will position us in front of an amazing opportunity to capitalize in the global markets of iLottery, iGaming, and online sports.
And we have entered 2020 strategic announcement of our planned acquisition of its fiber loop, which would position us in front of an amazing opportunity to capitalize in the global markets Avaya luxury I gaming and online sports betting.
Speaker Change: To the end, once again, I would like to extend what I believe are joint wishes and prayers for everyone to the swift and safe resolution.
And once again I would like to expand what I believe are joint wishes and prayers for everyone.
Sweden and safe resolution of the conflict in Ukraine.
With that.
Speaker Change: Thank you for joining us this morning, and we're happy to answer any questions. Operator, please.
We thank you for joining us this morning, and we're happy to answer any questions.
Operator, please open the line for questions.
Speaker Change: Thank you. And as a reminder, to ask a question, please press star 1 on your telephone keypad. To withdraw your question, press the pound key. Please stand by while we compare.
Thank you.
As a reminder to ask a question. Please press star One again, California Keybanc go ahead George.
Question press the pound key.
Please stand by law Ley compile the Q&A roster.
Yeah.
Speaker Change: Your first question comes from Barry Jonas from Chewy Security.
Your first question comes from Barry Jonas from <unk> Securities.
Barry Jonas: Hey guys, thanks for taking my questions.
Hey, guys. Thanks.
Thanks for taking my questions.
Barry Jonas: First off, as you've had some time to dig in further into Aspire, do you maybe have a better sense about potential revenue or cost synergies?
First off as you've had some time to dig into further into our spire.
You have a better sense about potential revenue or cost synergies.
Speaker Change: Yeah. Thanks, Barry. Good morning.
Yes, Thanks, Barry good morning.
Speaker Change: We've been looking into Aspire up till the point in time we've announced the transaction.
We've been we've been we've been looking into aspire.
Up until the point in time, we've announced the transaction.
Speaker Change: As you are aware, we're now in the focus of completing the transaction by the timetable we've promised the market by the end of Q2 2022.
As you are aware we are now in a focus on completing the transaction by the timetable we have promised the market by the end of Q2 2022.
Speaker Change: We have a couple of errors in mind, but we are not providing any detail at this point in time and we're waiting for the transaction to be closed.
We have we have we have a couple of fares in mind, but we are not providing any details at this point in time.
For the for the transaction to be closed.
Speaker Change: Okay, understood. Then maybe just a higher level question. What do you think is holding back the U.S. states that have not approved iLottery at this point? You know, is there something that maybe would spark more of a domino effect or a tipping point? What's the best way to think about that?
Okay understood then.
Maybe just a higher level question, what do you think is holding back.
The us states that have not approved I lottery.
At this point is there something that maybe with spark a more of a domino effect or is there a tipping point, what's the best way to think about that.
Speaker Change: I don't think anything specific has changed from the various factors that are so-called holding back, like you said. It's just a natural thing.
I don't think anything specific.
Changed from from the various factors at all so called the holding back like you said, it's just natural.
Speaker Change: I would say conservative progression of lotteries generally speaking, even in adopting...
I would say conservative progression or locally generally speaking do you mean in adopting <unk>.
Speaker Change: other similar patterns, like not only Aleppo, if you take the Kino rollout across the U.S. state from when the first state launched it and where it is today.
Similar path.
Like not only are literally if you take.
The keno rollout across the U S. U S date from when the first state launch date, then whether it needs today.
Speaker Change: which is by the way only about half of the state.
By the way only about half of the eight.
Another example, and Thats a product of course will be the one.
Speaker Change: We see that the hesitation has always been around what we mentioned in the past, what impact will that do to retail. I mention again here, as we mentioned to all legislators, that we have seen nothing but parallel growth with retail.
We see that the.
You have mutation has always been around what we mentioned in the past what he thought we might do to repay.
You mentioned the <unk>.
Mentioned to our legislators that we have seen nothing but.
The growth with retail.
Speaker Change: I think the expansion of gaming by governments is always a sensitive matter and they're taking it in a responsible manner and we're doing our best to help our lotteries to...
Expansion of gaining by by governments Ngos as always a sensitive the Netherlands, they're taking it.
Responsible manner.
Best scheme to help our lotteries too.
Speaker Change: What I can say that is very different on a positive note at this day than where we were a few years ago is that today there is no single director of any lottery in the U.S. that does not understand that iLottery, if they could, would be the best option for them to grow revenue into the future.
But what I can say that it is very different on a positive note.
And then when we work in terms ago, you that today there is no single.
Rector well then you Walter in the U S does not understand that <unk> III.
<unk> would be the best option for them to grow revenue into the future. We think the faster has been debates around that this is now non debatable.
Speaker Change: If in the past there has been debate around that, this is now non-debatable. So now it's only a move on the legislation side. But it doesn't say that there's anything that has changed from the reasons we mentioned in the past.
Now Tony a move on the legislation.
I wouldn't say that.
If there is anything that has changed from our business as we mentioned in the past.
Speaker Change: Got it. All right. Thanks, guys, and hoping everyone in Ukraine on the team is safe.
Got it alright, thanks, guys and hoping everyone in Ukraine on the team is safe.
Thank you Barry.
Speaker Change: Your next question comes from Jeff Stancho from CFO Alliance.
Your next question comes from gas from Stifel. Your line is open.
Jeff Stancho: Great. Thanks, Marty, Mochi, Raviv. It's good to hear from you both. I wanted to start on margins for a minute. I think last quarter you had talked to some non-recurring launch costs. Was there anything, you know, sort of one-time in nature that impacted EBITDA margins specifically in Q4? Is kind of the 37% or so the right way to think about the business as it stands with your current contract?
Great. Thanks, Good morning, <unk>, it's good to hear from you both.
Wanted to start on margins for a minute I think last quarter, you had talked to some nonrecurring launch costs was there anything sort of onetime in nature that impacted EBITDA margin specifically in Q4 is kind of a 37% or so the right way to think about the business as it stands with your current contract mix.
Marty: Yeah, thank you, Jeff. And, and indeed, you know, we ended up the quarter with with roughly the same
Yes, Thank you Jeff.
And indeed, you know we ended the quarter with.
Roughly the same.
Marty: Margin profiles in terms of numbers and percentages. We closed q3 There has has been some one-timers associated with them with with with some currency devaluation of the dollars against the expenses that we incur in Israel, but in generally speaking
Margin profile is in terms of numbers and percentages, we closed Q3.
There's has been some one timers associated with with with some currency devaluation of the dollar is against the expenses that we incur in Israel, but in generally speaking.
Marty: We believe comfortable with where the margins are currently trending, you know, given the profile of customers and the revenue mix.
We believe comfortable with where the margins are currently trending given the profile of customers and the revenue mix.
Marty: and believe that the band of high 30s to low 40s would represent well where the business should trade given our current customer mix and revenues profile.
And and believe that the the band of high 30 to low 40 would represent well what are the business should trade given our current customer mix and revenue profile.
Speaker Change: Okay, that's great. Thank you, Raviv. And then for my follow-up, on the top line guidance, you mentioned
Okay. That's great. Thank you Rajiv and then for my follow up on the topline guidance you mentioned.
Speaker Change: Just an unclear impact from Ukraine being the main explainer for the difference in range. If memory serves, you know, your initial guide for 2021 had a 4 million spread between the low and the high end, looks like you're going with 7 million for the guidance you introduced. You know, can I back the two out to get sort of, you know, what your thoughts are for potential impact to the fee-for-service business line for disruption in the Ukraine? Or is there more to it than that?
Just unclear impact from Ukraine being the main explainer for the difference in range. If memory serves your initial guide for <unk> for 2021.
$4 million spread between the low and the high end, let's say to euro was $7 million for the guidance you introduced can I back that two out to get sort of what your thoughts are for potential impact.
To the fee for service business line from disruption in the Ukraine or is there more to it than that.
Speaker Change: No, the wider range, as we've noted on our notes to the quarter, was mainly associated with the potential impact of the Ukraine.
No.
The wider range.
As we've noted on on our on our notes to the quarter was mainly associated with the with the potential impact of.
Of the Ukraine crisis.
Speaker Change: which as Barry noted, we all hope to see being concluded in the coming days in a safe way.
Which as Barry noted, we hope to see being concluded in the coming days in this safely.
Speaker Change: That being said, and Moti touched it on his notes, we've taken all the mitigation plans required in terms of moving certain elements of the business to other teams globally.
That that that being said and then multi touched it on an on on these notes we've taken all the mitigation plans required in terms of moving certain elements of the business to other other teams globally.
Speaker Change: Um, so that we, we expect that the vast majority is already mitigated within our existing performance.
So that we expect that the vast majority has already mitigated within our existing performance.
Speaker Change: That being said, we've provided wider range because we have, you know, given the changing circumstances on a daily basis.
That being said we've provided wider range because we have you know given the changing circumstances on a daily basis.
Speaker Change: uh... it's it's uh... very difficult to predict how things would fall at the end
It's very difficult to predict how things would fall again.
Speaker Change: With that notion, I would just add, and again, it was touched by Moti that a vast majority of our revenues is generated through the ILO3 contract in the U.S. market, and given the same mix expectations also into 2022, if there's going to be some revenues impact, it's going to be marginal.
With that notion I would just add and again it was touched by noting that the vast majority of our revenues are generated through other I lottery.
Contracts in the U S market and given the same.
The same mix expectations also into 2022.
If theres going to be some some revenue impact it's going to be marginal.
Speaker Change: Okay, understood. That's helpful. Thank you. And if I could just squeeze in one last one, one quick clerical follow up on the guide. So you mentioned no new contracts in guidance, but I just want to be clear. Does that include any contribution from getting instant tickets up and running in North Carolina? Or would you count that likewise as a new contract?
Okay understood. That's helpful. Thank you and if I could just squeeze in one last one one quick clerical follow up on the guide. So you mentioned no new contracts in guidance, but I just wanted to be clear does that include any contribution from getting instant tickets up and running in North Carolina, or whether you count that likewise, I said new contracts.
Yes.
Speaker Change: North Carolina is blended into the guidance, mainly during the second half of the year.
North Carolina is blended into the into the guidance.
Into mainly mainly doing this.
Second half of the year.
Speaker Change: And this is the reason why we've used the, one of the reasons why we've used the range that you see currently between the nine to 97, 90 to 97, sorry.
And this is this is the reason why we have we've used one of the reasons why we've used the range that you see currently between the $92 90 792 to 97 story.
Perfect. That's helpful. Thank you both.
Speaker Change: Your next question comes from Chad Bainin from Macquarie. Your line is open. Hi. Good morning.
Your next question comes from Chad Beynon from Macquarie. Your line is open.
Hi, good morning, <unk>, Thanks for taking my question.
Chad Bainin: Wanted to touch on Michigan. In your prepared remarks, you noted that trends have stabilized there. Wondering if you have any views in terms of, you know, why this is stabilized after only
Wanted to touch on Michigan in your prepared remarks, you noted that trends have stabilized. There wondering if you have any views in terms of.
While this has stabilized after only.
Chad Bainin: You know a little a little under a year in the market Do you believe it's just been kind of the passage of time of people trialing the other the other products out there? And then is the lottery doing anything from a marketing standpoint to help you know help you? Assure that that this is stabilized. Thank you
A little a little under a year in the market do you believe it's just been kind of the passage of time of people Trialing.
The other products out there and then as the lottery doing anything from a marketing standpoint to help help you.
Sure that this is stabilized thank you.
Speaker Change: Thank you, Chuck. It's a good question. Yes, the answer to everything in short is yes.
Yes. Thank you Todd good question.
Yes, yes.
So pleased with the control yet.
Speaker Change: We have mentioned in the past that actually it took maybe longer than expected to get into stability and then looking at growth patterns in a competitive environment just because of the very fierce marketing spend by the others in the market, but we were hopeful that it would work. We will get to a point where this stabilizes and starts to see growth patterns.
We have mentioned in the past that actually.
Maybe longer than expected to get into stability and then looking at the growth patterns.
In a competitive environment, just because of the very fierce marketing spend by the others in the market, but we were hopeful that we could work we will get to a point, where this stabilizes and starts to see growth rather than.
Speaker Change: We very much believe that there is good reason to believe we're there. We see through the numbers where they're coming from.
We very much believe that there is good reason to believe we're there.
We we see the numbers, where they are coming from and they do like to note that the growth is sustainable and that's generated through the fact that new players that are joining into the system or not do with leaders because they know that there's any given state. So once we have.
Speaker Change: and they do let us know that the growth is sustainable and that's generated through the fact that new players are joining into the system.
Speaker Change: are not replayers because they know that there's a game in each state so once we have
Speaker Change: Finish with a mix and match of players that maybe wouldn't actually belong on the other side and now we're recruiting new players and those new players are...
Finished with a mix of natural players that maybe more naturally belongs to the other side and now we're in.
In keeping with players those those new players are coming.
Speaker Change: coming into the activity, the iLottery program, at the point of time that they are aware about everything in the market. That's why we believe it's more sustainable. The Lottery marketing is doing...
Coming into the activity the regulatory program at that point of time that they are aware about everything and be in the market. That's why we believe it's more sustainable luxury marketing is doing tremendous work really really well.
Speaker Change: in the last couple of months, as we mentioned, they were very disciplined. They continue to be disciplined with marketing, and by the way, it seems like the entire online sports betting market is now joining their disciplined approach.
In the last couple of months as we mentioned, we're very disciplined we continue to be disciplined with marketing spend by the way. It seems like the entire women's sports betting market has now joined <unk> disciplined approach.
Speaker Change: But I think that this is working, and we have good reason to believe that we've reached a point of sustainable growth. It will be modest growth. We're not going to grow double digits year on year, given the competitive landscape in the market.
But.
But I think that this is working.
And we have good reason to believe that we've reached a point of of sustainable.
It will be multiple growth, we're not going to grow.
Double digit.
Given the competitive late in the market.
Speaker Change: But we believe that in good reason to say that we were, we shouldn't continue to decline.
But we believe that as we can see that we were.
We shouldn't continue to decline.
Speaker Change: OK, perfect, thank you and then wanted to ask about the.
Okay perfect. Thank you and then I wanted to ask about.
Speaker Change: the fee-for-service contract with Caesars, just wanted to get a little bit more of an understanding of how this should flow through. So my understanding is, you know, Caesars has made a pretty big push at the end of 2021 with your help, with their new Liberty platform. I think they have, yeah, a few more markets, as you mentioned, where they'll be rolling out Illinois and then, you know, Canada and the like.
The fee for service contract with with Caesars, just wanted to get a little bit more of an understanding of how this should flow through so my understanding is Caesars has made a pretty big push at the end of 2021 with your help with their new Liberty platform I think to have a few more markets as <unk>.
You mentioned, where there'll be rolling out, Illinois in Canada and the like.
Speaker Change: Can you just help us understand that when Caesars gets to a point where...
Ken can.
Can you just help us understand that when Caesars gets to a point, where there is no new launches kind of how the revenue picture will start to look given it's more of a fee for service.
Speaker Change: There's no new launches, kind of how the revenue picture will start to look given it's more of a fee-for-service. I guess there will always be new states for CSRS, but just trying to think about 22 versus 21 in terms of all the help that they will need from your team. Thanks.
There will always be new states for Caesars, but just trying to think about 'twenty two versus 21 in terms of all the help that they will need from.
From your team thanks.
Yes.
Speaker Change: The activity that we support for teachers continues to grow, and while it's not a revenue shared directive, it is connected to the magnitude of the activity that we need to support for them. So with more space, there's more need for people that will monitor, maintain, handle go-live, and so on and so forth, apart from just the development team.
The the acuity that we support for theaters.
Continued to grow and why not the revenue.
Their collective is connected to the.
The magnitude of the activity that we need to support for them. So with more states. There was more need for people that will.
Monitor maintain.
Handle go live.
And so on and so forth apart from just the development team.
Speaker Change: The development teams themselves are now focused on two aspects. One is the continuous rollout of markets, and there are still ambitions to do that in quite a number of states. I can't speak, of course, on behalf of Caesar's, but we're supporting everything they're doing.
Development teams themselves are now focused on two aspects. One is the continued rollout of market then.
Theres still ambition to do that in quite a number of states I can't speak of course on behalf of seizures, but we're supporting everything they are doing.
Speaker Change: Um, and I, uh, there is also side by side with that.
And I.
There is also a side by side with it.
Speaker Change: quite an enhanced and ambitious roadmap to improve the product itself. It's two parallel efforts, so it could be that at some point the part of the effort that is...
Quite an enhanced and ambitious.
Roadmaps to.
To improve the product itself, it's too bad that effort. So it could be that at some point the part of the S. Four studies pointed towards states rollout.
Speaker Change: pointed towards state rollout will stabilize that calling. I have to say that, you know, we're not there yet according to what we see in terms of ambition.
We've stabilized that call it.
To say that.
We are not there yet according to what the what we see in terms of ambition.
Speaker Change: But the rest will continue to maintain its existence throughout the year. Okay. Great. Thank you very much and best of luck.
But the rest will will continue to.
To maintain.
It's existed throughout the year.
Okay, great. Thank you very much and best of luck.
Thank you Chad.
Thank you very much Jeff.
Good luck to you by the way.
Excellent.
Speaker Change: There's no further questions at this time. I would now like to turn the call over to Moody for closing.
There is no further question at this time I would now like to turn the call over to <unk> for closing remarks.
Moody: Yeah, thank you guys for for joining the call. As always, we continue to appreciate any interest in our story in our company.
Yes. Thank you guys for joining the call as always we continue to appreciate any interest in our story and our company.
Moody: And we're really, really thrilled from what we're seeing in front of us in 2022, hoping for the Swiss resolution of the conflict in Ukraine as always, because these are first and foremost our friends. Thank you, everyone.
And we are really thrilled from what we're seeing in front of us in 2022.
Hoping for Swift resolution of the conflict in Ukraine as always because these are first and foremost on sentence.
Thank you everyone for joining.
Speaker Change: This concludes today's conference call. Thank you all for joining. You may now disconnect.
This concludes today's conference call. Thank you all for joining you may now disconnect.
Speaker Change: .
Okay.
[music].
Sure.
[music].
Okay.