Q1 2022 NeoGames SA Earnings Call
Good day, ladies and gentlemen, thank you for standing by welcome to the New games first quarter 2022 earnings Conference call.
At this time all participants are in a listen only mode. A question and answer session will follow the formal presentation. Please note that this conference call is being recorded to date May 12 2022.
I will now turn the call over to tax cornett with ICR.
Thank you operator, and good morning, everyone by now everyone should have access to our first quarter 2022 earnings release, which is available on the neo games web.
Site at Www Dot Neo games Dot com in the Investor Relations section.
Before 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.
These statements are subject to numerous risks and uncertainties that could cause actual results to differ materially from what we expect.
Therefore, you should exercise caution when interpreting and relying on them.
Refer all of you to our recent SEC filings for more detailed discussion of the risks that could impact our future operating results and financial condition.
We encourage investors to review our regulatory filings.
The form 6K for.
For the period ended March 31 2022.
During today's call, we will discuss non Ifr's 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 FRS.
Reconciliation of these measures to the most directly comparable <unk> measure.
Available in our earnings release on the Neo games Dot Com website.
Hosting the call today, we have Motetema Louisville games, Chief Executive Officer, and review, the Adler Chief Financial Officer of the company they.
They will provide some opening remarks, and then we will open the call to questions with that I will turn the call over to <unk>.
Thank you Jack and good morning, everyone.
Last night, we released our first quarter 2022 results. This morning, I will highlight some key points about the first quarter performance and provide an update on the trends we are seeing in the market.
Ravi will then run through our financials and business performance.
Overall, there hasnt been significant changes since we last spoke only two months ago as the business continues to perform well and in line with our expectation.
Also obviously diligently working towards the close of the spire acquisition.
We recently launched a tender offer and we are on track for closing before the end of the quarter.
During the quarter the total of revenues plus our NPI revenue interest climbed modestly growing three 8% year over year as well as over 5% sequentially from Q4, bringing the total sum to an all time high.
2020.
$22 4 million.
We consider this.
To be an impressive result, given the comparison of the first quarter of 2021, which benefited significantly from a double jackpots run from both Mega millions and powerful.
These results highlight the strong trends, we are seeing in some of our key markets.
Virginia for example continues to outperform with strong growth both quarter over quarter and year over year.
Count continues to innovate in many areas.
Such as the recently launched online raffle gains subsequent to quarter end.
Both of the two has demonstrated continued growth.
Given the full portfolio of gaming vertical across lottery casino and sports, which we have geared play Alberta wind.
Such that the market has become our second largest turnkey account, we view, Alberta as a terrific example of the type of accounts, where our lottery customer will benefit from our strategic acquisition of Aspire for example.
Content from Perry plea Wizard the game studio continued to gain traction and wallet share with an impressive introduction that began in Q4 last year.
In Michigan with the first quarter of this year, we have fully lapped the introduction of <unk> in the market in January of 2021.
This gives us enough perspective to see evidence for what we believe is sustainable sustainable growth in the account.
Which has continued to growth that started in the second half of Q4 last year into Q1.
Recall when we last spoke we mentioned result has stabilized sequentially.
And in fact, we were seeing the beginnings of what we were hoping would be a momentum shift during the latter part of the fourth quarter.
As we have mentioned in the past our long term belief that app.
After an aggressive period of promotion for my gaming during 2021.
The lottery will get to a point, where the business stabilizes and then again begins to regain growth.
We are seeing new players joined the system and in our view. These new players today are more dedicated lottery players because they are all aware over the <unk> gaming offering and have decided to join the <unk> program.
While we may still see fluctuations in revenues due to expected impacts from factors such as seasonality all our jackpots overall, we're expecting the pattern will be trending towards growth moving forward.
Our <unk> partnership continues to perform well as we launched New York and Illinois with them during the first quarter in.
In April we also went live in the first Canadian market with Ontario, broadening our partnership with Caesars to include international markets.
In Europe SaaS got.
Another of our multi gaming product customers continues to perform well and we have seen continued growth of revenues with an impressive online performance.
The regulatory environment and state authorization in the U S for I lottery continues to evolve in some key markets.
Which we have mentioned on prior calls.
However, since we last spoke two months ago, there hasnt been much new to report.
Internationally, we see movements in a few regions.
One way of interesting dynamics in Brazil in which we see continued progress in various states to form create and regulate lottery authorities as a first step towards gearing up with lottery Tech and operations as well as sports betting in the coming years. This is a long term process.
But an interesting market with attractive potential opportunities given its size, particularly particular when you consider the products that will be offered within this emerging lottery market.
Obviously, our biggest news during the quarter was the announced acquisition of aspire Global in January .
To summarize the deal we viewed as a natural development for the progression of new games as the combination would aspire will enhance our scale and competitive position across all business lines, adding aspires proprietary sports betting offering.
Gaming content than aggregation platform as well as its turnkey bto B gaming solutions to the Neogen is offering.
We believe this strategic combination will generate significant long term shareholder value via <unk> capitalizing on the key strength of our two companies and positioning nail games for expansion in new and existing markets.
Based on the impressive first quarter results, we remain excited at the prospects of completing the transaction.
The deal continues to progress on schedule for closing as we recently put out the prospectus on the commenced offering a couple of weeks ago. The acceptance period runs from April 27.
Through may 25th with an expected settlement date of June 14th 2022.
Currently.
Given market reception, we are confident we will meet the shareholder approval threshold.
And we look forward to updating you on our next earnings call.
Lastly, I would like to provide an update on the conflict in Ukraine as it relates to our operations friends and colleagues who remainder during these difficult times.
Once again their safety and wellbeing are our chief concern and.
And with this in mind I'm happy to report that all of our country safe and we continue to support them in the best way we can.
While the situation remains fluid.
Secondly, we have been so far very successful with our efforts and we're able to completely mitigate all the impacts to our business through various measures measures such as relocation to safer areas and parallel recruitment outside of Ukraine in a few markets.
We are fortunate to have such a dedicated motivated and engaged team in Ukraine, who are all demonstrating admirable responsibility and loyalty to the company and to our customers.
Like everyone, we hope to see a swift end to this conflict, but until then we expect our operations to continue with minimal impact with that I'll now turn the call over to Rajiv.
Thanks Marty.
<unk> get into the results as a reminder, when we discuss our results I would point out that all for Idaho crude business in North America operates through a 50 50 joint venture Neapolitan interactive or NPI, except in Michigan, which is reflected in our topline revenues.
Our contracts in Virginia, and New Hampshire, North Carolina in the province of Alberta run through NPI.
<unk> for the NPR contract will conduct all of our business to new games as a result from an accounting standpoint as many of you know we generate revenues and earnings through our wholly owned operation and throw equity interest in NPI.
Now turning to the results our revenues reported on the income statement with which excludes our share of NPI revenues was $13 2 million during the first quarter of 2022 down <unk>, 7% over the same period last year.
However, our share of NPI revenues grew to $9 2 million during the first quarter of 2022, compared with $8 2 million last year.
The sum total of these two numbers was $22 4 million during the first quarter, representing an increase of about three 8% year over year.
Generally speaking first quarter earnings were partially impacted by one time items, which was transaction cost incurred for the upcoming <unk> global acquisition of $2 2 million.
For the quarter, our adjusted EBITDA was $8 5 million, which is down 12% compared with $9 seven last year the results, representing EBITDA margins of 38% up 90 basis points quarter over quarter.
Turning to our balance sheet winded up this quarter with about $40 9 million of cash and cash equivalents, our outstanding debt at quarter end was approximately $13 2 million at a weighted average interest rate of four 1%, leaving us in a net cash position of $27 7 million.
Corresponding with aspire capital No terms, we have settled in full both outstanding principal and accrued interest of a total of $21 1 million.
With 25 5 million shares outstanding at quarter end.
With respect to guidance, we are updating the range to account for our reported results which were in line with our expectations. We continue to expect solid growth from our existing customer base in 2022, and we still expect 11% year over year growth during 2022 based on the midpoint of our guidance range.
91% to $96 million.
Keep in mind, however that this guidance does not include the launch of any new turnkey contracts, nor presumes the closing of the merger will dispose global.
It also assumes the full range of possible outcomes from the Ukraine crisis.
With that I will turn the call back to Marty.
Thanks Rajiv.
We believe we are in a great position to continue executing on our growth strategy from both internal and external growth opportunities and are excited by the momentum. We are generating we look forward to welcoming the team from aspire global into the <unk> family.
And take advantage of the amazing opportunity to capitalize on global markets of Ilo, III, I gaming and online sports betting with that operator. Please open the line for questions.
Thank you and as a reminder to ask a question simply press star one on your telephone to withdraw.
Good question press, the pound or housekeeping.
First question is from Jeff <unk> with Stifel. Please go ahead.
This is Jack can give on for Jeff Daniel Thank you for taking my question.
So I wanted to dig into the guidance changes a little bit if I may.
Could you maybe give a little bit more detail around that.
Yes.
Meanwhile, leaving the midpoint flat.
Okay.
Other quarter in the books, even more visibility or did.
<unk> been in Michigan or.
Your ability to mitigate Ukraine disruption figure into that as well so you get a little bit more color around.
Around the decision to tighten the range there that'd be great.
Yeah. Thanks for the question and good morning, Jeff.
First of all yes, we haven't moved our midpoint, because we're getting more confident.
Around the guidance overall, we felt that the range of the guidance we provided.
In our last earnings call, which was because of certain uncertainties on the lower end because we didn't know what the impact would be for total from the Ukraine.
Ukraine situation, which we're happy to report that we have fully mitigated so far and.
On the other hand, there has been a couple of deals on the content side of the business that we launched at the later part of last year that we didn't know how fast it will take for them to pick up on an aggregate value.
Not a specific deal it's an aggregate value over where do we forecast towards the.
At the end of the year. So we took this opportunity as we are now in in me to kind of.
Lighten a bit the range to give more clarity to investors on where do we see but we.
I have not done any significant changes beyond that.
Okay, Great. That's really helpful and then if I could.
More margin were 38%.
Almost 100 basis points sequentially reversing kind of.
The declining trend.
How much of this do you think.
Really the result of the cost.
Once development work for Caesars.
And how much.
The Alberta contract becoming <unk>.
Ramping and coming your second largest contract.
How do you think that various puts and takes.
Spec margin.
Bigger than that.
Our investors can look for margins to go.
Through the rest of the year and long term.
Yes, Thank you Jeff so.
Relative to margins.
As a general statement.
We still expect that Gulfport.
A go forward basis that the business would perform.
Around the high <unk> and low <unk>, and we feel comfortable where the margins are currently trending.
Well, we're not giving guidance relative to EBITDA contribution on a specific contracts in general I can I can say that.
Quarter over quarter, we are seeing a better performance in volumes and revenues coming through contracts, which are driving higher higher margins profile.
And also the work that we've done with the contract in Alberta relative to the.
Structure.
Cost contributing contributed a bit to the margin improvement and we expect that to also on a go forward basis.
Understood. Thanks, a lot guys.
Thank you. Your next question comes from Barry Jonas with <unk>. Your line is open.
Thank you.
My first question is if we think about the potential for new high lottery jurisdictions, how would you frame the scale and size of opportunities for the company.
In North America, with the JV as opposed to international where it's 100% video games.
First of all we always said that the U S has so much.
To still open up where we have roughly 10 states may be depending on how you count maybe one or two states that are doing.
Just subscriptions.
There are more than 35.
Dates to still to still go with Idaho, III, so absolutely the potential in the U S market is huge going forward. Then also the the nature of the deals in the market, where we are providing full turnkey account, including the.
The fullest extent of services provides for those deals due to account for.
For the most meaningful portion of our revenues and we still expect for the U S market going forward to be the more dominant market, that's not to say that there aren't markets, where we feel there are good opportunities.
To explore.
Especially markets, which we believe that can have economic of scale, which is why for example, I referenced to Brazil, which is 26 states. However, like in the U S is a lot of internal scaling if you aggregate wins of a couple of states in them and so we're trying to look for for the market switch.
We have a more attractive profile and unfortunately, we see that some of these are opening up around.
Around the world.
But again, we still expect that as.
With.
With enough time, Thats, a given it enough time for the markets to open up.
In its fullest extent the U S market will definitely continue to be the largest portion.
Okay got it and then just as a follow up question.
How should we be thinking about potential M&A.
Once the aspire deal closes I believe.
Expire management has talked about an interest in live dealer.
Sure.
Yes first of all I hope that you will.
Let us have a few days of risk.
We've been we've been working very diligently on this one for five or six months and even even before that.
<unk> to find interesting opportunities in the market Hasnt stopped before because of the aspire transaction to remind you even before.
The aspire transaction was announced we said that we are looking at opportunities in a landscape of three or four.
Universes or buckets of verticals and one of them was gaming, but we had other than we will definitely continue to pursue pursue opportunities in those areas. We will now add to these also areas, which we don't have full visibility into with the exception of publicly made statements on the <unk> side of the business obviously.
The transaction has not been completed so we have not yet had the chance to strategically see how to blend to the prioritization of potential transactions, but.
We are we are definitely looking to continue to seek for opportunities that will enhance the full offering of what will become the group.
Yes.
That's great. Thank you Marty.
Your next question comes from Cassandra Lee with Jefferies. Please go ahead.
Hi.
Hi, Good morning, Thank you for taking my questions.
Can you talk about the timing of North Carolina.
As the launch and what kind of grades that.
That from that.
Yes, good morning, Cassandra Thank you for joining us.
We can see that we have a specific date and time that that was already approved.
By the commission the lotteries waiting for an approval by its governing commission to let them upgrade the activity to include the instance, they have been working very diligently on educating the board and working to gain approval for a good couple of months, but there hasnt been a final decision.
On that matter, obviously, when it does upgrade itself too.
To become a full.
<unk> accounts with the instance, we expect that this will create.
Quite a significant impact on our potential revenues in the extent that we have seen when we opened up for example, <unk> instance in.
In Virginia in the middle of 'twenty.
2020.
2000, 22020, I forget the timeline I think it was July 2020.
So yes, so it gives quite a significant boost to the to the activity because obviously for as long as that we have only draw games, we are able to grow the business very nicely in North Carolina is a successful account when it comes to draw games.
But very much impacted from from.
From jackpot trends in an instance will provide so depending on the timing of when that opens up and how much runway do we still have in the year or two.
To transfer that into into revenues.
The revenue potential will will change so.
I don't know if it answers your question, but when we are now in May and we haven't yet received the approval. So obviously the impact on this year if it opens up.
We will probably be modest.
Alright, thank you.
If I may ask another one.
We saw the use of IP rights jumped quite a bit sequentially and year over year I assume.
With Caesars.
Launch in New York I Wonder how much of that is kind of one time.
Got it.
A good run rate going forward.
Yes so.
Some of the thanks for the question as you probably.
Number one.
The use of Ip's very much linked to the Caesars.
Aspiration of expansion in the U S and the U S market, which were.
Which we're supporting.
And as you rightfully stated it was associated with the launch.
Off New York and later also early Q2 in Ontario.
We're very much.
Linkedin committed to support their expansions and the pace of them opening new new states. So.
I cannot say that it was one timer, but.
Given that.
What we're familiar with their business plan is going forward it should be.
Recurring also into into Q3 and Q4 later on this year.
Got it. Thank you very much for taking my questions.
Thank you and with that ladies and gentlemen, we now conclude Q&A I'll turn the call back to Marty <unk> for his final remarks.
Thank you and thank you everyone for joining this morning as usual and showing interest in.
In our company.
The main thing obviously, while we are still reporting on our on our existing businesses for us too.
<unk> focus on completing the transaction and next next quarter our results if we close on time.
Will allow us to provide a bit more color on on the joint activities of the company.
Because if we close the transaction obviously still in Q2 as we expect by by second half of August we will be able to provide a bit more color that I know that many investors are waiting for but we're definitely excited for the opportunity.
So thanking everyone for joining this.
This morning, and showing interest in us and have a great day.
And with that ladies and gentlemen concludes today's conference call. Thank you for participating and you may now disconnect everyone have a great day.
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Good day, ladies and gentlemen, thank you for standing by welcome to Danielle Games first quarter 2022 earnings Conference call.
At this time all participants are in a listen only mode. A question and answer session will follow the formal presentation. Please note that this conference call is being recorded today May 12 2022.
I will now turn the call over to Jack's cornett with ICR.
Thank you operator, and good morning, everyone by now everyone should have access to our first quarter 2022 earnings release, which is available on the Neo games web site at Www Dot Neo games Dot com.
The Investor Relations section.
Before 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.
These statements are subject 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 them.
We refer all of you to our recent SEC filings for more detailed discussion of the risks that could impact our future operating results and financial condition.
We encourage investors to review, our regulatory filings, including the form 6K.
For the period ended March 31 2022.
During today's call, we will discuss non <unk> financial measures, which we believe can be useful in evaluating the company's financial performance.
Measures should not be considered in isolation or as a substitute for our financial results prepared in accordance with FRS.
Reconciliation of these measures to the most directly comparable <unk> measure is available in our earnings release on the Neo games Dot Com website.
Hosting the call today, we have most of your mobile games, Chief Executive Officer and review the Adler Chief Financial Officer of the company.
They will provide some opening remarks, and then we will open the call to questions with that I will turn the call over to <unk>.
Okay.
Thank you Zach and good morning, everyone.
Last night, we released our first quarter 2022 results.
This morning, I will highlight some key points about the first quarter performance and provide an update on the trends we are seeing in the market.
<unk> will then run through our financials and business performance.
Overall, there hasnt been significant changes since we last spoke only two months ago.
The business continues to perform well and in line with our expectation.
We're also obviously diligently working towards the close of the spire acquisition.
As we recently launched a tender offer and we are on track for closing before the end of the quarter.
During the quarter.
Total of revenues plus our NPI revenue interest climbed modestly growing three 8% year over year as well as over 5% sequentially from Q4, bringing the total sum to an all time high of 2020.
$22 4 million.
We consider this.
To be an impressive result, given the comparison of the first quarter of 2021, which benefited significantly from a double jackpot run from both Mega millions and powerful.
These results highlight the strong trends, we are seeing in some of our key markets.
Virginia for example continues to outperform with strong growth both quarter over quarter and year over year.
Account continues to innovate in many areas.
Such as the recently launched online raffle gains subsequent to quarter end.
Alberta, two has demonstrated continued growth.
Given the full portfolio of gaming verticals across lottery casino and sports, which we have geared play Alberta with.
Such that the market has become our second largest turnkey account, we view, Alberta as a terrific example of the type of accounting for our lottery customer will benefit from our strategic acquisition of Aspire for example.
Content from Perry plea Wizards game studio continues to gain traction and wallet share with an impressive introduction that began in Q4 last year.
In Michigan with the first quarter of this year, we have fully lapped the introduction of <unk> in the market in January of 2021.
This gives us enough perspective to see evidence for what we believe is sustainable sustainable growth in the account.
Which has continued to growth that started in the second half of Q4 last year into Q1.
Recall when we last spoke we mentioned result has stabilized sequentially.
And in fact, we were seeing beginnings of what we were hoping would be a momentum shift during the latter part of the fourth quarter.
As we have mentioned in the past our long term belief is that <unk>.
After an aggressive period of promotion for my gaming during 2021.
The lottery will get to a point, where the business stabilizes and then again begins to regain growth. We are seeing new players joined the system and in our view. These new players today are more dedicated lottery players because they are all aware of the <unk> gaming offering and have decided to join the lottery program.
While we may still see fluctuations in revenues due to expected impacts from factors such as seasonality or large jackpots overall, we're expecting the pattern will be trending towards growth moving forward.
Our <unk> partnership continues to perform well as we launched New York and Illinois with them during the first quarter in.
In April we also went live in the first Canadian market with Ontario, broadening our partnership with Caesars to include the international markets.
In Europe , SaaS Guy and.
Another of our multi gaming product customers continues to perform well and we have seen continued growth of revenues with an impressive online performance.
The regulatory environment and state authorization in the U S for I lottery continues to evolve in some key markets.
Which we have mentioned on prior calls.
However, since we last spoke two months ago, there hasnt been much new to report.
Internationally, we see movements in a few regions.
One way of interesting dynamics is Brazil in which we see continued progress in various states to form create and regulate lottery authorities as a first step.
Gearing up with luxury tech and operations as well as sports betting in the coming years. This is a long term process, but an interesting market with attractive potential opportunities given its size, particularly particular when you consider the <unk>.
Products that will be offered within this emerging lottery market.
Obviously, our biggest news during the quarter was the announced acquisition of aspire Global in January .
To summarize the deal we viewed as a natural development for the progression of new games as a combination would aspire will enhance our scale and competitive position across all business lines, adding aspires proprietary sports betting offering.
Gaming content aggregation platform as well as its turnkey bto B gaming solutions to the Neogen is offering.
We believe this strategic combination will generate significant long term shareholder value by Synergistically capitalizing on the key strength of our two companies and positioning nail games for expansion in new and existing markets.
Based on the impressive first quarter results were in.
We remain excited at the prospects of completing the transaction.
The deal continues to progress on schedule for closing as we recently put out the prospectus on the commenced offering a couple of weeks ago.
The acceptance period runs from April 27th.
Through may 25th with an expected settlement date of June 14th 2022.
Currently <unk>.
Given market reception, we are confident we will meet the shareholder approval threshold and.
And we look forward to updating you on our next earnings call.
Lastly, I would like to provide an update on the conflict in Ukraine as it relates to our operations friends and colleagues who remainder during these difficult times.
Once again their safety and wellbeing are our chief concern and.
And with this in mind I'm happy to report that all of our country safe and we continue to support them in the best way we can.
While the situation remains fluid.
Secondly, we have been so far very successful with our efforts and we're able to completely mitigate all the impacts to our business through various measures such as relocation to safer areas and parallel recruitment outside of Ukraine in a few markets.
We are fortunate to have such a dedicated motivated and engaged team in Ukraine, who are all demonstrating admirable responsibility and loyalty to the company and to our customers.
Like everyone, we hope to see a swift end to this conflict, but until then we expect our operations to continue with minimal impact with that I'll now turn the call over to Rajiv.
Thanks Marty.
<unk> get into the results as a reminder, when we discuss our results I would point out that all four idle crude business in North America operates through a 50 50 joint venture Newport interactive or NPI, accepting Michigan, which is reflected in our topline revenues.
Our contracts in Virginia, and New Hampshire, and North Carolina in the province of Alberta run through NPI.
Except for the NPR contract, we conduct of our business to new games as a result from an accounting standpoint as many of you know we generate revenues and earnings through our wholly owned operation and throw equity interest in NPI.
Now turning to the results our revenues reported on the income statement with which excludes our share of NPI revenues was $13 2 million during the first quarter of 2022.
<unk>, 0.7% over the same period last year.
However, our share of NPI revenues grew to $9 2 million during the first quarter of 2022, compared with $8 2 million last year.
Sum total of these two numbers was $22 4 million during the first quarter, representing an increase of about three 8% year over year.
Generally speaking first quarter earnings were partially impacted by one time items, which was transaction cost incurred for the upcoming to spur global acquisition of $2 2 million.
For the quarter, our adjusted EBITDA was $8 5 million, which is down 12% compared with $9 seven last year the results, representing EBITDA margins of 38% up 90 basis points quarter over quarter.
Turning to our balance sheet, we ended up this quarter with about $40 9 million of cash and cash equivalents, our outstanding debt at quarter end was approximately $13 2 million at a weighted average interest rate of four 1%, leaving us in a net cash position of $27 7 million.
Corresponding with aspire capital No terms, we have settled in full both outstanding principal and accrued interest of a total of $21 1 million.
With 25 5 million shares outstanding at quarter end.
With respect to guidance, we are updating the range to account for our reported results which were in line with our expectations. We continue to expect solid growth from our existing customer base in 2022, and we still expect 11% year over year growth during 2022 based on the midpoint of our guidance range.
91% to $96 million.
Keep in mind, however that this guidance does not include the launch of any new turnkey contracts, nor presumes the closing of the merger with <unk> global.
It also assumes the full range of possible outcomes from the Ukraine crisis.
With that I will turn the call back to Monty.
Thanks Rajiv.
We believe we are in a great position to continue executing on our growth strategy from both internal and external growth opportunities and are excited by the momentum we are generating.
We look forward to welcoming the team from aspire global into the <unk> family.
And take advantage of the amazing opportunity to capitalize in global markets are vital III I gaming and online sports betting with that operator. Please open the line for questions.
Thank you and as a reminder to ask a question simply press star one on your telephone to withdraw your question press the pound or Husky, yes.
Your first question is from Jeff Daniels with Stifel. Please go ahead.
This is Jack can give on for Jeff Daniel Thank you for taking my question.
So I wanted to dig into the guidance changes a little bit if I may.
Could you maybe give a little bit more detail around that.
Thanks, I'll leave it flat.
Okay, another quarter in the books and more visibility or did.
Stabilization in Michigan or <unk>.
Your ability to mitigate the Ukraine disruption.
You're into that as well.
A little bit more color around.
Hamilton to tighten the range there that'd be great.
Yeah. Thanks for the question and good morning, Jeff.
First of all yes, we.
We haven't moved our midpoint, because we're getting more confident.
Around the guidance overall, we felt that the range of the guidance we provided.
In our last earnings call, which was because of certain uncertainties on the lower end because we didn't know what the impact would be if at all from the Ukraine situation, which we're happy to report that we have fully mitigated so far.
And on the other hand, there has been a couple of deals on the content side of the business that we launched at the later part of last year that we didn't know how fast it will take for them to pick up on an aggregate value. It's not it's not a specific deal it's an aggregate value over where do we forecast towards the.
At the end of the year and so we took this opportunity as we are now in me to kind of.
<unk> tightened the range to give more clarity to investors on where do we see but we have not done any significant changes beyond that.
Okay, Great. That's really helpful and then if I can.
More margin were 38%.
Almost 100 basis points sequentially reversing kind of.
It is a declining trend.
How much of that you think is really the result of the car.
Once development work for Caesars.
And how much.
The Alberta contract becoming.
Ramping and becoming the second largest contract.
I do think that various puts and takes effect.
Tech margin.
Bigger into.
Our investors can look for margins to go.
Through the rest of the year and long term.
Yes, Thank you Jeff so.
Relative to margins.
As a general statement.
We still expect that on a go forward basis that the business would perform.
Around the high <unk> and low <unk>, and we feel comfortable where the margins are currently trending.
Well, we're not giving guidance relative to EBITDA contribution on a specific contracts in general I can I can say that.
Quarter over quarter, we are seeing a better performance in volumes and revenues coming through <unk>.
Contracts, which are driving higher higher margin profile.
And also the work that we've done with the contract and Alberto relative to the.
The structure of our cost contributing contributed a bit to the margin improvement and we expect that to also on a go forward basis.
Yes.
Understood. Thanks, a lot guys.
Thank you. Your next question comes from Barry Jonas with <unk>. Your line is open.
Thank you.
My first question is if we think about the potential for new high lottery jurisdictions, how would you frame the scale and size of opportunities for the company.
In North America, with the JV as opposed to international where it's 100% Neo games.
First of all we always said that the U S has so much.
To still open up where we have roughly 10 states may be depending on how you count it maybe one or two states that are doing.
Just subscriptions, where there are more than 35 states to still to still go with Idaho III. So absolutely the potential in the U S market is huge going forward then.
Also the the nature of the deals in the market, where we are providing full turnkey account, including the the fullest extent of services provides for those deals due to account for.
For the most meaningful portion of our revenues and we still expect the U S market going forward to be the more dominant market, that's not to say that there aren't markets, where we feel there are good opportunities.
To explore.
Especially markets, which we believe that can have economic of scale, which is why for example, I referenced to Brazil, which is 26 states. However, like in the U S has a lot of internal scaling.
You aggregate wins of a couple of states in them and so we're trying to look for for the markets, which we.
Which have a more attractive profile and unfortunately, we see that some of these are opening up around.
Around the world.
But again, we still expect that as.
With.
With enough time, let's say, giving it enough time for the markets to open up.
In its fullest extent the U S market will definitely continue to be the largest portion.
Okay got it and then just as a follow up question.
Should we be thinking about potential M&A.
Once the aspire deal closes I believe.
Aspire management has talked about an interest in live dealer.
Sure.
Yes first of all I hope that you will.
Let us have a few days of risk.
We've been we've been working very diligently on this one for five or six months and even even before that our appetite to find interesting opportunities in the market hasnt stopped before because of the aspire transaction to remind you even before.
The aspire transaction was announced we said that we are looking at opportunities in a landscape of three or four.
Universes or buckets of verticals and one of them was gaming, but we had other than we will definitely continue to pursue pursue opportunities in those areas. We will now add to these also areas, which we don't have full visibility into with the exception of publicly made statements on the <unk> side of the business obviously.
The transaction has not been completed so we have not yet had the chance to strategically see how to blend to the prioritization of potential transactions, but.
We are we are definitely looking to continue to seek for opportunities that will enhance the full offering of what will become the group.
Yes.
That's great. Thank you Marty.
Your next question comes from Cassandra Lee with Jefferies. Please go ahead.
Hi.
Hi, Good morning, Thank you for taking my questions.
Can you talk about the timing of North Carolina.
Launch and what kind of grades that from that.
Yes, good morning, Cassandra Thank you for joining us.
We can see that we have a specific date and time that that was already approved.
The commission the lottery is waiting for an approval by its governing commission to let them upgrade the activity to include the instance, they have been working very diligently on educating the board and working to gain approval for a good couple of months, but there has been to be in the final decision on <unk>.
Net.
Obviously, when it does upgrade itself too.
To become a full a.
Full of luxury accounts with instance, we expect that this will create.
Quite a significant impact on our potential revenues in the extent that we have seen when we opened up for example, <unk> instance in.
In Virginia in the middle of 'twenty.
2000.
2000, 22020, I forget the timeline I think it was July 2020.
So yes, so it gives quite a significant boost to the to the activity because obviously for as long as that we have only draw games, we are able to grow the business very nicely in North Carolina is a successful account when it comes to draw games.
But very much impacted from from.
From jackpot trends and an instance will provide so depending on the timing of when that opens up and how much runway do we still have in the year or two.
To transfer that into into revenues.
The revenue potential will will change.
Don't know if it answers your question, but when we are now in May and we haven't yet received the approval. So obviously the impact on this year if it opens up.
It will probably be modest.
Alright, thank you.
If I may ask another one.
We saw the use of IP rights jumped quite a bit sequentially and year over year I assume.
Can we do with Caesars.
And I.
I wonder how much of that is one time.
Kind of.
A good run rate going forward.
Yes so.
Some of the thanks for the question as you probably.
Number one.
The use of Ip's very much linked to the Caesars.
Aspiration of expansion in the U S and the U S market, which were.
Which we're supporting.
And as you rightfully stated it was associated with the launch.
Off New York and later also early Q2 in Ontario and <unk>.
We're very much.
Linkedin committed to support our expansions and the pace of them opening new new states. So.
I cannot say that it was one timer, but given that.
What we're familiar with their business plan is going forward.
B.
Recurring also into into Q3 and Q4 later on this year.
Got it. Thank you very much for taking my questions.
Thank you and with that ladies and gentlemen.
Conclude our Q&A I'll turn the call back to Marty for his final remarks.
Thank you and thank you everyone for joining this morning as usual and showing interest in.
In our company.
The main thing obviously, while we are still reporting on our on our existing business is for us to have.
<unk> been focused on completing the transaction and next next quarter.
If we close on time.
We will allow us to provide a bit more color on the joint activities of the company.
Because if we close the transaction obviously still in Q2 as we expect by by second half of August we will be able to provide a bit more color that I know that many investors are waiting for but we're definitely excited for the opportunity.
So thanking everyone for joining this.
This morning, and showing interest in us and have a great day.
And with that ladies and gentlemen concludes today's conference call. Thank you for participating and you may now disconnect everyone have a great day.