Q1 2022 Inspired Entertainment Inc Earnings Call
Good morning, everyone and welcome to the inspired entertainment first quarter 2022 conference call all participants will be in a listen only mode should you need assistance. Please signal a conference specialist by pressing the Starkey followed by zero. After today's presentation, there will be an opportunity to ask.
Please note today's event is being recorded.
I'll begin today's conference call by referring you to the company's Safe Harbor statement that appears in the first quarter 2022 earnings press release.
It is also available in the investors section of the company's website at Www dot.
I N S E ink dot com again, www dot I N S E ink dot com.
This safe Harbor statement also applies to today's conference call as the company's management will be making certain statements that will be considered forward looking under the securities laws and rules of the SEC These statements are based on management's current expectations or beliefs and are subject to risks uncertainties.
And changes in circumstances. In addition, please note that the company will discuss both GAAP and non-GAAP financial measures. A reconciliation is included in the earnings press release.
With that completed I would now like to turn the conference call over to Lorne Weil the.
The company's executive Chairman Mr. Weil. Please go ahead.
Thank you operator.
Good morning, everyone and thank you for joining our first quarter earnings call.
Using a hockey metaphor I'm pleased to say that we're back now to full strength.
With Stewart, joining Brooks and myself and speaking this morning.
And not a minute too soon because there are a huge number of developments to keep track of.
And when it comes to keeping track of things they don't get any better than Stewart.
As we indicated in the press release, we were pleased with our first quarter results.
With consolidated EBITDA coming in nicely ahead of estimates.
And all of the important performance vectors going in the right direction.
In our last conference call, we talked about our digital business the combination of virtual sports and interactive.
Moving towards accounting for half of our overall earnings and indeed in the first quarter.
The digital business grew 47% year over year.
To reach 48% of total EBITDA.
As we have also mentioned previously.
This dynamic continues to positively impact the growth rate operating margins and capital intensity of the overall business.
Virtual sports was the primary digital driver in the first quarter with overall revenue growing 84% year after year.
Despite the fact that retail virtual returned almost to pre COVID-19 levels online virtual still recorded a growth of 54% illustrating the tremendous momentum in this business.
Brooks will discuss in a moment virtually all of this growth in the quarter was organic coming from the existing customer base.
And now to this we will add several new customers rapidly coming on stream.
We should also note that in the first quarter, there was no longer any COVID-19 related impact on live sports.
And yet what the full menu of live sports betting options being available virtual sports still charged ahead.
On this tremendous growth trajectory.
Indeed, this might even read them for some point, we've been making for some time.
That live and virtual sports might be complementary.
Rather than competitive.
Under normal circumstances, Jim digital growth in the first quarter.
Would've actually been still greater and digital's over share excuse me digital's overall share it might already had been 50%, but as we've seen from the numbers in the press release.
As against only modest interactive revenue growth.
There was about a 34% increase in interactive operating costs.
Situations that is already turning itself around.
<unk> nicely in the second quarter.
During the first quarter, we invested heavily in new markets and new operators.
But we introduced only about half the number of new titles as we typically do.
But by the end of the quarter, a handful of new titles were performing very strongly.
Driving revenue growth a week by week improvement.
So the outlook for this business over the balance of the year remains very positive.
As can be seen in the press release as well, our combined gaming and leisure business effectively our land based systems and equipment activities.
Rebounded tremendously from the Covid Covid impacted first quarter of 'twenty to 'twenty two.
With combined EBITDAR swinging from a loss of $3.3 million in 2020 one.
To positive EBITDA of 12.4 billion in 2021.
Despite the first quarter generally.
Being relatively weaker seasonally.
At the same time, we've been very pleased with the performance of our North American machine base business.
Highlighted by a very significant order from the Western Canada, well Lottery Corporation, which Brooks again, we'll talk a little bit more in a minute.
Elsewhere in the North American Lottery World things continue to move forward on or ahead of schedule.
Revenue and profitability in our Dominican Republic retail lottery operation are running ahead of projections.
And we're moving towards completing the development of the online platform, which we expect to launch in the early summer.
This will not only drive incremental high margin in the Dominican Republic, but provide us with a lottery platform, having wide applicability and synergize well with our growing a lottery content capability.
Finally, let me say a word about our share repurchase announcement, which we mentioned in the press release.
Throughout most of my career I have generally not been a huge advocate for share repurchases.
My feeling has generally been that allocating resources.
To building the fundamental business itself is.
Is the key to creating a longer run shareholder value, but we find ourselves in an interesting position right now.
Fastest growing parts of our business are also the highest margin and less capital intensive.
So generating sufficient cash cash to fund our growth is not an issue.
And at the same time, given our outlook, we believe that repurchasing our shares will be very highly accretive to our shareholders.
Again without compromising their need for growth capital.
And with that I'll turn it over to Brooks.
Okay. Thank you Lauren.
Happy to go into a little bit more detail in each of our operating segments and I certainly agree that our positive results.
In the first quarter continued building strong second quarter and for the second half of the year.
<unk> segment. It was gratifying to see the recurring revenue of our retail business has returned to pre COVID-19 levels with several of our key customers actually showing growth compared to pre COVID-19 levels.
Also important to note that we've built a significant backlog in the sales side of our gaming business, which also includes machine sales.
K, where we've seen success of our products in both the pub and AGC segments driving demand.
Like pretty much every other business in the world, we're facing the challenges of supply chain issues and expect that our hardware sales will be a little lumpier in less predictable from a quarter to quarter perspective than usual because of this.
However, we remain quite comfortable that over the course of this year, we'll deliver to our plans.
It's more mentioned this quarter, we saw the results of significant efforts by our team here in North America. When we received an award of 720 terminals through the Western Canada Lottery Corporation.
We're a little background, we delivered 100 terminals to them previously and based on the performance of our products there they renewed their commitment to inspire with the award of a 100% of the available order. During this procurement cycle frankly, a really significant achievement by our entire team. We think this bodes well for us with other.
Actions in Canada, and North America in the future as we continue to build out this part of our business.
It was also the first quarter in which we reported on our recently acquired lottery systems business through later in the Dominican Republic and their results exceeded our expected expectations as Lauren mentioned, we have significant plans to build out this opportunity as we will be expanding their suite of services to include both online and mobile betting in the second half and we.
These services to be a showcase of our capabilities in the broader battery industry.
Moving onto the virtual sports business, the virtual sports business had a record first quarter with adjusted EBIT EBITDA almost doubling from the same period in 2021 on the strength of the growth in our online segment combined with.
Retail business.
As Loren just mentioned the growth came largely from existing customers frankly, demonstrating the ability to grow this business organically over time, but we're also quite excited to have a very full pipeline of customers that we expect to go live throughout the rest of the year in a number of key geographies.
Also in this segment from a limited number of customers, thus far in Ontario have been quite promising and we expect that it will be a strong market for us as more and more players are exposed to the product.
Second half of the year will also see US go live with a new football product in Pennsylvania with the lottery and the addition of the D C lotteries.
As well as the launch of some key new products like our women's soccer game and time for the euros. This summer at our home run shoot out product with licensed players from the M. L. B P a a including paper with.
Moving onto the interactive rock gaming segment, where we showed modest growth compared to the prior period, but which has long discusses in part to the staging of content beyond Q1, which is historically the lowest quarter. In this segment. We are excited for some of the new games. We have launched in April we're already seeing strong performance and trends we believe.
That's several markets that are new for us in North America, including Connecticut, and Ontario will produce meaningful contributions to our growth as well as the potential licensing in Pennsylvania, which is a very big market that we're not yet live the.
The combination of all of the above as well as getting live with both <unk> and <unk>.
Penn National in existing markets, like New Jersey, and Michigan in the second half of the year will help us have a strong.
Second half.
Moving to the leisure segment, we saw all aspects of the business operating with no restrictions compared to Q1 of 2021 and have seen the benefits of early openings of the holiday parks as well as increased traffic on the motorways contributing to our MSA sector performance.
We're now close to 80% of our pub estate being digital and we'll have the whole state connected by the end of Q2, which allows us to refresh content more regularly report more detailed analytics to our customer base, and which we expect to drive yield.
Yield improvements and increased cashbox.
Our omnichannel content strategy continues to work as intended at several of the titles that are successful across I gaming betting shops pubs and agencies and we will have more titles like this being delivered to the market throughout the rest of the year.
Summary, we feel very good about the progress of the business and our execution and we see a very clear path to deliver consistent growth across each of the segments for the rest of the year with that I'll hand, it over to Stewart to cover off some of the financial performance.
Thank you Brooks and good morning all.
First of all let's just say how great. It is to be back and I think he is tool extensive well wishes, including in the last earnings call.
Feels even better to see that business really didnt skip a beat and that semi dobro momentum seems to have accelerated when it was gone.
The growth in virtual schools, the Western Canada, Tim and Lauder or any number of the other metrics. The business really has never been in a better shape. It is today.
So with that in mind, it wouldn't be a quarterly call I didn't take a little bit of time to run through the financials in a bit of detail.
I will try and keep a high level as we filed the 10-Q last night and also given the rolling Lockdowns during the third quarter of last year year on year comparable not terribly meaningful.
Does this third quarter of 2021, we told you that the business is operated on a on a regular way basis in this quarter do any more than say.
Overall, our revenue grow 66% on a reported level orange and 73% on a constant currency basis against the same quarter, a year ago, but like I say I remind you of the extensive lockdowns and operating restrictions that were in place and the physical through 'twenty one.
Additionally, last year's numbers also included that related income of $3 $1 million. This is Eric what $9 million. This year. So excluding that does not relate to income overall revenue grew 203%.
The segmental a virtual sports was clearly the standout started the quarter with a year on year revenue growth of 84% on a reported basis, just slightly higher than that on constant currency basis, and an approximate increase of 300 basis points and EBITDA margin.
Each of our business lines performed well.
And one thing to note if you read through our segment level results and putting them sort of been mentioned and interactive that we had.
Two North American go live straddling the end of the quarter, Connecticut in March in Ontario. In April . These guys will go lives took up some bandwidth, which did impact the pace of content introductions during the quarter. So we don't think the headline growth that we saw in the physical to an interactive has demonstrated the practical improvements made in that business, we do expect future growth in future periods to be more relaxed.
The high growth rates.
It depends on how our revenues compared to pre COVID-19 levels, we saw gaming and leisure combined recurring revenue overall, and 98%, 100% 104% of pre pandemic levels in January February and March respectively.
We continue to believe these results reflected a return to normalcy and actually the positive trajectory has continued in April right into 109%.
Also worth noting that during the quarter, our online revenues with well over 280% pre COVID-19 levels.
So we do still have it down the income statement adjusted EBITDA grew 418% on a reported basis.
Adjusted EBITDA margin, increasing by 1600 basis points continuing to reflect the operating leverage from that.
Business.
Depreciation expense declined by approximately 23% year on year, reflecting our reduced capital expenditure, yes, assuming that we seek to continue to build upon reduce it shifting to reduce capital intensity.
So overall it was really was a clean quarter from an income statement perspective, Camden, no warrant liability impact nowhere in our crews and only a small below the line gain will be Italian VLT disposal.
Just following that I can also very happily report to you that we reported positive EPS for the quarter.
Turning attention to cash flows we started the quarter with $48 million in cash and ended up with $48 million.
As part of that you'll note that $1 $1 million of that decline is directly attributable to ethics convention. So on a constant currency basis, we saw a $5 9 million use of cash.
I want to note that includes an $11 9 million.
Inventory, which we don't see as reflective of Ctrip as each periods.
Weighted to timing of deliveries of both finished goods and also some deliberate short term stop Huntington component boss.
We expect inventory to attend to know normal levels by the end of the year.
Another way, we expect over the course of the year the working capital outflow into this.
Absent this increase would have been cash generation during the first quarter.
I would also note that the first quarter is also a seasonally high capex quarter and similarly, it's also the case sits in items that payable during the first quarter, such as the payroll taxes and employee share vesting at the end of last year, which incidentally have the same impact of repurchasing about 377000 shares.
Knowing this mentioned.
You mentioned by loan you will note that we announced that our board approved share repurchase authorization yesterday.
Well, we won't comment publicly about our exact intentions. How we may use. This I think it is demonstrated that conviction as a management team and the long term outlook for the company. We will obviously report back in future periods to the extent that we've taken action with respect to buy securities in the capital market.
So once again, it's great to be back to the food to speaking with you and seeing a number of you in the near future and with that I'll hand back into the queue.
Okay.
Thank you Stuart.
I don't have any more prepared remarks to make so operator, if you could go ahead with the Q&A. Please.
Yes, Sir we.
We will now begin the question and answer session to ask a question you May Press Star then one on your Touchtone phone if youre using a speakerphone. Please pick up your handset before pressing the keys to withdraw your question. Please press Star then two.
At this time, we will pause momentarily to assemble our roster.
The first question comes from Barry Jonas with Truest Securities.
Please go ahead.
Great Hey, guys, good morning, and Stewart welcome back.
I wanted to start.
By talking about the macro environment, we've heard some operators.
Talking about starting to see some impact to the consumer from inflation or just general macro trends curious what you guys are seeing there today and any expectations going forward.
It's it's it's it's Lauren Oh.
I'll tell you, what I see or don't see but in no.
And that order to Brooks because he's.
A lot closer to it on a day by day basis than I am but I.
I'm hearing the same things that you're saying, but we're at least so far we're not seeing.
Any meaningful impact of that in any of our businesses.
If you look at the.
Certainly our across the board performance in the first quarter, there's there's not much.
To suggest that that's having an impact.
You know, we we were thinking that maybe we had begun to see it a little bit in the interactive business, because there's both Brooks and I mentioned.
The first the first quarter revenue growth in the interactive business.
<unk> was not overwhelming.
But.
I think.
In our case it it had really I mean this is a business that's driven.
Bye bye.
By New game introductions, that's just really what the name of the game is once you have your customer base, which we obviously do.
And the last couple of weeks.
In April we've seen you know a tremendous acceleration week after week after week so.
What we're seeing right now absolutely does not.
Suggest that there's an impact.
Although a slowdown in consumer spending, but again in our case it really had to do with our own game and product introduction. So.
Oh, we're not and we're certainly not seeing it in virtual sports and were not seeing it in the.
In the machine business is in a in the U K I mean, Brooks if youre seeing so no.
Thank you you covered it very well I mean, I think in Stuart Barry I'm not sure. If you caught that with Stuart's response about the pre COVID-19 levels kind of accelerating in the gaming side of the business.
Even more so in Asia and our April results, So where you might think that you will see the impact on inflation of inflation on the consumer in the U K and even Greece, frankly, what we're seeing is an acceleration.
<unk> of the business and you know who knows if that's some pent up demand issues from Covid some.
Some of the reductions in the Covid issues that you.
You know for restrictions into the betting shops in Greece, etcetera, etcetera, but as Lauren said in summary, where we're not seeing it.
Great Great that's really helpful.
For a follow up question you guys have been very successful diversifying the mix of the business into digital.
I'm curious how do you think the geographical mix will shift over time, just with the majority today in the U K.
Well there's it.
Uh huh.
I was I was tempted to say, it's a virtual certainty, but then.
But brooks and Dan hate it when I say things like that so.
I'll restate it and say it is a tower.
Very strong.
<unk> belief and certainly our objective.
That over the next couple of years the mix of the business.
Is going to swing very very strongly.
Towards North America.
U S and Canada.
We're just.
In the very very early innings of both the I gaming and lottery.
Evolution in in in North America, There is only a handful of states that are doing it and yet we've seen.
You know tremendous growth of the.
I think in Ontario were seeing that virtual sports.
Definitely has the same potential here as it has had in Europe .
Brooks talked about the machine business.
Western Canada lottery.
That in turn has spawned.
Tremendous interest on the part of a number of other jurisdictions because.
Obviously.
The terrific performance of our products.
In Western Canada that.
That gave rise to this large orders that are Brooks talked about so.
I would have to think.
And in the next next couple of years even without.
Any M&A enhancement to our growth, but just organically and of course assuming that.
The opening up of new I gaming and lottery markets.
Proceeds at the rate that we think is going to that we should be getting pretty close to 50 50 between North America and in Europe .
Thank you.
Really helpful.
Got it.
The next question comes from Ryan Seagull, with Craig Hallum Capital Group.
Please go ahead.
Good morning, guys Stuart will come back I'm glad you're all doing better I want to start on virtual sports. So you mentioned a lot of kind of new upcoming game launches can you just remind us kind of the cadence of past game launches and maybe what that did to the virtual business and then how the forthcoming kind of what you meant.
<unk>, three but launches how that compares to the passengers.
Sure well, probably the two most notable launches for us and again kind of plays on Lauren's last answer to.
To Barry's question about North America focus so.
The football game that we lost as well as.
Our basketball game. So now all of a sudden you know where clearly the predominant sport for us because of our exposure outside of North America soccer.
But you know the the addition of football basketball and we're Super excited about this baseball game that that I think Ron you've seen.
And I think at some point, particularly with the with the experience we're seeing in Ontario, I don't think it would be a leap of faith to think that we will be having a hockey game as.
As well so generally what they do is when you introduce these new spa.
Sports it doesn't actually cannibalize. It generally is accretive people just tend to play more frequently.
With the addition of the sports and obviously on the online segment, where it's so much easier to introduce sports.
It's clearly kind of a big win for us. So obviously, we think we think this is going to be we.
<unk> to try and develop products that will make sense in the markets and again I think baseball for us will be.
Big products here in North America, and obviously as we look to Latin America.
That will be a big big product as well.
One thing I would add to that is.
You know when we first.
Started in virtual sports apart from.
And experience, we had with our boxing game.
We really haven't.
Had much.
To do with with with licensing or license product in the virtual sports business.
And this whole sports licensing thing actually is something that we had.
Phenomenal success with and phenomenal experience with.
Back in our scientific games days, we actually we grew we add side games created.
The instant ticket.
Sports licensing business, which.
For many years was.
Probably the most important driver of growth in scientific games. So we had relationships with the NBA with major League baseball and so forth and actually at some point we did.
Our license basketball game in China that was just absolutely spectacularly successful.
And this is one of these things, where it's a chicken and egg problem because.
These these licenses arent cheap and.
So if youre not doing enough business to justify spending the money on the license then you can't but on the other hand, if youre not doing the licensing it's difficult to drive the growth. So we've.
I think we've reached that.
That inflection point in.
And inspired so you know in the fall, we're going to be and now we're gonna be launching the football game that uses.
All of the players from the retired NFL players Association, which we think will be phenomenal and now we've got as Brooks said.
The license baseball game, So we will have.
You know we will have a.
You know a homerun hitting contest between Babe Ruth and Richard Jackson, or whoever else. We want so I think on top of all of the sports specific things that Brooks talked about baseball basketball hockey and so forth.
I personally think that we're going to get a real jolt from the addition of.
Of.
Professional sports licensing to these games and and then and then once that process starts it really feeds on itself. We saw it in the lottery business, it's a games and I'm.
I am as certain as I can be that we're going to see it in.
In our virtual sports as well.
I appreciate that color just a follow up on the licensing.
So historically interact or excuse me virtual has had phenomenal margins I mean, north of 90% gross margins close to 80% are on the EBITDA margin. So I guess given these are not cheap licensing fees.
You know how should we think about margins in that segment and then secondly, how did the contracts works are they revenue share or is it a fixed cost for that license content.
Yeah. So again, it's all yeah everything tends to be.
On a Rev share basis, typically what happens in the licensing world there is.
There there'll be some kind of guarantee.
So that if the if the revenue projections turn out not to be.
Not to be accurate then there is some short term negative impact on margins because we have to pay.
The fixed guaranteed license fee licensing fees, even if we don't get the revenues but.
I'll really be shocked if in the case of the football and baseball that we don't get a very significant bump.
In revenue and that that revenue growth will offset the cost of the licenses.
Yeah, and Brian just maybe one other thing I'd add to that remember, particularly for the licensees.
Virtual sports is a brand new space.
So you know maybe after the initial contracts if they're really successful licensing fees might be something that we obviously have to keep our eye on but at this point. It is frankly going to the licensor and basically.
Talking to them about what virtual sports is and what the potential is and theyre kind of in they've got some skin in the game with us as Lauren talked about so I don't I don't anticipate any margin erosion for the certainly for the foreseeable future.
Great I want to switch over to leisure.
Just curious what you're seeing kind of boots on the ground from a holiday bookings in and playing some are traveling in the U K.
Yeah. So the good news is the holiday parks have opened sooner than they did last year. So we're seeing the benefit of that.
And the bookings are stronger, which last year as you remember last year was a record year.
And the bookings are even stronger this year so.
That might actually be one of the.
Perversely benefits of inflation is that folks in the U K may decide not to take.
Overseas vacations, it may stay and go to our holiday parks. So so far the results have been outstanding.
Outstanding.
Great.
Writing things happening and good luck guys.
Thank you Ron.
The next question comes from Chad Beynon with Macquarie. Please go ahead.
Okay.
Hi, Good morning, Thanks for taking my question Stuart Good to have you back can you talk about any supply chain bottlenecks that you're currently are expecting to see you mentioned the inventory builds and the working capital hit, but just trying to understand if you're able to fulfill all orders and if there should be an impact later on the year end margins. Thanks.
Sure.
I'll I'll take the first part and Stuart if you want to add the second part I mean, one of the things.
As Stuart talked about in terms of inventory as we have been aggressive.
Frankly to meet the demand so we've probably ordered more inventory.
Then certainly we historically have and as I mentioned in my remarks.
Obviously, there's going to be a little bit more of a lumpy nature to this we're not having problems getting product, but certainly we have some issues with delays. So how we've kind of kill that with a sledgehammer. So to speak is just ordered enough inventory to make sure that we have the flow of product to be able to deliver to.
The demand, but I think as Stuart also mentioned, we certainly feel like we'll work through that over the course of the year.
In terms of the margin side sure, where we're getting a very modest probably uptick and certainly the container costs and shipping costs and a little bit on the product side, but but you know our asps is holding pretty strong so I don't I don't see.
Real issue with margins either.
Great. Thanks, and then in terms of Capex for the year Stewart I don't think you gave that how should we think about how that starts to flow in and then how that.
Affects how much share repurchases you're available to do in the year.
Alright.
Yeah, so in terms of Capex so.
The numbers in the back of the release and so just over $10 million for the quarter and as we say that the first quarter is always the highest capital spend and not least because it makes sense to put the new channels new equipment into holiday parks and started the Ralph Coffman joining them.
And I think we've talked around them on a stabilized basis.
Capex being around the $30 million Mark.
Yeah, and let you know when somebody is at the high end to me at that low end that might be slightly higher this year, there's a lot of opportunities out there and we you know we've got a lot of decisions to make in terms of when we bring that expenditure forward. So we can exploit those opportunities earlier.
Land based businesses.
As <unk> said in the digital businesses and its much much less of that.
The decision point to be made.
Obviously, the oil and exchange rate on the pound actually reduce I don't spend and to some extent, but we'll see now how that plays out.
I don't think it makes a big difference in terms of what we're thinking about in terms of.
Share buyback I think in a way very confident around the long term cash flows of the business.
No I don't think comes to that I mean launch you want to add anything contented yeah.
Yeah. Thanks, Stuart I was just going to add again to the last part of Chad's question, which is.
It was there.
Our concern with Capex, having an impact on.
Our ability to execute the share repurchase program.
I think.
The answer to that is no.
If if if you take the our current cash position.
And I think it's.
Pretty comfortable given our backlog that the.
The inventory build is going to unwind over the course of the year. So that that will all come back in as cash flow.
And bear in mind also.
Chad that our revolver is completely undrawn, so with the cash we have now.
The cash is going to be generated by the operations plus.
The reverse of the inventory build and then the availability of the revolver I think we'll be in a position to.
To do whatever we feel is the right thing to do with the share repurchase.
Thank you very much appreciate it and a nice quarter.
Thank you.
Again, if you have a question. Please press Star then one.
The next question comes from Edward Engel with Roth Capital. Please go ahead.
Hi, Thank you for taking my question just kind of following up on that last one can you just maybe remind us what your target leverage ratio is today versus I guess, what your question is why the actual leverage stands today and then maybe I mean, it sounded like you'd be willing to maybe even increase net debt to EBITDA alongside the buyback do you think that's necessary.
Or do you think you have enough free cash flow to kind of maintain that ratio or even declining.
Yeah.
All I can talk about it conceptually and then Stewart who is whose.
A lot closer or Dan to the to the numbers can embellish on it but.
In terms of the first part of your question we've said.
<unk> lead that our target.
Leverages three.
But which on a net debt basis I think is about where we are now.
Where we've historically been comfortable letting it go up above three if we can see that the.
The EBITDA and cash flow growth going forward is going to quickly bring us back down to that.
I don't think.
That we would have announced the share buyback.
If we weren't.
Quite confident that we could execute it without.
Upsetting our.
Our target of being at or below three so I think there.
It's actually a very good question and I'm glad you asked it but the.
The answer is I think the all of these objectives are.
Consistent with one another again, mainly because.
As you can see in this in the first quarter the.
The.
With so much of our growth coming from businesses that.
Have you know really very high margins and very little.
Capital intensity that.
We're able to keep all these balls in the air at the same time.
Okay.
Yeah.
One way to stay in one way to think about it is.
The business as Stuart said has never been in better shape than it is in today and we've never had more financial flexibility and a better balance sheet than we have today.
But as we look forward and we look at our long term plan.
We see it already.
Consistent improvement in that auto.
Short medium and long term basis right. So even though it's in the best shape, it's ever been in today.
From our standpoint, it's only going to improve going forward.
So we think that gives us a lot of flexibility to opportunistically implement and execute the plan.
Great. That's helpful. And then just kind of wanted to get a better sense of what youre seeing in Ontario.
Sounds like your virtual sports products are a gateway to get traction, but we've kind of heard that.
Might there have been a little bit of a slower ramp for I gaming.
Industry overall, its kind of wondering about what you're seeing on the ground.
Yes, that's true I think.
I mean, I'm happy to say that the last week. We have is the best we've had in Ontario. So the trend is going in the right direction, but I would say and I've listened to some of the other calls and I think everyone.
Probably underestimated.
What it would take to do this this kind of changeover into a regulated market, but I think over the long term, Ontario will bear fruit.
13th worn Renault since he's from Ontario, but 13 or 14 million people.
Obviously plenty of gaming up there so I think long term the <unk>.
<unk> are still great, but yet it's probably started slower I think where we're certainly in that same group with everyone else is talking about it is that started slower than we anticipated.
Helpful. Thanks, Congrats on a good quarter.
Thanks, Thank you.
Yes.
This concludes our question and answer session I would like to turn the conference back over to Lorne Weil for any closing remarks.
Okay. Thanks, operator, I think actually.
Dan's comments, a couple of seconds ago.
It was the perfect closing.
Our remarks, I'll simply echo with debt.
Despite the fact that the business right now is in the best shape.
Shape, it's ever been from every point of view.
Because of the way.
We see the dynamics unfolding, we actually think it is going to consistently get better and better.
Uh huh.
Sure.
Our view of the future couldn't possibly be more volume and.
We're looking forward to.
Talking to you again in three months and reporting on what we think will be tremendous progress over the next three months so.
Thanks for calling in and we'll talk to you soon.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
Okay.
Just as written.
[music].
Yeah.
[music].