Q2 2022 Gan Ltd Earnings Call
Greetings and welcome should again limited second quarter 2022 earnings call. At this time all participants are in a listen only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance. During the conference. Please press star zero on your telephone keypad. As a reminder, this conference is being recorded I would now.
I'd like to turn the conference over to your host Rob.
Sure head of Investor Relations for Ken. Thank you, Sir you may begin.
Thanks Melissa.
Florida 20 say two original lease was issued today after market closed is posted on the company's website again dot com with me today are Jeff <unk>, our CEO and carrier Flores CFO . Please note that we are providing a powerpoint slides that will accompany the prepared remarks, you may access these slides in the Investor Relations section of our website.
I'd like to directly to the second slide presentation, we have posted to the IR portion of the website. It talks to our forward looking statement and legal disclosures along those lines I'd like to remind our audience that we may make forward looking statements to call.
Which protected under safe harbor afforded by the inquiries laws in each case I qualify the forward looking disclaimers contained in our earnings release.
We're looking statements are based on information associated with each of them.
Our actual results of operations may vary for the Florida participated or implied in forward looking statements for a number of reasons, including the risk factors included our SEC filings from time to time.
Also reference non-GAAP financial measures such as adjusted EBITDA, which are intended to supplement not substitute for comparable GAAP measures are included as additional clarifying items to aid investors in further understanding the company's third quarter for US. In addition to the packaged items as I have in the financial results reconcile.
A reconciliation of certain non-GAAP financial measures to comparable GAAP measures provided in the appendix of the presentation.
The comparisons we make the call today relate to the corresponding period of last year unless otherwise noted we will also provide growth rates in constant first you weren't available as a framework for assessing how our underlying business performed excluding the effect of foreign currency rate fluctuations where growth rates the same in constant currency the.
I'm sorry, Paul.
With that I'll turn the call over our CEO Devers perfect.
Okay.
Thank you Bobby and good afternoon, everyone. Please join me on the fourth slide of the presentation to discuss our second quarter 2022 financial performance and operating segment results we.
We continue to make strong progress executing our strategy during the second quarter. However, our financial results were below our expectations due largely to factors outside of our control, including foreign currency fluctuations against the U S dollar and a tightened operating environment in certain markets in Europe that negatively impacted marketing and customer activity to a lesser extent.
<unk> results were also impacted by a slower than anticipated start in I'm, sorry in Canada.
We are taking specific actions to respond to changing business conditions, while not losing sight that we are still in the very early innings of the grow that well use digital gaming and continued to strategically invest our capital.
We will balance market dynamics by focusing our marketing spend on the highest return countries improving both our cost structure and running the business more efficiently.
Operationally, we continue to enhance and expand our product offerings I'm delighted to announce today that Caesars entertainment has been secured as a client of our I gaming Super Rgs, which now lifts our content distribution network reach to approximately 50% of the overall U S. I gave me market up from 20 <unk>.
At the beginning of this year with a target to reach 80% in 2023.
We're also ready to rollout our new game stack 2.0, plentiful and will very shortly launch online and retail again sports technology in two states, which represents the culmination of our company wide commitment to re imagine the sports gambling experience in America.
So getting into the results on the <unk> side, we delivered an all time record quarterly performance driven by a 28% increase in gross operator revenue the recurring revenue portion of the business, which we referred to as performing content fees grew by 13% from the prior year, we are continuing to.
First in our core <unk> strategy here in the United States, which remains an essential driver of shareholder value.
Our one stop shop <unk> capability now very much led by demand for Gan sports coupled with our seamless multistate single wallet player account management platform remains at the heart of our right to win <unk> market share over time, and we are excited by the visible BTB opportunities within our pipeline as we progress through the balance of.
This year.
<unk> segment, how about it did not fare well in the second quarter, despite showing strong underlying key performance indicators.
Revenue was $28 million versus $23 9 million in the prior year. The result relative to the prior year were impacted by four main items first the international business of cool that dot com saw a negative foreign currency impact of $2 $7 million as a result of the strengthening U S dollar.
Second you marketing challenges emerge in certain European markets, which led to a broader tightening of the operating environment.
Third we experienced a slower than anticipated starting on target, Canada and lastly, we had a tough comparison with the second quarter 2021, which featured two marquee global soccer tournaments, which generally serve to drive heightened customer engagement.
In addition, we experienced a sports hold of nine 7% in the quarter versus a 7% normalized range, which created a $4 $2 million benefit from last year's second quarter.
Our BDC underlying key performance indicators remained quite healthy and are growing we saw strong underlying growth and handle more volume of wagers nearly 40% growth in active customers and our per unit customer acquisition costs remain well below peers, driven by operations and Latin America will continue to focus on operational excellence, but to be very clear.
Our <unk> business remains healthy profitable and growing.
Turning to the operational highlights our top priority continues to be profitability, which enabled positive adjusted EBITDA generation in the quarter, while our focus is on profitability both from the expense discipline perspective, as well as maximizing efficiencies. We continue to ensure that we make strong progress on our core strategy.
<unk> sports has generated significant buzz and awards and we expect a robust live launch schedule next year.
We are continuing to build a unique library of content and gains from our own studio silverback to complement the rapidly growing Ainsworth library of more than 100 slots exclusively distributed online by Gan here in the United States.
Jumping to our outlook for the full year 2022, we are revising our full year revenue to between $142 5 million and $152 5 million and our adjusted EBITDA to between 10% and $15 million.
Our revised revenue guidance incorporates our current expectations with respect to the impact of FX and operational headwinds in Europe related to <unk> as well as a slower start in Ontario.
While we are disappointed in having to outlook lower our outlook for the balance of 2022, we expect to continue to yield positive adjusted EBITDA in every quarter of 2022 and deliver positive cash flow in the fourth quarter profitable growth is our number one priority. Furthermore, the team is working diligently to mitigate the top.
Wine challenges with measures to further refine our cost structure and protect our margins.
While we continue to invest in our strategic initiatives, our overarching focus remains to generate increased levels of adjusted EBITDA profitability and free cash flow.
Several factors outside of our control will impact our operating results the ultimate timing of the state by state rollout of the <unk> U S opportunity regulatory changes in key markets, we serve macroeconomic conditions and of course currency fluctuations, but it is important to note that we are uniquely positioned with a leading full stack too.
Energy offering an online and retail sports betting accompanying trading services I gave an aggregation and of course, social casino stimulated gaming and.
No less optimistic began will continue to grow our clients capture an increasing piece of the value chain and ultimately create substantial opportunities for our <unk> platform and of course, our Gan sports Omnichannel solutions as we seek to create value for all of our stakeholders.
Let's move on together to the next slide slide five.
So you've heard us talk about our three strategic priorities of number one cost discipline and profitable growth number two our investment strategy to capture a greater wallet share of the <unk> value chain, which now includes 10 sports in CCAR Jess.
And thirdly, optimizing the organic growth, we're seeing in both our <unk> and <unk> segments.
On the first tenants of cost discipline and profitable growth, we have been progressing well. The next iteration of our Pam and as a reminder, our Pam four player account management platform includes patented technology, enabling Americas retail casinos to offer online sports betting alright gaming seamlessly integrated with our existing on property rewards program prove.
And to be a critical success factor for unlikely to see operators with retail casinos.
We've recently evolved our Pam by combining the best elements of our battle tested proven U S platform with the leading elements of Cool That's award winning technology to create Gamestop to point out this will be a best in class platform for our new and existing <unk> clients with a host of new capabilities to further drive new revenue generating deal wins.
In addition to the added benefit the platform is significantly more efficient to both maintain and develop.
This year, we will also realize the majority of a $10 million annual tangible benefits and cost savings from Gamestop to point out as a result of the synergies in combining these technologies.
Let's move to get them on to slide six please slide six.
Switching gears here to our investment strategy, we're still very much in the early stages of the sports and online opportunity in North America and remain laser focused on delivering industry, leading product solutions to operators in these markets as recently recognized by hydrogen Krajicek research when they reviewed BTB powered apps the outcome of this.
It will be significant recurring BTB revenues that translates to better adjusted EBITDA and free cash flow generation.
Our Super Rgs or I gaming content aggregation platform strategy is making great strides as touched on earlier Caesars Entertainment to day joins our growing client list. We now offer over 2500 game titles here in the U S, which is nearly 800 games increased from last year and that includes over 100 exclude.
Ziv online casino titles.
<unk> studio Silverback based in Bulgaria is now producing fresh new content that we're really excited about it and the customer feedback on our upcoming expanded proprietary portfolio has been very positive and encouraging the handful of games currently preparing for certification in the fourth quarter.
We've been across the Gan sports the product itself has exceeded our expectations. Since we originally acquired cool that in January of 2021 for the purpose of bringing their leading offering to the U S sports market.
The coming weeks, we will launch Gan sports subject to regulatory approvals, which we fully by field clinical trial in the Las Vegas locals market with Red rock resorts and a modest noticed thanks to our friends at Red Rock resorts that are support of Gan and I'll draw attention to that client testimonial set out on this slide which merits industry attention.
I'd like to note here as many on the call already know gaming is heavily regulated and the timing of go live dates very much subject to receiving gaming regulatory approvals in the relevant states, which is very much outside of our control.
However, our licensing and compliance team has been working around the clock with regulators to move this process forward and as a proof point of this work I'm happy to say that Canada is now licensed in 16 U S States and then target Canada versus just seven states. This time last year.
These regulatory relationships and associated privileged gaming licenses represent very real assets, both today and in the future as well as creating a significant barrier to entry for competition.
So we wont get ahead ourselves or our partners, but we do expect a robust rollout of Gan sports <unk> and we'll formally announce additional client partners at all approvals are received.
Let's move on to slide seven slide seven.
Turning to the opportunity for organic growth and what makes us. So excited about the future of Ghanem why we are so different than our peers. Firstly in our <unk> segment, we have a profitable cash generative business with a leading brand of great product and an opportunity to expand to new markets in a capital light manner Secondly, in our <unk> segment.
We can leverage our award winning products significant experience some regulated markets and being a one stop shop solution would be to be sports book Multistate player account management enterprise solution and leading gaming obligations. There is a ton of runway ahead to grow and scale our <unk> business.
Let's move onto the next slide slide eight.
This slide shows again as the only provider that can truly provide a proven end to end <unk> patented technology solution across retail and online sports betting <unk>.
Gaming content and I gave an aggregation fully supported of course by our award winning trading team led.
Led by Andrew message in Tallinn, Estonia, and our marketing services team led by Merit duration as user acquisition and retention experts located in Tel Aviv Israel.
And so as more states come online we are uniquely positioned to provide clients with a full suite of enterprise solutions that get some up running and winning from this perspective, there was really no true competitor to gain that can deliver this kind of comprehensive offering across seven states today.
There are of course, Standalone BTB vendors of gaming and I gave a degradation. There also BTB vendors of Standalone sports solutions nobody else can do for clients for Ken Ken and I'm extremely proud to represent all of our employees and team members today, many of whom have been working for years to create this unique full service <unk> enterprise solutions customized.
To capture the continuing online gambling opportunity in America.
Moving onto the next slide slide nine.
I'll take the opportunity to remind everyone listening that our strongest quarter. This year will be the fourth quarter with a world Cup occurring over the months of November and December .
The last World Cup four years ago, so over $150 billion wagered over the tournament.
At that time <unk> was still in its infancy with under 40000 active customers on a quarterly basis compared to the current active customer a customer base of 260000.
In addition to the potential <unk> revenue and adjusted EBITDA lift we anticipate the event will be both a key customer acquisition events as well as a significant reactivation event as a reminder, cool that just recently registered its 1 million verified customer account and cool that continues to enjoy strong customer loyalty is nearly 50 per.
<unk>, a players who joined before 2019 remain active customers today.
We're excited to introduce a new cohort of players to cool, that's brand and leading technology offering.
We're also planning to launch in Mexico in the fourth quarter, a new regulated BDC opportunity for cool that dot com, we expect our share of this anticipated $600 million Tam to grow over time, but initially we expect both investment spend and revenue to be modest as we gain familiarity with the market. The first truth gave me an opportunity to occur.
In 2023.
On the <unk> side, we're very much looking forward to firstly the launch of Gan Sports Secondly, showcasing new features of our <unk> offerings at G suite.
Thirdly, capturing opportunities in multiple incremental states, including Oklahoma, Ohio, Massachusetts, and in particular, California, we provide simulated gaming to leading tribal operators.
Of note, California will hold the ballot initiatives in November which could create substantial b to b to b opportunities forecast sports and our new platform games back to point out.
Before turning the call over to Karen <unk>.
Note that while I'm not pleased with this quarters results and the revision of guidance I'll make a few additional points. Firstly, we're taking measures to mitigate near term revenue headwinds secondly, the strategic progress behind our long term initiatives continues unabated and thirdly, there are several potential catalysts in the back half of this year.
In the mid to longer term, we're still in the very early innings of a massive opportunity in both domestic b to b and our international <unk> markets and while the timing of new market openings in the general macro environments are uncertain today, we continue to focus on what we can control and find additional ways to run the business more efficiently and ultimately more profitably. The result will be access.
<unk> adjusted EBITDA strong topline growth a great product for our clients that I'm confident will drive increased shareholder value.
With that I'll hand, it over to Karen Karen.
Thank you and good afternoon, everyone.
<unk> referenced Q2 came in under our initial expectations as a result of several factors.
FX.
The U S dollar strengthened during the quarter at a higher rate than what we've observed over the last year and with the majority of our business. Currently derived internationally. This created a headwind that was the largest driver of the shortfall.
As a result revenue and adjusted EBITDA were negatively impacted $2 7 million and $1 $3 million, respectively on a year over year constant currency basis, and one $3 million and 600000, respectively versus the expectation is included in our initial guidance.
Next we observed a tightening of the operating environment in certain markets in Europe , which resulted in an unexpected contraction inactive users and revenue.
As a result, Europe Q2 revenue of $10 2 million declined 28% and 18% in constant currency.
Lastly, our financial results for the second quarter of 2021 provide a tough comparison as we observed higher than normalized fold during the European football tournament, which positively impacted our revenue and profitability by $4 2 million in the prior year quarter as disclosed previously.
Moving forward I will simply refer to this in my comments is the Q2 'twenty one fold event.
Now turning to our consolidated quarterly business results <unk>.
<unk> revenue was $35 million increased 2% compared to the prior year adjusting for the effect of currency exchange revenue increased 10% in constant currency.
Record <unk> revenue of $14 2 million increased 36% and BDC revenue of $28 million declined, 13% and 2% in constant currency versus the prior year quarter, which included the Q2 'twenty one hold event.
Gross profit margins remained flat year over year and 70%.
Adjusted EBITDA was $1 3 million compared to $3 5 million in the prior year with a $1 3 million negative impact from constant currency FX and earnings in the prior year benefiting from the Q2 'twenty one holding back.
Adjusted operating expense of $23 4 million was that 15% versus 25 in the prior year quarter.
This increase was related to sales and marketing at 36% to $7 1 million and five points from 15% to 20% of revenue related to focused efforts to grow our customer base and emerging Latin American markets.
I would assume technology cost increased 15% to $5 1 million and two points from 13% to 15% of revenue in line with investments in our technology platforms and upcoming launches.
We expect to see positive near term returns in both these areas of sales and marketing and product and technology.
Our largest operating expense G&A increased 4% year over year to $11 2 million and one point from 31% to 32% of revenue largely due to software and related technology expenses as well as unfavorable FX expense.
These increases were partially offset by a reduction in professional fees.
Part of our ongoing effort to enforce our back office and development functions.
Total interest expense of $1 1 million. This quarter included 664000 related to the April closing of $30 million debt facility, which is now fully drawn down their credit agreement was filed in conjunction with our 10-Q today as a material agreement for the company.
Depreciation and amortization increased $2 four to $6 6 million for the quarter.
The increase was primarily related to the amortization of acquired assets related to our Super Rgs content licensing strategy.
Our net loss of $38 3 million and EPS of negative <unk> 91 cents included a $28 9 million noncash impairment charge, we recorded in the quarter.
The impairment relates to our <unk> acquisition completed in early January of 2021 as most on the call are aware valuations across the broader gaming technology and growth sectors have declined since that time and the decline we've seen in our equity market cap was the primary driver of the write down of our goodwill.
As Jeremy commented, we're seeing underlying strength in the business exhibited by strong kpis in both segments.
Driven by our core growth markets, and <unk>, which increased 41% year over year, and BDC, Latin America, which increased 9% and 22% in constant currency.
As we approach the balance of the year, we intend to continue investing in future growth, while also refining and improving our cost structure remaining vigilant and responding to changing business conditions.
We expect to benefit from maintenance and support costs related to the integration of our games back to your point are released and we are carefully focused on our marketing spend allocating it where we expect maximum returns.
Lastly, we ended the quarter with $49 million in cash and our balance sheet is healthy following the establishment of our debt facility in late April .
Moving on to slide 12, I'll provide a bit more color on our <unk> segment results.
The underlying kpis at the BDC segment remained healthy in Raleigh, particularly in Latin America.
Overall active customers of 260000 was that nearly 40% from 187000 in the prior year.
This drove $557 million and handle at 8% from the prior year and 22% in constant currency.
Average turnover per active user has shifted downward driven by the geographic mix as Latin American growth is outpacing Europe , which has a higher proportion of vips versus retail players.
In the prior year quarter, Latin America drove two thirds of our active players in 40% of turnover this quarter Latin America accounts for 75% of our active players and over 45% of turnover.
Overall, Q2, Bdcs segment revenue of $20 $8 million decreased 13% versus the prior year and 2% in constant currency.
Increases in BDC revenues in Latin America up, 9% and 23% constant currency offset the declines experienced in Europe , which declined 27% and 17% constant currency as a result of changes to the operating environment, which contracted the active user base.
The 23% increase in Latin America on a constant currency basis is particularly noteworthy given the prior year comparison increased both the Euro tournament and the Q2 'twenty one is old event.
Keith you pour told was a normalized seven 1% compared to nine 7% for the prior year quarter. Additionally, customer acquisition cost remained stable at $65 and we continue to be pleased with the overall efficiency of our global acquisition effort.
Which results in average payback periods of approximately four months.
Turning to slide 13.
Q2, BW segment revenue of $14 2 million increased 36% and in fact has increased sequentially for the past four quarters.
Recruiting platform and content revenue represented 74% of segment revenue and increased 13% to $10 5 million.
The increase was driven by 28% growth in gross operating revenue to $283 million.
We experienced a 22% increase in U S real money gaming SaaS revenue fueled by strong organic growth in Michigan, New Jersey, and Pennsylvania, along with new states, including Connecticut, and West Virginia.
It only declined 31% and 23% in constant currency and now represents 10% of <unk> revenue.
Our stimulated business was down 5%, representing 20% of total <unk> revenue in the quarter.
The take rate on our revenue increased 30 basis points from the prior year period to 5% on a higher mix of development and hardware revenues in the quarter overtime. As we said before we expect to take rate to increase as we offer our full enterprise solution to capture greater economics in the b to b value chain, but in the near term it will.
Fluctuate related to the mix shift of development services and other revenue.
Moving on to our full year guidance on slide 14.
For full year revenue, we are now guiding a range of $1 42, five to $152 5 million.
Within this we are modestly increasing our <unk> revenue guidance up.
From our prior guidance of 50 to 55 million to now 52, 5% to $57 5 million and decreasing our BDC segment revenue guidance from our prior guidance of $105 million to $110 million.
Now, 90% to $95 million.
Our revised PTC segment revenue forecast is driven by two main factors first foreign currency headwind.
Our new outlook assumes a euro dollar rate at parity for the second half of the year down from when we initially presented our outlook.
To take a simple example, 100 million euros on last year's foreign currency exchange rates was worth approximately $118 million. This now equates to $105 million, taking actual exchange rates through July and small things like constant for the remainder of the year.
This is also a reduction versus the $113 million, we would've assumed at the time of our original guidance set another way the negative impact to BDC is approximately 11% on a year over year constant currency basis, and 7% versus our original guidance.
The second factor is softness outside our emerging breast market of Latin America. This.
This is driven by marketing challenges in certain markets in Europe , which are contracted active users and we have softened our outlook for BTC operations in the regulated market of Ontario, due to the intensely competitive environment.
Our revised guidance does not change our outlook at 2022 is a significant turning point for Gan, where.
Where we have incurred adjusted EBITDA losses for the last few years as we built the business for scale.
And remain confident that our efforts to drive topline organic growth and accelerated profitability will result in an overall adjusted EBITDA profit for 2022.
Let me discuss some of the operational changes we are implementing in response to current market dynamics.
First on the expense side, our biggest expense item is labor we have implemented some head count reductions and are any head count in June was 675 as compared to 730 at the start of this year.
While we have reduced head count and are slowing our hiring ramp the benefit of the integration and launch the games back to point out and it's $10 million in annual synergies will allow us to focus resources to remain on track with our long term strategies.
Second marketing spend in BDC is flexible and easily dialed up and down.
We are reallocating spend only to the highest ROI countries and well dialed back where we aren't seeing a stronger return.
Third in Ontario, where Washington Native App prior to the end of the quarter and will continue to monitor the return on AD spend and customer ltvs in this market to ensure it enhances our future growth.
Based on the above actions, we anticipate a reduced 40% flow through impact of the revised revenue guidance and as such are lowering our full year guidance for adjusted EBITDA to a range of $10 million to $15 million from our prior guidance of $15 million to $20 million.
On a final note, we executed against our share repurchase program in the quarter.
During the three months ended June 30th we repurchased 393000 shares at an average price of $3.32 under our $5 million share repurchase authorization fulfilling 20% of the total program.
We'll continue to monitor market conditions and remain opportunistic as we consider our objectives relative to free cash flow generation and maintaining a strong balance sheet.
Moving on to slide 15, and wrapping up my remarks.
While our results this quarter were below the expectations, we set for ourselves the business remains very healthy and on a strong trajectory, which was evident in our <unk> results and the strong underlying key performance indicators in b to C. Despite operational headwinds.
There is a lot to look forward to in the back half of the year, including the launch of games sports and the FIFA World Cup.
In the mid to longer term Gan is uniquely positioned to capture an increasingly greater share of the U S sports and gaming market given our comprehensive end to end enterprise solution, expanding client roster and growing track record record of delivering client success.
I will now turn the line back over to the operator to open it up for questions Melissa back to you.
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Our first question comes from the line of David Bain with B Riley Securities. Please proceed with your question.
Thank you.
I guess my first question you know I understand B to C continues as profitable and is growing handle them, but the marketing spend ratio has also moved up a little bit how should we look at that from here and you know FIFA and the launch in Mexico and for Q I understand that the big customer acquisition opportunity in time period.
Should we look at that to rise a little bit.
At that point, along with the absolute EBITDA and kind of.
How do we target.
The the percentage over the next.
Several quarters.
Help us with that that'd be great.
Yeah, what I would say there is that.
Generally targeted 2022 as approximately 20% of revenue, but it will pick up in the fourth quarter, because we do have additional marketing activities.
That we're putting behind the World Cup event, primarily.
Within Latin America, as we noted on the call.
So you you might see an uptick but in general it's.
We expect the marketing ratio because of the efficiency of our marketing spend by nature of.
The pull that business and how they.
You know how they promote the brand within each of the countries. We expect it to continue to be efficient. So around 20% is that is a good expectation.
Okay, Great and then I appreciate that you reiterated that the <unk> free cash flow guidance if.
If we look past that given that there was an event in four Q and we looked at <unk> I mean, that's free cash flow shall we look at it improving.
Year over year, and maybe getting a net positive for the year full year next year or can we look at it more like sustainable from a free cash flow standpoint from <unk>.
<unk> and <unk> or even <unk>, how do we think about the cadence there.
Yeah, we're not we're not specifically guiding into 2023, but it is and it is our expectation that will be overall free cash flow positive for the full year next year.
Of course, the fourth quarter right now is the only the only quarter in 2022 that we're targeting to be free cash flow positive, but we do expect not be again wholesale teams as we're talking about really accelerated path to profitability, which is the entire objective and our key priority right. Now so we're going to continue pressing on that.
And we expect continued improvement as we move through <unk>.
2023, and continue to hit these milestones that we set for ourselves relative to the overall scaling of the business.
Okay, great. Thanks, so much.
Thank you. Our next question comes from line of Chad.
Bennion with Macquarie Group. Please proceed with your question.
Hi, This is Aaron on for Chad. Thanks for taking my question.
Can you talk about the opportunity set of potential partners in North America has the macroeconomic backdrop.
<unk> the conversations you're having with customers in any way or has that been balanced by being somewhat more rational promotional environment.
And the progress towards profitability that a lot of the operators have made have made this quarter.
Alright, thanks for the question.
The different cohorts of potential b to B clients remains largely the same you've got effectively every BDC operator of I gaming.
He has a very clear candidate to be a client of I gaming aggregation and Super Rgs driven by demand for the haynesworth slots, but also.
Some of the emerging slots coming out of a great new Silverback game studio in Bulgaria.
When it comes to the Pam opportunity, we're certainly being a lot more aggressive in seeking minimum financial commitments from our b to b clients and whether that manifests as a minimum revenue or fee guaranteed again or in minimum marketing commitments to drive customer acquisition and therefore revenues those are the two ways that we like.
Just getting that particular cat so it's a very.
Very much similar you know plenty of native American gaming opportunities in our sales pipeline near term plenty of commercial opportunities principally around Gan sports and a competitive replacement marketplace, where we're seeking to displace or replace a various different existing incumbent vendors of standalone.
BW sports and we're super excited by the demand indicators foreseen that hopefully that answers most of your question.
Yeah. It does that's helpful.
And a follow up for me there's been an increase recently in M&A opportunities can you talk about if you believe you had everything within your company or are there opportunities to grow inorganically now as well. Thank you.
Yeah.
M&A is not part of our near term focus right now I mean, it's a very interesting M&A environment for stocks appear to hit a bottom in bounds. So it will monitor.
What happens next but from our standpoint, we're really heads down focused on delivering fourth quarter free cash flow profitable growth all the all the aspects that we've tried to communicate to the market over the course of the last few minutes, but no significant M&A. We feel we are feature complete.
Cool, but completed again with the incredible Gan sports technology and as I said earlier, we are getting extraordinary very strong demand indicators for that retail corridor.
Okay understood. Thank you.
Yeah.
Thank you. Our next question comes from the line of Ryan Macdonald.
Craig Hallum Capital Group. Please proceed with your question.
Good afternoon. Thanks for taking my questions I wanted to start with Mexico.
Mentioned on the call you'll be launching b to C. But I believe you said you'll be launch with a <unk> customer is wall in the press release or slide deck somewhere he thought is that an existing customer or a new customer and then can you talk about kind of balancing.
B and the BDC in that market.
Brian It I'm afraid somebody's wires across somewhere in Mexico, as a regulated BDC market opportunity for us exclusively we don't have any.
Intention for B to B activities in Latin America generally of course, Mexico is part of Latin America. So it's if there wasn't there then we will will correct as appropriate, but Mexico to be abundantly clear is a b to C opportunity for them.
That could just be me Dermot I will go back and look well that's helpful.
On the goodwill impairment can you elaborate a little bit more what what happened there what's going on and why it's in the <unk> segment versus.
A b to C.
Yeah, I mean, it's Ryan what I would say is that ultimately ties back to of course, our intent to bring the bluebird technology into the U S market and how we developed a model around that and there's been of course again.
And there's some modifications to the long term strategy the long range forecast there and it is again relative to the overall equity valuation of the company. It was perfunctory relative to the change in the equity market cap. So we did take it within the B to B.
Segment, and we have about $105 million left as outlined in the Q and it's about a 65 35 split leaning towards BDC.
And remind me is that all of that back to the Coalbed acquisition or is there other anything else in there.
So pull that acquisition.
Okay.
Got it thanks, that's it.
Thank you, ladies and gentlemen, as a reminder, if you'd like to join the question queue. Please press star one on your telephone keypad.
Our next question is evolved from the line of David Bain with B Riley Securities. Please proceed with your question.
Great. Thanks, I'm, sorry, if I could just two more one was.
Going up from the customer acquisition strategy, one of the hold strategies amongst BDC has been augmentation of the exotic that the par latest and real time betting can you.
Tell us how that's been trending within that.
That category in terms of new offerings, and any you know afford initiatives to sort of move hold higher as we go forward.
Yes, David there's been a lot of focus on developing the early cash out capabilities and also in that specifically for the international markets centered around Latin America.
So that's been improving or helping support our hold expectations and delivery then secondarily.
Effectively multi leg parlays for the U S has been a major focus for us as we build up towards launch can sportsmen coming weeks and that's been extremely well received and as I think most people.
Within that U S sports family knowledge know that they are extremely high margin offerings for the end user consumer, particularly in the retail environment. So we have a unique competitive advantage that we believe.
Okay Awesome, and then I get excited about the hybrid still anything new in terms of just even general more substantive conversations.
You may be having since legal action was taken on a potential patent violation or any update in general on average.
Okay.
Yeah, I mean, it's always early to comment on.
Enforcement strategies.
Motions have been filed and we have filed our tender oppositions to set motions.
We are extremely committed to enforcing our intellectual property rights here in the United States and so far as I said.
We are pursuing the litigation of the claim but you know it's.
It's still extremely early to make any substantive comments or observations on this time David.
Okay fair enough. Thanks, so much.
Yeah.
Thank you ladies and gentlemen, this concludes our question and answer session I'll turn the floor back to Mr. <unk> for any final comments.
[noise]. Thank you Melissa and thank you everyone for joining us today.
Well, we still have some work to do but I'm extremely excited for the back half of the year to launch can sports enter new markets and the opportunity to introduce new players to the cool bed brand during the World Cup I do hope to see some of you in person at <unk> in Las Vegas, as we showcase our full service enterprise solution for digital gaming.
Again.
Yes.
Thank you. This concludes today's conference you may disconnect. Your lines at this time. Thank you for your participation.