Q3 2022 Bragg Gaming Group Inc Earnings Call
[music].
Good morning, My name is Andre and I will be your conference operator today at this time I would like to welcome everyone to the Brad Gaming Group third quarter 2022 earnings Conference call. Today's conference is being recorded all lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and.
Answer session. If you would like to ask a question. During this time simply press the star key followed by the number one on your telephone keypad.
You would like to withdraw your question Press Star one again.
At this time I would like to turn the conference over to your knees Spielberg Chief strategy Officer. Please go ahead.
Thank you operator, good morning, everyone and thank you for joining our third quarter 2022 earnings conference call I'm getting Spielberg Chief strategy Officer for broad gaming group I'll be hosting today's call alongside my colleagues Chief Executive Officer, Sherman, who will comment on our third quarter performance and will then conclude.
<unk>, our CFO , who will review and discuss our third quarter results.
Not already done so you can follow our Q3 earnings call presentation from our website.
And is that third dock broad dot gain in the section called events and presentations on the media.
On this call, we'll review broad financial and operating results for the third quarter of 2022. Following our prepared remarks, we'll open the conference call to a question and answer session.
I'll start the call with some brief cautionary remarks regarding certain statements that maybe made on this call.
Certain statements made on this conference call and our responses to various questions may constitute forward looking information.
Future oriented financial information within the meaning of applicable security laws statements about expected growth prospective results strategic outlook in financial and operational expectations opportunities and projections rely on a number of assumptions concerning future events, including market and economic condition.
Prospects or opportunities for you.
Planning strategy technological developments and anticipated events or.
Trends and regulatory changes that may affect the corporation subsidiary and their respective customers and industry, but we believe these assumptions to be reasonable.
So a number of risks uncertainties and other factors many of which are outside the company's control and which could cause the actual results performance or achievements of the company to be materially different.
There can be no assurances that these assumptions or estimates are accurate or.
Any of these expectations with Iraq yards for a complete discussion of these factors. Please refer to our recently filed press release and other publicly available disclosure with that behind us I'd like to turn the call to our CEO and chairman.
Thanks, Randy Good morning, everyone and welcome to our 2022 third quarter results presentation, I named Chairman, Brad Gaming CEO . Thanks for joining us today moving straight into some notable highlights for the quarter.
Brian generated record quarterly revenues of 29 million Euro gross profit of $10 4 million Euro and adjusted EBITDA of $2 2 million or up considerably in 2021.
While these percentages are presented against a favorable comparable when the business was exiting the German market and just ahead of launching into new ones. It demonstrates the impressive growth over the previous year. These.
These results also represent our continued investment into the business and specifically, our proprietary tech and content to solidify our competitive edge.
As far as various operational and commercial activities, we continue to diligently execute against our content led game plan exclusive content development deals that were secured with leading gaming and entertainment brands, which provide us with a much needed differentiation and a growing yet highly competitive global gaming market.
We're pressing on with our North America, new content rollout in various states aiming to increase our share and footprint in the market.
We've launched our turnkey solution and the new market, the Czech Republic, while enhancing our existing position in the Netherlands with two new partners, making Bragg, the leading b to B platform in this recent deregulated and growing market.
I'll share more about our business and operational activities later in the presentation now I would like to hand, it off to one day before our financial review.
Thank you and good morning, everyone.
I'll begin my comments on slide seven.
Third quarter revenue was up 62, 3% year over year to $20 9 million Euro.
And up to half a percent from the previous quarter, representing an all time record for Brett.
The groups year over year revenue growth was mainly organic tweets existing customer base.
Onboarding of new customers in various jurisdictions, particularly in the Netherlands, and the strong revenue performance from the Wall Street games studio and spin games existing U S customer base.
From our Kpis perspective, the total wagering generated by our games and content offered by Brad was up 42, 4% from the prior quarter to $4 6 billion.
By eight 9% from the previous quarter.
As you can see from the Wagering chart on the right hand side, we have seen a positive momentum since the onset of the German regulator of restrictions on gameplay in Q3 2021.
The gross profit increased by 57, 6% to $10 4 million euros.
With gross profit margin seeing a slight decrease to 50%.
The margin reduction is primarily due to the change in the composition of revenue drive from our I gaming platform and managed services.
Partially offset by increase in revenue from proprietary game Studios, which has no cost of sales compared to the third party games and content, which have associated third party costs.
Adjusted EBITDA for the quarter was up by 51, 6% to $2 2 million euros with adjusted EBITDA margins, reaching 10, 7%.
Slight decline of 80 basis points from the same period in the previous year the.
The change in margins was mainly the result of the scale and changing our product mix of I gaming and managed services along with high investment in salaries and subcontractors cost as part of the group strategy to expand its software development and product portfolio.
With a focus of margin control.
Other highlights during the quarter, we completed an $8 7 million convertible debt facility to strengthen our working capital and our investment and development needs.
We ended the quarter with $17 2 million euros of cash and positive cash flow from operations.
Our current trading is strong.
From guidance perspective, we are reiterating guidance for full year 2022 revenue and adjusted EBITDA.
And our initial 2023 expectation is for full year revenue growth in the low double digit percentage range and adjusted EBITDA growth of at least 20%.
Now turning to slide eight.
I mentioned earlier.
Entry into new markets, particularly in the Netherlands.
Has been exceptionally strong this coupled with new client wins and the ramping up with operators launch earlier. This year has given us significant momentum in the current financial year.
During the quarter revenue from legacy customers grew consistently.
Rising two 3% from previous quarter and nine 2% from the first quarter of 2022.
Revenue from new customers launch in 2021, and 2022 has also grown consistently driven by the Dutch market.
Total wild streak and spin revenue was up by 27, 8% from the previous quarter as a result of our strong performance of our proprietary games. It is important to note that underpinning our financial 2022, and financial year 2023 revenue target of <unk>, new business pipeline new market entry.
And more focused sales efforts.
Slide nine.
You can see from slide nine.
Gross profit margins have been in a growing trajectory since Q3 2020 due to an ongoing shift in product mix.
We're targeting gross profit margin of 60% by financial year 2024.
We are scaling up our business in line with both of our revenue growth and the convenient movement and product mix as indicated on the right hand side of this slide.
Product mix has changed noticeably since last year third quarter. It is trending towards spam turnkey solutions and proprietary content, leading to improving gross profit margins and profitability.
As we indicated in the past Pam turnkey solution and proprietary content products have no third party costs, resulting in a material increase in gross profit margins.
Please note that Q3 2022 margins benefited from a Pam and thank you solutions, which delivered some strong performance from our new touch customers.
On slide 10, we highlighting our efforts to maintain margins while growing revenues.
Total operational costs, excluding cost of goods associated with third party content providers have declined since Q3, 2021 and amounted to 39, 2% as a proportion of total revenue.
At the same time the group continues to invest in developing its technology products and games in a measured way totaled.
Total salaries and subcontractor costs as a proportion of revenue have declined since Q3, 2021 to 21, 7% and its targeted to scale in line with future growth.
Professional fees amounted to three 8% of total revenue and were mainly related to entering new jurisdictions licensing legal and all these costs.
And hosting costs were four 9% of the total revenue as a result of the U S expansion inorganic revenue growth all other cost target to scale in line with future growth.
Ultimately, we expect Brexit operating leverage to increase over time, given limited growth in employees and.
Hosting and professional services and other costs.
Moving to slide 11, adjusted EBITDA amounted to $2 2 million euros against an operating loss of $1 6 million. The gap was driven by the following noncash an exception items depreciation and amortization and increase in intangible amortization as part of the wild streak and spin acquisitions in.
In June 2021, and June 2022, respectively.
Share based payments near awards were granted to senior management in the first quarter in the third quarter composed of the issues and our Sears and transaction acquisition costs in the third quarter costs, mainly associated with our convertible debt financing and for the nine months ended September 2022 were attributed to the wild streak and.
Spain acquisitions.
As you'll see on slide 12, we ended the quarter with a cash balance of $17 2 million euros compared to the six 2 million as of December 31st 2021.
The $10 million of convertible debt facility.
Net working capital was $4 5 million euros compared to $11 6 million at the beginning of the year.
The main difference between the periods was the $9 1 billion consideration paid upon the spin acquisition and the $8 3 million net proceeds from the convertible debt offering completed in September 2022.
We continue to project positive free cash flow from operations and as a reminder, our business strategy required the little capex related to technology.
From a cash flow perspective in the nine months ended September 2022, we generated $7 7 million euros from operating activity, while investing $14 4 million euros of acquisition of spin games and software development as part of the investment in our technology. We also receiving proceeds of $8 3 million.
Post the completion of the new convertible facility.
With that I'll turn the call back to you anyway.
Thanks Helane.
Moving into our operational update on slide 14.
One of our key focuses over the past quarter has been the continued integration of the spend in the Wall Street U S businesses with brags existing operation.
We have complemented the technical integration, which has been completed earlier in the year connecting the Org Tech stack with spins distribution and wall streets premium content with a unified brand identity, we are Bragg.
This unified Brian that helps us create a joint mission and identity across our various sites from Slovenia through volatile, London U S and India.
Well this is an ever evolving process and only part of our overall strategy. It marks an important milestone in our journey I would like to take this opportunity and thank our braggers around the world for supporting this effort and powering our growth.
On slide 15, we put some focus on the Netherlands, where Brad continues to be an online partner of choice for both full turnkey and content solutions.
Based on recent data we believe we are now the leading <unk> platform in the market.
This is a great case study in another testimony of our team's ability to offer a scalable and customizable solution to a wide range of brands in a highly regulated and competitive environment.
Our fuse innovative player engagement tool has taken another step in its evolution announced supports both sports and casino operating players a variety of events and incentives across the entire product suite, helping our partners improve retention and lifetime value and return on investment key element in their online success.
This was also deployed perfect timing because we are heading into the 2022 World Cup tournament in Qatar.
It has been an overwhelming vote of confidence by our partners. So far some of our local and global brands as we help them build digital value and monetize their assets powered by the <unk> Tech stack product and supporting operations.
Moving into the heart of our proposition on slide 16, we have been extremely busy growing our content ecosystem alongside our ongoing development of market focused proprietary titles led by our U S and Slovenia in House game Studios. We are also struck exclusive deals with valleys interactive which include the King show.
James and gaming Arts title incredible technology that Sega Sami creation. These partners joined our existing stable of studios like government and blueberry.
We will allow us to complement our fully owned titles with highly recognizable gaming bred some catering to specific markets and some with a global footprint. The games are powered by brags Modern Tech stack is developed through analytical based process leveraging our growing data set derived from hundreds of partners and operators, we aim to offer.
For our customers a unique content suite. In addition to our successful aggregation platform, which includes thousands of games from all leading providers.
Content is indeed, king and it is a central pillar in our growth strategy. It will create differentiation for the brand proposition in a crowded marketplace. Our clear goal is to become the content partner of choice for leading I gaming operators in North America, Europe , and future markets like Latin America and Africa.
In this slide we're focusing on North America, specifically the U S. The U S remains a highly concentrated <unk> gaming market, both from a state and operator perspective, we're.
We are seeing a clear shift toward topline sports betting led growth to the proverbial path to profitability, which is best represented by gaming agenda. There is a clear and consistent demand for high quality casino content with differentiation and positioning becoming the key success factors, especially on mobile devices.
We continued to religiously develop our games and products with our partners needs in mind, as we aim to support them and engaging their players.
We continued rolling out our new games and making good progress.
Once an initial batch of new Brac developed games has rolled out we've been focused on further expanding our proprietary and exclusive portfolio with these operators leveraging the game's performance to extend our distribution into additional partners Dave side.
These efforts require persistence is the yield results over time, but it's once successful it will serve us as an effective boat, creating sustainable value for the business in the long term.
We're also encouraged by the latest discussions in several sports betting states like Illinois, and Indiana around the potential regulation of I gaming, we firmly believe it will serve both the states and the players to develop and enact I gaming legislation to ensure a safe and regulated experience towards constituencies.
The recently regulated Ontario market has demonstrated healthy early indicators as it continues its licensing rollout we're looking to further enhance our presence in this market during 2023.
Lastly, I'd like to summarize and leave you with a few key points on slide 19, before we open the floor for questions.
We're marking another growth quarter in a volatile macro environment and a competitive landscape now one company Brad gaming is executing against our content led strategy with focus on our North American rollout effort, while we leverage our recent success in Europe .
We're on track to meet our 2022 revenue and adjusted EBITDA guidance looking into 2023, given the strong performance in 2022, our initial expectation is to deliver low double digit revenue and at least 20% adjusted EBITDA growth respectively.
Taking into account our ongoing investment in <unk> content in Tech development aiming to meet our long term revenue and margin goals.
I wanted to thank our shareholders board and brag team members for their ongoing support and to you for your time, we will be happy to take questions now.
Yeah.
Thank you at this time I would like to remind everyone in order to ask a question Press Star then the number one on your telephone keypad.
We will go first.
I apologize we will go first to Gian Luca <unk> at.
Hey with Securities.
Okay.
Good morning, guys and congrats on a good.
Q3, I was just wondering if you can speak to organic growth witnessed in the quarter is there a jurisdiction that is.
Is outperforming others and secondly in your early days in the U S market, how how are things shaking out there for you guys.
If you look at Geneva.
Thanks, Yes.
I'll comment on both.
First of all in terms of organic growth, we're seeing good healthy growth across.
Across the board, but as we are a dominant player in the Dutch market than the market Overindexes naturally for US. It's also relatively new one so growth there is is more apparent.
But we are seeing good.
Good growth in our other markets as well.
As far as as far as the North American market and in the U S market. We've recently deployed.
And three out of the top five operators in Michigan, our new content suite early signs demonstrate the games are doing well.
We've deployed the same games by the way in Europe , and they're also showing some initial signs of good performance that we're looking to leverage on so so far we've been very focused on the initial rollout of the new content.
And that is undergoing we're looking to ramp this up considerably into next year, but the initial signs of games are performing well against their their competition and in some cases over indexing existing incumbents.
Okay, that's great. Thanks, and just lastly from.
Our end here in terms of the World Cup happening in Q4, this year and casino being a higher margin product when compared to the sports book.
How are you guys positioned for that in your operator relationships that you have.
Overseas and on our side of the Atlantic.
Oh, it's a good question. This is the first time, we've seen the World Cup in Q4, there's typically a summer event that coincide with seasonality. So it will be interesting. It's also typically.
More on acquisition prone event that Dennis monetize over cross sale into next year, which in this case is good because its leading into the <unk>.
Q Q1, which is traditionally strong as far as the operators are concerned our pan relationships.
Some of them have very successful sports books, we offer some of the leading product in the market overseas in Europe .
And we're geared up we've deployed our player engagement tool.
Fuse is now connected over sports book with Great timing, So what are.
Some of the operators can can offer.
Player engagement tournament in the live events.
Through sport and casino, we hope that that will create a long lasting effect on the proposition. So in short we are well prepared the tech stack is ready.
And our partners are very excited by the <unk> already started their marketing portion I hope everyone will have.
A great tournament, mostly overseas in the U S market soccer is less guard of the betting pattern typically eight number five or six.
Event, but we're focusing on our content deployment through the quarter and into the holiday season. There. So I think that will have a lesser effect across the Atlantic.
Okay. Thanks for the color guys.
Thank you.
We'll move next to Sam <unk> at <unk> Securities.
Hey, guys. Thanks for taking my question and congrats on a great quarter.
During the quarter you know you went live in Connecticut, and Ontario, just wanted to get your thoughts on so far how is your performance in these markets versus your expectations.
In general how do these two market sort of stack up against all the other European markets you currently serve.
Okay.
Alright, thanks so.
These are two very different markets first of all.
The.
Spin acquisition in the Wall Street acquisition, you really put us front and center. The content was spin contents already available in all key gaming states. So it's predominantly introducing new content into the states that serves as the growth the growth driver is.
As far as Connecticut, and Ontario voluntary is a reregulate market behaves very differently.
So a lot more competitive.
Connect is a duopoly, but it's fair to say that those are sort of demonstrated growth in their own way, Connecticut has a very high GDP per capita and you can actually see it from some of the initial signs of performance in the operators there the total addressable market, Ontario, we believe its still early days.
Because the market is not just not.
Not just rolling out this new licensing.
Regime, but it's also stepping into a leaning into enforcement. So these two forces will probably see accelerated growth into next year again, the games small batches or a small group of games was deployed into Ontario. So far we're pleased with their performance, but it's also a game of numbers. So we will be looking to.
Rent up the pace.
As far as content in Europe versus the U S.
The games some of the gains translate well across the pond and some to a lesser extent, that's the main reason or the logic behind creating.
Separate in House Studios.
Part of them like Indigo Magic and Orix are more focused on the European market.
<unk> nicely for that reason.
It's all managed by a central content production.
And development organization, but the games are developed with our I believe we were one of the only if not the only.
Studios that actually has different mass models and and analytic approach that separates European players from North American ones and we're looking to start leveraging that this year and into next.
But these are very different.
<unk> crowd different markets that we'll be developing content toward some of the games over index and some of the European markets, but overall the focus is develop bespoke North American content, and then focus on European territories, even inside Europe . There is a clear distinction between different market Central Europe .
Western Europe Northern Europe .
And we have a great deal of data that we're now looking to leverage to translate into game developments, so but again a.
A lot of investments going into games and the initial signs for the new content suite is a we're very pleased with it.
Okay. That's great that's very helpful.
And then just just a quick follow up on Netherlands, Gerry you guys continuing to put up good market share gains on a sequential and annual basis.
Italy, we expected.
Personally for that to slow down a little bit as some of the operators that initially exited the market.
We're expected to sort of enter the market back.
So just know that it's been.
In some time.
Market wide.
Are you seeing any competitive pressures in the market.
Where you see our search market share gain growth to slow down in the next few quarters maybe.
So that's a great question I think that what we're seeing is a.
Typical reregulation of a market that sort of reopened in and the.
Catapult was very much stretched to its limit. So there was a lot of pent up demand in the market.
What youre seeing is there are competitive pressures like incumbents that have re launched in the market on the back of local brands that were there first but.
When other dominant brands launch we also grow the market. So the market continues to grow the total pie continues to grow having said that.
We have to say that the operators are partners in the market has been very effective and customizing the technology and project to create separate brand identity. So each one of the brands that we power has a very different angle.
Angola marketing philosophy.
Player base, and I think that helps to for them to grow and compete with other brands, but also defend their market share. So overall, we've seen growth on our platform and our existing partners have grown very nicely and also the brands that we've recently launched into the market are showing.
Good initial momentum that's the reason why we believe we are taking share from from competitors I think again, it's a testimony of of the techs ability to scale and also differentiate because it's very important for the different operators and partners to be able to offer something different each one of them with his own asset.
But overall the market at some point it will naturally the growth would subside, but you want to get to that point. When you have the biggest market share nationally as we can see scale matters also from a <unk> perspective.
Alright.
Okay, and then sorry, just one last one from me.
Just on the general macroeconomic trends are you seeing so I'm not sure I gaming operators starting to feel the pullback in discretionary spending and the impact of that on your customers' wagering activity at all or.
Still too early to say anything about that.
I would say, it's a bit early from our end and also because we are very much focused we're very much beat to be focused or solely b to b b to b, but also on the IGT side, what we're actually seeing is even operators that are opting to scaled back on.
On the marketing spend or their players, but the shift is as we mentioned in the presentation. The initial shift is towards casino our I gaming.
As the higher margin products. So right now we actually see in the near mid term that shifts should serve assess.
We're well positioned in that regards naturally have discretionary income.
Subsides worldwide.
It will have an effect, but we're sort of twice removed from it.
And it says that we're focused on the more lucrative addressable markets.
So I would say that we are less susceptible to it at this point.
Okay. Thanks, I'll pass lineup.
Thank you.
We will go next to Jack Vander Ark at Maxim Group.
Okay.
Okay, great. Good morning, guys. Congrats on the solid results and strong initial 2023 outlook.
Maybe yaniv.
Your initial outlook for 2023 low double digits.
Low double digit revenue growth and adjusted EBITDA margin of at least 20%. It's good to see very positive can you maybe just walk us through the key puts and takes here.
What are the potential drivers of even further upside relative to your what's baked into your plan.
Sure Yeah. Thanks, So again as we mentioned in our initial guidance as we get closer to 2023, we'll be able to hone in our.
Our guidance still a few moving parts there, but the rationale behind it is quite simple I mean, we're looking to leverage a strong year and naturally as I mentioned. The 2022 was had strong performance. The business has repositioned itself through that period over 12 months period from a mostly pre <unk>.
<unk>.
Facing business into a regulated one and we've done so again, a testimony to the team and the Tegra. We've done so while continuing growth and also margin expansion and where.
So we're forecasting that trend to continue again, it's not a trivial.
Task.
As to expand through more proprietary and exclusive content.
That has naturally no. The proprietary one is no cost of goods. So it's 100% upside, but that does take time and growing.
Stable of titles and content that starts performing well as I said, we're seeing some good initial signs, but the Devil's in the details there and we need more of those games and that's what we're very much focused on so that's our.
Sort of thought process to ramp up and accelerate lean into this strategy and accelerate the content production. So we can expand those margins, even even faster, but we are the main messages. We are conscious that that is something we expect to do and we also want to make sure that we are.
We're consistent in that approach, we'd rather see a long term consistent thread a trend than a pretty erratic won I think everyone would prefer that.
Okay.
Great. That's helpful. That's helpful color, maybe just a follow up to your content strategy can you just remind us.
I'm not sure if things have changed can you remind us how many new games you plan to rollout.
And how many of those gains are still under development and then just a follow up to that do you expect any of these new upcoming games to be as popular are successfully driving power Egyptian magic and the euro.
Successful titles.
Okay.
Yes first of all of those titles are again, a testimony of our of our content teams ability to create a quality content.
Doug Fallon and his team in Nevada doesn't amazing job in creating deep and <unk>.
Sticky content that resonate with the with players over a long period of time, that's exactly what we're looking to bolster and accelerate right.
Right now we're still developing in final stages of developing next years.
Our content strategy. The main reason is we wanted to again ramp it up that the recent deals that we've signed are being worked into those roadmaps over the past couple of few weeks there were the Sega semi creation.
The value of interactive and.
An incredible technologies just to name a couple they are all being worked into the roadmap I can say that we're looking to at least.
A few dozens of games from our proprietary level and a larger number.
From an exclusive and proprietary.
Date in mind, we're also looking to focus on top tier operators and deploy the content through them.
We don't just done 20 or 30 games at a time into the market. There's also.
A very well thought of release plan and rollout plan behind it to create the effect of the continuous effect.
So that's the level, we're not going to produce hundreds of games over next year, we believe of the quality there and the depth rather than quantity. So that those are sort of when we will share more accurate numbers there that that roadmap takes shape over the next few weeks, but just these are the sort of scale of develop.
But we're looking to to produce over the next 12 to 18 months.
And if I if I could just ask one more question in terms of your U S growth ramp and expansion strategy Slide 17 provides a great illustration of this.
Where else do you see opportunity in the U S. Outside of these markets, maybe just get your thoughts on Ohio, specifically.
And so it should be a pretty near term big market launch as well.
Well. These are right now these are sports only stage states.
So we do it.
Any of these states are relevant is probably.
Through a fully full turnkey.
<unk> solution, which right now we are sort of considering on a case by case basis, but right now we're very focused on the content element, which are the gaming state I've mentioned that we see some.
Progressive and good discussions in some states to add <unk> gaming to its existing legislation that hasnt happened to date. The states that you see today are state that enacted or.
Legalized all of the I gaming suite and not one by one so we're sort of looking for the first and the second one to do that.
And I think any state that adds casino, whether its a smaller state like Iowa, or a big state like Illinois or oral higher for that matter. It is about the launch sports betting will have a net positive effect and basically double or even more the that addressable market.
So I mean, that's the apparent upside at the 10 31 sports betting states tool versus six gaming states.
You can see the potential runway there, but we're being very cautious in that because it has been a while.
So were just addressing these top three or four states any additional state there just as any other Canadian province, as pure upside from from our perspective, because distributing builds games into additional states.
Requires certification the partners were already be there technology is going to be there. So it's mostly that that gearing effect that kicks in once the new market opens.
Makes sense fantastic I appreciate the color. Thank you.
Yes.
And as a reminder, press star one if you would like to ask a question. We will go next to Edward Engel at Roth capital.
Hi, Thanks for taking my question and congrats on a nice set of results.
If I recall during the quarter you had an off site, where everyone from the combined business got together and for the first time, we kind of reviewed the strategy could you give any color on what some of the takeaways were from that review process.
Sure Hi, Ed.
We had a.
Naturally the team got together for the first time physically earlier in the quarter.
And Slovenia.
Ran through a very intensive two day workshop sort of re sort of re honing or re calibrating. The business strategy. I think we came out with a very clear understanding of what we what the task in hand is.
As I mentioned, you know Steve translated into a streamlined cohesive.
Cohesive structure and strategy and also a unified company behind it.
And the strategy again is a content led won the business, we have the prerogative or the ability to deliver content through a variety of channels, whether our proprietary content directly.
Or using.
Powering our proposition through our Pam player account management system or through our aggregation.
So we have a variety of channels or it means to deliver content, but it's all a matter of at the end of the day is how much proprietary content can we deploy with our partners.
That will.
Bolster or accelerate our success in the various markets. It serves as a key differentiator. So that was the main resolved behind it and naturally a variety of other.
Both decisions and action items, but that said and adjust I mean the team today is very much as I mentioned the team building in such a rapid growth environment is always a challenge, but I think the team today.
This is very much United and getting behind this strategy and excited to execute on it but it was a very it was a great. It was a great exercise it's always great to also meet in person after a long time.
Yeah.
Great I appreciate it and then just a quick question on the 2022 guidance.
Our full year guidance kind of implies that the fourth quarter does dip a bit sequentially just kind of curious I mean in terms of seasonality is for key typically the lightest quarter in terms of seasonality for your customers I'm, just kind of wondering what what kind of drivers.
Well typically the summer months used to be the seasonal high.
Adas, but we've seen those sorts of ani or unusual events over the past two years seasonality, giving way was covered at first and then we saw seasonality.
Effect during the summer months. This year people were traveling but again. The reason why is it's a moving target as this world. This year's World Cup for ones when Theres, a lot of sports focus behind it.
And also we do see strong.
Strong trading at this point.
We've already updated our guidance and we're sort of expecting to hit the upper upper range of that.
Of that range.
We just we didn't feel that the current trading more than another.
Other update we may be slightly higher but I.
I don't think there'll be a material dip thats just.
We couldnt accurately forecast with all these moving parts another.
Aggressive growth quarter, but these are I don't think they are material deviations.
Yes.
Perfect. Thanks, Nick could just kind of squeeze one more left on the cost side.
Gross margins quarter over quarter were down a bit, but if I kind of look at your revenue segments.
Everything is generally pretty flat.
Kind of wondering seasonally is <unk>, typically youre kind of onetime events and <unk>.
Every year that kind of happened that kind of dampened that or just kind of wondering what that kind of a sequential dip is is from yes sure.
Sure Happy Alta I'll, let the owner to take this one.
Hi, Ed how are you doing good morning.
So so I think the best way to look at the gross profit. One is that of course, we're trying to keep on a quarterly basis the growth from quarter to quarter Youre right to this particular quarter. The revenue was remained flat compared to the previous quarter, having said that gross profit was deemed by couple of percentages to about 50.
Percent.
I call it pure accounting and revenue recognition for us.
We're dealing with aggregation with dealing with suppliers and we deal with customers, we are buying and the selling some time you have revenue recognition movement.
The best way to look at it I mean of course, we probably going to go back to a 52 week, 53% that we the average in normal as rates, we have from Q1 to Q2 increase III.
The best way to look at that as you look at the year to date.
So last year same period was 47% now with 52, 6%.
Hating, we're heading towards a 2024 numbers, which is 60%.
I don't think we're going to see those Jose movement from one quarter to another it might happen. It's always happen when we true up we don't have to release our numbers, but I think it is just that particular accounting adjustments, we had to do a phone particular suppliers that we charge them later and not earlier.
That's not something we analyze it we realize we realize it's going to be a questions around that but we're confident that we're going to go back to the 50, 253% gross profit margins and the more proprietary content and we are going to rollout this quarter and the beginning of next quarter in the U S. Mostly we will see the growth.
It's increasing so I'm less concerned about that.
Perfect. Thanks, and then if I can just squeeze one last in here.
The kind of core operating our operating costs are fixed costs have been really stable the past two quarters and if I look at your guidance for 2023, it kind of implies a decent uptick in your core opex.
I guess is that due to a hiring ramp sometime during the year in terms of content or I guess, how should we read.
Some sort of uptick in.
Opex right.
So I think I think the best way to look at our Opex is that we keep investing we king we kept <unk> mentioned before we are moving from the pre regulated markets to proper regulated markets. We have more compliance product development and of course sales team we ramping up.
So I think what we're going to see is that they have more revenue going to generate of course from our proprietary content when we're going to be fully.
Operational without content in the U S. We will see this cost scaling up 4%.
And prospects.
Percentage perspective, so I think from all the overheads, we will see.
How to say, a scaling down or scaling up a percentage wise not necessarily nominal value.
But we definitely were looking side with very very focused on our cost control. We're trying to do any ROI analysis on every single investment we are doing in the business.
Also we just need to remember that we always have.
How does the gap between went out when revenue will be derived from particular content. We are building an investment we're doing in our technology and the capitalization rate that caused that it's starting at a period in the first period in a couple of months later you can see the return so I think in 2023, we will see even further decline.
In our margins in other words from cost margins in other words, we will see that we are increasing revenue and the cost will as a percentage wise will start scaling them.
That's the trend that's what we're seeing and I think we're going to deliver that.
Perfect. Thank you.
Okay.
And that does conclude our question and answer session. At this time I would like to turn the call back to management for any concluding remarks.
Thank you everyone for joining the call. It was great having you all and we'll see you all.
Our next call.
Enjoy the rest of your day.
And that concludes today's conference call. Thank you for your participation you may now disconnect.
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Okay.
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