Q1 2023 Gambling.com Group Limited Earnings Call
Greetings and welcome to the gambling Dot Com group's first quarter 2023 earnings conference call.
This time, all participants are in a listen only mode.
And answer session will follow the formal presentation.
No one should require operator assistance during the conference. Please press star zero on your telephone keypad.
As a reminder, this conference is being recorded at this time I would like to turn the call over to Peter Mccarthy, Vice President of Investor Relations. Thank you you may begin.
Thank you.
Hello, everyone and welcome to gambling Dotcom group's first quarter 2023 earnings results call, Peter Mcgough, Vice President of Investor Relations and I'm joined by Charles Glasby, Chief Executive and co founder and Elliott Schwartz Chief Financial Officer.
The call is being webcast live through the Investor Relations section of our website at gambling dotcom forward slash corporate forward slash investors and a downloadable version of the presentation is available there as well what cast replay will be available on the website. After the conclusion of this call you may also cause.
<unk> Investor relations support by Emailing investors at GTC Group Dotcom.
I would like to remind you that the information contained in this conference call, including any financial and related guidance can be provided consist of forward looking statements as defined by securities laws.
These statements are based on information currently available to us and involve risks and uncertainties that could cause actual future results performance and business prospects.
And opportunities to differ materially from those expressed in or implied by these statements.
Factors that could cause such differences are discussed in the risk factors section of gambling dotcom group's filings with the Securities and Exchange Commission forward.
Forward looking statements speak only as of the date. The statements were made and the company assumes no obligation to update forward looking statements to reflect actual results.
Just in assumptions or changes in other factors affecting forward looking information.
To the extent required by securities laws.
During the call. There will also be a discussion of non <unk> financial measures and a description of these non <unk> financial measures is included in the press release issued earlier this morning, and reconciliations of these non <unk> financial measures to their most directly comparable <unk> measures are included in the <unk>.
<unk> two of the presentation and the press release.
Both of which are available in the Investor tab of our website I'll now turn the call over to Charles.
Thank you Peter and welcome everyone.
Again, we got Congress is off to a tremendous start in 2023. This morning, we reported another quarter of all time record results.
Record results were driven by continued outstanding execution of the key fundamentals of our business.
And by the loss of sports betting in Ohio, Massachusetts with these results. We have again demonstrated that we are leading the way in terms of organic growth among our publicly traded peers.
This great start.
We continue to expect that 2023 will be another year of record financial performance driven by strong organic growth, resulting in attractive levels of free cash flow that last point attractive free cash flow highlight a very significant differentiator and make that call.
Well most of the other publicly traded companies in the U S targeting the high growth online gambling industry.
Although we do not currently have clarity on this.
U S launches for sports betting before January 2024, we are today, raising our guidance for full year 2023, as Elliot will detail later in the call.
First quarter revenue rose, 36% to $26 7 million, reflecting a 30% increase in north American revenue.
<unk> strength in the UK and Ireland with revenue growth of 36%.
We generated $10 7 million of adjusted EBITDA, and $6 2 million of free cash flow of course.
Quarter results benefited from sports betting, Washington in Ohio, and to a lesser extent, Massachusetts as well.
Strong results.
Across both North America, and in a number of our European markets.
We delivered over 88000, new depositing customers for our online gambling, operator clients an increase of 31% over Q1 2022.
Our Q1, 2023 and D. C growth is even more impressive when you consider that last year's first quarter strongly benefited from new York's athletes sports betting Walsh.
Our growth in E C.
<unk> continues to be driven by an expansion of our portfolio of assets as well as our continuously improving our ability to leverage our proprietary technology and data science systems to convert and monetize that traffic.
Our focus on organic growth paid off again with the first quarter, North American revenues, increasing 33% year over year to $14 1 million.
Revenues from the U K, and Ireland increased 36% year over year to $8 5 million. This was our fifth consecutive quarter of record revenues in the U K Ireland. Despite having operated in these markets for over 10 years.
Last month, we got the long awaited white paper.
The online gambling industry in the U K.
Many of the proposal in the White paper had already been implemented.
By the industry and we expect no meaningful impact on our business from the proposed measures.
Our media partnership with Mcclatchy performed as expected during the seasonally stronger winter sports calendar, we continue to expect meaningful revenue from our partnership with all of them.
NFL season gets underway.
Have already launched a new section on USA today, which is available at USA today Dot com slash betting.
Oh, just fine your dot com continued to perform well and in line with our expectations for the quarter Rod and wire had healthy growth overall with performance marketing revenues and subscriptions continuing to grow it in the first quarter Kpis from the reservoir subscription business were at record levels.
Overall continues to deliver on our strategic objectives.
Position.
Our continued focus on the positioning of our websites leveraging the business intelligence capabilities of our technology stack, that's created an execution gap between gasoline dot com.
And our publicly traded peers there.
There is no change to our plans to continue to invest.
And the business to further improve our.
Operated websites as well as the optimized media partnerships.
We've made great progress in the development of casinos Dot com, which we expect to launch this summer.
Development and optimization of Cogs.
Good at partnerships will continue throughout the remainder of 2023.
It's noteworthy that these two very large news organizations chose gambling dot Com group among all of our peers to monetize that opportunity in U S sports betting available to that.
Believe that our partnerships speak to the to their understanding that among all of the online gambling affiliate companies. We have separated ourselves in terms of how we leverage our digital expertise and proprietary technology to maximize outcomes for our website visitors.
Operator clients what are they.
We're optimizing the footprint of our media partnerships will create yet another competitive compared to our competition.
National and local branch footprint.
You asked me is unmatched by any other day.
Sure.
Locking the full potential partnerships over the coming years.
Now I'd like to turn the call over to our CFO Mark to discuss our first quarter results in detail.
Thank you Jonathan and welcome everyone.
Charles maintain but still a record quarter not just in the past.
Nice quarter.
Revenues increased.
26 million.
Or 40% in constant currency.
The increase in revenue was driven by stronger.
N D C, both North America, and UK and Ireland.
You can get both being up.
91% to more than 88.
But the sales during the first quarter from our immediate Ultrashape and the subscription business worldwide amounted to two one.
Operating expenses for 17 months.
An increase of people.
That's about breaking expenses, each $80 million to $90 million.
And you can take into consideration.
Since our acquisition.
Adjusted operating expenses were $16 6 million, an increase of 22% in constant currency.
The increase was driven primarily by additional headcount.
Gross marketing product sales and technology functions well.
The company accepted.
Amortization expenses decreased to $1 4 million that's true it up at some of the Rosewater.
About decision.
Multiple.
For the full year.
Oh wait.
We expect to incur more staged approach.
Natalie <unk>.
Okay.
Hiring in the fourth quarter continued at a more moderate pace.
Oh, well below our pace in 2022.
Staffing levels close to being able to support near and longer term objectives, while we expect to continue to hire selectively.
That works for breath, and I'll start with operating expenses.
Okay.
You too.
Exactly.
Net income coastal.
Got it.
But nothing.
Well that's good.
Thank you.
Right.
Adjusted book value.
Our situation nothing come into Portugal.
Yes.
But in 'twenty.
27.
Okay.
Well continue to adjust nothing.
Okay.
Okay.
Yeah.
We generated first quarter adjusted EBITDA.
At this time.
2 million corporate.
It will be 90% plus.
Elaborate to regain top line growth outpaces.
Adjusted EBITDA margin was 40.
97% High School Journal 2020.
Okay.
Total cash generated from operations of $7 1 million.
Maybe I can see.
T.
Driven by this fall.
We generated first quarter free cash flow of $6 2 million Capex normalized.
The expansion of our domain name before.
'twenty and.
Okay.
Mark.
It'd be nice.
Well remain able to hardly from our organic growth initiatives operating cash flow what can you exactly.
Free cash flow.
Cash at that mall, but.
2023.
Great.
Again sequentially.
And the fact that the great performance in 'twenty, two we're pleased to paint.
And that one possible.
At the beginning of Q2.
Okay.
Uhm 20 million August 15th.
Yeah.
Turning to outlook.
We are now.
So in theory, we get open hole to fill.
Got it.
We expect the normal seasonal pattern second impactful because he.
He was talking about.
Yeah.
Thanks, Michael.
In our view.
Consensus, it's well beyond that many industry remains strong and even more about nickel prices.
They need to make progress towards delivering profitability.
As we continue to gain additional scale, particularly through increased but they forget about it.
And additional parking.
Yeah.
We will continue to monitor consumer behavior closely.
America, that's reflecting our Q1.
The strong start to Q2.
Nothing unusual.
Okay.
Given the fact that while the backlog from Q1 performance. This morning waste all of 'twenty four.
For the year revenues.
Got it.
The new range fits our core revenue.
Range of 95 to 90.
Patrick a tight range.
Type et cetera.
The new range, but year over year growth, 24% to 29%.
We now expect adjusted EBITDA to be between three 7 million.
I'll give extra patrons are pretty cheap.
The new range.
Yes.
Yes.
So.
On a full year market.
Okay.
And adjusted EBITDA ranges.
Let me highlight let me provide an initial update our.
Great guys.
No new market launches or maybe talk about making true.
Our guidance for 2023 now it seems in Europe change right.
Hong Kong CMO.
Under the company's authorized share buyback program, we have to touch it totaled 178.
Sure.
The average price.
48.
But the thing about 10%.
Okay.
We will continue to opportunistically repurchase that value at our April .
In September .
Ethylene registration statement to enable the company.
400 million.
Without the company he's able to raise additional capital deployment.
The transaction, such a poor chemical increasing capital.
Earlier. This morning, we filed an additional registration statement to enable some of our guns are quite yet.
Yellow shareholders instead of a portion of their shot at you teach.
It increased about four weeks ago and locally.
Sure.
Without a clinical one.
Thank you Louise.
Already we have three I'd just like to quickly note.
And the major pre IPO shareholders are all you know weinberg regarding the benefits of it.
Potential structure trade.
We increased the company's free float, which should help improve liquidity for the benefit all shareholders.
We expect that the outcome of such a transaction.
Make investing and you haven't got copper easier or larger institutional investors.
Before we wrap up for questions I'd like to zoom out and start talking about a single quarter and get some big picture perspective.
We continue to be a great position to deliver strong organic growth and gained market share in many of our markets as we move through the balance of spring and summer.
A lot of momentum from Q1 has carried over into the start of Q2.
The 2023 legislative season has kicked off in the first successes in Kentucky or do they have successfully regulated sports betting.
<unk> is more or less a sports betting legislation.
Signature, we believe that North Carolina is also likely to succeed with sports betting legislation in the coming months.
In Minnesota, Texas legislators continue to debate and there is a chance of a positive outcome, Texas would of course be an adverse market, but despite early signs of progress. It is still long odds for success this year.
As early as highlighted we are not yet generating any revenue from additional state launches. This year. Once we have full clarity on the launch timelines for any new states, we will adjust the prior guidance.
While the ending expansion of regulated online gambling in the U S captured most people's attention. These days.
Buying the opportunity of newly regulated markets outside of North America, and Europe is equally compelling.
They're really under appreciated.
Likewise the ability.
Largest regulated all geographic markets to continue to be drivers of growth for Gan is remarkable.
I was delighted to see exceptional growth in the UK and Ireland.
And actually surpassed North America during the quarter, highlighting our ability to still deliver impressive growth in established markets as well as how truly early it remains in north American online gambling.
We're looking forward to the launch of casinos, but all of the next few months and expect to be a tremendous vehicle to drive revenue growth over the coming years.
Believe the domain.
Yes, I fully expect it to become a dominant brand in the online gambling affiliate world.
Of course.
I will end by once again, they can be brilliant team at Canada.
Their exemplary efforts in delivering yet.
Record quarter.
With that we'd be happy to open up the line for questions operator.
Thank you we will now be conducting a question and answer session.
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Please while we poll for your questions.
Our first questions come from the line of Ryan Macdonald with Craig Hallum. Please proceed with your questions.
Hey, Charles Elliott's nice job guys good quarter.
Curious just want to start with the new states that launch, Massachusetts, Ohio, Obviously, a lot of spending we've heard some pull forward of spend from some of the big operators into those states into Q1, but curious kind of how the quarter was in those states and then how trends and results have been kind of subsequent to quarter end in April and May so far.
So, Ohio, it was very important to state laws lots of operators.
Meaningful population.
Good competition all in all came in.
A very successful state laws.
It's kind of surprising thing about Q1 for us week, Massachusetts and how.
Our expectations for Massachusetts, where we're certainly not as high as the high.
It's kind of uniquely among all the USA launched it so far.
Two.
In Massachusetts was actually better than one.
That had something to do with kind of the sporting calendar.
Some of the kind of momentum around the initial launch day, but.
Yeah. Those are two great states and they will continue to be very good markets for us going forward.
Just to clarify Charles April was better than March for Massachusetts.
Yes.
Got you.
Curious then kind of as you look through the second half of this year, what youre hearing from your customers add partners operators et cetera, but on user acquisition spend and budgets and kind of plans for the rest of this year, how much visibility and if any of that dialogue has changed.
It doesn't tend to meaningfully change.
Quarter to quarter year to year.
Sure.
And then you know.
Zoom out even further.
Demand for affiliate services remains rather constant.
Yeah, the CPA rates may ebb and flow slightly but you know the.
Prospective from our clients and the operators in general as they want to buy as much traffic as they possibly can be affiliates.
There's discussions really center around.
Kind of market share within the affiliates how can they get more exposure how can they get more M. D C.
If they're ranked two or three on our operator, how can they be ranked number one.
And that's.
Partially a commercial discussion.
You know it's really.
There really is no kind of meaningful.
The trend you know either positive or negative in terms of demand for the services, we see it as kind of this.
Barry reliable constant.
Great I'll turn it over to the others nice job guys the outperformance.
Thank you.
Thank you. Our next question comes from the line of Jeff <unk> with Stifel. Please proceed with your questions.
Alright, great. Thanks, Good morning, Charles and thanks for taking my questions.
Starting off Charles I was hoping you could give us an update on what youre seeing in some of the core markets within other Europe and just some of the initiatives in play that are kind of helping you take share in some of the more mature markets and then for some of the more regulatory challenged markets Youre talking with Germany, Netherlands things of those nature. So just what are you seeing there in terms of progress towards normal.
Thanks.
We've seen some strength.
Obviously in the U K and Ireland, but in the other markets in Europe , Italy has been good Netherlands has been good.
You know, we're still optimistic that Germany will come out with some regulations, which are more consumer friendly.
You will see more growth.
And that market, but you know what's been driving.
The business is really just execution, it's not really kind of market level factors. So much as it is us just delivering on website plans search rankings.
Yield enhancement, yes, it would be kind.
Our bread and butter business.
Great that's helpful.
Switching gears could you just talk about how you see margins sort of progressing sequentially through 2023, taking at the mines and the puts and takes to your operating leverage on the investments called out in the press release things of that nature. Thanks.
Yeah.
Yes.
If you look at our guidance.
What we're guiding towards margin expansion for the full year, but not.
Yes.
The majority of our costs are fixed.
The margin will vary between quarters.
That's a function of that especially smoking.
Okay great.
Sure.
Okay got it.
Okay. So is it fair to assume.
Seasonality for margins should basically mirror the seasonality you called out in your prepared remarks on guidance or should we think about other.
The investments.
Just on the growth initiatives some some other dynamics at play.
I think thats it Jeff its really driven by the sports calendar and to a lesser extent.
Somewhat by weather in the Northern Hemisphere, you know the people and.
The height of summer people spend less time on their computers.
So whether that's betting on sports, where all you know that.
More of a kind of a cycle of online casino than it does on sports betting but.
So that's the other kind of seasonal factor, but it sits.
Far less pronounced than the sports calendar.
Dimension.
Great. That's helpful. Thank you, both and a nice quarter.
Okay.
Thank you. Our next question is coming from the line of Barry Jonas with the Truest Securities. Please proceed with your questions.
Hey, guys wanted to ask a bit about media partnerships. It seems like many U S operators are maybe trying to get out of some of their deals and on the affiliate side Youre seeing some partner swaps and EBIT litigation. So could you maybe talk about your media strategy, how you structure deals and how good you feel about them being successful.
Yes.
Yeah, Hey, Barry.
With pleasure.
First thing to point out is when an operator does it meet your partnership.
Wanted to fill either the media partnership those are two very different beast.
The affiliate model.
Has been the model, which you've seen succeed.
Grow and there's lots of them.
New deals are still being done on that basis, whereas the kind of.
Operator tie up with the Big media brands.
These deals are by and large just not being renewed or canceled and you're not really seeing any good ones.
And that is.
A perfect example of the superiority of the affiliate model.
Text, if you are a large media you.
You can make more money by partnering with an affiliate.
Monetize with all the operators versus trying to monetize with one single operator, it's kind of.
Obvious in retrospect, but.
Yes, its affiliate media partnership model is simply fundamentally superior.
The collateral perspective.
So I wouldnt we.
I wouldn't really compare the two but.
I'm looking at the way we've gone about this the same way we've thought about M&A.
We are going to be fewer bigger deals and where are we going to be really picky.
It's just.
It's just easier to concentrate our finite resources on <unk>.
Two big media partnerships that would be to focus those same resources on 10 smaller medium sized partnerships.
We call it really a lot of effort into both.
Glad she and her chips and we've got great relationships there.
I think it's just it's just easier to manage what when you.
Develop a good.
Your relationship with your partners.
Got it and then just for my follow up I apologize if I missed this in the remarks, but how much of the guidance raise is attributable to FX versus just underlying strength and can you also.
And us what the difference is at this point between the high end and the low end.
Yeah.
Yes.
The majority of the change in guidance. It is on the back of strong trading.
We have done.
The FX assumption from.
One point over 75% to one 1.85.
If you look at the.
Chip.
That data.
Currency between the low and the high range will be in our Unbilled pizza continue to.
Outperforming the U K, neither market, but we've seen tremendous growth.
And.
At quantum all set.
I will just be relative to speed up the ramp up at the auction.
Understood. Thank you so much guys.
Okay.
Thank you. Our next question is coming from the line of David Katz with Jefferies. Please proceed with your questions.
Hi, Good morning, everyone. Thanks for taking my questions I wanted to.
Just talk about pardon me the M&A landscape.
A couple of deals just within the past week.
Right.
That aren't necessarily directly related to gambling dot com, but it does imply some changes in the landscape.
Our imaginations can carry us toward further consolidation of things.
How do we think about the degree to which that's either positive negative or neutral for you as.
As we move forward.
I think anytime a company that said your exact sector. That's also a significant <unk> supplier is acquired at a premium in excess of 100%.
That can that can only reflect positively on the company than the peers. So.
We take our hats off to the Neo games.
Fantastic.
Transaction.
And.
Yeah.
It will hopefully also bring some more attention back into the online gambling.
Inside of the equity market.
This this industry it was obviously very in favor.
A couple of years ago there.
People don't realize okay, theyre not going up.
The whole world shifted to.
Focus on companies, which were profitable.
Profitable.
Uh huh.
But it.
It does feel like maybe that got it got.
Got it swing back the other way again that these companies are now.
Either profitable or on the brink of achieving profitability at least from the operator side.
Obviously, the CDB suppliers have been there for some time.
And yeah.
We feel like the one that was announced earlier this week will further catalyze investor.
Perception of the industry I think at the end of the day the cash flow, it's hard to ignore.
<unk>.
These are going to be some very.
Some very great businesses in the U S market not only in the next couple of years, but in the next 2030 years.
Alright.
Just if I can carry that one step further right the degree to which you know.
Does it does it affect I assume it would.
Efforts you might make to acquire.
More things does it does that rising tide lifts all boats or do you still see opportunities for you to acquire.
Here.
Here and there to bolster what's your house.
Well, we haven't had anyone double the price they were talking about since Monday thankfully, but.
Look we.
Very focused on M&A, we're having a lot of conversations we're having a lot of good conversations there is no shortage of things out there to consider.
And.
I'm hopeful that we'll be able to.
[noise] announce something at some point, but but we also remain as picky as ever. We are we have we feel like we're under absolutely no pressure to do M&A. So we are only going to do.
The big deals.
Back to kind of fewer better bigger transactions, we're going to do that.
Deals, which we think.
Really just Michael.
So much sense that we can.
We have kind of.
Very very high conviction to move forward.
Hmm.
We look forward to.
Updating everybody when one of those buckets.
Got it 100% premiums good for good for everyone.
Indeed.
Thank you there are no further questions at this time I would now like to turn the floor back over to Charles to lessen for any closing comments.
Thank you again to everyone for joining us today, we appreciate your support and interest and Kevin got comp group, we've had a strong start to the year and expect more of the same solid performance for 2023, we look forward to updating everyone again, when we report our Q2 results in August .
Thank you. This does conclude today's teleconference. We appreciate your participation you may disconnect. Your lines at this time enjoy the rest of your day.