Q2 2024 Gambling.com Group Ltd Earnings Call

August 15, 2024

Cofounder and Chief Executive Officer, and Mark <unk>, Chief Financial Officer.

This call is being webcast live through the Investor Relations section of our website at gambling Dot com forward slash corporate forward slash investors and a downloadable version of the presentation is available there as well.

Webcast replay will be available on the website. After the conclusion of this call. You may also contact investor relation support by E mailing investors at GTC group Dot com.

Elias Mark: As Charles highlighted, we expect to manage our portfolio websites to grow revenues in 2024 despite the impact of the Google policy change on our media partnerships. For the full year 2024 period, our guidance does not include contributions from any new acquisitions. The guidance also assumes no additional U.S, state launches beyond the recent launch in North Carolina. We now expect full year cost of sales of 6.5 million, of which 3.7 million was incurred in the first half of the year. Finally, our guidance assumes an average year-to-USD exchange rate of 1.09 throughout 2024.

Speaker Change: I would like to remind you that the information contained in this conference call, including any financial and related guidance to be provided consists of forward looking statements as defined by securities laws.

Elias Mark: For the full year 2024 period, our guidance does not include contributions from any new acquisitions. The guidance also assumes no additional U.S. state launches beyond the recent launch in North Carolina. We now expect full year cost of sales of 6.5 million, of which 3.7 million was incurred in the first half of the year. Finally, our guidance assumes an average year-to-USD exchange rate of 1.09 throughout 2024.

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.

Speaker Change: Some important factors that could cause such differences are discussing the risk factors section of gambling.

Speaker Change: Welcome to Gambling.com Group Second Quarter 2024 Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation.

Speaker Change: Gambling dot com group's filings with the Securities and Exchange Commission.

Operator: Operator, we are now happy to open up the line for questions. Thank you. Ladies and gentlemen, we will now be conducting a question-and-answer session. If you would like to ask a question, please press star n1 on your telephone keypad. A confirmation tone will indicate your line is in the question Q. You may press star n2 if you would like to remove your question from the Q. For participants using speaker equipment, it may be necessary to pick up your answer before pressing the star keys. Ladies and gentlemen, we will wait for a moment while we poll for questions.

Operator: Operator, we are now happy to open up the line for questions. Thank you. Ladies and gentlemen, we will now be conducting a question and answer session. If you would like to ask a question, please press star n1 on your telephone keypad. A confirmation tone will indicate your line is in the question Q. You may press star n2 if you would like to remove your question from the Q. For participants using speaker equipment, it may be necessary to pick up your answer before pressing the star keys. Ladies and gentlemen, we will wait for a moment while we poll for questions.

Speaker Change: Forward looking statements speak only as of the date. The statements are made and the company assumes no obligation to update forward looking statements to reflect actual results changes in assumptions or changes in other factors affecting forward looking information except to the extent required by applicable securities laws.

Speaker Change: If anyone should require operator assistance during the conference, please press star and zero on your telephone keypad.

Speaker Change: 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>.

Speaker Change: As a reminder, this conference is being recorded.

Speaker Change: I would now like to turn the call over to Peter McGough. Thank you. You may begin.

Peter McGough: Thank you.

Peter McGough: Hello everyone and welcome to Gambling.com Group's second quarter 2024 results call. I am Peter McGough, Senior VP of Investor Relations and Capital Markets. I am joined by Charles Gillespie, Gambling.com Group's Co-Founder and Chief Executive Officer, and Elias Mark, Chief Financial Officer.

Speaker Change: <unk> two of the presentation and the press release, both of which are available in the investors tab of our website.

Jeffrey Stantial: The first question comes from Jeff Stanchill with Stephen. Please go ahead. Great. Thanks. Morning, Charles. Thanks for taking our question.

Speaker Change: I'll now turn the call over to Charles.

Good morning, and thank you for joining us.

Peter McGough: This call is being webcast live through the investor relations section of our website at gambling.com forward slash corporate forward slash investors

Strong MDC growth led to record Q2 revenue and adjusted EBITDA are year over year revenue growth of 18% to $35 million and adjusted EBITDA growth of 19% to $11 2 million highlight the benefit of our international diversification.

Jeffrey Stantial: Maybe the customer acquisition environment that you are seeing in North America, more specifically, we have heard several operators discerning season that the volume of users being acquired is surprising them to the upside will cost for user acquired. is to decline more specifically for the scale players. I guess I'm at first dynamic. Are you also seeing it all taken in organic searches on your site? You know, recognize the fits. You know, we see the technical changes. I'm in a fragmented affiliate landscape, but just curious to be able to discern all this incremental user code work as well.

Jeffrey Stantial: Maybe the customer acquisition environment that you are seeing in North America, more specifically, we have heard several operators discerning season that the volume of users being acquired is surprising them to the upside will cost for user acquired, is to decline more specifically for the scale players. I guess I'm at first dynamic. Are you also seeing it all taken in organic searches on your site? You know, recognize the fits. You know, we see the technical changes. I'm in a fragmented affiliate landscape, but just curious to be able to discern all this incremental user code work as well.

Peter McGough: and a downloadable version of the presentation is available there as well. A webcast replay will be available on the website after the conclusion of this call. You may also contact investor relations support by emailing investors at gdcgroup.com.

Speaker Change: We generated very strong gaming growth across Europe, including the UK and our business in North America was resilient in the face of exceptional performance in the comparable period.

Peter McGough: I would like to remind you that the information contained in this conference call, including any financial and related guidance to be provided, consists of forward-looking statements as defined by securities laws.

Speaker Change: <unk> back from our phenomenal quarterly results and looking at the bigger picture our performance in Q2 underscores three key factors that reflect the strong physician gambling dot Com group occupies in the online gambling ecosystem a position. We are very confident we will continue to build upon.

Peter McGough: 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.

Charles Gillespie: And then on the second, on the declining cap, are you seeing any big shifts away from affiliate channels for pricing pressure? Or is it reasonable to conclude that this comment really more refers to economies on a scale on the brand awareness side of operator marketing budgets? Thanks. From our perspective, the operators don't have a lot of money. They don't immediately change their approach to affiliates quarter to quarter or year to year. The thing that really drives our business is really supply. You know, how many people are searching for what we're offering? And those trends are always up into the right.

Peter McGough: Some important factors that could cause such differences are discussed in the risk factors section of Gambling.com group's filings with the Securities and Exchange Commission.

Speaker Change: First our team is exceptional at addressing in real time any changes in the operating environment to optimize our performance as.

As we discussed on our Q1 call in early May Google started to de prioritize content from most media partnerships.

Peter McGough: Forward-looking statements speak only as of the date the statements are made and the company assumes no obligation to update forward-looking statements to reflect actual results, changes and assumptions, or changes in other factors affecting forward-looking information, except to the extent required by applicable securities laws.

Speaker Change: This had an immediate impact on contributions from our media partnerships, which led to the conservative guidance revision, we provided on our Q1 call.

Charles Gillespie: The thing that really drives our business is really supply. You know, how many people are searching for what we're offering? And those trends are always up into the right. The number of people searching for the high intent keywords in the United States continues to grow and we continue to capture a greater share of it. Yes, operators have different moods and one quarter may be slightly more aggressive than other quarters, but by and large what's dictating the number of the amount of revenue we're able to generate with the clients is the supply of people that we can send to them.

Peter McGough: During the call, there will also be a discussion of non-IFRS financial measures.

Speaker Change: The difference in our Q2 performance compared to the expectations. We provided on May 16th is primarily due to the fact that our team was able to respond immediately to the changes and recalibrate our portfolio of owned and operated sites faster than had been initially expected to date.

Charles Gillespie: The number of people searching for the high intent keywords in the United States continues to grow, and we continue to capture a greater share of it. Yes, operators have different moods, and one quarter may be slightly more aggressive than other quarters, but by and large, what's dictating the number of the amount of revenue we're able to generate with the clients is the supply of people that we can send to them. It makes sense that their pack is coming down because, from our perspective and consistent with the public comments that they have made, they have turned off a lot of things that we're not working.

Peter McGough: A description of these non-IFRS financial measures is included in the press release issued earlier this morning, and reconciliations of these non-IFRS financial measures to their most directly comparable IFRS measures are included in the appendix to the presentation and the press release.

Speaker Change: The effects of the Google policy shifts have also been less pronounced than originally expected.

Peter McGough: both of which are available in the investors tab of our website.

Peter McGough: I'll now turn the call over to Charles.

Speaker Change: The second bigger picture factors to highlight is the critical value. We continue to create for our B to C online gambling operator clients for nearly 30 years performance marketing has proven to be one of if not the biggest source of new players for growing operators, we estimate that about 40.

Charles: Good morning and thank you for joining us.

Charles: Strong NDC growth led to record Q2 revenue and adjusted EBITDA.

Charles Gillespie: It makes sense that their pack is coming down because from our perspective and consistent with the public comments that they have made, they have turned off a lot of things that we're not working. You know, a lot of the TV radio outdoor stuff that you can't track, no attribution. That's come way down, whereas there's been no meaningful change with the way they deal with the affiliates. They know that works because they can track it.

Charles: Our year-over-year revenue growth of 18% to $30.5 million and adjusted EBITDA growth of 19% to $11.2 million highlight the benefit of our international diversification.

Speaker Change: Percent of the I gaming and 30% of the sports betting customers and operators of databases and established markets were delivered by the performance marketing channel. While these percentages are lower so far in North America, we expect that they will continue to trend towards the established markets.

Charles Gillespie: You know, a lot of the TV, radio, outdoor stuff that you can't track, no attribution. That's come way down, whereas there's been no meaningful change with the way they deal with the affiliates. They know that works because they can track it. They have the attribution. It's black and white, so there's absolutely no reason that they would back off on that. So I think the reason the pack has come down is because they have become more efficient overall. And as they have become more efficient, a greater proportion of their spend has come to companies like us.

Speaker Change: We generated very strong iGaming growth across Europe including the UK and our business in North America was resilient in the face of exceptional performance in the comparable period.

Charles Gillespie: They have the attribution. It's black and white, so there's absolutely no reason that they would back off on that. So I think the reason the pack has come down is because they have become more efficient overall. And as they have become more efficient, a greater proportion of their spend has come to companies like us.

Speaker Change: Stepping back from our phenomenal quarterly results and looking at the bigger picture, our performance in Q2 underscores three key factors that reflect a strong position Gambling.com Group occupies in the online gambling ecosystem, a position we are very confident we will continue to build upon.

Jeffrey Stantial: That's great. Thank you for that, Charles.

Speaker Change: Levels as players continue to mature and certainly as I gaming expansion eventually takes hold.

Speaker Change: Most importantly, as demonstrated by our Q2 results. We believe we are consistently growing our industry share on a global basis, and we are better positioned than ever before with the right assets technology and teams to further this growth.

Speaker Change: First, our team is exceptional at addressing in real time any changes in the operating environment to optimize our performance.

Jeffrey Stantial: That's great. Thank you for that, Charles.

Jeffrey Stantial: And then for my follow-up, you know, turning to the comments made on your media partnerships and the race to four-year cost of sales guidance. And I think, you know, at both, both each other and Ellie has commented on this a bit, but, you know, I'd love to dig in a little bit further. So contribution from media partnerships is surprising a bit to the upside. Do you think this is more of a timing phenomenon just in terms of, you know, taking time for Google to sort of manually push back on some of these media partners' involvement and affiliate offers, or do you think this is kind of more durable with more of these media partners likely to stick around even after these changes roll through?

And the third factor I want to remind everyone of this morning is the relentless digitization of the gambling in advertising world, while uncertain established markets online gambling revenue dwarfs land based gambling revenue many of the world's largest economies are still at the beginning of their relationship with this industry.

Speaker Change: As we discussed in our Q1 call in early May, Google started to deprioritize content from most media partnerships.

Speaker Change: This had an immediate impact on contributions from our media partnerships, which led to the conservative guidance revision we provided on our Q1 call.

Charles Gillespie: Do you think this is more of a timing phenomenon just in terms of, you know, taking time for Google to sort of manually push back on some of these media partners involvement and affiliate offers, or do you think this is kind of more durable with more of these media partners likely to stick around even after these changes roll through? And let me know if that makes up. Thanks. That's a great question, and we've been asking ourselves the same question.

Speaker Change: And digital advertising continues to grow in importance and influence as it offers marketers at the highest level of visibility and certainty for the return on their investments with our portfolio of platinum brands, such as gambling dot com bookings dot com and casinos dot com, we are in the sweet spot of this conversions controlling the <unk>.

Speaker Change: The difference in our Q2 performance compared to the expectations we provided on May 16th

Speaker Change: is primarily due to the fact that our team was able to respond immediately to the changes and recalibrate our portfolio of owned and operated sites faster than had been initially expected.

Speaker Change: <unk> high intent audience determined to be cost to become customers at our clients as websites.

Charles Gillespie: And let me know if that makes up. Thanks. That's a great question, and we've been asking ourselves the same question. I think at this point we have a fair amount of clarity on the situation, although I wouldn't say that it's black and white and we understand exactly where the lines are with Google. When we updated Guidance and May, we took a conservative view, as we had made clear at the time, given the changes were quite fresh and we had limited visibility. And then we have more visibility. The Q2 contribution was higher than our guidance suggested at the time.

Speaker Change: To date, the effects of the Google policy shift have also been less pronounced than originally expected.

Speaker Change: These factors combined with our strong first half performance now give us confidence to raise our revenue and adjusted EBITDA guidance for this year.

Speaker Change: The second bigger picture factor to highlight is the critical value we continue to create for our B2C online gambling operator clients.

Charles Gillespie: I think at this point we have a fair amount of clarity on the situation, although I wouldn't say that it's black and white and we understand exactly where the lines are with Google. When we updated Guidance and May, we took a conservative view as we had made clear at the time, given the changes were quite fresh and we had limited visibility. And then we have more visibility. The Q2 contribution was higher than our guidance suggested at the time.

Speaker Change: The mid points of our new guidance now reflects year over year revenue growth of 15% and adjusted EBITDA growth of 24%.

Speaker Change: For nearly 30 years, performance marketing has proven to be one of, if not the biggest source of new players for growing operators.

Speaker Change: With confidence in the business is the reason we have repurchased over 6% of our outstanding shares today. We also remain as active as ever in evaluating M&A opportunities and we will not hesitate to pursue the right targets, our balance sheet and free cash flow generation enable us to both repurchase shares.

Speaker Change: We estimate that about 40% of the iGaming and 30% of the sports betting customers and operators as databases

Speaker Change: and Established Markets were delivered by the Performance Marketing Channel.

Speaker Change: While these percentages are lower so far in North America, we expect that they will continue to trend toward the established markets as levels as players continue to mature and certainly as iGaming expansion eventually takes hold.

Charles Gillespie: Moving forward, we now expect cost of sales related to media partnerships to be approximately 6.5 million for the H1. We already had 3.7 million in cost of sales. So, from our perspective, there absolutely remains a bright future for these media partnerships. If they're the right partnerships, there's certainly been a, you know, the wheat has been separated from the chaff big time. You know, a lot; we don't do very many of these, but when we do them, we do them with very substantial publishers, and that has absolutely endured to our benefit as these partnerships have evolved.

Charles Gillespie: Moving forward, we now expect cost of sales related to media partnerships to be approximately 6.5 million for the H1 we already had 3.7 million in cost of sales. So from our perspective, there absolutely remains a bright future for these media partnerships. If they're the right partnerships, there's certainly been a, you know, the wheat has been separated from the chaff big time. You know, a lot, we don't do very many of these, but when we do them, we do them with very substantial publishers and that has absolutely endured to our benefit as these partnerships have evolved.

Speaker Change: And fund acquisitions.

And finally, we remain confident we are on a clear path towards generating $100 million and adjusted EBITDA, given our exemplary execution high cash flow generation organic market share gains and disciplined M&A growth focus.

Speaker Change: Most importantly, as demonstrated by our Q2 results, we believe we are consistently growing our industry share on a global basis, and we are better positioned than ever before with the right assets, technology, and teams to further this growth.

Now, let me turn the call over to Elliot for a review of our second quarter financial highlights and details on our revised full year outlook.

Elliot: Thank you Charles.

Speaker Change: And the third factor I want to remind everyone of this morning is the relentless digitization of the gambling and advertising worlds.

Revenue.

Elliot: $8 5 million was a second quarter record as we delivered more than 108000, mdc's to customers up 19% compared to the year ago period.

Speaker Change: While in certain established markets online gambling revenue dwarfs land-based gambling revenue, many of the world's largest economies are still at the beginning of their relationship with this industry.

Speaker Change: The 18% year over year revenue increase primarily reflects strong growth in high gaming revenue across Europe.

Charles Gillespie: But they are going to be less prominent than they have been in the past. We continue to be focused on being great partners to our media partners and are increasingly looking in all the different ways we can leverage our capabilities to help them beyond just organic SEO. There's a lot of different things that we can do for them, and obviously now is the right time to fully take advantage of that. And as you can see from our Q2 results and our raised guidance, our own and operated sites performed strongly during the quarter and were ahead of our expectations.

Charles Gillespie: But they are going to be less prominent than they have been in the past. We continue to be focused on being great partners to our media partners and are increasingly looking in all the different ways we can leverage our capabilities to help them beyond just organic SEO. There's a lot of different things that we can do for them and obviously now is the right time to fully take advantage of that. And as you can see from our Q2 results and our raised guidance, our own and operated sites performed strongly during the quarter and were ahead of our expectations.

<unk> in the UK, and Ireland rose, 18% year over year out of Europe was up 111% and rest of the world revenue grew 70% following strong performance by gambling Dot com and our entre owned and operated assets.

Speaker Change: and digital advertising continues to grow in importance and influence as it offers marketers the highest level of visibility and certainty for the return on their investments.

Speaker Change: With our portfolio of platinum brands such as Gambling.com, Bookies.com, and Casinos.com, we are in the sweet spot of this convergence, controlling the valuable, high-intent audience determined to become customers at our clients' websites.

Speaker Change: The initial contributions from the acquired freedom at Telecom and related assets.

Speaker Change: Revenue in North America was stable year on year, when factoring out the a typically strong OSB performance. We saw in Q2 last year, which we discussed at the time in.

Speaker Change: These factors, combined with our strong first-half performance, now give us confidence to raise our revenue and adjusted EBITDA guidance for this year.

Speaker Change: Inclusive all stock performance North America revenue was down 8% year over year.

Charles Gillespie: The diminished visibility of media partnerships and search engines directly translates to improved visibility of our own and operated sites where our margins are substantially better. That's great. Thanks for that color, Charles, and to grab those strong core.

Speaker Change: The midpoints of our new guidance now reflect year-over-year revenue growth of 15% and adjusted EBITDA growth of 24%.

Speaker Change: Gross profit increased 16% or $4 million year over year to $29 1 million cost of sales grew 60% year over year to $1 4 million was down 36% from the first quarter.

Speaker Change: This confidence in the business is the reason we have repurchased over 6% of our outstanding shares to date. We also remain as active as ever in evaluating M&A opportunities and will not hesitate to pursue the right targets.

Speaker Change: Our cost of sales, which are directly related to our media partnership revenues were higher in the second quarter than we anticipated at the time of our Q1 call at the higher level of this business will sustain through the quarter unexpected at the time.

Operator: Thank you.

Barry Jonas: The next question is from Valley Jonas with Truist Securities. Please go ahead. Hey guys, good morning. You know, as we think about newer US states versus more mature, is there a sizable difference in NBC growth? I mean, I guess we hear concerns around slower state legalizations. I just want to better understand that. Thanks.

Speaker Change: Our balance sheet and free cash flow generation enable us to both repurchase shares and fund acquisitions.

Speaker Change: Gross margins increased to 95% from 92% in the first quarter.

Speaker Change: And finally, we remain confident we are on a clear path towards generating $100 million in adjusted EBITDA, given our exemplary execution, high cash flow generation, organic market share gains, and disciplined M&A growth focus.

Speaker Change: Total operating expenses declined 15% to $20 8 million, reflecting the elimination of fair value movement in contingent consideration and a modest decrease in G&A, partially offset by increases in sales and marketing and technology expenses.

Charles Gillespie: Yeah, I think one point that we've been really keen to make to everybody that'll listen is that there's a very long, healthy growth opportunity after these new states finish launching. In the first three months, you get a lot of interest; a lot of demand comes to market. There's a lot of activity, and then it kind of bottoms out. But after three months, it just keeps growing every year indefinitely. And you know, that's where we're seeing growth in North America. You know, we it gives us a lot of confidence to expect growth in certain parts of our portfolio this year, and growth overall in North America next year, but I think it's underappreciated how much some of these kind of early cohort-regulated states are continuing to grow.

Charles Gillespie: Yeah, I think one point that we've been really keen to make to everybody that'll listen is that there's a very long healthy growth opportunity after these new states finish launching. In the first three months, you get a lot of interest, a lot of demand comes to market. There's a lot of activity and then it kind of bottoms out. But after three months, it just keeps growing every year, indefinitely. And you know, that's where we're seeing growth in North America.

Speaker Change: Now, let me turn the call over to Elias for a review of the second quarter financial highlights and details on our revised full year outlook.

Speaker Change: Adjusted EBITDA increased 19% year over year to a second quarter record $11 2 million compared to $9 4 million in the year ago quarter.

Elias: Thank you, Charles.

Elias: Revenue of 30.5 million was a second-quarter record as we delivered more than 108,000 MDCs to customers, up 19% compared to the year-ago period.

Speaker Change: Q2, adjusted EBITDA margin of 37% was up from 36% into year ago quarter.

Okay.

Speaker Change: Adjusted net income for the second quarter of 2024 rose, 13% to $7 4 million from $6 5 million in the year ago period, while adjusted diluted net income per share of <unk> 20.

Elias: The 18% year-over-year revenue increase primarily reflects strong growth in iGaming revenue across Europe.

Charles Gillespie: You know, we It gives us a lot of confidence to expect growth in certain parts of our portfolio this year, and growth overall in North America next year, but I think it's underappreciated how much some of these kind of early cohort-regulated states are continuing to grow. You look at New Jersey, New Jersey is still growing. There's a lot of growth outside of these new state launches. So, of course, we're really looking forward to the next new state launch, but even in the absence of one of them, we fully expect the business to be growing over the medium and long-term.

Elias: Revenue in the UK and Ireland rose 18% year-over-year.

Speaker Change: Increased 18% from 17 per share in the second quarter of 2023.

Speaker Change: Other Europe was up 111% and rest of the world revenue grew 70% following strong performance by Gambling.com and our other owned and operated assets and the initial contributions from the acquired FreeBets.com and related assets.

Speaker Change: Operating cash flow of <unk> 2 million includes $7 2 million of the final bonus find it a comp payments. Excluding this payment operating cash flow would have been seven 4 million.

Speaker Change: Revenue in North America was stable year-on-year when factoring out the atypically strong OSB performance we saw in Q2 last year, which we discussed at the time. Inclusive of such performance, North American revenue was down 8% year-on-year.

Charles Gillespie: You look at New Jersey; New Jersey is still growing. There's a lot of growth outside of these new state launches.

Barry Jonas: That's great.

Speaker Change: Free cash flow was $6 million in the second quarter compared to $8 7 million into year ago quarter, reflecting working capital movements and increased capital expenditure related to our new offices in the U S.

Barry Jonas: So, of course, we're really looking forward to the next new state launch, but even in the absence of one of them, we fully expect the business to be growing over the medium and long term. That's great.

Speaker Change: During the second quarter, we repurchased approximately 834.

Speaker Change: Gross profit increased 16% or 4 million euro year to 29.1 million. Cost of sales grew 60% year-over-year to 1.4 million but was down 36% from the first quarter.

Speaker Change: 834000 shares.

Speaker Change: At an average price of $8 17 per share to date, we have repurchased approximately two 3 million shares at an average price of eight.

Charles Gillespie: Thank you for addressing that, and just as a follow-up, you know, curious if you could talk a little bit more about the M&A pipeline, any noticeable changes since Q1 earnings, and any areas you may be a little more focused on today than others. Yeah, we continue to have a lot of great conversations, but we remain as famously picky as we've ever been. We look forward to announcing something when the time is right, but we, you know, with our great organic growth, we don't feel like we're under any pressure to do something. We've already done a fantastic deal this year with the freebeth.com acquisition, which is trending ahead of expectations.

Charles Gillespie: Thank you for addressing that, and just as a follow-up, you know, curious if you could talk a little bit more about the M&A pipeline, any noticeable changes since Q1 earnings and any areas you may be a little more focused on today than others. Yeah, we continue to have a lot of great conversations, but we remain as famously picky as we've ever been. We look forward to announcing something when the time is right, but we, you know, with our great organic growth, we don't feel like we're under any pressure to do something.

Speaker Change: Our cost of sales, which are directly related to our media partnership revenues, were higher in the second quarter than we anticipated at the time of our Q1 call, as a higher level of this business was sustained through the quarter than expected at the time.

Speaker Change: 76, representing more than 6% of the total outstanding shares.

Speaker Change: Earlier this week, we completed repurchases for the entirety of the previous $20 million share buyback authorization.

Speaker Change: Gross margins increased to 95% from 92% in the first quarter.

Speaker Change: Yesterday, the board approved an additional $10 million authorization to continue shopping with us.

Speaker Change: Total operating expenses declined 15% to $20.8 million, reflecting the elimination of fair value movement in contingent consideration and a modest decrease in G&A, partially offset by increases in sales and marketing and technology expenses.

Speaker Change: At June 30, we had total cash of $7 5 million, a $17 8 million quarter on quarter decrease reflecting cash utilized for share repurchases. The final cash payment of $13 6 million for bonus find the dot com and the initial $20 million cash consideration paid for the.

Charles Gillespie: We've already done a fantastic deal this year with the freebeth.com acquisition, which is trending ahead of expectations. As we've already mentioned, we're spending a lot of time evaluating opportunities which are tangential or adjacent to the real money online gambling affiliate business that we know and love. There's a broad universe of opportunities for us to sell more things to our existing clients or leverage our existing skills and complimentary businesses with similar margins and cash flow characteristics in the gaming space. So we'll be delighted when we announce something, but I can't say any more than that at the moment.

Charles Gillespie: As we've already mentioned, we're spending a lot of time evaluating opportunities which are tangential or adjacent to the real money online gambling affiliate business that we know and love. There's a broad universe of opportunities for us to sell more things to our existing clients or leverage our existing skills and complimentary businesses with similar margins and cash flow characteristics in the gaming space.

Speaker Change: Adjusted EBITDA increased 19% year-over-year to a second quarter record $11.2 million compared to $9.4 million in the year-ago quarter.

Speaker Change: Acquisition of <unk> com and related assets.

Speaker Change: The Q2 adjusted EBITDA margin of 37% was up from 36% in the year ago quarter.

Speaker Change: As of June 30th we had drawn a total of $18 million on our $50 million credit facility.

Speaker Change: This morning, we raised our guidance for 2020 for revenue to now be.

Speaker Change: Adjusted net income for the second quarter of 2024 rose 13% to $7.4 million from $6.5 million in the year-ago period, while adjusted diluted net income per share of $0.20 increased 18% from $0.17 per share in the second quarter of 2023.

Speaker Change: Between 123 million.

Charles Gillespie: So we'll be delighted when we announce something, but I can't say any more than that at the moment.

Speaker Change: Two $127 million with the midpoint, representing 15% year over year growth.

Speaker Change: The midpoint of our new higher adjusted EBITDA range of 44 million to $47 million represents 24% year over year growth.

Speaker Change: Operating cash flow of 0.2 million includes 7.2 million of the final BonusFinder.com payment. Excluding this payment, operating cash flow would have been 7.4 million.

Operator: All right, Farah and I have to congrats on a great quarter. Thanks. Thanks, Farah.

Charles Gillespie: All right, Farah and I have to congrats on a great quarter. Thanks. Thanks, Farah. Thank you.

Speaker Change: Looking at some of the factors that comprised our outlook for the year, we continue to see strong demand for consumer sign ups for new player accounts.

Chad Beynon: Thank you. The next question is from Chad Beenan with McQuetti Asset Management. Please go ahead. Hey, good morning.

Aaron Lee: The next question is from Chad Beenan with McQuetti Asset Management. Please go ahead. Hey, good morning. This is Aaron on for Chad. Thanks for taking our question. Just kind of going back to Google for a second. There was a recent court ruling that Google has been running an illegal monopoly on search. Can you just share any thoughts on how that might impact your business? Hey, Aaron. Yeah. Good question. If you go back to the Microsoft antitrust case, you know, it took a better part of decades before they made any real headway and enforcing the antitrust desires of the government.

Speaker Change: Free cash flow was $6 million in the second quarter compared to $8.7 million in the year-ago quarter, reflecting working capital movements and increased capital expenditure related to our new offices in the U.S.

Speaker Change: Operator demand for performance marketing services.

Aaron Lee: This is Aaron on for Chad. Thanks for taking our question. Just kind of going back to Google for a second. There was a recent court ruling that Google has been running an illegal monopoly on search. Can you just share any thoughts on how that might impact your business? Hey, Aaron. Yeah. Good question. If you go back to the Microsoft antitrust case, you know, it took a better part of decades before they made any real headway in enforcing the antitrust desires of the government. So I don't think we, you know, absolutely nothing is going to happen.

Speaker Change: As Charles highlighted we expect to manage our portfolio of websites to grow revenues in 2024, despite the impact of the Google policy change on our media partnerships.

Speaker Change: During the second quarter, we repurchased approximately 834,000 shares at an average price of $8.17 per share. To date, we have repurchased approximately 2.3 million shares at an average price of $8.17 per share.

Charles: For the full year 2024 period, our guidance does not include contributions from any new acquisitions.

Aaron Lee: So I don't think we, you know, absolutely nothing is going to happen. Imminently, it might be five years, it might be 10 years before anything happens. And as in what it does happen, then sure, you can speculate about what the changes will actually mean. But, you know, five and 10 years of long time in technology, I think, you know, by the time they got to the end of the road with Microsoft, the browser was less important than it was at the beginning of the process and the whole exercise seemed like a waste of time.

Speaker Change: <unk> also assumes no additional U S state launches beyond the recent launch in North Carolina.

Speaker Change: dollars 76 cents, representing more than 6% of the total outstanding shares.

Speaker Change: We now expect full year cost of sales of $6 5 million of which $3 7 million was incurred in the first half multiyear.

Speaker Change: Earlier this week, we completed repurchases for the entirety of the previous $20 million share buyback authorization.

Speaker Change: Finally, our guidance assumes an average euro to USD exchange rate of 1009 throughout 2024.

Charles Gillespie: Imminently, it might be five years; it might be 10 years before anything happens. And as in what it does happen, then sure, you can speculate about what the changes will actually mean.

Speaker Change: Yesterday the board approved an additional 10 million authorization to continue shareware purchases.

Charles Gillespie: But, you know, five and 10 years is a long time in technology. I think, you know, by the time they got to the end of the road with Microsoft, the browser was less important than it was at the beginning of the process, and the whole exercise seemed like a waste of time. So, you know, I think what would be more relevant to us would be the pace at which consumer search patterns are changing, and frankly, to date, we haven't seen any change as a result of, you know, gender to AI and, you know, various kind of AI-enabled search engines.

Speaker Change: Operator, we are now happy to open up the line for questions.

Speaker Change: After June 30th, we had total cash of $7.5 million, a $17.8 million quarter-on-quarter decrease.

Thank you.

Speaker Change: Ladies and gentlemen, we will now be conducting a question and answer session.

Speaker Change: reflecting cash utilized for share repurchases, the final cash payment of $13.6 million for BonusFinder.com and the initial $20 million cash consideration paid for the acquisition of FreeBets.com and related assets.

Speaker Change: If you would like to ask a question. Please press star and one on the telephone keypad.

Aaron Lee: So, you know, I think what would be more relevant to us would be the pace at which consumer search patterns are changing and frankly to date, we haven't seen any change as a result of, you know, gender to AI and, you know, various kind of AI-enabled search engines. The volume of search that still comes off of Google is, I mean, it tires and ever and the traffic's still there, nothing's changed. You know, that's obviously gives a lot of confidence, you know, more than a year into the new kind of era of generative AI that traditional search is simply, it's just two different products, two different things, two different use cases, and people are clearly continuing to use Google in the way they have for a long time.

Speaker Change: A confirmation tone will indicate your line is in the question queue.

Speaker Change: As of June 30th, we had drawn a total of $18 million on our $50 million credit facility.

Speaker Change: You May press star two if you'd like to remove your question from the queue.

For participants using speaker equipment, it may be necessary to pick up your handset before pressing the strategies.

Speaker Change: This morning, we raised our guidance for 2024 revenue to now be between $123 million

Speaker Change: Ladies and gentlemen, we will wait for a moment while reported for questions.

Charles Gillespie: The volume of search that still comes off of Google is, I mean, it tires and ever, and the traffic's still there; nothing's changed. You know, that's obviously gives a lot of confidence, you know, more than a year into the new kind of era of generative AI that traditional search is simply, it's just two different products, two different things, two different use cases, and people are clearly continuing to use Google in the way they have for a long time.

Speaker Change: to 127 million with a midpoint representing 15% year-over-year growth.

Speaker Change: The first question comes from Jeff Satchel with Stifel. Please go ahead.

Speaker Change: The midpoint of our new higher adjusted EBITDA range of $44 million to $47 million represents 24% year-over-year growth.

Jeff Satchel: Great. Thanks, Good morning, Charles Thanks for taking our question.

Speaker Change: Maybe.

Speaker Change: Looking at some of the factors that comprise our outlook for the year, we continue to see strong demand for consumer sign-ups for new player accounts and operator demand for performance marketing services.

Speaker Change: Yes.

Current customer acquisition environment that Youre that youre seeing in North America more specifically.

Speaker Change: Several operators this.

Speaker Change: This earnings season that the volume of users being acquired is surprising them to the upside while cost per user acquired.

Speaker Change: As Charles highlighted, we expect to manage our portfolio websites to grow revenues in 2024 despite the impact of the Google policy change on our media partnerships.

Aaron Lee: So, you know, if they actually spun off your Android or actually managed to break it up, I think it'd be a long time from now, and I don't frankly see this search business being terribly impacted. But ask me again in five years. Got it, appreciate that.

Aaron Lee: So, you know, if they actually spun off your Android or actually managed to break it up, I think it'd be a long time from now and I don't frankly see this search business being terribly impacted, but ask me again in five years. Got it, appreciate that.

Speaker Change: More specifically for the scale players I guess on that first dynamic are you also seeing an uptick in organic searches on your site.

Charles: For the full year 2024 period, our guidance does not include contributions from any new acquisitions.

Speaker Change: Well changes.

Speaker Change: In a fragmented.

Charles: The guidance also assumes no additional U.S. state launches beyond the recent launch in North Carolina.

Speaker Change: Just curious if youre able to discern.

Charles Gillespie: And then, with regard to free bets, I believe we're still in the integration window you talked about last quarter, but can you update us on how the integration is going and whether your expectations for its contribution in 2024 have changed at all? Thank you. Sure. We are a few months in at this point, and we have been consistently trending ahead of expectations in terms of revenue produced by the acquired assets. The acquisition included a substantial base of NDCs previously referred on a revenue share basis, and this is where we have seen actual exceed our expectations.

Speaker Change: Incremental user cohort as well and then on the second.

Charles Gillespie: And then with regard to free bets, I believe we're still in the integration window you talked about last quarter, but can you update us on how the integration is going and whether your expectations for its contribution in 2024 has changed at all? Thank you. Sure. We are a few months in at this point, and we have been consistently trending ahead of expectations in terms of revenue produced by the acquired assets. The acquisition included a substantial base of NDCs previously referred on a revenue share basis, and this is where we have seen actual exceed our expectations.

Speaker Change: We now expect full year cost of sales of $6.5 million, of which $3.7 million was incurred in the first half of the year.

Speaker Change: The declining cash or are you seeing any mix shift away from affiliate channel pricing pressure or is it reasonable to conclude that this comment really more of a first economies of scale on the brand awareness side of operator marketing budgets.

Speaker Change: Finally, our guidance assumes an average euro to USD exchange rate of 1.09 throughout 2024.

Charles Gillespie: We've already successfully migrated certain aspects of the acquired portfolio to our technology stack, including our ad tech, and we will continue our integration work across the entirety of the portfolio for another few quarters, but we expect to see benefits from this in Q4 as we drive increases in the number of NDCs produced by these assets, and we now expect that the assets will exit 2024 on a materially higher run rate than what was implied by our initial guidance when we announced the acquisition. Understood that all sounds great. Appreciate all the color. Thanks, guys. Thank you. Before we take the next question, a reminder to all participants that you may press star and want to ask a question.

Speaker Change: Operator, we are now happy to open up the line for questions.

Speaker Change: Okay.

Speaker Change: But from our perspective the.

Speaker Change: The operators don't.

Speaker Change: Thank you.

Speaker Change: They don't meaningfully change their approach to affiliates quarter to quarter or year to year.

Speaker Change: Ladies and gentlemen, we will now be conducting a question-and-answer session. If you would like to ask a question, please press star and 1 on a telephone keypad.

Speaker Change: The thing that really drives our business is really supply.

Speaker Change: Many people are searching for what we're offering and those trends are.

Speaker Change: A confirmation tone will indicate your line is in the question queue.

Charles Gillespie: We've already successfully migrated certain aspects of the acquired portfolio to our technology stack, including our ad tech, and we will continue our integration work across the entirety of the portfolio for another few quarters, but we expect to see benefits from this in Q4 as we drive increases in the number of NDCs produced by these assets. We now expect that the assets will exit 2024 on a materially higher run rate than what was implied by our initial guidance when we announced the acquisition. Understood that all sounds great. Appreciate all the color. Thanks, guys. Thank you.

Speaker Change: You may press star and 2 if you would like to remove your question from the queue.

Speaker Change: Always up into the right and the number of people searching for the high intent keywords in the United States continues to grow and we continue to capture a greater share of it.

Speaker Change: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.

Speaker Change: Yes operators.

Speaker Change: Ladies and gentlemen, we will wait for a moment while we poll for questions.

Speaker Change: Have different moods in one quarter may be slightly more aggressive than other quarters, but by and large what's dictating.

Speaker Change: [inaudible]

Stephen: The first question comes from Jeff Stantial with Stifel. Please go ahead.

Speaker Change: The number of.

Yes.

Speaker Change: The the amount of revenue, we were able to generate with declines as the supply of people that we can send to them.

Jeff Stanchil: Great. Thanks, Marty, Charles, Elias. Thanks for taking our questions.

Jeff Stanchil: Maybe

Speaker Change: Sorry about that. Great job.

Speaker Change: On the current customer acquisition environment that you're seeing in North America, more specifically, we've heard from several operators.

Speaker Change: It makes sense that their taxes coming down because from our perspective and consistent with the public comments that they have made they have turned off a lot of things that were not working.

William Lampen: Before we take the next question, a reminder to all participants that you may press star and want to ask a question. The next question is from Clark Lampen with BTIG. Please go ahead. Morning, everybody. Thanks for taking the questions.

Speaker Change: This earnings season that the volume of users being acquired is surprising them to the upside, while cost per user acquired continues to rise.

Speaker Change: A lot of the TV radio outdoor stuff that you can't track no attribution, that's come way down, whereas theres been no meaningful change with the way they deal with affiliates that they know that works because they can track it they have the attribution, it's black and white. So there's absolutely no reason that they would back off on that.

Clark Lampen: The next question is from Clark Lampen with BTIG. Please go ahead. Morning, everybody. Thanks for taking the questions. Charles, I wanted to see if maybe we could just drill down a little bit more on expectations of the balance of the year for growth. I guess, you know, two ways. I guess one sports betting versus eye gaming, but then North America versus Europe should we expect, I guess, most of what we've seen in QQ and the first half of the year to sort of continue over the balance, and I wanted to, I guess, kind of also follow up on your point around exit rates of growth for the year.

Speaker Change: I guess I'm at first dynamic, are you also seeing inauthentic and inorganic searches on your site, you know, recognizing that we see physical changes and then a fragmented?

Clark Lampen: Charles, I wanted to see if maybe we could just drill down a little bit more on expectations of the balance of the year for growth. I guess, you know, two ways. I guess one sports betting versus eye gaming, but then North America versus Europe should we expect, I guess, most of what we've seen in QQ and the first half of the year to sort of continue over the balance, and I wanted to, I guess, kind of also follow up on your point around exit rates of growth for the year. If we're thinking about the performance business in general sort of being back on track right now, free bets, you know, I guess really hitting its stride, I guess, towards the end of the year.

Speaker Change: I'm just curious if you're able to discern the quality of the incremental user code.

Speaker Change: So I think the reason the CAC has come down is because they have become more efficient overall and and as they have become more efficient and a greater proportion of their spend.

Speaker Change: Or, that's well. I'm in that on the second- [inaudible]

Speaker Change: on the declining cap. Are you seeing any big shifts away from affiliate channels or pricing pressure, or is it reasonable to conclude that this comment really more refers to economies of scale on the brand awareness side of operator marketing budgets? Thanks.

Speaker Change: Has come to companies like us.

Speaker Change: That's great. Thank you for that Charles and then for Mike.

Clark Lampen: If we're thinking about the performance business in general sort of being back on track right now, free bets, you know, I guess really hitting its stride, I guess, towards the end of the year. What is this, I guess, kind of suggests right now about the medium term organic growth profile of this business overall, and then maybe for Elias, I guess, as part of that, what is, I guess, that medium term growth rate translate to now from a cash flow standpoint.

Speaker Change: Follow up turning to the comments made on on your media partnerships.

Our raised full year cost of sales guidance I think both both Charles and <unk> commented on this a bit but I'd love to dig in a little bit further so contribution from media partnerships is it surprising a bit to the upside do you think this is more of a timing phenomenon just in terms of.

Speaker Change: From our perspective, the...

Speaker Change: You know the operators don't

Clark Lampen: What is this, I guess, kind of suggests right now about the medium term organic growth profile of this business overall, and then maybe for Elias, I guess, as part of that, what is, I guess, that medium term growth rate translate to now from a cash flow standpoint. We have a pretty good sense of the outflows that are ahead. If we're thinking about inflows and I guess cash flow conversion off of this business, maybe give us a sense of, in addition to the top line outlook, what it translates to to the bottom line. Thank you.

Radig: Radig, they don't meaningfully change their approach to affiliates.

Speaker Change: The thing that really drives our business is really supply, how many people are searching for what we're offering. And those trends are all over the place.

Speaker Change: Taking time for for Google to sort of manually.

Clark Lampen: We have a pretty good sense of the outflows that are ahead. If we're thinking about inflows and I guess cash flow conversion off of this business, maybe give us a sense of of, in addition to the top line outlook, what it translates to to the bottom line. Thank you.

Speaker Change: Always up and to the right. The number of people searching for the high intent keywords in the United States continues to grow and we continue to capture a greater share of it.

Speaker Change: Pushed back on.

Speaker Change: On Sunday News media partners involvement in affiliate offers or do you think this is kind of more durable with with more of these.

Speaker Change: Yes, operators, you know, have different moods and, you know, one quarter may be slightly more aggressive than other quarters, but by and large, what's dictating the number of, you know, the...

Speaker Change: More of these media partners likely to stick around even after these changes roll through and let me know if that makes sense. Thanks.

Elias Mark: Hey Clark. In terms of North American growth, to be clear, there's parts of our North American portfolio which have grown year on year in 2024 and will continue to grow in the second half of the year. That set our media partnership business was a substantial proportion of our H2 2023 revenue in North America and that will be substantially smaller this year. So, on balance, we do not expect to grow overall in 2024 in North America. However, we are confident that we will continue to take meaningful market share in North America. Looking forward, we expect North America to grow modestly in 2025 from same state sales alone, and when we get expanded regulation, of course, especially in eye-gaming, growth will really accelerate, and with more new state launches and or away the new operators entering the market.

Charles Gillespie: Hey Clark. In terms of North American growth, to be clear, there's parts of our North American portfolio which have grown year on year in 2024 and will continue to grow in the second half of the year. That set our media partnership business was a substantial proportion of our H2 2023 revenue in North America and that will be substantially smaller this year. So on balance, we do not expect to grow overall in 2024 in North America.

Speaker Change: That's a great question and we've been asking ourselves. The same question I think at this point, we have a fair amount of clarity on the situation, although I wouldn't say that it's it's.

Speaker Change: The amount of revenue we're able to generate with the clients is the supply of people that we can send to them.

Speaker Change: It makes sense that their CAC is coming down, because from our perspective and consistent with the public comments that they have made, they have turned off a lot of things that were not working.

Speaker Change: Black and white, and we understand exactly where the lines are with Google.

Speaker Change: When we updated guidance in May we took a conservative view.

Speaker Change: As we had made clear at the time given the changes were quite fresh and we had limited visibility.

Speaker Change: you know, a lot of the

Charles Gillespie: However, we are confident that we will continue to take meaningful market share in North America. Looking forward, we expect North America to grow modestly in 2025 from same state sales alone and when we get expanded regulation, of course, especially in eye-gaming growth will really accelerate and with more new state launches and or away the new operators entering the market. But never forget that this is a global business and we have 18 years of history operating outside of North America and we grew the UK in Ireland by 11.5% and other Europe by 75% in the first half of the year.

Speaker Change: TV, radio, outdoor, stuff that you can't track, no attribution, that's come way down.

Speaker Change: And now that we have more more visibility.

Speaker Change: <unk>.

Speaker Change: The Q2 contribution was was higher than our our guidance suggested at the time.

Speaker Change: Whereas there's been no meaningful change with the way they deal with affiliates That's they know that works because they can track it. They have the attribution. It's black and white So there's absolutely no reason that they would back off on that. So I think the reason the cactus come down

Speaker Change: Moving forward, we now expect cost of sales related to media partnerships to be approximately $6 5 million for the full year 2024 versus the previous guidance of $4 7 million.

Speaker Change: is because they have become more efficient overall. And as they have become more efficient, a greater proportion of their spend has come to companies like us.

Speaker Change: And in each one we already had $3 7 million and cost of sales. So from our perspective. They are absolutely remains a bright future for these media partnerships. If they are the right partnerships Theres certainly been a you know the.

Elias Mark: But never forget that this is a global business and we have 18 years of history operating outside of North America, and we grew the UK in Ireland by 11.5% and other Europe by 75% in the first half of the year. On exit rates, we haven't provided any specific guidance for 2025 yet, of course, but we do think it will be low double digits organic growth in North America even without any new state openings and specifically in the context of the Freebats acquisition. When we tabled our initial guidance for that acquisition, we said 10 million in revenue and 5 million in adjusted EBIT off for the last three quarters of 2024.

Speaker Change: That's great. Thank you for that, Charles. And then for my follow-up, you know, turning to the comments made on your media partnerships and the raise to four-year cost-of-sales guidance.

Speaker Change: <unk> has been separated from the chaff big time.

Speaker Change:

Speaker Change: We don't do very many of these but when we do them. We do them was very substantial publishers and that.

Charles Gillespie: On exit rates, we haven't provided any specific guidance for 2025 yet, of course, but we do think it will be low double digits organic growth in North America even without any new state openings and specifically in the context of the freebats acquisition. When we tabled our initial guidance for that acquisition, we said 10 million in revenue and 5 million in adjusted ebit's off for the last three quarters of 2024. Of course, the first quarter of the year tends to be one of the best quarters of the year.

Speaker Change: I think, you know, both you Charles and Ellie has commented on this a bit, but, you know, I'd love to dig in a little bit further. So, contribution from media partnerships.

Speaker Change: Has absolutely.

Speaker Change: In order to our benefit as these partnerships that it's evolved.

Speaker Change: is surprising a bit to the upside. Do you think this is...

Speaker Change: But they are going to be less prominent than they had been in the past.

Speaker Change: more of a timing phenomenon just in terms of

Speaker Change: You know, taking time for Google to sort of manually push back on some of these media partners' involvement and affiliate offers, or do you think this is...

Speaker Change: We continue to be focused on being great partners to our media partners and are increasingly looking at all the different ways, we can leverage our capabilities to help them beyond just organic SCO you know theres a lot of different things that we can we can do for them and obviously now is the right time to fully take advantage of that.

Speaker Change: kind of more durable with, you know, with more of these, you know, more of these media partners likely to stick around even after these changes roll through. And let me know if that makes sense.

Speaker Change: And as you can see from our Q2 results and our raised guidance are owned and operated sites performed strongly during the quarter and were ahead of our expectations. The diminished visibility of media partnerships and search engines directly translates to improved visibility of our owned and operated sites where our margins are.

Elias Mark: Of course, the first quarter of the year tends to be one of the best quarters of the year. So if you're looking at that on an annualized rate, you have to put a little extra weight on the Q1, and now we're saying for 2025, we will exit 2024 with those assets on a substantially higher run rate. So that will set us up for growth both predominantly in other Europe and the UK in Ireland next year.

Speaker Change: That's a great question and you know we've been asking ourselves the same question. I think at this point we have a fair amount of clarity on on the situation although I wouldn't say that it's it's

Charles Gillespie: So if you're looking at that on an annualized rate, you have to put a little extra weight on the Q1 and now we're saying for 2025, we will exit 2024 with those assets on a substantially higher run rate. So that will set us up for growth both predominantly in other Europe and the UK in Ireland next year. I could just add to the second part of your question on our expectations for the second half of the year.

Speaker Change: black and white and we understand exactly where the lines are with Google.

Speaker Change: Substantially better.

Speaker Change: When we updated guidance in May, we took a conservative view.

Speaker Change: That's great. Thanks for that color, Charles and congrats on a strong quarter.

Speaker Change: as we had made clear at the time, given the changes were quite fresh and we had limited visibility.

Speaker Change: Thank you.

Speaker Change: The next question is from Barry Jonas with tourists Securities. Please go ahead.

Speaker Change: And now that we have more visibility, the Q2 contribution was higher than our guidance suggested at the time.

Barry Jonas: Hey, guys good morning.

Elias Mark: I could just add to the second part of your question on our expectations for the second half of the year. As you said, the expectation is that the UK and Ireland, out of Europe and the rest of the world, will continue to be the growth drivers in the second half, as we've seen in the first half of 2024. If you look at margins with the current proportion of our media partnership revenue. Our H1 margins are indicative of run rate and correlates with the midpoint of our full-year guidance. So, our guidance, including 6.5 million in cost of sales for 2024, is expected to produce growth margins in the mid-90s, and the midpoint of our adjusted EBITDA margin for the full-year is 36 percent, which is consistent with the first half of all of the year.

Barry Jonas: As we think about newer U S states versus more mature or is there a sizable difference in MDC growth I mean, I guess, we hear concerns around slower state legalization and I just want to better understand that thanks.

Speaker Change: Moving forward, we now expect cost of sales related to media partnerships to be approximately $6.5 million for the full year, 2024, versus the previous guidance of $4.7 million.

Charles Gillespie: As you said, the expectation is that the UK and Ireland out of Europe and rest of the world will continue to be the growth drivers in the second half as we've seen in the first half of 2024. If you look at margins with the current proportion of our media partnership revenue. Our H1 margins are indicative of run rate and correlates with the midpoint of our full-year guidance. So, our guidance, including 6.5 million in cost of sales for 2024, is expected to produce growth margins in the mid-90s, and the midpoint of our adjusted EBITDA margin for the full-year is 36 percent, which is consistent with the first half of all of the year.

Yes, I think one point that we've been really came to make to everybody that will listen is that.

Speaker Change: and in H1, we already had $3.7 million in cost of sales. So, from our perspective, there absolutely remains a bright future for these media partnerships if they're the right partnerships. You know, there's certainly been a, you know, the wheat has been separated from the chaff big time.

Speaker Change: There's a very long haul.

Speaker Change: The growth opportunity after these new states fin.

Speaker Change: Finished launching in the first three months you get a lot of interest a lot of demand comes to market. There's a lot of activity and then it kind of bottoms out but after three months it just keeps growing.

Speaker Change: We don't do very many of these, but when we do them, we do them with very substantial publishers.

Speaker Change: Every year indefinitely, and that's where we're we're seeing growth in North America.

Speaker Change: has absolutely inured to our benefit as these partnerships have evolved.

Speaker Change: but they are going to be less prominent than they have been in the past.

Speaker Change: We.

Speaker Change: It gives us a lot of confidence to.

Speaker Change: We continue to be focused on being great partners to our media partners and are increasingly looking at all the different ways we can leverage our capabilities to help them.

Speaker Change: <unk> growth in certain parts of our portfolio this year and growth overall in North America next year, but.

Speaker Change: Beyond just organic SEO, you know, there's a lot of different things that we can we can do for them And and and obviously now is the right time to fully take advantage of that

Clark Lampen: Thanks very much. Thank you.

Elias Mark: Thanks very much.

Speaker Change: Yes, I think it's underappreciated how much some of these kind of the early cohort of regulated states are continuing to grow you know you look at New Jersey, New Jersey is still growing I mean, it's it's it's there's a lot of growth outside of these new state launches. So of course, we are.

Ryan Sigdahl: Thank you. The next question is from Ryan Sigdahl with Craig Hallam, Capital Group. Please go ahead. Hey, Charles, Elias. Good day, guys.

Ryan Sigdahl: The next question is from Ryan Sigdahl with Craig Hallam, Capital Group. Please go ahead. Hey, Charles, Elias. Good day, guys.

Speaker Change: And, you know, as you can see from our Q2 results and our raised guidance, our owned and operated sites performed strongly during the quarter and were ahead of our expectations.

Ryan Sigdahl: I want to start with Other Europe. Really nice strength and acceleration there. I guess anything to call it specifically, and then maybe more broadly speaking, the benefit you guys saw from the Euros 2024? Just to start with Euros 2024, it's definitely the one, you know, our sports betting business is predominantly in the U.S. You know, we have a eye-gaming first strategy around the world. We try not to; we don't go into markets which don't have eye-gaming. And the only real exception to that is the U.S. because of the huge long-term eye-gaming opportunity and entering now with sports betting is the obvious way to pre-position for that bright future.

Charles Gillespie: I want to start with other Europe. Really nice strength and acceleration there. I guess anything to call it specifically, and then maybe more broadly speaking, the benefit you guys saw from the Euros 2024? Just to start with Euros 2024, it's definitely the one, you know, our sports betting business is predominantly in the U.S. You know, we have a eye-gaming first strategy around the world. We try not to, we don't go into markets which don't have eye-gaming.

Speaker Change: Really looking forward to the next when we say launch, but even in the absence of one of them.

Speaker Change: The diminished visibility of media partnerships and search engines directly translates to improved visibility of our owned and operated sites where our margins are substantially better.

We fully expect the business to be.

Speaker Change: Growing over the medium and long term.

Speaker Change: That's great. Thank you for addressing that and then just as a follow up curious if you could talk a little bit more about the M&A pipeline any noticeable changes.

Speaker Change: That's great. Thanks for that color, Charles, and congrats on the Strong Corp.

Speaker Change: Thank you.

Speaker Change: Since Q1 earnings and any areas you may be a little more focused on today than others.

Speaker Change: The next question is from Barry Jonas with Truist Securities, please go ahead.

Barry Jonas: Hey, guys, good morning. You know, as we think about newer U.S. states versus more mature, is there a sizable difference in NBC growth? I mean, I guess we hear concerns around slower state legalization, and I just want to better understand that. Thanks.

Yes.

Speaker Change: Continue to have a lot of great conversations, but we remain as famously picky as we've ever been.

Charles Gillespie: And the only real exception to that is the U.S, because of the huge long-term eye-gaming opportunity and entering now with sports betting is the obvious way to pre-position for that bright future. But in terms of other Europe, free bets saw some positive on the margins exceeded expectations, and definitely caught a bit of a tail when would the Euros. But in other Europe, you know, we've got new licenses in Greece and Romania.

Speaker Change: We look forward to announcing something when the time is right, but we without a great organic growth. We don't feel like we're under any pressure to do something we've already done a fantastic deal. This year with the free bets dotted column acquisition, which is trending ahead of expectations.

Charles Gillespie: But in terms of other Europe, free bets saw some positive on the margins exceeded expectations, and definitely caught a bit of a tail when would the Euros.

Speaker Change: Yeah I think one point that we've been really keen to make to everybody that will listen is that there's a very long healthy growth opportunity after these new states

Speaker Change: As we've already mentioned, we are spending a lot of time evaluating opportunities which are <unk>.

Tangential or adjacent to the real money online gambling affiliate business that we know and love.

Speaker Change: finish launching. You know, in the first three months you get a lot of interest, a lot of demand comes to market, there's a lot of activity, and then it kind of bottoms out. But after three months...

Charles Gillespie: But in other Europe, you know, we've got new licenses in Greece and Romania. So we're now licensed in both jurisdictions and live in both markets. And we expect those to be growth drivers over the medium terms, so we can kind of maintain some of these elevated growth rates moving forward. But the free bets acquisition is a mix. It was both the contribution from the free bets acquisition and organic growth in our own and operating assets.

Speaker Change: There is a broad universe of opportunities for us to sell more things to our existing clients or leverage our existing skills and complementary businesses with similar margins and cash.

Charles Gillespie: So we're now licensed in both jurisdictions and live in both markets. And we expect those to be growth drivers over the medium terms so we can kind of maintain some of these elevated growth rates moving forward. But the free bets acquisition is a mix. It was both the contribution from the free bets acquisition and organic growth in our own and operating assets.

Speaker Change: It just keeps growing

Speaker Change: every year indefinitely and you know that's where we're we're seeing growth in North America you know we

Hello characteristics in the gaming space so.

Speaker Change: We will.

Speaker Change: Thank you.

Speaker Change: It gives us a lot of confidence to expect growth in certain parts of our portfolio this year and growth overall in North America next year.

Speaker Change: We will be delighted when we announce something but.

Speaker Change:

Speaker Change: Can't say anymore than that at the moment.

Speaker Change: Alright fair enough congrats on a great quarter. Thanks.

Charles Gillespie: And just from a follow-up question, you specifically rush street or Bet Rivers and also refining their affiliate strategy. They're cutting off certain low ROI affiliates, effective September 1st. I guess two parts of the question here. One, did you get Gambling.com, say, to get that termination letter? And then secondly, how do you think your properties have been performing from a customer ROI standpoint versus years past and also versus competitors as operators kind of refine their strategies here? Yeah, I think from a customer ROI standpoint, we have always not only are we eye-gaming first, but we're also highest player value first.

Charles Gillespie: And just from a follow-up question, you specifically rush street or bet rivers and also refining their affiliate strategy. They're cutting off certain low ROI affiliates, effective September 1st, I guess two parts of the question here. One, did you get gambling.com, say, to get that termination letter? And then secondly, how do you think your properties have been performing from a customer ROI standpoint versus years past and also versus competitors as operators kind of refine their strategies here?

Speaker Change: You know, I think it's it's underappreciated how much some of these kind of the early cohort of regulated states are continuing to grow You know, you look at New Jersey. New Jersey is still growing. I mean, it's it's it's it's there's a lot of growth Outside of these new state launches. So of course, we're you know

Barry Jonas: Thanks Barry.

Barry Jonas: Thank you.

Speaker Change: Our next question is from Chad Beynon with Macquarie asset management. Please go ahead.

Hey, Good morning. This is Aaron on for Chad Thanks for taking our question.

Aaron: Just kind of going back to Google for a second there was a recent court ruling that Google has been running in a legal monopoly on search can you just share any thoughts on how that might impact your business.

Speaker Change: Really looking forward to the next new state launch, but even in the absence of one of them, we fully expect the business to be growing over the medium and long term.

Aaron: Hey, Erin yes, good question.

Speaker Change: That's great. Thank you for addressing that. And just as a follow-up, you know, curious if you could talk a little bit more about the M&A pipeline, any noticeable changes since Q1 earnings, and any areas you maybe are a little more focused on today than others.

Speaker Change: If you go back to the Microsoft Antitrust case.

Speaker Change: Uh huh.

Speaker Change: A better part of a decade.

Charles Gillespie: Yeah, I think from a customer ROI standpoint, we have always not only are we eye-gaming first, but we're also highest player value first. We know the keywords and search terms which are correlated with the highest player value. And we have, and those are the most competitive ones. Those are the hardest ones to get. But we have always gone for those first and our clients understand that. And they understand that they're, you know, we are one of, if not the best ROI affiliate to work with.

Speaker Change: They made any real headway in enforcing the antitrust.

Speaker Change: Desires of the government so.

Charles Gillespie: We know the keywords and search terms which are correlated with the highest player value. And we have, and those are the most competitive ones. Those are the hardest ones to get. But we have always gone for those first, and our clients understand that. And they understand that they're, you know, we are one of, if not the best ROI affiliate to work with. It's hard to get kind of hard data out of them. The evidence is that because they would naturally lose some leverage in pricing power with us. But it's a comment we have repeatedly heard from them.

Speaker Change: I don't think we know.

Speaker Change: Yeah, we continue to have a lot of great conversations, but we remain as famously picky as we've ever been.

Speaker Change: Absolutely nothing is going to happen imminently it might be five years, it might be 10 years before anything happens and as and when it does happen then sure you can speculate about what the changes will actually mean, but.

Speaker Change: We look forward to announcing something when the time is right, but with our great organic growth, we don't feel like we're under any pressure to do something. We've already done a fantastic deal this year with the FreeBets.com acquisition, which is trending ahead of expectations.

Speaker Change: Five and 10 years is a long time and technology I think by the time they got to the end of the road with Microsoft at the burn.

Speaker Change: <unk> was less important than it was at the beginning of the process and the whole exercise seemed like a waste of time so.

Charles Gillespie: It's hard to get kind of hard data out of them. The evidence is that because they would naturally lose some leverage in pricing power with us. But it's a comment we have repeatedly heard from them. In terms of RSI, we work with RSI and over 250 other operators. We get a lot of respect for the team at RSI, but simply put, they are a small client. We continue to promote and work with them in various states, but their particular pullback in certain areas will not have any effect on us and we raised guidance this morning.

Speaker Change: As we've already mentioned, we are spending a lot of time evaluating opportunities which are...

Speaker Change: I think what would be more relevant to us would be the the pace at which consumer search.

Speaker Change: tangential or adjacent to the real money online gambling affiliate business that we know and love. There's a broad universe of opportunities for us to sell more things to our existing clients or leverage our existing skills in complementary businesses with similar margins and cash.

Speaker Change: Patterns are changing.

Charles Gillespie: In terms of RSI, we work with RSI and over 250 other operators. We get a lot of respect for the team at RSI, but simply put, they are a small client. We continue to promote and work with them in various states, but their particular pullback in certain areas will not have any effect on us, and we raised guidance this morning.

Speaker Change: And frankly to date, we haven't seen any change as a result of of generative AI and.

Speaker Change: Various kind of AI enabled search engines the volume of searched it still comes off with Google is is it's higher than ever and the traffic is still there and nothing has changed it's.

Speaker Change: Flow Characteristics in the gaming space.

Speaker Change: We'll be delighted when we announce something.

Speaker Change: I can't say any more than that at the moment.

Speaker Change: And that's obviously gives us a lot of confidence.

Ryan Sigdahl: Great. Thanks, Charles.

Charles Gillespie: Great. Thanks, Charles. Good luck, guys. Thank you.

Speaker Change: All right, fair enough. Congrats on a great quarter. Thanks.

David Katz: Good luck, guys. Thank you. The next question is from David Katz with Jeffrey. Please go ahead. I'm warning everyone. Thanks for taking my question.

Speaker Change: More than a year into the new era of generate sort of AI that the traditional search is simply.

Speaker Change: Thanks, Barry.

David Katz: The next question is from David Katz with Jeffrey. Please go ahead. I'm warning everyone. Thanks for taking my question. I think we've talked about North America in decent amount, but to the degree that you can qualitatively, could you just talk about this long-term, 100 million and just help us maybe unpack it a little bit and how much of that becomes North America whenever it is that we sort of get there. I assume that's a much faster growing aspect of all this unless I'm mistaken.

Speaker Change: Thank you. The next question is from Chad Bainin with Macquarie Asset Management. Please go ahead.

Speaker Change: It's just two different products as two different things to different use cases and people are clearly continuing to to use Google and the way they have for a long time so.

Speaker Change: Hey, good morning. This is Aaron on for Chad. Thanks for taking our question. Just kind of going back to Google for a second, there was a recent court ruling that Google has been running an illegal monopoly on search. Can you just share any thoughts on how that might impact your business?

David Katz: I think we've talked about North America in a decent amount, but to the degree that you can qualitatively, could you just talk about this long-term, 100 million and just help us maybe unpack it a little bit and how much of that becomes North America whenever it is that we sort of get there. I assume that's a much faster growing aspect of all this unless I'm mistaken. Yeah. Look, as we said, we're very confident on reaching 100 million in adjusted EBITDA in the next couple of years. We're not going to put a specific timeline on it until we have more clarity on additional new state launches in the US and also more clarity from an M&A perspective.

David Katz: Yeah. Look, as we said, we're very confident on reaching 100 million in adjusted EBITDA in the next couple of years. We're not going to put a specific timeline on it until we have more clarity on additional new state launches in the US and also more clarity from an M&A perspective. Obviously, M&A will play some part in that and North America will clearly play a substantial part in that. We get a lot of questions on Latin America, for example, and if you look at Latin America and the context of us reaching 100 million in adjusted EBITDA, I don't need Latin America.

Speaker Change: It's a.

If they actually spun off your Android or actually managed to break it up I think it'd be a long time from now and I don't I don't frankly see that.

Speaker Change: Hey Aaron, yeah good question. If you go back to the Microsoft antitrust case you know it took

Speaker Change: Search business.

Speaker Change:

Speaker Change: Terribly impacted but ask me again in five years.

Speaker Change: they've talked for better part of a decade before they made any real headway in enforcing the antitrust desires of the government so uh...

Speaker Change: Got it appreciate that.

And then with regard to free bets I believe we're still in the integration window, you talked about last quarter, but can you update us on how the integration is going and whether your expectations for its contribution in 2024 has changed at all thank you.

Speaker Change: I don't think we, you know, absolutely nothing is going to happen imminently. It might be 5 years, it might be 10 years before anything happens. And as and when it does happen, then sure, you can speculate about what the changes will actually mean. But, you know, 5 and 10 years is a long time in technology, I think.

Speaker Change: Sure.

Speaker Change: We are a human few months in at this point and we have been consistently trending ahead of expectations in terms of the revenue produced by the acquired assets.

Charles Gillespie: Obviously, M&A will play some part in that, and North America will clearly play a substantial part in that. We get a lot of questions on Latin America, for example, and if you look at Latin America and the context of us reaching 100 million in adjusted EBITDA, I don't need Latin America. It gets 100 million in adjusted EBITDA, but there's a lot of opportunity in Latin America. Obviously, Brazil is on everyone's tone these days. Brazil, when Brazil fully regulates, in people's start paying taxes, the people with businesses in Brazil are going to be dealing with very different customer lifetime values.

Speaker Change: By the time they got to the end of the road with Microsoft, the browser was less important

The acquisition included a substantial base of Nbc's previously referred on a revenue share basis.

Speaker Change: It was at the beginning of the process and the whole exercise seemed like a waste of time. So You know, I think what would be more relevant to us would be the the pace at which consumer search

Speaker Change: And this is where we have seen actuals exceed our expectations.

Speaker Change: We've already successfully migrated certain aspects of the acquired portfolio to our technology stack, including our AD Tech and we will continue our integration work across the entirety of the portfolio for another few quarters, but we expect to see benefits from this in Q4 as we.

David Katz: It gets 100 million in adjusted EBITDA, but there's a lot of opportunity in Latin America. Obviously, Brazil is on everyone's tone these days. Brazil, when Brazil fully regulates in people's start paying taxes, the people with businesses in Brazil are going to be dealing with very different customer lifetime values. That doesn't affect us because we're not big in Brazil today. But it's Latin America and Brazil are of course interesting opportunities, stuff that we're looking at and thinking about.

Speaker Change: Patterns are changing and frankly to date we haven't seen any change as a result of you know, gender to Bay Eye and

Speaker Change: You know, various kind of AI-enabled search engines. The volume of search that still comes off of Google is, I mean, it's higher than ever, and the traffic's still there. Nothing's changed. It's... It's...

Speaker Change: Drive increases in the number of Nbc's produced by these assets and we now expect that the assets will exit 2024 on a materially higher run rate than what was implied by our initial guidance when we announced.

Charles Gillespie: That doesn't affect us because we're not big in Brazil today. But it's Latin America, and Brazil are of course interesting opportunities, stuff that we're looking at and thinking about. But just in the context of the overall global opportunity for this business, I would expect us to be able to get to the 100 million predominantly on the back of the markets. We're already in plus new state launches and some M&A.

Speaker Change: And that obviously gives us a lot of confidence.

Speaker Change: You know, more than a year into the new kind of era of generative AI that traditional

Speaker Change: The acquisition.

Speaker Change: Understood that all sounds great I appreciate all the color thanks, guys.

David Katz: But just in the context of the overall global opportunity for this business, I would expect us to be able to get to the 100 million predominantly on the back of the markets. We're already in plus new state launches and some M&A. We wouldn't need to make some giant push into some region that we're not already active in.

Speaker Change: It's just two different products. It's two different things. It's two different use cases and and and people are clearly Continuing to use Google in the way they have for a long time. So you know if a

Speaker Change: Thank you.

Speaker Change: Before we take the next question a reminder to all participants you May press star one to ask a question.

David Katz: We wouldn't need to make some giant push into some region that we're not already active in. Perfect.

Speaker Change: If they actually spot off Android or actually manage to break it up, I think it would be a long time from now, and I don't frankly see the...

Speaker Change: The next question is from Clarke Lampion with BTG. Please go ahead.

Clarke Lampion: Good morning, everybody. Thanks for taking the questions Charles I wanted to see if maybe we could just.

David Katz: Perfect. I think you, Charles, maybe you set up my follow-up question pretty nicely, which is, intuitions suggest that, you know, should US states raise tax rates, that changes the value proposition for operators and works to your benefit? Is that a fair assumption for us to make? Yes and no. I mean, you know, if the taxes go up, the player LCBs come down and that affects everyone in the whole ecosystem, including the players.

Charles Gillespie: I think you, Charles, maybe you set up my follow-up question pretty nicely, which is, intuitions suggest that, you know, should US states raise tax rates, that changes the value proposition for operators and works to your benefit? Is that a fair assumption for us to make? Yes and no. I mean, you know, if the taxes go up, the player LCBs come down, and that affects everyone in the whole ecosystem, including the players. You know, this Draft King surcharge thing, everybody's been talking about for the last couple of days and obviously they'd walk it back, but I thought it was really interesting and I thought it was really a smart thing to do.

Speaker Change: search business being terribly impacted, but ask me again in five years.

Clarke Lampion: Drill down a little bit more on expectations over the balance of the year for for growth I guess.

Speaker Change: Got it. Appreciate that. And then with regard to FreeBets, I believe we're still in the integration window you talked about last quarter, but can you update us on how the integration is going and whether your expectations for its contribution in 2024 has changed at all? Thank you.

Speaker Change: Two ways I guess, one sports betting versus I gaming, but then North America versus Europe should we expect I guess most of what we've seen in <unk> and the first half of the year to sort of continue over the balance.

Speaker Change: And I wanted to I guess kind of also follow up on your point around exit rates of growth for the year. If we're thinking about the performance business in general sort of being back on track right now free bets you know I guess really hitting its stride I guess towards the end of the year. What is this I guess kind of suggest right now.

Speaker Change: Sure, we are a few months in at this point and we have been consistently trending ahead of expectations in terms of the revenue produced by the acquired assets.

David Katz: You know, this draft king, surcharge thing, everybody's been talking about for the last couple of days and obviously they'd walk it back, but I thought it was really interesting and I thought it was really a smart thing to do. You know, you could debate about how they implemented, but the reality is these costs are real and whatever manner the operators come up with, they're going to pass it along to the players.

Speaker Change: The acquisition included a substantial base of NDCs, previously referred on a revenue share basis, and this is where we have seen actuals exceed our expectations.

Elliot: How about the medium term organic growth profile of this business overall and then maybe for Elliot I guess as part of that what is I guess that medium term growth rate translate to now from a cash flow standpoint, we have a pretty good sense of the outflows that are ahead, if we're thinking about in low inflows in I guess cash flow conversion.

Charles Gillespie: You know, you could debate about how they implemented, but the reality is these costs are real, and whatever manner the operators come up with, they're going to pass it along to the players. Maybe not the whole thing, maybe it's just part of it, but this idea of putting it into some sort of separate bucket is actually an active transparency that brings more attention to this issue, and more attention should be brought to this issue because, at a certain level, the tax rates are unhelpful. It inhibits market growth. It doesn't allow the operators to compete effectively against the black market.

Speaker Change: We've already successfully migrated certain aspects of the acquired portfolio to our technology stack.

Speaker Change: including our ad tech and we will continue our integration work across the entirety of the portfolio for another few quarters but we expect to see benefits from this in Q4 as we drive increases in the number of NDCs produced

Speaker Change: Version off of this business, maybe give us a sense of of in addition to the topline outlook what it translates to the bottom line. Thank you.

David Katz: Maybe not the whole thing, maybe it's just part of it, but this idea of putting it into some sort of separate bucket is actually an active transparency that brings more attention to this issue and more attention should be brought to this issue because at a certain level, the tax rates are unhelpful. It inhibits market growth. It doesn't allow the operators to compete effectively against the black market. It actually lowers the amount of tax that these states will be able to collect.

Clarke Lampion: Hey Clarke.

Clarke Lampion: In terms of the North American growth.

Speaker Change: by these assets, and we now expect that the assets will exit 2024 on a materially higher run rate than what was implied by our initial guidance when we announced.

Clarke Lampion: To be clear there is parts of our North American portfolio.

Clarke Lampion: Which have grown year on year in 2024, and we will continue to grow in the second half of the year.

Clarke Lampion: That said our media partnership business.

Speaker Change: The Acquisition

Clarke Lampion: Was a substantial proportion of our age to 2023 revenue in North America and that will be substantially smaller this year. So on balance we do not expect to grow overall in 2024 in North America. However, we are confident that we will continue to take meaningful.

Speaker Change: Understood. That all sounds great. Appreciate all the color. Thanks guys.

Charles Gillespie: It actually lowers the amount of tax that these states will be able to collect. So I think it's an, you know, I applaud DraftKings as efforts to highlight the issue, but it affects everybody. Our ability to sell our traffic is based on the value of that traffic, and if the taxes are higher, it's not helpful.

Speaker Change: Thank you. Before we take the next question, a reminder to all participants that you may press star and 1 to ask a question.

David Katz: So I think it's an, you know, I applaud draft kings as efforts to highlight the issue, but it affects everybody. Our ability to sell our traffic is based on the value of that traffic and if the taxes are higher, it's not helpful. Longer discussion than we have time for. Thank you very much. Thanks David. Thank you. Ladies and gentlemen, that was the last question for the question non-succession. This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.

Speaker Change: The next question is from Clark Lampin with BTIG. Please go ahead.

<unk> share in North America.

Clark Lampin: Morning, everybody. Thanks for taking the questions. Charles, I wanted to see if maybe we could just drill down a little bit more on expectations of the balance of the year for growth, I guess, you know, two ways, I guess one.

Clarke Lampion: Looking forward, we expect North America to grow modestly in 2025 from same state sales alone and when we get expanded regulation of course, especially in high gaming growth will reaccelerate in <unk>.

David Katz: Longer discussion than we have time for. Thank you very much. Thanks, David.

Speaker Change: Sports betting versus iGaming, but then North America versus Europe. Should we expect, I guess, most of what we've seen in 2Q and the first half of the year to sort of continue over the balance?

Operator: Thank you.

Clarke Lampion: With more new state launches in or a wave of new operators entering the market.

Operator: Ladies and gentlemen, that was the last question for the question non-succession. This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.

Clarke Lampion: But.

Speaker Change: And I wanted to, I guess, kind of also follow up on your point around exit rates of growth for the year. If we're thinking about the performance business in general, sort of being back on track right now, free bets, you know, I guess, really hitting its stride, I guess, towards the end of the year.

Clarke Lampion: Never forget that this is a global business and we are.

Clarke Lampion: 18 years of history operating outside of North America, and we grew the U K and Ireland by 11, 5% and other Europe by 75% in the first half of the year.

Clarke Lampion: On exit rates.

Clarke Lampion: We're we haven't provided.

Speaker Change: What does this, I guess, kind of suggest right now about

Clarke Lampion: Any specific guidance for 2025, yet of course, but we we do.

Speaker Change: the medium-term organic growth profile of this business overall and then maybe for Elias, I guess, as part of that.

Clarke Lampion: I think it'll be double digit low double digits organic growth in North America, even without any new state openings.

Speaker Change: What is I guess that medium-term growth rate translate to now from a cash flow standpoint? We have a pretty good sense of the outflows that are ahead

Speaker Change: If we're thinking about inflows and I guess cash flow conversion off of this business, maybe give us a sense of in addition to the top line outlook, what it translates to, to the bottom line. Thank you.

Clarke Lampion: And specifically in the context of the free bets acquisition.

Clarke Lampion: When we tabled our initial.

Clarke Lampion: Guidance for that acquisition, we said $10 million in revenue and $5 million and adjusted EBITDA for the last three quarters of 2024 of.

Speaker Change: [inaudible]

Speaker Change: A clerk

Speaker Change: In terms of North American growth, you know, to be clear, there's parts of our North American portfolio which have grown year-on-year in 2024 and will continue to grow in the second half of the year. That said, our media partnership business

Clarke Lampion: Of course, the first quarter of the year tends to be one of the best quarters of the year. So if youre looking at that on an annualized rate you have to put a little extra weighed on the Q1 and now we're saying.

For 2025.

Speaker Change: was a-

Clarke Lampion: We will exit 2024 with those assets on a on a on a substantially higher run rate.

Speaker Change: substantial proportion of our H2 2023 revenue in North America, and that will be substantially smaller this year. So on balance, we do not expect to grow overall in 2024 in North America. However, we are confident that we will continue to take meaningful market share in North America.

Clarke Lampion: So that will set us up for <unk>.

Clarke Lampion: Growth both in.

Clarke Lampion: Predominantly in.

Clarke Lampion: Other Europe, and the UK and Ireland next year.

Speaker Change: Looking forward, we expect North America to grow modestly in 2025 from same-state sales alone.

Clarke Lampion: I could just add.

Clarke Lampion: To the second part of your your question on our expectations for the second half Altiero in.

Speaker Change: And when we get expanded regulation, of course, especially in iGaming, growth will re-accelerate with more new state launches and or a wave of new operators entering the market.

Altiero: As you said the expectation is that the UK and Ireland and other Europe and rest of the world will continue to be the growth drivers.

Altiero: In the second half as we've seen in the first half of 2024.

Speaker Change: But, you know.

Speaker Change: never forget that this is a global business.

Altiero:

Speaker Change: and we have 18 years of history operating outside of North America and we grew the UK and Ireland by 11.5% and other Europe by 75% in the first half of the year.

Altiero: If you look at the margin.

Altiero: With the current proportion of our media partnership revenue.

Speaker Change: On exit rates, we haven't provided any specific guidance for 2025 yet, of course, but we ...

Speaker Change: Our <unk> margins are indicative of run rate and correlates with the midpoint of our full year guidance.

Speaker Change: Our guidance, including $6 5 million in cost of sales for 2024. It is expected to produce gross margins in the mid nineties.

Speaker Change: We do think it'll be double-digit, you know, low double-digits organic growth in North America even without any new

Speaker Change: And the midpoint of our adjusted EBITDA margin for the full year is 36% versus push it's consistent with the first half of <unk>.

Speaker Change: state openings

Speaker Change: and specifically in the...

Speaker Change: context of the free bets.

Speaker Change: acquisition.

Speaker Change: Thanks very much.

Speaker Change: When we tabled our initial guidance for that acquisition, we said $10 million in revenue and $5 million in adjusted EBITDA for the last three quarters of 2024.

Thank you.

Speaker Change: The next question is from Ryan <unk> with Craig Hallum Capital Group. Please go ahead.

Speaker Change: Of course, the first quarter of the year tends to be one of the best quarters of the year. So if you're looking at that on an annualized rate, you have to put a little extra weight on the Q1. And, you know, now we're saying...

Ryan: Hey, Charles Elliot Good day, guys I want.

Ryan: Want to start with other Europe.

Ryan: Really nice strength and acceleration there I guess anything to call out specifically and then maybe more broadly speaking and the benefit you guys saw from the Euro 2024.

Speaker Change: for 2025, you know, we will exit 2024 with those assets on a substantially higher run rate.

Speaker Change: Just to start with Euro 2024, because that's an easy one you know our our sports betting business is predominantly.

Speaker Change: so that will set us up for ...

Speaker Change: growth both in predominantly in other Europe and in the UK and Ireland next year.

Speaker Change: In the U S.

Speaker Change: We have a.

Speaker Change: Gaming first strategy around the world, we try not to we don't go into markets, which don't have <unk>.

Speaker Change: I could just add.

Speaker Change: Clark, to the second part of your question on our expectations for the second half of the year and as you said the expectation is that the UK and Ireland and the Europe and rest of the world will continue to be the growth drivers.

Speaker Change: Gaming and the only real exception to that is the U S. Because of the huge long term gaming opportunity in <unk>.

Speaker Change: Entering now with sports betting is the obvious way to two.

Speaker Change: So pre positioned for that bright future.

Speaker Change: But in terms of other Europe free bets saw some some some positive.

Speaker Change: in the second half, as we've seen in the first half of 2024.

Speaker Change:

Speaker Change: On the margins exceeded expectations and.

Speaker Change: If you look at margins with the current proportion of our media partnership revenue,

Speaker Change: And definitely caught a bit of a tailwind with the euros.

But in other Europe, we've got a new licenses in Greece and Romania.

Speaker Change: Our H1 margins are indicative of run rate and correlates with the midpoint of our full year guidance so our guidance including 6.5 million in cost of sales for 2024 is expected to produce gross margins in the mid 90s

So were now licensed in both jurisdictions in and live in both markets and we expect those to be growth drivers over the medium term. So we can kind of.

Speaker Change: Maintained some of these.

Speaker Change: Elevated growth rates moving forward.

Speaker Change: But the the free bets acquisition is a mix. It was both of the contribution from the free bets acquisition and organic growth in our owned and operated assets.

Speaker Change: and the midpoint of our adjusted EBITDA margin for the full year is 36%, which is consistent with the first half of the year.

Speaker Change: Thanks very much.

Speaker Change: And then just for my follow up question, you are specifically Rush Street that reverse and I would say refining their affiliate strategy, they're cutting off certain low ROI affiliates effective September 1st of all leaning in with others and I gaming specific states I guess two part.

Speaker Change: Thank you.

Speaker Change: The next question is from Ryan Sigdal with Craig Hallam Capital Group. Please go ahead.

Ryan Sigdal: Hey Charles, Elias. Good day guys. I want to start with Other Europe. Really nice strength and acceleration there. I guess anything to call out specifically and then maybe more broadly speaking the benefit you guys saw from the Euros 2024?

Speaker Change: So the question here one did you get the gambling dotcom sites get that termination letter and then secondly, how do you think your properties have been performing from a.

Speaker Change: Customer ROI standpoint versus years past and also versus competitors as operators kind of refine their strategies here.

Speaker Change: Just to start with Euros 2024, because that's an easy one, you know, our sports betting business is predominantly

Speaker Change: Yeah, I think from a from a customer ROI standpoint, we have we have always.

Speaker Change: in the U.S. We have a...

Speaker Change: Not only gaming first but we're also highest player value first we know the keywords and search firms, which are correlated with the highest player and we have and those are the most competitive ones those are the hardest ones to get.

Speaker Change: Eye-gaming first strategy around the world. We try not to we don't go into markets which don't

Speaker Change: have

Speaker Change: Eye gaming, and the only real exception to that is the U.S. because of the huge long-term eye gaming opportunity, and, you know, entering now with sports betting is the obvious way to...

Speaker Change: But we have always gone for those first and our clients understand that and they understand that there.

Speaker Change: to preposition for that bright future. But in terms of other Europe, you know, free bets saw some positive, you know, on the margins exceeded expectations and definitely caught a bit of a tailwind with the Euros.

Speaker Change: One of if not the best ROI affiliate to work with its hard to get kind of hard data out of them.

The evidence is that because they would naturally lose some leverage in pricing power with us, but it's a it's a comment we have repeatedly heard from them.

Speaker Change: But in other Europe, we've got new licenses in Greece and Romania.

Speaker Change: In terms of Rsi.

Speaker Change: Hey.

Speaker Change: Yeah, we were.

Speaker Change: So, we're now licensed in both jurisdictions and live in both markets, and we expect those to be growth drivers over the medium term, so we can kind of maintain some of these.

Speaker Change: Worked with Rsi and over 250 other operators, we got a lot of respect for the for the team at resi, but simply put there are not that they are a small client.

Speaker Change: Elevated growth rates moving forward, but the FreeBets acquisition, it was a mix, it was both a contribution from the FreeBets acquisition and organic growth in our owned and operated assets.

Speaker Change: We continue to promote and worked with them in various states.

Speaker Change: But there are particular pullback in certain areas, we will not have any effect on us and we raised guidance. This morning.

Speaker Change: Great. Thanks, Charlie Good luck guys.

Speaker Change: And just for my follow-up question, you specifically Rush Street or Bett Rivers and I'll say refining their affiliate strategy.

Speaker Change: Okay.

Speaker Change: Thank you.

Next question is from David Katz with Jefferies. Please go ahead.

David Katz: Hi, Good morning, everyone. Thanks for taking my question.

Speaker Change: They're cutting off certain low ROI affiliates effective September 1st while leaning in with others in iGaming-specific states.

David Katz: Okay.

David Katz: I think we've talked about North America decent amount, but to the degree that you can qualitatively could you just talk about this long term 100 million.

Speaker Change: Two parts to the question here. One, did you get, did gambling.com sites get that termination letter and then secondly, how do you think your properties have been performing from a customer ROI standpoint versus years past and also versus competitors as operators kind of refine their strategies here?

Speaker Change: Just help us maybe unpack it a little bit and how much of that becomes North America. Whenever it is that we sort of get there I assume that's a much faster growing aspect of all of us.

Speaker Change: Yeah I think from a from a customer ROI standpoint we have we have always

Speaker Change: Unless I'm mistaken.

Speaker Change: Yeah look we as we said, we're very confident on reaching $100 million and adjusted EBITDA in the next couple of years, we're not going to put a specific timeline on it until we have more clarity on additional new state launches in the U S and also more clarity from an M&A perspective.

Speaker Change: Not only are we iGaming first, but we're also highest player value first.

Speaker Change: We know the keywords and search terms which are correlated with the highest player values and those are the most competitive ones, those are the hardest ones to get.

Speaker Change: But we have always gone for those first, and our clients understand that, and they understand that we are one of, if not the best, ROI affiliate to work with.

Obviously, M&A will will play some part in that and in North America will clearly play a.

Speaker Change: A substantial part of that.

Speaker Change: We get a lot of questions on Latin America for example, and if you look at Latin America in the context of us, reaching $100 million and our adjusted EBITDA.

Speaker Change: It's hard to get hard data out of them, the evidence is that, because they would naturally lose some leverage and pricing power with us, but it's a comment we have repeatedly heard from them.

Speaker Change: I don't need Latin America to get to $100 million and adjusted EBITDA, but.

Speaker Change: In terms of RSI, you know, they...

Speaker Change: There's a lot of opportunity in Latin America, obviously, Brazil is.

Speaker Change: We work with RSI and over 250 other operators.

Speaker Change: As you.

Speaker Change: On everyone's telling these days.

Speaker Change: Brazil.

Speaker Change: for the team at RSI, but simply put, they are not, they are a small client. We continue to promote and work with them in various states.

Speaker Change: When Brazil fully regulated people start paying taxes.

Speaker Change: The people with businesses in Brazil are going to be dealing with very different customer lifetime values.

Speaker Change: But their particular pullback in certain areas will not have any effect on us, and we raised guidance this morning

Speaker Change: And we that doesn't affect us because we're not we're not big in Brazil today, but it's Latin America, and Brazil are of course interesting opportunities stuff that we're looking at and thinking about.

Speaker Change: Great. Thanks, Charles. Good luck, guys.

Speaker Change: Thank you. The next question is from David Katz with Jeffries. Please go ahead.

Speaker Change: But just in the context of the overall global opportunity for this business.

Speaker Change: Hi, good morning, everyone. Thanks for taking my question.

Speaker Change: I would expect us to be able to get to the $100 million predominantly on the back of the markets. We're already in plus new state launches and some M&A, we wouldnt need to make some giant push into some region that were not already accident.

Speaker Change: I think we've talked about North America a decent amount, but to the degree that you can, qualitatively,

David Katz: Can you just talk about this long-term, you know, $100 million?

David Katz: and just help us maybe unpack it a little bit and how much of that, you know, becomes North America whenever it is that we sort of get there. I assume, you know, that's a much faster-growing aspect of all this, unless I'm mistaken.

Perfect. Thank you Charles maybe you set up my follow up question pretty nicely with Jos.

Speaker Change: <unk> suggests that.

Speaker Change: Should U S states raise tax rates that changes the volume value proposition for operators and works to your benefit.

Speaker Change: Yeah, look, we...

Speaker Change: As we said, we're very confident on reaching $100 million in adjusted EBITDA in the next couple of years. We're not going to put a specific timeline on it until we have more clarity on additional new state launches in the U.S.

Speaker Change: Is that a fair assumption for us.

Speaker Change: Yes, and no I mean, if the taxes go up the player LTV has come down and that affects everyone in the whole ecosystem, including the players.

Speaker Change: Yeah.

Speaker Change: This this draft Kings surcharge thing everybody's been talking about for the last couple of days and obviously they'd walk it back but I thought it was really interesting and I thought it was really a smart thing to do you know you could debate about how they implement it.

Speaker Change: substantial part of that. You know we get a lot of questions on Latin America for example and you know if you look at Latin America in the context of us reaching a hundred million and not just at Ibiza

Speaker Change: But the reality is these these costs are real and.

Speaker Change: I don't need Latin America to get to $100 million in adjusted EPSA, but there's a lot of opportunity in Latin America. Obviously, Brazil is...

Speaker Change: Whatever manner.

Speaker Change: The operators come up with there are going to pass it along to the players maybe not the whole thing maybe it's just part of it but this idea of putting it into some sort of separate bucket.

Speaker Change: You know on everyone's tongue these days Brazil What when Brazil fully regulates and people start paying taxes?

Speaker Change: The people with businesses in Brazil are going to be dealing with very different customer lifetime values.

Speaker Change: Is.

Speaker Change: Is actually an active transparency that brings more traffic more and more attention to this issue in more attention should be brought to the to this issue because at a certain level. The tax rates are unhelpful. It inhibits market growth. It doesn't allow the operators to compete effectively against the black market. It acts.

Speaker Change: You know, that doesn't affect us because we're not big in Brazil today. But Latin America and Brazil are of course interesting opportunities, stuff that we're looking at and thinking about. But just in the context of the overall global opportunity for this business.

Speaker Change: Lowers the amount of tax that these sites will be able to collect.

Speaker Change: I would expect us to be able to get to the hundred million.

Speaker Change: So I think it is.

Speaker Change: Predominantly on the back of the markets, we're already in, plus new state launches and some M&A. We wouldn't need to make some giant push into some region that we're not already active in.

Speaker Change: I applaud draft Kings as efforts to highlight the issue.

Speaker Change:

Speaker Change: And but but if.

Speaker Change: 'cause it affects everybody you know.

Speaker Change: Our ability to sell our traffic is based on the value of that traffic and as soon as the taxes are higher it's it's not helpful.

Speaker Change: Perfect. I think you, Charles, maybe you set up my follow-up question pretty nicely, which is, intuition suggests that, you know, should U.S. states raise tax rates, that changes the value proposition for operators and works to your benefit?

Speaker Change: Longer discussion than we have time for thank you very much.

David Katz: Thanks, David.

Speaker Change: Thank you.

Speaker Change #100: Ladies and gentlemen that was the last question for the question and answer session. This concludes today's teleconference. You may disconnect your lines at this time.

Speaker Change: Is that a fair assumption for us to make?

Speaker Change: Yes and no. I mean, you know, if the taxes go up, the player LTVs come down, and that affects everyone in the whole ecosystem, including the players.

Speaker Change #100: You for your participation.

Speaker Change: This DraftKings surcharge thing everybody's been talking about for the last couple of days, and obviously they've walked it back. But I thought it was really interesting, and I thought it was really a smart thing to do. You know, you could debate about how they implement it.

Speaker Change: but the reality is these costs are real and in the you know whatever manner

Speaker Change: The operators come up with they're going to pass it along to the players. Maybe not the whole thing Maybe it's just part of it. But you know that this idea of putting it into some sort of separate bucket is

Speaker Change: is actually an act of transparency that brings more attention to this issue, and more attention should be brought to this issue.

Speaker Change: At a certain level, the tax rates are unhelpful. It inhibits market growth. It doesn't allow the operators to compete effectively against the black market. It actually lowers the amount of tax that these states will be able to collect.

Speaker Change: And, you know, but if it affects everybody, you know, our ability to sell our traffic is based on the value of that traffic and if the taxes are higher, it's...

Speaker Change: It's not helpful.

Speaker Change: Longer discussion than we have time for. Thank you very much.

David Katz: Thanks, David.

Speaker Change: Thank you.

Speaker Change #100: Ladies and gentlemen, that was the last question for the question and answer session. This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.

Q2 2024 Gambling.com Group Ltd Earnings Call

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