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spk02: Hello, everyone, and welcome to Gambling.com Group's second quarter 2022 earnings results call. I am Peter McGough, Vice President of Investor Relations at Gambling.com Group. I am joined by our Chief Executive Officer and Co-Founder, Charles Gillespie, and our Chief Financial Officer, Elias Mark. The call is being webcast live within the Investor Relations section of our website at Gambling.com forward slash corporate forward slash investors. 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. 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. 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. 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. 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. During the call, there will also be a discussion of non-IFRS financial measures. A description of these non-IFRS financial measures is included in the press release issued promptly after market closed today. Reconciliations of these non-IFRS financial measures to their mostly directly comparable IFRS measures are included in the appendix to the presentation and press release, both of which are available in the investor tab of our website. I'll now turn the call over to Charles.
spk07: Thank you, Peter, and welcome, everyone. This afternoon we reported record second quarter revenue that showed continued strong performance in both our core business and from our acquisitions from Q1. For those following on the slide deck, I'm now on slide four. Revenue grew 53% to $15.9 million. North American revenue grew more than 300% despite the seasonally slower nature of the second quarter. We delivered $3.6 million of adjusted EBITDA and $2.9 million of free cash flow. Our strong profitability continues to differentiate us among many online sports betting and iGaming names while we continue to invest in the organization. to support our organic growth initiatives. We delivered over 57,000 new depositing customers, an increase of 119% compared to Q2 2021, when we delivered 26,000. The increase in MVCs continues to be driven by our expanded portfolio of websites, as well as growth in existing websites. Slide five. We continue to deliver on our strategic objective to grow our North American presence. After growing more than 500% year over year last quarter, North American revenue grew over 300% year over year to $6.2 million in the second quarter. The increase was supported by our successful launch in Ontario in April, as well as continued solid performance elsewhere in North America. Given the low season in the world of sports, Growth was primarily driven by online casino. We expect the return of NFL along with the regular fall and winter sporting calendar in North America to drive growth in the second half of the year, and we believe additional new market launches in the U.S. will continue to be a key driver of revenue growth over the coming years. Business in the U.K. and Ireland was also strong in the quarter and increased 24% compared to last year despite material currency headwinds. Our media partnership with McClatchy announced in January, so another encouraging quarter. The recently acquired BonusFinder.com performed ahead of plan in the quarter and delivered very strong NBC numbers, providing a great platform to continue to expand in the Canadian market and beyond. Work on applying our performance marketing platform to Rotowire.com is also progressing well. with encouraging early signs ahead of the NFL regular season, such as the Roto-Wire Fantasy Football Draft Kit occupying the number one spot in the Apple App Store for paid apps over this past weekend. Now on slide six. Our growth in North America, along with strong revenue in our more mature markets during the first half of the year, is demonstrating the breadth and quality of our portfolio of websites and technology platforms. We have made substantial investments over the past few quarters to diversify and strengthen our portfolio to ensure we are well-conditioned to serve a growing and diverse audience of players around the world. In addition to our established cash-generating websites, we own and operate a number of additional websites which are ready to be monetized as soon as additional states launch, such as betmaryland.com and betmassachusetts.com. These sites on these premium domains have been developed in-house on our technology platform, which will maximize the ROI for these capital investments over time. On to slide seven. As announced last week, the launch date of online sports betting in Kansas is on Thursday, and we are well-positioned with BetKansas.com, as well as major in-market media outlets, thanks to our partnership with McClatchy. We are ready with BetOhio.com when Ohio launches on January 1st, 2023. Maryland and Massachusetts have already legislated sports betting but have not yet launched their regulated markets. We expect these states to launch during 2023. Now I'd like to turn the call over to our CFO, Elias Mark, to discuss our second quarter and first half financial performance in greater detail.
spk01: Thank you, Charles, and welcome, everyone. We're on slide eight now. As Charles mentioned, we saw another strong quarter of financial results during the seasonally slower Q2. Revenue of 15.9 million increased 53% compared to the prior year, or 74% on a constant currency basis. This currency had negatively affected revenue by 1.2 million in the quarter. The increase in revenue was driven by strong growth in NDCs primarily in North America. We also saw solid growth in the UK and Ireland that was partly offset by the weakening pound and Euro against the US dollar. As a reminder, we began recognizing cost of sales during the first quarter as a result of our new media partnerships and the subscription business of roadtowire.com. In the second quarter, we incurred $0.5 million. Total operating expenses were 17.7 million, an increase of 10.4 million. The total operating expenses were affected by fair value movements in contingent consideration of 2.8 million related to the BonusFinder.com acquisition. Adjusted for fair value movements, adjusted operating expenses were 14.8 million, an increase of 7.6 million. On a constant currency basis, adjusted operating expenses increased by 8.4 million, a difference of 1.2 million. The increase was driven primarily by additional headcounts across marketing, product, sales, and technology functions, as well as increased amortization related to our Q1 acquisitions. During 2022, we expect to incur amortization of approximately 4.5 million related to the Q1 acquisitions. We have also increased administrative expenses associated with operating as a public company. We have continued to invest organically by scaling our organization as we seek to solidify our portfolio of brands, websites, and technologies for future state launches in the U.S. We will continue to hire to drive future growth, but we are slowing the pace of hiring in the second half of the year to consolidate our enlarged organization. We are in a privileged position as a highly profitable company to be able to invest heavily while maintaining high margins and generating positive free cash flow. While we continue to see some inflationary pressures, we're working to mitigate those headwinds by increasing the proportion of our operating expenses for more cost-efficient jurisdictions as we expand. Net income totalled 0.05 million, which is an immaterial amount per diluted share, compared to net income of 2.4 million or 8 cents per diluted share in the prior year. Adjusted for fair value movements in contingent and deferred consideration, adjusted net income in the quarter was 3.1 million, and adjusted earnings per share was 9 cents per diluted share. Net income and adjusted net income were positively affected by net forex gains of 2.8 million. We will continue to adjust operating profit and net income in this manner until the end of the earn-out period for BonusFinder.com in the first quarter of 2024. We generated adjusted EBITDA of 3.6 million compared to 5.5 million in the prior year. This represents an adjusted EBITDA margin of 23% compared to 53% in 2021. The lower margin was driven by increased operating expenses from our investments in the organization to drive organic growth and the lower margin profile of the acquired core business of rotowire.com. Total cash generated from operations of 3.5 million decreased from 4.7 million in 2021 as a result of the lower adjusted EBITDA. We generated free cash flow of 2.9 million as capital expenses were scaled back as planned after having invested in our portfolio of US-focused domains over the last quarters. We remain able to entirely fund our organic growth initiatives from operating cash flow and remain free cash flow posted. New depositing customers in the quarter grew 119% to more than 57,000 compared to 26,000 in Q2 the prior year. Growth was driven primarily by online casino given the low season for sports. Cash, as of June 30th, 2022, totaled $31.1 million. The quarter-and-quarter decrease of $1.9 million is primarily a result of the settlement of acquired working capital related to the Q1 acquisition of BonusFinder.com and payment for domain acquisitions acquired in previous quarters, which was partly offset by our operating cash flow. On to slide nine. Turning to our first half results, revenue grew 62% to 35.5 million. On a constant currency basis, revenue increased 79%. Currency headwinds negatively affected revenue by 2.1 million in the first six months. Our cost of sales in the first half year totaled 1.7 million. Operating expenses increased by 18.2 million to 31.8 million. Adjusted operating expenses were 28.9 million, an increase of 15.4 million. On a constant currency basis, adjusted operating expenses increased by 16.7 million, a difference of 1.3 million. We recorded net income of 4.5 million, or 13 cents per diluted share, compared to 6.9 million, or 22 cents per diluted share in 2021. Adjusted net income was 7.6 million, and adjusted earnings per diluted share was 21 cents. Net income and adjusted net income were positively affected by net forex gains of 3.6 million. Adjusted EBITDA declined by 15% to 10.7 million, reflecting an adjusted EBITDA margin of 30%. The lower adjusted EBITDA is again the result of our higher operating expenses associated with growing our team, investing in products, marketing and technology, public company overheads, and the lower margin profile of the acquired core business of road2wire.com. Our free cash flow in the first six months was 4.2 million compared to 9.5 million in 2021. The decrease was primarily a result of investments in our portfolio domains aimed for the US market. Lastly, we delivered our 124,000 new deposit in customers representing growth of 100% compared to the first half of 2021. Our first half financial results were in line with our strategic objectives and expectations. These first half results sets us up for another year of record financial performance for the group, driven by strong performance in both our core business and our acquisition. Moving on to slide 10. Turning to our outlook. Given our growing exposure to the North American sports calendar, we are subject to deeper natural seasonality patterns than we have experienced historically. The third quarter starts slow, as it's initially affected by the same seasonality patterns of Q2. This is followed by a seasonally stronger period, starting with the launch of the NFL season and continuing through the end of the year. Our growth expectations are also affected by the timing and quality of new market launches. The Ohio market launch which we had anticipated for September in our initial guidance, is now confirmed to launch on January 1st, 2023. As Charles discussed, Kansas is confirmed to launch this Thursday and is included in our guidance. The weakening of the pound and euro against the US dollar negatively affected reported revenues. by 2.1 million and positively affected operating expenses by 1.3 million in constant currency terms in the first six months. Compared to a Euro to USD rate of 1.15 implied in our initial guidance, revenue was negatively affected by 1.8 million and adjusted operating expenses were positively impacted by 1.5 million in the first six months. Our guidance assumes a Euro to USD parity for the second half of the year. Given the macroeconomic headlines from Europe and North America, we feel it's prudent to mention that we have seen no deterioration of consumer demand for online gambling year to date. We are monitoring and we will continue to monitor consumer behavior closely in Europe and North America as the fall and winter sports season developed. From our perspective, demand for performance marketing services for the online gambling industry remains strong. As U.S. operators drive their businesses towards profitability, performance marketing becomes even more important. Along with our increase in scale, our pricing power in respect of our U.S. NDCs With all that being said, and in spite of the adverse currency movements, we are reiterating our guidance for 2022 of revenue in the range of 71 to 76 million, representing growth of 68 to 80 percent, and adjusted EBITDA between 22 and 27 million, representing growth of 20 to 47 percent. With that, I'll turn the call back to Charles.
spk07: Thanks, Elias. Before we wrap up for questions, I would like to provide some additional perspective on the market today and going forward. The team is well positioned and fully prepared to monetize the fall sports season in the state of Kansas when the market launches Thursday. Likewise, we are positioning ourselves for a successful launch in Ohio in January. The launch dates of Maryland and Massachusetts remain unclear at this time, but we expect both to launch during 2023, adding considerably to our market opportunity in North America. We will continue to focus on potential market developments elsewhere, such as the California ballot initiative to legalize sports betting. And we continue to expect a broad-based expansion of online gambling in the United States, with the remaining states, without sports betting, embracing regulation. states which have regulated retail sports betting considering online, and states that have online sports betting considering iGaming. Our strength in performance marketing offers online gaming operators high ROI and a path to long-term profitability. Going forward, we expect online gaming operators to continue to invest in the performance marketing channel as they have always done, given the transparent return and low risk the channel provides. I will end by once again thanking the brilliant Gambling.com group team for their exemplary efforts in delivering yet another strong quarter. With that, we'd be very happy to take a few questions.
spk04: Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 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 star key. One moment, please, while we poll for questions. Thank you. Our first question is from David Katz with Jefferies. Please proceed with your question.
spk03: Hi, afternoon, everyone, or good day, everyone, depending where we're sitting. The question we wanted to pose is we had made a note around the portion of 2Q revenue relative to the full year, frankly being about 18 to 20%, which implies kind of a higher full year revenue based on what you just reported. And we're wondering the degree to which you might be going at this a little bit conservatively. Elias, I know you made a couple of comments about what the guidance assumes, and candidly, I didn't catch all of them. So could you just revisit that matter about the rest of the year and the revenue and the revenue guide and help us unpack all that?
spk01: Yeah, I guess it's a mix of headwinds and tailwinds, all of which leads us to reiterate our guidance. We definitely have headwinds in terms of currency, and we've seen continued weakness in the euro in July and August. But we are well positioned for the second half. of the year with our sports products. We look forward to the Kansas market opening. I think in Q2, we saw strong trading in our casino business, both in North America and in the UK and Ireland, which would be why results came in slightly above your expectations. I think looking forward, we're positive about the second half of the year, but we're cautious about having to make up the lost revenue from the currency headwinds. So on balance, we're reiterating our guidance.
spk03: Would you consider that to be the largest impact or headwind is the currency?
spk01: Yes, I would say so. As you know, and as I touched upon as well, we had initially expected Ohio to launch in September. That is now confirmed for January. But that's no news at this stage that was communicated when we presented last quarter.
spk03: Right. And one more, if I may, since we hear so many different perspectives
spk07: uh and or guesses about california uh i'd love to hear i'm sure everyone would benefit from hearing yours and whether it passes and and in what form well we are digital marketers not um not pollsters or or campaigners for ballot initiatives but um from you know i i Clearly, it's the most expensive ballot initiative ever. I think what we have going against us is the fact that there's two competing proposals. Statistically speaking, that makes it harder to get either one of them through. I'm definitely hopeful that logic and sense will prevail here. The appeal of online sports betting is pretty clear. It's not a It's not a bad thing for the consumer. I know a lot of people in California that like sports. So, you know, we're doing our little bit to get the word out with betcalifornia.com, and we'll be watching very, very closely in November. But I don't have, unfortunately, any inside track on it, David.
spk03: No, your guess is every bit as good as anybody else's, I would assume. Thanks very much.
spk04: Thank you. Our next question is from Barry Jonas with Truist Securities. Please proceed with your question.
spk06: Hey, guys. Just had a couple. I noticed you recently filed a shelf. Wondering if there's any color you could provide on your intent there?
spk07: Yeah, no problem. We did. The reason we filed it when we did was purely a function of the one year anniversary of the IPO. We couldn't do it until then. And the rationale behind doing it was simply to give ourselves maximum optionality in the event that we need to raise some additional resources for M&A. You know, we continue to evaluate constantly all of the opportunities that we find interesting and, you know, and also prioritize those opportunities to make sure we're spending time on the ones that are most interesting. And, you know, having this shelf in place will, you know, potentially be very useful if one of the larger transactions, you know, were to actually get serious. But at this stage, you know, there's nothing There's nothing immediate. There's no specific plans. It's truly there for optionality in the future.
spk06: Got it. I think we're all excited about the potential in the U.S., but I was curious to get maybe some more thoughts on Europe. Some competitors have noted challenges across Europe, and some are even exploring strategic opportunities there. So with that, can you maybe talk about, A, your overall view, broadly speaking, across Europe, and if you're evaluating any M&A there?
spk07: We still have a preference for U.S. M&A, but we wouldn't be doing our job if we didn't also consider the attractive European M&A targets that are out there. You know, if you look at us and some of our peers, and you compare those businesses in Europe, we're not, you know, Europe's a big place. We're not all in the same markets. You know, we have a, we have a pretty healthy business, a big business in the UK and Ireland. And a lot of our peers have their European businesses are, are, are frankly elsewhere. So, you know, we, we, You know, what drives our results is really in Europe, is really UK and Ireland. And, you know, we wanted to put into the script today that from our perspective, everything's great. You know, you see these headlines and, you know, you definitely start to wonder, you know, is the consumer going to come under pressure in Europe with energy prices, cost of living and everything else? But we haven't seen it yet. But, of course, we're eyes wide open like everyone else.
spk06: Great. And if I could sneak in one more, I think it's clear many operators are feeling pressure to hit profitability. I think you guys make a strong case how the affiliate model is more helpful than hurtful there. but I'm curious if you're seeing any, uh, pressure on, on CAC economics or, or really anything where the operators are sort of trying to, uh, impact your economics.
spk07: Uh, it, it's, it's honestly very, it's the opposite. Now that we've got a thriving business in the United States with real momentum, we can have, uh, pushier conversation with our clients about what we want to charge them per NDC. That scale is very important from a pricing perspective. If you're an operator and you can go to affiliate A and buy 100 players, you go to affiliate B and buy 10,000 players, it's the same amount of work. you're going to get an affiliate B and buy more players. Naturally, they themselves prioritize affiliates that have the traffic. And increasingly, we are part of that conversation.
spk01: And the affiliate channel itself tends to increase because we provide more or less guaranteed ROI. So if you've got a standard customer acquisition, we're the most efficient way of doing so. It's guaranteed to make money.
spk06: That's extremely helpful. All right. Thanks so much, guys. Appreciate it.
spk04: No problem. Thank you. Our next question is from Jeff Stanchel with CFO. Please proceed with your question.
spk05: Hey, afternoon, guys. Thanks for taking the questions and congrats on a nice quarter here. You know, I wanted to start and follow up on one of Barry's questions and some of your prepared remarks. at the end, Charles, specifically on M&A. Just curious, are you seeing interesting assets being marketed out there for sale right now? And as a follow-up, are you starting to see the sell-off in public equities and the online gambling sector begin to impact private market valuations and asking prices? Or just curious your thoughts there.
spk07: Thanks. In terms of The smaller targets out there, which are obviously private and completely disconnected from the public markets, there's a bit of education involved to explain to them that these companies that might have bought them are now trading on very different valuations than they were six months ago. I think that process is well underway in terms of the kind of private companies coming to terms with the new climate. um in terms of uh other opportunities um it's complicated you know people have listings in different countries and and that drives different um you know what influences uh share prices in one place um may not have the same effect in different places and and uh you know there's there's um There's a lot of affiliate assets out there, and I think there's a lot of people willing to have discussions. But we are going to be very, very cautious and make absolutely sure that the next deal is as good as the last two that we've done, which we think were fantastic.
spk05: Great. That's helpful. Thank you. And then for my follow-up question, you know, I appreciate the comments earlier. I wanted to kind of drill in and take your pulse further on the sentiment around iGaming legislation. At the moment, there are a handful of states entertaining the notion of adding iGaming, but just curious to hear your perspective on potential expansion in the near to longer term future. And if it feels like overall that there's appetite, you know, from policymakers for iGaming, you know, kind of the way we've seen with sports betting. Thanks. Yeah.
spk07: I mean, it, It is a bigger act, but Illinois and Indiana are going to have a serious think about it next year. There's chatter coming out of New York that they might consider it as well. Of course, that would be a total game changer if New York came online for only casino. The comments today on the call were not meant to be directed at any specific state, but You know, with a potential recession, with states under pressure on their budgets, it's just such a logical and straightforward way to boost state tax revenue. And if states have already gotten comfortable with online sports betting, it's not that big of a lead to add on iGaming. And, you know, having watched this industry grow from nothing 20 years ago to being regulated in virtually every single European country, that path of regulation is hardwired into our brains, and that's how we look at the world, and we don't think the U.S. will be any different. Clearly, it's a little slower, but we'll get there. There will be more states with iGaming, and it will be, at scale, a very important, a huge part of the overall market.
spk04: Great. That's helpful.
spk07: Thank you both.
spk04: Thank you. There are no further questions at this time. I'd like to hand the floor back over to Charles for any closing comments.
spk07: Thank you again to everyone for joining us today. We appreciate your support and interest in GAMI.com Group. We've had the strongest first six months to a year in the group's history, and we expect more of the same solid performance in the second half of the year. We look forward to updating everyone again when we report Q3 results in November.
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