Gambling.com Group Limited

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.

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.

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.