Gambling.com Group Limited

Hello, everyone, and welcome to Gambling.com Group's second quarter 2023 earnings results call. I am Peter McGough, Vice President of Investor Relations. I'm joined by Charles Gillespie, Chief Executive Officer and Co-Founder, and Elias Mark, Chief Financial Officer. The call is being webcast live through the Investor Relations section of our website at gambling.com forward slash corporate forward slash investor, and the 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 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 factor 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. Please also see our references to forward-looking statements in a related presentation and press release. During the call, there will also be a discussion in non-IFRS financial measures. The 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 press release, both of which are available in the investors tab of our website. I'll now turn the call over to Charles.

Thank you, Peter, and welcome, everyone. Today, we reported phenomenal second quarter results. including strong year-over-year revenue, adjusted EBITDA, and free cash flow growth. These results demonstrate our ability to win with our business model in regulated markets around the world at all stages of their development. The record results are just an early example of GAMLI.com Group's bright near and longer-term future as we further leverage our excellence in SEO and our proprietary data science systems to deliver consistent growth, healthy margins, and great returns for our shareholders. I'll provide a bit more color on our growth opportunities in a moment, but at the outset, I want to highlight that these opportunities reach beyond just new states coming online in North America. While North America is already our largest revenue contributor, and we are still in the very early stages of realizing our scale and potential in the market, Our near and long-term growth profile is not solely dependent on when new states will come online. New state launches will surely be additive to our business, but we also expect to continue to gain market share in existing states, benefit from the development of our new media partnerships, and realize the near and longer-term benefits from the launch of our new premier brand, casinos.com. I would like to also highlight that as online gambling markets mature, the importance of performance marketing solutions increases for two reasons. First, consumers become more selective and need more help. Secondly, operators begin to exhaust the capacity of their lowest cost acquisition channels. Broadly speaking, we expect to have more inventory to sell to operators, and for the operators to need our channel more than ever as markets mature. You can see that dynamic in the strong growth we continue to generate in the UK and Ireland, markets that have been regulated for nearly 20 years. Turning now to some of the highlights for the second quarter results, revenue rose 63% to $26 million, reflecting a 115% increase in North American revenue. and continued strength in the UK and Ireland, where revenue rose 25% year over year. We generated adjusted EBITDA of $9.4 million, and we converted a remarkable 91% of our adjusted EBITDA to free cash flow, which totaled $8.5 million in the quarter. Our ability to consistently generate mid-30s% adjusted EBITDA margins and convert a high-level adjusted EBITDA to free cash flow reinforces our belief that we have the most attractive business model in our industry. At the core of our success is our technology-focused approach which continues to differentiate GANWI.com Group from our publicly traded peers with best in-class organic growth. We expect to continue to drive strong organic growth for the balance of 2023 resulting in another year of record financial performance, including improved year-over-year profitability and continued robust free cash flow generation. Since our last call, we now know that Kentucky will launch sports betting on September 28th. Therefore, we are now including Kentucky in our guidance. We expect that the next state to launch after Kentucky will be North Carolina. While we suspect this will be during Q1 of 2024, We do not yet have any certainty about the launch specifics, and therefore North Carolina will remain outside of our guidance until we do have such specifics. Elise will give a full update on our RAISE guidance later in the call, but I am delighted to say that we now expect to deliver at least $100 million in revenue in 2023. Looking at the second quarter results in more detail, we benefited from unseasonably strong growth in US sports betting NDCs. Excluding this atypical outperformance, our results would have still exceeded consensus estimates. Beyond the strength in US sports, we also profited from continued strength in iCasino revenues in the US and in other markets. We delivered over 91,000 new depositing customers for our online gambling operator clients, an increase of 60% over Q2 2022. Our growth in NDCs is driven by our continuously improving ability to capture high intent traffic and leverage our proprietary technology and beta science systems to monetize this traffic through our expanding portfolio of websites. We are very pleased to have officially launched casinos.com on July 17th. As a new powerhouse brand, our long-term vision for casinos.com is for it to be the category defining destination for the regulated global casino market. We expect to accomplish in years with casinos.com what we accomplished in a decade with gambling.com. And I'll have a bit more to say on casinos.com at the end of the call. On an operational level, we remain focused on optimizing the positioning of our websites and leveraging our BI capabilities to widen the execution gap that we have created versus our peers. We will continue to prudently invest to improve the performance of our websites and our media partnerships to maintain industry-leading organic growth rates. Finally, The bonus finder acquisition has consistently outperformed our expectations since we acquired the business in early 2022. In order to accelerate the realization of all potential synergies from this successful acquisition, we negotiated and agreed to a final deferred compensation arrangement in a fixed amount of 18 million euros in exchange for the early termination of the earn-out period. With that, I will hand the call over to our CFO, Elias Mark, for a more detailed review of second quarter results and our increased guidance.

Thank you, Charles, and welcome, everyone. As Charles mentioned, we generated another quarter of record financial results. Revenue increased 63% to $26 million compared to prior year, or 60% in constant currency. The increase in revenue was driven by strong growth in NDCs in North America, the UK and Ireland, and the rest of the world. New depositing customers in the quarter grew 60% to more than 91,000. As Charles stated, second quarter results would have exceeded consensus expectations even without the tailwinds from unseasonally strong NDC generation in US sports. We expect to deliver a strong third quarter in line with market expectations, despite not modeling the benefit of the seasonally aided typical outperformance from the second quarter to carry over into the third quarter. Cost of sales during the second quarter from our media partnerships and the subscription business of roadtowire.com amounted to 0.9 million versus 0.5 million in Q2 of 2022. Total operating expenses were 24.3 million, an increase of 6.7 million. Total operating expenses included 6.1 million of fair value movements in contingent consideration related to the bonus binder acquisition. Adjusted for fair value movements, adjusted operating expenses were 18.3 million, an increase of 23%. The increase was primarily driven by additional headcount across our marketing products, sales, technology, and finance functions. Amortization expense decreased to 0.4 million as short-lived assets from the rotowire and bonus finder acquisitions are now fully amortized. For the full year 2023, we expect to incur amortization of approximately 1.9 million. We continue to hire selectively to drive continued organic growth. But at the same time, we expect operating leverage from revenue growth for the full year to outpace growth in operating expenses. And we expect to continue generating substantial free cash flow as our business model enables strong free cash flow conversion, which was approximately 90% of adjusted EBITDA in the second quarter. Net income totaled 0.3 million or one cent per diluted share Jan-Willem Wasmann, Adjusted for fair value movements in contingent and deferred consideration. Adjusted net income in quarter was 6.5 million and adjusted earnings per share was 17 cents per share. Jan-Willem Wasmann, As a result of the early termination of the bonus finder earner, there will be no related fair value movements in future periods. We generated second quarter adjusted EBITDA of 9.4 million compared to 3.6 million in Q2 of last year. This 161% growth represents the leverage we gain as our top line growth outpaces spending growth. Adjusted EBITDA margin was 36% compared to 23% in the second quarter of 2022. Total cash generated from operations of 4.6 million increased from 3.4 million in Q2 2022, driven by the strong year-over-year revenue growth partly offset by the earn-out payment for the bonus binder acquisition. We generated second quarter free cash flow of 8.5 million, and we continue to be positioned to entirely fund our organic growth initiatives from operating cash flow while continuing to generate positive free cash flow. Cash as of June 30th, 2023 was 31.3 million, a 2.3 million quarterly sequential decline, primarily reflecting the owner's payment for BonusFinder's 2022 performance. Turning to outlook, we expect to see typical seasonality in the third quarter reflecting the lighter sports calendar in July and August, followed by the launch of the autumn sports season in September on both sides of the Atlantic. It includes the start of NFL and college football, as well as the commencement of European Football League. Our strong second quarter results underscores the fact that the amount of performance marketing services in the online gambling industry remains strong, and our unique offerings are even more valuable to operators as they progress towards delivering profitability. We continue to monitor consumer behavior closely, and as of now, we have not seen any signs of pullback from consumers. Given these factors and our strong Q2 performance, we're increasing our 2023 full-year revenue and adjusted EBITDA guidance. The new ranges are for revenue expected in the range of 100 to 104 million compared to the prior range of 95 to 99 million. The new range represents year-over-year revenue growth of 31 to 36%. We now expect adjusted EBITDA to be between 36 and 40 million compared to our earlier expectation of 33 to 37 million with a new range representing year-over-year growth of 49 to 66%. Assuming the midpoints of our revenue and adjusted EBITDA ranges implies a full year adjusted EBITDA margin of 37%. Our updated 2023 guidance assumes that Kentucky will launch on September 28th. Beyond Kentucky, our guidance assumes no benefit from additional market launches or acquisitions over the balance of 2023. Our guidance for 2023 now assumes a Euro to USD exchange rate of 1.095. We repurchased 77,683 shares at an average price of $9.83 in the second quarter. We continue to have 8.9 million remaining on our 10 million authorization. and will continue to opportunistically repurchase shares when we believe it represents the best use of capital, is in shareholders' best interest, and we are able to be in the market. And finally, following the successful follow-on offering of 4.9 million secondary shares by certain pre-IPO shareholders, which of course did not increase the shares outstanding, but did increase the free flow, we are pleased to have an expanded shareholder base and improve daily trading liquidity. With that, I will turn the call back to John.