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spk03: Thank you, Operator, and hello, everyone. By now, everyone should have access to our first quarter 2021 earnings release, which is available on the Neogames website at www.neogames.com in the investor relations section. Before we begin the formal remarks, we remind everyone that the discussion today will include forward-looking statements. Forward-looking statements, which are usually identified by use of words such as will, expect, anticipate, should, or other similar phrases, are not guarantees of future performance. These statements are subject to numerous risks and uncertainties that could cause actual results to differ materially from what we expect. Therefore, you should exercise caution when interpreting and relying on them. We refer all of you to our recent SEC filings for more detailed discussion of the risks that could impact our future operating results and financial condition. We encourage investors to review our regulatory filings, including the form 6K for the quarter ended March 31st, 2021, when it's filed with the SEC. During today's call, we will discuss non-IFRS financial measures, which we believe can be useful in evaluating the company's financial performance. These measures should not be considered in isolation or as a substitute for our financial results prepared in accordance with IFRS. The reconciliation of these measures to the most directly comparable IFRS measures is available in our earnings release on the neogames.com website. Hosting the call today, we have Modi Malul, Neogames Chief Executive Officer, and Raviv Adler, Chief Financial Officer of the company. They will provide some opening remarks, and then we will open the call to questions. With that, I'll turn the call over to Modi.
spk01: Thank you, Jack, and good morning, everyone. Welcome to our first quarter earnings call. As you can see from our announcement, we're off to a strong start in 2021. We continue to execute ahead of expectations for our customers, unleashing their full iLottery potential, empowering them with the best technology platforms, the most entertaining game experiences, and a complete range of expertise, services, and market-leading solutions. The strong start to the year was driven by a few factors, including continued strong performance in the recently launched jurisdictions of Virginia and Alberta and the double-jackpot run in the U.S. during January. I'll touch on these in a moment. This morning, I will highlight some key points about our first quarter 2021 performance and discuss the trends we're seeing thus far during 2021. Afterwards, I will turn the call over to Raviv, our CFO, to run through our financials and business performance. For the first quarter, revenues were $13.3 million, which is up 46.5% compared to the first quarter last year. In addition, our share of NPI revenues for the quarter was $8.2 million compared to $1 million during the first quarter of 2020. Looking at the two components added together, they equate to $21.5 million for the first quarter of 2021, representing growth of approximately 114% year over year. Equally important is that we're growing profitably as our adjusted EBITDA growth outpaced revenue growth. For the first quarter of 2021, we generated adjusted EBITDA of $9.7 million, up about 148%, compared to the same period last year. As I touched on briefly earlier in my remarks, the better than expected results for the quarter were due to a combination of a few factors. First, Virginia continues to operate ahead of expectations. We're seeing a higher and accelerated adoption rate compared to what we experienced in other jurisdictions. As we said in our Q4 call, we revised our expectations higher after we saw a faster pace of player conversion into e-instant games sooner than expected. These trends continued through the first quarter and were even amplified with a double jackpot, which brought a significant increase in new players and enabled the lottery to introduce them to non-jackpot games and especially e-instants. Interestingly, as many of you know, online sport betting launched in Virginia during January. Simply put, the launch of online sport betting has not slowed down iLottery in any way. iLottery sales continue to grow during the quarter, breaking records simultaneously with the introduction of online sport betting in the state. Second, outside of the U.S., revenues in Alberta exceeded our original expectations after only two full quarters of operations for the province's only regulated iGaming platform. and iLottery website, PlayAlberta. Results are growing, and we continue to introduce new gaming verticals. This quarter, we introduced LiveDealer, and we are beginning to implement the much-anticipated DrawGames vertical with a wide range of games. Third, results in Michigan continue to perform well, side by side with the introduction of online sport betting and iGaming. There has been a lot of market focus in Michigan, as more than 10 iGaming and online sport betting sites launched and aggressively advertised during the quarter. Along with what we are seeing in Virginia and what we have been experiencing in New Hampshire, our first quarter results provide additional data points supporting our view that iLottery can grow and thrive in parallel with introduction of sport betting and other forms of online gaming, given the unique proposition that lotteries have to their audiences. We've seen similar dynamics in other jurisdictions in Europe and in the U.S. Lastly, as we mentioned in our Q4 call, we benefited from a double jackpot run from Mega Millions and Powerball that carried into the early part of first quarter. While we initially enjoyed the benefits of increased traffic from these new players, we have been able to continue to develop deeper relationships with them which will continue to benefit us over time. Looking further out at the landscape, we remain confident that the momentum we have generated over the past year has put us in a strong position to continue growing in our existing markets and to be well positioned to take our successful model to new markets. We continue to believe that the global iLottery market is poised for growth and especially in the U.S., where we carry a market-leading position, and the market is still very new, and the opportunity for growth from both new states and live states is tremendous. When we look at how the U.S. market evolves, many states continue to have internal conversations and make inquiries into iLottery, especially as they see the strong results coming out of existing live jurisdictions, particularly those where we operate. We remain deeply engaged in providing data and insights to demonstrate the success and importance of iLottery and the material impact it is having on good causes and state budgets. One of the main reasons for our success is the superiority of our technology and content. As always, it is important to mention that investors should expect us to keep investing in technology and product innovation. as that drives the monetization advantage we provide our customers and provides the foundation for both internal and external growth. The success we have achieved is clearly tied to the investments that we are making in the business, which will total roughly $20 million in this calendar year. Together with our technology, our content is a significant driver of growth for our business. The superb games developed by Neo Game Studio play a central role in driving the growth of our full turnkey accounts. We also see growing interest in our content by lotteries with existing iLottery programs. One such deal has been announced with a launch with Austrian lotteries this quarter, and we see similar interest in a growing pipeline. We are proud that our results continue to strengthen as we execute on our internal and external growth strategies. In terms of execution on internal growth, one other way to demonstrate our leadership in the U.S. market is by the fact that the top three U.S. states for iLottery in per capita sales are our markets, Michigan, New Hampshire, and Virginia. This demonstrates the value added to all our stakeholders, including our shareholders and customers, as well as serves to highlight the value we present to prospective customers. With that, I'll now turn the call over to Raviv.
spk00: Thanks, Moti. Before I get into the results, as a reminder when we discuss our results, I would point out that all of our iLottery business in North America operates through our 50-50 joint venture Neapolitan Interactive, or MPI, except in Michigan, which is reflected in our top-line revenues. To be more precise, our contracts in Virginia, New Hampshire, North Carolina, and the province of Alberta run through NPI. Except for the NPI contracts, we conduct all of our business through NeoGames. As a result, from an accounting standpoint, as many of you know, we generate revenue and earnings through our only-owned operation and through our equity interest in NPI. Revenue as reported on the income statement, which excludes our share of NPI revenues, was $13.3 million during the first quarter of 2021, up 46.5% over the same period last year. Our share of NPI revenue was $8.2 million during the first quarter of 2021, compared with $1 million last year. The sum total of these two numbers was $21.5 million during the first quarter, representing an increase over 113% year-over-year. For the quarter, our adjusted EBITDA was $9.7 million, up 147% compared with $3.9 million last year, as we continue to demonstrate our ability to grow profitability alongside with revenues. We started off 2021 strong. which puts us in a great position to continue to execute during the remainder of 2021. With favorable results in Virginia and Alberta, added to its strong performance in our existing customer, we're starting to see greater diversification in our revenues across a broader number of key accounts. Turning to our balance sheet, we ended up this quarter with about $63.3 million worth of cash and cash equivalents. Our outstanding debt at the quarter end was approximately $135.6 million at the weighted average interest rate of 1.17%, leaving us in a net cash position of $27.7 million. Moving into guidance, as Moti mentioned, first quarter results were ahead of our expectations. As we've mentioned, we had several tailwinds, including higher volumes in Michigan, Virginia, and Alberta. and as a result of in part of ongoing implication of stay-at-home policies in most of our jurisdictions, as well as benefits from the dual US jackpot run. The good news so far is that the retention rates for new players are in line with past trends, which are favorable for 2021 outlook. As we look forward, we try to balance the aspects of what we can fairly control and estimate versus what we cannot control. With this in mind, looking ahead, we estimate that the full year 2021 revenues, plus our share of NPI revenues, will be between $73 million and $77 million. At the midpoint, the guidance represents year-over-year growth of 28%. The revenue guidance does not include launching of any new turnkey contracts. With that, I will turn the call back to Monty.
spk01: Thanks, Raviv. As I mentioned earlier, We're seeing success across the board in our markets. We ended the quarter as a clear market leader in every KPI in the growing USI lottery market, according to an ENK Gaming USI lottery tracker report for the first quarter of 2021. Our results continue to demonstrate the strength of our model in generating significant value for our customers and thus for NeoGames and our shareholders. We remain excited by the momentum we are generating, and we believe NeoGames remained well-positioned to continue to capitalize on the current landscape as a leader in the rapidly expanding global iLottery market. With that, we thank you for joining us this morning, and we're happy to answer any questions.
spk06: Thank you. If you have a question at this time, please press star then 1 on your touch-tone telephone. If your question has been answered or you wish to remove yourself from the queue, please press the pound key. To prevent any background noise, we ask that you please place your line on mute once your question has been stated. Our first question comes from the line of Justin Donnell with Stifel. Your line is open. Please go ahead.
spk04: Great. Thanks, operator. Morning, Monty. Morning, Raviv. Great to hear from you this morning, and thanks for taking our questions.
spk01: Hey, Jeff. Morning to you too.
spk04: Hey, morning. Moti, last time we spoke during Q4 earnings, you had mentioned a bit of an educational period playing out early in the year, just getting some turnover amongst the decision makers for lottery expansion. And you touched on this a bit in the prepared remarks, but just curious if you could talk a bit further on how those are going at a high level. Do you find most are generally receptive to the idea of adding an online channel? Are you hitting any sticking points in these discussions? Just any color there would be helpful.
spk01: Yes, of course, Jeff. Great question, of course. Yes, we do continue those discussions, and I would want to point out maybe two or three things that have come up in these. First of all, as more and more states launch online sports betting and are looking at what tax rates and what direct taxes are actually collected into state budgets. There is a growing interest that we see on iLottery in debt and how it compares to the others. It's not that one is on the expense of the other, but it helps us promote the cause largely because iLottery contributes much more in dollars spent than taxes collected through online sports betting or iGaming in the majority of the state structures. So that's definitely a key point of discussion that we have with regulators. We have also seen that in quite a number of states there has been bills introduced with different types and shapes of iLottery mentioned within them in Massachusetts, in Missouri, in Maryland, I think in Arkansas and quite a few others and other states that do not require bills. Connecticut have passed a bill, as you guys know, in a trend that we have noted in the past, which is looking at the comprehensive approach in gaming expansion in the state and discussing iLottery in the context of what other gaming expansion looks like for sport betting and iGaming. So that's a good sign forward. I would say the third thing that we have experienced in Q1 was simply the fact that Mindset and attention of legislators has been largely to deal with COVID, so available bandwidth to discuss other issues were relatively limited, and we have done our best to promote that. And we do expect that when states look into the rest of the year, the voice of what we had to say will turn itself into actions.
spk04: Okay, great. Thanks. That's helpful and encouraging as well. Switching gears a bit, I wanted to touch on content, specifically the trend of platform providers also including third-party content that they're offering. And you talked to this, you know, a little bit in the prepared remarks. As it stands, how much do your various U.S. state contracts also offer access to third-party instance game content? And conversely, how many states are you involved with on the content side? without necessarily holding the platform contract? And how do you see this evolving as the market matures?
spk01: Sure. Specifically in the U.S., up until recently, we have taken a strategy that we wanted to focus the entire attention of our fantastic game studio to drive the growth of our turnkey accounts. However, as I said, both in North America as well as in Europe, we're now recalibrating those efforts to also introduce future deals that will see our content offered across iLottery programs that exist with other providers. So we did take note of that. One such was launched during the quarter in Austria, and we are working on a pipeline of additional deals across the world. In the turnkey accounts that we have in North America, whether it's in Alberta and Canada and also in the U.S., there are, in quite a few of them, a third party is offering content as well and integrated into our platforms in order to be offered to the market.
spk04: Okay, great. Thanks. That's very helpful. That's all for me. I appreciate all the color and congrats on another really strong quarter here.
spk01: Thank you, Jeff.
spk06: Thank you. And our next question comes from the line of Barry Jonas with Truist Securities. Your line is open. Please go ahead.
spk05: Gentlemen, it's actually Matt call in for Barry today. It's just kind of a high level one to kick it off the How are you guys thinking about, you know, the positive results we've seen around COVID for I lottery, and how that's influenced kind of the market, whether or not that's permanent, lingering? Or how are you thinking about the impact of just COVID in general, on the business?
spk01: Well, of course COVID has impacted positively any type of business that dealt with online in the last year, and iLottery in that perspective was no exception. The book on post-COVID has not been written, as I said a few times. We may anticipate that some of that will turn into additional entertainment options that players will start to reengage with. However, we're confident that the player base that joined during this more than a year, close to a year and a half process, will allow us to create longer-term relationships with them and reengage, and we are definitely happy with the retention rates that we're seeing. So it's still an unknown question, I would say, carefully on how much of that remains, but our view and what we are seeing I would say anticipating is that we should be able to retain a major portion of that through marketing efforts.
spk05: Got it. And you've talked a lot about Michigan and how successful that market's been. As we think about additional states potentially rolling out iLottery, I'm just curious to get your thoughts on why that state has been so successful and if there are things that other states should or should not follow.
spk01: As we said quite a few times in the past, Michigan was a tremendous success and still is a tremendous success that have shown the way forward for so many others. However, it's definitely not an exception. And as you can see, we have two other customers occupying the top three places of per capita sales in the U.S. New Hampshire is performing fantastically well. and in many patterns even ahead of what Michigan has done in relatively speaking to the timeline that they are live. Virginia, that has been phenomenal in breaking records since they went live, and we have reported that more specifically in our Q4 and end of year, and we're seeing continuous trends into Q1. And I would say that the learning from what Michigan has done properly and correctly has been adopted by other customers, and there is a lot of sharing between them. North Carolina as an account is also interesting to mention, while it still doesn't have the ability to offer instance, and we're working with the lottery to try and approve that into the future. But even on a draw games only offering, since we have transitioned and launched with our solution late 2019, to be more exact at the beginning of November 2019, About a year and a half has passed since, and we have seen that the revenues on the similar portfolio that was available before transitioning to our solution are now coming close to three times what the lottery has experienced in the past. So we definitely are working very close with our customers to show success, even if only draw gains are allowed.
spk05: Perfect. And if you don't mind me sneaking one more in here, just looking for maybe an update on the process in Ohio. Our understanding is there was a process in 2019. It pops up in the news from time to time. And Neopolar was ultimately selected the winner. There's still some uncertainty there. How do you expect the process to roll out from here?
spk01: There's been a number of different committees that have discussed the broader approach to gaming expansion in the state since the beginning of this year. We've been engaged with all of those committees to explain the potential, to explain our position, and as I mentioned earlier, to try and educate for the cause and the importance of approving iLottery to go live in that state. Those processes have not yet completed themselves. and we remain closely connected with them to do our very best to ensure that the cause for the lottery primarily and also for us will end up positively.
spk05: Perfect. Very helpful, and congrats on a great quarter.
spk01: Thank you.
spk06: Thank you. And our next question comes from the line of Chabonon with Macquarie. Your line is open. Please go ahead.
spk02: Hi, Moti. Hi, Raviv. Thanks for taking my question. Nice first quarter. Thank you. I wanted to start with EBITDA, understanding that you're not giving EBITDA guidance for 2021. You did give revenue guidance, which implies roughly $18 million of revenue per quarter for the next three quarters. You also mentioned that you're continuing to invest in technology, $20 million for the year. Are there any other items that we should be mindful of when we think about either flow through or how EBITDA could come into a clearer picture for the next three quarters? Thank you.
spk00: Spot on, Judd. Thanks for the question. And Without, as you rightfully mentioned, without entering into EBITDA guidance or economics of particular accounts, we would just like to point out your attention to, and the market's attention to the fact that, and we've touched that also on our commentary, relative to the diversification of our portfolio, There is differences in the accounts that we serve and the type of the offering that we offer in each jurisdiction, which drives, obviously, different EBITDA margins from the traditional, I would say, iLottery program that we offer in the U.S., which you're familiar and the market is familiar with, given our previous filings. That being said, we're extremely happy with the margin that we managed to produce alongside with the revenues growth, and we do hope to see the very same positive EBITDA trends going forward into the year.
spk02: Okay, great. Thank you, and, yeah, appreciate it. In light of your not giving guidance, that's helpful. And then with respect to the William Hill-Caesars transaction closing, I know that's been a nice contribution from the use of IP rights historically. Caesars recently talked about rolling out new markets. I'd envision that you guys will be certainly helping them given your success with William Hill. Is there any update just in terms of how we should think about the current business? And then I'm guessing it's too early to tell how we should think about the long-term value of that relationship given the expiration, I believe, which is at the end of next year. Thanks.
spk01: Thanks, Judd. Obviously, we're very happy with the relationship that we have with William Hill and now with Caesars. You have correctly said that they have even amplified their ambitions on market access, looking now also at converting certain Caesar brands to the platform on which we take a significant portion in the U.S. market. The way that this has met us, And I believe we've touched that already in the Q4 and end of last year report. It's simply that the type of services that we are providing to Caesars and William Hill have been asked to be extended with additional teams and additional efforts in order to support the accelerated expected pace of opening new states and also now looking at additional brands and content types into that. So while this is not a revenue share deal, as you recall, these additional services that we have been asked to amplify will most probably meet us with a certain portion of growth in that account revenues. You are correct to assume that longer term is something that we haven't yet identified, discussed with Caesars, but for the moment and for the foreseeable future, teams on both sides are focused on an accelerated opening of new markets and adding over the Caesar website and brand.
spk02: Thank you. And then lastly, I just wanted to ask about any M&A opportunities, I know last quarter you mentioned that there was nothing kind of on the table and everything that you kind of plan to roll out would be in-house. But just given your cash position and the froth of the M&A market and the valuation of your stock, do you envision other M&A kind of tuck-in opportunities that could fit into your strategy and what you offer from a comprehensive standpoint?
spk01: Yeah, great question and a very valid one, Chad. I would say that, you know, as always, when we work as newcomers to the market, we prefer to take a crawl, walk, run approach. You know, up until now, we've dealt and concentrated with learning how to be a member of the financial market. We've only listed just a bit less than six months. and we were mainly concentrated on internal growth and managing our infrastructure of working with the market and with you guys. But we are now entering a strategic process to review what M&A should look like and what type of contribution we would want to see that play into the future of NeoGames. And I assume that the result of such a process that we would be taking with the board will be a further definition of the focus of those type of opportunities that we should be looking at.
spk02: Thanks, Moti, and congrats on the quarter.
spk01: Thank you, Chad.
spk02: Thanks a lot.
spk06: Thank you, and I'm showing no further questions at this time, and I would like to turn the conference back over to Moti Malou for any further remarks.
spk01: Thank you. Thank you. We first and foremost thank you guys for joining us. You know, as the newcomers into the market, we have such a high appreciation for the interest that the market is showing in our company and our performance, and the analysts that are taking the time to speak with us. We are greatly, greatly appreciative of everyone's support, both our customers and our employees that have been working for more than a year in a COVID situation and helping the business moving forward. And that's it. Thank you, guys. Have a fantastic weekend ahead of you.
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