NeoGames S.A.

At this time, all participants are in listen-only mode. A question and answer will follow the formal presentation. Please note that this conference call is being recorded today, March 10, 2022. I will now turn the call over to Mr. Zach Skorning with ICR.

Thank you, Operator, and hello, everyone. By now, you should all have access to our fourth quarter and full year 2021 earnings release, which is available on the Neogames website at www.neogames.com in the investor relations section. Before we begin our formal remarks, we need to remind everyone that the discussion today will include forward-looking statements. These 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, and therefore you should exercise caution when interpreting and relying on them. We refer all of you to our recent SEC filings for a 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 20F for the year ended December 31st, 2021, when it is 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. A reconciliation of these measures to the most directly comparable IFRS measure is available in our earnings release on the neogames.com website. Hosting the call today, we have Moti 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. And with that, I'll turn the call over to Moti.

Thank you, Jack, and good morning, everyone. Last night, we released our fourth quarter and full year 2021 results. Before touching on the fourth quarter results, I will highlight some of the accomplishments we are proud of as we wrapped up our first full year as a publicly traded company. I will then provide an update on the fourth quarter as well as the trends we are seeing in the market before turning the call over to Raviv to run through our financials, business performance, and 2022 guidance. However, before I begin, I would like to dedicate a few words to our teammates and colleagues in Ukraine. On behalf of myself, our management team and board, as well as the entire Neogim family, our thoughts and actions or with our colleagues based in Ukraine and our families. They are enduring an unprecedented and unspeakable crisis in their nation, and their safety and well-being is our prime concern. They have shown unparalleled determination and bravery, and they have our wholehearted support in their justified cause. We continue to provide assistance to the best of our ability to support their relocation efforts to safe areas in and outside Ukraine, and we pray for these difficult times to end swiftly. I will provide further explanation in a few minutes about our business continuity efforts and impact. Looking back, it has been a very exciting year for Neogame. Our first full year as a publicly traded company. We remain concentrated on our vision to help drive iLottery customers to reach their full potential by empowering them with the best technology combined with powerful game experiences and a full complement of market-leading expertise and insights. In the U.S., according to Ehler and Krejcik, the top three states for all of 2021, as measured by gross eye lottery sales per capita, were Michigan, New Hampshire, and Virginia, all NeoGames customers. And this makes us very proud. Furthermore, while our customer state account only represents 33% of the population of states with iLottery, the new games powered states generate 67% of iLottery GGR generated in the entire U.S. market. In Alberta, investments in expanding gaming verticals powered PlayAlberta to a record year with a full rollout of draw-based games, live dealer, and online foreplay. More broadly, We launched multi-game progressive jackpots with instant content for three customers already, as well as innovative online raffle technology. We have launched several successful product innovations through our Neo Game Studios, titles which continue to be the cornerstone to the revenue growth we've seen across our key accounts. We entered into content deals with several national lotteries across Europe, including Austria, Italy, and most recently, Turkey, through our partner, SQL Fund. We also announced the first New Game Studio content deal in Canada with Atlantic Lottery Corporation. While the revenue benefits from these are currently modest, we view them as important fundamental investments in relationships that may grow with other future products and services we may be able to provide. We're also proud of our strong partnership with Cedars Entertainment, In 2021, as part of the Liberty Solution, we went live with five more states, and including New York, which launched in early January, and Illinois, which launched this week, bringing the total number of states that we support the online sports betting or IT gaming offering to 12 states. As a result, revenue contributions from this strong partnership have grown by almost 20% in 2021 compared to 2020. We ended 2021 with strong momentum that has carried over into the start of 2022. As I'm sure most of you are aware, in January, we announced our offer to acquire Aspire Global. This transaction represents a major strategic step forward for us and will create what we believe is a global leader across all interactive gaming verticals, including online lottery and the gaming industry. As I mentioned in our investor call held in January when we announced the transaction, we view the combination will inspire the natural strategic progression of our company. The transaction will enhance our scale and competitive position across all business lines. The transaction process continues to progress in line with our timing expectations, and we still expect it to close in the first half of 2022. Looking at our results, we continue to significantly grow our business year over year and outperform the market. For the fourth quarter, our revenues, combined with our share of NPI revenues, was $21.3 million, representing approximately 15% of year over year growth. For the full year, this number was $84.5 million, representing an increase of about 44% year over year. We are incredibly proud of these results and we'll continue to execute our growth strategy as we take this momentum into 2022. Looking closer at the recent trends we're seeing across our customer base, as reflected in our prior guidance, we saw single-digit sequential decrease in Michigan iLottery sales. However, with the momentum we saw during the latter part of Q4 and as we begin 2022, We believe trends are beginning to stabilize in the market as we anticipate that they may, and we hope to return to modest growth at some point during 2022. We continue to work closely to support the measures and disciplined approach demonstrated by the state lottery with its high lottery program and remain confident that the foundations our joint teams have built in the state will lead to sustainable long-term growth as we have seen in other markets with similar landscapes. Keep in mind, however, that year-over-year comps for the fourth quarter were partially impacted by the significant double jackpot run which started in December 2020. And we were particularly evident in the year-over-year comparison next quarter. Outside of Michigan, our North America accounts continue to benefit from robust growth due to the rollout of our platform and introduction of new content throughout the year. As a result, Most of our accounts have more than doubled in their revenue contribution during 2021 compared to 2020. Specifically, both Alberta and Virginia have excelled beyond our expectations. In Alberta, for example, following the rollout of online sports betting, live dealer, and drawbait games, we have driven the market to become our second largest account, despite the fact that we only launched there a little over a year ago. We are very proud of the performance of this account and see it as a model of where we can add significant value to new accounts that make full use of our platform as we implement the widest range of offerings from iLottery to iGaming and Sparketing, driving significant revenue growth. Our relationship with Savka has also proven to be highly beneficial as they grew online GGR to be about 39% of their total GGR generated in the Czech Republic, another great example of our tech-driving growth for lottery operators expanded into a wider range of gaming particles. The regulatory environment and state authorization in the U.S. for iLottery continues to evolve in the states which we have discussed on prior calls. Among others, We see certain progression in iLottery legislative discussions in Ohio, and we continue to monitor for an RFP in West Virginia as a further step to the process that commenced late last year. Outside of the U.S., we see continued movement of lotteries formation and deregulation in the Brazilian market, which we believe will provide for iLottery opportunities in the years to come. With that, I want to come back to the conflict in Ukraine. As many investors are aware, we have a portion of our employees based in Ukraine. First, it's important to note that our revenues from ILO 3, which represents the vast majority of our revenue base, are driven from long-term recurring revenues which are not impacted by the crisis. To that end, a little bit of a background. Over the first part of the year, we have been planning for and are now implementing a business continuity program which includes several critical elements. First, by working with all of our global teams, we have successfully ensured that there has been no service or system disruption throughout our customer base. Second, we redeployed ongoing development efforts across our global teams, including many members of our Ukrainian teams who are currently operating from safe locations, both outside and inside Ukraine. Third, In order to mitigate the potential for future impacts to development and product innovation for our customer base, we have stepped up our recruitment activities in other locations where we have existing business relationships, such as Poland, Bulgaria, and others, as well as supporting the relocation efforts of our Ukrainian employees to safer regions, such as in the Czech Republic and elsewhere. Indeed, certain portions of our revenues Within the fee-for-services segment is revenue that was partially tied to our Ukrainian workforce, providing such development services that we are working to mitigate. Our guidance, which Raviv will cover in greater detail, is a bit wider than normal, and among other items, it takes into consideration all the possible outcomes related to the Ukrainian crisis. I would like to also mention in this regard that our entire customer base, in North America and Europe has been extremely accommodating and extending additional assistance in a variety of ways. For example, SASDA in the Czech Republic has been very helpful in our rapid effort to create a safe harbor for our employees to relocate to, and for this, we are very grateful. This is such a great demonstration to the strong relationships we have developed through the years with our customers. With that, I'll now turn the call over to Ravi.