NeoGames S.A.

Good day, ladies and gentlemen. Thank you for standing by. Welcome to the Neo Games second quarter 2022 earnings conference call. This time, all participants are in listen-only mode. Question and answer sessions follow the formal presentation. Please note that this conference is being recorded today, August 11, 2022. I'd like to turn the call over to Mr. Jeff Cornet with ICR. Please go ahead, sir.

Thank you, operator. By now, everyone should have access to our second quarter 2022 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 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. 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 6K for the quarter ended June 30th, 2022, 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. 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 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. With that, I'll turn the call over to Moti.

Thank you, Jack, and good morning, everyone. Last night, we released our second quarter 2022 results. This morning, I will highlight some key points about the second quarter and provide an update on our current business initiatives and the trends we are seeing in the market. Raviv will then run through our financial results, which we recognize are a bit more complex this quarter than in the past due to the SPAR transaction. Overall, we had a very exciting and productive quarter. Of course, the most significant development since we last spoke is that we completed a tender offer for the outstanding shares of Aspire Global on June 16. In total, over 99% of shares in Aspire were tendered. The less than 1% remaining outstanding are subject to a squeeze-out proceeding, which we expect will be completed shortly. With the tender behind us, the real work begins. as we have positioned ourselves in such a prominent position that enables us to become a global leader in providing technology and content across iLottery, online sport betting, and iGaming to our lottery customers and to leading online gaming operators in regulated markets. We are very excited about this transformational combination from a number of important perspectives. Our technology and product offering for lotteries are now unmatched. Second, we have strategic and significant growth opportunities across iLottery, online sport betting, and iGaming, which has a combined time of over $70 billion. That, together with our combined track records of profitable growth, opens up even more opportunities ahead. We continue to be focused on markets with attractive potential and significant barriers to entry. And with the addition of our talented colleagues from Aspire, we have a broad, experienced, and innovative management team that we believe places us in a position to lead the industry. We are hard at work integrating the teams and our operations, and we are realizing more growth potential synergies as we progress in the process. There are lots of things to be done. However, even as we are in early phases of integration, we are happy to report that the combination is already bearing fruit. When we announced the Aspire transaction earlier this year, one of the key reasons for putting our two companies together were some of the trends we were seeing with our lottery customers, where more and more lotteries globally are expanding into additional verticals within their online offering, specifically online sport betting and iGaming operations. From our perspective, the ability to provide a full range of products combined with our experience in operating across all verticals is becoming increasingly important. To that end, we announced a multi-year turnkey project with the existing lottery operator in Brazil's second largest state of Minas Gerais, expanding our reach to an additional 21 million people. With this agreement, we have added a new turnkey lottery customer and entered a very attractive new market. We are excited about this opportunity for several reasons. First, this will be our first launch of e-instant games and online sport betting. in the regulated market in Brazil. And in fact, it is the first one in the entire Brazilian market. Second, this puts us in a great position for future opportunities as Brazil continues to regulate lotteries state by state and develop other forms of regulated gaming. And third, we have found this to be an advanced market with access to innovative e-payment solutions and overall high e-commerce adaptations, which usually suggests a good foundation for iLottery and iGaming operations. In the end, we won the business because we were able to offer a comprehensive digital solution, a solution that provides our advanced newsflare platform, market-proven e-instant content from our in-house iLottery game studio, and a complete online sports betting solution with B2Bets. Together, our offering was what our new partner needed to achieve its goal of building on the successful retail lottery and digital keynote program available in the state and expanding further with a wider online portfolio. This is precisely the type of business we envisioned we could win when we conveyed the key strategic benefits of the Aspire transaction earlier this year. We have started a project already with our talented teams, and we expect to go live in Brazil during the first half of next year. In addition to Brazil, we are seeing benefits in other areas of the world. In Canada, at the end of 2021, we added PeriPlay content aggregation solution for PlayAlberta, and we have launched a suite of content from its in-house studio wizard games. which has been quite popular with the players and growing its market share. Recently, PeriPlay continued that success and expanded its presence in Canada, entering into an agreement with the Canadian Atlantic Lottery to offer its Fusion content aggregation platform and games from Wizard Studio throughout the region. Then, last week, We entered into an agreement through B2Bet with Sojogo, the lottery provider in Mozambique. Sojogo is majority owned by Santa Casa Global, which is the global arm of our long-standing customer, the Portuguese Lottery, a relationship we were excited to expand. In this case, we are entering a new lottery market with our B2Bet offerings and providing our proprietary support book solution for both online operations and the retail network. Looking forward, we feel really good about having all these various offerings at our disposal as we look to expand our global presence. Looking at our results for the quarter, the total revenues plus our NPI revenue interest increased to $31.3 million, including approximately $8.3 million of revenues from Aspire. Even when excluding Aspire, The quarter's results were up 7.6% year-over-year and up 2.6% compared to the first quarter of 2022. The revenues from Aspire-nominated functional currency, Euro, grew 17% year-over-year, as well as 5.5% sequentially from the first quarter. These results highlight the strong trends we are seeing in both areas of the business. Moving to a few updates on our various business areas, we are happy to report that all of our turnkey accounts in the U.S., Canada, and Europe posted quarter-over-quarter revenue growth despite typical seasonality during the second quarter. Michigan continues to perform in line with our expectations, posting nice sequential growth compared to the prior quarter and continuing the positive trend in the account. Results in Canada through the AGLC continue to perform well and show sequential growth as I touched upon earlier. Virginia, too, continues to impressively outperform in the current environment as the account innovates in many areas, launching advanced marketing programs and expand its product portfolios. Turning to the Aspire side of the business, we are taking great strides in integrating the Aspire segments. For the Aspire core business, which provides full iGaming solutions, including our PAN technology and managed services to iGaming operators in regulated markets, we signed two new full product and managed services deals in European regulated markets with B2C operators. On the sport betting side, we are experiencing increased momentum in the development of this business area. In line with a long-term plan to enter the U.S. market, we are pleased to announce that B2Bet's sport betting platform is now certified with GLI33 as an events wagering system, which practically means that our sport betting platform is certified to operate in the North American market. As such, we now have our POM certified and live in 50 markets, and our sport betting platform is ready for B2B sport deals. In addition, through B2Bet, we expanded our presence in Africa a market where it already has a dominant position with its sport betting technology, partnering with UtopBet, the Ethiopian retail and online brand for which B2Bet will provide its proprietary sport book platform and risk management. We expect to launch early next year, which will expand our market's dominant presence in Africa to 27 countries. Our content aggregation and iGaming arm, Parapay, continues to perform very well and continues its growth in all its business areas. ParryPlay signed 12 new partnerships to provide content aggregation and games, including with industry leaders such as BetMGM, which went live with games from Wizard Studio in Michigan and New Jersey, as well as a deal with DraftKings in the U.S. Through ParryPlay, we also expanded our relationship with Caesars, to provide our gains and aggregation in the U.S. and Ontario and Canada. Turning to the macro environment outlook, while there seems to be possibility of a recession, we would like to remind everyone that lottery is typically an industry that has been less impacted during similar macro-related environments. With this in mind, we're currently not seeing any impact to any of our business lines as a result of the macro environment. However, we will continue to monitor as the economy develops. With that, I'll now turn the call over to Raviv.