NeoGames S.A.

Good day, ladies and gentlemen. Thanks for standing by and welcome to the NeoGames fourth quarter and full year 2022 earnings conference call. At this time, all participants are in a listen-only mode. Question and answer session will follow the formal presentation. Please note that this conference call is being recorded today, March 7th, 2023. At this time, I'd like to turn the floor over to Shox Cornett with ICR. Please go ahead.

Thank you, Operator, and hello, everyone. By now, you should all have access to our fourth quarter and full year 2022 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 December 31, 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. 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. With that, I'll turn the call over to Moti.

Thank you, Jacques, and good morning, everyone. Last night, we released our fourth quarter and full year 2022 results. Before touching on the results, I will highlight some of the accomplishments which we are proud of as we wrapped up the last year. I will then provide an update on the results as well as the trends we are seeing in the market before turning the call over to Raviv to run through our financials in further detail and 2023 guidance. We ended 2022 on a very strong note. Our principal mission is to capitalize on the expansion of the global lottery industry into the online channel. And we think the actions and decisions we made during the past year have moved us further along that path as we continue to build a global leader in the industry. As I have mentioned many times before, with the lottery business going digital, we see an increasing amount of convergence. Our lottery customers require a broad range of products and services to support them across lottery, sport betting, and online gaming. Combining NeoGames and Aspire last year is allowing us to deliver the full suite of products and services that our customers demand. Since the acquisition, we have unlocked our potential beyond our core focus in the lottery industry. With the expansion, we are becoming a key player within the iGaming and online sports betting markets. We see this as a significant opportunity for us as it has allowed us to vastly expand our addressable market. In our view, we are very well positioned as an industry leader capable of providing our customers with a full suite of solutions to meet all their digital needs. Our recent launch in Brazil, which I will touch on further, is a perfect example of the revenue synergies we continue to target around the globe. Raviv will discuss our financials in more detail later. However, I wanted to touch briefly on some highlights from our financial results. On a consolidated basis, the total of revenues plus our share of NPI revenues grew to $83 million for the fourth quarter and $210 million for the year. As a reminder, the full year results include a little bit more than half a year of the Aspire Global business. At the high level, we continue to experience solid growth across all our businesses and are beginning to see revenue synergies as anticipated from our merger last year. In iLottery, looking at revenues and our share of NPI revenue, we had a record quarter and a record year with $28 million for the fourth quarter and $98 million for the full year. In addition, we continue to see improved numbers sequentially in each quarter throughout the year. In iGaming, on a pro forma constant currency basis, compared to the same period last year, we posted 27% growth in the fourth quarter and 19% for the full year. On the adjusted EBITDA line, we also posted quarterly and annual records of $18 million and $54 million, respectively. Looking closer at the iLottery business, we had strong performance across all our key accounts. The U.S. lottery market had its largest-ever parable jackpot of over $2 billion when it hit in November. that was a major contributor to the impressive performance across all U.S. accounts, and as a result, during the quarter, all of our U.S. customers experienced both year-over-year and quarter-over-quarter growth. Yet, there is another long-term benefit, as these large jackpot runs are very effective customer acquisitions and marketing opportunities where benefits accrue to our customers' businesses long after the jackpot is hit, and that allowed our customers to carry the strong results through the end of the year. Beyond the impact of the November jackpots, we had strong growth in our key accounts throughout North America. Our growth and success has also been fueled by several of our own initiatives geared to drive organic growth. Some of the recent game launches from our NeoGames studio in Q4 contributed immediately. For instance, we released The Lamp in Virginia and it quickly became the most successful game launch for that online lottery thus far. Given the success, we quickly rolled out the game into additional markets with localized versions where we also see similar success patterns. The quality and high performance of NeoGame Studio is one of the key advantages we provide our customers with to enable them to reach their leadership positions and full potential in the market. All this positive momentum is evident in our full year results. For the full year 2022, we grew our North America iLottery business revenue organically by approximately 16% year over year. Importantly, growth has not confined to North America during the fourth quarter. In Europe, we experienced growth across our key markets as well, where the year-end holiday season and marketing activities seem to have piqued players' interest. We ended the year with terrific momentum and continue to see great progress at an account level as we work to carry that momentum into 2023. As the calendar turned to 2023, in January, we formally entered into a joint venture agreement for Neopollard Interactive and amended our Michigan JV agreement with Pollard. These agreements will help reinforce the leadership position and continued success of NPI and its customers, of which we are so proud. The agreements provide us with the flexibility to pursue future business opportunities in North America by ourselves should we choose so. This flexibility allows us to assess the specific facts and circumstances of each relevant opportunity and consider a path forward that makes the most sense and brings the most value for our shareholders. We see these agreements as the natural evolution of both our partnership with Pollard and the markets in which we operate. NPI's day-to-day operation and strong performance remain unchanged, and collectively, our primary focus is to provide continued support to the growth and success of our market-leading customers. Turning into recent news, as I mentioned briefly in my opening remarks last week, we shared some very exciting news about our entry in the Brazilian market. We launched Loto Minas iLottery and online sports betting in Minas Gerais, Brazil's second largest state with 21 million people, together with our partner, the local lottery operator, Intralo do Brasil. This is the first launch in Brazil of a full online offering across iLottery and online sports betting fully approved by Loteria Mineira, the official lottery regulator in the state. We see this as a groundbreaking opportunity for us as it positions us for future lottery and sports betting opportunities, which are now being widely considered by state lotteries in the country. Being selected as the technology and services partner is another great example of what we believe will be many that demonstrate the advantages of the Aspire Group acquisition. In this instance, we integrated our iLottery solution with B2Bet's sport betting solution, complemented with the Aspire Core managed services. No doubt, the collaboration sets us apart from our competitors, and in our view, was key to winning the contract. Given we are the first in the market we intend to be very deliberate and measured in our approach as we ramp, learning these new market dynamics. We are focused on getting this right and are very excited about the opportunity over the long term. In terms of additional new markets for iLottery, we see traction building up in various places across the globe with business opportunities in the U.S., including West Virginia, that has an active public procurement process, as well as in Asia Pacific, plus a few anticipated in Europe in the next two to three quarters. Turning to look at our iGaming front, we continue to make great progress both in the U.S. and internationally. In iGaming aggregation and content, we had significant success over the last few months, having signed eight new deals during the fourth quarter, and an additional six so far in the first quarter of 2023. In the US, we launched games with BetMGM and Caesars while reaching deals with others. Outside of the US, we greatly expanded our aggregation platform with deals in a few markets. One of them is our partnership with Batway, which includes content and aggregation for its US operations. In Alberta, we have continued to launch new wizard game content as well as third party content through our aggregation platform. We see significant and continued interest in our games across our existing lottery customer base and are now in the process of rolling out in Europe with a few accounts. We anticipate we will see additional similar opportunities going forward. One region that is gaining momentum is Latin America. During the fourth quarter, notably, we recently went live in a new market, Argentina, through a partnership with Andes Group that is regulated in Buenos Aires. Going forward, we see Latin America as a growing region for our aggregation and gains, particularly in Mexico and Colombia, where we have gained strong positions. In the Aspire core business, Providing full suite iGaming solutions and services, we signed a few new brand partners in regulated markets, including an important deal that we have announced subsequent to quarter end. That deal is with leading UK land-based casino operator, Metropolitan Gaming, to provide our full suite of iGaming solutions. We see this deal as one that speaks to our strength in successfully delivering everything land-based gaming operators need to branch out into the online gaming universe while leveraging their unique player base and assets. In sport betting, we signed several new deals. One I will call out that is interesting is Piquen in Mexico. This deal is another great demonstration of the full group synergies we can bring. In this instance, B2Bet was able to go live with its online sport betting solution through an existing integration that PeriPlay already had with the operator for its aggregation platform. Finally, it is also worth mentioning on the iGaming front that during Q4, the World Cup in Qatar provided growth opportunity to our business through solid product and operations as sport betting performance grew more than 30% year-over-year in the online sport betting parts of our gaming business. To conclude my remarks, it has truly been a transformational year for NeoGames across all our businesses. We are very well positioned to continue executing on our strategy and are excited about the future.

With that,

I'll now turn the call over to Ravi.

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 NPI, except in Michigan, which is reflected in our main company revenues. 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 new games. The results from an accounting standpoint, as many of you know, we generate revenues and earnings through our own operation and through our equity interest in NPI. Now turning to the results, as Moti mentioned, we ended the year with very strong momentum across our entire business. During the fourth quarter of 2022, our revenues as reported on the income statements, which excludes our share of NPI revenues, 69.2 million, of which 54.8 million is attributable to the revenues from Aspire Global Business. Excluding the Aspire Global contribution, our results of 14.5 million represents year over year growth of 18%. Our share of NPI revenues, which 14 million during the fourth quarter of 2022, up 54% compared to the same period last year. The total revenues and the company's share in NPI revenues was $83.2 million for the fourth quarter of 2022. For the full year, reported revenues were $165.7 million, of which Aspire Global Results contributed $112.1 million. Our share of NPI revenues was $44.5 million for the year, compared to $34.1 million in 2021, representing 31 increase year-over-year. The sum total of these two numbers was $210.2 million during 2022, representing an increase of about 149% year-over-year. Excluding the SPIRE revenue contribution, our combined results, including NPI, are 98.1, representing an increase of 16% year-over-year. For the quarter, our adjusted EBITDA was $18.1 million, compared with $7.9 million for the same period last year, representing a 129% increase. And considering the neogame score high lottery business, we saw adjusted EBITDA increase to $12.2 million and margin expand to over 40%. For the year, this brings adjusted EBITDA to 39.7 million, up 19% year over year. Further to this, I would like to highlight a couple of notes relevant to our results. As we have discussed on previous call, exchange rates fluctuation had an impact on performance of this buyer business. With much of the business revenues denominated in euros or British pounds, FX moves during 2022 muted the revenue growth when converted into U.S. dollars. To provide better transparency on the strength of the business, independent of currency moves, we have again included a table to show the business revenue's growth on a constant currency basis in our earning release. For the fourth quarter, Aspire global revenues of $54.7 million reflect 27% growth when measured on a constant currency basis. This growth, however, is offset by 14.6% decrease caused by impact of foreign currency exchange rates. In addition, near this quarter to our press releases table highlighting our adjusted earning per share. During the fourth quarter, our EPS was impacted 24 cents per share due to the amortization of intangible assets related to Aspire acquisition. Our adjusted EPS disclosures intended to offer investors a view as to what our earnings power looks like, excluding this non-cash recurring amortization charge net of tax impact. Turning to our balance sheet, we ended the year with $41.2 million of cash and cash equivalents. At quarter end, our outstanding debt was approximately $209.2 million, or unchanged based on the Blackstone loan of Euro basis of 200.8 million euros. Our weighted average interest rate was 7.44%, and we have 33.5 million shares outstanding. With respect to guidance, a quick reminder on key matter we have discussed since announcing the SPAR deal over a year ago. Recall that the SPAR global contracts as commercial terms that dictated the SPAR core revenues be recognized on a gross basis. This is different from the neogames business where contracts dictate revenues is recognized on a net basis. This has historically resulted in higher revenues but lower margin for the SPAR global business. As we explained last quarter, we have been working with Aspire Global's partners to adjust the commercial terms of the contract to better align with the rest of our business. We're pleased to update you that contracts representing approximately 87% of Aspire Core full year 2022 have been modified to reflect new commercial terms and will be accounted for in net basis effective January 1, 2023. We believe this will improve the clarity of our results in the long term and our sparse segment. We'll now report revenues more in line with our other segments. As always, we strive to provide shareholders with the clearest pictures of our results as we progress into 2023. Two points to keep in mind. First, 2023 revenue guidance reflects the change to net, which will distort year-over-year comparisons on top line. will still reflect the prior method of gross revenue recognition. Second and most important, this change has no effect on our reported EBITDA or the amount of cash the business generates. Obviously, change will show up in higher adjusted EBITDA margins. Reflecting this change net from gross, the company expects revenues and the share of NPI revenues interest to be between $235 and $250 million. Assuming a like-for-like basis, to prior year's guidance specifications. Our 2023 guidance would be between 323 million and 350 million, reflecting 10.4% increase year-over-year at the midpoint when compared to our performer results for the year ended December 31, 2022. With that, operator, please open the line for questions.

Ladies and gentlemen, at this time, we'll begin the question and answer session. If you would like to ask a question, you may press star and then one using a touch-tone telephone. To withdraw your questions, you may press star and two. If you are using a speakerphone, we do ask that you please pick up the handset prior to pressing the keys to ensure the best sound quality. Again, that is star and then one to join the question queue. Our first question today comes from Jeff Stanchel from Stiefel. Please go ahead with your questions.

Great. Thanks. Morning, Moti Raviv. Thanks for taking the questions. Maybe starting off here on the Aspire business, you know, Aspire core was a lot stronger than we had anticipated going from a 6% constant currency decline last quarter to 28% growth this quarter. Can you just expand a bit more on what's driving that inflection? And as we look to 2023, are there still any headwinds, you know, aside from FX still working through that segment, whether that's regulatory changes, COVID comparisons, anything else, or? or should we be more clean from a comparison's perspective? Thanks.

Hey, Jeff. First of all, good morning. Aspire has indeed delivered good results, and that's purely due to execution on solid operations. One of the things that I've touched was the World Cup. Part of Aspire's business is sport betting, and they actually saw that contributing to the way that the business grew and converting players into the other parts of the activities. And they had a few good partners in the mix that have pushed quite significantly on marketing in Q4. Some of that was done with assistance from Aspire that we may touch a little bit on later. I'm putting aside FX changes because they're hard to predict, but we do see that that business is performing well.

Great. That's helpful. Thanks, Mosey. And switching gears a bit, consolidated EBITDA margins down about 200 bits quarter-on-quarter, running some math on Raviv's commentary on the iLottery piece seems to suggest that was mostly driven more by the Aspire side of the business. Can you just talk about what's driving that and sort of how we should think about margins more just directionally into 2023, you know, given the accounting changes, the mix dynamics, and some of the other puts and takes here? Thanks.

Yes, Jeff, good morning. So you were right to say that we've seen quite strong EBITDA margins on the iLottery business during the quarter, way above 40%. Directionally, we always said that we're happy with margins ranging between the high 30s to low 40s, and this is where the iLottery business performed during Q4 were significantly better. positive about the trends on the margins. On the iGaming side, there has been some headwinds on the margins, especially with some few one-timers hitting the P&L, mainly due to the fact that the Brazil project was launched by Bitobet during the quarter. We've seen some few clouds. hits on the P&L, on the cost side, on BetoBet. But as you probably can imagine, with the change of the accounting from gross to net, we're certainly expecting expansion of the margins going forward for the iGaming business during 2023. Great. That's awful.

Thanks, Moti. Thanks for being involved. I'll pass it on.

Thank you, Jeff. Our next question comes from Barry Jonas from SunTrust. Please go ahead with your question.

Hey, guys. Fundamentally, it sounds like not much changes today with the new Pollard agreement, but how would you expect things to look different in the future as renewals come up and you may be competing more directly? Thanks.

Hey, good morning again. I think that, you know, first and foremost, we care about the growth of the existing accounts, as I messaged. What we've done simply gives us flexibility. I think per deal we will see what's good for the shareholders, what's good for the business. One simple and obvious example that I can give is, for example, as we expand beyond our turnkey accounts in order to provide content from our NeoGame studios to other North American lotteries, whether it's in the U.S. or in Canada, we feel that those deals, which have little involvement from operations that NPI is strong at, are better pursued directly through NeoGames and there could be also other deals in the future that are broader than just content that we will pursue directly and independently. What we like about this setup is that it gives us really full range of flexibility. Some things we will be able to capitalize on pretty quickly as I messaged when we truly see during 2023 quite a few content opportunities that, in our view, can evolve over time to be material. And then later on, as new opportunities come into market, we will look at them and see what value any corporation would bring to the table. But the benefits of that flexibility, I think, will already be in place in 2023 in some deals.

Great, great. And then just, you know, last quarter you noted that pickup rates into the large November jackpot. We're perhaps slower than in the past. Just curious if you've seen any changes in that in regards to the large jackpot in January. And I guess with that, I'm curious, just given the strength, we are seeing in draw based if there's a huge difference in your overall growth rates between e-instance and jackpots. So sorry, sort of two questions in one there.

No problem. First of all, the jackpot in Q4 in November was significant because it has reached a level that gained media attention, and even with the elections that took place almost right on the time that the jackpot was hit, and it was hard to carve media attention, but just because it hit largest ever jackpot of Parable, it did get to levels that drove the market forward, and then, of course, coupled with the good games launches that we had. So there was solid performance not only on the draw game side, but also on the instant game side. While we're not guiding on Q1 results, I could say that we do see that the level of jackpots needs to reach very high levels notes in order to pay attention, and the one that was in January was not necessarily one of that kind that reached the same level of attention that previous ones had.

Wow, a billion dollars isn't huge anymore, quite a change.

Yeah, you know, you guys need something to get you out of bed, which is more than a billion dollars now.

Yeah. And then I guess just the follow-up, is there a huge difference in terms of what you're seeing on e-instance and draw-based, or is draw-based really driving players into e-instance? Just curious about the trajectory of growth between the two businesses.

When we reach jackpots that are very interesting to the market, such as the one that did happen in November, they bring massive traffic that then is nicely converted by our customer's to playing instance, and that's why it followed through to the rest of the quarter last year. I think that at the same time, the fact that we are getting to the market time and time again with good titles that are launched and are spread across our accounts allows us to also grow in between jackpots by by leveraging the databases that we collected during jackpot times and with good marketing by our customers' teams.

Great. Thanks, Modi. Thanks, Raviv.

Thank you.

Our next question comes from David Katz from Jefferies. Please go ahead with your question.

Hi. Good morning, everyone. Thanks for taking my question. I just wanted to take a big picture look at the U.S. versus rest of the world. Obviously, U.S., you're, in some respects, reliant on more legalizations and those opportunities. But when we look out, call it two to five years, how do you think it breaks down for your company in terms of rest of the world versus U.S. from an earnings perspective?

Morning, David. Glad to have you with us. When we look at the iLottery parts of our business, we feel that now and into the very long future, U.S. will continue to be the majority of our revenues. Even if it is dependent on more state authorization, we do feel that that is a pace that is coming as we messaged, reminding you that we grew organically 16% year on year on our lottery accounts. We still think We can continue to grow the business while we ramp up additional markets. And at the same time, we do see that there's traction in the market. West Virginia is in a public procurement process. We see two, three other states that are in active discussions in legislation cycles about how to authorize iLottery. So we feel that the U.S. will continue to be on the iLottery front in the short term and in the longer term our biggest market. That doesn't mean... that we do not see opportunities in other regions around the world, but we are selective about them. We are going into markets that we feel has scale. So Brazil is a good example because it's not only the first states that we have launched there, but we think there's scale in that market in order to replicate that into other states in Brazil. And when we look at regions such as Asia Pacific that has one or two opportunities that are interesting for us in the next, you know, 12 to 24 months, Europe that has some emerging ones. So we're selective about it, and we're trying to pick the ones which suggest revenue levels that are in line with the revenue levels that we are seeing also from the North American market. On the iGaming side, David, it's the opposite. Obviously, our iGaming business on all of its three business units has predominantly business outside of the U.S. although PariPlay in aggregation and content is making very good strides into North America and the revenue share in their revenues of North America is growing rapidly, it could very well be that in that specific business line of content and aggregation, US or North America overall in the next three to five years will grow to be significant. When I say significant, I can't tell you now if it's more than 50% or not, but it has an opportunity to be pretty significant. Aspire Global's business for the moment is predominantly in Europe, and they will venture out into other areas as well. And B2Bet is currently strong in Africa, making strides into Europe, and has a growing market in Latin America. So it will take time before U.S. will be a big market for the sport betting, even if we think we will be successful in bringing North American deals to B2Bet, even during 2023 in some scenarios. But it's the flip side of revenues when you look, you know, five years into the horizon. I hope that answers the question.

Very thoroughly. Thanks very much.

Thank you, David.

Our next question comes from Chad Bainon from Macquarie. Please go ahead with your question.

Morning. Thanks for taking my question. I know you just kind of outlined more of a medium-term outlook, but just as we think about the 2023 revenue guidance growth of 10%, wondering if you could help us just a little bit more think about kind of what's included in that. Moti, you talked about an exit rate in the fourth quarter that was very strong, and then you listed a number of new opportunities that will provide revenue growth, including Brazil. So at the low end of your guide, are you kind of assuming that everything that's already been agreed upon is in that? And then, yeah, what's the difference between the low and the high end? Thank you.

Yeah, Chad, thanks for the question. So just to flush out, the 10% increase is on the midpoint. So there's certainly potential for higher range. And the band moves from... Low to high is basically dependent on a few items. First of all is how successful we were going to be in Brazil, which was recently launched two weeks ago, and yet not enough signs to forecast. The second one is a few new contracts that has been signed recently and announced both by Prairie Plain and Metropolitan in UK by Spiral. So there it's... too early to say whether it's going to move us between the low end of the band to the higher end of the band. And generally speaking, as you probably know, we don't include any contracts on the guidance which is not yet signed when we start the year. So there's always an optionality for new contracts being signed during the year and generating revenues which obviously will push for the higher end of the guidance. I hope that clarifies.

Yeah, that's perfect. Thank you. And then just in terms of the balance sheet and leverage, what's kind of the right leverage on this business? And even though you have an end-to-end solution on the tech side, are there still opportunities out there where you would consider adding on to what you're offering? Or how should we think about capital allocation? Thanks.

Yeah. Thank you, Chad, for that. So, you know, we always say that we feel comfortable with, you know, to run this business on a leverage ratio, which wouldn't be significantly higher than three. We're happy where we landed in the end of 2022 in terms of leverage ratio, which is a bit lower than three. So this is within the guidance that that we've got from our board. And relative to M&A opportunities, I'll defer to Moti to answer.

Yeah, Chad, definitely. We're always looking at opportunities in the market. We still think that there's good ways to grow from non-organic growth and to capitalize on opportunities that in the current dynamics of the market may present themselves, and we're looking at them actively at the same time. We're looking at two or three things. Number one, as Raviv said, we do not necessarily look into growing our leverage in order to do those deals beyond where it is now. So it would probably permit that we would do, let's say, tuck-in acquisitions. And these are ones that we are looking actively to pursue in a disciplined manner. Another matter that we have to balance into all of this is that the – unforeseen nature of how interest rates will continue to perform, and that's why we have to be also disciplined and make sure that we are taking enough margins in the way that we manage our cash to be ready for any scenario. So the bottom line of all of this is that, yes, we do see that there are opportunities in two or three areas that we have discussed a few times with the market in the past. But for the moment, we would see them mostly as tuck-in acquisitions that would enhance our business in specific areas.

That's great. Thank you. And then one more quick one, if you don't mind. Could you just kind of help us think about the Brazilian outlook? Are other states considering doing what was kind of just announced? Is this potentially a test case? Just wondering what the conversations have been like in the other markets. And that's all for me. Thank you.

Yeah, that's exactly the way that we see that. I wouldn't say a test case, but it's a role model. It's a first case, which we are very proud of, and we're working very hard with our local partner to make that as successful as we can. Yes, there are active processes in at least three other states in Brazil Some of them would, first of all, pursue concessions that would run lotteries. Others are considering to split sport betting licensing regime or selecting sport betting operators separately from lotteries online. It really depends on the state, but there are at least three states, probably even closer to five, which have formed lottery regulations authorities within them and have messaged the market that during 2023 they are planning to come to the market with tenders to select the way that they would approach that into the future. You could put Rio de Janeiro in that bucket, Parana, even Sao Paulo that had a bid which they pulled from the market before the elections and they are intending to come back with that, and two or three other states. We're definitely using the fact that we are first there. I can tell you that when I was in Brazil to celebrate the go-live, we had participations from other states to look at that very carefully, and we keep getting a lot of good questions in order to learn the dynamics of what we've done that. And I think we're also setting a role model to the other states when it comes to player protection, social responsibilities, responsible gaming, payment solutions, and so on, that regulators take very close look at and will learn from. This is what we've done, as you recall, in the U.S. market, which, knock on wood, then replicated success to other states, and this is what we intend to do also in Brazil.

Thanks for all the additional color. Appreciate it.

Our next question comes from Sean Kelly from Bank of America. Please go ahead with your question.

Hi. Good morning, everyone. Thanks for taking my questions. First, we'll just be kind of going back to, I think, the beginning of Chad's question as we think about the 10%, you know, midpoint growth and guidance. Can you just give us a little bit more color on what's sort of the underlying, let's call it same store increase or same state increase expected in iLottery as we look out for 2023? And, you know, kind of what's the impact of that big jackpot or potentially tough comp in the fourth quarter?

Yeah, good morning, Sean. So on the same store basis on the iLottery side, especially in the North American market, there has been – so as Moti mentioned, all the portfolio has grew up year over year by double digits, 16%. There have been two states or two jurisdictions that were outperformed, standing out from the crowd to some extent in terms of growth rates. We certainly believe that those can continue to strive also into 2023, and they will obviously push the entire business to the higher end of the guidance. In terms of content opportunities, we have few deals on the pipeline, which has not yet materialized so far, but we believe those will be launched during 2023 and also has a good potential given the very good titles that have been launched recently to push the revenues even further into 2023.

Thank you. And then my follow-up would just be a little bit on the expense side. As we look at sort of what happened, obviously, the Aspire numbers came in much better than we were expecting. But the sales and marketing and G&A side, was also a bit higher than expected. I think you called out a couple of one-time items. Could you quantify that? And then maybe big picture, could you help us think about sales and marketing slash T&A, maybe as a percentage of sales as we look out in 2023, what's kind of the right ratio or way to think about organic growth in that expense line year over year?

So, yeah, you know, as stated earlier on this call, we've had a few, you know, one-off items, both on the GNA as well as the sales and marketing. I can point out, you know, G2. I can point out World Lottery Congress in Vancouver, which we have participated in, you know, as exhibitors. That has been, you know, significantly pushed forward the numbers from a cost perspective. This is also expected during Q1, given that we've participated in ice in a very significant way earlier on in February. And if you are looking on a trans or ratio, I wouldn't take Q4 as a test case relative to the percentage of cells, but rather Q3 to Q2 could reflect better on the trends on the business without any one-timers on a go-forward basis.

Thank you very much.

And our next question comes from Steve Pizzella from Deutsche Bank.

Please go ahead with your question.

Mr. Pacella, is it possible your phone is on mute?

Hey, sorry about that. Good morning, guys. Just kind of a little bit of a bigger picture question, given some of kind of the economic headlines and outlook out there. Of the three verticals with the iLotto, iCasino, and OSB, can you kind of talk us how you think about each would respond in an economic downturn, and which kind of do you think you would see the impact in first?

Lottery has historically been pretty resilient to previous periods of economics downturns, and I don't think that we have reasons to believe that this one will be different, even if this one is different in many other macroeconomics levels. We're definitely watching, but we haven't seen anything there. I would say that for the moment we haven't seen also anything on the iGaming and online sports betting side. I think it's pretty consistent with what others have been messaging in the industry as well. I cannot necessarily put the finger of what we think will, as you said, be hit first because there hasn't been historical benchmarks for online betting gaming and online sport betting so much in economical classes, you could look at 2008, and in 2008, there was a bit of a downturn in those businesses, but it rebounded pretty fast. So just a quick summary, lotteries were not expecting much, and on the others, for the moment, we're not seeing anything. We're watching. If it will happen, then history shows that if it will happen, then it has good reasons to rebound.

Okay, great. Thanks. Appreciate it.

Thank you, Stephen. Good to have you with us.

And ladies and gentlemen, with that, we'll be concluding today's question and answer session. I'd like to turn the floor back over to management for any closing remarks.

Thank you. And thank you all for joining us on the call today. And everything we've shared with you, we hope that you are as excited about 2023 as we are. The outlook looks really promising for us And we're also very excited to have our first Capital Markets Day next week on March 14th in New York, and we're inviting everyone to join us either on-site or remotely. Thank you all, as always, to show continuous interest in our company and our story.

And, ladies and gentlemen, with that, we'll conclude today's conference call and presentation. We thank you for joining. You may now disconnect your lines. Thank you. Thank you. Good day, ladies and gentlemen. Thank you for standing by and welcome to the NeoGames fourth quarter and full year 2022 earnings conference call. At this time, all participants are in a listen-only mode. Question and answer session will follow the formal presentation. Please note that this conference call is being recorded today, March 7th, 2023. At this time, I'd like to turn the floor over to Jacques Cornette with ICR. Please go ahead.

Thank you, Operator, and hello, everyone. By now, you should all have access to our fourth quarter and full year 2022 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 December 31st, 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. 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. With that, I'll turn the call over to Moti.

Thank you, Jacques, and good morning, everyone. Last night, we released our fourth quarter and full year 2022 results. Before touching on the results, I will highlight some of the accomplishments which we are proud of as we wrapped up the last year. I will then provide an update on the results as well as the trends we are seeing in the market before turning the call over to Raviv to run through our financials in further detail and 2023 guidance. We ended 2022 on a very strong note. Our principal mission is to capitalize on the expansion of the global lottery industry into the online channel. And we think the actions and decisions we made during the past year have moved us further along that path as we continue to build a global leader in the industry. As I have mentioned many times before, with the lottery business going digital, we see an increasing amount of convergence. Our lottery customers require a broad range of products and services to support them across lottery, sport betting, and online gaming. Combining NeoGames and Aspire last year is allowing us to deliver the full suite of products and services that our customers demand. Since the acquisition, we have unlocked our potential beyond our core focus in the lottery industry. With the expansion, we are becoming a key player within the iGaming and online sports betting markets. We see this as a significant opportunity for us as it has allowed us to vastly expand our addressable market. In our view, we are very well positioned as an industry leader capable of providing our customers with a full suite of solutions to meet all their digital needs. Our recent launch in Brazil, which I will touch on further, is a perfect example of the revenue synergies we continue to target around the globe. Raviv will discuss our financials in more detail later. However, I wanted to touch briefly on some highlights from our financial results. On a consolidated basis, the total of revenues plus our share of NPI revenues grew to $83 million for the fourth quarter and $210 million for the year. As a reminder, the full year results include a little bit more than half a year of the Aspire Global business. At the high level, we continue to experience solid growth across all our businesses and are beginning to see revenue synergies as anticipated from our merger last year. In iLottery, looking at revenues and our share of NPI revenue, we had a record quarter and a record year with $28 million for the fourth quarter and $98 million for the full year. In addition, we continue to see improved numbers sequentially in each quarter throughout the year. In iGaming, on a pro forma constant currency basis, compared to the same period last year, we posted 27% growth in the fourth quarter and 19% for the full year. On the adjusted EBITDA line, we also posted quarterly and annual records of $18 million and $54 million, respectively. Looking closer at the iLottery business, we had strong performance across all our key accounts. The U.S. lottery market had its largest ever Powerball jackpot of over $2 billion when it hit in November. that was a major contributor to the impressive performance across all U.S. accounts, and as a result, during the quarter, all of our U.S. customers experienced both year-over-year and quarter-over-quarter growth. Yet, there is another long-term benefit, as these large jackpot runs are very effective customer acquisitions and marketing opportunities where benefits accrue to our customers' businesses long after the jackpot is hit, and that allowed our customers to carry the strong results through the end of the year. Beyond the impact of the November jackpots, we had strong growth in our key accounts throughout North America. Our growth and success has also been fueled by several of our own initiatives geared to drive organic growth. Some of the recent game launches from our NeoGames studio in Q4 contributed immediately. For instance, we released The Lamp in Virginia and it quickly became the most successful game launch for that online lottery thus far. Given the success, we quickly rolled out the game into additional markets with localized versions where we also see similar success patterns. The quality and high performance of NeoGame Studio is one of the key advantages we provide our customers with to enable them to reach their leadership positions and full potential in the market. All this positive momentum is evident in our full year results. For the full year 2022, we grew our North America iLottery business revenue organically by approximately 16% year over year. Importantly, growth has not confined to North America during the fourth quarter. In Europe, we experienced growth across our key markets as well, where the year-end holiday season and marketing activities seem to have piqued players' interest. We ended the year with terrific momentum and continue to see great progress at an account level as we work to carry that momentum into 2023. As the calendar turned to 2023, in January, we formally entered into a joint venture agreement for Neopollard Interactive and amended our Michigan JV agreement with Pollard. These agreements will help reinforce the leadership position and continued success of NPI and its customers, of which we are so proud. The agreements provide us with the flexibility to pursue future business opportunities in North America by ourselves should we choose so. This flexibility allows us to assess the specific facts and circumstances of each relevant opportunity and consider a path forward that makes the most sense and brings the most value for our shareholders. We see these agreements as the natural evolution of both our partnership with Pollard and the markets in which we operate. NPI's day-to-day operation and strong performance remain unchanged, and collectively, our primary focus is to provide continued support to the growth and success of our market-leading customers. Turning into recent news, as I mentioned briefly in my opening remarks last week, we shared some very exciting news about our entry in the Brazilian market. We launched Loto Minas iLottery and online sports betting in Minas Gerais, Brazil's second largest state with 21 million people, together with our partner, the local lottery operator, Intralo do Brasil. This is the first launch in Brazil of a full online offering across iLottery and online sports betting fully approved by Loteria Mineira, the official lottery regulator in the state. We see this as a groundbreaking opportunity for us as it positions us for future lottery and sports betting opportunities, which are now being widely considered by state lotteries in the country. Being selected as the technology and services partner is another great example of what we believe will be many that demonstrate the advantages of the Aspire Group acquisition. In this instance, we integrated our iLottery solution with B2Bet's Sport Betting solution, complemented with the Aspire Core Managed Services. No doubt, the collaboration sets us apart from our competitors, and in our view, was key to winning the contract. Given we are the first in the market we intend to be very deliberate and measured in our approach as we ramp, learning these new market dynamics. We are focused on getting this right and are very excited about the opportunity over the long term. In terms of additional new markets for iLottery, we see traction building up in various places across the globe with business opportunities in the U.S., including West Virginia, that has an active public procurement process, as well as in Asia Pacific, plus a few anticipated in Europe in the next two to three quarters. Turning to look at our iGaming front, we continue to make great progress both in the U.S. and internationally. In iGaming aggregation and content, we had significant success over the last few months, having side eight new deals during the fourth quarter and an additional six so far in the first quarter of 2023. In the U.S., we launched games with BetMGM and Caesars while reaching deals with others. Outside of the U.S., we greatly expanded our aggregation platform with deals in a few markets. One of them is our partnership with Batway, which includes content and aggregation for its U.S. operation. In Alberta, we have continued to launch new wizard game content as well as third party content through our aggregation platform. We see significant and continued interest in our games across our existing lottery customer base and are now in the process of rolling out in Europe with a few accounts. We anticipate we will see additional similar opportunities going forward. One region that is gaining momentum is Latin America. During the fourth quarter, notably, we recently went live in a new market, Argentina, through a partnership with Andes Group that is regulated in Buenos Aires. Going forward, we see Latin America as a growing region for our aggregation and gains, particularly in Mexico and Colombia, where we have gained strong positions. In the Aspire core business, Providing full suite iGaming solutions and services, we signed a few new brand partners in regulated markets, including an important deal that we have announced subsequent to quarter end. That deal is with leading UK land-based casino operator, Metropolitan Gaming, to provide our full suite of iGaming solutions. We see this deal as one that speaks to our strength in successfully delivering everything land-based gaming operators need to branch out into the online gaming universe while leveraging their unique player base and assets. In sport betting, we signed several new deals. One I will call out that is interesting is Piquen in Mexico. This deal is another great demonstration of the full group synergies we can bring. In this instance, B2Bet was able to go live with its online support betting solution through an existing integration that PeriPlay already had with the operator for its aggregation platform. Finally, it is also worth mentioning on the iGaming front that during Q4, the World Cup in Qatar provided growth opportunity to our business through solid product and operations as sport betting performance grew more than 30% year-over-year in the online sport betting parts of our gaming business. To conclude my remarks, it has truly been a transformational year for NEO Games across all our businesses. We are very well positioned to continue executing on our strategy and are excited about the future. With that,

I'll now turn the call over to Ravi. 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 NPI, except in Michigan, which is reflected in our main company revenues. 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. The results from an accounting standpoint, as many of you know, we generate revenues and earnings through our own operation and through our equity interest in NPI. Now turning to the results, as Moti mentioned, we ended the year with very strong momentum across our entire business. During the fourth quarter of 2022, our revenues as reported on the income statements, which excludes our share of NPI revenues, 69.2 million, of which 54.8 million is attributable to the revenues from Aspire Global Business. Excluding the Aspire Global contribution, our results of 14.5 million represents year-over-year growth of 18%. Our share of NPI revenues, which 14 million during the fourth quarter of 2022, up 54% compared to the same period last year. The total revenues and the company's share in NPI revenues was $83.2 million for the fourth quarter of 2022. For the full year, reported revenues were $165.7 million, of which Aspire Global Results contributed $112.1 million. Our share of NPI revenues was $44.5 million for the year, compared to $34.1 million in 2021, representing 31 increase year-over-year. The sum total of these two numbers was $210.2 million during 2022, representing an increase of about 149% year-over-year. Excluding the SPIRE revenue contribution, our combined results, including NPI, are 98.1, representing an increase of 16% year-over-year. For the quarter, our adjusted EBITDA was $18.1 million, compared with $7.9 million for the same period last year, representing a 129% increase. And considering the neogame score high lottery business, we saw adjusted EBITDA increase to $12.2 million and margin expand to over 40%. For the year, this brings adjusted EBITDA to 39.7 million, up 19% year-over-year. Further to this, I would like to highlight a couple of notes relevant to our results. As we have discussed on previous call, exchange rates fluctuation had an impact on performance of this buyer business. With much of the business revenues denominated in euros or British pounds, FX moves during 2022 muted the revenue growth when converted into U.S. dollars. To provide better transparency on the strength of the business, independent of currency moves, we have again included a table to show the business revenue's growth on a constant currency basis in our earning release. For the fourth quarter, Aspire global revenues of $54.7 million reflect 27% growth when measured on a constant currency basis. This growth, however, is offset by 14.6% decrease caused by impact of foreign currency exchange rates. In addition, near this quarter to our press releases table highlighting our adjusted earning per share. During the fourth quarter, our EPS was impacted 24 cents per share due to the amortization of intangible assets related to Aspire acquisition. Our adjusted EPS disclosures intended to offer investors a view as to what our earnings power looks like, excluding this non-cash recurring amortization charge net of tax impact. Turning to our balance sheet, we ended the year with $41.2 million of cash and cash equivalents. At quarter end, our outstanding debt was approximately $209.2 million, or unchanged based on the Blackstone loan of Euro basis of 200.8 million euros. Our weighted average interest rate was 7.44%, and we have 33.5 million shares outstanding. With respect to guidance, a quick reminder on key matter we have discussed since announcing the Aspire deal over a year ago. Recall that Aspire global contracts as commercial terms that dictated Aspire core revenues be recognized on a gross basis. This is different from the NeoGames business where contracts dictate revenues is recognized on a net basis. This has historically resulted in higher revenues but lower margin for the Aspire global business. As we explained last quarter, we have been working with Aspire Global's partners to adjust the commercial terms of the contract to better align with the rest of our business. We're pleased to update you that contracts representing approximately 87% of Aspire Core full year 2022 have been modified to reflect new commercial terms and will be accounted for in net basis effective January 1st, 2023. We believe this will improve the clarity of our results in the long term and our sparse segment. We'll now report revenues more in line with our other segments. As always, we strive to provide shareholders with the clearest pictures of our results as we progress into 2023. Two points to keep in mind. First, 2023 revenue guidance reflects the change to net, which will distort year-over-year comparisons on top line. will still reflect the prior method of gross revenue recognition. Second and most important, this change has no effect on our reported EBITDA or the amount of cash the business generates. Obviously, change will show up in higher adjusted EBITDA margins. Reflecting this change net from gross, the company expects revenues and a share of NPI revenues interest to be between $235 and $250 million. Assuming a like-for-like basis, to prior year's guidance specifications. Our 2023 guidance would be between $323 million and $350 million, reflecting 10.4% increase year-over-year at the midpoint when compared to our performer results for the year ended December 31, 2022. With that, operator, please open the line for questions.

Ladies and gentlemen, at this time, we'll begin the question and answer session. If you would like to ask a question, you may press star and then one using a touch-tone telephone. To withdraw your questions, you may press star and two. If you are using a speakerphone, we do ask that you please pick up the handset prior to pressing the keys to ensure the best sound quality. Again, that is star and then one to join the question queue. Our first question today comes from Jeff Stanchel from Stiefel. Please go ahead with your question.

Great. Thanks. Morning, Moti Raviv. Thanks for taking the questions. Maybe starting off here on the Aspire business, you know, Aspire core was a lot stronger than we had anticipated going from a 6% constant currency decline last quarter to 28% growth this quarter. Can you just expand a bit more on what's driving that inflection? And as we look to 2023, are there still any headwinds, you know, aside from FX still working through that segment, whether that's regulatory changes, COVID comparisons, anything else, or? or should we be more clean from a comparison perspective? Thanks.

Hey, Jeff. First of all, good morning. Aspire has indeed delivered good results, and that's purely due to execution on solid operations. One of the things that I've touched was the World Cup. Part of Aspire's business is sport betting, and they actually saw that contributing to the way that the business grew and converting players into the other parts of the activities, and they had a few good partners in the mix that have pushed quite significantly on marketing in Q4. Some of that was done with assistance from Aspire that we may touch a little bit on later. I'm putting aside FX changes because they're hard to predict, but we do see that that business is performing well.

Great. That's helpful. Thanks, Marcy. And switching gears a bit, consolidated EBITDA margins down about 200 bits quarter-on-quarter, running some math on Raviv's commentary on the iLottery piece seems to suggest that was mostly driven more by the Aspire side of the business. Can you just talk about what's driving that and sort of how we should think about margins more just directionally into 2023, you know, given the accounting changes, the mix dynamics, and some of the other puts and takes here? Thanks.

Yes, Jeff, good morning. So you were right to say that we've seen quite strong EBITDA margins on the iLottery business during the quarter, way above 40%. Directionally, we always said that we're happy with margins ranging between the high 30s to low 40s, and this is where the iLottery business performed during Q4, where significantly positive about the trends on the margins. On the iGaming side, there has been some headwinds on the margins, especially with some few one-timers hitting the P&L, mainly due to the fact that the Brazil project was launched by Bitobet during the quarter. We've seen some few clouds hits on the P&L, on the cost side, on BetoBet. But as you probably can imagine, with the change of the accounting from gross to net, we're certainly expecting expansion of the margins going forward for the iGaming business during 2023. Great. That's awful.

Thanks, Moti. Thanks for being involved. I'll pass it on.

Thank you, Jeff. Our next question comes from Barry Jonas from SunTrust. Please go ahead with your question.

Hey, guys. Fundamentally, it sounds like not much changes today with the new Pollard agreement, but how would you expect things to look different in the future as renewals come up and you may be competing more directly? Thanks.

Hey, good morning again. I think that, you know, first and foremost, we care about the growth of the existing accounts, as I messaged. What we've done simply gives us flexibility. I think per deal we will see what's good for the shareholders, what's good for the business. One simple and obvious example that I can give is, for example, as we expand beyond our turnkey accounts, in order to provide content from our NeoGame studios to other North American lotteries, whether it's in the U.S. or in Canada, we feel that those deals, which have little involvement from operations that NPI is strong at, are better pursued directly through NeoGames and there could be also other views in the future that are broader than just content that we will pursue directly and independently. What we like about this setup is that it gives us really full range of flexibility. Some things we will be able to capitalize on pretty quickly as I messaged when we truly see during 2023 quite a few content opportunities that, in our view, can evolve over time to be material. And then later on, as new opportunities come into market, we will look at them and see what value any corporation would bring to the table. But the benefits of that flexibility, I think, will already be in place in 2023 in some deals.

Great, great. And then just, you know, last quarter you noted that pickup rates into the large November jackpot. We're perhaps slower than in the past. Just curious if you've seen any changes in that in regards to the large jackpot in January. And I guess with that, I'm curious, just given the strength, we are seeing in draw-based if there's a huge difference in your overall growth rates between e-instance and jackpot. So sorry, sort of two questions in one there.

No problem. First of all, the jackpot in Q4 in November was significant because it has reached a level that gained media attention, and even with the elections that took place almost right on the time that the jackpot was hit, and it was hard to carve media attention, but just because it hit largest ever jackpot of Powerball, it did get to levels that drove the market forward. And then, of course, coupled with the good games launches that we had. So there was solid performance not only on the draw game side, but also on the instant game side. While we're not guiding on Q1 results, I could say that we do see that the level of jackpots needs to reach very high levels in order to pay attention, and the one that was in January was not necessarily one of that kind that reached the same level of attention that previous ones had.

Wow, a billion dollars isn't huge anymore, quite a change.

Yeah, you know, you guys need something to get you out of bed, which is more than a billion dollars now.

Yeah. And then I guess just the follow-up, is there a huge difference in terms of what you're seeing on e-instance and draw-based, or is draw-based really driving players into e-instance? Just curious about the trajectory of growth between the two businesses.

When we reach jackpots that are very interesting to the market, such as the one that did happen in November, they bring massive traffic that then is nicely converted by our customer's To playing instance and that's why it followed through to the rest of over the quarter Last year. I think that at the same time the fact that we are getting to the market with You know time and time again with good titles that are launched and are spread across our accounts allows us to also grow in between in between jackpots by by leveraging the databases that we collected during jackpot times and with good marketing by our customers' teams.

Great. Thanks, Modi. Thanks, Raviv.

Thank you.

Our next question comes from David Katz from Jefferies. Please go ahead with your question.

Hi. Good morning, everyone. Thanks for taking my question. I just wanted to take a big picture look at the U.S. versus rest of the world. Obviously, U.S., you're in some respects reliant on more legalizations and those opportunities. But when we look out, you know, call it two to five years, how do you think it breaks down for your company in terms of rest of the world versus U.S. from an earnings perspective?

Morning, David. Glad to have you with us. When we look at the iLottery parts of our business, we feel that now and into the very long future, U.S. will continue to be the majority of our revenues. Even if it is dependent on more state authorization, we do feel that that is a pace that is coming as we messaged, reminding you that we grew organically 16% year on year on our lottery accounts. We still think We can continue to grow the business while we ramp up additional markets. And at the same time, we do see that there's traction in the market. West Virginia is in a public procurement process. We see two, three other states that are in active discussions in legislation cycles about how to authorize iLottery. So we feel that the U.S. will continue to be on the iLottery front in the short term and in the longer term our biggest market. That doesn't mean... that we do not see opportunities in other regions around the world, but we are selective about them. We are going into markets that we feel has scale. So Brazil is a good example because it's not only the first states that we have launched there, but we think there's scale in that market in order to replicate that into other states in Brazil. And when we look at regions such as Asia Pacific that has one or two opportunities that are interesting for us in the next, you know, 12 to 24 months, Europe that has some emerging ones. So we're selective about it, and we're trying to pick the ones which suggest revenue levels that are in line with the revenue levels that we are seeing also from the North American market. On the iGaming side, David, it's the opposite. Obviously, our iGaming business on all of its three business units has predominantly business outside of the U.S. although PariPlay in aggregation and content is making very good strides into North America and the revenue share in their revenues of North America is growing rapidly, it could very well be that in that specific business line of content and aggregation, U.S. or North America overall in the next three to five years will grow to be significant. When I say significant, I can't tell you now if it's more than 50% or not, but it has an opportunity to be pretty significant. Aspire Global business for the moment is predominantly in Europe, and they will venture out into other areas as well. And B2B is currently strong in Africa, making strides into Europe, and has a growing market in Latin America. So it will take time before U.S. will be a big market for the sport betting, even if we think we will be successful in bringing North American deals to B2B, even during 2023 in some scenarios. But it's the flip side of revenues when you look five years into the horizon. I hope that answers the question.

Very thoroughly. Thanks very much.

Thank you, David.

Our next question comes from Chad Bainon from Macquarie. Please go ahead with your question.

Morning. Thanks for taking my question. I know you just kind of outlined more of a medium-term outlook, but just as we think about the 2023 revenue guidance growth of 10%, wondering if you could help us just a little bit more think about kind of what's included in that. Moti, you talked about an exit rate in the fourth quarter that was very strong, and then you listed a number of new opportunities that will provide revenue growth, including Brazil. So at the low end of your guide, are you kind of assuming that everything that's already been agreed upon is in that? And then, yeah, what's the difference between the low and the high end? Thank you.

Yeah, Chad, thanks for the question. So just to flush out, the 10% increase is on the midpoint. So there's certainly potential for higher range. And the band moves from... Low to high is basically dependent on a few items. First of all is how successful we were going to be in Brazil, which was recently launched two weeks ago, and yet not enough signs to forecast. The second one is a few new contracts that has been signed recently and announced both by Prairie Plain and Metropolitan in UK by Spiral. So there it's too early to say whether it's going to move us between the low end of the band to the higher end of the band. And generally speaking, as you probably know, we don't include any contracts on the guidance, which has not yet signed when we start the year. So there's always an optionality for new contracts being signed during the year and generating revenues, which obviously will push for the higher end of the band, of the guidance. I hope that clarifies.

Yeah, that's perfect. Thank you. And then just in terms of the balance sheet and leverage, what's kind of the right leverage on this business? And even though you have an end-to-end solution on the tech side, are there still opportunities out there where you would consider adding on to what you're offering? Or how should we think about capital allocation? Thanks.

Yeah. Um, thank you Chad for that. So, you know, we, we've, we, we always say that, um, that we feel comfortable with, um, you know, to, to, to run this business on a leverage ratio ratio, which wouldn't be a significantly higher than three. Um, we're happy where we landed in the end of 2022 in terms of a leverage ratio, um, which is, which is, uh, a bit lower than three. So this is, uh, within, uh, within the guidance that, uh, that we've got from our board. And relative to M&A opportunities, I'll defer to Moti to answer.

Yeah, Chad, definitely. We're always looking at opportunities in the market. We still think that there's good ways to grow from non-organic growth and to capitalize on opportunities that in the current dynamics of the market may present themselves, and we're looking at them actively at the same time. We're looking at two or three things. Number one, as Raviv said, we do not necessarily look into growing our leverage in order to do those deals beyond where it is now. So it would probably permit that we would do, let's say, tuck-in acquisitions. And these are ones that we are looking actively to pursue in a disciplined manner. Another matter that we have to balance into all of this is that the – unforeseen nature of how interest rates will continue to perform, and that's why we have to be also disciplined and make sure that we are taking enough margins in the way that we manage our cash to be ready for any scenario. So the bottom line of all of this is that, yes, we do see that there are opportunities in two or three areas that we have discussed a few times with the market in the past. But for the moment, we would see them mostly as tuck-in acquisitions that would enhance our business in specific areas.

That's great. Thank you. And then one more quick one, if you don't mind. Could you just kind of help us think about the Brazilian outlook? Are other states considering doing what was kind of just announced? Is this potentially a test case? Just wondering what the conversations have been like in the other markets. And that's all for me. Thank you.

Yeah, that's exactly the way that we see that. I wouldn't say a test case, but it's a role model. It's a first case, which we are very proud of, and we're working very hard with our local partner to make that as successful as we can. Yes, there are active processes in at least three other states in Brazil Some of them would, first of all, pursue concessions that would run lotteries. Others are considering to split sport betting licensing regime or selecting sport betting operators separately from lotteries online. It really depends on the state, but there are at least three states, probably even closer to five, which have formed lottery regulations authorities within them and have messaged the market that during 2023 they are planning to come to the market with tenders to select the way that they would approach that into the future. You could put Rio de Janeiro in that bucket, Parana, even Sao Paulo that had a bid which they pulled from the market before the elections, and they are intending to come back with that, and two or three other states. We're definitely using the fact that we are first there. I can tell you that when I was in Brazil to celebrate the go-live event, we had participations from other states to look at that very carefully, and we keep getting a lot of good questions in order to learn the dynamics of what we've done that. And I think we're also setting a role model to the other states when it comes to player protection, social responsibilities, responsible gaming, payment solutions, and so on, that regulators take very close look at and will learn from. This is what we've done, as you recall, in the U.S. market, which, knock on wood, then replicated success to other states, and this is what we intend to do also in Brazil. Thanks for all the additional color.

Appreciate it.

Our next question comes from Sean Kelly from Bank of America. Please go ahead with your question.

Hi. Good morning, everyone. Thanks for taking my questions. First, we'll just be kind of going back to, I think, the beginning of Chad's question as we think about the 10%, you know, midpoint growth in guidance. Can you just give us a little bit more color on what's sort of the underlying, let's call it same store increase or same state increase expected in iLottery as we look out for 2023? And, you know, kind of what's the impact of that big jackpot or potentially tough comp in the fourth quarter?

Yeah, good morning, Sean. So on the same store basis on the iLottery side, especially in the North American market, there has been – so as Moti mentioned, all the portfolio has grew up year over year by double digits, 16%. There have been two states or two jurisdictions that were outperformed, standing out from the crowd to some extent in terms of growth rates. We certainly believe that those can continue to strive also into 2023, and they will obviously push the entire business to the higher end of the guidance. In terms of content opportunities, we have few deals on the pipeline, which has not yet materialized so far, but we believe those will be launched during 2023 and also has a good potential given the very good titles that have been launched recently to push the revenues even further into 2023.

Thank you. And then my follow-up would just be a little bit on the expense side. As we look at sort of what happened, obviously, the Aspire numbers came in much better than we were expecting. But the sales and marketing and G&A side, was also a bit higher than expected. I think you called out a couple of one-time items. Could you quantify that? And then maybe big picture, could you help us think about sales and marketing slash G&A, maybe as a percentage of sales as we look out in 2023, what's kind of the right ratio or way to think about organic growth in that expense line year over year?

So, yeah, you know, I stated earlier on this call, we've had a few, you know, one-off items, both on the GNA as well as the sales and marketing. I can point out, you know, G2, I can point out World Lottery Congress in Vancouver, which we've participated in, you know, as exhibitors. That has been, you know, significantly pushed forward the numbers from a cost perspective. This is also expected during Q1, given that we've participated in ice in a very significant way earlier on in February. And if you are looking on a trans or ratio, I wouldn't take Q4 as a test case relative to the percentage of cells, but rather Q3 to Q2 could reflect better on the trends on the business without any one-timers on a go-forward basis.

Thank you very much.

And our next question comes from Steve Pizzella from Deutsche Bank. Please go ahead with your question. Mr. Pizzella, is it possible your phone is on mute?

Hey, sorry about that. Good morning, guys. Just kind of a little bit of a bigger picture question. given some of the economic headlines and outlook out there. Of the three verticals with the iLotto, iCasino, and OSB, can you talk us how you think about each would respond in an economic downturn, and which do you think you would see the impact in first?

Lottery has historically been pretty resilient to previous periods of economic downturn. downturns, and I don't think that we have reasons to believe that this one will be different, even if this one is different in many other macroeconomics levels. We're definitely watching, but we haven't seen anything there. I would say that for the moment, we haven't seen also anything on the iGaming and online sports betting side. I think it's pretty consistent with what others have been messaging in the industry as well. cannot necessarily put the finger of what we think will, as you said, be hit first, because there hasn't been historical benchmarks for online gaming and online sport betting so much in economical class. You could look at 2008, and in 2008 there was a bit of a downturn in those businesses, but it rebounded pretty fast. So just a quick summary, lotteries, we're not expecting much. And on the others, for the moment, we're not seeing anything. We're watching. If it will happen, then history shows that if it will happen, then it has good reasons to rebound.

Okay, great. Thanks. Appreciate it.

Thank you, Stephen. Good to have you with us.

And ladies and gentlemen, with that, we'll be concluding today's question and answer session. I'd like to turn the floor back over to management for any closing remarks.

Thank you. And thank you all for joining us on the call today. And everything we've shared with you, we hope that you are as excited about 2023 as we are. The outlook looks really promising for us. And we're also very excited to have our first Capital Markets Day next week on March 14th in New York, and we're inviting everyone to join us either on-site or remotely. Thank you all, as always, to show continuous interest in our company and our story.

And, ladies and gentlemen, with that, we'll conclude today's conference call and presentation. We thank you for joining. You may now disconnect your lines.