Betmakers Technology Group Ltd (BET) Earnings Call Transcript & Summary

You're watching NWR Virtual Small Cap Conference August 2020. We're joined on the line by BetMakers. BetMakers is a wagering technology and data partner for some of the world's most recognized and respected bookmakers and rights holders. It develops and provides data and analytic products for B2B wagering markets and the production and distribution of racing content. The group's revenue channel includes Australia, the U.K. and the U.S. The company recently raised $35 million via a placement to accelerate its growth, particularly in the U.S.A. We'll turn the hand over to BetMakers' CEO, Todd Buckingham. Todd has more than 20 years' experience working with sports and wagering industry in Australia. While working as a high school P.E. teacher, he also worked as a sports manager at a successful sports management company, NSRT, where we negotiated more than $20 million worth of sporting contracts, culminating in his appointment as Managing Director. Todd has been at the helm of BetMakers for more than a decade. Over to you, Todd.

Thanks, [ Laura ], and thanks very much for having us. And I'd like to thank Simon and Alex and the team at NWR for putting on the conference, and thank you guys for listening in. I'm going to try and get through a fair few of these slides nice and quickly, give you a bit of an update on the last quarter. And then also, we're going to hand over for some questions, which I'm sure there's a few coming in. So just an overview of BetMakers. So we provide essential services to the racing industry, racing bodies and rights holders, racing authorities from around the world. And then we deliver that to waging operators or bookmakers around the world as well. So what we do for racing authorities, we've got into integrity systems, we do official pricing solutions, we compile their data, do the vision as well. And we compile that into a solution, so bookmakers can take that in a normalized format no matter where it's coming from around the world. Because we're able to do that for the bookmakers, we package that up and do all of their race day controls. And then we add on a bunch of services and products onto that solution, so they have a normalized solution across their racing offering, whether it comes from U.K., Australia, U.S. or other parts of the world. We have rolled out a number of products through that platform, such as price manager, risk management solutions. We also now just introduced managed trading services. So who uses our service? There's a bunch of operators and a bunch of racing bodies from around the world. You'll see there, there's a fair list of people that you probably know here in Australia. From the racing bodies perspective, we deliver all the on-track solutions for the racetracks around Australia, such as Racing New South Wales, Racing Victoria and any of the other racing bodies here in Australia. You'll see on that side, there's bodies from the U.S., from the U.K., Mexico, Canada. So we deliver a lot of solutions from around the world into Australia and then also into the U.K. markets. And now we have moved into the U.S. market as well. From an operator perspective, you can see the who's who of wagering around the world who we deliver to most of the operators here in Australia, but they're now into the U.K. market as well. And our recently announced deal that we've done with PointsBet to deliver their solution -- a racing solution for them into the U.S. market. So a bunch of those operators there that you'll see who are also entering into the U.S. market where we expect to partner with in those markets as well. So the overview of our operations. Sorry about that. So I just want to touch on our quarter 4 highlights, which is the quarterly insights into the business. We had a strong fourth quarter. Improved receipts, $2.4 million in Q4 receipts from customers, which is up about 40% quarter-on-quarter. We're positive cash flow for the last quarter of FY '20. The company has got a very strong balance sheet. As [ Laura ] had mentioned, we did a capital raise that netted us about $33 million. We paid off about $4 million in debt, and we ended the quarter with about $31.6 million cash balance on 30 June. The growing revenues for the June 2020, we've announced to the market, unaudited revenues in excess of $1 million, which is up a fair bit from previous months. We've done a product expansion, which is launch managed trading services, which launched mid-June as well, which was very successful. And then our U.S. operations, U.S. expansion, we secured the rights for the on-course, fixed-odds operation for Monmouth Park in New Jersey. Again, that's a managed trading services, which we'll talk about a little bit further down the slide deck. So the managed trading services and platforms. You'll see here, these are a bunch of on-course bookmakers that have come online in the Australian market, RobWaterhouse.com, Bbet and BetDeluxe, a couple of operators who, again, were on course with the pandemic have had to bring their solutions online. And we've been able to roll out a very successful solution for those guys. And then RobWaterhouse, who's taking our full package solution, which is a platform mobile solutions brought through to managed trading services as part of our agreement with Rob, again, very successful launch in the last month. And we're pretty excited about where these bookmakers can end up in the next 12 to 24 months. The global racing network is an explanation to what we're currently doing from grabbing data from around the world, packaging up into a full solution. The idea for global racing network is to provide a transparent, commercialized and more importantly, an integrity focus on horse racing where your full solution goes around the world. Whether you're an Australian operator or Australian racing body delivering into the U.K. market or the U.S. market, the global racing network is there to give you a full solution to access those operators wherever they are. We generally operate or always operate in a regulated market. And for the waging operator, it provides access to racing content from around the world in a uniform sense so that's your data stream, your race-day controls gives you a consistent product across. Whether it's a domestic racing or international racing, it gives you that consistent product that you can then offer to your customers. The racing bodies, they get direct access to some of the world's largest operators. We've recently announced that we do Monmouth Park distribution globally. We're able to get that on approximately 20 of the major operators globally within a matter of weeks after doing that deal. So that just gives you an example of how a single track can get access to a big bunch of bookmakers from around the world. From the operators, as I mentioned, they get a full turnkey solution. That includes their race-day controls, enhanced data packages. We also provide a racing channel for them. So we grab their vision, whether that's coming from any racetrack around the world, we package that up into a single solution for them and deliver that in a customized version on their platform with their own branding and pricing over the top of it. From there, we can also provide pricing and trading solutions for the operators as well. Our acquisition and retention platforms. You'll notice the website on the left here, which we've highlighted, which is DynamicOdds. We're really excited about this. It's a brand-new format for DynamicOdds. We've rebuilt the platform in a new technology, and that's due to get released in the next couple of months, getting played into the spring racing carnival. So really excited about that full back-end redevelopment, which allow us to do a whole range of different things and provide better solutions for our customers as well. It's a real retention and acquisition tool for operators. Using that technology, we partnered up with Tom Waterhouse, which is his app that you'll see there on the right-hand side. That app has just gone out to market, so I think it's been live for about 3 weeks. It's been highly successful in acquisitions of customers. And the feedback on that while it's only in a really beta phase has been really positive. So we're excited. We've got 6 or 7 bookmakers that are already on the platform and another 3 or 4 bookmakers from the Australian market that will go live in the next week or 2 as well. So really excited about how that product will roll out. So moving on to the U.S. opportunity. We -- at the moment, there's 14 states that have legalized sports betting. There's a further 7 states that have passed the bill to legalized betting. So it's starting to roll out into the global market as well in the U.S. market. From a racing perspective, which is where BetMakers fits in, it currently generates about $15 billion per annum in pari-mutuel horse racing. And there's currently no fixed-odds horse racing betting in the U.S. We've obviously flagged to the market that we think New Jersey will be the first state that offers fixed-odds racing, and we've positioned the company quite well to capitalize on that opportunity. So BetMakers where they're positions, the potential New Jersey market. There's only 3 racetracks there. Predominantly, it's a 1-gallop track, which is Monmouth Park and Meadowlands Racing. Freehold is only -- does 1 or 2 meetings a year. We're looking to bring other U.S. content into that New Jersey market. There's a lot of racing that goes on in the U.S. And to give you some sort of idea, it's about twice as much as the Australian market in terms of how many races they do per year. We also have the opportunity to bring international content into that U.S. market by the New Jersey deal as well. So BetMakers, we've signed an exclusive deal in New Jersey and with Monmouth Park and the New Jersey Thoroughbred Horsemen's Association. There's 2 parts to that deal: firstly is to manage the fixed-odds betting across all operators in New Jersey on behalf of the horseman, secondly is to provide a managed trading services solution at the Monmouth Park race book. So just touching on the first component, a mini operator that is licensed in New Jersey and that wants to bet on fixed-odds horseracing in New Jersey will need to do a deal with the horseman and via the BetMakers association. So we're still awaiting the final structure of the New Jersey regulatory framework, which we've flagged to the market previously. It's just to ensure that all rights holders, including our partners and the New Jersey Thoroughbred Horsemen's Association and Darby Developments, are covered and protected as well. So while there's no time frame that's been given to us on that, it is currently under review. We have signed exclusive deals as well, which we have announced, which is an exclusive deal with up to 10 tracks in the U.S. market. And that's to not only do fixed-odds betting in New Jersey, but it also covers the other U.S. markets as well, the other U.S. states as they roll out. So quite excited about that. And the other thing that we'd like to point out is that we've signed with PointsBet, which we've recently announced, and that's to help out the PointsBet guys with all of their fixed odds for horse racing in that U.S. market. They're doing quite well in the Australian market here, which we partner with them on and provide them with all of these services for the Australian offerings. So rolling out into that U.S. market, we're excited about what PointsBet can do as well. So that probably covers the overview. [ Laura ], if there's any questions there, we'd...

Yes. Thank you so much, Todd. That was a great overview. Maybe if you just want to linger on that side, actually, that might be helpful. So a question came through about racetracks in the U.S. and Canada. So how many are there? And how do you look at that in terms of market opportunity?

Yes. Look, as you can point out in that last slide, they currently only do pari-mutuel horse betting across North America at the moment. There's about 87 racetracks that's thoroughbred tracks. There's about another 30 or 40 horse tracks as well. We're looking to partner up with any track that looks -- is looking for a solution to roll out fixed odds into operators and would like a full package solution that they can deliver to operators.

What's your next state after New Jersey just to recap?

Well, if you look on that -- this slide here, there's 14 states that have legalized sports betting. It makes sense to track that market. We do really want to concentrate on the New Jersey market and make sure that we get that right. It's important for us that not only do we launch into a state, but we launch into it and be successful. So we are concentrating heavily on New Jersey, making sure that, that is right from a regulatory sense and from a data delivery and what the operators get. We want them to be successful. We want the racetracks to be successful as well. And so we get that right, and then we can roll out into those other states and follow the trend of sports betting.

Can you give us a bit of detailed time around the ease or the difficulty with signing those last -- that last motor states in the U.S.?

Look, it's -- it comes down to the performance of New Jersey, I think. There's a lot of eyes on how New Jersey works and how that rolls out. So as I pointed out, it's important for us to get that right. And if we get that right, then I think the other states will become a lot easier than what we've experienced. But this is something that's been talked about for as long as I've been involved in the game. Pari-mutuel betting on horseracing in the U.S. has been legal over there for many years. There's been mentioned of fixed odds, and we're the first ones to be able to come up with a framework that can solve everybody's problems, all the stakeholders that are involved. So it's exciting for us that we can get everybody on the same page as what we have with the New Jersey market. And we expect the other states to roll out a lot faster than getting over the first hurdle.

Couple of questions, Todd, now around particulars. A question around whether you could give an update or just confirm the expected timing on the Monmouth Park approval?

Yes. We haven't got any time frames that we can give on that. It's something we have been having -- working on now for a couple of months. What I can say is that there's a lot of stakeholders that are all working together to ensure that it gets done and gets done properly. So while we can't give any time frames, we're confident that it's imminent.

Maybe the same question, too. Is there a timing update though on the decision by the New Jersey Racing Commission to launch fixed odds?

No. There's no timing update.

And just to recap, Todd, who would you say in your words are the top 3 competitors to your business?

Look, we're fortunate in the horseracing sense that we have concentrated on horseracing just generally because we're Australian company that operates in a horseracing market. It's one of the countries that is -- just horseracing is the most dominant sport. So we're -- in terms of competitors, there's a lot of people out there that do things similar to what we do in certain -- in some form or shape, but not as comprehensive as what BetMakers does. So probably similar to what we do with sports, there's companies like Betradar, Betgenius or Genius Sports, Sporting Solutions, SBTech and those guys. But in a horseracing sense, we're -- we've got a bit of a run at it.

People are really interested in hearing more about this fixed-odds business. Do you have a view on how expensive it'll be for -- with this other fixed-odds on racing in the U.S. market?

Look, we're trying to use the same framework that is here in Australia. And I know it's taking a number of years for this market to settle down with regulators, rights holders such as the racing bodies trying to get the right balance between how much they can charge an operator and how much revenue they can take. I think it's really settled into being a successful market at the moment. I think what we've found in the last 6 months from an operator perspective, their offering now has actually shown to carve out a decent margin for them. The racing bodies are getting a good cut out of the offering as well. So I think we've got a really good model here in Australia, and that's the similar model that we're taking into the U.S. market. So for those operators over there, we're looking to do a revenue or a percentage of turnover model in the U.S. market in that circa 2.5%, 3% of turnover to do the fixed-odds betting over there.

One final question, Todd. Could you perhaps give us some color or detail around potential future acquisitions? Or how are discussions coming along with that?

Yes. We flagged to the market that we want to do some -- have a look at what's out there and see what companies are available that would be complementary to our offering. Without sort of sharing too much, we have -- are looking at a few different options, which we're excited about, both in the Australian market and the U.S. market. However, we can't divulge any details at this stage.

No worries. Well, thank you so much for joining us today, Todd. It was great to hear from you and hear a little bit more about BetMakers.

No worries and thanks very much to NWR for putting the show on.

Thank you.