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

We apologize for the delay, everyone. [indiscernible] a couple of issues. And we'll just give it a few moments because we have quite a few people coming in. So good morning, and thank you for joining the BetMakers Technology Group Limited August investor webinar. I'm Jane Morgan, the Investor and Media Relations Manager. On Monday, we released our August investor presentation, which we'll run through today. [Operator Instructions] So today, I am joined by BetMakers' CEO, Todd Buckingham; our CFO, Anthony Pullin; and our COO, Jake Henson, who will be providing an overview of the presentation. Todd, I'll pass over to you.

Thanks, Jane, and thanks very much, everyone, for joining us in our latest investor presentation to discuss our FY '21 results, along with our next phase of growth for BetMakers. It's always good to look back each year on our achievements and understand how far the company has come in a very short space of time. For you investors that have been along the journey, in particular, over the last few years, we have obviously had a fantastic result with the share price [ climbing some 25x ] from where it was in June. The company has come -- I mean broadening its [indiscernible] we have now achieved. Joining me today, we've got Anthony Pullin, our CFO; and Jake Henson, our COO, who will be assisting me running through the presentation. So a quick recap. Obviously, a lot of people would understand BetMakers and where we fit into the ecosystem. But just to give everybody a clear understanding, obviously, we sit in the middle of the racing ecosystem between the wagering operator and the racing bodies or the rights holders. We provide a whole range of services, important services, to both parties across digital wagering platforms, Global Tote or pari-mutuel services. We provide all the data and analytics for operators. And then we provide a range of services like managed trading services, integrity solutions, race vision and streaming and also a [indiscernible] race-day controls [indiscernible] that we would do each year. BetMakers operate in a very regulated market. We now hold some 45 wagering and gaming licenses globally. The Board and its key officers have passed probity in some of the most stringent heavily regulated jurisdictions around the world. Our customers that operate in these regulated markets, they include commercial B2C operators, regulators and casinos and racetracks across the United States, Europe, Asia, United Kingdom and also Australia. The company now has a global footprint. As you can see, there's -- we're in some 30 countries now, operating with 55 -- over 55 online wagering operators, more than 225 racing partners around the world. That's casinos, racetracks, online operators, regulators globally. We have 45 -- as I mentioned, we've got over 45 regulatory licenses globally, almost 400 employees now across 10 offices around the world. We're granted [indiscernible] in the last 2 years and obviously, it's a substantial global footprint that BetMakers now holds. Our key team that we've been able to build and establish in recent years, I believe, is the best in the market. Our Board sits with Nick Chan, Matt Davey, Simon Dulhunty and myself. We've got some really key advisers who have got extreme experience in the industry with Martin Tripp and Paul Bittar. And then the underlying executive team headed up by Jake Henson and Anthony Pullin. Our technical team, Karl Begg and Oliver Shanahan. And then recently, that's come on as Sam Adams as our Chief Legal Officer, and Martin Tripp as Head of Products. So I'll hand over to Anthony now who will give an overview of our financial report for FY '21.

Yes. Thanks, Todd. Look, we're very pleased to present our results to you all today for FY '21. Going through them, revenue of $19.5 million, which is up 127% from the prior year. We've also seen really good, continued growth throughout the year. Second half revenue was up 56% on the first half as well as 161% on the corresponding period in the prior year. Much of this growth has been driven by our Australian operations, where we've seen continued interest and expansion in our platform and managed trading services offering as well as our international content distribution business. As I'm sure most of our listeners today are aware, we completed the Sportech acquisition for that. So the acquisition of the Sportech operation digital assets in 30th of June. Therefore, our FY '21 figures talk about 2 weeks of contribution from these assets. Putting that in revenue terms, about $2 million. We're currently working on a number of really exciting opportunities, not least of which is fixed odds horse racing in New Jersey. So during FY '21, we were actively investing additional resources to put the company in the best possible position to take advantage of these opportunities. For FY '21, we reported an adjusted EBITDA loss of approximately $2.9 million, which includes approximately $2.4 million of costs related to the U.S. market development. We finished the financial year with $120 million in cash on the balance sheet and no debt. Once again, putting us in a really strong position to execute on our strategy going forward. Just on the bottom left there of the slide to give you an update on where the business is currently trading. Based on July figures, this business is on a run rate in excess of $70 million in annual revenue. Todd, if you want to jump to the next one. Here, I'll leave it to Jake to run through these visions in greater detail later in the presentation. But as a brief introduction going forward, we'll be reporting across these 3 division lines. We've got Global Betting Services, which was formerly the wholesale wagering products segment where we've got Global Racing Network, which was formerly content and integrity. And we've got Global Tote, which reflects our tote operations business. Here, we've simply broken down the revenue and the growth across these 3 divisions. We're seeing really good strong growth across all 3. In particular, the GBS division, which captures our platform in the MTS operations. With the launch of fixed odds in New Jersey, hopefully, in the short-term future, this will be captured through the GRN segment. And so hopefully, we'll see some continued strong growth there over the next year and beyond. And the Global Tote segment, the blue one there at the top, that reflects 2 weeks of owning U.S. and European tote operations. I'll now pass to Jake to run you through these core divisions in a little bit more detail.

Thank you, Anthony. And as you've touched on, we've consolidated our products and services into those 3 global divisions that we'll use as pillars of the business moving forward. So I'll start with Global Betting Services. These are essentially B2B products built for and servicing customers who interact with other customers on a B2C basis or a B2C level, covering our global platforms and applications as well as the back-end data services that are integral to the racing wagering ecosystem, things like race-day controls, event life cycle information and pricing. Our Managed Trading Services and bespoke fixed pricing also fits into this pillar as well as the racing form content and statistical information. Examples of customers who would fall into this bracket would be wagering operators such PointsBet, our media partner such as racing.com and an aggregator and affiliate by the tomwaterhouse.com mobile application. The Global Tote business, as you've touched on, is a consolidated Sportech digital and racing assets combined with some of the internal proprietary technology from the BetMakers side. The Quantum Tote engine from the Sportech racing assets came across as the host and commingling and point-of-sale technology. That point in tote currently processes around about $15 billion in handle annually. Examples of customers within this division, the UK Tote Group; Penn Gaming, the racetracks; Danske Spil, the Danish lottery company; and the Hong Kong Jockey Club. Then we'll talk to Global Racing Network. The GRN is our one-stop shop of racing data, content and integrity services. We act as intermediary between regulators, rights holders and racing bodies and their interaction with the wagering operators. race-day control, streaming, digital price network, reporting services and integrity. These will fall into this bracket. And as Anthony touched on, the fixed odds opportunity managing within New Jersey market would fall into this particular division as with partnerships with the likes of SIS and Racecourse Media Group, which we announced in the previous financial year and the integrity services we provide someone like Racing Victoria. So just a quick snapshot of some of the highlights of these businesses. So the GBS business, we have 9 betting clients now live in Australia and 23 U.S. ADW customers and around about 25 price management customers globally. The event life cycle and pricing services now cover over 250,000 races annually. On the tote side, we'd host -- we have 130 hosting and service contracts and over 145 pooling and co-mingling contracts. That's coupled with our terminal and point-of-sale deployment around the world, which at the moment stands at around 29,000 wagering and betting terminals. The Global Racing Network is now connected with 36 countries around the world, which results in around about 300 racing wagering partners and brands. And of course, the opportunity to roll out fixed odds within the New Jersey market that will sit within here. And obviously, the new relationships we formed with, not only operators, but content providers who will be looking to get their content into that market. And on that note, I'll hand back to Todd, who will cover off in a little bit more detail around the strategic plan for FY '22.

Thanks, Jake. Obviously, a very good result for us in FY '21, establishing ourselves, getting a very good base, and we're ready for a real step change in the business, both from a financial metrics point of view, but also from a global footprint point of view. So we're looking to expand into and accelerate the business. To do that, we've got some key things that we're doing for each one of those segments, Global Betting Services, Global Tote and also the GRN, Global Racing Network. But at the top of the page here, you'll see 4 key areas that we're really looking to concentrate on for FY '22. So exploration of inorganic growth opportunities through acquisitions and partnerships. We recently announced a couple of deals. We bought a business called Form Cruncher, and we also bought another business called Swopstakes. Both of those were bought for addition to our existing platform and further engagement with the customers on that platform. And we'll be looking at continuing to look for opportunities that we can add into our network and broaden either our product suite or our customer base or our exposure to global markets. We'll have an increased focus on penetrating the U.S. market. We have announced, obviously, the fixed odds deal in New Jersey. We see that as a really important piece, along with our acquisition of the assets within that U.S. markets, both digital and land-based. We're going to focus on expanding that customer base into more products. We're bringing in new technology, which we're quite excited about in terms of the terminals that sit in that U.S. market. And from a digital point of view, we see some real upside there with the sportsbook makers that are in that jurisdiction now. So adding our products onto those platforms will be a key focus for us in 2022. The land-and-expand strategy across all of our customers, our existing customers, that strategy is around taking our existing customers that we've got and expanding our product suite onto those customers. So a lot of the business that we bought in terms of Sportech acquisition. We might be selling 1 or 2 products to those customers. We'll be looking to expand that to sell 4 to 5 products to each of those customers, connecting them in globally into different jurisdictions. We'd also -- one of our key focuses is on continued investment in our BetMakers global resource and technology. So getting the right people on the team and also developing our technology and capitalizing on the opportunities that are presented to us. One of the key areas that obviously will be of quite interest to a lot of people on this call is the U.S. opportunity update, U.S. opportunity in terms of New Jersey. And we'd like to update you on that. Look, New Jersey is something that we've been working on for the last 18 months, and we've been working really closely with Monmouth Park, the racetrack. We've been working really closely with the New Jersey Horsemen to get the right model for New Jersey. And by introducing fixed odds into that, we want to make sure that we've got a sustainable model that will be rolled out across New Jersey without affecting -- or benefiting, sorry, the Horsemen and the racetrack there. So we've been able to move through that legislative process. The governor signed a bill authorizing fixed odds betting in New Jersey. The model as well that we've been working closely with Monmouth Park on is ensuring that they get control of their signal and any signals that are coming into New Jersey, which means any betting on fixed odds in New Jersey will be controlled by Monmouth Park. And as such, BetMakers who are their agent and partner over the next 10 years. That process now has moved on to the regulators who are forming the rules. And as we understand it, the rules are -- have been implemented or are ready to go and at the final stage. And they will obviously come out over the next month or two. And once that happens, then we'll be able to roll out fixed odds into the New Jersey market. A lot of questions are coming through in regards to when and how our fixed odds will roll out in New Jersey. Initially, it will be done at Monmouth Park. We've done the technology integration at the track. So we're ready to go. As soon as the approval comes through, then we'll be able to start taking fixed odds bets at the track at Monmouth Park. And that's not just on Monmouth Park races, but that's on any tracks that would like to offer their product into the New Jersey market. We've announced the number of tracks that are already on board to go into New Jersey. We're also working with a lot of rights holders and track owners that would like to be a part of this process as well in New Jersey. It's a really exciting time for us. After that, there will be online operators. We've announced our deal with PointsBet. PointsBet are in the stage of integrating to get ready to start taking online bets in New Jersey on horse racing. And after that, there'll be a number of other operators that will be offering fixed odds betting on horse racing in New Jersey. So thanks very much for listening in. I know we've got a whole range of questions that are coming in. So it's probably a good time for us to take those questions, Jane. And obviously...

Yes, of course. Todd, if you want to just stop sharing the screen. I'll jump into them. Again, please feel free to ask a question using the Q&A function at the bottom of the screen. Just first up, this will be one for you, Anthony. So we've announced in FY 2022 update with the July annualized revenue run rate in excess of $70 million per year. Can you walk us through this number?

Yes. Sure. I guess first of all, the $70 million is just an extrapolation of the July revenues of [indiscernible] by 12 indication per year. The makeup of that is -- sorry, based on July, it's approximately 2/3 from our tote operations across the Northern Hemisphere, near U.S. and U.K. and Europe, about 1/3 from our Australian operations. In terms of putting forward that number, we don't see too much seasonality in it. And we -- it's based on the current deals that we have in the market at the moment. And hopefully, we can see some good growth on that number as the year progresses.

Perfect. Probably one for you, Jake. So one of our shareholders would like to know if BetMakers has a plan to release the DynamicOdds app on a mobile, [indiscernible] that product are not in a computer or a laptop.

Yes. So this particular project is under development currently, and we expect to roll that out throughout the Spring Carnival, coupled with some of the new technology we've developed in the last 12 months around the Tom Waterhouse and a few other things where we're pretty keen to unravel the next phase around the digital betting experience.

Perfect. There's another one that's just come through. So this one is probably for you, Todd. So given the recent changes to fixed odds betting on thoroughbreds horse racing in New Jersey, can you provide some color on what the timing and rollout plan might look like?

Yes. As I just mentioned, the rollout plan is to go live at Monmouth Park. We're in the hands of the regulator who's working closely with Monmouth and the Horsemen group to get the regulations out. Once that goes live, then we'll be live on course, and then that will be a case then of rolling out across the online operators. We expect to see a number of operators go live before the end of the year. But really sort of ramp up in the first half of calendar year next year.

Sorry just on that then. So what other wagering operators have signed on to fixed odds betting in New Jersey?

We've got PointsBet that have announced that they're signed. We're in discussions with all of the operators that are in -- or we're keen to talk to all of the operators that are in New Jersey. There's about 30 to 33 online operators in New Jersey, but there's also a whole range of casinos as well and ADWs that would be keen to obviously participate in fixed odds betting on horse racing.

Okay. Another one has come through. So we've mentioned the strategic focus is across the 3 divisions of the business, and we have roughly $120 million in the bank. What's the strategy for growth?

Yes. This is concentrating on our existing customers and investing in technology. That's both from an online digital point of view. But also in the terminals where we've got a number of terminals that are globally placed. We've got a lot of terminals in the U.S. as well. Our new terminal range comes out towards the back end of this year. We're really excited about that and being able to invest in that technology will allow us to extend and lengthen contracts and convert contracts into a bigger revenue stream for BetMakers as well. So we'll have investment in technology. And we're also looking at any types of partnerships and acquisitions that are on the table that fit into our business and will be accretive for shareholders.

There's been a few questions about potential acquisitions. So is there anything in the wings?

We've been through that. We've got a number of opportunities, which we're looking at. We haven't done anything as yet. So we have just recently completed not only Sportech but 2 other acquisitions in Swopstakes and Form Cruncher. So at this stage, there's nothing immediately, but we're obviously keeping our eye on everything that's going on.

Okay. Anthony, probably one for you. So could you please provide some insight on the seasonality of the Sportech general revenue? Is this seasonal or a good indication of the current run rate we should expect?

Yes. I think that's a good indication of what to expect. When we first announced the acquisition back on the 1st of December, we sort of put Sportech or revenue indications for these assets out to market of around about $47 million, $48 million a year. So around about $2 million for 2 weeks of acquisition or ownership is about fine. So I don't think there's too much seasonality within that.

Jake, this one might be for you. So who do you see as your major competitors? And who are you keeping a close eye on and stay ahead of?

Yes. So we've had a few questions around that. And I guess our core competencies and competitive advantage. Certainly, as a business we're keeping abreast at everything that's moving in the racing space specifically. I would say even more so than that, just generally in technology in terms of how things are presented to customers, how transactions are processed, how data is stored, et cetera. From, I guess, a business standpoint, our focus is certainly on growing the pie as opposed to competing over the same patch. And I think that will stand down to some of the partnerships we strike with people who would B2C as competitors traditionally where we think, obviously, there's an opportunity to align with those people already in the industry and grow things forward. So certainly, that's -- an internal focus is obviously to focus on the growth markets and achieving more growth in existing and regulated markets. And doing so, partnering with someone who might be perceived as a competitor, but -- and we can see an advantage in teaming together and applying our broad product range to what they can bring to the table as well.

Thank you. There's been quite a few questions just about the next state of what they're going to drop in the U.S., probably one for you, Todd.

Yes. I think it's an important one to look at with that last slide in our deck in regards to how sports betting rolled out. Obviously, it went to New Jersey first. That went into the New Jersey market. And some 2 years later, took over 2 years. It's now in 30-odd states around the U.S. So while we're concentrating heavily on New Jersey and making sure we get that right, we see this as a rollout similar to how sports betting has rolled out previously. And so it's -- it will probably follow that same trend we expect.

Thank you. Sorry, there's quite a few coming through. I'm just making sure we don't miss anything. So we've talked about the new technology to be implemented in the Sportech business, can we talk about the cost involved here? What additional functionality will be implemented to enhance the user experience or the product set and the timing to deployment?

Yes. I'll speak to part 1 of that. Certainly, from a business standpoint, what we've developed from a software side of things, is obviously quite cost effective to deploy at scale. Most of the costs that we'll incur in terms of increasing the technology base will be centered around hardware. And that's certainly an investment that we'll make around point-of-sale technology to improve the capability to deliver more products through that vertical. At the moment, of those 29,000 terminals, they're somewhat limited in terms of the product and different offerings that they can deliver through there. So a key thing for us is, obviously, to upgrade them to a stage in which we can rapidly deploy new product, new bet types, et cetera. And from a finance point of view, Anthony, I'm not sure if you've got anything to add to that, but certainly, the software is very scalable from a cost point of view.

Yes. Correct. Look, and on the hardware piece, we'll definitely be investing that, as Jake said, in the upcoming year. As at today, I'd be getting somewhere between $5 million to $10 million of CapEx investment. But the U.S. being a new market, as Jake said, the new hardware technology being, I guess, a new stream for ourselves, we'll put that into market, learn -- I guess, live and learn with it, and then refine our CapEx investment expectations from there.

Thanks for that. Todd, one for you. There's quite a few questions coming up about Tabcorp. Do you want to maybe just comment on that and what the next steps are?

Yes. As everyone would probably know, BetMakers was 1 of 3 bidders for the Tabcorp business when there was a bit of uncertainty as to how that asset would have eventually come out. Tabcorp rejected all those bids. And BetMakers, we've always said that we're really confident with our existing business and where we're heading. And the time with Tabcorp was around some products that they have with in their business that is complementary and would fit into, we think that really should be more a wholesale offering. We still feel that. And we're still in discussions with Tab in regards to that and how that would look. Obviously, they're under a -- their business is doing a demerger with the lotteries business. So obviously, they're focused on a whole range of things at the moment. While BetMakers is just going to concentrate on getting on with all the opportunities that we've got in front of us as well. And we're still obviously got an interest in those assets. And at the right time, if the opportunity comes up, we'd certainly be interested in working with them.

Just a few more bits come through. So is there an opportunity to apply fixed odds betting to other sports in the U.S. market? And if so, has this been considered?

Yes, I can take that one. So obviously, the development of -- and the rollout of fixed odds betting in the United States has basically gone from 1 legalized state to around about 30 in 2.5 years. Of which, throughout that, there's obviously a customer journey of education around the bet type and how that's communicated to customers. And the exciting opportunity for racing is that, that's a new customer, someone who's not traditionally interacted with the sport. And we see a big part of that growth in the U.S. market is tapping into the digital market, and those 2 are currently betting with PointsBet or DraftKings and presenting racing in a way that hasn't been presented to consumers in the U.S. previously. So certainly, how that type interacts with traditional sports bets in that market and how that product can be displayed, I think, is key to growth and tapping into new revenue streams and customers.

Thank you, guys. There's a few questions about the fixed odds distribution deal in Jamaica. Jake, maybe this one's for you or...

Yes. So we've done a lot of deals in the last 12 months that center around the same principles here of a full service offering for a racetrack. That's stemming from reporting and integrity services to what we can help out on the track via our official price race-day controls, the deployment of race-day screens. And then the end product as you develop that racetrack experience, obviously, you end up with data that you can then commercialize internationally. So Jamaica is a good example of that. In recent times, we've partnered with Kentucky Downs and a few other tracks to do something similar where we're basically looking to do a full-service distribution schedule for these guys from streaming to tote co-mingling and fixed odds distribution. The Jamaican opportunity is progressing really well, and we've already worked with those guys on the fixed odds distribution side. And we look forward to explaining a little bit more around the strategy with some of the tracks were partnering with in the near future.

Todd, probably one for you to comment on. There's quite a few questions coming up about Matt Tripp and his involvement. So maybe just comment on that.

Yes, certainly. Matt's been a really strong advocate of BetMakers and he signed on with us after he did an investment in the business to put his money in. We've structured a deal around being able to bring commercial deals to us that would turbocharge the business, I suppose, and accelerate where we sit. He's brought a number of deals to us, which -- some of which are still active, and we're working through, and he'll continue to do that. So -- and Matt's one -- been a big supporter of ours, but also he's there to commercially bring in deals. At this stage, we haven't closed any obviously. He worked with us under Tabcorp acquisition proposal, which obviously didn't go ahead, but we are working on a number of other deals that we expect to develop over the next 12 months.

Okay. Last one I think we've got is, so given the copy on the ground overseas of Sportech, have we found any surprises of the business since we took control of it?

Yes. I'll start and Todd can -- as a whole, we've been obviously pleasantly surprised with the internal culture in terms of how many passionate racing people exist at that business that really fit into the mold of BetMakers and what we're trying to achieve in terms of growing the returns for all stakeholders. Certainly, the restrictions have been not ideal. But there's also a considerable amount of leadership within that U.S.-based Sportech team that is now coming across to the BetMakers leadership team and leadership structures, some of which we'll announce in coming weeks. So in terms of, obviously, physically being there, certainly, the 3 of us have clocked up our [indiscernible] over the last 12 months. But there's also some very capable people on the ground already who have bought into the BetMakers goal and vision and are starting to deliver that message across to their team. So we couldn't really be happier with the team that we've inherited there, and we look forward to bringing them on the journey.

Right. Just the last one, Todd, probably for you. So what can shareholders look forward to in the next sort of 3 to 6 months?

I think more of the same. We're going to bring out more products, we're going to put on more customers. We've obviously got the big ticket items like the New Jersey fixed odds going live. So there's a whole range of things that we're continuing to work on, but really exciting times here at BetMakers for the business. And obviously, for shareholders as well, who have benefited out of the long sustainable growth that we've had over the last couple of years. So thank you to the shareholders that have stuck with us. And obviously, there's been ups and downs, but it's been a great journey, and we're glad you -- they'd stuck with us.

Well, I think that's what we've got time for today. So thank you, everyone, for joining the BetMakers' August investor webinar. Should we have missed any questions, please look free to reach out via the contact details on the bottom of our ASX releases, and we look forward to updating you in the coming weeks.