Gaming Realms plc (GMR) Earnings Call Transcript & Summary

Good morning, and welcome to the Gaming Realms' plc Full Year Results Investor Presentation. [Operator Instructions] Before we begin, I would like to submit the following poll. And I would now like to hand you over to CEO, Mark Segal. Good morning to you.

Good morning, everyone. Thank you for being here today. I'm Mark, CEO of Gaming Realms, and I'm pleased to present our financial results for the full year of 2024. The past year has been another record one for the company. We've had strong revenue growth and EBITDA growth as well as further cash generation. I'm actually really proud of what we've achieved as a team. Today's presentation, I think, is going to be similar to the previous ones we've done, where we'll run through the business model, walk through key financial metrics and highlight the drivers of our performance and also the opportunities we have in the future. So you've got myself as CEO and Geoff is joining as CFO. We have a strong management team, all very experienced in the industry that we're in. They've worked for other sort of similar businesses before and all worked very -- in all the areas that we'll be needing as a team. So what do we do? We are a developer and licenser of casino games for the regulated international iGaming market. Our core business is -- well, this is the core business of what we're doing, and it's very much based around the Slingo IP that we acquired in 2015. This is a unique product and a very strong brand, which allows us to have a cut-through with the operators we work with, and also the game format is incredibly engaging and popular with players. Slingo itself, as I say, is a strong brand. And as such, we're able to license this to adjacent markets we're in. So we license Slingo to -- for example, in the lottery world, and in the U.S., they print tens of millions of lottery tickets each year, which are branded Slingo. We also have a couple of other deals with iLottery products and also in the social space with Zynga. We also operate a smaller social gaming Slingo-based product called Slingo Arcade. This is a freemium model really, a bit more like Candy Crush where you can pay for play, and you can also get some advertising revenue. And it's really a way that we can monetize the games that we're making in the real money space into the social. Underpinning all of this is our proprietary platform. We have almost 90 games that we publish through the platform, our own Slingo games. We have some other types of games on the platform that we've developed as well as taking third-party studios, which we're publishing to the -- to our partners. The value is created for us across our different sort of verticals that we are in or businesses we are in. So in the core licensing business where we're developing the games, it's actually we share in the operator success. So the more popular our games are and the more they're played, we earn a revenue share of that. This is a very diverse revenue stream for us now. We have over 200 partners live. We have close to 90 games live as well, which means there are revenues that are spread well across all of these, and they will continue to grow as we build more really popular games and go live with more operators. The brand licensing side is, generally, on a revenue share basis as well, although the revenues that we see coming in are a little volatile in the sense that we so often get advances on our brand deals, in which case they may get accounted slightly more lumpy than in our financial periods. But this really nicely allows us to be in different markets and essentially have a Slingo brand out there. Social gaming, as I said, is more of a freemium-based model where you pay for further play, and there's advertising revenue there. So Slingo, not only are they great games that we're producing, which are very popular with players, but they are category defining. Slingo is a mixture of slots and bingo. It is essentially found -- or the operators are promoting these games alongside Bingo and slots and jackpots or whatever else they may have on their sites. So we've given a few examples here in North America. We could find examples in almost every market we're in. So for example here, Caesars, above all the game images you can see, you can see there's a Slingo section on their site. And this allows us to have quite valuable real estate on mobile phones, where our games are found. And the reason they're there is because Slingo is this very, very popular format now. I can show you the same here with BetMGM. These are 2, both of them, Caesars and BetMGM, big U.S. operators. They also have Slingo section. And we've also just taken an example from one of the lotteries we work within Canada, Loto-Québec. You can see those 6 titles there of which Slingo is highlighted. And each time you click in these sections, you'll find our portfolio is promoted. I won't spend a lot of time here, but we are -- we have a great reputation in the market, and we're working with the biggest sort of operators that there are in each market we're in. And we're also growing. So we're now in 21 regulated markets, having just launched in Brazil. We've got a number of markets, in the sort of lighter blue colors here, which we hope to go into or launch into this year, as well as growing in our existing markets. And so we're really well spread now. We are a big international game supplier. So just moving on to the financial results, I hand over to Geoff.

Thanks. So I'm going to take you through some slides looking at our financial performance in 2024 and then look to go into a bit more detail on where the growth has come from both at a market level and then also from a new partner versus organic growth perspective. So this first slide here, this is a snapshot of some of our key metrics in 2024. I won't go through every single one of these tiles, but some of the ones which I would pull out would be it was another record year, both in revenue and adjusted EBITDA terms. So our revenue was up 22% to GBP 28.5 million, and adjusted EBITDA grew to GBP 13.1 million. That was up 30% year-on-year, and that really shows the operational leverage the model has. And as you would have seen no doubt earlier in the week with our announcement, this growth has really been propelled by our performance in North America. So the bottom 2 tiles on the left-hand side. Our content licensing revenues in the U.S. grew 57% over 2023 and 71% in Canada. We're live in 21 regulated markets now, as Mark just mentioned. We went live in Brazil a couple of months ago and we expect to go live in British Columbia any day now. So that 21 will tip over to 22 very shortly. The middle tile on the right-hand side. We have 5.7 million unique players playing our content in 2024, which was 22% ahead of the previous year. And then finally, all this momentum has continued into 2025. Our content licensing revenues in January and February of this year were 22% ahead of the same period last year. So that's the snapshot. This next slide I'm going to turn to, this is our summary income statement for 2024 against 2023. Again, I won't go through every single line here, but some of the key items I'll pull out would be headline revenue growing 22%, which was really driven by our core content licensing business growing 28% in-year. Variable costs, or operating expenses as they are on financial statements, they remain at a relatively low level. So they represent 21% of our revenue, which is the same level they were last year. And that's really revenue-linked costs, like brand license fees, hosting costs. So that -- they've moved in line with revenue, as to be expected. Our admin expenses increased 14%. Almost 2/3 of that growth is head count-driven, as we invested in our team over the past year to deal with operating in more markets with more partners, launching more games and diversifying our content. And we talk operational leverage a lot. And I guess you can see that at the bottom of this slide with adjusted EBITDA increasing 30%, EBITDA up 33% and profit before tax up 61%, all well ahead of headline revenue growth. Now this is next slide is quite a simple slide. It's trying to summarize our operational model. And it's saying, as we launch with more operators in more markets and we develop, distribute and launch more games, the engagement on our game portfolio increases, more gameplay, there's more bets placed and ultimately, that feeds into revenue or increases in revenue for the business. And that's much better demonstrated visually on this next slide. So this is a slide we really like showing. It shows our progress made over each half year period, going all the way back to 2017. The top 2 charts here are both on a cumulative basis, so the number of operators and the number of games. So at the end of 2024, we were live with 87 games and we were live with around 225 partners. And the bottom 2 charts are both in-period metrics, so the value of bets placed in-period and the revenue generated. So again, if you add up the 2 bars, in 2024, in the bets placed, it was almost GBP 6.4 billion worth of bets placed through the platform on our games last year, which I guess really highlights the scale and capability that the platform holds for us. So the message on the last 2 slides is, as we launch more operators, more games, the bets placed increases, and all of that ultimately feeds into the bottom right chart with revenues increasing. So on the next couple of slides, I'm going to talk through and look at our revenue growth in particular and looking at it from a couple of different angles. This first one is at a market level. So this is showing our revenue generated in 7 of our key markets, plus the rest of the world bucket on the right-hand side. And the great thing about this is we're continuing to grow in all of our key markets. And looking at a couple of these in a bit more detail. The U.S., on the far left-hand side, this is our largest market now and revenues grew 57% over 2023. That came from a number of areas. We launched in West Virginia in August, which is the fifth regulated iGaming state that we distribute to. All of the states that we distribute to, our revenues grew really nicely against 2023. I guess Michigan would probably be the one I'd pull out as a standout where revenues doubled in 2024 over the previous year. And even better, all of that growth came organically. And in that market, in total, 70% of that growth came organically from partners that we were already live with, and 70 -- and 30%, sorry, came from the 15 partners that we launched with in-year. As we look further ahead, we're starting the process to get a license in Delaware. The markets we're already in are growing, and we're really, really well placed as new markets and states regulate for iGaming hopefully in the future. Moving to the right, the U.K. This is by far the most mature iGaming market that we're in, but we did still see growth here. We only went live with a couple of small operators with a U.K. presence, so that change really has come organically. Moving on again, Canada. So this is a market which continues to grow really nicely for us, up 71% over 2023. Again, we only went live with a handful of partners in that market and 95% of that growth has come organically. And as we mentioned, we expect to go live in British Columbia any day now. And we have Alberta on the horizon, which is a province regulating in a commercial way like Ontario. So I think we expect Canada to really show strong growth looking forward. And then on to some of our small markets, Italy. So Italy grew 4%, again, which was all virtually organic. We went live with just 1 partner during the year, and we launched our first -- Italy first game last year, so the back end of November. So it didn't have a huge impact on the 2024 numbers, but we licensed a top Italian slot brand called Fowl Play. We built a game around -- or Slingo game around that IP, distributed it globally, but it was an Italy first title. And I guess just to give you a flavor of what that's done, in the 3 months after we've launched that game, the revenues in Italy are 25% ahead of where they were coming into 2024. And then I wouldn't propose to talk too much about Spain and Portugal, they're both very much earlier in their growth cycle with us, but they continue to grow really nicely, 32% and 138%. So that's at the market level. This next slide is a relatively simple chart, but it's quite interesting, nonetheless. It's showing the type of partner that our growth has come from. And what this is doing is it's bridging our content licensing revenues in 2023 of GBP 18.5 million up to the GBP 23.8 million generated in 2024. And when we say organic partner here, this is growth with partners that we were already live with before the 1st of January in 2024. And there's 2 key messages from this chart really. The first one is that 70% of our growth in 2024 has come organically from partners that we were already live with. And the second is that we've still managed to layer on top GBP 1.5 million of revenue from the new partners that we went live with during the year. And that becomes important as we move on to this next slide showing the compound effect of what happens when we go live with a batch of operators. So this is looking at what happens when we go live with a cohort of operators in any year. I should say the scaling on this, this is showing the gross revenues that the operators generate from our games in any year. So the 2024 stack chart comes to almost GBP 330 million of gross revenue. And each of the colors within the chart represent a different cohort year of operators. So for example, in 2021, we went live with a batch of operators, which generated GBP 18 million of gross revenue from our games that year. They then went on to subsequently generate GBP 62 million in 2022, GBP 73 million in 2023 and then GBP 93 million last year. So the message here is really that we don't go live with an operator or a cohort of operators, launch our entire portfolio with them on day 1 and then see that journey down. We launch with a selection of games, we then get to know the operator a lot better, deepen our ties with them, understand their player base, how they interact and can interact with our games, and then methodically launch content with them over future periods to really organically grow and maximize the value of that relationship. So yes, last two slides is kind of 2 messages. We're growing in 2 ways. We layer on new partners on top of existing and then we also grow organically with the partners that we're already live with. And then this last chart I wanted to talk through, this is just a look at our cash, and it shows essentially the bridge from how you get from profit before tax of GBP 8.3 million on the left-hand side over to our increase in free cash flow of GBP 6.1 million on the right-hand side. So our closing cash balance at the end of 2024 was GBP 13.5 million, which was a GBP 6.1 million increase over 2023. And the bridging steps to get between the 2: you add back the GBP 4.3 million of combined depreciation and analyzation, the GBP 0.8 million of share option charges, both of those buckets are noncash charges to the income statement. And then going the other direction, we made GBP 0.9 million of corporation tax payments in the U.S. We capitalized GBP 5.8 million of development spend, predominantly within intangible assets, and the GBP 0.7 million increase in working capital, which was largely receivables-driven. I'll pass you back to Mark.

So sort of the future of where we're going, I mean, this slide here is showing the growth we've been seeing in North America, so it's U.S. and Canada, and we've been growing with scale and we're able to grow with our existing partners as we are launching new, exciting content. Today, this has been very Slingo-led, although we are now starting to distribute some slots into the market from third-party studios. And we're looking at new, innovative games that we can be taking to market ourselves as the pipeline is open with these operators, and we are a good leading supplier for most of them now as well. So we're able to take more content and hopefully, we'll see the growth continue on. This is some research and forecast of where the U.S. market can be going, showing 92% forecast growth. And the good news is that -- this is really good news for us over the next 4 years. The markets we're in are growing organically, and so we're able to grow in these markets. But the really big opportunity for us and for the industry in the U.S. is that regulation will open new states. There's over 30 states, which have regulated online sports betting now. There are 7 for the iGaming market. There are a number of states which are looking to go through legislation at various stages. I don't know when they will pass but then I always think it will happen, and it's a when rather than an if. The lighter shade here is the base case. This is assuming the organic growth in the market, plus adding 2 more states: one, I think, at the back end of '26; and the other at the back end of '27. And the more optimistic case is adding another 4% on top of that: 2 in '26 and 2 more in '27. And where we stand is, look, we know Slingo is very popular already in the U.S. market, not only in the concept we're providing, but also in the licensing deals we're doing to the luxury space, the social space. We think there's opportunity for Slingo to grow into other markets as well in the U.S. or other product verticals. We're experienced at obtaining licenses, and we're also experienced in having our game and tech certified in various markets. We're already working with the majority of the operators in the market. We have the integration routes. And so there's a lot to be optimistic about in this market. And on top of that, we are now bringing in different types of content as well to layer on top of Slingo, all to innovate Slingo further and hopefully drive more players to our games and more revenues. This -- just moving on to a couple of slides at the end. This is showing how we're growing in the respective markets in the U.S. And again, this is a snapshot to show, as new markets open, we will layer on top and continue our growth. In the meantime, we've been growing in these markets already. And then just a little bit at the end is what we've been doing with Slingo. So we should probably start, which is not shown here, is we -- Slingo is an amazing format of brand, where we're able to license IP into Slingo. So we've been licensing TV shows. We launched last year the Slingo Press Your Luck game, Press Your Luck being a popular game show in the U.S. We've also licensed game shows here like Deal or No Deal, but we're also working with competitor studios, either land-based or online slot games, and license them into our Slingo formats as well, which has been working well for both parties essentially. And that allows more players to play both the Slingo games, but also for the slot IP owners as well. On top of that, we do a number of more bespoke games for various operators, whether it's sports brands, which are highlighted here; or operator branded games, for example, [ Fowl Play ] Slingo, which launched last year; or Paddy Power Lucky Pants Slingo. We do this for a number of our partners, which allows -- then the partners have got something more unique they're working with and it's great for us to be working closely with them. We also will look to do, as Geoff mentioned, more market-specific branding. So some of the IP relicensing is more specific for a license, and we've done that more recently with Italy. And there's always themes that we're looking for various markets as well to try and have the most engaging games for our users. And again, this is another area where we can start essentially growing and doing a lot more work with our players, more opportunity for us. I don't know if there's particularly any balance sheet, I mean it's out there. You've seen a lot of our financial numbers.

Yes, there's not too many things I've put out here. I think the cash is the obvious one to highlight, increasing from GBP 7.5 million to up to GBP 13.5 million last year. Overall net assets are up GBP 9.6 million, which shows the strength of the business and the balance sheet. And then the noncurrent assets increasing GBP 3 million, that's a function of our investment in the games, the platform and what we want to distribute.

Great. And that is it for us in terms of the presentation.

[Operator Instructions] Mark, Geoff, as you can see, we have received a number of questions throughout today's presentation. And if I may now hand back to you and kindly ask you to read out the questions, where appropriate to do so, and I'll pick up from you both at the end.

All right. Thank you very much. So question one is, what jurisdictions do you see the most growth potential for in 2025? Answer to that is I still think the U.S. will continue to grow as we launch more great content in the market. I'm not sure if we mentioned before, but our 2024 set of games was the highest grossing set of games we produced in the first year. And so we are still continuing to make great games. And that's definitely -- we're definitely seeing that in our results. The U.S. is still a growing market, but definitely, in the long term, it's got the potential to be -- grow and grow as more states regulate that. Next question, would you consider diversifying away from the Slingo name and brand? Look, at the moment, I still think Slingo is our differentiator. It still has a much higher ceiling than we are utilizing the brand for. We're seeing that as we're able to see the results of how it does in areas where we're licensing the brand. So it's a very popular format with the players and it's category defining. However, we'll continue to innovate within Slingo as well as look for new additional products we can take to market. We are distributing some slot games now. There is demand, of course, for different types of games. And it'll be interesting to see how we can take Slingo into some other categories of games. And hopefully, we'll see the crossover from that. I mean, just for example, we're seeing with some operators now how well they are able to use Slingo to cross-sell from other products, whether it's sports or bingo, for example. Slingo is a nice way to bring people into their casino offering. And the next one is, what's the rationale behind the share buyback? So look, we sat down as a Board. We've decided at this point in time, with the surplus cash we have, this is probably the best use of this amount of money. We still have more surplus cash and we're still continuing to generate cash. But this -- we want to be able to have some cash on hand. It allows us to be nimble. We're looking to invest more into the company. And that's whether it be additional games, quicker launches, quicker market access or more platform features to allow us to -- essentially allow more ability for our games to be marketed in all the various markets and territories we're in. But also it may allow us, and I'm not saying we're in the process or anything like that, but it allows us to be nimble if we see some really interesting content that we may want to acquire, invest in, nurture. And I think that's an area where we can put the money to use in a really good way to essentially add shareholder value. And the other one is, is there much growth left in the U.K.? And do you envisage more regulation coming? Look, the regulation is coming now. Staking limits will be in next week. There's already been a lot of regulation today. We think we're very well prepared. Our games are relatively lower staking in average. So we feel we have a good portfolio for the U.K. We've been doing a lot of innovation within our games to allow them to still be just as engaging afterwards. We'll have to wait to see. I mean the great thing I would say about our business is, as we've seen on previous slides, we are well diversified. I mean, the U.S. is the largest market. So we're not fully reliant on U.K. Of course, it's our home market, and we've put a lot of effort into it. But we'll continue to grow in new markets. It should be interesting over the next couple of years to see how South Africa has done, how we're growing in Canada, how we're growing in Brazil as well and other markets growing. So it's not -- we are trying to be as diversified as possible.

Yes, we've had one on our capitalization levels and what we should expect these to be looking forward into 2025 and beyond. I think I said in the presentation, we increased our head count 24% in 2024 over 2023, and that was to get us to a level to be able to distribute the content flow that we're now seeing and we will see in 2025. I think we were up to just north of 100 employees at the end of 2024. I think we expect, or we are expecting, a handful of increases this year, but nowhere near the increase we saw last year. So I think ultimately, that will mean the capitalization will increase over 2024 just purely because of the full year impact of that increase in head count, which was predominantly in our product teams and tech teams. But we're probably looking around the GBP 6 million level rather than the same sort of growth that we saw last year.

Next question, how many more regulated markets, operators, can the current head count sustain? Looking to gain an idea of the current spare capacity. So it's probably worth saying we've grown head count 20% or 20-odd percent over 2024. That's not -- we're not going to continue with that growth for now. We feel that we have to grow more particularly in certain areas of the business, product and tech, to allow us to produce more games, more tailored games and also more market launches. We've been doing a lot of work, to be fair, over the last 4 or 5 years on improving our platform so it can be more scalable. So it is easier to be launching that we -- in these new markets. So we're not expecting a lot more growth over the next year. There may be the odd 1 or 2 just sort of targeted, to help us get to -- achieve our goals. But I think actually, we have a good capacity in our team now to meet definitely our short-term goals.

There's one in our marketing expenses, and it says marketing expenses fell substantially year-on-year, what drove this change and how is this likely to progress? So our marketing expenses are predominantly within our social business, which is noncore, our B2C premium games. So each half -- first half of the year, over the past few years, we've done a relatively small marketing campaign. And we did that again in 2024. It was slightly lower. It had a better effect in 2024. I think we'll see that happen again in 2025. I think that'll probably remain at a similar quantum to 2024.

Great. Next question, you reported strong growth in Canada in '24. Can we anticipate that for the market 2025 and 2026? Should Alberta bring even faster growth dynamics? So Canada actually has been a really good growth story for us. There's one regulated province, which is Ontario, which we were live partway through 2023. We are live with the only regulated operator in Quebec, which is the lottery. We will be live very soon with the only regulated operator in British Columbia, which is the lottery there, which comes with a few other provinces' lotteries. Alberta is targeted to be the next commercial province which opens. And quite a few of our partners are really excited about that market. We think it can be a decent-sized market for them to be operating. Of course, we'll be there supplying our great content as well. So I guess the answer is yes, that should bring faster dynamics in that market, for sure. I think that's targeted for beginning of 2026 at the moment rather than '25, albeit the date hasn't been set yet. I think final question we have here is, do you have any idea of the status of the gaming app review, when it will be implemented? So I assume this is U.K. This is already being implemented in stages. And there's more regulation, I think, coming for -- mostly, this is on the operator side. So there's more that they will be looking on, bonus levels and things, towards the end of this year. Particularly on the game side, we are already compliant with most of -- well, almost -- I think all of the things they're bringing in. The only one, which is coming in next week, is around the staking limits. So we've tried to get ahead of that and already brought in the staking limits on our side earlier. So we're already sort of hopefully compliant. We've got 1 or 2 little ticks to go before we get there. But yes, that's either in progress or coming very soon for all of the changes that they are proposing.

That's great, Mark, Geoff. Thank you for addressing those questions from investors today. And of course, the company can review all questions submitted today, and we'll publish those responses on Investor Meet Company platform. But Mark, before we redirect investors to provide you with their feedback, which is particularly important to the company, can I please ask you for a few closing comments?

Yes. I just want to thank you all for your time today. I think the message is we've had a really, really strong set of results for the last few years. We are executing better every year. So this year, we'll execute better again. And we have lots of really exciting things in the pipeline on the new market launches, partner launches, product launches, and we're really excited to see what the future brings. So thank you all.

That's great, Mark, Geoff. Thank you once again for updating investors today. Could I please ask investors not to close this session as you will now be automatically redirected to provide your feedback in order that the Board to better understand your views and expectations. This will only take a few moments to complete, and I am sure it will be greatly valued by the company. On behalf of the management team of Gaming Realms plc, we'd like to thank you for attending today's presentation, and good afternoon to you all.