Meridian Holdings Inc. (MRDN) Earnings Call Transcript & Summary

Good morning, everyone, and welcome to Meridian Holdings First Quarter 2026 Earnings Call. On today's call are William Scott, Interim Chief Executive Officer of Meridian Holdings; Rich Christensen, Chief Financial Officer of Meridian Holdings; and Zoran Milosevic, Chief Executive Officer of Meridianbet Group, a subsidiary of Meridian Holdings. [Operator Instructions] At the conclusion of the call, the recording and supporting materials will be available on the Meridian Holdings Investor Relations website at www.meridian-holdings.com. As a reminder, today's call will contain forward-looking statements within the meaning of applicable securities laws. These statements are based on various assumptions and subject to risks and uncertainties that could cause actual results to differ materially. For a complete discussion of these factors, please refer to our most recent 10-K and 10-Q filings and other public disclosures available at sec.gov. Non-GAAP financial measures will be discussed on today's call. Reconciliations to the nearest GAAP measures can be found in our earnings release available on our Investor Relations website. I will now turn the call over to William Scott, Interim Chief Executive Officer of Meridian Holdings.

Thank you, and good morning, everyone. We appreciate you joining us for our first quarter 2026 earnings call. I'll begin with some context on what this quarter represents for Meridian Holdings because I think it merits a moment of reflection before we move into the numbers. Q1 2026 is the first quarter in which we reported GAAP profitability under Meridian Holdings brand. And that is not a milestone we take lightly, it reflects the collective work of every team across our 25-plus regulated markets, and it reflects the operational discipline and strategic clarity that we are committed to when we began this journey together. Now let me take you through the headline results. We delivered revenue of $50.1 million in Q1, up 17% over the same period last year, exactly in line with the guidance we issued during our Q4 2025 earnings call. Adjusted EBITDA came in at $6.3 million, representing a 12.6% margin and a 26% increase year-over-year. Importantly, we exceeded our previously issued adjusted EBITDA guidance of $6.1 million, which reflects both the strength in our Meridian operations and our ongoing commitment to cost discipline, and we delivered net income of $2.2 million, $0.18 per diluted share compared with a net loss of $300,000 last year. I want to be direct about what these results mean. They demonstrate that our model is working. We are growing the top line at scale, managing costs with discipline, generating profits and continue to fortify the balance sheet. Total debt declined 54% year-over-year. Net debt fell 62% year-over-year. Our leverage ratio now stands at just 0.53x annualized adjusted EBITDA, the strongest capital structure since the 2024 merger. 2025 was the year we proved our operational delivery, record revenue, meaningful debt reduction and a rebrand that positions this company for the next chapter of its growth. 2026 is about executing against that positioning with discipline and confidence. Our priorities in 2026 remain flat and consistent: Deliver on guidance, maintain operational discipline across every market, continue the balance sheet trajectory we established last year and communicate clearly with you every quarter about what the numbers mean and what drives it. Every decision we make is driving long-term shareholder value. With that, I'll turn it over to Rich to walk you through the financials in detail. Rich?

Thank you, William, and good morning, everyone. I'll walk through the first quarter results in detail, covering revenue, margins, profitability, the balance sheet and our guidance for the second quarter of 2026. Revenue for the first quarter was $50.1 million, an increase of $7.4 million or 17% compared to $42.7 million in the first quarter of last year. This growth was broad-based across our portfolio, but was led by Meridianbet, which delivered $34.9 million in the quarter, up approximately 26% over last year and accounted for approximately 70% of total company revenue. Revenue growth was driven by continued expansion in active users and depositors, scale in our established markets across Europe and Africa and early contributions from our Brazil operations, which launched in 2025. Gross profit reached $28.1 million for the quarter, representing a gross margin of 56.2%. This compares to gross profit of $24.2 million and gross margin of 56.6% in Q1 of 2025. Gross margin was consistent with the prior period, declining only 46 basis points despite the evolving revenue mix, particularly with Meridianbet's high-margin contributions being partially offset by the early stage economics in our smaller markets as they begin to scale. In nominal terms, gross profit grew 16% year-over-year, reflecting a combination of strong top line momentum and our continued focus on high-margin B2C casino and sportsbook operations. Turning to operating expenses. Selling, general and administrative expenses were $25 million in Q1 of 2026 compared with $24.3 million in Q1 of last year. This modest increase reflects disciplined expense management even as we continue to invest in technology, regulatory compliance infrastructure and market expansion capabilities, including our AI-powered platform investments, as Zoran will speak to in more detail. Income from operations was $3.2 million for the quarter, a significant improvement from the operating loss of $0.1 million in Q1 of last year. This $3.3 million swing reflects the operating leverage inherent in our business model as we scale revenue and maintain cost discipline. Net income was $2.2 million or $0.18 per diluted share. This compares to a net loss of $300,000 or $0.02 per diluted share in Q1 of last year. This represents a return to profitability, the first of many profitable quarters under the Meridian Holdings brand, and a meaningful milestone as we demonstrate the earnings power of our scaled diversified platform. Adjusted EBITDA for the quarter was $6.3 million, up 26% from $5.0 million in Q1 of 2025 and ahead of our previously issued guidance of $6.1 million. Adjusted EBITDA margin was 12.6%, representing approximately 86 basis points of margin expansion versus last year. The adjusted EBITDA outperformance was driven by the strength in Meridianbet's core operating metrics and the continued operating leverage of our B2B content business. The balance sheet continues its positive trajectory in Q1 of 2026. I'd like to highlight on a few key metrics that demonstrate the financial strength for building. First, cash and cash equivalents were $16.2 million at quarter end. Total debt was $29.7 million, down from $34.7 million at year-end 2025 and representing a 54% reduction compared to Q1 of 2025. Net debt stands at $13.4 million, a 62% reduction from last year, translating to a net debt leverage ratio of just 0.53x annualized adjusted EBITDA. The balance sheet is in great shape and is improving. Operating cash flow for the quarter was $5.2 million, underscoring the cash-generating nature of our business and supporting our ongoing debt reduction trajectory and reinvestment in technology and regulated market expansion. Turning to our segments. Meridianbet Group delivered Q1 revenue of $34.9 million, up 26% year-over-year and represented 70% of total company revenue. Segment gross margin was 69.3%, reflecting the attractive unit economics of our core sports betting and online casino operations. Segment operating income grew 37% year-over-year to $6.6 million. Zoran will provide more detail on Meridianbet's operational performance in just a moment. Our teams in Classics For A Cause segment delivered combined revenue of $12.1 million in the first quarter. This is up 9% from the prior year, and it represents 24% of total company revenue. At our teams, our U.K.-based pay-to-enter price competition business, revenue reached $7.7 million in Q1, up 12% year-over-year. Average order value increased 29% to $16.91 and the value per new registration improved 15% to $17.72, metrics that speak to the improving unit economics of this business and our focus on high-value customer engagement. At Classics For A Cause, our Australia-based subscription, digital membership and trade promotion lottery platform, new users rose 18% year-over-year to 9,813. Total transactions grew 12% sequentially and VIP subscription surpassed 10,000 for the first time in 12 months, ending Q1 at 10,750. The return of VIP subscriptions above this threshold is a strong indicator of customer loyalty and future revenue momentum. Finally, GMAG, our B2B iGaming aggregation segment, which includes MexPlay, contributed $3.1 million in revenue in the quarter, representing approximately 6% of total company revenue. While the segment's revenue declined 18% from $3.8 million in Q1 2025, we are investing in our Mexico business, which grew 28% over last year. MexPlay, our Mexico-facing regulated online casino continued its impressive growth strategy. Registrations reached 74,000, up 271% year-over-year and first-time depositors climbed 6,101, up nearly 200% over last year. These registration and conversion metrics reflect strong early market penetration and the compelling value proposition in the Mexican iGaming market. This revenue mix shift from the competitive B2B aggregation business to MexPlay revenue improves gross margin by over 5 percentage points over last year as well. Turning to our outlook for the second quarter of 2026. We are issuing revenue guidance of $51 million to $53 million, representing approximately 18% to 23% growth over Q2 of 2025's revenue of $43.2 million. This outlook reflects continued growth in core Meridianbet operations, seasonal uplift in retail and online wagering activity, our general confidence in underlying business fundamentals and our ability to execute against our operational priorities. We remain committed to transparent, consistent guidance, and we're pleased to enter Q2 with strong business momentum and financial flexibility to pursue the growth opportunities ahead of us. With that, I'll turn the call over to Zoran to discuss Meridianbet's operational performance. Zoran?

Thank you, Rich. Good morning, everyone. I'm pleased to report that Meridianbet delivered another strong quarter with revenue reaching $34.9 million, up approximately 26% year-over-year. This performance reflects continued execution across our 25 regulated markets and the ongoing scaling of our strategic growth initiatives, user acquisition and engagement. Our customer metrics tell a compelling story of sustained quality-driven growth. Total registration reached 428,400 in registrations in Q1 2026, up 41% year-over-year. This is not simply growth in absolute numbers, it reflects the effectiveness of our localized acquisition strategies and the resonance of our brand across diverse markets. Active users increased 21% year-over-year to 333,000 and depositors grew 27% to 283,000. The progression from registration to active use to depositing is a critical measure of platform engagement quality and these metrics demonstrate that we are not only acquiring customers at an accelerating pace; we are converting and retaining them. The gap between registration growth and active depositor growth reflects healthy customer maturation patterns and suggest continued revenue upside as our new cohorts develop. In Brazil, our operations continue to scale following the successful launch in 2025. Brazil is one of the world's largest single country sports betting market by population opportunity, and we are pleased with the pace of early market penetration. Our team has built strong local partnerships invested in locally relevant content and user experience and position Meridianbet with credible compliant operator in this high potential jurisdiction. Regulatory framework in Brazil continues to develop favorably and our early position backed by our 25 years of regulated market experience across Europe and Africa provides meaningful competitive advantages as the market matures and competition intensifies. We will continue to invest in Brazil with discipline, targeting sustainable market share growth rather than short-term promotional volume. Expanse Studios, our B2B gaming content subsidiary operating within Meridianbet Group, delivered another strong quarter of operational progress. Our operating network expanded to 1,519 active distribution sites during Q1 2026, adding 175 new sites on a cumulative basis in the quarter alone. Our proprietary game portfolio now encompasses 77 titles, including 6 new games launched during Q1. The strategic importance of Expanse Studios to our overall business cannot be overstated. The content business generates recurring B2B revenue with attractive margins and strong operating leverage. Each new game title we launched is distributed across our entire 1,519 site operator network with minimal incremental cost. And as our network grows, so does the revenue potential of every title in our library. On technology front, we continue to make meaningful investments in AI-powered capabilities across our platform. These investments are enhancing personalization at the individual player level, improving risk management and pricing accuracy in our sportsbook operations and driving operational efficiencies across our [indiscernible] markets from customer service automation to trading floor optimization. We view technology investments not as a cost center, but as the core driver of our long-term competitive differentiation. In a market where scale and platform quality determine winner-takes-most outcomes, our proprietary technology stack built in-house over 25 years of regulated market operations is a durable advantage that third-party and white label competitors cannot easily replicate. Looking ahead, our strategic priorities remain consistent and clear: scale Brazil with discipline, deepen our presence and share of wallet in existing markets, continue expanding our Expanse Studios content distribution network and maintain the operational discipline that has driven our results. The strategic investments we have made over the past several years in technology, market licenses and talent are now translating into accelerating growth and expanding margins. We are well positioned to continue this trajectory through 2026 and beyond. With that, I'll turn the call back to William for his closing remarks.

Thank you, Zoran. Before we open the line for Q&A, I want to leave you with a few direct thoughts on where we stand and where we are going. Q1 was a quarter of continued execution and the results speak for themselves, 17% revenue growth, first profitable quarter under Meridian Holdings brand, 26% adjusted EBITDA growth with margin expansion ahead of our guidance, strong balance sheet and declining leverage. I'm generally proud of what this team has built and more excited about what comes next. Our focus in 2026 is 4 things: delivering on guidance, maintaining operational discipline across our markets, continuing the balance sheet trajectory we established last year and communicating clearly and consistently with our shareholders every quarter. We remain committed to disciplined capital allocation, focusing on high-return growth investments in technology, content and strategic market expansion. This includes supporting our continued scaling in Brazil, deepening our footprint across Europe and other regulated markets, expanding the Expanse Studios content network and pursuing strategic acquisitions and alternatives where they meaningfully enhance our market position and create durable shareholder value. Our fortified balance sheet, combined with our highly scalable and proprietary technology platform gives us financial flexibility and an operational foundation to take prudent, decisive action when the right opportunities arise. We do not feel pressure to deploy capital recklessly. We feel confident to deploy it thoughtfully. To every shareholder, analysts and partner on this call, thank you for your continued support and trust. We are committed to earning it. With that, we will now open the call for questions. Operator?

[Operator Instructions] We will take our first question from Jack Vander Aarde with Maxim Group.

Okay. Great update, great profitable results. Maybe I'll start with to limit myself, which is hard to do because there's a lot to talk about. William, maybe can you just touch on some of the key upcoming catalysts. Obviously, the strong 2Q guidance here with the growth assumption. Maybe you can just touch on some of the key upcoming catalysts since this is kind of a unique summer with the World Cup. And then obviously, you have Brazil ramping up as well and Expanse Studios continues to expand. Maybe touch on a handful -- the top 2 catalysts you see coming up here that could provide upside to the business going forward.

Thank you for the question, Jack. My computer is working, but my phone seems to be linking in and out on mute all the time, which I have no idea why. But let me answer your question. I think the World Cup is going to be an interesting time for us because it is a big World Cup. It's got players in it this time -- or sorry, countries in it. So it's going to be okay. But what we find is the World Cup, you really don't know what's going to happen with it, but it's a great acquisition to help us drive the business. So that's really one of the big catalysts which we're going to have. The other thing is really what we're focusing on is on execution in all the markets. So it's really about delivery and also strategic acquisitions as we go through and it's going to be ones where we can have operational leverage because we really want to deploy our capital with care.

Okay. Great. And yes, you are cutting in and out there, but I got to most of that.

Go ahead, Jack.

No problem, guys. Zoran, maybe it'd be helpful, too, just touching on the Expanse Studios front with the pending approvals or review processes in New Jersey and Ontario. Can you maybe just provide an update there? What's the sense of timing and just how important or significant these approvals are?

Jack, thank you for the question. And if I may, just to answer your prior question related to the potential growth in Q2. As you know, second part of June, we will have World Cup, the beginning of World Cup. And basically, World Cup is always big if you have your national team playing. And from our portfolio of countries where we operate, four of our countries actually have their national teams. That's Belgium, Brazil, Mexico and Bosnia. And basically, in these countries, we expect maximum growth, especially with Brazil. So that's most significant -- by far most significant event when it comes to marketing. And we are preparing special marketing promotions in the countries where -- which have their own national team playing. And when it comes to possible profits, World Cup is always tricky because we have an emotional betting patterns involved all the time, especially where in the countries, as I said, where national teams are playing, it's like all emotional roller coasters. So we did several simulations. And when it comes to World Cup, I would say it's from neutral to mild positive when it comes to profit at the end. But as I said, on marketing level, that's like by far the biggest event we can get because most of the attention of the local public is driven to that event, which we must use. When it comes to Expanse, whatever you mentioned is basically days away. We are just waiting for approvals. And I really cannot give any predictions when it can be. And during the regulatory, as you know, it's -- we always hope for days, but it's never days. But actually, we did everything what is on our side -- we did everything what is on our side. So we're just waiting, but we have never been closer to that, both relative to New Jersey and Ontario, and it's really big news for us. I cannot tell much, but basically, let's say, 100% of our efforts are made in these 2 directions.

We will move next with Marla Marin with Zacks.

So in the prepared remarks and the scripted commentary, you talked a little bit about the relationship between registrations being up and then active users also being up. Do you have a sense based on operating history and things that you're able to glean from any marketing that you do? Do you have a sense of how long in advance of a potential catalyst? And I'm thinking specifically of the soccer -- of the World Cup soccer games. Do you have a sense for how far in advance people who are new to the platform actually would consider registering or there's really no way to get a good [indiscernible] for that?

Zoran, do you want to take that? Sorry.

Yes. Yes, this is a really good question. When it comes to -- this is like my fifth World Cup in Meridian. So it's very different, do you have your national team playing or not? So in the countries where your national team is not playing, this is like -- this is not a big attraction. It is -- but it keeps you -- you can actually have -- get good revenues during summertime, June, July and August because usually major soccer leagues don't play during this period. So if you have World Cup, but your national team is not playing, that means you can have like good results in June, July and August, but nothing special. It is just like season as it used to be. But if your national team is playing, it can go multiple a lot, multiple 4, 5, 6 comparing to all previous periods. Because I said, this is all driven by emotional betting and all the companies which operate in the countries where national teams are playing are like all in when it comes to marketing. So basically, this is like -- and as I said, we have Brazil and Mexico, huge countries. And we expect a lot. So it can be easily multiple 5, even multiple 6 when you have national teams playing. What is also something new, which we have is that the process from registration to get an active player is -- also depends from regulatory to regulatory. We call it now because basically in the past, you didn't have this segment. It was from registration, all activities will be related how to get first deposit, how to convert this customer to make it first deposit and everything was related to your basically user experience. But these days, unfortunately, but this is the situation in the last several years due to inflation of regulatory, especially in KYC, AML and customer protection, actually, there is increased delay from registration to have active customer only because of these processes. And we call them on-boarding processes, which really depends on regulatory to regulatory. So in some countries, Brazil, definitely, this process will be harder because Brazil is by far most regulated country in the world when it comes to KYC, AML and regulatory -- and sorry, customer protection. Or for example, on the other hand, let's say, all other countries have lighter regulations. So we are focusing our attention into this on-boarding process of how to make it seamless for the customer. So we have this period from registration until getting him as an active user to try to be as smooth as possible. And this is like by far most complicated process, which I said it didn't exist 5, 6 years ago. And now we are focusing like 90% of the time between these two.

Okay. Good. That's good color. So let me just make sure that I'm understanding. So there's the on-boarding process. But I'm also thinking my sense is that active users are not active consistently all the time or not necessarily active for the same length of time. And I think one thing you have talked about in the past is the power of the AI capabilities of the platform in terms of increasing the long-term value of customers. So if you have customers or let's talk on one customer example. If you have a customer that was active and no longer is, you're not looking at the same kind of trajectory there to try to turn that customer back on, right? Because that customer has already gone through that on-boarding process that you just spoke about.