Trident Acquisitions Corp. (SEGG) Earnings Call Transcript & Summary

Hello, everyone, and thank you for joining us today for the Lottery.com Analyst Day. I'm Matt Schlarb, Head of Investor Relations at Lottery.com. And joining us on today's call are Lottery.com's Co-Founder and CEO, Tony DiMatteo; Lottery.com's COO, Ryan Dickinson and Vadim Komissarov, CEO of Trident Acquisitions Corp. Before we begin, I'd like to remind everybody about the disclaimer language on the first few pages of our investor presentation, which is available online as well as filed with the SEC and an 8-K. I'd also like to remind everybody that the call is being recorded and that we ask that everyone to remain on mute until the end or at the end of the prepared remarks, and we'll have a Q&A session. And with that, I'll turn the call over to Vadim.

Thank you, Matt. My name is Vadim Komissarov. I'm the CEO of Trident Acquisitions. When we started looking for our acquisition targets, last year, we were in the midst of the COVID epidemic. And what we were trying to find in our target was a company that would benefit from this process of going from off-line to online. We also wanted to find a company that had a very large TAM that have professional management and proven track record. And in Lottery.com, we found exactly what we were looking for. Lottery.com is spearheading the revolution from the paper tickets to online and the company has tremendous market opportunity ahead of them. So with that, let me turn over to Tony DiMatteo, who is going to talk to you about the operations of the company and what lies ahead of Lottery.com.

Thanks, Vadim. I appreciate it. Hello, everyone. My name is Tony DiMatteo. I'm the Co-Founder and CEO of Lottery.com, and I'll just tell you our story. So my background is I have been a serial entrepreneur for most of my adult life. I got into tech very early in San Francisco in around '98, '99. I saw the dot com boom and bust and learned a lot of lessons through that entire journey. And then about 8 years ago, as I met my co-founder, Matt Clemenson. At the time, I was running a tech company. He was running a different tech company. And we got together and we decided that we should just build things together on the side and sort of self-incubate any ideas that we had and around a very specific thesis. And that thesis was we should build things that should exist or that are inevitable to exist, things that have to happen eventually. And we just wanted to be the ones that sort of build to that, whatever that platform would be. And Lottery was the clear winner there. And so we sort of built several products together. Some worked, some didn't. But when we looked at lottery is we saw an industry that has a huge total addressable market, about $400 billion right now, globally speaking, and about $80 billion in the U.S. And it is one of the last industries that has failed to make the shift from off-line to online. And we've sort of called out the shift to convenience from the consumer perspective. And it's not just a shift to digital, it is really a shift to convenience. And as you -- we've all seen from borders to Amazon, from taxis to Uber, from blockbuster to Netflix. This is the way of things. And sort of once we realized -- what we thought was that once we can change the buying behavior of a user and allow them to play the lottery from their phone, they're the same games they already love like Powerball or Mega Millions that, that would be a very compelling product. And so at first, as we look for way is -- I guess our first question was, is there a way that we can allow people to play their favorite games in a completely legal and compliant way. And we found that, and that's called the courier service. And so I'll say when you're on our platform, it looks and feels like you're buying a Powerball ticket from us or a U.S. lottery game, which there are many. What you're actually doing is you're placing an order for us to go -- to buy a ticket on your behalf and then manage the interest of that ticket over time. And so we get the ticket for you in one of our secured facilities. We don't go to sort of the front of the store anywhere. And then we -- once we have a ticket, we manage the interest of that ticket, which means we check the numbers. We redeem the winnings for you. We credit your wallet in the app, and then you can draw that back down to whatever your payment method was. And that's been a very successful sort of model for us as we've gone. And for that is we just charge a service or convenience fee domestically and internationally as we can charge a bit more and we can get into that a little bit later. Moving on to the next slide. So our vision is to be a premier global marketplace for all forms of online gaming. It's really to be sort of an Amazon of games. And we believe that with the domain name on the brand of Lottery.com that we are well positioned to do that and to be sort of the top of mind brand whenever you think of not just online lottery, but online gaming, in whatever vertical that is, whether it'd be sports betting or online slots, casinos, charitable sweepstakes, et cetera, is that you think of us and we'll get into why we think we can execute across that. Our mission statement is simply to deliver responsible and trusted online gaming in legalized jurisdictions throughout the world. Next, please. So we'll talk a bit about our advisers and investors here. Jason Robins was one of our first investors in the company way back in 2015. So we've been around for about 6.5 years now. and he wrote a check personally to us, and it's been a really strong influential adviser for us and guiding us sort of on the regulatory side, but also just on the marketing side and really everything around. He's built a great company, and we're really excited to still have him as one of our advisers. Paraag Marathe, he's the President of 49ers Enterprises. 49ers family office invested us again in the seed round, and he's been very helpful for us navigating the sports world as we've evolved. And then finally, Senator Mark Lipparelli. He's the former Chairman of the Nevada Gaming and Control Board and he's currently the Chairman of Galaxy Gaming. And he has been incredibly helpful as we moved along on the regulatory side because it's important to understand, and this is one of the lessons that we've learned, I think, very early on is that it's not good enough for us to just be legal. It's -- we really need the cooperation of the states that we work with. And so when we go into a state is we build the relationships with all of the regulators at the lottery director level, the AGs, the governor's offices and we work with them and we explain to them how it is that we operate. Here's -- and we completely analyzed their laws and regulations of that individual state. We deliver them the legal recent opinion, and we say, here's why we are legal and why we would like to come into your state. And that's been a successful way for us to operate. And over the last 6.5 years is we've proven to the industry that we are a good actor that we do what we say we are going to do. We've never lost a ticket. Everybody has always been paid out. And we actually had a $1 million winner earlier this year and they got paid out on time. And so we're very proud of the traction we've gotten so far. Next slide. So something that's -- a couple of things to touch on here. The first point is we really are the foremost brand name and premier provider of global lottery, whether it's data but also just sort of running the courier model. We've had about 9.4 million unique visitors in the last year or so. And one thing I really want to hit, number 2, is we have a massive global market opportunity. In the U.S., it's about an $80 billion market of just all tickets sold globally. Again, if you put that all together, it's about $400 billion, and that's actually expected to grow to about $650 billion over the next 5 years. And we think that, as Lottery.com, we are well positioned to be the, again, the foremost brand there and to control the consumer. That's very important for us to acquire all of the users we possibly can over the next couple of years and to just be the market leader as we go forward. Number 3 is we do have a very diverse product offering. Not with -- not just with -- on the courier side but with some of the other products that we'll talk about in the slides ahead and we do expect about $59 million in EBITDA by 2023. And along our growth starting in 2021 as we expect to be an EBITDA-positive company. Number 4 is we have multiple opportunities to grow not just in geography, but in various products like our blockchain product and again, adding other verticals to our product portfolio like sports betting and other types of games. And by 2023, as we expect $571 million in overall revenue. And lastly, we have very significant existing and projected revenue growth. We've enjoyed a 294% CAGR and oftentimes, higher in the past, but we do expect that to continue from now until 2023. So I think this slide really highlights the difference between us and some of our other competitors, like if you look at, let's say, a DraftKings where -- and a lot of the growth in the sports betting market, at least in the U.S., that has already happened. That sort of consumer shift from offline to online in the sports betting world or the daily fantasy world. That is obviously already happened. And so there's just not as much room to grow, we believe, in sports betting for DraftKings going forward, although, again, they've done a tremendous job. Whereas us, at Lottery.com, is we currently account for 0.02% of the market share. And that is just to illustrate the incredible blue ocean opportunity ahead of us and by us being what we think is the best brand and the best domain name to make that happen. And as we continue to execute on our plan, we think the investment opportunity with a market cap of $562 million at the time of leaseback is a very compelling investment opportunity. This just sort of highlights what I was just talking about. If you look at sports betting, that digital or convenience transformation has already happened in the U.S. There are still massive opportunities outside of the U.S. in sports betting, which we will take advantage of, as recently, we have announced that we have also acquired the domain name of Sports.com and we're in active conversations on how to best leverage that domestically as well as internationally. But you can also see U.S. lodging and bookings. A lot of that has already happened. There's still some room to grow there. But really in lottery, only about 7% of lottery tickets are sold online right now. And that's largely just a function of some states have been able to go online, which we will talk about in a few slides. But it's -- there's a tremendous amount of growth ahead of us, and we think we're the best positioned to take advantage of that. So this is really maybe the key slide. We acquire a user for about $4, both domestically and internationally. And the way that we do that is through sort of typical channels, obviously, one organically is we get a lot of traffic just by being Lottery.com, and we provide lottery data for about 400 games plus in about 40 countries -- sorry, I think that's about 800 games actually. And so just by that is we get a lot of traffic on our own, but also we do advertise on like Google and Facebook and sort of the traditional channels. Now, we know that our sort of nearest competitors acquire that same user in the same jurisdiction for between $20 to $25. And so I think it's just a difference in branding. To be honest, is, we are Lottery.com and so we get the sort of engender trust of being Lottery.com. And oftentimes, people believe that we potentially are the lottery. And once we do acquire that user, is we've worked very hard with our customer happiness team and our retention team to make sure that we keep that user. And so as you can see, we enjoy about $17 in annual new user profit within that first year. And honestly, the CAC is typically repaid within the second or third transaction, which is typically within about the second month that we acquired that user. And I think our churn rate is very impressive. So we keep about 69% of people who play on the platform. And I think it's important to understand is that we measure that retention time as a 12-month period rather than a 30, 60 or 90 day, which I think most tech companies measure at. And there's a really good reason for that, which is -- there's really 2 types of players for the lottery. There's the sort of lottery enthusiasts. They play their lucky numbers, which may be their birthday and their families' birthdays. And they'll play that basically once per week sort of from 18 years old until they're done, basically their entire lives. The other type of player is an occasional player. And an occasional player only plays when that jackpot is very high, whether that's $100 million, $200 million, $300 million, whatever is sort of the trigger for them. But what we found is that even if we can acquire that occasional player when the jackpot is high, after the draw, goes back down to, let's say, $20 million or $40 million, even if we don't see them again for another 6 months or the jackpot doesn't get high again for another 6 months, once it does about 8 out of 10 times, they'll come back to us. So it's a very sticky product. And again, our -- one of our big goals is to just when you think of lottery, you think of Lottery.com and we become the way that you play going forward and change that behavior. And so ultimately, domestically, that leads to a customer lifetime value of about $55. And so now I just -- I want to sort of explain the difference of how we operate domestically versus internationally. Those domestic numbers are because we charge a service fee or a convenience fee to deliver our product in a purely digital way. So you can think about that as sort of like Uber Eats or a DoorDash where you're paying for some convenience instead of driving down the street to go to get a hamburger, you're willing to pay x amount of dollars to have that delivered to you, and they've obviously been pretty successful in that. We do the same thing. But to be clear, is we never deliver the physical ticket to a winner unless it's a jackpot winner of over -- of millions of dollars. It's a purely digital experience on our side, but it's still effectively the same model. Internationally is we actually do have the flexibility to mark up the price of U.S. lottery games. So we could sell a, let's say, a $2 ticket for potentially as high as $5 if the market will bear that internationally. And we found that, that's actually about the right price point for us. And so we can do that internationally that we have the restrictions domestically but not internationally to do that. And that's the difference in the top and the bottom of this slide is that our customer acquisition is about the same, the retention is about the same. We enjoy a higher -- a larger customer lifetime value because we can actually mark up the price of those tickets. Next please. So talking about sort of the different products that we have. At the top, you'll see the domestic lottery. That is us acting as a courier service, which is everything that I've described so far. We additionally have charitable sweepstakes under the WinTogether.org brand. And a charitable sweepstakes is just, if you care about a cause, we create these sweepstakes where if you donate, say, $10 to $20, whatever that donation is, we average about $20 is then we'll give you x amount of sweepstakes entries dependent on that, and then you can win something amazing, whether that's a cash price, an experiential price, a luxury vacation, et cetera. But we found that the difference there is also lottery law and sweepstakes law are very different. And so we can run these tradable sweepstakes in all 50 states now. which is just a great way for actually even cheaper user acquisition. So then when we do go live in that state is we have sort of an embedded user base that we can market to do and convert them into lottery players. Along the top, the international lottery there's really -- that's, again, what we talked about on the previous slide, where it's effectively the same product us selling [indiscernible] in U.S. lottery games, but up to the international market at a higher margin and that's the difference. If you look at the bottom between the gross margins of those products between 17% and 33%, whereas we -- when we operate internationally, it's between 34% to 54%. And then finally, across the top, the international games, we believe that the future of all gaming eventually must move to blockchain. And so we are developing a blockchain-based game, really a platform that will allow us to operate internationally, not be competitive to any sovereign lottery and with proper licensing. And I think a big difference between us and some of the other blockchain lottery players is there are some blockchain-based lottery projects out there, I'll say. Typically, they don't have proper licensing. And really, they're addressing a very small total market which means that for you to participate in that game is you must hold actual crypto. And so crypto is your payment method into that game. Now the benefits of blockchain is that you can be assured and with full transparency that the game is authentic and genuine and it could not be altered. So you know who won and you know that the results are genuine. The drawback in what I think that they're doing is that, again, it's just very, very small market where you can only accept crypto as a payment method, whereas the platform that we are building, will be a blockchain-based game that will be able to accept either crypto as a payment method or fee and whatever your local currency is. And so again, as we believe, as Lottery.com, we can create a game, say, let's call it, Lottery.com Monster Millions that can be very attractive. It can be a Powerball-esque game with very high jackpots, reaching a global market and we think we can do very well for that. And the margins sort of bear that out, it's between 75% to 95%. So again, going to the sort of bottom left of the slide, the other way that we operate is our B2B partners. And I think we are -- as far as we know, I'll say is we are the only lottery company that has created, what we call, a partner API which allows any e-commerce company to leverage our API to sell these genuine -- currently, it's these genuine U.S. lottery games, but it could be any of the games that we have on our platform as we expand that. And so that could be a sports book internationally or domestically. It could be just any e-commerce company, whether they're selling T-shirts or widgets that can use a lottery ticket as an upsell or as a retention method. And we've already integrated this with several partners, and they've been -- it's been very successful for us. And really, the only difference between those 2 yellow boxes are the difference between, again, the domestic service fees that we can charge versus the international. And then finally, the data sales is we are, we believe, the world's largest lottery data provider. And so we have data on about 800 games in, let's say, 40-plus countries around the world. And we have some significant partners already that buy our data from us. It's very high margin, but some of those are like Google, which we power in multiple countries. Amazon Alexa right now, if you ask Alexa when is the next Powerball drawing or what were the last results or what's the size of the jackpot. She'll tell you, and that is all powered by us natively without an additional Alexa skill installed. Next one, please. So I want to talk about states a little bit. When we started, it took us about 4 to 5 years to get 4, 5 states on board with us as a courier model. And the reason for that is we are very much an unknown quantity. So when we -- as a very small start-up, when we first started talking to states is our value proposition to them was very clear, which is that we are here to sell your product for you for free. And so that's a good thing for the states because they ultimately want more tax revenue and that's a benefit for the state. Their hesitancy was simply we don't know who you are. And if a company like us were to be a bad actor, meaning we did not pay out the winnings or we lost tickets or things like that, that would be very detrimental to the state's reputation, the state lottery's reputation and then ultimately, they would lose that -- fewer people would play and they would lose a lot of tax revenue. And so it took us some time to really get the states on board with this. And -- but we did it. And really, as we've proven to the industry now for 6.5 years that we are good actor. We've never lost a ticket. And again, we had $1 million winner earlier this year. They got paid out on time. And so we've proven that we can do what we say we're going to do, and we're here for the long haul. We're here to build a 20-year company. And so that's played out very well for us. But I think the real inflection point for us was when COVID hit. So when COVID happened, the lockdowns and the quarantines happened and it became very obvious to the states that they must find a way to go online, some way. And it's -- because simply speaking, is if you cannot go to the store, with your paper money and leave with a paper ticket, if that's not an available transaction for you, then you just don't play and that tax revenue drops significantly. And so because of that, we believe, since the beginning of 2020, we've opened up another 8-plus states, and we expect to open up at least another 6 states by the end of this year. And our goal would be to be in every available lottery states by the end of 2023. I think we can move forward. Last thing that I want to touch on is how we grow internationally. And I think our recent acquisitions of Aganar and JuegaLotto in Mexico are really good jumping off point for us. One is that they already sell the Pronosticos tickets, which are the Mexican National Lottery games. They also have their own digital games that they operate with. We expect them to contribute about $4 million -- sorry, $1 million per quarter over the next couple of years, but the real benefit for us in this acquisition is to enter into Latin America. These companies also have access to a sports betting license. And so we believe sort of leveraging the Sports.com brand and some technology is that we can enter those markets and then quickly learn sort of the cultural differences and changes. Obviously, any time you enter into a new country, we have to learn that culture and how they love to play and then we can expand into multiple jurisdictions going forward. And so part of our strategy is definitely M&A where we look for very good operators who know their vertical better than we possibly could. You'll have the advantage of sort of booking their revenue to us, but really to be a profitable endeavor from day 1, as we expand. Next one, please. So again, I think at a very high level, the difference between us and anybody else is that we are incredibly easy to use. We've really targeted the app to be as simple as possible. We call it sort of tap tap ticket where we want to be able to get you from as soon as you're on board to the home screen to actually buying within just a few taps. Ease of payment is we do not require a consumer to sort of prefund a digital wallet, which some competitors may do. And we -- our goal over time is to add as many local payment processors around the world as we possibly can because each country has sort of their favorite payment process whether that's sort of a PayPal or a Paytm or whatever that similar one is in that country, and that's what we want to be able to provide for them. And really the ease of collection is -- it's interesting, there's about $2 billion in unclaimed lottery winning globally every single year. And that's just simply a function of people buy that paper ticket, maybe they forget about it. If they have an idea of what their lucky numbers are and if they don't think that they won the jackpot, they often sort of stick it in the glove box or they just forget about it. Where on our platform is everybody -- every ticket is always redeemed no matter what and everybody has always paid out. Next slide. This just sort of speaks to our partnerships and our distribution ecosystem. We've partnered with AccuWeather, Gannett, iHeartRadio, Gannett and iHeart are actually investors in us back in our Series A. We recently announced Coinstar with all of their kiosks around the U.S., which I think -- and we just -- often most of these partnerships are in a rev share arrangement. So if they help us onboard a user then we can have a long-tail rev share with them for, say, 1 to 2 years and everybody is much happier that than sort of their current business. Again, the second part of this is the API program, the partner API that I discussed. And I think PayRange is probably one of our premier partners there. We've sold millions of tickets through their platform. They started as a wallet that just made it easier to pay at a vending machine or coin op laundry. But they -- we've had an incredible uptake from them, and we continue to expand this ecosystem. And we have no shortage of deals, and I hope to be able to announce a couple along those lines in the near future. And then finally, at the bottom, I already mentioned is that we are already contractually partnered with Google and Amazon and USA TODAY for those data services. Next slide, please. Lastly, we touched on this when together is our charitable sweepstake platform. It is one, win together -- winning together is one of our core values at the company, meaning we realized early on that life and business is not a zero-sum game. We can all find a way to be successful together. So I don't -- we don't need to win -- or nobody has to lose for us to win. We can find ways to be collaborative and all be successful going forward. And so that's the name of our charitable sweepstakes platform. And that's still, and I think, in its nascency, but will be a considerable value driver as we go forward. It is blockchain-based and with the ERC-20 token that we announced a couple of years ago. And then on the right side of the slide, you see, again, our blockchain-based platform, which I think will be a significant value and revenue driver up until 2023 and beyond. Next slide. So with this, I think I'll turn it over to Ryan Dickinson. He is our COO and President, and I will let him take it from here.

Yes. Thanks, Tony. So on this slide, this is really the business overview portion where it kind of breaks down some of the various things that Tony has already talked about. And puts them into some projection numbers, which we'll get into further in more depth in the next couple of slides. But primarily, it's important to understand how we're breaking down the business because I'll highlight that a little further in another slide, which is the base way we look at things are, here's our B2C market, and our B2C market is the general marketplace. And again, to piggyback on some of the things that Tony had mentioned the global marketplace is really where we're bringing users in at that very low cost of acquisition price of $4 and we're presenting them with the lottery games that we have. So then that also affords us the opportunity to begin -- to present to them other games that they can play through our platform that otherwise would have been a very high cost of acquisition, but we already have them in and we secured them in at that low cost of acquisition through our lottery brand name in the lottery products. And that's our B2C market space. Our B2C market space in '23 will make about 34% of our total revenue. Then we have our data side. The data side, again, that's everything Tony talked about. We're already selling this data now to various partners. And we're going to have subscription services for that data. And that -- long term, there's only a handful of opportunities from the B2B side, eventually hit a cap on where you can hit those numbers. But -- so long term that the percentage of the amount of revenue they make up really only becomes about 9%, say, in about 2023. There's some additional development fees we receive for developing these services and kind of creating some of these concepts. But again, that still falls within that 90% bucket. The other major portion certainly on the growth side and where we really think we're going to take things off, and I'll get into that in another slide about why we believe that is our B2B side and the partnerships. So by the end of 2023, our B2C portion will -- our B2B side will take up about 43% of our total. Now it's important to understand that when we talk about our B2B partnerships, that's really B2B2C where we are integrating with them. They are integrating with us. They are selling to their pre-existing users. They're using their marketing. They're using their payment processing. And we're more or less the operation portion of that, which is the post-transaction portion to fulfill that order of the tickets. And we think there's significant opportunities there for us, and we'll get into why here in a couple of slides. And then the last portion is the M&A bucket. And as Tony said, we have plenty of targets that we have either already done, which is Aganar and JuegaLotto as an example. We have a couple on the horizon. And we have a handful that we would like to go after in the next several years. And we believe that by the end of '23, that will make up about 14% of our total revenue. All right. So this is really where we're going to break down some of these numbers. I think the bigger portion is here to talk about are -- and this is where I want to kind of get into the B2B2C side and why we believe that is such a significant revenue growth for us, is that it's really the barrier of entry is relatively low given that it is a simple -- it's a business development management job, right? So we have -- we know the players in the space. There's plenty of e-commerce systems out there. They don't always have to be in our industry and our space as an example would be PayRange. which is, again, why Tony kind of highlighted that one as a prime example of a successful story for us in the B2B2C integration. B2B2C integration is extremely well for us because essentially it removes a few of the barriers that we have. While we do have great user acquisition costs, and we know that we can drive significant user growth for our own product, through that funnel that we've already created and that we've refined over those last 4 years, for sure. We don't have that same barrier -- burden of cost when we're talking on the B2B2C side. So on the B2B market space is simply it's a contract with pre-existing e-commerce systems, where they integrate with us, they sell our ticket. So it's a really nice margin integration for us as well as it reduces our long-term capital requirements and our long-term spend requirements. So which I think brings us into this particular portion of some of these slides I'd like to get into. So one of the major things that I think sets us apart and there's a slide coming up where we really compare that and you kind of can see the comparison there about what I'm talking about. But that is our EBITDA projections. So for us, we don't want to be a company that is simply chasing the next round we want to be an EBITDA-positive company, and we believe we will be by -- before the end of this year, and those numbers will continue to grow over the next several years. A lot of that is that our margins are fairly good now. And on the -- as I mentioned, like on the B2B2C side, which is why we're going to be putting so much emphasis on that over the next several years that margins maintains a steady growth as well as not having to have ongoing continued spending that we need to do to maintain it, right? It's simply we do the integration, we sit back and we do the operation portion. And the operational portion is the portion that we don't have to scale to some massive size in order to complete those numbers. So for us, the other aspect of it is the thing that Tony had already talked about, which is our user acquisition funnel. Our user acquisition funnel is something that we have really spent a lot of time on, as a company to get that as refined as humanly possible and bringing it down well below what most people in our space are paying to acquire user down to $4, means that by transaction 2 or 3, which is typically about month, 2 of having a user means that we're already turning a profit under the user. So anything else we put in front of them that is new games, new features, new products, even completely new verticals means that it's just graving on top to the revenue and the profitability that we already received from those users, which is a key component here. The last thing before we get into the next couple of slides I really want to highlight in relation to these numbers and the growth which we're projecting is that these are not blind performance. These are based off of our historicals. These are the numbers that we have already been performing and the growth percentages we've been performing over the last several years have continued to be what these are, the acquisition funnel that we're showing as far as the $4 per cost and where we land on that lifetime value, those are also based off of our actual numbers currently. So it's just a matter of taking the growth which we've already been receiving, take the acquisition funnel, we already know we can obtain and throwing additional capital at it to hit a lot of these numbers, which is why, again, as I said, 34% of our growth will be from the B2C side because we already have that funnel. We already know how that works. We already know how to get there. And that's why it's going to be a significant portion of our revenue moving forward. I think we can move to the next slide. Yes. So I was going to highlight this in the last slide, but we have a whole slide, so it support. So let's set it up here, which is you can look at those numbers that I just showed previously. And yes, we are showing some growth there. But as comparison to the growth in which this market is seeing in that same time period, we still are going to be a fairly small portion in percentage of the total that the market is going to be growing. This market is still just a colossal market. That addressable market is not only big now, but it is continuing to grow over the next several years at a fairly significant rate. In conjunction with just the total market growing, you'll see that there is -- there's still only a small portion of the total business is online. And while that is growing fairly significantly over the next years, that opportunity, which is everything in the gray, basically on the slides is still there and with our name and the history which we've had and the experience that we have in obtaining these users, we believe that we're poised to really take advantage of the fact that the market is just now starting to shift in the online. And with our -- like I said, with our brand name, we think we can ship them into us as the online source. So I would typically toss it over to Vadim here, and I'll let him tackle one part. One thing I will just say on this particular slide though is, as I mentioned in the 2 slides previously, our EBITDA growth is a major aspect of where we want to be as a company, we want to be a profitable entity. We don't want to be just chasing the next round. And people in our space, that's a fairly uncommon thing, unfortunately, where there is a lot of comparisons to us and some of the people we're showing here. But the reality is that a lot of them are not projecting EBITDA positivity even by '23. It's just not how their models work. It's not how their growth projections work. They're acquiring users at, say, $25 to $50 or more. And they're kind of playing the game where they have to wait about 18, 24 or longer months until they can turn a profit on that single user, whereas we had highlighted, we're turning a profit on our user usually within the second month or so. So with that being said, I'm going to pass it over to Vadim.

Thanks. Can you hear me guys? Can you see me?

Yes.

So I want to spend a little bit of time on this slide, and I wanted to say that we really wanted to bring a very well-priced and structured transaction to the market. And when we look at the peers and comps on the next slide, please keep in mind that the company is going to be very well priced. And that also takes advantage of the fact that the company is growing at higher than its peers. So not only is it valued with a discount, it is growing faster than its peers. And you can ask whether the company can perform and the answer is already in the body. The company has been performing very, very well. The company has shown 87% quarter-over-quarter growth consistently for the past 4 quarters. And Tony has publicly announced that the company expects this growth to continue. So if you take this growth and apply to the already -- the results that the company has already shown this year, they will on to making their projections and most likely over blowing through them. So next slide, please. Here, we look at the peers and the comps, and we chose the universe of comps that are very relevant to the company. You can see the companies that are either in lottery space or in sports betting and gaming space. And some of those companies went public through the stack route just like Lottery.com is doing with us. So we looked at Jambo, at Zeal, at Rush Street, Golden Nugget and DraftKings. And if you look at ever metrics that you can look at, which are into revenue, or you need to gross profit or you need to EBITDA, the company is priced very, very competitive. It has at least a 45% discount and we wanted to make sure that investor see a good return on the investment. Next slide. Here, we look at the structure of the deal. Together, the total sources of the funds is $562 million. All of the shareholders and the management of Lottery.com are rolling over the equity into the deal. There is no cash out whatsoever. And after paying out the business combination fees, the total pro forma enterprise value is going to be $525 million. We have about $10.94 cash in trust and the money that the company is going to receive from the business combination. They intend to use it for their growth, they're going to invest in their marketing campaigns, and they're going to use it for some of the M&A deals that they are aligning right now, and hopefully, they're going to come to fruition very soon after the business combination. The company, together with their current shareholders, is going to retain roughly 80% of the overall company. and the rest is going to be public stock and management promote all the SPAC. So with that, I'll be happy to open the floor to your questions.

[Operator Instructions] The first question is coming from [ Brian Dabson ] with [indiscernible].

So just a quick question to kick it off on your international markets. So it looks like your proprietary products offer considerably higher margin, I guess in terms of gaining acceptance for those products, how important is it that you offer new consumers access to both their local lottery games that they're familiar with and also U.S. games that might have a high quality perception among foreign players.

Sure. I'll take that one. Thanks, Brian. When we think about international is, one is -- obviously, we do want to -- I think the same thing is true in terms of strategy is when we open up a U.S. market as we want to let the people play the games that they already know and love, right? And that's just converting their buying behavior from offline to online. And we want to be able to do the same thing as when we open up an international market. And so we look to onboard those local games as fast as possible. But also, I think it's true in some countries, certainly in developing markets that they oftentimes do not trust their local lottery potentially to actually pay out on time and that it is a legitimate game and enterprise. And so whether that's true or not, there is certainly a demand for the U.S. games in those markets because, number one is the U.S. games have the highest jackpot just as a function of how they work, starting at $20 million to $40 million and growing from there. And Powerball had a jackpot of about $1.6 billion a couple of years ago. And so that's a very attractive in all markets internationally, and that's one of the best known brands that there is. So I'll say again, we look to, one, expose them to the U.S. games because we know there's a draw there. But absolutely, as part of our acquisition strategy is we want to onboard their local games for them, which just plays into the sort of cultural aspect of, they know the game, they want to play the game and they just want the same convenience that we're delivering in the U.S.

Tony, I appreciate that. And would it be possible for you to give us an update on where you stand in New York and New Jersey as well?

Sure. We're going to the -- actually, this is a really good question. So I'll take a little bit step back from that is there's 2 ways for a state to go online with their lottery program. One is to let a courier company like us to come in. The other way is to create effectively what's called an iLottery. And so an iLottery would be that the state itself is bringing that game online for that to happen is that you have to first get the consensus internally in that state of the 2 major political parties, pass legislation to make that happen, which can take sometimes years, sometimes it's just not a possible thing to do. And then once that's done, there's an RFP process, which could take 12 to 18 months potentially. And then once that's done and a winner is selected, then the actual tech must be created and deployed, et cetera. That's a very expensive way to go about things because one is you have to spend that political capital to make that happen. And then there is real capital and contracts that must be done through whoever the winner of the RFP is. And back to New York and New Jersey is they've looked at these 2 paths going forward. And New York is the #1 lottery market in the country. New Jersey, obviously, top 5, top 10 always. And obviously, you've seen what New Jersey has done on the sports betting side as sort of a vanguard on that side. They've looked at these 2 paths forward, and they've both decided to create defined lottery courier programs and licensing programs to make that happen. And so we expect that the remaining states either will adopt that model because New York is sort of the bellwether there or that they'll just effectively just let us in without actually creating a defined program. But -- and if you look historically at iLotteries, I believe the first iLottery was in 2012, and we're now about a decade later and there's only 6 states that have actually been able to pull that off. And in fact, I believe it was Minnesota. They actually had an iLottery for a while up until 2015 and then the legislature shut that down. So it is expensive and has quite a bit of risk associated with it to go that direction, whereas allowing a company like ours into their state gives them the benefit of having online sales without having to go through this entire long process. And to directly answer your question, is we expect to be in New York and New Jersey, either by the end of Q4 or probably early Q1 at the latest.

The next question comes from Greg at Northland.

I wanted to ask about the breakdown. If you have kind of a sense of how many of your -- how much of your user base is occasional players versus maybe the consistent player base?

Yes. Tony, I'll take that one. So we actually break them down into 3 different buckets. We have our kind of like hardcore players or the whales of the group, right? And we actually think that number is fairly impressive. Just generally speaking, it's about 5% of our total user base, average between both international and domestic are whales. We define whales as people who are consistent enough players where they are buying about one ticket every single draw throughout the entire year. That's also, again, to Tony's point about why we measure across the entire year. We want to see that build up over the whole year and see how the players are doing so that we can kind of break them down the way that you're asking about. So about 5% of our users are whales. Then we have about 12% of our users that are onetime purchasers, where they come in and they kind of -- they -- and that's about all they do. And then everybody else in between are these average players. Now in those average players, I would say it's about -- it's -- a very small portion of them actually are people who only come in when the jackpots are at a significant level. So of that 80-some percent or so, we are looking at about 40% of those are the people only come in at various jackpot sizes, and those sizes range very dramatically between that 40%. So there are some group of that 40% that will only that $100 million is that's their number. That's the magic number where they feel great. Then there's a smaller portion of the users where it's only at $500 million or plus where they deem it worthy enough to come in and play. Either way of that group, though, that 40% of that group, that, that's the -- that come in when the jackpots are higher. Part of the long-term goals we have as a company are to present various methods to those players, various features to those players, incentivize them to come back more often, so that the things that they are waiting for to win things are not just solely based off of the large jackpot sizes.

Yes. And I'll just add on to that quickly, Ryan. The buying behavior that we've always seen on the app absolutely matches the real-world buying behavior. So it's -- there's nothing significantly different about what we do versus online purchases as the people are who they are and they want to play when they want to play. And so it absolutely mirrors what the offline behavior goes. I'll say one of the differences is that we've been very successful in onboarding millennial players, sort of the younger demographics, where about 2/3 roughly of our users are actually those players. And I think the misconception was that sort of younger players don't want to play the lottery and that's not true. It's that they do not carry cash and they do not go to the store as often as sort of the older generations. So we've been very successful in that. And then again, to what Ryan said is, again, once we do get you is we want to be able to offer you other sort of second chance trials and other types of games that you can play while you're sort of waiting to whatever your jackpot amount is to make that actual purchase, but we can continue to engage you over time and make sure that we retain it.

Great. Yes, that's helpful, Tony. Also good to hear that kind of you're having success with the younger or more millennial groups. So that's good to hear. And I guess, I wanted to ask to what kind of your marketing efforts were maybe following the business combination. You'll have some extra cash. And did you kind of see that $4 cost of acquisition going up as you maybe experiment with some new marketing channels?

Well, I think there's a possibility of it going up in the short term, but we actually expect to be able to bring that down, I don't know, significantly, but we do believe that we can bring that down. We have not reached sort of a critical mass or a network effect of where we are even in the states that we're in. And one of the things that I'd like to highlight is all of the projections that we have put into the deck that we have filed is our real numbers from 2019 and 2020. And so we expect to continue to do that. And one of the reasons is because, again, we have a very small market share as we are in each state. And so we believe that -- and honestly speaking, it's not impossible for a new entrant to come in, but it is every time that we open up the state it is more and more discouraging for a new entrant to come in. Of course, there's always a possibility of, let's say, Amazon wants to come in, they can spend enough money and they could do that, and we can't discount that as a possibility, but we don't expect that to happen. But that is effectively how we look at things. And again, if we never opened in another state right now, and all we did was intensive user acquisition in the states and countries that we operate in currently is that we could hit all of the projections that we have publicly posted right now. And that's just a function of we have a huge blue ocean ahead of us. That would be great. But obviously, we have a bigger vision. And we do believe that we can become the sort of global marketplace for all types of games, leveraging our brand, leveraging our expertise and our very low user acquisition cost.

Okay. Great. And if I could follow up, too, on your comments between the courier model versus the state run model or the iLottery, you call it. When I guess we have a market where they're kind of bidding for the RFPs, is that almost like a challenge for you guys? Or -- because I mean it seems like you're still operating the courier model in those markets and then seeing success with it. But how should we think about maybe the differences there? I mean, in terms of states or markets that have implemented that versus those that haven't? Is it a lot harder to kind of penetrate?

No, actually, it's not. So when you think about an iLottery and in some of the states that are running iLotteries right now, they are literally doing the same things that we are, which is printing out physical tickets and just presenting an online interface to do that. But when that legislation happens, effectively de facto is that we have the same permissions to operate there as well. And we're doing that in several states now. So we don't see that as a barrier, meaning we're not really competitive to the iLotteries. It's my comments meant to speak to is that it's difficult and expensive and time-consuming for a state to actually stand up on iLottery. And with COVID, I would say the regulators look at that our hypothesis is that they would be irresponsible to assume that there will be no more lockdowns going forward with COVID and whatever comes next. So they must plan for that. And so then the question for them is which path do we choose? Allow couriers in, which is -- allows them to be at somewhat arm's length distance from us or to sort of go all in and try to get an iLottery, past all that legislation happens, the RFP, the actual approval. And it just -- I don't think it makes sense for them for that to be the trend. And again, if we look at New York and New Jersey, they looked at this and they said, we should go courier because that is the shortest path forward to go online. That is the easiest for us as a state. We don't have to incur any cost, and we don't have to have that political battle going forward. So I don't know if that answered your question. I can continue, but that's the way that we look at things.

The next question is coming from Chad at Macquarie.

Tony, I just wanted to go back to one of the last points you made there just in terms of the projections, which I believe are on Slide 23 and 24 from the bridge from $70 million to $280 million. So I think you mentioned that you don't need to see too much in terms of state expansion. But can you kind of walk us through that again just in terms of how we should think about like each state economics from a revenue bridge standpoint, how long it takes to get up and running and just wanted to confirm if this is more like back half weighted and then it's kind of that recurring stream or if you're expecting a lot of this to come in '21, early '22 and then the foundation is set.

Sure. Well, maybe I'll give you the high-level perspective, and then I'll pass it to Ryan to sort of get into the nitty gritty of it. But when -- again, when we look at a state -- and I'll say all of the projections we've done have been mostly organic. Like we have done some very small user acquisition campaigns between, say, $50,000 and $100,000 each time that we've done it. Really just to refine that user funnel and to make sure that we can get a user, keep the user and make that profitable. After the leaseback because obviously, we'll have a lot of dry powder to go and then just pour gas on the fire of what we're doing in those different jurisdictions. And then when we think of a new state, is -- I'll say that just the typical path is we obtain a lottery license in that state, which is the same one that a bodega or a gas station may obtain. We then -- there is some CapEx costs where we have to secure that facility so that we have a secure backroom where we have lines of terminals where we're printing out the tickets. We scan that back into our system. We check those numbers through OCR and say, here's the numbers that were ordered. Here's the numbers that were actually print to do those match. If they do, that's a good order and then that we securely file those away until after the draw. And so that's typically how we operate there. Also potentially is if it makes sense in certain states, we can partner with an existing lottery license holder and then do a typical rev share with them, which is just bonus for them, right? But the way to think about it from the state's perspective again is that we are additive to whatever it is that they're doing. And they don't need to worry about it. They don't need to sort of roll out all of these processes or technology. And we also give them full transparency. So they know what we're doing. And if they ever want to come in and audit us, we're happy to do that, right? We just want -- and what we've always said is we're not here to disrupt the industry. We're here to help advance it and bring it online at effectively no cost to the states. And that's really been our entire MO for 6.5 years. Did that answer for you, Chad?

That's perfect. And how long are the terms of length for these contracts? Or is it like you're saying, just kind of helping them along the way...

Sure. As we've really shied away from getting specific contracts because then the state is in a position of choosing winners and losers and then we would be in sort of the RFP process, if that makes sense, which just takes much, much longer. And actually, we believe would slow us down on our rollout. It's more of a -- look, we sit down with the state, we say, here's our legal recent opinion. Here's why we believe that we are legal based off of your laws and regulations. So you don't need to change anything. We can actually conform our business practices to whatever laws are on the books. Even if those laws are 100 years old and in some states that they are. And so here's how we will operate. And here's why we believe with very good gaming council why we are legal to operate. And now we're going to go and then our goal is to gain market share as fast as we can. But if we went the other route, we don't actually need exclusivity. Even -- we're sort of happy when a competitor comes into the same state that we are because we know that we can just beat them on the nuts and bolts user acquisition side. As Lottery.com, it takes much fewer ad impressions to convert somebody. Really, when we do a user acquisition campaign, we're saying, did you know that you can now play the same games that you've loved and playing your entire lives to do them online through Lottery.com. And so it's a very easy sell for us. And again, once we get them as we work really hard to keep them and just make sure that everybody is paid out, we never lose a ticket, and it's a good experience all around.

Okay. Great. The last one I had just on , I think it goes into player segmentation with the whales and then the more casual, I guess, Jackpot players. You mentioned 31% churn. So where are those players going to another courier usually when they leave your site or are they just discontinuing this way of purchasing tickets. How are you...

I think they just aren't playing as much, honestly. Again, even on the -- if you think about the type of player who only plays when the jackpot is very high. That type of player -- our goal about 8 out of 10 times the next time that, that jackpot hits $400 million and honestly, that might take a year. It might take 1.5 years for that user to actually come back when that jackpot is very high, which is outside of our control, obviously. About 8 out of 10 times, they come back to us. So our goal in the long term is some people will play all the time. Some people will play once a year. Some people will play every couple of years. But our goal is like once you're exposed to us and we've onboarded you is that the next time that you do play, the next time you want to play is that you think about us and you come back.

[Operator Instructions] All right. It sounds like there are no more questions. So with that, I'll turn the call back to Tony just to give some concluding remarks.

Well, I just thank everybody for attending the call. I think I endeavor and so does Ryan to sort of be very available for questions and information. There are few ways to reach us. Obviously, if you have sort of a general question, you can reach [email protected]. My personal e-mail is [email protected], T-O-N-Y. Ryan is R-Y-A-N @lottery.com. And so we look forward to hearing from you. And if you have questions, we'd love to answer them.