Gaming Realms (LSE:GMR) — Full Year Results

0:01 Good morning, and welcome to the GAMING REALMS PLC for your results investor presentation. Throughout this recorded presentation, investors will be in listen only mode. Questions are encouraged, and they can be submitted at any time using the Q and A tab situated on the right hand corner of your screen. Simply type in your questions and press send. The company may not be in a position to answer every question received during the meeting itself. However, the company can review all questions submitted today and publish responses what is appropriate to do so. Before we begin, I would like to submit the following poll.

0:32 And I would now like to hand you over to CEO, Mark Siegel. Good morning to you. Good morning, everyone. Thank you for being here today. I'm Mark, CEO of GAMING REALMS. 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, and I'm actually really proud of what we've achieved as a team. Today's presentation, I think, is gonna be similar to 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.

1:21 So you've got myself as CEO, and Jeff's 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, you know, in all the areas that that we'd be needing as a team. And so what do we do? We are a developer and licensor of casino games for the regulated international gaming market. Our core business is well, this is the core business of what we're doing, and it's very much based around the Zyngo 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.

2:19 Slingo itself, as I say, is a is a strong brand. And and as such, we're able to license this to adjacent markets we're in. So we license Slingo to, you know, for example, in the lottery world. And in The US, 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, Zynga based product called Zynga Arcade. This is a freemium model, really, a bit more like Candy Crush where you can pay for play, and you can also, we get some advertising revenue.

3:05 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, you know, almost 90 games that we publish through the platform, our own Slinger 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, you know, across our different sort of verticals that we're in or businesses we're in. So in the core licensing business where we're developing the games, it's actually we share in the operator success. The more popular our games are and the more they're played, we earn a revenue share off that. This is a very diverse revenue stream for us now.

3:56 We have over 200 partners live. We have 90 close to 90 games live as well, which means that our revenues 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, it generally on a revenue share basis as well. Although the revenues that we see coming in are a little more volatile in the sense that we often get, advances on our brand deals, in which case they may get accounted slightly more lumpy in in, financial periods. But this is really nice. It allows us to be in different markets and essentially have the Slinger brand out there. Social gaming, as I said, is more of a premium based model where you pay for, you know, further play in this advertising revenue there.

4:52 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 apps they may have on their side. 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's 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.

5:43 I can show you the same here with BetMGM.

5:46 These are two both of them seasoned BetMGM BetMGM big US operators. They also have a Slingo section. And we've also just taken example from one of the lots of reason we work within Canada, lots of Quebec. You can see those six titles there of which Slingo is highlighted. And each time you click in these sections, you'll find our portfolio is promoted. And then I won't spend a lot of time here, but we are you know, 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 hoping to go into or launch into this year, as well as growing in our existing markets.

6:39 And so we're really well spread now. You know, we are a big international game supplier. So just moving on to the financial results, hand over to Jeff. Thanks. So I'm gonna 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 a new partner versus organic growth perspective. So this this first one 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 our revenue was up 22% to 28,500,000, and adjusted EBITDA grew to 13,100,000.

7:30 That was up 30% year on year, and that really shows the operational leverage the model has. And as you have seen, no doubt, earlier in the week with our announcement, this this growth has really been propelled by our performance in North America. So the bottom two tiles on the left hand side. Our content licensing revenues in The US grew 57% over twenty twenty three and seventy 1% 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 tick over to '22 very shortly. The middle tile on the right hand side, we have 5,700,000 unique players playing out content in 2024, which was 22% ahead of previous year.

8:19 And then finally, 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 a snapshot. This next slide I'm gonna 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'd 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 in financial statements, they they remain remain a relatively low level. So they represent 21% of revenue, which is the same level they were they were last year.

9:04 And that's really revenue linked costs like brand license fees, hosting costs. So that they've moved in line with revenues to be expected. Our admin expenses increased 14%. Almost two thirds of that growth is headcount driven as we invested in our team over the past year to deal with operating in more markets with more partners, launching more games, diversifying the 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.

9:46 Now this 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 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 the top two charts here are both on a cumulative basis, number of operators and the number of games. So at the end of twenty twenty four, we were live with 87 games, and we were live with around 225 partners.

10:37 And the bottom two charts are both in period metrics, so the value of bets placed in in period and the revenue generated. So, again, if you add up the two bars in 2024 in the bets place, there was almost £6,400,000,000 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, yeah, the message from the last two slides is as we launch more operators, more games, the best place increases will allow to be feeds into the bottom right chart with revenues increasing.

11:14 So now the next couple of slides I'm gonna talk through are looking at our revenue growth in particular and looking at it from a couple of different angles. This this first one is our market level. So this is showing our revenue generated in seven of our key markets plus the rest of the world bucket on the right hand side. The great thing about this is we're we're continuing to grow in all of our key markets and looking at a couple of these in in a bit more detail. The US on the far left hand side, this is this is our largest market now, and revenues grew 57% over 2023. That that came from a number of areas. We 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.

12:03 Michigan would probably be the one I'd I'd pull out as a stand up 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 within year. As 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 UK, this is by far the most mature iGaming market that we're in, but we did still see growth here.

12:48 We only went live with a couple of small operators with a UK 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 of partners in that market, and 95% of that growth has come organically. And as we've 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 forwards. And then on to some of our smaller markets, Italy. So Italy grew 4%, again, which was all virtually organic. We went live with just one partner during the year.

13:36 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 the top Italian slot brand called Foul Play and built a game around or a slinger 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 in the three 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 at 32% and a 138. So that's at a market level. This this next slide is is a relatively simple job, but it's quite interesting nonetheless. It's it's showing the type of partner that our growth has come from. And what this is doing is bridging our content licensing revenues in 2023 of 18,500,000 up to the 23,800,000 generated in 2024.

14:39 And when we say organic partner here, this is growth with partners that we were already live with before the 01/01/2024. And there's there's two 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 a million and half 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 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 330,000,000 of gross revenue.

15:31 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 18,000,000 of gross revenue from our games that year. They went then went on to subsequently generate 62,000,000 in 2022, 73,000,000 in 2023, and then 93,000,000 last year.

15:56 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 one, and then see that turning down. We we launch with a selection of games. We then get to know the operator a lot better, deepen our ties with them, understand their play about 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 the value of that relationship. So, yeah, the last two slides is kind of two messages. We we grow in two 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 want to talk through, this is just to look at our cash, and it shows essentially the the bridge from how you get from profit before tax of 8,300,000 on the left hand side over to our increase in free flow of 6,100,000 on the right hand side.

16:53 So our closing cash balance at the end of twenty twenty four was 13,500,000, which was a 6,100,000 increase over 2023. And the bridging steps to get you between the two, we you add back the 4,300,000 of combined depreciation and amortization, the 800,000 of share option charges, both of those buckets are noncash charges to the income statement. And then going the other direction, we made 900,000 of corporation tax payments in The US. We capitalized 5,800,000 of development spend predominantly within intangible assets, and there was a 700,000 increase in working capital, which was largely receivables driven. I'll pass you back to Mark.

17:41 So sort of the future and where we're going. I mean, this slide here is showing the growth we've been seeing in North America. So it's The US and Canada. We've been growing at scale. 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. I'm looking at new innovative games that we could be taking to market ourselves, as the pipeline is open with these operators. And, you know, we we are a good, you know, 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.

18:29 This is some research and forecast of where this The US market can be going, you know, showing 92% forecast growth. And the good news is that, you know, this is really good news for us over the next four years. You know, the the old markets we're in are growing organically, and so we're able to grow in these markets. But the really big opportunity for for us and for the industry in The US is that regulation will open new states. There's over 30 states which have regulated online sports betting now. There are seven for the iGaming markets. There are a number of states which are, you know, looking to go through legislation at various stages. I don't when they will pass, but I always think it will happen. It's a when rather than the the name.

19:24 The lighter shade here is the base case. This is assuming the organic growth in the markets plus adding two more states. One one, think, at the back end of '26 and then the back end of '27. And the more optimistic case is adding another four on top of that, two in '26 and two more in '27. And where we stand is, look, we know Slinger is very popular already in The US 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 Slinger to grow into other markets as well in The US or other product verticals. We're experienced at obtaining licenses, and we're also experienced of having our game and tech certified in in the various markets.

20:15 We're already working with the majority of the operators in the market. We have the integration routes. 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 or 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 US. 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 a little bit at the end is what we've been doing with Slingo.

21:05 So we should probably start, which is not shown here is we Slingo is an amazing format and brand where we're able to license IP into Slingo. So we've been licensing TV shows. You know, we launched last year Slinger press your luck game, press your luck being a popular game show in The US. We've also licensed game shows here like deal or no deal, but we're also working with competitor studios via land based or online slot games and license them into 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 it's also for the slot IP owners as well.

21:51 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 branding games, you know, for example, Fanduel Slinger, which launched last year or the Paddy Power Lucky Pants Slinger. We do this for a number of our partners, which allows, you know, then the partners have got something more unique they're working with, and it's great, you know, for us to be working closer with them. We also will look to do, as Jeff mentioned, more market

22:23 specific branding. So some of the IP relicensing is is more specific for a license. 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 and doing a lot more sort of work with our with our players, more opportunity for us.

22:53 I know there's particularly any balance sheet. I mean, it's out there. I've seen a lot of our financial numbers. Yeah. There's not too many things I've put out here. I think the cash is the obvious one to highlight increasing from 7.5 to up to 13,500,000 last year. Overall, net assets are up 9,600,000, which shows the strength and the business and the balance sheet, and then the the non current assets increasing 3,000,000. 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 on the in terms of the presentation. That's great, Mark. Jeff, if I may just jump in there. And thank you very much indeed for your presentation. Ladies and gentlemen, please continue to submit your questions using the Q and A tab situated on the top right corner of your screen.

23:38 While the company take a few moments to read those questions submitted today, I would like to remind you that a recording of this presentation along with a copy of the slides and the published Q and A can be accessed via our investor dashboard. 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. Thank you. 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 we mentioned before, but our 2024 sets of games was the highest grossing set of games we produced in the first year.

24:29 And so we are still continuing to make great games, and that's definitely we're definitely seeing that in our results. The US is still a growing market, but definitely in the long term, it's got the potential to be, you know, growing growing as more stage regulate that. Next question is, 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 a much higher ceiling than we are, you know, utilizing the brand for. We're seeing that as we're able to, see the results of how it does in in areas where we're licensing the brand. So it's a very popular format, with the players and it's category defining.

25:18 However, we'll continue to innovate within Slingo, as well as look for new, you know, additional products we can take to market, which we are distributing some stock 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.

26:00 The next one is what's the rationale behind a share buyback? So look. We've sat down as a board. We've decided at this this point in time with the surplus cash we have. This is probably the best best use of this amount of money. We still have more surplus cash, and and this is still continuing to generate cash. But this we want to be able to have some cash on hand. It allows us to be nimble when 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.

26:51 But, also, it may allow us and I'm not saying we're 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, you know, we can put the money to use in a really good way to essentially, you know, add shareholder value.

27:16 And another one is, is there much growth left in The UK, and do you envisage more regulation coming? Look. The regulation's coming now. State 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 than average, so we that we feel we have a good portfolio for The UK. 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, and as we've seen in previous slides, we are well diversified. I mean, The US is is the largest market, so we're not fully reliant on UK. Of course,

28:03 you know, it's our home market, we put a lot of effort into it. But we'll continue to grow new markets. You know, we're you know, it should be interesting over the next couple of years to see how South Africa's done, how we're growing in Canada, how we're growing in Brazil as well and other markets we're in. So it's not you know, we we are trying to be as diversified as possible.

28:25 Is there any any Yeah. We've had one on our capitalization levels and what we should expect these to be looking forward since 2025 and beyond. I think I said earlier in the presentation, we we increased our headcount 24% in 2024 over 2023, and that was to get us to a level to be able to distribute the content flow that that we're now seeing that we will see in 2025. I I think we're up to just north of a 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 headcount, which was predominantly in our product teams and tech teams.

29:11 But we're probably looking around the 6,000,000 level rather than the same sort of growth that we saw last year.

29:20 Should I I don't know if there's other one to go, or should I go? No. Go for it. Fine.

29:26 Next question. How many more regulated markets, operators, and can the current headcount sustain? Looking to gain an idea of the current spare capacity. So it's probably worth saying we've grown a headcount 20% or 20 odd percent over 2024. I 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, products 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 four or five years in improving our platform so it can be more scalable. So it is easier to be launching that we in these new markets.

30:13 So we're not expecting a lot more growth over the next year. There may be the odd one or two just for sort of targeted, to help us get to our achieve our goals. But I think, actually, we have a good capacity in our team now to be, you know, definitely our short term goals. There's one on our marketing expenses. So 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 b to c premium games. So each half first half of the year, over the past few years, we've done a relatively small marketing campaign.

31:01 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. So I think that'll probably remain a similar similar quantum to to 2024. Great. Next question is you reported strong growth in Canada in '24. Can we anticipate that for the market in 2025 and 2026?

31:25 Should Alberta be 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 would like 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 covers a few other provinces, lotteries. Alberta is told to be the next commercial province which opens. And quite a few of our partners are really excited about that market and think it can be a a decent sized market to for them to be operating. Of course, we're we'll be there supplying our 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 twenty twenty six at the moment rather than '25, albeit the date hasn't been set yet.

32:31 I think final question we have here is, do you have any idea of the status of the gaming app review when it'll be implemented? So I assume this is UK. This is already being implemented in stages, And there's there's more regulation, I think, coming for mostly, this is on the operator side, so there's more that they will be looking at on bonus levels and things toward 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. And we've tried to get ahead of that and already brought in the staking limits on our side, earlier.

33:16 And so we're already sort of hopefully compliant. We've just got one or two little ticks to go before we go there. But, yes, that's that's either in progress or coming very soon for all of the changes that they are proposing. That's great, Mark, Jeff. Thank you for addressing those questions from investors today. And, of course, the company can review all questions submitted today. I will publish those responses on the Investor Me company platform. But, Mark, before we redirect investors to provide you with their feedback, which is particularly important to the company, could I please ask you for a few closing comments? Yeah. I just wanna 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, you know, this year, we'll execute, better again. We have lots of really exciting things in the pipeline, having new market launches, partner launches, product launches, and we're really excited and see what the future brings. So thank you all.

34:17 That's great, Mark, Jeff. 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 better understand your views and expectations? This will only take a few moments to complete, and I'm sure 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.