Gaming Innovation Group Inc

OSE:GIG

Earnings Call Transcript 2019-Q1

[Robin Eirik Reed, Founder, CEO & Interim CTO]

Morning all, and welcome to this Q1 interim report of Gaming Innovation Group. My name is Robin Reed, I'm the CEO and the Founder of the company. I'm here alongside Tore Formo, our group CFO; and Anna-Lena Åström, our Head of Investor Relations. Welcome to the audience here in Stockholm. Thank you for taking the trip here. Also, a good welcome to all the people watching the webcast and who are listening in on the audiocast. Today, we will get a quick overview of the quarter and of the company before looking at the highlights of the quarter. We'll then proceed into a strategic and business update before having a thorough look at the outlook of the company. The presentation is expected to last about 25 minutes and followed by the Q&A. A quick overview for those who are new to Gaming Innovation Group. We are a technology company focusing on the iGaming industry. We deliver iGaming solutions based on innovative technology. We were founded in 2012. And today, a small 7 years later, we're 700 staff with offices in Malta, Denmark, Gibraltar, Norway and Spain and licenses in Malta, U.K., New Jersey, Germany, Sweden, and we're having a license pending in Spain. Recently, we were listed on the Nasdaq exchange in Stockholm, so we're now currently dual-listed between Oslo and Stockholm. It's been an amazing growth journey with GiG. It is a company who has been trailing about EUR 150 million in revenues. Launching only 7 years ago, it's been profitable growth. And it has been a great pleasure to be onboard the company in this period of time. We're now standing ahead of a transformational quarter. Sweden regulated in this quarter, and I'm very happy to share sort of our thoughts and our views on this quarter and the period ahead for the company. First, though, I would like to show you this graph, which is showing the total online and land-based gambling spend worldwide. We're gambling for about EUR 5 each per month on this planet. The land-based gambling is estimated to be about USD 407 billion this year. Online is still a small share of EUR 55 billion. However, land-based is growing at a compound rate of 1.9%, whilst online is growing at 6.6%. Online is getting an increasing share of the wallet. I'm showing it because I think it is very important when doing this inventory to see that there's still good growth, that the large opportunity is in online gambling, which is gaining an increasing share of the wallet. GiG is well positioned to capture this growth mechanic. We have proprietary technology and products across the whole value chain of iGaming. We have the technical platform, meaning the customer wallet, the tools that you need in order to manage your player database, all the integrations, all the hosting and the infrastructure you need. We have the contents, such as casino and odds -- casino games and odds. We have the marketing arm -- the digital marketing arm, and we have operators. We are utilizing this both B2C for our own operations, and we're selling it B2B, primarily through revenue-sharing agreements but also some level of flat fees are paid. I would like to show you a new slide today, which is quickly summarizing GiG's business model and how we are thinking. In GiG, we are primarily in 2 product categories, casino and sports. If you follow the vertical for casino, you see we do our own content, so the games. We do the platform, so the back-office and the infra. We do the content, so the actual website. We do the media, so the actual marketing and the distribution. All of these components constitute our technological architecture, our products and services, and we are applying it at our casino brand, Rizk.com. Once we have proven that we can achieve the digital perfection and the level of quality of service we desire, that it can take market shares and to the most competitive markets in the world, we can then sell it. We're selling B2B either as full turnkey solutions, so we can power the larger brands, we can power the incumbents, the operators, the ones who take their business online, with a complete set of tools and services required to get that digital perfection for them online. We can also sell each of these product areas as modular sales. This quarter, we sold 10 copies of GiG Comply, our compliance monitoring tool, and this is an example of such modular sales. Combined, we have an aim of being the global operator and partner for strong brands in iGaming. This is our strategic intent, what we wanted to achieve. We want to achieve it through this high level of proprietary technology and solutions, have a high degree of in-house control. We want to focus on growth for our B2C brands through accelerating that growth with our B2B operations. Some highlights for this quarter. As mentioned, it was a transformational quarter with increased regulation and taxation, but it was also a quarter where we have a very positive outlook and many opportunities. To reiterate, as most people which would be viewing this stream would know, Sweden regulated in Q1 this year. That led to an environment where most operators, at least on this stock exchange now, would have about 50% or more of their revenues from the regulated environment for the first time. If we summarize GiG's performance in this quarter, I would like to point out first our media business. It was, again, an all-time high revenue in media. We had a continued solid and stable growth. It is the largest contributor to the group profits. We will talk about the specific numbers in a subsequent slide, but I'm very happy to see how our media is progressing. There was initial revenue impact from Sweden experienced in January and then February, which was absorbed by March. The introduction of limits, our self-exclusion registries and the increased competition from the incumbents such as Svenska Spel ATG, the monopolies, of course, led to a more competitive climate. We were happy to see that this was absorbed by March. And going forward, it is a matter of our focus on the market, how much marketing we're putting in and how we prioritize this market compared to other markets we're in that will determine how the revenues and profits will develop. In Q1, we launched our omni-channel Sportsbook with Hard Rock in New Jersey, a full suite of products and services for sports betting, retail as well as online in one of the most exciting opportunities being the U.S. market today. We signed MegaLotto in order to enter the lottery vertical. Whilst we are predominantly focusing on casino and sports, we're also present with clients in poker and now also in lotteries. We think it is very interesting to look into the lottery vertical being how the iGaming industry is moving towards a regulated environment with more sort of community games and softer games and a higher degree of monopolies and incumbents going online. Therefore, we think it is important to explore and research this vertical, and that is the strategic rationale behind signing this client. We had very strong traction for our new marketing surveillance tool called GiG Comply. We've now sold 10 agreements, and these are a combination of larger Tier 1 clients as well as some smaller operators. The dual-listing in Nasdaq Stockholm was completed on the 26th of March 2019. We're very happy to be in Sweden, and we're looking forward to starting our roadshow here this week. And we will continue to spend significant amounts of time to spread the word about the company and to get to know the investor base here in Stockholm throughout the year. Finally, I want to mention that in Q4, we announced that we were close to signing a very large customer, a Tier 1 customer on a turnkey contract. And I would like to reiterate that, as indicated on Q4, this is on track. We're working closely with that client. We had to announce it because there were so many people within the company that was aware of this as they're working on the project. And there is still some formalities pending, but it is very much on track and hopefully will happen very shortly. Having a look at the development in revenues and EBITDA, it is stable. It is slightly down in Q1 2019 due to the initial revenue impact of Sweden as well as the Tier 1 customer that we announced that would leave the platform this quarter. Then there is a rolling EBITDA of EUR 15.9 million for the quarter, which is also stable and in line with Q4 '18. I look at the financial highlights. As mentioned, there was a revenue impact. We're down 13% to EUR 32.4 million. As revenues are down, cost of sales are also slightly down. And with the increased betting duties, they are not as much down as revenues. However, we predicted that there would be a tougher environment in Q1 and that we would grow from there. And therefore, we decided to sort of introduce tight cost control, and we reduced our marketing spend in the quarter with 28%. Other operational expenses are down 7%, which is, again, due to the strong focus the company has on cost control. Therefore, EBITDA for the quarter was in line with the same quarter last year, slightly down 5%. Given that we are at the start of the year, I would like to talk a bit about our strategy and the initiatives and the objectives that the company is working towards. I want this update as well as the outlook to be hands on, so that you can have some of the very direct questions that I often receive answered. I want you, as an investor base, to be very aligned with what the company is doing. There is many moving parts in GiG, and, therefore, there is quite a few points on this list as well as the outlook that we will review to you later. And feel free to ask any questions, of course, should I need to elaborate on these. We have an aim of continuing the stable organic growth in the high-margin media business. It functions as a base for financing the group expansion into other products, services and markets. And that expansion, it is very important for the company that we're now able to take our B2C and B2B operations into new high-margin, low-entry barrier markets, especially with our B2C operators. So we are looking now into launching Rizk into Asian markets, into Spain and into Latin American markets using Spain as the gateway. We will touch base on this later. These will function as the exciting growth, as the profit drivers. With the increased profit and growth in these markets, we will compete in regulated markets. It is very important for the company to secure our long-term sustainability for increased share of such regulated markets, for instance, in Sweden and Spain. But this is a more long-term play. We need to accelerate this growth by selling B2B turnkey partnership contracts and modular sales. To explain. If GiG is about a EUR 150 million company, there is a limit to how many markets we can target with a maximum marketing efficiency through our B2C operations. In order to maximize that marketing efficiency and gain the market share that you would need to be one of the leaders in the category post regulation, you need to invest significantly. In GiG, we want to grow controlled. We want to grow stable. We want to grow profitable. Therefore, there is a limitation as to how many markets we can target. However, our technology is scalable. Our operations is scalable, so we can leverage that technology by growing with partners, who has the strong brands, who has the marketing funds, into markets where we might not be able to reach. So I think it is incredibly important that in order to accelerate the in-house capacity we have, we need to also make partnerships with larger companies and grow in the markets where they are strong that we wouldn't necessarily target ourselves. In addition to this, we can sell our technology as modular services, and we are having very strong sales traction currently seen by the 10 agreements of GiG Comply. In GiG, we're working across the whole value chain of iGaming again sports, platform, casino, compliance and so forth. It is therefore incredibly important that we, at all times, have the best senior management in the company. We're very proud of what the management have achieved over the last 7 years, building the company from nothing to the scale we're operating at today. Increasing this so, it is important that we strengthen the management at all times in order to handle all of the business that we currently have ongoing. There is, therefore, a very strong focus into training the current leadership and to hiring the best people. We need to develop our product positioning and tech scalability. We need to increase our operational efficiency. We will talk more about this in the coming slides. Starting with the B2C update. We had a strategic review in 2018 following a quarter where we lost money. We decided to go for fewer and larger brands predominantly because we realized that we didn't have the marketing funds required in order to scale as many brands as we had in as many market as we needed to target. So we focused on the best-performing brands, Rizk.com. We have improved the EBITDA this quarter despite the reduced revenues. There was a growth in Rizk, who's now constituting 71% of our revenues. We'll return to that growth rate on a subsequent side. So the strategy going forward is to focus on Rizk for casino, while Guts is now under development for sports betting. We do want to achieve a leadership in some of the markets, on some sports, on some competitions for Guts as a Sportsbook and use that to exhibit our excellent sports betting technology. We are reinvesting the marketing spend from core markets into new markets in Q2 to boost performance in H2 2019. As mentioned, the B2C strategy is evolving, and we're having an expansion in less mature market as Spain, Lat Am and parts of Asia coming up. And this will happen rapidly. So going forward, we have a strong focus on our sustainability model that we can take market shares into regulated markets, but grow that patiently, controlled and profitable, whilst we want to achieve faster growth in markets that have yet not regulated, where there is lower entry barriers and where there is less taxation, so we can use that to shoot our overall position and growth. Looking into our B2B. So as mentioned, our Media Services continued to generate stable profits, allowing us to invest. It was awarded the top 5 position at the coveted EGR top power affiliate list, where we came in the top 5 position, up 7 places from 2018. We're surely one of the top affiliates in the world. We have an opportunity now to grow both paid media and publishing in current and new markets aligned with our strategy, so we can go into North America, Lat Am and Asia. In our current cost base, we're already expanding our product portfolio and our activities in the core European markets. What we have seen is that it works and that it's highly profitable, and we now want to expand that geographical footprint to new markets. Our Sports Betting Services, we're now focusing on developing innovative trading tools to improve the front end and to build on the omni-channel Sportsbook. As mentioned, we launched it in New Jersey U.S. through Hard Rock. In Q1. We have also launched it on our own brand and into the [ boat again ], and we're focusing on building out the capabilities of these services, where we're having few new clients going live shortly. GiG Comply, our marketing surveillance tool, sold to 10 operators. In our games services, we have now launched the first 4 proprietary games. Focus now is on building high-quality innovative games that we will launch throughout the summer and from there grow the revenue base. We have 1 new brand signed to the platform services, MegaLotto, and there is now a total of 39 brands on the platform. A quick look at the operations. As mentioned, we are increasing the operational efficiency of the company. We are down in staff now for the fourth consecutive quarter. You can see the split between headcount there. I won't touch it now, but you can revisit the presentation, of course, in gig.com. Just mentioning shortly that the company has signed a new chief information officer starting in October as well as an SVP for technology starting now in July, which will relieve me of having the dual role of being both CEO and CTO shortly, which I think is important. And, of course, I have enjoyed intertwining the tech and the business to the level of where we're operating today. Going forward, I will enjoy it even more focusing on the business and the market here in Stockholm to get to know you all a bit better. Great hires. As mentioned, I think we never had this more senior and strong management as we had today. It is overwhelming for me to see the level of candidates that are approaching the company and that we can sign, and I'm very happy that we now have closed this role as well as a range of all the director roles and senior management roles for the company. In GiG, we're taking sustainability very seriously. Our goal is to improve the regulatory standing and reduce the social impact the industry is having on society. A range of initiatives as well as businesses has been introduced in order to meet these goals. I mentioned GiG Comply and how we have sold this to now 10 companies, including a range of Tier 1s. In Q1, we also was part of a group of the market-leading companies in Norway, who formed a trade body in order to self-regulate. In the lack of regulation that is coming out of the Norwegian government, we took this initiative. We have now trained more than 75 staff in response to gambling-related roles. This training has been conducted by the very best companies in the U.K. on the field. We even now have 75 staff as well as the whole management capable of dealing with complicated responsible gaming issues, very important for our sustainability model and the road ahead of us in regulated markets. We published our sustainable -- group sustainability report in April, so you can go onto the website and download it to read more. So a quick business update, starting with our B2C brands. As mentioned, a transformational regulatory and market conditions. Now about 50% of revenue is coming from regulated markets. EBITDA improved from EUR 0.1 million last year to EUR 1.1 million this year. Rizk.com now represents 71% of B2C revenues, with a growth of 34% from Q1 2018 despite the initial revenue hit that we experienced in Sweden. The marketing cost decreased by 28% from Q1 2018 and it now represents 39% of the B2C revenue. I'm proud of this because I have told the market previously that we needed to get below 40% by now, and we did despite what happened in Sweden in the period. 42% of our revenues now are generated from regulated or near-regulated meaning type markets. Looking into Media Services, again, all-time high revenues, organic growth of 10% compared to Q1 2018. About 34,500 FTDs referred, whereas 13% was referred to brands and platform clients within our ecosystem, of course, generating an upsell effect on that traffic. We have 2 models in media. We're having organic revenue, meaning players we have acquired through organic searches such as Google; and we're having paid media, meaning players we have acquired through Facebook paid advertisement and through Google paid advertisement as well as display. Throughout last year, this paid vertical within media suffered an initial revenue hit as the U.K. market was regulated in a similar fashion to Sweden, and, predominantly, the customers were U.K. Tier 1 Sportsbooks. Now we have regained the profitability that we historically have had within paid media. Paid media was profitable in Q1. And I'm very proud of the performance of our Copenhagen office, who achieved that under a very challenging environment, and it's a testimony to their capability and technology. 57% of the revenues in media came from revenue share agreements. 19% from CPA and 22% from listing fees. So it means that more than half of the revenues are still recurring perpetual revenue-sharing agreements. Going into our second business area the Platform Services. There was a total of 39 brands operating on the platform, 1 new brand signed and 4 that ceased operations in Q1. I will return to this. As I mentioned, we signed an agreement with MegaLotto to support their entry and, in general, our growth in the lottery vertical. The revenues were impacted negatively. As announced in Q4, there was a determination of a major customer, where the quarter -- or the sequential effect was about EUR 2 million on both top and bottom line. Also worth to mention is that within this sort of area or reporting segment, we have included the sort of burn rate of our games studio that is being currently sort of developed and our front-end services. So noteworthy is that the GiG Core segment is profitable. There was 1 new brand launched in April and 4 new brands that are in the pipeline, meaning they have already been signed and we're ready to put them live shortly. Total database transaction came in at 4.3 billion. Looking into sports betting. The full suite of products and services was launched with Hard Rock in Q1 in New Jersey. We're currently having expenses of about EUR 1.8 million and incomes of about EUR 0.3 million. Noteworthy is, of course, that our revenues in our own B2C operations, which is, of course, a lot down due to the capabilities that we're developing on the bet cams or actually Sportsbook platform is not included here. So overall, you might not get a fully accurate picture of the importance of these investments for the company. We will look into how we can improve that reporting going forward. With that said, we're about EUR 500,000 per month down, and we're looking to improve this. And we're expecting to improve this throughout the rest of 2019, so this rate will go down. And as we are launching our full suite of products and services on our in-house brand, Guts, starting to market there and take market shares in some key markets, where we believe we can be best on odds and on product, we hope to see profitability achieved throughout H1 2020. Noteworthy is that there is 2 external and 1 internal customer live with GiG sports Betting Services. And there's 3 in the pipeline that has already been signed, and that is onboarding currently and expected to go live shortly. Which leads me to the last slide, the outlook. As mentioned, I want to be in a bit hands-on and explain what we are exactly doing currently. We've launched Rizk in Spain in Q3. We will meet the platform certifications required to put the brand live in Q3, and we will then initiate marketing in Q4, Spain being a high-growth market, in our opinion less mature in terms of competitiveness than, for instance, the regulated Nordic markets. It's a great opportunity to go in with our playful and fun brand, Rizk.com, which we think will fare well with the mindset and the sort of customer demographics in that region. Spain also can function as a gateway to Lat Am, Lat Am undergoing regulation shortly or already and being a very exciting growth opportunity for the industry. So we are looking into launching Rizk now in selected Asian markets already now in Q2. We worked on this and we're close. So we'll start initially, of course, and test the waters, but we hope that we will be able to achieve the success, allowing us to scale-up marketing quickly thereafter. Following the launch in Asia, we would then -- and Spain, we would then look into Lat Am. We will continue the stable development in the high margins for media. We're very happy with the current trend. We will sign and launch one large B2B turnkey contract in H1, sign and launch. We will then look into and see what we can do in H2, but I cannot give any promises there, but, of course, there is interesting dialogues ongoing. We're looking to accelerate the sales of GiG Comply. In GiG Comply, we can both build on the product capability, and, therefore, upsell the amount of compliance services that we have. And we can, of course, sell to more clients. There is great interest in the product. And of course, with the current traction, people are noticing that there is something very exciting going on. We have now launched the initial games on our proprietary casino platform within sort of the casino content category. We're now looking at building very good games that we can launch in order to take those top 10 positions that is so important in order to succeed in this segment. So we are currently focusing on developing the games that we hope will gain such traction, and we will launch these games throughout the summer and early autumn. I'm often asked, when are you done with your tech development, Robin? And I think the best and most accurate answer I can give to that is today. By the end of the year, we're looking to complete our target architecture. And what do I mean with complete our target architecture? In GiG, we have already built a very solid fundament. We have a lot of good technology. We're currently working on the next generation of our core systems, of our data platform, of completing the initial development road map for our sports betting platform. We're looking at completing the platform for casino that we have started. This work is progressing very well, meaning that when we're coming to the end of the year, we can start to decommission all called and work on a new architecture. There is currently double cost going into several development teams, several sort of data storage products, network products and so forth in order to support this development. So this will help us not only in terms of cost, but also development velocity, innovation and so forth from that point. We have then completed what we set out to do 4 years ago. We're through most of that development now. We're half year into almost this year. Of course, from that point, as mentioned in the report, we then need to start migrating business over to the new technological architecture, and we're looking forward to start with that next year. So we have a goal of continuing to improve the delta for other operating expenses to revenues, and we believe we will improve this throughout the year, hopefully, in every quarter. Then we will look into what we're doing with the white label model. Worth mentioning is that following the increased regulation, the white label model has changed in nature. The reason being that there is now such a high compliance threshold on companies that you need to assume more of the operational responsibility for white labels, meaning companies operate B2B companies, operating on your license and platform. What we are seeing now is that we're getting much more traction on what we call modular sales, so actual sales of APIs and technology and so forth to other licensed operators, and we're seeing great interest now from larger turnkey contracts. And we believe that these type of sales will replace the white label model over time and going forward. And we think this is very important to the company because it allows us to focus more in our in-house operation and more on our technology sales. So I mentioned that 4 clients have ceased operations in the quarter on GiG Core, and this is predominantly smaller white labels, which, for financial reasons, we have decided not to work closely with because it is an opportunity cost for us in the current regulatory landscape and with the opportunity we have. So I also expect this trend to continue, and that we will replace white label revenues with Software as a Service agreement and larger operators. Overall, I would like to finish on the note to say I'm very confident in the company's prospects for this quarter. I think it was a reasonably good result, given the challenges that the industry went through in this quarter. I think from here, we can grow, and I'm very excited to start the new year and to be here in Stockholm to start it. And with that, I would like to open up for the Q&A session. We will have both the possibility to answer questions over the audio call as well as through gig.com, on the website and here in the audience, where we have a microphone we can pass around. Thank you.

[Christian Hellman, Director of Small and Mid Cap]

Christian Hellman here with Nordea Markets. Just a question. It's been a challenging quarter for the industry in general, at least the ones with exposure to Sweden. Despite that, you grew media revenues and you sort of declined in your B2C business. Could you elaborate a bit on why the media business still managed to grow with the numbers that you did despite those challenges?

[Robin Eirik Reed, Founder, CEO & Interim CTO]

Thank you. I would love to. As previously indicated, we would focus on organic growth in media. We were as other companies focusing on acquisitions when that was a great opportunity in the industry. And about 1.5 years ago, we started consolidating our business and focused on the organic product development and growth of that business. I'm very happy for this choice. Over the last year, we have been able to substantially develop sort of the attractiveness of our products and geographical reach of our products. And what we're seeing now is that we're gaining increased traction in your key markets for our top products, and that those are climbing in rankings and that the user metrics are increasing. So it's basically a result of a strong performance by the team and, yes, I'm looking forward to see it continue.

[Christian Hellman, Director of Small and Mid Cap]

And just a question on Lat Am and Asia that you're sort of going to make a push into in the quarters ahead. Could you elaborate a bit on markets there or at least regulated, near-regulated, non-regulated markets, just to give us some sort of view at least in terms of Asia? What are the gray, black, markets?

[Robin Eirik Reed, Founder, CEO & Interim CTO]

I will be a bit careful in this quarter as we are relatively early in the life cycle of those markets. What I can say is that Asia is exciting, vast opportunity, very high potential, large amount of revenues and high growth there. The regulatory situation is volatile. There is markets where single regions are regulating, where markets as a whole are regulating, but it is difficult to predict exactly where and when and how. And therefore, it is challenging to determine sort of exactly how you can operate and where. We, of course, have a very strong ID, and we are planning this market interest now and are working on the implementation as we speak. And of course, we therefore have made up our mind about where we have good prospects, but I would like to not comment on that in this quarter until it is materializing.

[Christian Hellman, Director of Small and Mid Cap]

Sounds reasonable. And just a question on sports betting. Revenues came down sequentially in sports betting from Q4 into Q1 despite launching with Hard Rock in February. Could you just elaborate a bit on that? Was that due to different sports betting margins? Or...

[Robin Eirik Reed, Founder, CEO & Interim CTO]

Yes.

[Christian Hellman, Director of Small and Mid Cap]

Why was that yes?

[Robin Eirik Reed, Founder, CEO & Interim CTO]

A single-word answer, that was down due to sports betting margin and some key markets. And I think on an organic basis, it should have gone up on an everything equal basis, yes.

[Christian Hellman, Director of Small and Mid Cap]

Right, okay. And just sort of my final question just to sort of round it off. You've had 2 quarters now with contraction. You've taken down the headcount. The revenues have come down a bit. What do you see going forward? And you mentioned also that March sort of absorbed at least the losses from January and February in Sweden. What do you see sort of going forward? Can you paint a bit of a picture into Q2? Will this sort of be the bottom of the trough and then you see it moving up, and you have a big Tier 1 client potentially signing? Or how should we look at -- upon 2019?

[Robin Eirik Reed, Founder, CEO & Interim CTO]

Yes, I agree with you, but I would like to make one correction. Q4 last year, adjusted for one-offs, was our best quarter ever. So despite staff count going down and us being increasingly efficient, the organic underlying business had never been performing better before we entered this quarter. It has been a goal of the company following very strong growth. In 2017, we went from EUR 54 million in revenues to EUR 128 million in revenues. At which point, we need to look into the long term and say, "We need to grow responsible, okay?" And of course, there was a lot of expansion initially. We needed to add headcount. We needed to cope with the growth. But as mentioned, we believe there is a very strong synergy and operating across the value chain in iGaming on a uniform technological stack, seamlessly integrated across the value chain in having a company where are all of these verticals are sort of represented, so that all the knowledge can be cross-pollinated and sort of extrapolated upon in-house. And that's why you see the staff count going down. We started indicating in Q1 last year that we sort of had reached peaked OpEx at least for the foreseeable future, and that we would be able to be more efficient. And that's why you're seeing the staff count going down. Now, of course, there has been an impact on revenues now in Q1. Not only do we have the sort of the Swedish market and the initial sort of contraction due to limits and the before-mentioned reasons, but we also had the loss of this client that's announced in Q4. From now, with entries into new markets, there would obviously be some marketing investment, but they will grow again. And with the new customer that we're onboarding, we will grow again in that segment, too. We mentioned in Q4 that we expect -- as well as the report, that we expect the revenue loss by the larger client announced in Q4 to be replaced at large by the current pipeline. And of course, we can sign more clients. So I'm expecting the revenues to increase going forward. And marketing will increase as well, but revenues will follow shortly thereafter. So I think we're in a very good spot.

[Unknown Analyst]

I have a couple of question about Hard Rock. It was our biggest signing to-date, and it was approximately 18 months ago that we signed with them and we went live last summer. What's your plan with Hard Rock going forward? Because we haven't seen any significant increase in sales or marketing or taking their brand to Europe or other states as we speak. So can you elaborate a little bit more about Hard Rock and our deal over there?

[Robin Eirik Reed, Founder, CEO & Interim CTO]

Yes. We empowered Hard Rock International's launch in New Jersey with our technological platform, first for casino and then for sport, the casino being the best launch ever into that marketplace without marketing funds. They grew from EUR 0 million to EUR 1 million in revenues within 4 months, previous record was 8 months, a testament to the efforts of the team and the products and services that we offer. New Jersey being the most complicated regulated market in the world, we did it in record time. We are fully committed to stay behind Hard Rock as they grow and expand. But they're the operator. So the questions in which you're asking must be answered by them. It is them who choose whether they want to expand into other states in United States and whether they expand into other countries in Europe. Their SOP for Hard Rock interactives, so the person in charge, have previously given interviews in media, where he explained their ambition of becoming a large operator worldwide. So we are ready to support them on that mission should they continue to embark on that, as they have done in New Jersey. So that's the best answer I can give.

[Unknown Analyst]

And can we talk a little bit more about Germany? Because the last quarter, you elaborated a lot about Germany. And there's some recent development in licenses, and can you talk a little bit more about that?

[Robin Eirik Reed, Founder, CEO & Interim CTO]

Yes. So Germany being a key market in Europe, of course, and there was a clarification on the regulatory standing. And it seems clear that you can operate sports betting legally in Germany or at least that it will be fully regulated from 2021. Now there's also casino licenses offered by Schleswig-Holstein, so one state in Germany. We are having a sports betting license in Schleswig-Holstein, which has allowed us to operate in Germany sort of relatively comfortably. Now casino is still a question mark from that regulation that's being introduced in 2021. We believe there is discussions between the various Bundesländer and their ministers in how to approach this, whether it should be a model, where single states in Germany would be allowed to offer casino, or whether all of Germany should offer a casino or whether there would be a ban in Germany. We believe, and this is pure speculation, it's on thin ice, given the context of the sort of this statement. So read it as such. But we see it currently as most likely that some states would allow for casino while some would not. And how much of the total addressable population that would then be is, again, speculation, now too early to tell. Again, you'd have to see what the actual lawmakers and the politicians in Germany decide and respect it accordingly.

[Unknown Analyst]

And you touched on it that your core white label customers, that the small ones are probably falling off as we're going forward in the regulated markets. Are we going to take a hit on the sales going forward? Because onboarding the big clients like Hard Rock and the other Tier 1 customers tends to take a little bit time -- a little bit longer time. So what's your predictions on the sales and margins going forward?

[Robin Eirik Reed, Founder, CEO & Interim CTO]

What we see is that in the regulated market, in order to achieve the scale that you need in order to be profitable in a category, if you look at Sweden now, for instance, there has been real and truly 6, 7 companies, whom are looking to be positioned for casino, for instance, to be operating profitably in the future. I don't think they're profitable today, but they can be profitable in the future. I think it is very important to recognize that you either need to be one of those operators or I think you need to target a niche market. I still think there is pent-up opportunity for companies to target niche markets in regulated markets and be profitable, but I don't think you want to be caught in between. Now it means that there is definitely a business for the white label model going forward. However, for me, it is not an exciting-enough business. I want to be the partner for strong brands. I want to be an operator of strong brands. So I want to focus on the companies that can have a much stronger position in these markets. So we will certainly reduce the efforts going into the white label model. I wouldn't say we would discontinue it entirely, but we'd be carefully selecting the right and most scalable opportunities, given that the opportunity for a client is small, and then would focus on the larger ones. With that said, there is currently a lot of work and man years going into keeping the white labels compliant, ensuring that there is not risk on us and supporting the amount of clients. Now all of that resource can be freed up and moved towards larger clients that are acquiring their own licenses, that are looking to take these positions that are so coveted in these markets. And that's where, I think, our efforts should be going forward. So we will look at reducing the amount of white labels while we will increase the amount of Software as a Service agreements, turnkey and modular sales. Are there any questions on the web, Tore?

[Tore Formo, Group Chief Financial Officer]

Yes, some has been answered already. We have one about Rebel Penguin, our Danish paid marketing company. Can they do B2C in Sweden for Rizk and core operators using the license, but not for the third-party operators?

[Robin Eirik Reed, Founder, CEO & Interim CTO]

Correct. So Sweden -- Google allowed operators having a license to do B2C marketing in Sweden. So you cannot allow -- you cannot market for it in parties. GiG is proprietary technology for marketing sports betting in Google. So we're in a very good position there. So we, of course -- whilst it's very early to the market, I think in the very first second we could market, we were there. And that is an advantage, I think, we have with our own operators. Of course, should it change in the future, we'd probably expand that capability to other operators. There was a question from the audience as well in this context.

[Unknown Analyst]

Sorry, I forgot one question. About our other brands on B2C, except Rizk and Guts because we only mentioned Rizk and Guts in the presentation, and we see a slight -- we see a pretty big loss in the other brands, what's our plans for existing B2C brands that we are having right now?

[Robin Eirik Reed, Founder, CEO & Interim CTO]

Yes. So in terms of predictability, I would like to reiterate the Q4 presentation where we had just north, I believe, of EUR 7 million in revenues and minus EUR 2.2 million in losses on non-Rizk brands in our portfolio combined of 6 B2C brands. In this quarter, where Rizk was 71%, you can actually derive that the revenue on other brands was about just north -- or just south of EUR 6 million. Now I communicated in that report that I believed the other brands would contract and stabilize around EUR 5 million in revenues, and where there had been EUR 2.2 million loss-making that there would be about breakeven. Now they have contracted to about EUR 5.9 million in revenues and EUR 0.9 million in losses one quarter after. So in terms of the operational plan, that's working out well. A large degree of that revenue is on Guts.com, which we are now developing to be a Sportsbook. It is currently positioned as a casino that also has a Sportsbook. This will be a Sportsbook-first product. So that's what we're currently working on, Rizk for casino, Guts for Sportsbook, leaving 4 brands aside. And a couple of these brands is performing well at a low scale. It is sad to see Highroller, launched in Q1 last year, having great KPIs, working really well. However, due to the before-mentioned reasons of us wanting to sort of grow, control and profitable and take these key positions of the markets, has been regulated, as one of the leaders in the categories, we need to focus our marketing spend. So unfortunately, we currently don't have the amount of money that we would ideally have to market for, for instance, Highroller. So of course, we might look into divesting some of these brands to other companies that might come onboard our platform as a customer and who might be willing to pay us money for these brands and to grow them profitably from there because they have the funds. And I think we will look into such opportunities for the best-performing brands going forward.

[Unknown Analyst]

Great. And in Q1, we had 2 major sports events in the U.S. We had the March Madness and we had the Super Bowl. How come our revenues didn't rise in Sportsbook in the February or March in -- with Hard Rock? Is it a problem with them or is it a problem with us?

[Robin Eirik Reed, Founder, CEO & Interim CTO]

As before mentioned, there is, as we mentioned, consolidated revenues into some key events in this period that your margin on those are very important, and I think that contributed greatly to the results you saw in that period. But again, it is up to Hard Rock, which you're mentioning now U.S. markets and events. Is it up to Hard Rock to decide how much they want to market and how they want to capitalize on those opportunities that you mentioned. We are ready to support them. Yes. With that, we're finished with taking questions from the audience and the web. I would just like to ask if there's any questions coming through the telephone conference.

[Operator]

[Operator Instructions] We have no audio questions.

[Robin Eirik Reed, Founder, CEO & Interim CTO]

With that, I would like to conclude the presentation. Thank you all for coming. Looking forward to see you for the Q2 presentation. Thank you.