Gaming Innovation Group Inc

OSE:GIG

Earnings Call Analysis

Earnings Call Transcript 2024-Q2

[Hjalmer Ahlberg, analyst]

Hi, and welcome to Redeye. Today, we are joined by

Gaming Innovation Group, who will present their Q2 results. We are joined by Chairman of the Board, [indiscernible], and

Gaming Innovation CEO, Jonas Warrer; as well as Platform & Sportsbook CEO Richard Carter. I will let Michael start with interaction.

[Unknown Executive]

Thank you for that. Yes, good morning, and welcome to Gaming Innovation Group's presentation of its second quarter report, 2024. My name is Michael I'm the Chairman of GiG, and this will be -- actually my first presentation -- quarterly presentation for GiG. And most likely also the last presentation we have in this format with a combined group of GiG Media and GiG Platform. We will today start with a short update of the ongoing split process, followed by some key highlights of the -- during the quarter. And then we'll move on to Jonas Warrer, who will present the business updates for the GiG Media. And then Richard Carter will do the same for GiG Platform. Then we'll have a summary and then a short Q&A session.

So split update. There's been a lot of questions regarding this. I think we, as you all know, we initiated a strategic review in 2023 with the purpose of splitting up GiG into two different companies, GiG Media and GiG Platform. This process is proceeding according to plan, and GiG will split into two by distributing the GiG Platform business through a dividend from the existing GiG Group to its current shareholders. And subject to remaining regulatory and shareholder approvals, we expect this to be executed end of September. And then hopefully, we'll have a first day of trading for GiG Platform on the October 1, 2024.

The Board of Directors, meaning us, will call for an Extraordinary Shareholders Meeting pretty soon and which will be held in September, where we will approve the remaining corporate actions and the dividend of GiG platform. And as part of the split, we have rebranded the GiG Media into Gentoo Media with a complete new brand identity. Whilst the platform and Sportsbook business will continue under the existing GiG brand and then we, as I said, separately listed on Nasdaq and Stockholm First North. So all in all, we are proceeding according to plan with the split.

Moving on to some key highlights. And to put it very shortly, I think conclude that Gentoo Media achieved yet another record high revenue and yet another record high EBITDA in the quarter, making this then the 14th consecutive quarter of all-time high revenues, GiG and Gentoo Media. The platform and Sportsbook business has continued to build on its foundation for growth and have secured significant contracts and developed, a very impressive and growing pipeline of customers. And with that, I leave it to Jonas to present a business update.

[Jonas Warrer, executive]

[indiscernible] results. I think it's safe to say that it's been [indiscernible] Internally, we have gone through a rebranding and now have -- into Gentoo Media, transition that I'm personally I'm very excited about. We have also done a lot of work internally preparing for the split ahead of us. So we are ready for that. If you look externally, I think it's safe to say that it's been also eventful year there. As one example, Google has probably been a little bit more active than normally. Nevertheless, and this is probably the point in town now where I should move a little bit further ahead on the stage and stand a little bit taller. Nevertheless, this is another quarter with records, record high revenue and record high EBITDA. As Michael said, the 14th successive quarter with all-time high revenue. Q2 revenue ended at EUR 30.3 million, up 39% year-on-year, of which 18% organic. EBITDA ended at EUR 14.8 million, up 43% year-over-year, meaning that we grow EBITDA slightly more than we grow revenue. This also means that our EBITDA margin ends at 48.7%, slightly up from basically the last longer period, if we look at the previous two quarters and also up from Q1. And EBITDA margin, I'm very satisfied with and that we are very satisfied with and -- which improves our operational excellence. 65% of our revenue comes from recurring revenue share agreements with earnings from that revenue source up 43% year-over-year. European revenue grew 43% year-over-year and 2% Q-on-Q. And this is actually driven by markets outside the Nordics. And why I highlight the Nordics is if we look back in time, we started out as a Nordic-focused business and have then gradually expanded into Europe and then gradually expanded into the rest of the world. As I will touch upon later, this is part of our diversification strategy. But we can see here that similar to the previous quarters, we grow more and more outside what was our legacy markets. Revenue from the Americas increased by 94% year-on-year and 27% Q-on-Q, with strong growth in both North America and less in Latin America around -- actually around the same pace. If we look now at how big are these two markets or regions stand for us. Europe and the Americas account for respectively 55% and 26% of revenue in the quarter. As I said, the developments there line with Gentoo Media's diversification strategy, positioning us for sustained growth. First-time depositors reached 122,000, marking a 11% year-on-year increase. Publishing increased 17% year-on-year and paid increased 5% year-over-year. I think when you look at this graph, we can talk about the year-on-year increase, but we can also see, of course, that there is a decline from Q4, which normally is a very strong seasonality and a very good quarter traditionally for everyone in iGaming. But added to this, similar to Q1, we have a continued focus on higher-value markets over broad market expansion. So I think the difficult part here to communicate and to understand when you're looking from the outside, the sheer amount of players is not a metric anymore that we are steering the business for. It is more looking at where do we make players, in what markets and then looking at what anticipated cash flow do we then make in the quarter and that we can see that we keep growing that part.

So also going forward, it will not be the amount of players that will matter, but it will be that we make players in the right countries. So we keep growing the business going forward. Similar to all the -- yes, what is that? 3.5 years now, the bulk of players that we made are on deals with a revenue share component. And why is that? That is simply because this is where we earn the most money and where we can make the most of all the players that we generate.

Diversification strategy. As I touched upon and to simplify this to make it very simple, more markets, more websites and more customers should drive revenue to mitigate risk and to ensure sustained growth. If we look at our portfolio of websites, they are around what, 150 websites that we have. If we look then outside the top 5, we can see that the non-top website that grew 48% year-on-year and 10% Q-on-Q and now drives 68% of quarterly revenue. We can also see if we look at our top 5 websites, that they grew 24% year-on-year, but on level with last quarter, and they accounted for the 32% of quarterly revenue. So what we can see here is that more and more websites contribute to the party and sort of drive the revenue going forward. In a market and in the marketplace where a lot of things can happen, this is part of our strategy. Of course, we love to have big international websites, but we are also very happy about the broad portfolio of our local champion sites.

We can also see if we look into partners, where we can see that we have done another round of partner expansion, meaning that more and more partners drive material revenue for us. So if we look in the quarter, we now have 296 partners where we make quarterly revenue above EUR 10,000. And as you can see, that number has increased quite a lot from the Q2 last year. Now we think we can discuss what kind of numbers should we reach here. And of course, we also want to work with the right partners in each market that are performing the best and have the best player values. So there's probably a limit to how many partners you can work with. But going forward, it will still be a focus to try to have as broad a partner base as possible. And we would still like to see that number going up.

we have an outlook, another record quarter on some high revenue and all-time high EBITDA. 65% of our revenue comes from recurring revenue share agreements, up 43% year-on-year. And similar to all the previous quarters, the bulk of the players that we have acquired are on recurring revenue share deals. Europe and Americas accounted for 81% of Gentoo Media revenue and have grown respectively 43% year-on-year and 94% year-on-year. And as I added in Americas, we see that it's both North America and Latin America growing at roughly the same pace.

Diversification strategy have been further executed this quarter to secure sustained growth, more markets, more websites and more partners drive revenue. Operational excellence, as continues to break records, amazing story with that website and with the team working behind it. KaFe Rocks integration has progressed as planned. Business is growing and is doing great. And we have a tireless organization and employees behind us that work dedicated and that keeps growing the business and driving things forward. We can also then see that in our EBITDA margin that ends at 48.7% in the quarter. And I think also here that we can start to see what I would call, economies of scale that benefits profitability.

We completed the acquisition of Casinomeister in June. And very, very old casino domain when I started out in the industry, that was sort of one of the really the legendary website. A website that I'm very excited about adding to our portfolio. So we maintain our pole position in casino affiliation. We have also outside of the quarter, completed the acquisition of Titan Inc., a company that specializes in SEO and content. Very excited about integrating that into our value chain to drive OpEx down, to improve time to market and also just to become stronger and better in one key element in our business, which is SEO and content. We see a strong start to Q3, with July revenue up 37% year-on-year. And we reiterate the guidance we have previous given to the market when it comes to revenue and when it comes to EBITDA for 2024. Then I think I will hand over to Richard.

[Richard Carter, executive]

Good morning, everyone, and thank you, Jonas, for the -- so like our last results, I'm going to take you through our Q2 highlights firstly. Following that, I'm going to take you through the financial performance. Then I'm going to review our integration and our sales pipeline before touching on our guidance we put out this morning, and then I'll conclude with a summary.

So when I first spoke to you last February, at our Q4 results, I was very clear that this year was going to be a year of transformation. A year of making real progress to try and improve the underlying foundations of the business. And that's exactly what we've been doing. We've been rebuilding this business, this organization, brick by brick. And I'm really, really pleased with the work that the team has done, specifically around -- and the work they continue to do around our strategic enablers of enhancing our technology and our product offering and improving our operational sort of execution and focus, and that's beginning to see a very significant increase in enlargement of our sales pipeline. And that is why this morning, we have the confidence to introduce 2025 revenue guidance of at least EUR 44 million of revenue and at least EUR 10 million of EBITDA.

Now let's look at some of the Q2 operational highlights. So recurring revenue growth continues to build as does our medium-term revenue visibility, and we expect recurring revenue growth to accelerate in both Q3 and Q4 and into 2025. We also continue to see our operational action gain traction. We launched four other brands in Q2. We've already launched 2 so far in this quarter, and we expect to launch another 2 later this quarter in September. We also launched [indiscernible], which is our new social take Casino platform, which has really dramatically expanded our total addressable market, and we expect to start generating revenue from this new product vertical in Q4. We also successfully tested our migration layer at scale and we migrated two partners, which is very, very important for the future growth of the business. And in one of the migrations we did over 1 million active players. Our pipeline continues to expand, as I touched on before, and then enlarged to 39 million at the end of Q2, and over 40% of that pipeline is either signed or secured at contract stage. We continue to secure very strong partnerships, 4 signed during the quarter, including the football pools, which is a big heritage brand in the U.K., and Primero, which is a leading U.S. land-based sweepstakes operator. And we also appointed our new CFO, Phil Richards.

Now let's turn to the financials. So revenue for the platform and Sportsbook declined 22% to EUR 7.3 million during the quarter, and that was primarily driven by the GiG Enterprise Solution and client exits. If we strip out the GiG Enterprise Solution and client exits, then the platform and Sportsbook revenue actually increased 9%. And -- now given the revenue decline during the quarter and our year-on-year increase in OpEx, which is attributable both to spin-off related costs, we made quite a big strategic investment in marketing, which is helping drive the sales pipeline also in product and senior hires. Our adjusted EBITDA declined year-on-year from EUR 3.1 million to a loss of EUR 1.6 million. And we also signed 1 significant contract renewal during the quarter.

Now let's have a look at the year-on-year revenue and EBITDA in a bit more detail. So starting with revenue. So as you can see here, the GiG Enterprise Solution impacted revenue in Q2 by EUR 1.7 million, and that's primarily due to accounting treatment when the majority of that transaction was recognized in 2023. And client exits also cost us EUR 0.9 million year-on-year revenue. And this relates largely to legacy issues in 2022 and 2023. And I'm delighted to say that the team have worked really, really well here to address issues. And so when we look forward, we don't expect very much impact in Q3, Q4 and into 2025.

Now on the positives. New client launches added EUR 0.2 million of year-on-year revenue growth, and we expect that to start -- that level of cohort to expand as we go forward and setup fees contributed EUR 0.3 million year-on-year to revenue.

Now let's look a bit more of the detail behind our EBITDA bridge. So the revenue decline was the key driver of our decrease in EBITDA during the quarter and that contributed to a EUR 2 million EBITDA impact. And then the other key contributor was people investment, which contributed to a EUR 1.4 million year-on-year EBITDA impact. Then the other 2 buckets, IT hosting corporate costs of minus 0.6. That was largely to reflect investments we're making to the business to drive future revenue growth. And we also saw a 0.2 million year-on-year EBITDA impact which comes from the additional sales and marketing initiatives we put in place, again, that is to drive future EBITDA.

Now let's look at the integration pipeline, and what you can see here is that we continue to see very strong performance. So we launched 4 brands during the quarter, and that compares to 2 brands in Q2 2023, and that takes us to 10 live brands by the end of Q2 and for H1 2024 versus 3 brands last year in 2023. We have 16 brands in the integration pipeline continuing to build future revenue and margin expansion. Now this is quite an important point. The 10 brands that went live in H1 are expected to generate over EUR 1.6 million of revenue during this year. Now if we take the Q4 '24 run rate of those 10 brands, we expect that to generate at least EUR 2.4 million next year. Now if we look at the 2024 revenue from all of the 10 brands we launched last year, that's expected to generate EUR 0.6 million of revenue this year. Therefore, implying that all of the clients we're launching so far this year are generating a fourfold increase in average revenue per client, and this is very significant. And this is how we get this business back into material revenue and EBITDA growth. And we're obviously working very hard to also increase the profitability and revenue of the clients that we launch going forward.

Now we've increased brand launch cadence, an integration pipeline of 16 and growing sales pipeline, we target not only replicating but also expanding on the H1 performance in H2 and into 2025.

Now let's just briefly touch on the sales pipeline. So as I said, it stands -- it stood at EUR 39 million at the end of the quarter, and that represented 25% growth quarter-on-quarter. And that's primarily being driven by the X-Suite products we launched in Q1 and also the enhanced sales strategies that we put in place and the additional spend on marketing.

And of that, EUR 39 million, EUR 16 million of that signed or advanced contract stage. We also, during the quarter, implemented Salesforce and also structured a new sales qualification process, which is already leading to a significant improvement in the quality of the sales pipeline. And also what is very, very pleasing and gives us the confidence going forward is that, so far in Q3, our sales pipeline has actually increased almost 25% to EUR 50 million. And that's primarily being driven by the recent launch of our social sweepstake casino product platform, SweepX and also -- as well as we're now targeting larger Tier 1 operators.

Now let's just briefly touch on the guidance we put out this morning. So in terms of 2024, we now expect GiG Platform revenue to be in the range of EUR 30 million to EUR 33 million. That's a midpoint of EUR 32 million. And then for adjusted EBITDA, we now expect the range of minus 3.5 to minus 2.5 at the midpoint of EUR 3 million. And we've modeled out here for your view, how we expect that to trend and phase during Q3 and Q4.

Now looking at 2025. So as I've already said, we expect to generate at least EUR 44 million of revenue in 2025. That implies a 38% year-on-year growth versus the midpoint of our 2024 guidance. Now as of today, 82% of our 2025 expected revenue is already contracted, and we expect that number to increase to around 90% by the year-end. We're also guiding to now at least EUR 10 million of EBITDA next year with a 23% EBITDA margin, and we expect cash flow breakeven by Q3 2025.

Now in summary. Revenue has stabilized and is expected to accelerate as we go forward in H2 and into 2025. Client delivery cadence continues to improve as does the average revenue per client, the quality and the value of the integration pipeline has strengthened significantly throughout the first 6 months of the year. SweepX has significantly increased our addressable market, and we're starting to see that with our sales pipeline, which has expanded significantly Q2 and now stands an annualized EUR 50 million. With that, thank you for listening, and I'll hand you back to our Chairman for closing comments.

[Unknown Executive]

Thank you for that exciting presentation. Yes, to summarize, I think we conclude -- sorry, wrong slide. To summarize, we conclude that, yes, the split process is proceeding according to plan. And we -- hopefully, with all the remaining approvals being made, we will execute end of September and then have the first day of trading for platform 1st of October 2024. We had record high quarterly revenue and EBITDA for Gentoo Media. And as we've said now, it was the 14th consecutive quarter of record high revenue and also worth stretching it was a company with a very attractive EBITDA margin despite the very turbulent conditions, which I think is especially impressive during this quarter.

Platform and Sportsbook established, as Richard said here, a very strong foundation to deliver results, in line with our also very ambitious goals. We have secured significant contracts and the pipeline is more promising than I've ever seen before. So to conclude, I would say that both of these businesses are very well positioned to provide great shareholder value as stand-alone businesses. And I'm extremely excited to see what we can do with these two businesses going forward.

Thank you for listening, and I now leave over for a Q&A session.

[Hjalmar Ahlberg, analyst]

Okay. Thanks for those presentations. I'll start with the trading update. So I'm going to do that this time again. 37% growth for in July. Can you say anything about the organic growth there?

[Jonas Warrer, executive]

No.

[Hjalmar Ahlberg, analyst]

Okay. So the follow-up question would then be, I mean, looking at GiG now compared to a year ago, do you have KaFe Rocks, which I think has a larger share of U.S. revenue, North America revenue. So do you think you should see potential for higher year-over-year growth in August, September maybe higher seasonal quarters for those regions?

[Jonas Warrer, executive]

I would say, broadly speaking, actually, both for KaFe Rocks and we have seen growth since taking over both of the assets and see continuous growth for the KaFe Rocks in the time to play business and would also anticipate that going forwards.

[Hjalmar Ahlberg, analyst]

All right. And then you highlighted on the slide here, the FTD intake where you showed both paid and publishing, and you mentioned that you're going maybe for higher value rather than volume, but the papers actually up sequentially as well. Was that kind of due to Euro 2024 or something driving the pipeline there?

[Jonas Warrer, executive]

Yes, of course, the Euros and Cuba-America had an impact. Actually, normally, with those events, I would have anticipated even higher player intake, but we simply took the decision to be more focused in our go-to-market approach and to think about long-term revenue growth instead of necessarily just making a lot of players that would look nice in a quarter, but would not deliver the results and the anticipation that you would see for the subsequent quarters. So we can make a lot of players that can either have very high value. We can also make a lot of players, probably even more that have very low value, and we want to make the players that have high value.

[Hjalmar Ahlberg, analyst]

Understand. And also a question on -- Cambridge for me and also a lot of -- from the web here, the sports launch? How has that gone this far?

[Jonas Warrer, executive]

Still early days. Very excited about it as gambles is a big domain and it's also a domain where, of course, we are, you can say, cautious in the sense that it is such a powerful domain that is doing so well. So we are taking our time to add sports and we are taking our time when we work our domain. So we know that what we do is delivering quality to the users, and quality in for instance, Google. So still early days, but we have started to move, and I'm very excited to see probably more in 2025, what we can do with sports and

[Hjalmar Ahlberg, analyst]

And is that kind of a global launch for sports? Or do you some markets?

[Jonas Warrer, executive]

No, that would be a global launch, like similar to everything else that we do there.

[Hjalmar Ahlberg, analyst]

Yes. And I mean you did the growth this quarter, driven largely by South America or -- I mean, Europe was strongest well, but in South America, North America, almost triple digit. Any specific drivers there that you want to mention? .

[Jonas Warrer, executive]

No. As I said, North America, that was actually a very good market for the. -- grew a little bit more than if I call it Latin America and then growth in Latin America is founded around several different countries. So very positive about the developments there. And also, if we look at Europe, we still grow Europe more than we actually grow year-over-year, broadly speaking. So this means also that you can say, the dependency on, if we call it more exotic markets are going further and further down. And of course, I'm very positive about that, having a broad market in Europe with a lot of different countries there, and then also being able to grow the business substantially in Americas.

[Hjalmar Ahlberg, analyst]

And you delivered a pretty solid margin here this quarter and you also acquired Titan in August now, which -- I mean, as I understand can expand margins even further. Do you think -- we'll see that immediately in Q3? Or it's something that could gradually expand the margin from here?

[Jonas Warrer, executive]

In short, I think you will see a gradual expansion. With Titan Inc., we always -- for a longer period, we've been discussing Normally, we would meet competitors when trying to compete for keywords on rankings, or campaigns on Google ads on Facebook, social media. We've always been discussing this, well, how do we also improve the value chain of the business and our operations and sort of ensure that the supply lines behind what you see on the marketplace are made better and better to sort of improve our competitiveness there. And we have a long very, you can say, the period with Titan Inc. We've been working with them, and it took quite some time discussions leading up to the acquisition that we did. I'm very excited about that one. And it will be a gradual transition where we hand over so you can see more and more of our operations to them. And then we'll see lower OpEx or lower marketing cost. You will also hopefully see higher quality and it will probably also be a burst of knowledge into the existing organization and then you will see better time to market. So I think the first move in trying to also look into how we improve the value chain that we have. And of course, I think something that we should think about going forward. So you can say acquisitions and everything we do is not only about competing for rankings or good campaigns, but also looking into how we improve everything beneath it.

[Hjalmar Ahlberg, analyst]

Right. Right. And another M&A carried out was Casinomeister, which you mentioned, a very well-known brand, as you say. Maybe first question, I mean, has this brand been for sale for a long time or something that popped up now? And have you been trying to buy it earlier or

[Jonas Warrer, executive]

I would say, for our part, it was something that a little bit popped up. We were not as such in the market for acquiring more assets. As I also, I think, talked about in Q1, we also want to make sure that the assets that we acquired, that we integrate them and grow them. the opportunity with Casinomeister was just too just too good to not jump on. I think from the person, I think, a very attractive price and an amazing domain, as you said, legendary domain in the world of gaming. A lot of similarities to gamers. So there's also a lot of synergies there that we hope to draw on. It will be -- again, it will be a gradual buildup. But of course, I hope that in a year from now, I can be able to talk about Casinomeister as one of our flagship sites that we have in our casino portfolio, where we then also hopefully, we'll maintain the pole position that we have right now.

[Hjalmar Ahlberg, analyst]

And regarding M&A in general, I mean you did as gamblers 2022, 2023 and now 2 smaller ones. What is your outlook as far do you rather look for bigger ones or smaller ones? Or is everything possible?

[Jonas Warrer, executive]

Of course, isolated the bigger they are, the more bang for the buck. You still need to do the same work, right? But at the end of the day, there has to be a strategic fit. There has to be a cultural fit and there has to be, of course, the right price with the right deal structure at the right time. So yes, size would be But at the end of the day, this is about doing something where all of the check boxes are marked off.

[Hjalmar Ahlberg, analyst]

And a question, I mean, going forward when you're stand-alone, there's a question from here. Capital allocation, I mean, how will you view that? I mean you will be cash generative, will maybe for you to answer that as well. What's your initial there?

[Unknown Executive]

That's what the future decide. But I mean there's obviously lots of opportunities to either M&A opportunities or to be the first ever dividend distributing affiliate company, or -- I mean, we look at all opportunities. But we're quite excited that kind of cash flow.

[Hjalmer Ahlberg, analyst]

Yes. Yes. All right. And also for a question on the Google update, I mean you mentioned was the one that was negative of your assets that you mentioned, but you said that you're working on improving that. Do you think -- I mean, it will be tough to bring it back to where it was? Or how should we view that asset going forward?

[Jonas Warrer, executive]

Of course, casino topline is 1 of our flagship site. So of course, there's no secret that it was a little bit ahead in the face when the Google update hit, with the consequences that it had for casino shops online. We, of course, immediately sort of made a task force to deal with this, have rolled out a lot of improvements already and are working on this also in Q3 and in Q4. The lucky thing when the Google update have was, as I said, when we have a wider portfolio, we also had other flagship sites that were actually rewarded quite handsomely AskGamblers being one example, one. So I think isolated the update would be slightly positive for us. But of course, it's never fun when you have a really good domain that drives an amazing amount of players with amazing player values that you see go down. We need to turn it around, and we are very focused and dedicated to make that turnaround.

[Hjalmer Ahlberg, analyst]

Okay. All right. I'm going to move over to the platform a bit there. Maybe starting a bit with the kind of the launch pace of new clients. I think you mentioned 6 in Q4 and 4 in Q2...

[Jonas Warrer, executive]

10 for the first half.

[Hjalmer Ahlberg, analyst]

First half. So do you see the pace increasing now from signing to launch? Or is that

[Jonas Warrer, executive]

Signing to launch, yes. So I think as we go through in Q4, you're going to see a significant increase, and then we'd expect that to continue into 2025.

[Hjalmar Ahlberg, analyst]

And one thing you highlighted, regarding of the -- I mean negative growth year-over-year. And of course, the enterprise solution contract but also client exits. And it sounds like you have managed that and we will not see the these kind of future. But if you look at the risk profile of the clients now compared to before, is it a really big difference? Or how should we view that?

[Richard Carter, executive]

Well, really, it's a combination of things. when I arrived last year, we didn't have the right level of reporting. We didn't really have the right incident reporting. We didn't have the right level of client account management. So I think it's all these different elements that we've managed to fix which obviously give us the confidence that we're not going to see the same level of client exits. You're always going to see some clients that exit. They get taken over, whatever, but not to the level that the business saw in 2023. So as I said, the team have addressed those issues, the legacy issues. And going forward, the impact on our business is de minimis. It's very, very small, Q3, Q4, and we don't expect to recur going forward.

[Hjalmar Ahlberg, analyst]

And the new upside that you have here is now with the sweepstake product launch, which there are a few questions on. I mean, first, I just think about this product, do you see it as kind of a -- I guess, in U.S., the kind of temporary market before you get casino in all states eventually? Or how should you that?

[Richard Carter, executive]

Well, I mean, it's quite interesting because, as I said, we signed up the largest land-based sweepstake operator. So this has been going on for years and years and years. And he wants to get in on the online. So I think it's very difficult to predict in terms of how this is going to interact with regulated online casino. But as we know, there are very few states at the moment. So we think in a sort of 5- to 7-year view, this still holds a big, big opportunity for us. And obviously, it's very early days for us. So I can't tell you how a sweepstakes works in a regulated New Jersey market versus other markets. But from the people we've been talking to, they are telling us that it works very well also in regulated markets. So we think it's a big opportunity. We're being quite opportunistic. We built this platform in sort of 3 months. There are not very many people who can -- who have got this product offering. And just in terms of the level of interest, I've never seen anything like it in terms of what's happened in the last sort of 2 months. So -- and that's one of the reasons why our pipeline, which was EUR 39 million at the end of Q2 is now EUR 50 million. And these are big sort of quoted U.S. companies, big international European companies that are looking at this and wanting to deploy a lot of capital. And I think it's also worth pointing out, this is not just U.S. there Are going to be big sweepstake markets in other countries, which you'll see us go into as well over the next sort of 12 months?

[Hjalmer Ahlberg, analyst]

And I think you mentioned in the press release that this market was kind of $3 billion market. The operators that are out now doing this, what kind of solutions are they using? Are their own solutions or...

[Richard Carter, executive]

So a few of them have got their own solution, they're big guys. And obviously, I mean, since we put out the announcement on the land-based Primero deal, I mean, I've been getting contacted with people I haven't spoken to for sort of 10 years, we're all looking at this. So there is a lot of interest and a lot of people looking at this, but it appears -- and there's going to be obviously more competition because it's a big market. But at the moment, given our product and our platform, we're in a very, very strong position.

[Hjalmar Ahlberg, analyst]

And in terms of the regulatory landscape in that, what's the risk on any impact from, I don't know if this will be regulated or so to say?

[Richard Carter, executive]

Well, the risk is quite binary, I guess, if it's regulated, then -- and we're in there and you obviously got taxes to deal with that's probably. And then if it's unregulated, then we have to deal with that. But as I said, there is a very established legal sort of sweepstakes business in the U.S. So we'll see what happens. But this is us being quite opportunistic. There's a huge opportunity, and it is sort of -- you could argue sort of a grayish market. And it will be just portion of our business going forward, and that's how we'll manage it.

[Hjalmar Ahlberg, analyst]

All right. And I saw in the presentation that your Sportsbook take from your clients was 38% now. I think it was 33% in Q1.

[Richard Carter, executive]

That's -- okay, the proportion that take Sportsbook, yes.

[Hjalmar Ahlberg, analyst]

Yes. So I'm just the trajectory there seems quite steep, but was that -- is that something we can see going forward or the low-hanging fruit?

[Richard Carter, executive]

No, no. Like so the football pools, and we've got more deals that we'll announce going forward, a high percentage of them, probably more than 50% are all taking the Sportsbook. So as we go through 2025, obviously, depending on how many sweepstake clients we launched. Then if we just take a stand-alone like-for-like, then I'd expect that percentage to increase. I mean we've been focusing very significantly on sports. Sports is a huge opportunity for this company. And I think we've been rebuilding the Sportsbook. And by the end of this year, we think we'll be in a strong position to compete. I keep talking about we need to compete more aggressively. And I think we'll be there. And so we'll start to see market share gains and that proportion definitely cover.

[Hjalmar Ahlberg, analyst]

All right. And then coming to your guidance here, which were pretty detailed, so thanks for that. But still trying to understand the moving parts. I mean -- you say the top line above EUR 44 million, EBITDA above EUR 10 million. And just looking at -- starting with OpEx, for example, it looks like your seeing quite stable OpEx next year, if you take this year's guidance and convert next one? So no big hirings or investments needed for...

[Jonas Warrer, executive]

No, I think probably maybe a bit of the opposite. But I think in terms of where the business is today, we're very well capitalized with the next couple of years to grow this business. We have the right resource. We can work more efficiently. And now it's just -- as I'm sure you're aware, there's obviously significant inherent positive and negative operational gearing in the platform business. So the goal is to keep costs largely unchanged as we go into next year. And as that revenue starts to increase, that will start converting to EBITDA and cash flow, and that's the current plan.

[Hjalmar Ahlberg, analyst]

Yes. And then if you look at the kind of -- I think you said like 80% is secured, so to say. To get that last 20%, is that dependent on launches, new signings or what was the

[Richard Carter, executive]

That's dependent on new signings. So that's obviously as our pipeline gets bigger every quarter, the risk should reduce, obviously, unless something goes wrong with our conversion. So that's why we have the confidence to introduce those numbers. The pipeline is now as I said, increased significantly. And as we go through now September, October, November and December, we'd expect to start signing clients and we've got good visibility of signing clients, which will then help contribute to that 2025 revenue. And that's why I say, by the year-end, we look to have about 90%. And then obviously, I have a very expensive sales team, and that job will be next year to obviously bring in more clients in 2025, and that will then circle it back up to how we get to our numbers.

[Hjalmar Ahlberg, analyst]

Okay. So 90% probably secured by year-end. And then...

[Richard Carter, executive]

Q1, Q2, Q3, it builds up. And then hopefully, by Q4, it will be a very small amount.

[Hjalmar Ahlberg, analyst]

All right. And also a few questions on -- I mean, when the split up is finished, I mean, for one thing you say cash flow positive Q3 2025, I mean what kind of cash position will you have when you...

[Richard Carter, executive]

Well, I mean, I think you can touch on this, Micheal. But I think we've said obviously that the platform business is going to be well capitalized. It's a requirement anyway, obviously, of being listed. And so -- we're all the same shareholders. So we're obviously going to make sure that the business is well capitalized. I don't know if we said how much cash or what we're going to do.

[Jonas Warrer, executive]

No, but it will be -- we obviously looked at this in great detail, and we would never do the split if we aren't 100% confident that this is well capitalized and it will be. Yes, we'll take it all the way. So the capitalization won't be an issue.

[Hjalmar Ahlberg, analyst]

Yes. And in terms of cash flow, in general, what kind of CapEx level do you see going forward? I mean, will that be stable as well? And...

[Richard Carter, executive]

CapEx, yes, yes. I mean I would like to -- I mean, we've done a lot of heavy lifting in this business over the last 1 or 2 years from a CapEx perspective. There obviously will be a ad hoc projects we're looking at doing. But I think in terms of CapEx, I'd expect to -- for that to be either unchanged or declining definitely in 2025.

[Hjalmar Ahlberg, analyst]

You haven't given any guidance beyond 2025, but if I kind of interpret you, I would say that -- I mean, the margin expansion is pretty good in this operating leverage if you deliver continued sales growth in 2026.

[Jonas Warrer, executive]

Yes. I mean, you can do the maths. I've given you the percentages, you can do the numbers, and then you can just take a run rate from our Q4 number next year. You can put some growth on the margin, and you can -- don't want to do your job for you, but you can probably get some idea of what the EBITDA might look like in 2016.

[Hjalmar Ahlberg, analyst]

All right. I see if there is any more questions here from the audience that we haven't asked yet. Yes, maybe one on the delisting here. Will Gentoo Media, will that still be and Stockholm listed after the split off?

[Jonas Warrer, executive]

Yes. I mean Gentoo Media will continue as is for now, and then platform will just be a Nasdaq

[Hjalmar Ahlberg, analyst]

Yes. Yes. All right. [indiscernible]. Yes, for the sweepstake as well, I mean the media business, I guess, as upsides well, maybe already are generating FTDs on that. But could you talk a bit about the sweepstakes potential for media.

[Jonas Warrer, executive]

There, of course, similar, I guess, to a platform of course, an opportunity for us and opportunity we're already now exploiting and already do quite some good business there. But I think that I think we can grow even further and something we are working on.

[Hjalmar Ahlberg, analyst]

All right. That was all question from here. So thank you very much. Thank you. .