Gaming Innovation Group Inc

OSE:GIG

Earnings Call Transcript 2021-Q4

[Hjalmar Ahlberg, Research Analyst]

Hi, and welcome to Gaming Innovation's Q4 Presentation. Today, we have CEO, Richard Brown; and CFO, Tore Formo, with us. And I'm Hjalmar Ahlberg, equity research analyst at Redeye, and I will be moderating the Q&A session. And if you have questions, please send them through the web page. With that, I will leave over the word to Richard to present the Q4.

[Richard Brown, Chief Executive Officer]

Thank you very much, Hjalmar. Good morning to you all, and welcome to Gaming Innovation Group's Q4 and Year-End Results for 2021. Pleasure to have with me today Tore Formo as well, our Group CFO, who will be available during the end of the presentation at the Q&A session. Very briefly, for those of you, introducing you to Gaming Innovation Group, a little bit about the company. The business is listed on both the Oslo Børs and Nasdaq Stockholm Exchanges. The business is around 470 -- approximately 470 employees spread through office locations in Malta, Denmark and Spain. The gambling industry is a global one, and we treat it as such. We have clients ranging from North America and New Jersey all the way through to New Zealand, Latin America and throughout Europe. As such, our Platform business has licenses in more than 14 different jurisdictions with an additional 5 in development pipeline. And our Media business has primary assets in more than 25 different countries. The business itself is built on end-to-end and built up to have an end-to-end iGaming solutions, all supported by innovative technology. The Platform business, often referred to as a player account management system, aggregates a number of different services required. It provides and performs all of the regulatory requirements, but also aggregates game suppliers, payment providers and the various different other third-party suppliers needed. It also creates, via its real-term data platform, an exceptionally strong tool through use of CRM, bonus engines and the various other gamification layers in order to be able to provide operators with a first-class and high-quality -- extremely high-quality product towards the end consumer. Within the Media business, we have 2 main areas. In here, we have a Paid and a Publishing department. Within the Publishing department, we're building high-quality website assets to attract users to the websites organically. And in the Paid Media division, we utilize high-quality assets again, but via an -- but attract users via various different paid marketing, digital marketing techniques such as pay-per-click on Google or various other search engines, but also via social media advertising and display advertising networks. We also have an end-to-end sportsbook solution covering both odds trading and risk management and all the way through to native app development for the sportsbook now via the acquisition of Sportnco, which I will also go into in a little bit more detail later on today. In addition to that, we also offer Managed Service, which is often very attractive to a number of retail to online customers that we have a particular focus on in many areas and jurisdictions. Our Managed Services incorporates various different things from front-end development all the way through to customer support, payment operations, player safety and compliance and marketing and media as a managed service. I'm very pleased with how we've developed the business in 2021. That being said, I still believe that we are still only at the beginning of the journey of what this business can achieve and how we can move forward to creating full value potential within it. Revenues for the year were at EUR 66.8 million, up 28% year-over-year. The EBITDA was up 93% year-over-year to EUR 20.7 million. And EBIT improved from minus EUR 0.87 million (sic) [ minus EUR 8.7 million ] to a positive EUR 7 million, an increase of 181% year-over-year. The group's performance was finished off strongly in the Q4 with group revenues for the quarter up 29% year-over-year at EUR 18.2 million and EBITDA at EUR 5.6 million, again, up 35% year-over-year. The EBIT of the business also improved by EUR 1.9 million year-over-year, and I'm very pleased as we continue to develop the business and for the long-term growth potential that we see ahead of us.So a couple of key takeaways from Q4. We continued, as I've demonstrated in the last couple of slides, with a positive development and a significant year-over-year growth. Our Media business, in particular, performed exceptionally well with all-time highs in revenues, EBITDA and as First Time Depositors referred to their customers.We signed 2 new agreements for the platform provision in the -- one in the land-based retail business in Sri Lanka and Africa; and the second one, a German operator who will migrate their business over to GiG's platform during this year. Two more brands went live during Q4, and we have completed an additional 2 projects that went live in the first 6 weeks of this year. We have generated a positive cash flow from the operations, and importantly and strategically, we signed a share purchase agreement to acquire Sportnco. Following on, on the strategic theme, I will talk a little bit now just around how we approach growth within the different segments. And starting off with the Media business, we tried to categorize the various different initiatives within 3 different particular areas. If we start off, we look at the growth via reoccurring revenue share. We work in predominantly -- or actually 95% of all the First Time Depositors we refer have a revenue share component. That contributes to more than 60% or approximately 60% of the revenue that we generate being on a revenue share on a reoccurring basis. We believe that this not only because we're referring the traffic today that then builds value over time as the customer and the B2C operators derive value over time from their consumers, which drives the revenue growth structure, we're also continually increasing the diversity of the earnings and the sustainability of the earnings, therefore, contributing to a positive earnings quality within the Media segment itself. The second key focus area for the business is the product development in order to drive the market share that we have. We have a strong focus and a lot of work has been done over the last 18 months in terms of developing their asset, marketing technology that sits behind it and the product quality in itself. These improvements in the website assets are focused around the increasing of optimization of users, which also then benefit in the wider advertising conversion aspects of the business. This product enhancement acts as a growth driver and has been a material impact -- has had a material impact in the growth within the Media sector and something I'm particularly pleased of. And I can see that the business is also continuing with its focus to drive that area of growth and focus point. The third part is the geographic and product expansions. In the year of 2021, we actually launched into 14 new markets. We approached into both short- and long-term growth drivers for the market expansion. We utilized the publishing sector, which tends to be a longer build phase, but has very high EBITDA margins at the end. We combine that with short term -- shorter or faster entry points via paid marketing. That enables us to attack markets in both different speeds and at different levels, but corresponding to the opportunity at the time. Again, new geographic revenue -- geographic expansion not only increases the revenue and acts as a growth driver, but also increases the diversity of the client mix that we have and the geographical exposure that we have, therefore, again, contributing to a higher earnings quality as we build through on the business. Within the Platform segment as well, we talk about 3 main growth areas there as well and areas of focus or how we break them down. The first, again, is pretty straightforward. It's the contract sales and client on-boardings. The volume of contracts that we have and the volume of clients that will go live on the platform contribute to the future growth of the business. We have, over the last 18 months, successfully transitioned to a SaaS-only client structure and a shutdown of the white-label model, which was an important strategic decision for us in order to improve the prospects of the business going forward. We signed 9 new contracts in 2021 and development completed 8 projects, which is up 60% year-over-year. We still continue to focus on working on improving the velocity in which we can deliver client projects, and it remains a key point for the business going forward. We also look at geographic expansion. And it's particularly important in the Platform business where barriers to entry are ever increasing and local regulation is spreading or reregulation of various different markets is continuing at a very strong pace. We entered 6 new markets during the year, and 5 new markets were in the development pipeline for the coming kind of 12 to 18 months. This is building up a strong global sales pipeline, and we have potential clients in the pipeline from all the way from North America through Latin America, Central, Eastern Europe and further. We also focus a lot on the product development, but then also increases the client's GGR. So in the case -- in most cases, we work on revenue share within the platform. So therefore, they're growing and escalating revenue share, both as the client ramps over time and as they build their own market share, which benefits Gaming Innovation Group. But we also look at product enhancement that can also, therefore, trickle and improve their offering to consumer that therefore improves our own return. As you can see from the graph on the right, that demonstrates how the build of those kind of combined factors work through on the SaaS clients. 75% of revenue comes from locally regulated or soon-to-be locally regulated markets where we see a clear path to regulation, and 34% of GGR increased year-over-year for our SaaS clients. I would like to touch also about our strategic approach to sustainability. One of the key important factors, again, we break it down into other areas. In our local environments, in particular where we have office locations, we always try to work with various different initiatives to provide a positive impact on the environment and our environmental standards, but also the people who work around and work for GiG and are impacted by GiG. Importantly for us also, working within the gambling industry is the ability to work towards as fair and fun environment within iGaming. We focus a great deal in development of tools that can enable our, although we're not license holders, enable our customers to take care of players. We have an entirely dedicated player safety team that helps them and identify and interact and prevent. We also have AI models developed with the technology, working in real time to identify any problem gambling behavior in order for our clients to be able to act as such. We've also utilized those tool sets to develop AML and various other features that would also increase the value and how we approach this particular area of iGaming. Following through on the strategic theme, as in the last part of the quarter, as mentioned earlier, we acquired or have signed a share purchase agreement with Sportnco. Sportnco is a very high-quality B2B supplier operating in a number of highly regulated jurisdictions with a number of Tier 1 sportsbooks in those locally regulated markets. They're currently operating in more than 11 regulated jurisdictions and 5 more in progress, incredibly complementary fit in terms of the geographical locations between the various different markets. So we're very pleased with how that fits together. The initial consideration of the business is at EUR 50.8 million, whereof EUR 23.5 million is paid in shares and the other EUR 27.3 million in cash. We will utilize a share issue towards SkyCity Entertainment Group of EUR 25 million to finance the acquisition. Just to touch more detail around the strategic rationale. We have -- if we break it down into some further areas, in the Platform business, we are increasing the scale, we are increasing our addressable market and creating opportunities for geographical cross-sell between the 2 companies' client base. We have a complementary product expertise where GiG's experience and product development is focused entirely on casino almost. And then we have sportsbook knowledge and expertise and products coming through with Sportnco. The Sportsbook, as I mentioned before, has proven Tier 1 customers in a number of regulated jurisdictions and competitive jurisdictions. We are securing recurring revenues in those markets and creating significant cost-saving opportunities for the business as we decommission Gaming Innovation Group's own Sportsbook and migrate our client base over. Importantly for us as well, as the markets are moving and structures are moving within the different regulated jurisdictions, being able to compete now for contracts which are sportsbook-only markets, but also sportsbook-led customers. And I will touch on that in some more detail in the next couple of slides. In our Media business, we can see opportunities for new market entries and new understanding of new markets and a number of customers that we don't currently work with being able to leverage our Media business, in particular, in Latin America where the GiG Media has performed well over the last 12 months and supporting to have a significant footprint. We also see the opportunity for cross-selling managed services, a structure that isn't provided to Sportnco's clients as of today. We also see, on a group perspective, a significant increased value proposition. We're increasing the profitability of the business. We see more and more growth prospects being derived from this particular transaction and continue to diversify revenues and the geographical reach of the business. A little bit more detail now about Sportnco and the client base, international portfolio of clients, more than 30 as of today. There's a very strong footprint in high-growth markets such as Latin America, also Southern Europe, such as France, Spain, Greece and Portugal. The business is also live with a developed U.S. product with a company called SuperDraft providing free-to-play social sportsbook. It's a draft owned by Caesars, and they're building up that product. And I'm very pleased to say that we can see some very strong indications in terms of the product and sportsbook for that particular market. We can also see an increasing market access in highly regulated growth jurisdictions. Now of course, as the markets are continually reregulating, this is an expanding market area with higher barriers to entry consistently. And by creating both -- well, by both companies having an extreme focus on this, this will enable us to be able to capture more and more market share within that, within the regulated environment. GiG currently has 14 different certifications with 5 in the pipeline; Sportnco, 11, so similar numbers, and 5 additional. So we can look not-too-distant future being having 35 -- of being able to offer platform sportsbook products in over 35 different regulated jurisdictions. So we believe this being a significant upside to the transaction and the addressable market for Gaming Innovation Group. There was relatively few overlaps as well. As I mentioned before, it's highly complementary. Whereas we have focused, at Gaming Innovation Group, on North America, Central and Northern Europe and for other Anglo-Saxon markets, the focus here from Sportnco, as you can see, Latin America and Southern Europe, so highly complementary. And we are doubling, in essence, the short- and long-term addressable market, both geographically, but also via having a competitive product in the sportsbook vertical. There are a number of markets which are also sportsbook-led. For instance, the obvious one would be the North American market where we can see a number -- only a handful of states have regulated online casino, but a significant number of regulated online sportsbook. It's not only the case in North America this pattern occurs. You can look to Europe, where places like France and Poland, where the sports betting is the only regulated product. Therefore, by having Sportnco and a competitive offering there, we are then able to attack those sportsbook-only markets and also sportsbook-led customers, whereas GiG historically has been focused on casino-led customers. Now we can augment sportsbook-led customers with the Sportnco solution in conjunction with GiG's casino and platform offering. To touch on the business update, I'll start off with Media for the full year. Extremely strong performance there, an immense testament to the team there that's put in the work and the technology that they've built and the products that they continue to deliver. Full revenue -- full year revenues of EUR 45 million, up 31% from 2020, all organic growth. The EBITDA landed at EUR 20.7 million, an 18% increase. And the business delivered almost 200,000 First Time Depositors in 2021, up 57% from 2020. We can also see the positive impact of that product development I talked about earlier, really pushing through in the search rankings and the visibility and the organic traffic being generated to the websites. We launched 14 new markets and assets during the year. We currently can operate in more than 19 different U.S. states. We laid a good foundation for the U.S. entry over the last 12 to 18 months. And we believe now we can start to accelerate the investment in order to pursue that market with more force. Our marketing compliance software as well, GiG Comply signed 10 new clients during 2021 and resigned a significant number of its existing customers for longer-term deals. The year was actually capped off by a fantastic quarter for Media where we reached all-time high in quarterly revenues, EBITDA and First Time Depositors with revenues of EUR 12.8 million, up 42% year-over-year. EBITDA ended at EUR 5.7 million, 34% year-over-year increase. And the positive developments, as I said, driven by, in current core markets, by product enhancement and entry into new markets as well as that building through on the revenue share value. Diversification of the business has continued and continues to be a focal point of structure and work, and revenue share accounted for 59% of revenues during the quarter. To touch on one of the main key KPIs that we deliver is First Time Depositors. First Time Depositors ended in Q4 at 60 -- plus 60,000, another new all-time high, and 82% up year-over-year. Publishing First Time Depositors increased by 21% year-over-year, and Paid saw a 244% increase as we have escalated marketing as well as entered into a number of new marketings -- new markets. We continue to focus around that, pursuing where we see value and marketing spend, which would deliver strong ROI and a resource in order to pursue the long-term growth opportunities that sit in front of this particular business unit. That strong development has continued all the way through into January here when player intake was up -- or referrals was up 50% compared to the same period last year. Touching on the Platform business now, extremely pleased with how we've managed to grow the business. We've replaced all of that white-label revenue and driven it up further even so. Full year revenues were EUR 21.4 million, up 13% year-over-year despite obviously some of the headwinds we've experienced in Germany. And EBITDA was up to EUR 1.4 million, and the margin was 6%. If we exclude those white-label contracts and revenues from previous comparable periods, we can see that the SaaS business and SaaS and other revenue has grown by 42% year-over-year, again, pointing towards that long-term momentum and long-term growth that this business can achieve. We signed 9 new contracts in 2021 and believe we have a strong momentum within the sales pipeline as it currently stands. In Q4, our revenues were at EUR 5.3 million, an 8% increase year-over-year, slightly impacted sequentially by the closure of the Dutch market and one of our clients, Hard Rock, moving away from the platform. We had a positive EBITDA for the quarter of EUR 0.2 million. And adjusting for that white-label structure, revenues were up 22% year-over-year. 75%, as I mentioned earlier, is also coming from locally regulated or soon-to-be locally regulated markets. And we can see, as we continue to focus on it, that we delivered 8 new client project completions, 2 clients have already gone live in the first 6 weeks of this year. We have 25 brands, therefore, live on the platform. The actual onboarding rate increased by 60% comparatively to 2020 and, again, an area of focus that we will continue to improve and deliver on. We continue with this growth strategy, the ones I went through before. We really believe that this is going to provide a significant upside in the mid to long term of the business. We really see that as those contracts build, how their value increases, and that points again, as I mentioned, to the underlying growth mechanics within the SaaS revenue growth. Just to touch on some events after the quarter. At the end of last week, we signed an extension with a -- to a long-term agreement with Betsson Group, taking the term of the contract in the SaaS business there to the end of 2025. The sales pipeline remains strong. We have good momentum within it, and 2 new brands, as I mentioned, already live during this year. Revenues in January were up 20% versus the same period last year and 24% if we adjust for that white-label discontinuation. And First Time Depositors, again, outperformance in Media continues to be very strong, 50% up year-over-year, and positive development continues. While we may look to adjust the long-term financial targets post the closing of Sportnco, we still believe that we will be going after in continually delivering double-digit organic revenue growth. We aim to continue to push towards having an EBITDA margin in excess of 40%. And we would utilize on the long-term cash generated from the business to lower our leverage ratio while we continue to focus on pursuing the growth opportunities within the iGaming sector. So in summary, GiG again has delivered its all-time high revenues, strong double-digit growth in revenues, EBITDA and EBIT. Media business is performing exceptionally well, reaching all-time highs across a number of its operational KPIs and financial KPIs and launching into new markets to build on top of the existing asset portfolio. GiG's platform has shown a robust and diverse SaaS revenues and client growth with ever-increasing addressable market, number of clients and a focus on global expansion. Combined with the Sportnco business, the company strives to become one of the largest and fastest-growing players in regulated iGaming industry with an unparalleled geographical footprint. The transaction is doubling both the short- and long-term addressable markets. Through the acquisition, GiG will also have a market-leading sportsbook proven in multiple competitive jurisdictions. And we are now very much ready to accelerate towards our vision of becoming an industry-leading platform, sportsbook and media provider. With that, I will pass back over to Hjalmar at Redeye. Thank you you very much for listening today.

[Hjalmar Ahlberg, Research Analyst]

Okay. Thank you very much for the presentation. We have a lot of questions, many coming in from the web.

[Hjalmar Ahlberg, Research Analyst]

But maybe start with the trading update. Can you say anything about the mix of growth between Media and Platform of the 20% growth in January?

[Richard Brown, Chief Executive Officer]

We're not disclosing that at the time being. We said that we've seen a very strong performance continue in the Media business, in particular, which we're delivering all-time highs again in First Time Depositor generation. So yes, we're very pleased with how that sector has developed. We have -- obviously, we mentioned in the previous slide that Hard Rock migrated off the platform at the end of Q4, which is obviously impacting some of the comps on a sequential basis. But yes, we continue to push forward and pleased to be able to deliver the 20% year-over-year in January.

[Hjalmar Ahlberg, Research Analyst]

Got it. And you mentioned Media Service, you have a positive outlook. You talk a bit about the U.S. here, mentioning that you have been -- built up your position and then now you're beginning to invest further here. Should we expect to see some revenue growth from that market from here?

[Richard Brown, Chief Executive Officer]

The revenue has actually been growing, but it's still from quite a low level. So I would say that we would anticipate obviously revenue to increase, otherwise we wouldn't be doing it. So -- but we really see that it's kind of a slow burn for us. We still have some learning to do. We want to make sure, while the website traffic is escalating quite materially comparatively to the previous periods and we see a lot of potential and we start to gain ground, we still try and take a little bit of a cautious approach towards that. We said -- as I said, we've built a very strong foundation, we believe, and now we can now look to take that next step and start to pursue it with some more force, more investment, just making sure that we do everything in the right order, the right sequence and the right manner.

[Hjalmar Ahlberg, Research Analyst]

Right. Yes. And looking at the Media segment, you increased a bit marketing this quarter, pushing the paid FTDs a bit higher than normal. Maybe that impacted profitability a little bit lower. But how should we view this longer term so that this build-up kind of a growth in revenue look going forward and for the profitability to come back to historical levels going forward? Or will you aim to kind of push growth more by using Paid, which might have slightly lower profitability in the short term?

[Richard Brown, Chief Executive Officer]

Yes. I mean I think one of the things important for us as well with Paid is that because we work on revenue share there as well in a significant portion, that means that we're obviously taking a lot of the upfront marketing costs now without the return, and the return continues to build over time. That actually enables a better ROI for us over the mid and long term because we can -- we're not forced into pursuing FTD counts in order to generate growth. But we see that there's a significant opportunity. We do spend a lot of time, and the team has some very strong marketing technology that analyzes the players' behavior or conversion spend and, therefore, the projected ROI of the particular clients. And we see opportunities sometimes to escalate that marketing spend in order to be able to pursue that further growth. And we will continue to -- if we see that the value isn't going to be there, then we would obviously reduce the marketing spend in the same way. But we believe that the systems that we built are able to identify which brings value, which doesn't, where we should escalate spend and where we shouldn't. I mean if you look sequentially, I think off the top of my head, it's like the EBITDA margin is 45% instead of 46%. So we're not talking about a huge material difference there, but it's still pushing a lot of growth. And we believe that we continue to do that. There is a lot of growth opportunity within the Media segment, and we want to make sure that we can pursue that as well.

[Hjalmar Ahlberg, Research Analyst]

I have some questions coming in on your kind of new markets. Which markets are you most excited about? And are you looking to grow in Asia? It's some questions there.

[Richard Brown, Chief Executive Officer]

Yes. So we've been -- there's a number of markets that I think are particularly exciting. I think the Canadian market is something that everyone is pretty excited about. There's some large markets there. And opportunities in the regulatory frameworks, so far, at least in Ontario, seem pretty open, which is obviously quite an attractive structure. I think there are a number of also markets in Southern Europe and Latin America, obviously, via the Sportnco acquisition, in particular, that we were pretty excited about in that regard. So yes, a number of markets, again, we don't necessarily focus on one particular area. We've always treated the gambling industry as a global one as it is, and there's a multitude of opportunities. But there are pockets, therefore, so as I mentioned, Canada, Latin America and some other opportunities in areas of Europe as well that we believe in. Then with regards to Asia, we don't really have anything -- well, we have nothing in Asia as of today, and it's not been a focal point for our particular area of business. I think there are some companies that are very focused on that and can provide, and it's not been an area of our focus up until today. And again, we have a material kind of focal point around locally regulated markets. So it tends to not be on our radar at the moment in the current structures within Asia.

[Hjalmar Ahlberg, Research Analyst]

And we also got some questions on the Betsson on the contract extension. First, maybe can you say something about the terms of the contract? Is there any big change in how the revenue share or how the contract is structured? And also if you can say anything about which new market you are -- or Betsson wants to enter?

[Richard Brown, Chief Executive Officer]

Yes. The contract terms, I mean, let's put it into 2 parts. Obviously, we have the premium fee that expires related to the -- through their acquisition that expires in Q2. But the actual terms of the agreement, underneath that, the normalized platform agreement remain more or less the same. So no material changes that I would say. Then we have the second part of the question, I don't believe that Betsson has disclosed, and therefore, I'm not going to inform ahead of them which markets they're going after in that regard.

[Hjalmar Ahlberg, Research Analyst]

And the follow-up on the premium fee, can you say if that will have a material impact, you think, on [ Q2 ] on the Platform Service revenue?

[Richard Brown, Chief Executive Officer]

There is -- it is something that we've disclosed in terms of how much we anticipated it to generate over the term of the contract. So I think that's what we've kind of communicated in the past. And we may come up with more details around that later. But yes, we still believe that, that underlying business and the number of SaaS clients that have gone live, that we'll be able to generate and push forward on that.

[Hjalmar Ahlberg, Research Analyst]

Right. And do you expect to sign any platform deals in Q1 2022? And what's the target for platform deals in 2022?

[Richard Brown, Chief Executive Officer]

We are working towards, as I said in the presentation, we have -- I believe we have a very strong pipeline as of today. We are targeting a number of probably large client structures, and they can take some time, and we need to be conscious of that. But we believe that we have a very strong pipeline and that, that will pay off both short term and long term. In terms of the number of clients that we would anticipate to sign for the year, I think we would look at -- if we take a base of around approximately 10 last year and similar numbers the year before, we could say that, that would be a kind of baseline for us to work from. We also, as I said, with Sportnco coming through, we'd anticipate further opportunities to come out of that in particular as well.

[Hjalmar Ahlberg, Research Analyst]

And regarding the Sportnco acquisition, I mean you see both synergies on the cost side and also investment side. How should we view the cost synergies? Do you think that you will, I mean, use this to invest for growth? Or do you think we should see improved profitability in that segment after the closing of the deal?

[Richard Brown, Chief Executive Officer]

There are different elements within the cost structures that will be identified at different sequences within the post-merger integration plan. So if we were to look at -- obviously, the primary one for GiG is the Sportsbook decommissioning. That is the most material savings. Of course, we have clients live today that we used to take care of, migrate, make sure that, that happens in a smooth and effective way because that will be a driver in the future. But of course, we will pursue that. Then we will obviously see a number -- as we do the -- go through the post-merger integration plan, we will be able to identify various other cost savings. There are obvious ones around some benefits of economies of scale, around licensing, hosting structures and various other items as well and being able to utilize each others' product structures. We also believe we'll be able to provide some cost synergies going forward as well.

[Hjalmar Ahlberg, Research Analyst]

And regarding Sportnco, you mentioned -- or you -- there was a target for the revenue and EBITDA for 2022. Can you say anything, give an update on that? Did it end as expected? And any update on maybe how 2022 has started for Sportnco, if you have that information?

[Richard Brown, Chief Executive Officer]

Yes, we're not in closing. We haven't closed the transaction yet, so it's a little bit difficult for me to comment on the specifics. But they were on track with their forecast that they delivered in the end of last year. And we -- January started quite well for them, let's put it that way. I think they were pleased with the development within the projects or within their projections.

[Hjalmar Ahlberg, Research Analyst]

Right. And looking at your business segments post the close of the acquisition, you say you will phase out your existing Sportsbook. How long will that take? And will you, after that, only have Media and Platform as 2 segments?

[Richard Brown, Chief Executive Officer]

Yes. So how long will it take is a little bit like, again, we're working through on the post-merger integration plan, kind of now, ahead of closing. But obviously, that starts for us when the closing occurs. The only kind of thing that may slow down the migration of our Sportsbook is there's a World Cup at the end of the year. And we have to make sure that our clients are happy to migrate to the new Sportsbook ahead of the World Cup. And we obviously have them as Platform clients as well, so we have long-term relationships with them. So we need to make sure that everybody is structured and happy. But we will work with force and speed where we can in order to achieve the synergies, most predominantly in the most efficient and effective manner. Whether that comes with a 1- or 2-month delay, we want to make sure that we get it right with more than anything else. The -- what was the second part of the question again, sorry?

[Hjalmar Ahlberg, Research Analyst]

The segments, how you will report moving forward?

[Richard Brown, Chief Executive Officer]

Okay, segment reporting. We would anticipate to just break it into kind of Media and Software-as-a-Service structures. So kind of Platform and Sportsbook pushed together, I would anticipate.

[Hjalmar Ahlberg, Research Analyst]

Right. And do you see any risks that the deal will not close or will take longer time than expected?

[Richard Brown, Chief Executive Officer]

As I'd say, things are progressing to plan. We're just waiting on some authority like approvals, et cetera. So the time line in that sense is a little bit outside of our control. But we're still on track, we believe, as of today, to close in Q1.

[Hjalmar Ahlberg, Research Analyst]

And looking at the sportsbook market, in general, we saw Kambi and Kindred kind of maybe separating in the future. And Kambi maybe it looks like it's proposing for it to be acquired by some other entity. What's your view on in-sourcing, outsourcing of sportsbook going forward? And what's the kind of client mix do you expect for outsourced versus in-sourced sportsbook in the future?

[Richard Brown, Chief Executive Officer]

I think maybe an important differentiator for how we approach it as well is because we're focused very much on that localization of product and structures. I think that enables us to reduce the kind of risk that we have people taking stuff in-house, et cetera. That being said, of course, we continue to also want to desire -- or we have a desire in order to be able to demonstrate that the product quality that we have actually enables people's growth rather than whatever it may be inhibits the potential. We also have a structure where a lot of the platform and business in itself can be modified on top by the clients. So we have a number of clients who take the platform, build their own CMS and front end on top. That enables them to have a differentiator on the product quality. So by having a -- how we're trying to approach it is by being a little bit more modular and allowing clients to be able to build through on top of what we can provide to them, and that flexibility kind of enables them to be able to develop their own product and not be so reliant on our road map as well. So we kind of go at it from different approaches. And I think there are some cases where I understand the desire for people to take stuff in-house. But I think for us, we've demonstrated we have a number of clients today who have their own proprietary platforms. And they still utilize us and have done for many number of years, and we've seen all the others extending the contracts. One part of that is obviously the local regulation. Our platform is very robust in that sense in terms of the number of clients that we have in a number of different jurisdictions. That also increases, as I said before, the barrier to entry, and therefore, how difficult it is or what the rationale for moving would be. Of course, I think we're able to provide localized product. I think it's going to be quite difficult for everybody to deliver a sportsbook or platform product on a global basis. It's a little bit different when people were operating on MGA only that they could be quite spread in terms of their product offering, whereas now with the local regulation and the quality required in local markets by us trying to offer that may prevent, again, people looking to in-source as well.

[Hjalmar Ahlberg, Research Analyst]

And also some questions on M&A, both if you're looking to do new acquisitions after Sportnco and also if you see, I mean, a potential upside from splitting up your business between the Media and the Platform business.

[Richard Brown, Chief Executive Officer]

We will always look at M&A opportunistically and if they'd still provide for a strategic value. Of course, we see that the Sportnco transaction is pretty transformative in the group structure. So we have a dedicated focus towards that specific integration of the business, not just the technology, but the business itself to -- in order to make sure that, that runs extremely well. That being said, of course, if there are opportunities that make strategic sense that we would look to pursue as well. In terms of splitting up the businesses, as of today, of course, we have a responsibility to continue to evaluate the different market structures in place. As of today, I see a real strength in having a diversified revenue stream across 2 different business units that are growing and performing well, both operationally and financially providing support as a group. But again, that diversification as we've seen in the gambling industry overall can be somewhat volatile. We've seen market closures impacting a number of the Dutch market closure, the German market closure. So by having a business that's actually quite diverse in terms of its product offering and, therefore, geographical structures is actually very beneficial to the business' long-term development. So then that needs to be weighed up against anything else as well. And I said, as of today, we don't have anything specific planned in that regard. But of course, as any business would do, they need to evaluate on a consistent basis.

[Hjalmar Ahlberg, Research Analyst]

Got it. And also a few questions on regulation. Firstly, if the gray listing is giving any impact on credits and the Malta guests is having an impact on Gaming Innovation Group. And also if you see, for the German market, which has reregulated, what kind of upside do you see there, both in affiliate and platform business?

[Richard Brown, Chief Executive Officer]

Yes. So I think in -- with regards to gray listing, it hasn't necessarily impacted us in Gaming Innovation Group at all. We have seen that, obviously, it's a little bit more bureaucratic in terms of some of our partners when they're working towards getting banking or banking and licenses within Malta, et cetera. So there's potentially some more -- it's been a bit more cumbersome for some of our clients to get set up operationally. But outside of that, I don't see any -- I haven't seen any impact or material impact around that structure. Then with regards to the second part of the question, would you just remind me of, please?

[Hjalmar Ahlberg, Research Analyst]

Yes. This was Germany which has, I mean, reregulated now fully with the regulated market, did you see upside potential there? Or how should we view the affiliate and platform business in this market?

[Richard Brown, Chief Executive Officer]

Yes. So Germany, obviously, was a big change over 2021 in terms of how it performed. I think there is some issues or there are certainly issues as well with some channelization rates in the current structures that they've put in. However, that being said, we have signed a significant number of clients, I think off the top of my head, around 5 or 6 clients, specifically looking at the German market in a regulated environment. For instance, we went live -- actually, we completed the project at the end of the year or middle of last year, and they just went live now. TipWin, which has a significant retail footprint within the German market, they would never have gone online for online casino without the regulation occurring. And now we can power their online casino offering. So we actually see -- while obviously it's been a difficult period for that market, now we start to see the new clients coming in, going live, et cetera, starting to build through on that. But yes, how long exactly I see before we start seeing acceleration again within that market, a little bit hard to judge as of today. I mean I don't know if any specific casino licenses have even been awarded as of today. So maybe you have to see how it plays out over the next 6 months or so.

[Hjalmar Ahlberg, Research Analyst]

And also some questions on your listing. You both have now Oslo and Stockholm. Are you looking at potential listing in U.S. as well with some other Nordic gambling companies might be looking at?

[Richard Brown, Chief Executive Officer]

Myself and the Board, we continue to evaluate where the most suitable place for the business is to be listed. We currently have a dual listing. We will continue to evaluate whether that is the best structure for the business to be listed in both or we move to a single market or potentially look to move elsewhere. I think that's a discussion we won't guide on or discuss in detail today. But again, we continually look to evaluate whether that which structure is the best and what structure should be the best for Gaming Innovation Group going forward.

[Hjalmar Ahlberg, Research Analyst]

And then now when you -- I mean when the acquisition of Sportnco will be finalized, you will become a larger company with a larger positive cash flow. Do you think you'll be able to improve the financial terms of your bonds? Or will that maybe wait until the bonds start to mature?

[Richard Brown, Chief Executive Officer]

We have almost 2 years still left on the bond structures. But of course, we have an ambition on our levers when we start to look at refinancing structure and when the various different step-downs occur that we would definitely be looking at improving bond terms. I mean that would be a goal and objective for any business, I believe.

[Hjalmar Ahlberg, Research Analyst]

All right. So if we have some questions more -- maybe very detailed questions. Some are asking if you are doing in the business in the Sri Lankan market, if that's a big market for you, in the Media business, I guess?

[Richard Brown, Chief Executive Officer]

I'd say no, but we did sign one of the largest integrated resort structures of Rank Entertainment in the end of last year. So they have a number of properties in Sri Lanka and also properties in East Africa as well. So it's a land-based business that's looking to migrate their current online offering into a more expansive structure. So yes.

[Hjalmar Ahlberg, Research Analyst]

Right. And so there was also one more question. On your Sportsbook, I think you've already maybe discussed it a bit, but it's a question on -- I mean, historically, you haven't really been able to grow your Sportsbook. Now of course, you're buying Sportnco. How -- will it be much easier to grow this product compared to your former product? And what's the difference between -- I mean except the size of Sportnco, obviously, but what's the difference now?

[Richard Brown, Chief Executive Officer]

I'm very confident in the ability of Sportnco's business to perform. They have an exceptional team that also have a structure and will become part of Gaming Innovation Group that I really truly believe will perform exceptionally well over the coming years. And then they have built a product that is demonstratively exceptional, especially in some very difficult markets such as France where you have extremely high turnover tax and to be able to offer a competitive and compelling product in those markets, the speed in which they can launch the Sportsbook is strong, the overall quality of product offering, the trading, just impressed with everything that they have as of today. And of course, there's much to develop and still to do. As with any kind of product, the markets move and you need to be able to move with the product with it. But I truly believe that they've performed an exceptional task. They've been live. They've been operating for more than 10 years, building up gradually year-over-year growth. So I'm very, very positive about the potential of that business to continue to perform in the longer term and the short term as well.

[Hjalmar Ahlberg, Research Analyst]

Okay. I think that was all we have here. So thank you very much for a great presentation and answering our questions.

[Richard Brown, Chief Executive Officer]

Perfect. Thank you very much for your time today. Thank you. Goodbye.