Gambling.com Group Q1 2025 Earnings Call Transcript

Quartr
Provided by Quartr
May 15, 2025

There are 11 speakers on the call.

Operator

Greetings, and welcome to the Gambling. Com Group First Quarter 20 20 5 Earnings Conference Call. At this time, all participants are in a listen only mode. A brief question and answer session will follow the formal presentation. As a reminder, this conference is being recorded.

Operator

It is now my pleasure to introduce your host, Peter senior vice president, investor relations and capital markets. Thank you, sir. You may begin.

Speaker 1

Thank you. Hello, everyone, and welcome to Gambling.com Group's first quarter 20 20 5 results call. I am Peter McGoff, senior VP of Investor Relations and Capital Markets, and I'm joined by Charles Gillespie, Gambling dot com Group's cofounder and chief executive officer and Elias Mark, chief financial officer. This call is being webcast live through the investor relations section of our website at gambling.com/corporate/investors, and a downloadable version of the of the presentation is available there as well. A webcast replay will be available on the website after the conclusion of this call.

Speaker 1

You may also contact Investor Relations support by emailing investors@gdcgroup.com. I would like to remind you that the information contained in this conference call, including any financial and related guidance to be provided, consists of forward looking statements as defined by securities laws. These statements are based on information currently available to us and involve risks and uncertainties that could cause actual future results, performance, and business prospects and opportunities to differ materially from those expressed in or implied by these statements. Some factors that could cause such differences are discussed in the risk factors section of Gambling.com Group's filings with the Securities and Exchange Commission. Forward looking statements speak only as of the date the statements are made, and the company assumes no obligation to update forward looking statements to reflect actual results, changes in assumptions or changes in other factors affecting forward looking information, to the extent required by applicable securities laws.

Speaker 1

During the call, there will also be discussion of non IFRS financial measures. Description of these non IFRS financial measures is included in the press release issued earlier this morning, and reconciliations of these non IFRS financial measures to their most directly comparable IFRS measures are included in the appendix to the presentation and press release, both of which are available in the Investors tab of our website. I'll now turn the call over to Charles.

Speaker 2

Thanks, Pete, and good morning, everyone. I'd like to start by thanking Fredrik Berval and Greg Mikkelsen, two of our long standing directors whose terms ended at the AGM yesterday for their wisdom, service, and support of the company over the better part of the past ten years, and also welcome our two new directors, Vincent Costello and Jamie Mendal to the board. It was just a short time ago that we reviewed our tremendous 2024 results while previewing the 2025 growth plan. The year is off to a strong start as expected with record all time quarterly revenue and adjusted EBITDA. Revenue rose 39% year over year to $40,600,000 and adjusted EBITDA grew 56% to $15,900,000 With 24% of first quarter revenue coming from recurring subscriptions, we have transformed a marketing only business into a marketing and sports data services company with a substantial and growing percentage of highly predictable subscription revenues.

Speaker 2

Our competitive position in the global online gambling ecosystem and our sustainable growth opportunities have never been stronger in the company's nineteen years. With our marketing business performing at all time highs and the significant expansion of our sports data services following the acquisition of OddsJam and Optic Odds on January 1, we are confident in not only achieving our growth targets for the year, but also delivering on our strategic objectives to expand beyond marketing and reach 100,000,000 in adjusted EBITDA. The growth opportunity for OZJAM and Optigon is robust. The integration of these new sports data services is progressing as planned, and execution in this business continues to highlight the significant strategic and financial value this acquisition has brought to Gambling.comGroup. Their entrepreneurial energy and ambition fits right in with our team of talented and accomplished entrepreneurs.

Speaker 2

It is great to now be working hand in hand with these talented operators. The consumer facing part of the business, OddsGem, has a strong subscriber base that we are confident we can scale while maintaining margins and profitability. For the b to b side of the business, OptiGods, we are just getting started with leveraging our reach and resources to grow enterprise subscription revenues. We continue to expect incremental adjusted EBITDA from OddsJam and OptiGod to grow by at least 20% this year, and we see attractive long term growth prospects for the current products. While the current suite of products has a very attractive growth opportunity, we now platform that is capable of powering a broader array of enterprise products and services to solve more problems for our online sports betting clients.

Speaker 2

Turning to our marketing business, our iGaming led strategy continues to drive performance with iGaming revenues rising 24% year over year. This growth reflects solid organic growth complemented by contributions from freebets.com and its related assets. We continue to grow our market share in The UK and the rest of Europe, and our North American sports betting business has now lapped its last quarter of difficult comparisons. For the full year 2025, we continue to expect our marketing business to grow in all of the geographic regions where we operate, including North America. We will add Missouri to our guidance once the launch date is clear.

Speaker 2

While the uncertain macro environment has recently created volatility in the capital markets and some uncertainty about the economy, I want to highlight that during the entire history of the online gambling industry, no economic slowdown has ever had any meaningful impact on the underlying growth of the industry. The online industry is fundamentally insulated from these economic effects as players don't have to travel to a land based casino to continue playing. We expect this current cycle will be no different from the other cycles the company has grown through since its founding in 02/2006. We can confirm that there have been no changes to our business volumes or expectations due to changes in trade policy. Furthermore, we do not expect any impact on our business from any change in tariffs, whether in The US or abroad.

Speaker 2

In addition to the resilient nature of online gambling, our strong competitive position sets us up to continue on our growth on our strong growth trajectory. Our industry leading brands such as Gambling.com and Bookies.com and growing brands like Casinos.com continue to drive market share gains. Our full embrace of AI has also accelerated our ability to keep improving upon our technology stack and digital marketing capabilities to continue to drive organic growth. On top of this, with the acquisition of OddsJam and Optigods, we have the best Odds data infrastructure in the industry, and the revenue from that platform increases our overall revenue visibility. As a result, we are in our strongest competitive position ever and are thus well positioned to drive continued growth, profitability, and free cash flow as reflected by our reiteration of our 2025 guidance, which will result in another year of record annual revenue and adjusted EBITDA and move increasingly closer to our next goal of $100,000,000 in annual adjusted EBITDA.

Speaker 2

I will now turn the call over to Elias to review the first quarter's financial highlights.

Speaker 3

Thank you, Charles. First quarter revenues grew 39% year over year to 40,600,000.0. Our marketing business grew 13% as we delivered more than 138,000 NDCs to our customers, representing 29% growth year over year. Our sports data services business, which includes the first full quarter of revenue contributions from OZGEN and Opticots quadrupled. Subscription revenue was 24% of total revenue.

Speaker 3

Inclusive of revenue share arrangements in our marketing business, recurring revenue was 50% of total first quarter revenue. Revenue grew in all geographic regions, and we expect that to continue for the remainder of 2025. Gross profit increased 42% year over year to CHF38.4 million. Cost of sales was CHF2.2 million, which was flat year over year, with lower media partnership fees offset by cost of sales related to the acquired Odds Jam and Opticost Odds businesses. While partnership fees were lower year on year, they were a bit higher than we had expected.

Speaker 3

Gross profit margin increased roughly 200 basis points compared to the first quarter of last year to 94.5. Total operating expenses increased 50% to million, primarily reflecting a significant increase in amortization from acquired intangible assets from the Odds Holdings and FreeBets acquisitions. Operating expenses also absorbed the cost base of the Odds Holdings acquisition. Excluding the non cash acquisition related amortization, growth in operating expenses was well under our revenue growth of 3% for Q1. Adjusted EBITA increased 56% year over year to another all time record of €15,900,000 compared to €10,200,000 a year ago.

Speaker 3

First quarter adjusted EBITA margin was 39%, up 400 basis points from 35% in the year ago period. First quarter adjusted EBITA margin would have been even higher if not for slightly higher than expected Partnership share of revenue and its related cost of sales, as well as investments in an ambitious product roadmap. Difficult software seasonality combined with product investments will naturally result in sequentially lower margins in the second quarter before expanding in the second half of the year, as we move into the seasonally stronger sports calendar, and our current wave of product investments start to bear fruit.

Speaker 4

Adjusted net income for the first quarter of twenty twenty five rose 78% to GBP 16,500,000.0 from the year ago period. Adjusted net income was positively affected by the strengthening of the euro versus the US dollar when translating balance sheet items at quarter end.

Speaker 3

Adjusted diluted net income per share increased 92% to $0.46 from the year ago period. As a reminder, in Q4, we revised the way we define adjusted net income to more closely align adjustments we make to adjusted EBITDA. This is to improve the like for like comparability between periods. Free cash flow was €10,300,000 up 25% from the year ago period. Free cash flow in Q1 reflects strong growth in adjusted EBITDA, partly offset by the timing of tax payments and working capital movements related to the settlement of transaction expenses for the Odds Holdings acquisition.

Speaker 3

As of March 31, we had total cash of CHF 21,500,000.0 and CHF 70,500,000.0 of undrawn capacity on our credit facility. On April 1, we made a final payment of 11,200,000.0 for the FreeBets.com acquisition using cash balances. In total, we have drawn 94,500,000.0 on our 165,000,000 credit facility. Effective on April 1, we entered into a swap agreement to effectively convert our 75,000,000 of US dollar term loan to euro borrowings. This lowered our cost of debt capital by approximately 200 basis points.

Speaker 3

The swap transaction also aligned our borrowings with our functional currency, eliminating the corresponding forex translation effects in our income statement moving forward. Our free cash flow and borrowing capacity continues to provide the flexibility to pursue both acquisitions and to optimize our capital structure to maximize shareholder value over time. As Charles noted this morning, we reiterated our full year guidance with a midpoint of our revenue guidance of 172,000,000, representing 35% year over year growth. The midpoint of our adjusted EBITA guidance of CHF68 million represents 40% year over year growth. This guidance assumes a resumption of growth in North American marketing business, continued global market share gains as well as well over 20% of full year revenue coming from recurring subscriptions.

Speaker 3

As per usual, our guidance does not include contributions from any new acquisitions or any new market launches. While we expect Missouri to launch sports betting in the second half of this year, as per our policy, we will not include it in guidance until the launch date is confirmed. Our guidance also assumes an average euro to USD exchange rate of 1.1 for the year. Operator, we will now turn the call for questions.

Operator

Thank you. We will now be conducting a question and answer session. You may press 2 if you would like to remove your questions from the queue. We ask that analysts limit themselves to one question and a follow-up so that others may have an opportunity to do so. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star Our first question comes from Ryan Sigdahl with Craig Hallum Capital Group.

Operator

Please proceed with your question.

Speaker 5

Hey. Good morning, Charles Elias. Really solid results.

Speaker 4

So

Speaker 5

I want start with kind of an industry topic across not just your own industry, but many, but AI search, growing interest from consumers, whether that's chat, GPT, perplexity, etcetera. Apple also reported browser search was done in April for the first time. So curious, I guess, what Gambling.com is doing to keep its content in focus as there's still consumer demand, but as that behavior is changing and how they're viewing content, finding content? And do you view this as an opportunity or risk?

Speaker 2

Morning, Ryan. To get some context here, Apple executive Eddie Q stated in a court hearing that from Apple's perspective search volume on Safari had peaked in April. Google immediately shot back with a statement contradicting this saying that they continue to see search volumes climb from Apple's devices, and Google reported a 10% increase in global search volume in q one. From our perspective, we are seeing all time high revenue from our marketing business, which continues to be fundamentally driven by natural search from Google, and we are not seeing any pullback or fundamental shift in search volumes. Now having said all that, we do continue to see more and more referrals from these generative AI experiences like ChatGPT and Perplexity.

Speaker 2

You know, the chart is a hockey stick, basically. But starting from you know, it was zero a couple of years ago. So starting from a low base, but it's growing very, very quickly. And that traffic is very high intent. It's similar, but really even better, you know, even more high intent than the traffic we get from Google search.

Speaker 2

And it feels incremental given that the level of referrals from natural search is not falling. Users using these AI tools have a deeper relationship with the tool than a simple drive by search. They give context. They ask specific questions. They steer the conversation where they needed to go.

Speaker 2

And almost by definition, are more high intent given the increased effort required and the longer engagement provided by the conversation. So, you know, we love high intent traffic, and we are indifferent as to the source of it. To the extent that more and more of this high intent traffic arrives via these tools, these AI tools, it reduces reliance on the Google organic search channel. And, you know, I've I've been thinking a lot recently about all of this, you know, as I'm sure a lot of people in in digital marketing have. And, you know, I'll I'll add that the monetization paradigm of these tools seems to be the opposite of Google, you know, where users are happy to pay for the service outright, obviating the need for the AI tool to monetize the actual content provided to the user.

Speaker 2

You know, if we allow ourselves to be optimistic here, this could be a boon for people like us, you know, publishers of high quality content, And and be you know, mark the beginning of a new era online where advertising is simply less central to the experience. You know? But I you know, at the end of the day, there's there are alternatives to Google search, but all the all the all the other search products have ads. But these generative AI experiences, there's no ads. So, you know, kind of all the traffic is organic.

Speaker 2

It's like it's almost a a cleaner, more direct relationship with the consumer. So the numbers are great. We're still making a ton of money from Google natural search. We're now also making money off of these generative AI experiences, and we're pretty excited about the future.

Speaker 5

Helpful context. I wanna switch over to Last quarter, you mentioned kind of the top for asset at Optic Odds was in Malta running through Gambling.com's global client list. Curious for any updated details, anything you can share there on how those conversations and that cross sell is going.

Speaker 2

Yeah. Opticos is flying. It's it's certainly the highest it's certainly growing. I mean, Ops Jam's also obviously growing, but Opticos is growing even faster. Probably the fastest growing piece of our entire business.

Speaker 2

I think that trip was was productive and eye opening, and we've just hired a senior salesperson based in London to help distribute that product more broadly in Europe. So, you know, it's we we've had one quarter. Right? It's still very early, but, you know, the the plans and hiring and and road map are are well in motion, and we expect the growth there to continue at a high level for some time.

Speaker 5

Excellent. Thanks, Charles, and good luck, guys.

Operator

Our next question comes from Jeff Stantel with Stifel. Please proceed with your question.

Speaker 6

Hey, good morning, Charles, always. Thanks for taking our questions. I wanted to ask, heard from Penn last week that they were turning back on performance marketing after leaning primarily on ESPN and reactivations for a handful of quarters. I'm curious if this specifically has been a material growth driver so far. And then more broadly, just how you think about the potential for other operators to start to dig in a bit deeper here just as some lower CAC channels get exhausted or sort of start to naturally decelerate?

Speaker 2

Good morning, Jeff. Thanks for a tremendous question. Very happy to answer that. You know, that would be consistent with our, you know, our entire experience of having run this business for nineteen years around the world. You know, these these operators all you know, obviously, if you can acquire customers cheaply, you do it.

Speaker 2

You but but as you say, those channels get exhausted, gets more competitive, all the low hanging fruit is plucked, and then where do you find players? Well, the affiliate channel. There's a reason it is central and fundamental to all these operators' marketing strategies and all of these different markets around the world. So, you know, to us, it's absolutely no surprise whatsoever that an operator like Penn would reach this conclusion. If if if anything surprising, it said it took them as long as it did to reach that conclusion.

Speaker 2

But, you know, Penn Penn to client, there wouldn't be a an enormous client at the at the, know, at this exact moment in time. You know, they have been an enormous client in the past, particularly around the point when ESPN Vet launched. But, you know, we welcome, of course, you know, any increase in demand from our customers.

Speaker 6

That's great. Thanks for that, Charles. And then turning over to guidance, Ellis, I think you said the assumption for the euro went from 1.7 last quarter to $1.1 Could you just quantify for us the impact from the higher euro on the actual revenue and the EBITDA guidance? Then just I guess, should we be interpreting the reiteration of guidance to mean that you might have been tracking more to the lower end if the euro didn't didn't kinda help out here? Or maybe now you are tracking above the midpoint with the benefit of FX?

Speaker 6

Just any any help there kinda thinking about the, I guess, the the constant currency implications would be would be great. Thanks.

Speaker 3

Yeah. A cup a couple of things there. Obviously, it's very hard to to guide on on Forex future Forex movement expectations in the current market has been very volatile. If we look at Q1, we had big positive translation effects from balance sheet items at the end of the quarter. But if you look at the P and L, we didn't see any big positive effects because the average rate was more or less in line with our expectations.

Speaker 3

We've assumed one ten for the remainder of of the year. That's you know, it it could go above. It could go below. I I would note that a much higher proportion of our both our revenue and our operating expenses are denominated in US dollars now after the last few years of acquisitions. So any positive or negative effects from Forex movements have less of effect than they would have had last year or or two years ago.

Speaker 3

As as as you noted, you know, we we have moved up marginally the the assumptions from the euro to USD rate, which has a slight positive effect of of on our revenue, but it's it's not big enough to to move the needle, and and nothing has really fundamentally changed in in our revenue expectations or EBITDA expectations for the balance of the year. Our

Operator

next question comes from Barry Jonas with Truist Securities.

Speaker 5

Hey, guys. I wanted

Speaker 7

to see if you'll share any thoughts on what the path could look like to get to your $100,000,000 EBITDA goal. Really, any color on business line or product composition, what M and A means to getting there and then timing would helpful. Thanks.

Speaker 2

Good morning, Barry. Well, with guidance this year putting us on $68,000,000 at the midpoint, we're we're gonna be 68% of the way there this year. Obviously, we do do m and a. That's the big delta here. If we find another acquisition that ticks all the right boxes for us and, you know, reminder, we're very picky about m and a, then it could shorten the timeline meaningfully.

Speaker 2

But, you know, we're still a high growth business even without m and a. So, you know, with a with a with a nice acquisition, you know, it could happen very soon. But without that, it it would, you know, all things equal, take another year or two. So we don't wanna put a specific year on it, but, you know, it doesn't take a whole lot of imagination to see that we could get there pretty quickly if we did another acquisition of meaningful size.

Speaker 7

Got it. Got it. And then just for a follow-up, on the OSV side, there's been investor concerns around decelerating handle trends for North American operators. You know, I think you've talked about this in the past, but one, are you seeing anything concerning there? And two, what's your latest thinking about rev share versus CPA mix in the current environment?

Speaker 7

Thanks.

Speaker 2

Okay. On yeah. There were some stats around NBA GGR that were, like, down year on year. There's no read through on that to the rest of the American OSB market. I think that's a NBA specific phenomenon.

Speaker 2

Everything we're seeing, all the data supports the fact that in q one, OSB grew, like, 15% nationally in The US. IGaming grew substantially faster than that still. So, you know, zero concerns. I you know, it's a little it's a curious data point, but zero concerns. In terms of rev share and CPA, I mean, we you know, nothing's fundamentally changed.

Speaker 2

We remain philosophically agnostic as to the benefits of either one of those. What we do is model it. You know, we use our sophisticated data science teams to estimate the value of the all the deals available to us, and then we pick the one that we think will make us the most money. Now having said that, we, you know, we this year, we expect, you know, 25% of group revenue to come from recurring subscription revenue. You know?

Speaker 2

So that's b to b enterprise sales, and that's b to c customer subscriptions, stuff like off the gods, odd jam, and then, you know, RotoWire itself has a data services business. But when you look beyond that and you include the kind of recurring proportion of our marketing business, you know, whether it's a pure revenue share deal or it's a hybrid deal and, you know, a portion of it is revenue share, you get to you know, from our seat here, looking at the full year, we expect over half of group revenue, you know, so it's another 25% of revenue is is recurring in that nature. So, you know, total group revenue, which is recurring in one way or another, is gonna be more than half of group revenue this year. You know, but again, we're not specifically targeting that. We're not trying it's not a a specific goal of ours to grow that that recurring proportion of our marketing revenue, but it it naturally builds up and grows as, you know, it is frequently the best monetization vehicle available to us.

Speaker 3

Thank you, Charles. Appreciate it.

Operator

Our next question comes from David Katz with Jefferies. Charles,

Speaker 4

you are, I believe, in a unique position to opine and and, you know, convey what you're seeing with respect to the topic of handle growth. You know, there obviously is a a bit of a debate at the moment about, you know, what the trajectory of US handle growth is looking like. And I and I would just, you know, welcome your perspective on sort of how you would characterize the the sort of growth in in handle in The US, please? I I think there's a

Speaker 2

lot of cross currents under the surface which are making it a little more confusing for people to understand, but that that mixed shift is what's happening, but fundamentally in aggregate, the market's growing. I mean, you know, we we're we've got an interesting and unique perspective, but at the same time, we, you know, follow a lot of these industry data sources and all of those are pointing to, you know, double digit gains in q one OSB growth. So we're we're certainly not seeing any slackening in in our business, but we're doing a lot more with things like same game parlays. You know, that's a product which is a home run for the operators. Mhmm.

Speaker 2

They want that traffic. They're now very actively looking for it. They wanna collaborate with companies like ours to give them more of that type of traffic specifically. So we've built on the back of our fantastic technology stack, a variety of really interesting same game parlay tools, which are available across different sites of ours, and and that's helping drive more engagement on on that type of product. But, yeah, I think it's just getting kinda more complicated, but in aggregate, it's it's very clearly still growing.

Speaker 4

Understood. And, you know, if I can just ask maybe an an easier one, you know, saw a bit of news about, you know, perhaps iGaming legalization. I believe it was in Ohio. Can you maybe just give us an update on your board of, you know, sort of iGaming legislation if you think we may get some this year. I know it's everyone has their own sort of opinions about it, but yours is is highly valuable.

Speaker 2

Yeah. Yeah. I mean, I it it has been a little quieter this year than I think we all would have liked. The developments at Ohio are are positive, and what I really like about the Ohio approach is that they're they're talking about sweeping reform and having one regulator regulate a rebooted gaming economy. You know?

Speaker 2

It's not you're not gonna have three or four different regulators. You can have one new one, which is gonna oversee the whole the whole thing, which is absolutely the right way to do it. We this isn't news. We know this already. All you have to do is look at all the various examples from around the world.

Speaker 2

So, look, that would be great. Ohio is a great market, you know, competitive market, lots of different operators. That would be clearly a a a really nice step in the in the right direction. But nobody's asked about prediction markets yet, but that's kind of related here because the legal situation with these prediction prediction markets is getting incrementally more clear, which means that category is is gonna grow very rapidly, and it the tax rate is, you know, zero. So that's dramatically more interesting from a business perspective than paying these, you know, sometimes, you know, very high state gaming duties, which, you know, some states are even trying to increase.

Speaker 2

So it it's a really interesting one to watch, you know, the big operators are out out there are are certainly looking into it and evaluating the feasibility of of providing their products and services under that regulatory regime, which I look. I think it just keeps it's gonna keep everybody honest. Right? You know, it it it forces the state gaming regulators to to think about everybody's economics here and make sure that that, you know, they're competitive in the broader marketplace.

Speaker 4

Understood. I have more, but I'll come back around. Thanks.

Operator

Our next question comes from Clark Lampkin with BTIG. Please proceed with your question.

Speaker 8

Thanks. Good morning. My first question is sort of a follow-up on iGaming in The U. S. I'm curious if you could give us an update on casinos.com, where you are in the process of sort of building domain authority traffic, and if there's any way that you guys have sort of thought about, you know, revenue upside or or how that brand might perform when you start to get into in earnest an iGaming legalization cycle in The US?

Speaker 8

Second question that I have is going back to, I think, some questions that were asked earlier around the 100,000,000 EBITDA target. I'm curious, I know this year, OddsJam and I think the sort of newer subscription businesses that you've been building out are going to represent something like 25% of overall mix, if I heard you correctly earlier. Have you thought about or tried to dimensionalize when you reach $100,000,000 whether it is revenue or EBITDA, where should the relative mix of sort of performance and and, I guess, kind of, you know, if you were to bucket a broadly nonperformance businesses land? Thanks a lot.

Speaker 2

Morning, Clark. So we're here in Charlotte at the moment. We had our big management summit earlier this week and got updates from all the teams, including Casinos.com. And we've got some very, very interesting stuff coming up in the pipe with with Casinos.com. They you know, it's we're we're trying to develop a unique tone of voice with that product.

Speaker 2

And, you know, they've got, like, comedians involved to to to write some of the content and and just, you know, meaningfully differentiate it from other products in in our portfolio. They're doing a lot of creative and interesting stuff, and the numbers are numbers are are are trending up very nicely in the past six months. You know, it's a it's a young still a young product and still has some ways to go, but it's it's we're doing all the right things. It's very much headed in the right direction. And, you know, they're doing really cool stuff.

Speaker 2

Like, for example, today, May 15, they have declared with the help of the mayor of Las Vegas, International Casinos Day. So this is a big kind of PR push by the Casinos.comteam to leverage that that brand and and, you know, get exposure around the world and not just in The US. You know, that's the other thing to bear in mind is casinos.com. Yeah. Of course, it has US revenue, but it's a, you know, it's a global product.

Speaker 2

There's there's a lot of casinos around the world. On the hundred million in margins, you know, the Oddjam and Opticott's business had you know, when we bought it, it had actually slightly higher adjusted EBITDA margins than our marketing business. It's an incredible business. And that we don't see that fundamentally changing. So when you when you get to a hundred million in adjusted EBITDA, you know, okay.

Speaker 2

You know, if if if you look at the figures today, okay, it's 20, you know, 25% of the business. You know, it's growing faster than than the marketing business. So, you know, it's maybe it's thirty, thirty five, or 40% of the business, but the margin profile is fundamentally the same. So I'd expect the margin profile of the sports data services to be you know, the the contribution to adjusted EBITDA to be 30, 30 5, or, you know, 40,000,000 depending on how how that plays out. But, you know, incrementally more than the than the marketing business.

Speaker 3

Our

Operator

next question comes from Chad Beynon with Macquarie.

Speaker 9

Morning. Thanks for, taking my question. Nice results. Wanted to ask about Brazil. I feel like we've heard from some of the operators down there that it's been a little bit of a slower start, than anticipated, yet everyone still has, you know, pretty high total addressable market sizing for that market.

Speaker 9

What are you seeing? I know that's a it's a big market with a lot of different, operators, which I think is probably the best model for for you guys, but are you working with different partners? I know it's gonna be a long haul there. And how have the expectations for 2025, changed in terms of what feeds into your model? Thank you.

Speaker 2

Morning, Chad. Our strategy in Brazil has been, very much wait and see, and and frankly still is. You know, we have not done any m and a there. We have not made any big organic push there ourselves, and we've never had meaningful revenue from Brazil. All of our peers that had meaningful revenue from Brazil have been digesting some extremely challenging comps as the market has regulated, taxes have gone up, etcetera, etcetera.

Speaker 2

You know, we we we we've reviewed it plenty of times, and the math is challenging. You know? It is competitive. There's lots of operators, sensible taxes, but at the same time, there's local regulations about how you have to run your business with a local entity, and then there's challenges on getting money out of Brazil, which make it less attractive. We are continuing to take calls on m and a opportunities in Brazil.

Speaker 2

You know, we remain interested. We'd like to have the right Brazilian business, but we are gonna be as picky and cautious. We're probably gonna be even pickier and even more cautious than we are in in any other given market given the operating challenges we've seen, from our peers in that market.

Speaker 9

Great. Thanks, Charles. And then another question, just kinda going back to some of the noise that we saw in the first quarter. I guess this one would be related to potential tax increases. I know we're still seeing in the in the in the trade rags that New Jersey is still contemplating this.

Speaker 9

But when the noise is heightened with a lot of your partners in The US with respect to potential tax, increases, I know most of them haven't happened, but there's just been a lot of headlines, What happens with the conversations with with you and your partners? Are they trying to pull back? Are they more hesitant? You know, I'm sure it's maybe even a time to to lean in, But just trying to get a sense if we do see some tax increases in The US, what happens with your partner's goal to grow NDCs through affiliates? Thanks.

Speaker 2

Yep. To the extent that states raise gaming tax rates, it it does, of course, negatively impacts player lifetime value, but over time, not immediately. You know, that, at the at the end of the day, that's the pool of value that we're all working off of. So if that pool gets smaller, there's less to go around. But in our experience, it takes you know, it can take a year for that to kinda play out, and it doesn't get fully passed on to us.

Speaker 2

So it's it's it's you know, it's it's a it's not a positive development, but it's not it's not particularly challenging either. You know, the rates, the deals, they just adjust and everyone presses forward. You know, these you know, again, the with these prediction markets probably about to experience hyper growth, you know, I think that has the chance to keep these state gaming regulators honest and and make them think twice about raising taxes.

Speaker 9

Thank you very much.

Operator

Our next question comes from Mike Hickey with The Benchmark Company.

Speaker 10

H. R. L. Duluth, Pete, nice quarter guys. Just I guess on your near term guidance outside of FX contribution or not, just curious how you guys are thinking about potential upside scenarios here, especially we've got Missouri, which is in your guidance.

Speaker 10

I think we're still planning for Alberta in early twenty six. So I'm guessing from your business standpoint, that that would be in in '25. So it just feels like your your business is strong here, maybe better than you're expected in one q, and then you've got sort of upside baked into your numbers here. Just curious for thinking about that. Right?

Speaker 2

Yeah. So one of our big projects this year is the is a is a rather substantial revamp of the consumer side of RotoWire. The internal code name is project Purple Rain, and that's going live at some point this summer. So it's not just a a refresh of the brand. It's it's a it's a it's a fairly substantial refresh of the fundamental product.

Speaker 2

You know, the data underlying that business is tremendous, and and that data will continue to be the the centerpiece of of the product suite. But that is that is a big focus of our team at the moment, and that has the potential to outperform.

Speaker 10

Nice. Thanks, Charles. Love the trends reference as well. The on the prediction market opportunity, it sounds like you're very enthusiastic. I mean, what what do you think, Charles, from from your view, operators need to be more confident that we, in fact, have a very durable regulatory framework here so that they can invest monies on the marketing side.

Speaker 10

And then this just seems like on the surface, like, a massive opportunity for you guys just thinking about sort of many states kinda legalizing here at once. So curious if could just sort of frame that for us the best you can. And then do you feel like you're sort of positioned today here if if it's sort of we get the framework we need? I guess it's already there, but there's more belief that it's sustainable. Like, you positioned to sort of benefit immediately, Charles.

Speaker 10

Do you feel like you have to make some acquisitions or deals or sort of how how would you sort of position your your the framework of your company to benefit from the prediction market? Thanks, guys.

Speaker 2

So there's been a couple of different court decisions. Call sheet keeps winning. You know, the the prediction markets companies keep winning. So that's providing incremental clarity that this is okay. But the big fundamental question here is do the states have authority to override the federal government on this?

Speaker 2

You know, can they you know, the federal government's got a, you know, fully flesh you know, fully full fledged fully fledged regulatory framework for this, which it has had for decades. Right? Now, of course, it's being kind of expanded into newer categories, but it this has been there for a long time. It's never really been challenged. And you know but now that it's overlapping, you could argue somewhat with these, you know, state gaming regulators, although it's a it is a very different product.

Speaker 2

You know, can the state gaming regulators kind of say, look. You can't do this. Stop it. Tax it. You know?

Speaker 2

Do they have a say in this? And that's the big question at the moment. Given the the kind of form in terms of court victories, I it it it it seems unlikely that they do, but this could be the next passbook. Right? You know, this one could grind on and go to the supreme court.

Speaker 2

So I don't I don't think any of us are gonna have perfect clarity anytime soon, unfortunately, but that's life. You know, ultimately, there's no there's no fixed number of skins. Right? You know, anybody can go and and, you know, assuming they're fit for purpose, apply, and theoretically get regulated to do this if they have the right, you know, control framework and everything else. So, you know, you could have quite a few entrants coming into this category.

Speaker 2

Obviously, it's more than just call sheet that's excited about this, although they do seem to be in the lead. And from our perspective, yeah, there's not really anything to buy. It's a brand new category. And if this is also our bread and butter, you know, we produce content about interesting gambling or gambling related, you know, products, and it's quite straightforward for us to just kind of expand our coverage to cover this new category. So I don't see any meaningful OpEx or m and a required to tackle it, and we'll do our best from our our seat here to to help everybody out.

Speaker 2

We have met we, you know, we have relationships, commercial relationships with a lot of these companies already. You know, we have revenue from this category. It's small, but it's, you know, potentially could be very substantial over the coming years. I, you know, I think it's not gonna it's not gonna explode next quarter, but it's, you know, when you when you think about the next couple of years, this could be a very meaningful feature of The US marketplace.

Speaker 10

Nice. Thanks, guys. Good luck.

Operator

We have reached the end of our question and answer session, which concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.

Powered by Quartr

Key Takeaways

  • Gambling.com reported record Q1 revenue of $40.6 million (up 39% YoY) and a 56% increase in adjusted EBITDA to $15.9 million, with recurring subscription revenues now representing 24% of total sales.
  • The integration of OddsJam and Optic Odds has quadrupled sports data services revenues, and the company expects at least 20% incremental adjusted EBITDA growth from these assets in 2025.
  • Core marketing revenues rose 24% YoY driven by an iGaming-led strategy, with continued market share gains in the UK, Europe, and North America, and full-year guidance remains at 35% revenue growth and 40% adjusted EBITDA growth.
  • First-quarter free cash flow jumped 25% to €10.3 million, supported by €21.5 million in cash reserves, €70.5 million of undrawn credit, and a debt-cost reduction via a USD-to-euro swap.
  • Management highlighted the potential of generative AI for high-intent traffic and is exploring U.S. prediction markets as a new low-tax growth frontier.
AI Generated. May Contain Errors.
Earnings Conference Call
Gambling.com Group Q1 2025
00:00 / 00:00