Earnings Transcript for ELYS - Q3 Fiscal Year 2021

Michele Ciavarella: Good morning, everybody. This is Mike Ciavarella, with Elys Game Technology. Thanks for joining us this morning for an investor presentation, and I apologize for the delay in getting the event up and running. Ran to a bit of a technical glitch. But we're all here now, and thanks for the audience. We have good group on this morning. So first, the game plan here is, we'll go through the slide deck for a few minutes, and I'll just kind of skip through since we're behind. Then, we'll get into maybe some highlights of the third quarter results. talk a little bit about some of the events that transpired through Q3, where we stand in terms of the companies’ movement into the U.S and Canada, as well as our developments in overseas operations, and then we'll shift to a Q&A. So to begin, of course, this presentation may contain forward-looking statements. Please do not rely on those statements and turn to our filings with the Securities and Exchange Commission. So what we've created with Elys Game Technology, is an Advanced Sportsbook Ecosystem. And what that's made up of is three components. First, you have the core technology, which is the betting platform, and 2. the software development team that essentially gets data from the other 2 divisions, which essentially is a B2C operation, through the Italian arm. So we get an understanding of how bettors play, and we get an understanding of their behaviors, and what though the types of betting that they're doing that makes a lot of sense; and 3. we coupled that with a B2B side of things where we are able to provide our technology that we've developed in that challenging B2C market understanding, and we've connected now a risk management team in the U.S. market with USBookmaking. And what we've created, is essentially a feedback mechanism that knows exactly what the market offers, in exchange for what players are looking for. So just looking at the schematics of the technology -- and I apologize, we're having Internet connection problems, everybody, in case there's a bit of a delay. So the Internet, so -- excuse me. The product differentiators, as many people that have been with us for a number of years of certain gotten the know, is 1. Our technology is state-of-the-art. It's one of the newest betting technologies that's built on a microservices architecture. And that differs, of course, from the monolithic or the older type of platforms that despite that, they are very powerful as well, this gives us an opportunity to have a highly - scalable architecture with a limited footprint. And what that does, it allows us to scale down as much as it allows us to scale up. What I mean by scaling down is, the difficulty with providing technology in our industry is, sometimes it's too expensive for the operators to be able to set up. For example, if you're a small business, or a small casino, or things of that nature, it's very difficult to set up because the providers cannot simply set up their system in your location for less than a significant amount of money. And what we're -- our architecture allows us to do, is provide that digital experience in a retail location for very low cost. And we're demonstrating that now with our first operation in the U.S. So two key combinations here that, generates value for U.S. operators. The first half, if you will, is the talent. And that really is critical. We talked a lot about that because essentially our industry is very unique than any other sector on the planet. It's an industry where your customers are actually coming in to take money. Okay. That's what they are coming into do, they're competing with you. So you need to have the talent to be able to understand that, be able to risk manage the offerings. In other words, you want to offer a very competitive product, but you want to make sure you don't put yourself out of business. That's the key structure there. What we have is, on the left side we've got our talent with USBookmaking in the U.S that understands the way the mark is driving. We have that same dynamic in the Italian market where we have very talented traders there, all working in-house, and we're able to offer a very competitive product both in Italy as well as now moving into Canada and U.S. So that we're able to manage the risk of the Company, negotiate with players that are a little bit sharper and they are trying to be a little bit acuter, if you will. So basically it gives us the ability to be able to be a genuine bookmaker. And that really is one of the key value propositions here. The second one is when you deep dive into the technology, you find that that technology is very cost-effective. It's purpose-built for this industry. And that's what operators are starting to like. They're starting to see it more. We're getting in front of a lot of operators and they are able to see all the powerful, unique features that are built right into the engine. Now in the engine of the trading, most players don't see that. Most players see what's upfront, they're looking for good odds, they're looking for all of the variety of games that are being offered around the world, etc. But what the operators need is they need the ability to have business intelligence and be able to manage their business properly because if the sports bettors put the businesses or the operators out of business, the business won't last very long. Therefore, they have to have a number of unique features that get their finger right on the pulse of what's happening in the space and in their actual business. That's Elys Gameboard provides. Taking a quick look at what the opportunity is for those folks that are just new to the story, one of the key things that have happened in our industry over the last few years is the repeal of the prohibition of sports betting in the U.S. And that happened in May of 2018, with the repeal of the PASPA law. And what the opportunity is here is that we're taking an industry that probably is in the neighborhood of $30-35 billion currently. But most of that up until PASPA -- when PASPA was the prohibition that was preventing sports betting, most of it was being played illegally or offshore. What we're seeing now is an amazing share of them, an amazing opportunity that's going to occur over the next 10 to 15 years, as that business starts to come to, let's say, into the light and become legalized. So it's a really brilliant opportunity, in any kind of given market or industry, and we're at the forefront of that. It's very early days in the U.S, and we're extremely well-positioned for this opportunity. Just really what we -- we've already made some significant announcements about the fact that Elys, for the past few years, has been doing a couple of things. First off, assessing the market, assessing what is needed in the market. And again, this goes back to the fact that we have a tremendous amount of experience. And knowing that when PASPA was repealed, a lot of our competitors simply repurposed their European platform and moved in. We did not do that, instead we assessed the market. While the opportunity was going to be, we then designed and built the Elys Gameboard in its own environment to deploy in the U.S, instead of repurposing our European platform. The key being that you want to make sure that there's no bugs and that the system is able to do what it's designed to do in a brand-new market, a market that trades much differently than the European market. So that being said, we recently, in October, not only did we get our license, our first license in the U.S, which sort of validated the fact that the business is properly organized., but we also rolled out our first location and we opened it up in a small restaurant bar. And the purpose of doing it that way, is because there's no competition in that segment. We really know of no other provider that is able to scale their system down, to be able to provide a cost-effective product for their small location and be able to do it in a, let's say, a profitable manner. So that the -- we're showing that, we've demonstrated that in that segment, now we're able to take our platform and actually expand out to the larger providers in the nation. That was the game plan, and now we basically have bookends and we're going to fill in the gaps. Quickly here, this was the -- in Q3, we also saw the completion of USBookmaking coming onboard and becoming part of the team here with Elys. It was really quiet a significant strategic deal that brought that highly talented team over to Elys so that we could replicate the performance that we have in the Italian market in the American and Canadian markets where those folks at USBookmaking truly understand that market much better. We're giving them the most powerful technology and all the nuances around that, and we're able to start expanding in the U.S in a very comfortable manner. Recently, we've done a joint announcement with Ocean Casino Resort in Atlantic City where they've partnered with us to plan out their next phase of their sports betting offerings at their location. We're really quite excited about all that, and I think that we hope it really resonates with our investors. Turning to the economics of our business. We're in extremely strong position in terms of the balance sheet of the Company. We have good cash, sustainable cash that's able to carry the Company, and we have no debt. And that really is quite important. We don't have the overhang of having to concern ourselves with debt and creditors and so on. And we've done that by smart investing and making sure that we get -- didn't get into any funky type of financing deals. So that really was quite important. And we're really well-positioned now for the expansion in North America. So just a quick snapshot here of the operations and the operating results. Clearly the Company is no slouch. I mean, we're not -- we're certainly not trending in billions of dollars but we have ramped up our sales, what we call our handle or the betting turnover. At the end of September where we hit approximately $626 million in terms of handle, that converts or translates to about $33 million in terms of revenue, $33.8 million or close to $34 million in total revenue for the first 9 months of the year. That really, when you compare it against prior years, you can see, we're on a good growth trend. And the key feature here, or the key discussion point is, this is a growth Company. So that means, we're more focused on the top line to be able to capture market, be able to deploy our platform, our technology, and our know-how, not only in our core market in the Italian space and the European expansion, etc., but also in North America. And part of growing into North America as a growth Company, we're reinvesting back into the Company. For instance, what I mentioned in the prior slide, is the balance sheet is strong. So what we're able to do is take revenue from operations, cash, and reinvest that back into technology build because the future isn't yesterday nor is it today. The future is in a year from now, 2 years from now, 5 years from now. So in order to prepare for that and to provide the right kind of technology for our potential customers as the U.S. and Canadian markets expand, we need to reinvest back in technology. And we think that right now, we're doing all the right moves, we're preparing the platform, and if I may, the deployment of our U.S. operations with no glitches or bugs and having pretty decent performance, is a reflection that we're doing things the right way. So that causes us to have a little bit higher expenditures, but we're managing it very well. And one of the key points shown above is the majority of -- well, the management team, or the founders of the Company, about 47% of the holding of the Company, are entrepreneurs. We're fully invested in this Company, so we're managing the expenses very tightly, we're secure about our budgeting, and we're going to be very cautious about overspending in the market. But the bottom line is, we are reinvesting back in the Company for growth in the future. Just as a quick summary. The game plan for going to market in the U.S. and Canada here is to capture large piece of the value chain by offering a unique B2B2C revenue model. What I mean by that is, going back to the first page and that feedback mechanism of how we've created the Company, is many operators in the U.S, they might have a lot of casino experience or alternatively, there is a lot of segments in the U.S market that have never had the opportunity, like small businesses and restaurants, to be able to offer any kind of betting, notwithstanding the fact that we're focused on sports betting. The area of expertise and not necessarily gambling. We are planning to offer, obviously, not only the technology and hand them the keys and walk away, but also the know-how of how to manage their sportsbook so they can focus on their core business, and we're managing the risks in terms of the sports betting that comes through the door. Technology again, has been optimized that fit the legislation in the U.S. Again, this goes back to the last 2 years of development. A lot of folks don't quite get it, meaning that they don't quite understand. Why does it take so long? Well, it takes long because the system in each state has to be modified. So we're currently the developing all the modules and all the new launches that have to be ready and able to deploy in those states as we cut across the nation. And we're quite confident, now that we've opened up our first location, we're active now on 5 states. We're going to be assuming a number of customers in those states. We have 7 active customers, including the small restaurant bar, and we expect that restaurant bar segment to start expanding quite rapidly. And we're also seeing some input, as you guys have seen, with the large resort casinos. That's essentially a bit of a summary of the Company. Last part is again, that point about certification. The Company now how this technology fully certified, easily able to jump into new markets in the U.S. And our customers, be it the large casino operators, or the small restaurant bars, or even the digital B2C operators that will intend to use our system to feel confident, that the Company is certified by ISO, to be able to provide them a system that they can count on. That, essentially, is a summary and the deck of our presentation here. Now, I wonder if I can get Mark Korb to perhaps give a quick summary. Now, this morning, we issued a press release providing some summary of our betting techno -- rather our betting results of the first 3 quarters. Mark, I don't know if you are available to take the call. I know we had some difficulty here this morning, but maybe if you're on, you can probably recap those numbers. Yeah, I don't see Mark either. Okay. All right. Let me -- maybe I'll take it. Sorry, everybody, we're -- we really had some technical difficulty this morning here. Allow me to bring up my footnotes here. Okay. All right. Okay. Allow me, everybody, to provide a summary of the results of operations for the first 9 months of the year. The first 9 months of the year were highlighted by again that significant growth that we've seen in our betting handle. We've reached almost $627 million in terms of the trading handle that we experienced. And again, that is just the Italian market. That's an increase, about 77 year-over-year. Again, that's a good reflection of the adoption of our betting technology. The third betting -- third quarter betting handle was about a $163.7 million, and we've yield it to date approximately $42.6 million. So we're right on track to hit our objectives that we set out at the beginning of the year. And again, we're very excited about what's going to happen in the U.S. Q4 being the first quarter that we are going to be really reflecting our income opportunities in the U.S. and Canada. Again, just going through the summarization here. Total revenue again, up until the end of Q3 for the first nine months, again, increased about 37.3% over the nine months compared to prior year, to $33.9 million. We again are having a very good Sportsbook hold, and again, Sportsbook being the product that adds that element of risk, so we get a higher risk reward profile on that product. Clearly Sportsbook is the exciting kind of opportunity in the U.S. So to have the fact that our betting system is performing extremely well, that's important. We do see the U.S. and Canada starting to migrate towards a more wholesome, end-to-end type of full suite product where we're going to be able to offer iGaming in addition to Sportsbook. And what iGaming essentially does is, it blends out your revenue. Because the iGaming, and the poker, and those kind of products there, what we call everything other than sports, tends to provide a flat level sort of income or revenue. And the Sportsbook gives you that element to risk, but you have a better opportunity for a return there. That all being said, in conclusion, we had a net loss from operations again at $6.4 million over those 9 months. And again, this reflects the acceleration of our investment in the U.S. and Canada. Clearly, we have to invest back in our technology, we have to invest back in our personnel. As we expand in the U.S., the more we land locations and we are able to demonstrate our platform, many operators across the U.S are going to be able to see those differentiators for 2 reasons

End Of Q&A: