Earnings Transcript for NGMS - Q4 Fiscal Year 2022

Operator: Good day, ladies and gentlemen. Thank you for standing by, and welcome to the NeoGames' Fourth Quarter and Full Year 2022 Earnings Conference Call. [Operator Instructions]. Please note that this conference call is being recorded today, March 7, 2023. At this time, I'd like to turn the floor over to Jacques Cornet with ICR. Please go ahead.

Jacques Cornet: Thank you, operator, and hello, everyone. By now, you should all have access to our fourth quarter and full year 2022 earnings release, which is available on the NeoGames' website at www.neogames.com in the Investor Relations section. Before we begin our formal remarks, I need to remind everyone that the discussion today will include forward-looking statements. These forward-looking statements, which are usually identified by use of words such as will, expect, anticipate, should or other similar phrases are not guarantees of future performance. These statements are subject to numerous risks and uncertainties that could cause actual results to differ materially from what we expect, and therefore, you should exercise caution when interpreting and relying on them. We refer all of you to our recent SEC filings for a more detailed discussion of the risks that could impact our future operating results and financial condition. We encourage investors to review our regulatory filings, including the Form 20-F for the year December 31, 2022, when it is filed with the SEC. During today's call, we will discuss non-IFRS financial measures, which we believe can be useful in evaluating the company's financial performance. These measures should not be considered in isolation or as a substitute for our financial results prepared in accordance with IFRS. A reconciliation of these measures to the most directly comparable IFRS measure is available in our earnings release on the neogames.com website. Hosting the call today, we have Moti Malul, NeoGames' Chief Executive Officer; and Raviv Adler, Chief Financial Officer of the company. They will provide some opening remarks, and then we will open the call to questions. With that, I'll turn the call over to Moti.

Mordechay Malool: Thank you, Jacques, and good morning, everyone. Last night, we released our fourth quarter and full year 2022 results. Before touching on the results, I will highlight some of the accomplishments which we are proud of as we wrapped up the last year. I will then provide an update on the results as well as the trends we are seeing in the market before turning the call over to Raviv, to run through our financials in further detail and 2023 guidance. We ended 2022 on a very strong note. Our principal mission is to capitalize on the expansion of the global lotto industry into the online channel, and we think the actions and decisions we made during the past year have moved us further along that path as we continue to build a global leader in the industry. As I have mentioned many times before with the lottery business going digital, we see an increasing amount of convergence. Our lottery customers require a broad range of products and services to support them across lottery, sport betting and online gaming. Combining NeoGames and Aspire last year is allowing us to deliver the full suite of products and services that our customers demand. Since the acquisition, we have unlocked our potential beyond our core focus in the lottery industry. With the expansion, we are becoming a key player within the iGaming and online sport betting markets. We see this as a significant opportunity for us as it has allowed us to vastly expand our addressable market. In our view, we are very well positioned as an industry leader capable of providing our customers with a full suite of solutions to meet all their digital needs. Our recent launch in Brazil, which I will touch on further, is a perfect example of the revenue synergies we continue to target around the globe. Raviv will discuss our financials in more detail later. However, I wanted to touch briefly on some highlights from our financial results. On a consolidated basis, the total of revenues plus our share of NPI revenues grew to $83 million for the fourth quarter and $210 million for the year. As a reminder, the full year results include a little bit more than half a year of the Aspire Global business. At the high level, we continue to experience solid growth across all our businesses and are beginning to see revenue synergies as anticipated from our merger last year. In iLottery, looking at revenues and our share of NPI revenue, we had a record quarter and a record year with $28 million for the fourth quarter and $98 million for the full year. In addition, we continue to see improved numbers sequentially in each quarter throughout the year. In iGaming, on a pro forma constant currency basis compared to the same period last year, we posted 27% growth in the fourth quarter and 19% for the full year. On the adjusted EBITDA line, we also posted quarterly and annual records of $18 million and $54 million, respectively. Looking closer at the iLottery business, we had strong performance across all our key accounts. The U.S. lottery market had its largest ever Power Ball jackpot of over $2 billion when it hit in November. Certainly, that was a major contributor to the impressive performance across all U.S. accounts. And as a result, during the quarter, all of our U.S. customers experienced both year-over-year and quarter-over-quarter growth. Yet there is another long-term benefit as these large jackpot trends are very effective customer acquisitions and marketing opportunities where benefits accrue to our customers' businesses long after the jackpot is hit and that allowed our customers to carry the strong results through the end of the year. Beyond the impact of the November jackpots, we had strong growth in our key accounts throughout North America. Our growth and success has also been fueled by several of our own initiatives geared to drive organic growth. Some of the recent game launches from our NeoGames Studio in Q4 contributed immediately. For instance, we released The Lamp in Virginia, and it quickly became the most successful game launch for that online lottery thus far. Given the success, we quickly rolled out the game into additional markets with localized versions where we also see similar success patterns. The quality and high performance of NeoGames Studio is one of the key advantages we provide our customers with to enable them to reach their leadership positions and full potential in the market. All of this positive momentum is evident in our full year results. For the full year 2022, we grew our North America iLottery business revenue organically by approximately 16% year-over-year. Importantly, growth has not confined to North America during the fourth quarter. In Europe, we experienced growth across our key markets as well, where the year-end holiday season and marketing activities seemed to have picked players interest. We ended the year with terrific momentum and continued to see great progress at an account level as we work to carry that momentum into 2023. As the calendar turns to 2023, in January we formally entered into a joint venture agreement for NeoPollard Interactive and amended our Michigan JV agreement with Pollard. These agreements will help reinforce the leadership position and continued success of NPI and its customers, of which we are so proud. Further, the agreement provide us with the flexibility to pursue future business opportunities in North America by ourselves should we choose so. This flexibility allows us to assess the specific facts and circumstances of each relevant opportunities and consider a path forward that makes the most sense and brings the most value for our shareholders. We see these agreements as the natural evolution of both our partnership put forward and the markets in which we operate. NPI's day-to-day operation and strong performance remain unchanged. And collectively, our primary focus is to provide continued support to the growth and success of our market-leading customers. Turning into recent news. As I mentioned briefly in my opening remarks, last week, we shared some very exciting news about our entering the Brazilian market. We launched LotoMinas' iLottery and online sports betting in Minas Gerais, Brazil's second largest state with 21 million people, together with our partner, the local lottery operator, Intralot do Brazil. This is the first launch in Brazil of a full online offering across iLottery and online sports betting, fully approved by Loteria Mineira the official lottery regulator in the state. We see this as a groundbreaking opportunity for us as it positions us for future lottery and sports betting opportunities, which are now being widely considered by state lotteries in the country. Being selected as the technology and services partner is another great example of what we believe will be many that demonstrates the advantages of the Aspire Group acquisition. In this instance, we integrated our iLottery solution with B2B sports betting solution, complemented with the Aspire Core managed services. No doubt the collaboration sets us apart from our competitors and in our view, was key to winning the contract. Given we are the first in the market, we intend to be very deliberate and measured in our approach as we ramp, learning these new market dynamics. We are focused on getting this right and are very excited about the opportunity over the long term. In terms of additional new markets for iLottery, we see traction building up in various places across the globe with business opportunities in the U.S., including West Virginia that has an active public procurement process as well as in Asia Pacific, plus a few anticipated in Europe in the next 2 to 3 quarters. Turning to look at our iGaming front, we continue to make great progress, both in the U.S. and internationally. In iGaming aggregation and content, we had significant success over the last few months having signed 8 new deals during the fourth quarter and an additional 6 so far in the first quarter of 2023. In the U.S., we launched games with BetMGM and Caesars while reaching deals with others. Outside of the U.S., we greatly expanded our aggregation platform with these in a few markets. One of them is our partnership with Betway which includes content and aggregation for its U.S. operations. In Alberta, we have continued to launch new Wizards gaming content as well as third-party content through our aggregation platform. We see significant and continued interest in our games across our existing lottery customer base and are now in the process of rolling out in Europe with a few accounts. We anticipate we will see additional similar opportunities going forward. One region that is gaining momentum is Latin America. During the fourth quarter, notably, we recently went live in a new market, Argentina through a partnership with Andes Group that is regulated in Buenos Aires. Going forward, we see Latin America as a growing region for our aggregation and games, particularly in Mexico and Colombia, where we have gained strong positions. In the Aspire Core business, providing full suite iGaming solutions and services. We signed a few new brand partners in regulated markets, including an important deal that we have announced subsequent to quarter end. That deal is with leading U.K. land-based casino operator, Metropolitan Gaming, to provide our full suite of iGaming solutions. We see this deal as one that speaks to our strength in successfully delivering everything land-based gaming operators need to branch out into the online gaming universe while leveraging their unique player base and assets. In sports betting, we signed several new deals, one I will call out that is interesting is PickWin in Mexico, there still is another great demonstration of the full group synergies we can bring. In this instance, BtoBet was able to go live with its online sports betting solution to an existing integration that Pariplay already had with the operator for its aggregation platform. Finally, it is also worth mentioning on the iGaming front, that during Q4, the World Cup in Qatar provided growth opportunity to our business through solid product and operations, as sport betting performance grew more than 30% year-over-year in the online sports betting parts of our gaming business. To conclude my remarks, it has truly been a transformational year for NeoGames across all our businesses. We are very well positioned to continue executing on our strategy and are excited about the future. With that, I'll now turn the call over to Raviv.

Raviv Adler: Thanks Moti. Before I get into the results, as a reminder, when we discuss our results, I would point out that total of our iLottery business in North America operates through our 50-50 joint venture in NeoPollard Interactive, or NPI, except in Michigan, which is reflected in our main company revenues. Our contracts in Virginia, New Hampshire, North Carolina and the province of Alberta run through NPI. Except for the NPI contracts, we conduct all of our business through NeoGames. As the results from an accounting standpoint, as many of you know, to generate revenues and earnings through our wholly owned operation and through our equity interest in NPI. Now turning to the results. Moti mentioned, we ended the year with very strong momentum across our entire business. During the fourth quarter of 2022, our revenues as reported on the income statements, which excludes our share of NPI revenues was $69.2 million, of which $54.8 million is attributable to the revenues from Aspire Global business. Excluding the Aspire Global contribution, our results of $14.5 million represents year-over-year growth of 18%. Our share of NPI revenues reached $14 million during the fourth quarter of 2022, up 54% compared to the same period last year. The total revenues and the company's share in NPI revenues was $83.2 million for the fourth quarter of 2022. For the full year, reported revenues were $165.7 million, of which Aspire Global results contributed to $112.1 million. Our share of NPI revenues was $44.5 million for the year compared to $34.1 million in 2021, representing 31% increase year-over-year. The sum total of these 2 numbers was $210.2 million during 2022, representing an increase of about 149% year-over-year. Excluding the Aspire revenue contribution, our combined results, including NPI, are 98.1, representing an increase of 16% year-over-year. For the quarter, our adjusted EBITDA was $18.1 million compared with $7.9 million for the same period last year, representing 129% increase. When considering the NeoGames' core iLottery business, we saw adjusted EBITDA increased to $12.2 million and margin expand to over 40%. For the year, this brings adjusted EBITDA to $39.7 million, up 19% year-over-year. Further to this, I would like to highlight a couple of notes relevant to our results. As we have discussed on previous call, Exchange rate fluctuations had an impact on performance of the Aspire business, with much of the business revenues denominated in euros or British pounds, FX moves during 2022 muted the revenue growth when converted into U.S. dollars. To provide better transparency on the strength of the business independent of currency moves, we have again included a table to show the business revenues growth on a constant currency basis in our earnings release. For the fourth quarter, Aspire Global revenues of $54.7 million reflect 27% growth when measured on a constant currency basis. This growth, however, is offset by 14.6 decrease caused by impact of foreign currency exchange rates. In addition, new to this quarter to our press release is stable highlighting our adjusted earnings per share. During the fourth quarter, our EPS was impacted $0.24 per share due to the amortization of intangible assets related to Aspire acquisition. Our adjusted EPS disclosures is intended to offer investors a view to what our earnings power looks like, excluding this noncash recurring amortization charge net of tax impact. Turning to our balance sheet, we ended the year with $41.2 million of cash and cash equivalents. At quarter end, our outstanding debt was approximately $209.2 million were unchanged based on the Blackstone loan fee basis of EUR 200.8 million. Our weighted average interest rate was 7.44% and would have 33.5 million shares outstanding. With respect to guidance, a quick reminder on a key matter we have discussed since announcing the Aspire deal over a year ago. Recall that Aspire Global contracts is commercial terms that dictated the Aspire Core revenues being recognized on a growth basis. This is different from the NeoGames' business where contracts dictate revenues is recognized on a net basis. This historically resulted in higher revenues, but lower margin for the Aspire Global business. As we explained last quarter, we have been working with Aspire Global partners to adjust the commercial terms of the contract to better in line with the rest of our business. We're pleased to update you that contracts representing approximately 87% of the Aspire Core full year 2022 have been modified to reflect new commercial terms and will be accounted for a net basis effective January 1, 2023. We believe this will improve the clarity of our results in the long term and our Aspire segment. We'll now report revenues more in line with our other segments. As always, we strive to provide shareholders with the clearest picture of our results as with progress into 2023. Two points to keep in mind. First, 2023 revenue guidance reflects the change to net which will distort year-over-year comparisons on top line as 2022 will still reflect the prior method of gross revenue recognition. Second and most important, this change has no effect on our reported EBITDA or the amount of cash the business generates. Obviously, the change will show up in higher adjusted EBITDA margins. Reflecting this change net from gross, the company expects revenues and the share of NPI revenues interest to be between $235 million and $250 million. Assuming a like-for-like basis to prior year's guidance specifications, our 2023 guidance would be between $323 million and $350 million, reflecting a 10.4% increase year-over-year at the midpoint when compared to our pro forma results for the year ended December 31, 2022. With that, operator, please open the line for questions.

Operator: [Operator Instructions]. Our first question today comes from Jeff Stantial from Stifel.

Jeffrey Stantial: Maybe starting off here on the Aspire business. Aspire Core was a lot stronger than we had anticipated going from a 6% constant currency decline last quarter to 28% growth this quarter. Can you just expand a bit more on what's driving that inflection as we look to 2023? Are there so any headwinds aside from FX that still work into that segment, whether that's regulatory changes, opco comparison or anything else, or should we more clean from a comparison perspective?

Mordechay Malool: Jeff, Aspire has indeed delivered good results, and that's purely due to execution on solid operations. One of the things that affect was the World Cup part of Aspire's business is sport betting and they actually saw that contributing to the way that the business grew and converting players into the other parts of the activities. And they had a few good partners in the mix that have pushed quite significantly on marketing in Q4. Some of that was done with the assistance from Aspire that we made a little bit later. So I'm putting aside FX changes because they are hard to predict, but we do see that, that business is performing well.

Jeffrey Stantial: Great. That's helpful. And then switching gears a bit. Consolidated EBITDA margins down about 200 bps quarter-on-quarter. I'm running some math on Raviv's commentary on the iLottery piece seems to suggest that was mostly driven more by the Aspire side of the business. Can you just talk about what's driving that? And sort of how we should think about margins more just directionally into 2023, given the accounting changes, the mix dynamics and some of the other puts and takes here?

Raviv Adler: Yes. So you are right to say that we've seen a quite strong EBITDA margins on the iLottery business during the quarter, way above the 40%. Directionally, we always said that we're happy with the margins ranging between the high 30s to low 40s, and this is where the iLottery business performed in Q4 were significantly positive about the trends on the margins. On the iGaming side, there has been some head -- or sorry, headwinds on the margins, especially with some few one-timers eating the P&L, mainly due to the fact that the Brazil project was launched by BtoBet during the quarter. We've seen some few clouds hits on the P&L on the cost side on BtoBet. But as you probably can imagine, we -- with the change of the accounting from gross to net, we certainly expect the expansion of the margins going forward for the iGaming business during 2023.

Operator: Our next question comes from Barry Jonas from SunTrust.

Barry Jonas: Fundamentally, it sounds like not much changes today with the new Pollard agreement, but how would you expect things to look different in the future as renewals come up and you may be competing more directly?

Mordechay Malool: I think that first and foremost, we care about the growth of the existing accounts, as I messaged. What we've done simply gives us flexibility. I think for per deal, we will see what's good for the shareholders, what's good for the business. One simple and obvious example that I can give is, for example, as we expand beyond our turnkey accounts, in order to provide content from our NeoGames Studios to other North American lotteries, whether it's in the U.S. or in Canada, we feel that those deals, which have little involvement from operations that NPI is strongest are better pursued directly through NeoGames. And there could be also other deals in the future that are broader than just content that we will pursue directly and independently. What we like about this setup is that it's -- it gives us really a full range of flexibility. Some things will -- we will be able to capitalize on pretty quickly, as I messaged when we see -- we truly see during 2023, quite a few content opportunities that, in our view, can evolve over time to be material. And then later on, as new opportunities coming to market, we will look at them and see what value any cooperation would bring to the table. But the benefit of that flexibility, I think, will already be in place in 2023 in some deals.

Barry Jonas: Great, great. And then just last quarter, you noted that pickup rates into the large November Jackpot were perhaps lower than in the past. Just curious if you've seen any changes in that, in regards to large jackpot in January? And I guess with that, I'm curious, just given the strength we are seeing in draw base, if there's a huge difference in your overall growth rates between eInstant and jackpots. sorry, Sort of two questions in one there.

Mordechay Malool: No problem. First of all, the jackpot in Q4 in November was significant because it has reached a level that gained media attention. And even with the elections that took place almost right on the time that jackpot was hit, it was hard to carve media attention. But just because it hit ever largest average export of Power Ball it did get to levels that drove the market forward. And then, of course, coupled with the good games launches that we had. So there was solid performance, not only on the draw game side, but also on the eInstant side. Well, we're not guiding on Q1 results. I could say that we do see that the level of jackpots needs to reach a very high note in order to pay attention. And the one that was in January was not necessarily one of that kind that reached the same level of attention that previous ones had.

Barry Jonas: Wow, $1 billion isn't huge anymore quite kind of change.

Mordechay Malool: You guys need something to get you out of bed, which is more than $1 billion now.

Barry Jonas: And then I guess just a follow-up, like is there a huge difference in terms of what you're seeing on eInstant's draw base? Or is draw-based really driving players into eInstant? Just curious about the trajectory of growth between the 2 businesses. .

Mordechay Malool: When we reached jackpots that are very interesting to the market, such as the one that did happen in November, they bring massive traffic that then is nicely converted by our customers to playing eInstant. And that's why it followed through to the rest of the quarter last year. I think that at the same time, the fact that we are getting to the market with, time and time again, with good titles that are launched and are spread across our accounts, allows us to also grow in between jackpots by leveraging the databases that we collected during jackpot's times and with good marketing by our customers' teams.

Operator: Our next question comes from David Katz from Jefferies.

David Katz: I just wanted to take a big picture look at the U.S. versus rest of the world. Obviously, U.S. you're, in some respects, reliant on more legalizations and those opportunities. But when we look out, call it, 2 to 5 years, how do you think it breaks down for your company in terms of rest of the world versus U.S. from an earnings perspective?

Mordechay Malool: Dave, glad to have you with us. When we look at the iLottery parts of our business, we feel that now and into the very long future U.S. will continue to be the majority of our revenues, even if it is dependent on more states authorization. We do feel that, that is a pace that is coming. As we messaged, reminding you that we grew organically 16% year-on-year on our lottery accounts, we still think we can continue to grow the business while we ramp up additional markets. And at the same time, we do see the distraction in the market. West Virginia is in a public procurement process. We see 2, 3 other states that are in active discussions in legislation cycle is about how to authorize iLottery. So we feel that the U.S. will continue to be on the iLottery front in the short term and in the longer term, our biggest market. That doesn't mean that we do not see opportunities in other regions around the world but we are selective about them. We are going into markets that we feel has scale. So Brazil is a good example because it's not only the first state that we have launched there, but we think there's scale in that market in order to replicate that into other states in Brazil. And when we look at regions such as Asia Pacific that has 1 or 2 opportunities that are interesting for us in the next 12 to 24 months, Europe that has some emerging ones, so we're selective about it and we're trying to pick the ones which suggests revenue levels that are in line with the revenue levels that we are seeing also from the North American market. On the iGaming side, David, it's the opposite. Obviously, our iGaming business on all of its 3 business units, has predominantly the business outside of the U.S., although Pariplay in aggregation and content is making very good strides into North America and the revenue share in their revenues of North America is growing rapidly. It could very well be that in that specific business line of content and aggregation, U.S. or North America overall in the next 3 to 5 years will grow to be significant. When I say significant, I can tell you now that it's more than 50% or not, but it has an opportunity to be pretty significant. As far as global business for the moment, it's predominantly in Europe, and they will venture out into other areas as well. And BtoBet is currently strong in Africa, making strides into Europe and has a growing market in Latin America. So it will take time before U.S. will be a big market for the sports betting even if we think we will be successful in bringing North American dealers to BtoBet even during 2023 in some scenarios. But it's the flip side of revenues when you look 5 years into the horizon. I hope that answered the question.

Operator: Our next question comes from Chad Beynon from Macquarie.

Chad Beynon: I know you just kind of outlined more of a medium-term outlook. But just as we think about the 2023 revenue guidance growth of 10%, wondering if you could help us just a little bit more, think about kind of what's included in that. Note that you talked about an exit rate in the fourth quarter that was very strong, and then you listed a number of new opportunities that will provide revenue growth, including Brazil. So at the low end of your guide, are you kind of assuming that everything that's already been agreed upon is in that? And then, yes, what's the difference between the low and the high end?

Raviv Adler: Yes, Chad, thanks for the question. So just to flush out, the 10% increase is on the midpoint. So there's certainly potential for higher range. And the band moves from low to high is basically dependent on a few items. First of all, it's how successful we were going to be in Brazil, which was recently launched 2 weeks ago and yet not enough signs to forecast. The second one is a few new contracts that has been signed recently and announced both by Pariplay and Metropolitan in U.K. by Aspire. So there, it's too early to say whether it's going to move us between the low end of the band to the higher end of the band. And generally speaking, as you probably know, we don't include any contracts on the guidance, which is not yet signed when we start the year. So there's always an optionality for new contracts being signed during the year and generating revenues, which obviously will push for the higher end of the guidance. I hope that clarifies.

Chad Beynon: Yes, that's perfect. And then just in terms of the balance sheet and leverage, what's kind of the right leverage on this business? And even though you have an end-to-end solution on the tech side, are there still opportunities out there where you would consider adding on to what you're offering? Or how should we think about capital allocation?

Raviv Adler: Yes. Thank you, Chad, for that. So we've -- we always say that we feel comfortable with -- to run this business on a leverage ratio, which wouldn't be significantly higher than 3. We're happy where we landed in the end of 2022 in terms of leverage ratio, which is a bit lower than 3. So this is within the guidance that we've got from our Board. And relative to M&A opportunities, I'll refer to Moti to answer.

Mordechay Malool: Yes, Chad. Definitely, we're always looking at opportunities in the market. We still think that there's good ways to grow from nonorganic growth and to capitalize on opportunities that in the current dynamics of the market may present themselves, and we're looking at them actively. At the same time, we're looking at 2 or 3 things. Number one, as Raviv said, we do not necessarily look into growing our leverage in order to do those deals beyond where it is now, so which will probably permit that we would do, let's say, tuck-in acquisitions. And these are ones that we are looking actively to pursue in a disciplined matter. Another matter that we have to balance into all of this is that the unforeseen nature of how interest rates will continue to perform, and that's why we have to be also disciplined and make sure that we are taking enough margins in the way that we manage our cash to be ready for any scenario. So the bottom line of all of this is that, yes, we do see that there are opportunities in 2 or 3 areas that we have discussed a few times with the market in the past. But for the moment, we would see them mostly as tuck-in acquisition that would enhance our business in specific areas.

Chad Beynon: That's great. And then one more quick one, if you don't mind. Could you just kind of help us think about the Brazilian outlook? Are other states considering doing what was kind of just announced? Is this potentially a test case? Just wondering what the conversations have been like in the other markets. And that's all for me. .

Mordechay Malool: Yes. That's exactly the way that we see that, that it's -- I wouldn't say a test case, but it's a role model. It's a first case, which we are very proud of, and we're working very hard with our local partner to make that as successful as we can. Yes, there are active processes in at least 3 other states in Brazil. Some of them would, first of all, pursue concessions that would run lotteries. Others are considering to split sports betting licensing regime or selecting sport betting operators separately from lotteries online. It really depends on the state. But there are at least 3 states, probably even closer to 5, which have formed lottery regulation authorities within them and have messaged to the market that during 2023, they are planning to come to the market with tenders to select the way that they would approach that into the future. You could put Rio de Janeiro in that bucket, Parana, even Sao Paulo that had a bid, which they pulled from the market before the elections, and they are intending to come back with that, and 2 or 3 other states. We're definitely using the fact that we are first there. I can tell you that when I was in Brazil to celebrate the go live, we had participation from other states to look at that very carefully, and we keep getting a lot of good questions in order to learn the dynamics of what we've done there. And I think we're also setting the role model to the other states when it comes to player protection, social responsibilities, responsible gaming, payment solutions and so on that regulators take a very close look at and we learn from. And this is what we've done as you recall, in the U.S. market, which knock on wood then replicate the success to other states, and this is what we intend to do also in Brazil.

Operator: Our next question comes from Shaun Kelley from Bank of America.

Shaun Kelley: First would just be kind of going back to, I think, the beginning of Chad's question, as we think about the 10% midpoint growth in guidance. Can you just give us a little bit more color on what sort of the underlying, let's call it, same-store increase -- or same-state increase expected in iLottery as we look out for 2023? And kind of what's the impact of that big jackpot or top potentially tough comp in the fourth quarter?

Raviv Adler: Yes. So on a same-store basis, on the iLottery side, especially in the North American market, there has been -- so as Moti mentioned, all the portfolio has -- grew up year-over-year by double digits, 16%. There are -- there have been 2 states or 2 jurisdictions that were outperformed, standing out from the crowd to some extent in terms of growth rates. We certainly believe that those can continue to strive also into 2023, and they will obviously push the entire business to the higher end of the guidance. In terms of content opportunities, we have few deals on the pipeline, which has not yet materialized so far. But we believe those will be launched during 2023 and also has a good potential, given the very good titles that have been launched recently to push the revenues even further into 2023.

Shaun Kelley: And then my follow-up would just be on the -- a little bit on the expense side. As we look at sort of what happened, obviously, the Aspire numbers came in much better than we were expecting. But the sales and marketing and G&A side was also a bit higher than expected. I think you called out a couple of onetime items. Could you quantify that? And then maybe big picture, could you help us think about sales and marketing/G&A, maybe as a percentage of sales as we look out in 2023, what's kind of the right ratio or way to think about organic growth in that expense line year-over-year?

Raviv Adler: So yes. I stated earlier on this call, we've had a few one-off items, both on the general as well as the sales and marketing. I can point out G2, I can point out World Lottery Congress in Vancouver, which we have participated as exhibitors that has been significantly push forward the numbers from a cost perspective. This is also expected during Q1 given that we've participated in ICE in a very significant way earlier on in February. And if you're looking on a trends or ratio, I wouldn't take Q4 as a test case relative to the percentage of sales. But rather Q3 to Q2 are -- could reflect better on the trends of business without any one-timers on a go-forward basis.

Operator: And our next question comes from Steve Pizzella from Deutsche Bank.

Steven Pizzella: Just kind of a little bit of a bigger picture question, given some of the kind of the economic headlines and outlook out there. Kind of the 3 verticals with the iLottery, Casino and OSB, can you kind of talk us how you think about you to respond in an economic downturn? And which kind of do you think you would see the impact in first?

Mordechay Malool: Lottery has historically been pretty resilient to previous periods of economic downturns. And I don't think that we have reasons to believe that this one will be different, even if this one is different in many other macroeconomic levels. We're definitely watching, but we haven't seen anything there. I would say that for the moment, we haven't seen also anything on the iGaming and online sports betting side. I think it's pretty consistent with what others have been messaging in the industry as well. I cannot necessarily put a finger of what we think will, as you said, be it first because there hasn't been a historical benchmarks for online gaming and online sports betting so much in economical crisis. As you could look at 2008 -- and in 2008, there was a bit of a downturn in those businesses, but it rebounded pretty fast. So to just a quick summary, lotteries were not expecting much. And on the others, for the moment, we're not seeing anything. We're watching if it will happen, the history shows that if it will happen, then it has good reasons to rebound.

Operator: And ladies and gentlemen, with that, we'll be concluding today's question-and-answer session. I'd like to turn the floor back over to management for any closing remarks.

Mordechay Malool: Thank you. And thank you all for joining us on the call today. And everything we've shared with you, we hope that you are as excited about 2023 as we are. The outlook looks really promising for us. And we're also very excited to have our first Capital Markets Day next week on March 14 in New York, and we're inviting everyone to join us either on-site or remotely. Thank you all, as always, to show continuous interest in our company and our story.

Operator: And ladies and gentlemen, that will conclude today's conference call and presentation. We thank you for joining. You may now disconnect your lines.