Release Date: November 08, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Interactive business revenue increased by 40% over Q3 2023, with EBITDA rising by 47%, indicating strong growth in this segment.
- The company achieved an EBITDA margin of 38.6% in Q3, moving closer to its 40% target.
- Cash balance increased significantly from $23.5 million at the end of Q2 to $36.5 million at the end of Q3, reflecting improved cash performance.
- New contracts with major players like FanDuel and Loto-Québec are expected to expand the company's market presence.
- The introduction of new products, such as the Valiant cabinet for the North American market, has received positive feedback and is driving new orders.
Negative Points
- Virtual sports segment is impacted by the decline of its largest customer, affecting overall growth in this area.
- Delays in customer resource issues, technical integrations, and regulatory approvals are slowing down the rollout of new products.
- The company faces challenges in expanding its virtual sports customer base, particularly in North America, where major players like DraftKings and FanDuel are not yet on board.
- The transition to a fully outsourced manufacturing model involves shutting down the manufacturing facility in Wales, which may present operational challenges.
- Despite growth in the interactive segment, the overall market share in some regions remains limited due to regulatory constraints and competition.
Q & A Highlights
Q: Can you comment on the expected impact of various growth drivers for 2025, such as the William Hill vantage cabinet uplift and interactive growth?
A: (Unidentified_2) We have several growth drivers, including the Hills contract and organic growth in the interactive business. We're comfortable with the consensus for 2025, but we may provide more explicit guidance early next year as things become clearer.
Q: How do you view capital allocation between M&A and potential share repurchases given your expected cash position?
A: (Unidentified_2) Our balance sheet is strong, and we can comfortably debt finance acquisitions. Using cash for buybacks and enhancing growth through acquisitions are not necessarily in conflict.
Q: Can you provide more color on the uplift from product refreshes in the gaming market, specifically with William Hill?
A: (Unidentified_3) We expect a 12-15% uplift from the William Hill conversion to vantage, similar to past experiences. Our strategy in North America, particularly Illinois, is working well, with ongoing content refreshes driving performance.
Q: Could you discuss the bespoke business model in the interactive segment and its pricing margins compared to off-the-shelf products?
A: (Unidentified_3) We aim for a blend of bespoke and standard products. Bespoke content involves upfront fees and takes longer to develop, but it offers unique opportunities for large customers like Fanduel.
Q: What are the challenges in expanding the customer base for virtual sports compared to interactive content?
A: (Unidentified_3) Challenges include regulatory approvals and the need for major North American operators like DraftKings and Fanduel to adopt virtual sports. Brazil presents a significant opportunity due to its favorable regulatory environment.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
