Published: March 12, 2023

Strong year for NeoGames as 2022 revenue grows to $210.2m

 ·35 min read

Mordechay Malool; CEO, Co-MD & Director; NeoGames S.A.

Raviv Adler; CFO; NeoGames S.A.

Barry Jonathan Jonas; Gaming Analyst ; Truist Securities, Inc., Research Division

Chad C. Beynon; Head of US Consumer, SVP and Senior Analyst; Macquarie Research 

David Brian Katz; MD and Senior Equity Analyst of Gaming, Lodging & Leisure; Jefferies LLC, Research Division

Jeffrey Austin Stantial; Associate ; Stifel, Nicolaus & Company, Incorporated, Research Division

Shaun Clisby Kelley; MD in Americas Equity Research & Research Analyst; BofA Securities, Research Division

Steven Donald Pizzella; Research Analyst; Deutsche Bank AG, Research Division

Jacques Cornet; MD; ICR, LLC



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 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 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.


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