Good afternoon, and thank you for joining the BetMakers Technology Group Ltd Q2 FY2023 results briefing. I'm Jane Morgan, the Investor and Media Relations Manager. From this morning's ASX release, investors will note that there have been several board and management changes. Today, I am joined by our Executive Chairman and President, Matt Davey, our Non-Executive Director, Nick Chan, our Chief Growth Officer, Todd Buckingham, our CEO, Jake Henson, and our CFO, Anthony Pullin. The team will be providing you with an overview of today's Q2 FY2023 results, as well as engaging in a Q&A session. To ask a question throughout today's briefing, please use the Q&A function at the bottom of your screen. Todd, I'll hand over to you.
Thanks, Jane. Welcome to our quarterly results and management update. There's obviously a lot to cover off with the Appendix 4C and company achievements for the quarter, along with the announced board and management changes which have occurred after our strategic review. For anyone that's followed the story, you'd understand that we have been in a very strong growth phase, opening up opportunities both domestically here in Australia and also globally with our footprint now in many locations around the world. The focus for our core business is now going to be on optimization and execution, while the global opportunities we've created and continue to develop, will now operate under a more structured and focused and agile team. I'd like to congratulate Jake Henson on his promotion to CEO.
He'll do a fantastic job, and I look forward to working with him in the years ahead. I'd also like to thank Nick Chan for his time as chairman, for his support to me and in my time as the CEO and obviously his commitment to the company over the years. To the shareholders that have been here from the start and helped build the company to where it is today, thank you for your continued support to me personally and your support to the company through good times and bad, and I look forward to the wins ahead. While I'm signing out as CEO, I still remain a 100% committed to the business and the company, and I look forward to delivering on the global opportunities that we've created and continue to open up.
Firstly today, we'll take you through the quarterly highlights and financials, along with some operational updates. Then we can open up to some questions in regards to the next phase and the management changes that we've implemented to capitalize on these opportunities over the next 12-24 months. With that, I'll hand over to Jake, who will cover off on the highlights from our previous quarter. Our new CEO, Jake Henson.
Thanks, Todd, and thanks for everyone for joining. Yeah, as mentioned, I'll run through some of the highlights from the quarter before Anthony Pullin will take you through a bit more of the detailed financial side. Key takeaway at the top was record cash receipts for the quarter, which was up 13% on the previous period to AUD 26.9. We obviously launched a tier one brand into the Australian market here in Australia, underpinned by our new BetMakers' next generation technology. Over time, this technology will become the backbone to what we do in global markets on the platform and trading operations side, which is really exciting. We had the also, the successful launch of the Global Tote Hub via our Alderney license. It's now operational with two key customers.
Obviously a key focus of our upcoming half will be to grow upon this area, which we'll touch on later. We had the acquisition of Punting Form, this is primarily to bolster our MTS and pricing capabilities and also to enhance our product suite for our parimutuel and premium customers globally. We announced the deal in December around Racing.com and the Victorian and South Australian Thoroughbred Vision. In addition to that, we've also done a deal with Greyhound Racing New South Wales to bring on that streaming to our platform, which will enhance what we offer to the Australian market, those existing platform and MTS customers. We look forward to rolling that out over the next quarter.
In December, we also launched Fixed Odds in Jamaica at Caymanas Park, the first Fixed Odds betting system launched in the Caribbean. On track at this stage, and the signs in terms of handle alongside the parimutuel are very encouraging. For us, our next step is to roll out the retail venues, which is occurring as we speak. From there, the digital offering, so the mobile and desktop offering. Finally, the big one to call out as a business was our ISO certification. For those that don't know, this is a big lift to get done because it's basically the globally recognized stamp in terms of governance, risk mitigation, and security.
As a business, not only do we think it was essential to where we are now, we think it's an essential piece of taking us to the next level, putting us in a position where we can do , big deals with tier one customers. Those customers can have the comfort that we have the right systems and processes internally to be able to deal with everything that comes with taking on business of that size. We completed the quarter's closing cash balance at AUD 61 million. With that, I'll hand over to Anthony for a little bit more detail on the finances.
Thanks, Jake. As Jake mentioned, I'll run through the Q2 Appendix 4C, in a little bit more detail. I think between Q1 and Q2, we're seeing sort of consistent themes in what's coming through those operational cash flows. As Jake mentioned on the cash receipts from customers, it was a record quarter for us with AUD 26.9 million in receipts, which is up 13% on Q1 and 9% on the prior year. From these receipts, we're seeing continued strong receipts from our platforms and Managed Trading Services division, as well as from our GRN division around the content distribution. Going back to, when was it? July this year, we acquired the PENN Entertainment content distribution.
Over the last 6 months or the first 6 months of FY 2023, we've sort of gradually built out, built up the rollout of that, and we're starting to see some of that growth in Q2 cash receipts results. As I said, from a quarter-on-quarter perspective, fairly consistent Q1 with about AUD 5.9 million in net cash, operational outflows for the quarter. For us, there's a bit of noise in there. You know, there's a few one-off items. There's still some residual STIP payments around, tax and super. We've got some annual charges, licensing fees, insurance premiums and alike.
Fundamentally, for the last first two quarters of FY2023, we've seen a sort of inflated cost base, which has been largely driven by the investment we've been making as a company into getting some of these new operational products into the market. Namely, the Next Gen platform, which is powering betr, and then also other opportunities like the Global Tote Hub. Look, while it's been a relatively expensive six months for us, we're quite happy with the operational gains that the company's made in that time. We think that puts us in quite a good position for capitalizing on growth going forward. I guess as announced in this morning's announcement, the company's now sort of focused on normalizing that cost base and then shifting towards positive operational cash flows for H2.
We've already made some pretty good gains in terms of cost down and normalizing that cost base. It will remain a high priority for the company and for the management to continue to work towards that, while some of these operational, some of these revenue items start to materialize in the future. I think lastly, as Jake touched on, we finished the quarter with AUD 61 million in cash and no debt. We're in pretty positive position from a balance sheet perspective. I'll now hand across to Nick Chan to run through some of the management changes.
Here you, Nick.
Are you there, guys?
Yep.
Yep.
Thanks, Anthony. We announced some changes today that the board, obviously working with management, have concluded that a restructure to create absolute clarity and focus to deliver growth, the growth plans for our shareholders would be the best way forward for the company. These changes are broadly Matt Davey appointed to the board in the role of Executive Chairman. His role will be to provide strategic direction, oversight and prioritization of our strategy. I myself will remain on the board as a Non-Executive Director. Todd Buckingham moves from his role currently as CEO to Chief Growth Officer, with a focus on developing and executing on his international opportunities and specifically our growth opportunities.
Jake Henson is promoted from COO to CEO, and his focus will be on driving the operational excellence of the business and optimizing profitability in the businesses that are requiring, at the moment, scale to deliver. Let me introduce and congratulate and welcome back, Matt Davey, now as President and Executive Chairman.
Thanks, Nick. Look, I couldn't be more excited to be rejoining the business. T he company's in good health with over AUD 100 million a year in revenue and net cash balance on the balance sheet and 0 debt. I think the company is incredibly well positioned. We have the ability to be able to drive growth on a, both a domestic and international platform, and the team have done a wonderful job of getting us into this, into this position. When I look around the world, and obviously the macroeconomic environment has changed, the cost of capital has increased. I t's now very prudent on management to drive operational efficiencies into the business, and I'll be working with the team to do that.
In my experience, when a company goes through this rapid growth, as the company has experienced over the last three or four years, it's never in a straight line. There are often from time to time, opportunities for us to tighten up how we run the business and improve the operational discipline around how the company is structured. That said, we're not here just to drive operating margin. I think the broader promise of the business is on the international growth, and those opportunities are as strong and present today as they ever have been. I think Todd and the team have a phenomenal opportunity now to really lean into those opportunities without any distraction from the rest of the business. I'm very excited about the structure that we have achieved today.
T he support of the board to get us here has been fantastic, and I look forward to working with both the board and the management to deliver fantastic results for you, our shareholders. With that, let me hand back to Jane.
Thank you, gentlemen, for the update. We've had quite a few questions come through, so I'm gonna jump into them. Matt, I might give this one to you first up. The share price performance has been pretty disappointing. What is the company gonna be doing to address this?
Thanks, Jane. Look, I think misery loves company. I think if you look around the world, most of tech-focused public companies have all suffered some form of price contraction. We certainly have not been immune to that. Some of that is justified and some of that is not. Our focus is to ignore the market. We do not care about day-to-day fluctuations in the stock price. Our core focus will be on the 2 kind of pillars that we have articulated today. 1 is operating core discipline and showing the operating leverage that the company can deliver. Coming from a revenue line of AUD 100 million a year, I think there's a great scope around that.
Two is executing on the growth opportunities we have, particularly around Fixed Odds betting internationally as well as the Global Tote. I think we have a phenomenal opportunity to deliver results there. If we do that over the next year or two the market will reward us with the right price around our stock and the valuation of the company.
Thank you, Matt. Just continuing on with that then. Given the current share price, do you consider BetMakers and acquisition targets, and is this why you've been brought on?
Look, as a business, it's incumbent upon the directors to always entertain any kind of conversation that could be accretive to shareholders. That said, as I mentioned in the outset, the company is in root health. We have a very strong revenue line, we have zero debt, we have cash on the balance sheet. My sense is our focus is on our own organic growth and delivering on the opportunities we have today, as well as looking at accretive opportunities if they present themselves. We are certainly not looking to shop the company. We think that there's enormous potential to deliver value creation just from what we have today, from the collection of assets we have, and where the company is positioned in this global market.
Thank you, Matt. We've had this question come through a few times, actually, just on the status of the share buyback. With AUD 61 million of cash in the bank, are BetMakers shares the best things to do with this cash?
In terms of the buyback, we are reviewing our capital allocation policy. I think we'll get back to the market in terms of, whether we move forward with that or not. At this stage, I believe that is on pause.
Thank you. Another one that's come through quite a few times. Just in regards to the short interest, it remains very high with a large portion reportedly associated with people very close to the company. This webinar attendee has asked in particular, "Are any executives or board members shorting stock? And what's your plan to address the shorters?
Look, for one, it's a policy that executives are not able to short the stock. That we wanna be very clear about that. Two, look, I've been in the public markets for over 25 years. Shorting comes and goes. F rom our perspective, we are going to ignore the noise and focus on delivering results. If we do our job, then we will watch the market provide the support that we expect to see in return. I am not interested in day-to-day conversations around short interest. If we deliver as we expect we will, that will not be part of the conversation we expect to have with the market.
Thank you. Anthony, this one's here for you. AUD 6 million operational loss for the last few quarters. For the half, it's AUD 12 million. How do you bridge the gap to breakeven for the second half? Do we expect it from revenue growth or cost out?
Yeah, sure. Look, as we noted, we're working towards positive operational cash flows for the second half of this financial year. I think that probably primary focus for ourselves is to bridge that gap from a cost perspective, at least initially. We've made some really good progress in the last two months or so. Really, we had a large cost pinch, for want of a better word, as we launched some of these products, and then into Spring Racing Carnival, which is ordinarily an expensive time of year for us. I think as a management team, we're focusing on getting back to that breakeven point through cost initiatives.
As the guys have touched on, there's a number of growth opportunities more from a revenue perspective, which we hope will deliver us the upside from that, from that solid base.
Thanks for that, Anthony. Jake, this one's for you. You mentioned that the intense competition in the Australian wagering market is impacting on Gross Gaming Revenue and therefore BetMakers revenues. Aren't our revenues based on Net Gaming Revenue? What would be the revenue benefit if the conditions were to return to normal?
Yeah. Thanks, Jane. I think the way to look at that is your net costs, that I guess bridge the gap between gross and net from a wagering perspective, are relatively fixed. These could cover things like the GST or the point of consumption tax or fees paid to racing and sporting bodies. The part you can control, I guess, as a, as an operator, and us as someone who facilitates that operator's being, is, the gross margin you make on the bets actually struck. Therefore, that becomes a primary focus for us, is, you know, helping the operator with the parts that they can control directly, be that, more efficient pricing and risk management, et cetera.
I think to cover off on that second piece we would deem any sort of increases in margin to be material, but they're also beholden to what happens at the net level and the macro factors. I mentioned point of consumption, you know, product fees and taxes can go up as well. All these things will factor into how the operators position their product in the market, and then further to that, what products they position in the market. I think going forward, as those taxes normalize a little bit, I think operators will invest heavily in higher margin products. We're seeing that shift in sports and racing through the introduction of Same Game and Same Race Multi over the last 6-12 months.
Thank you. Just bear with me. There's quite a few questions coming through, so I'm jumping around. Jake, another one for you actually. Looking at the betr product, it's sti ll a lot lower than other competitors. Is this being worked on?
The platform's under 24/7 development at this stage, so not only is it in a production state, you know, we're certainly not content of where it's at. We knew we were on a journey to develop it into, you know, the tier 1 global product it needs to be. Certainly everything gets benchmarked. Everything from the user experience to page load times, the product offering, to speed of prices, everything. Certainly we're aware of certain bridges we need to close. That's what we're committed to doing.
Thanks, Jake. Another one for you. Can you comment on the potential betr acquisition of PointsBet's Australian business, and what would that mean for BetMakers?
Look, I can't comment directly, for obvious reasons, any conversations between those two parties. I think it's important to point out that both PointsBet and betr are existing customers of us, on differing levels. Certainly, two customers we're cheering for in their respective markets they operate within. I think this question was geared to more on the betr side and the one thing I can point out is our arrangement covers a broad range of services, including our platform trading and management. These could be extended should they complete any form of M&A in the future, be that, you know, in their current conversations or future.
Thanks, Jake. One for you, Todd. Can you provide an update on the U.S., particularly on the Fixed Odds market? Another one that's come through. Is MonmouthBets still on track to launch mid-2023?
Yeah, we expect the digital platform to launch in the early part of this year. Again, I've seen a question come through there in relation to Caymanas as well. The focus for me moving forward in my new role is to get these products out into the market faster, to execute on these opportunities in a more timely fashion. We'll have our own little team that is there to be efficient and a lot more agile. T he expectation is that we'll be launching Monmouth Bets before they before they start the season in May, and then that'll be leveraged into Caymanas Bets as well.
That then creates, obviously opportunities around once you've got these products in the market, then we can leverage that into our other customers and other markets as well, which again, will be a focus of mine moving forward.
Thanks, Todd. Just another one here. When can we expect the rollout of a horse betting product from betr for the tier one online operators in the U.S.?
It comes down to obviously the challenges that we've had, you know, around regulation legislation, and obviously the content owners as well. I think the Monmouth betr app in the market with more content than just Monmouth betr at the momen we've just been betting on New Jersey content within New Jersey on track. To be able to then open that up so that we can have an online, mobile and web version where customers in New Jersey can bet on any content around the world, will open the eyes up to obviously the operators then to be able to offer a really compelling racing product.
Thank you for that. A few questions just on, New York. How confident are we that Fixed Odds is being approved in New York?
New York's not approved. It's going through the legislative process, which is, you know, similar to what we went through in New Jersey. The positives out of it are, you know, Colorado's gone through that already and still working through getting to where it needs to be. New York obviously implementing legislative bill to get past. It is gathering momentum over there. We're cheering for horse racing, Fixed Odds on horse racing and any horse racing in particular to obviously accelerate in the U.S. market. We've our flag in the ground over there. We believe that we're at the ground level. Horse racing, we believe will evolve and quite rapidly.
T his is just another stepping stone, of what needs to happen. I t's a, it's a little bit to go in New York, o bviously the wheels are moving.
Got another one for you. You noted the launch of Global Tote Hub. Which bookmakers are currently betting into this, and what pools are they betting into?
The Global Tote Hub is set up for our tote customers. You know, we've got a number of customers around the world who are small, large, all shapes and sizes, but predominantly parimutuel betting. Global Tote is a parimutuel product. Being able to distribute international content into other markets has been a challenge for racing bodies and rights holders for a number of years. We're uniquely positioned that we now have access to content, and we own our own tote, and we also have customers around the world that bet parimutuel. It makes sense that we can join these together and create a network where, you know, the totes meet the content.
Then it's a pipeline then for other people to bring in their content and other operators to jump on board. While it's in its early stages, all the pieces of the puzzle are there. It's now live. We're doing, you know, some small transactions there. T he exciting thing for us over the next 6-12 months is being able to put those pieces together and introducing our customers into our content that we got.
Thank you. Todd, another one that's come through for you. What is the expecting betting turnover of Fixed Odds in Jamaica?
Look, we're seeing some really good traction there, where, again, we've only launched betting on Caymanas Park at Caymanas Park. Where, you know, the turnover on track has actually exceeded the parimutuel turnover. Ironically, it's actually increased parimutuel turnover as well. It's created a lot of interest. In a very early, embryonic stage, what we are excited about.
Then providing the digital platform where, again, people in Jamaica, in the Caribbeans can actually bet on all content in a regulated form of Fixed Odds from content around the world. Getting racing bodies and rights holders access to that market now in a regulated sense, you know, from in a digital and access to those clients is what we're gonna be focusing on.
Thank you, Todd. One for you, Jake. How is the Caesars parimutuel system going with the rollout, and is this showing in the accounts yet?
The product is now live in Iowa and working really well. Obviously, Iowa only represents a small percentage of the Caesars global reach. What I can say is we're currently going through that licensing and approval process in Nevada, which is Caesars largest market globally. We're working actively with customer and regulator to get that completed. You know, it is a process, but it's obviously something that is well worth the investment, you know, given their reach in the States. We look forward to getting that done this year.
Thank you. There's one here for you, Matt. Excuse me. Sorry. Could Matt please talk about whether betr, sorry, rather, has met his expectations and the opportunity for the platform created by betr to be translated into other markets, including the US.
Look, that's a great question. betr has been a success on pretty much every metric you can look at. I think everybody who's been associated with that has been incredibly proud of the results, both from the team run by Andrew Wenham, as well as from the support from the BetMakers team to achieve probably the best launch we've seen in Australian history. In terms of the technology and the platform, I think this is one of the huge opportunities for the company. One of the challenges for new emerging technology platforms in the sports betting business is to prove that you can handle a tier one operator.
The issue there is sports betting is event driven, when you need the platform to operate, is on the largest sports betting event days of the year. That's difficult for operators to trust in a new platform until they've seen it actually prove it, so it's a bit of a catch-twenty-two. Here, BetrMakers has established a tier one operator, in the Australian domestic market, and we can take those results and use those as part of our sales and marketing campaigns, for tier one operators internationally. I think that's a great opportunity for the business.
Matt, I'm gonna stick with you. There's another one here for you. Where do you see the biggest opportunities for BetrMakers over the next 2 years?
Look, we have articulated those in the press release as well as in the opening today. Opportunity one, we need to demonstrate that we have the ability to show the operating leverage in the business. We need to be able to show good, strong cash flow generated from operations and strong EBITDA margins that are commensurate with AUD 100 million-plus top-line revenue business. The second is we have some amazing blue sky growth opportunities that Todd and the team will be focused on. Those are around Fixed Odds betting on racing in particular. That's not just U.S., but that's truly an international product set.
The vast majority of wagering on racing around the world is on a pari-mutuel basis today. We know through our experience in the Australian market that a Fixed Odds bet product type is incredibly attractive to the consumer base. The second is around the Global Tote. Nobody is in the market with a product like we have, and that has the ability to scale that product like we can. Those are the three kind of key levers that I think if we execute well on those, we will deliver fantastic results for our shareholders, and that will be reflected in the performance of the business and the way the market views us.
Thank you, Matt. Nick, I'm gonna direct this one to you. At the AGM, the chairman seemed to suggest that BetMakers was looking at an acquisition. Is there anything on the horizon? Secondly, is there a plan to pay a dividend?
There's no plans to pay a dividend at this stage, but obviously that's for board consideration at any point. While we're still in this growth phase, I don't believe that that's appropriate. Sorry, what was the first question, Jane? In terms of acquisition?
Yes.
Matt's already commented on that. I think we'll look at, we as a board and Matt and the team as executives will always look at opportunities that are accretive to our business. At this point, we believe we have a platform and a foundation that can deliver revenue growth and profit growth without necessarily through acquisition.
Thank you, Nick. Anthony, we've got one here for you. Can you explain why only AUD 1.4 million was generated from betr in the previous quarter, and how will we be paid from betr going forward?
Sure. The betr contract is structured as a...
Thank you, Anthony. Jake, this one's for you. Costs this quarter in each state are over 70% of receipts. This is not sustainable. What is the board and executives going to do to address this?
Sorry, Jane, I thought you said costs at the start of that. Yeah?
I did, yes. Sorry.
Throughout the half just completed, and more specifically the quarter, we obviously had to make significant investment. T hat investment was deemed to be necessary for us to take the next step. When I say take the next step, that is, you know, to deal with tier one customers on a global basis, in things like the development of the new technology, the certification. For us, that next step required the investment, but we think it puts us in a strong form to move from. Certainly as a business and management executive, we're well aware that, you know, costs and spending, particularly in the current macro environment, there's a heightened focus.
Our next six months will see a dial back in that area and increased oversight and focus as we start to get to a more mature state with, you know, those products and investment work that we put in last year. That's a common theme across the board from management. Obviously, in Matt's appointment, that's something that he'll be overseeing as well, with his insights into the capital markets.
Thank you, Jake. Matt, I might throw this one to you. There's been little to no insider buying. Can you just speak to that, please?
Having not been an insider for some time, it's probably not appropriate for me to chat about that at this point. Look, suffice to say, I think that the stock looks like fair value to me. I certainly have been a net buyer over the last six months. You know, I think we should stay focused on what we can control as executives, which is really driving the operating leverage in the business and focusing on the key growth opportunities. As in how we end up acquiring more stock. W e will obviously make the right kind of public statements as and when that happens.
Thank you, Matt. Todd, perhaps one for you. Where is Todd's incentives to grow the business? He's forgone a significant amount of performance shares, is he still committed to the business?
Yeah, I certainly am committed to the business. I've got a number of shares that I've acquired along the way. It's a, you know, obviously a company that I've got a lot of passion about. I wanna see it succeed. I think we've got the right structure in place now to help us achieve that. I'm certainly committed to the business. I'm excited about working with Jake and Matt into the future, and I think we'll do some good things.
Wonderful. Well, thank you, gentlemen. We've actually run out of time now. Matt, I might hand over to you just to do any closing statements.
Thanks, Jane. Look, thanks, everyone, for your time today. Appreciate the business has grown rapidly over the last couple of years. It's been quite the journey. And we find people get enthusiastic about the business, and then they get somewhat depressed about the business, and that's quite a cycle. Where we're at today is in rude health. AUD 100 million-plus in revenue, zero debt, tens of millions of AUD in cash on the balance sheet in a time where the value of cash is significantly higher than it has been over the last couple of years. We have an excellent management team, and we have some phenomenal assets inside the business, both domestically in Australia as well as internationally. I think the business is incredibly well-positioned.
We have exactly the right setup you'd want for a business that is set for significant growth. W e have a very clear path in front of us to deliver on that. We look forward to reporting back to you as shareholders over the next couple of years, certainly over quarter by quarter, as we execute on this promise. With that, I'd like to thank everyone for their time.
Yes, thank you, everyone, for joi`ning us today. Should we have missed any questions, please feel free to reach out by the contact details on the bottom of our ASX releases. Thank you again.
Thank you.