Gaming Realms plc

(the "Company" or the "Group")

Annual Results 2021

Strong performance underpinned by increased global presence

Licensing strategy delivering adjusted EBITDA[1] growth of 69% and adjusted EBITDA of £5.7m[2]

Gaming Realms plc (AIM: GMR), the developer and licensor of mobile focused gaming content, announces its annual results for the year ended 31 December 2021 and Q1 highlights for 2022.

Gaming Realms' licensing strategy has enabled the Group to grow revenues at high margins during FY21. The Group launched in several new regulated iGaming markets which will provide continued growth in the coming year.

2021 Financial Highlights:

·      Revenue increased by 29% to £14.7m (2020: £11.4m) for the year

o  Licensing revenue increased 48% to £11.1m (2020: £7.5m)

o  Social publishing revenue decreased 8% to £3.6m (2020: 3.9m). On a constant currency basis, the decline was 1%

·      Adjusted EBITDA before share option and related charges increased 71% to £5.7m (2020: £3.3m)

·      EBITDA increased 146% to £5.0m (2020: £2.0m)

o  Licensing segment generated £6.4m EBITDA (2020: £3.5m)

o  Social publishing segment generated £1.1m EBITDA (2020: £1.4m)

o  Head office costs were £2.5m (2020: £2.9m including £0.7m of restructuring costs and impairment charges) due largely to the increase in share option and related charges and growth in business activities

·      Profit after tax for the year of £1.3m (2020: Loss of £1.5m)

·      Year-end cash balance increased to £4.4m (2020: £2.1m)

2021 Operational Highlights:  

·      Increased portfolio to 53 proprietary games on the Group's remote game server ("RGS") (2020: 44)

·      Launched in 2 regulated iGaming markets in the U.S. in Michigan and Pennsylvania

·      Launched in European regulated iGaming markets in Italy, Romania and the Netherlands

·      Launched with 35 new partners for Slingo Originals content including Wynnbet, Sisal, Aspire Global and Goldbet

·      Signed inward brand licensing deals with Everi, Discovery Channel, IGT, Play AGS, Pragmatic Play

·      Increased unique players in licensing business by 48%

·      Prepared for launch in the Ontario, Quebec and Spanish markets

·      Extended brand licensing deal with Scientific Games for Slingo branded lottery instant scratch cards

Q1 2022 Highlights:

·      Increased licensing revenue 43% in Q1 2022 to £3.0m (Q1 2021: £2.1m)

·      Launched in Spain with Gamesys and Yo Bingo (part of Rank Group)

·      Launched with Loto-Québec

·      Obtained iGaming Supplier Licence from Ontario with subsequent launch earlier this month

·      Released four new Slingo games: Slingo Superspin, Slingo Fire & Ice and Slingo Racing

Outlook:

Gaming Realms continues to deliver on its strategy of expanding its game portfolio and launching into new regulated markets. In 2021, the Group launched in 5 new regulated markets, including Michigan and Pennsylvania in the U.S., and will continue to grow its market share in these territories during 2022. Since the beginning of 2022, the Group has launched its Slingo portfolio in Spain and, more recently, Canada through the newly launched market in Ontario and with Loto-Québec. With 10 new partners launched to date in 2022, together with the launch of 4 new Slingo games, the Board is confident in the Group's strategy and expectations for the current year. Whilst still early in the year, the Company is currently trading ahead of management expectations and therefore is confident in the outlook for the year.

Commenting on the Group's performance, Michael Buckley, Executive Chairman, said:

"2021 was another exceptional year for the Group as we expanded our Slingo portfolio and entered new regulated iGaming markets, increasing revenue by 29% and producing a maiden profit for the financial year of £1.3m.

"Our core licensing business continued to go from strength to strength as we secured 35 new licensing and distribution partners throughout the year that supported a 48% growth in the number of unique players enjoying our content globally. 

"The Group's commitment to increasing our global presence during the period has provided us with a strong foundation on which to deliver further growth in 2022 as we remain focused on expanding our foothold in these territories. Momentum has certainly continued into the year so far, having already released four new games and launched in both Spain and Canada. With additional planned launches in new markets and with new partners in the pipeline, we look forward to providing further updates in due course."

An analyst briefing will be held virtually at 9:00am today. To attend, please email gamingrealms@yellowjerseypr.com.

Enquiries

About Gaming Realms

Gaming Realms creates and licenses innovative games for mobile, with operations in the UK, U.S., Canada and Malta.  Through its unique IP and brands, Gaming Realms is bringing together media, entertainment and gaming assets in new game formats.  The Gaming Realms management team includes accomplished entrepreneurs and experienced executives from a wide range of leading gaming and media companies.

Executive Chairman's Statement

Introduction

The Group made excellent progress during the year, increasing revenues by 29% to £14.7m (2020: £11.4m), and adjusted EBITDA by 71% to £5.7m (2020: £3.3m) before share options and related charges. We invested heavily in our proprietary Remote Game Server "RGS" platform, and expanded into multiple regulated markets. We also increased our Slingo Originals game portfolio to 53 with the addition of 10 new games, and licenced Slingo into adjacent markets including our lottery deal for physical scratch cards in North America.

This resulted in revenue growth of 48% in our licensing business to £11.1m (2020: £7.5m), and we are continuing to see strong momentum in this area with increased international demand for our Slingo Originals portfolio. With growing distribution via our RGS combined with control of overheads, we were able to increase our EBITDA margin within the licensing division to 57% (2020: 50%).

Licensing business highlights:

·      Increased library of proprietary games to 53 games in total at year-end.

·      Went live with 35 new partners during the year, all of whom have licensed the Company's Slingo Originals content.

·      Launched in 2 additional regulated iGaming markets in the U.S. being Michigan and Pennsylvania.

·      Launched in 3 regulated iGaming markets in Europe, being Romania, Italy and the Netherlands.

·      Increased unique players in the year by 48% to 3.36m (2020: 2.28m).

·      Signed deals with IGT, Play AGS and Pragmatic Play as partners for new branded Slingo games.

·      With growth in New Jersey, together with launches in Michigan and Pennsylvania in the second half of the year, U.S. content licensing revenues grew 47% in 2021, and by 56% with constant currency conversion.

·      Extended brand licensing deal with Scientific Games for Slingo branded lottery instant scratch games.

We continue to operate our Social business as a partially integrated division.  This gives us an opportunity to rebrand our real money games for social users, and monetise them further.  It also keeps the Slingo brand within the Group, and has the advantage of bringing our games to a wider audience, many of whom play for real money as and when they are in a regulated territory.

Revenue from Social decreased 8% to £3.6m (2020: £3.9m), but this decline was marginal at 1% on a constant currency basis.  EBITDA decreased to £1.1m (2020: £1.4m), the decline again exaggerated by currency movements. However, the Social business continued to provide a positive cash contribution to the Group.

North America

The Group made significant progress during 2021 towards expanding its presence in the U.S. iGaming market beyond New Jersey, being granted additional full iGaming Supplier Licences in the U.S. states of Michigan and Pennsylvania. An application process was started for a supplier license in Ontario, Canada, which was subsequently granted in March 2022. Ontario is likely to be a larger market than any of the currently regulated U.S. states.

Capitalising on these opportunities, we signed a number of direct integration and multi-State deals, and the Group now has licensing agreements with the majority of the U.S. iGaming market. These include multi-State deals with BetMGM, Draftkings, Fanduel, Rush Street Interactive, Golden Nugget, Poker Stars, Barstool/PNG, Kindred, Wynn Interactive, Parx, Tropicana/Gamesys and Caesars Entertainment. The Company also has direct integrations with BetMGM, Draftkings, Rush Street Interactive, Fanduel, Golden Nugget, Gamesys, Wynn Interactive and 888.

Europe

Gaming Realms continued to strengthen its position in the growing European market having successfully launched in the Italian iGaming market with Goldbet and Sisal in January 2021. 

In November 2021, Gaming Realms entered the regulated Romanian iGaming market through a partnership agreement with Superbet, the largest digital and retail betting operator in Romania. Superbet now publishes many of the games from the Slingo Original's portfolio.

Further bolstering its European presence, Gaming Realms went live in December 2021 with JVH gaming and entertainment group in the newly regulated Dutch market under the Jack's Casino and Sports brand ("Jack's Casino").

Board and employees

Despite a number of Covid-19-related challenges during 2021, the Group's senior management and staff demonstrated outstanding teamwork and resilience, and the operational and financial outcomes achieved during the year owe much to their skill and commitment. On behalf of the Board and shareholders, I would like to pass on my sincere thanks to all of them.

After joining the Board in 2019, Chris Ash resigned as a Non-Executive Director of the Company in September 2021 given conflicts of interest that could arise from our third-party distribution agreement with 4ThePlayer.com, of which he is a Director. On behalf of the Company, I would like to thank Chris once again for the valuable guidance and strategic advice he provided in scaling our licensing business.

Post Period End and Outlook

Gaming Realms continues to focus on the following areas:

·      International expansion - particularly in the US and European regulated markets

·      Adding new distributors, operators and licensors

·      Further penetration with existing distributors and operators driven by new games

Momentum has continued into 2022, with Gaming Realms focusing on regulated markets and North America in particular.  In this regard, we launched our game portfolio in Ontario on 4 April 2022, having already gone live with Loto Quebec in March.  With the increased number of states we are now in, together with our multi-State deals with the largest operators, we are well placed to gain market share in North America.

In January of this year, the Group entered the regulated Spanish market with long-term strategic partner Gamesys (now part of Bally's Corporation) under its Monopoly and Botamania brands and has since launched with Yo Bingo (part of Rank Group).  Looking to the future, we have recently signed a deal with Microgaming, one of the largest distributors of content in the industry, and hope to launch our game portfolio with some of their partners shortly.

We have already increased our games portfolio with 4 new games in 2022, and during the course of this year we will introduce new marketing features on our platform.  These developments will maintain and drive stronger relationships with our partners and players.  The Company has made an excellent start to the current year, with licensing revenues increasing by 43% year-on-year for the first quarter of 2022, and unique players increasing by 39% to over 1.5 million in the same period.  This strong performance in the first quarter, combined with new markets and partners coming on stream, leads your Board to believe the Company will continue to grow significantly following its proven successful strategy.

Michael Buckley

Executive Chairman

Financial Review

Overview

The Group's financial results for the year ended 31 December 2021 reflect the continued delivery of the core strategy of scaling the licensing business.

The Group delivered total revenue growth of 29% to £14.7m (2020: £11.4m), driven by the performance of the licensing business.

For the year, the Group delivered adjusted EBITDA before share option and related charges of £5.7m (2020: £3.3m) which has translated into the Group recording a pre-tax profit of £1.0m compared with a £1.6m loss in the previous year.

The £1.0m pre-tax profit represents a £2.6m increase on the previous year (2020: £1.6m pre-tax loss).  This is materially explained by; the £2.0m increase in adjusted EBITDA generated in the current year, no adjusting items in the current year (2020: £0.9m total charge for restructuring expenses and an impairment against financial assets), offset by a £0.2m increase in the current year amortisation charge and £0.1m higher net finance costs.

The table below sets out the split of revenue and adjusted EBITDA:

Performance

Year-on-year Group revenues increased 29% to £14.7m (£2020: £11.4m) due to the strong performance of the licensing segment, offset by an 8% decline in social publishing revenues in the year.

The overall Group generated adjusted EBITDA of £5.0m (2020: £2.9m) and £5.7m before share option and related charges (2020: £3.3m).  Adjusting items in the prior year relate to management restructuring costs and impairment of financial assets, while there were no such costs in the current year.

Operating expenses incurred remained stable compared with the previous year at £2.2m (2020: £2.2m).  Between the segments this was split between a £0.1m increase in revenue associated operational costs in the licensing segment offset against £0.2m lower operational costs in the social publishing division due to revenue driven costs falling in line with segmental revenues.

Adjusted administrative expenses increased to £6.4m (2020: £5.5m) predominantly due to increased staff costs in the licensing segment required to deliver the segments growth, along with other incremental business expansion costs.

Licensing

Licensing segment revenues increased 48% to £11.1m (2020: £7.5m).  This can be split as:

·      Content licensing revenue growth of 36% to £9.1m (2020: £6.7m); and

·      Brand licensing revenue increasing 137% to £2.0m (2020: £0.9m).

The segment delivered £6.4m adjusted EBITDA (2020: £3.7m).

Content licensing

Growth in the content licensing business remains the key focus of the Group.  The current year performance reflects the successful implementation of the Group's strategy of growing the games portfolio and increasing the distribution footprint to an increased number of operators in Europe and the U.S.

During 2021 the Group began operating with partners in 5 new regulated markets; Italy, Romania, the Netherlands, and the U.S. states of Michigan and Pennsylvania. After the year-end, the Group was awarded an iGaming supplier license within the Canadian province of Ontario and started trading in April 2022.  The Group also started trading in the Spanish regulated market in January 2022.

Outside of going live with partners in these newly entered regulated markets, we also went live with a further 18 partners during 2021 in existing markets in Europe and New Jersey. This has been further bolstered with an additional 10 partners going live in 2022 to date in these jurisdictions.

The strong operational leverage and largely fixed cost base of the segment's content business model allowed total expenses (excluding share option and related costs) to increase by 23% to £4.6m (2020: £3.7m) compared to the 36% content licensing revenue increase.

The Group released 10 new Slingo games to the market during 2021, including Slingo Starburst and Slingo Lucky Larry's Lobstermania.  Due to the popularity of Slingo as a genre amongst our partners and players, in addition to these new Slingo games, a number of partner themed Slingo and table games were released to the market during the year.

A key focus of the segment remains identifying and partnering with the leading gaming brands in the market, in order to bring the best possible content to players.  During the year we released new Slingo game collaborations with key partners including King Show Games, NetEnt and Pragmatic Play.  Further agreements were entered into during the year for the development of innovative new Slingo collaborations, which will be released to the market in 2022.

Revenues from North America continue to be a focus for the segment, and in 2021 increased to £4.5m (2020: £2.4m), representing 40% of total licensing revenues (2020: 32%).  We anticipate this to increase further in 2022 with a full year of trading in Michigan and Pennsylvania, as well as the impact of the recent entry into the Ontario market and expected entry into the Connecticut market later in 2022.

Brand licensing

The significant £1.1m increase in brand licensing revenues in 2021 compared with the prior year is predominantly the result of a significant deal completed in the year. 

The Group's Slingo brand is well-known by consumers, which allows us to license this brand into adjacent markets where the right opportunities arise.

Social publishing

The Group's social publishing business saw an 8% decline in revenues to £3.6m (2020: £3.9m), largely as a result of currency headwinds experienced during 2021, with the majority of the segments transactions denominated in U.S. Dollars.  At constant currency, the revenue of the segment would have decreased by 1% as opposed to the reported 8%.

Operational costs, which are largely driven by revenues, reduced by 15% from the previous year to £1.0m (2020: £1.2m). 

Marketing expenses of £0.3m were incurred (2020: £0.2m) with the aim of driving player activity and revenues.

The 13% increase in segmental administrative expenses is due to investment in the development and operational team.  In recent years there has been a successful implementation of cost controls, which has resulted in the segment having a stable fixed cost base.  Excluding staff costs, segmental administrative expenses remained stable with the prior year, increasing 3%.

As a result, the segment delivered £1.1m adjusted EBITDA for the year, a 24% reduction on the £1.4m in 2020.

Cashflow, Balance Sheet and Going Concern

Net cash increased by £2.3m in 2021 (2020: decreased by £0.5m) to £4.4m at 31 December 2021 (2020: £2.1m). 

The current year increase in net cash was largely driven through the £5.0m cash inflow from operating activities (2020: £2.0m) and £1.0m deferred consideration received (2020: £Nil), offset by the £3.4m of development costs capitalised in the year (2020: £2.4m).  

The £1.0m increase in development costs capitalised in 2021 compared with the previous year is a function of the Group investing in the development teams in both the licensing and social publishing segments, to enable the delivery of an expanded games portfolio in both segments, and to develop and enhance the Group's proprietary RGS with new tools, features and capabilities to cater for the demands of expanding partner and territory numbers.

During the year, the Group received £1.0m from River Tech plc ("River") for full and final settlement of the deferred consideration receivable, certain other receivable balances, and various legal proceedings and out of court disputes between the parties.

Net assets totaled £13.1m (2020: £10.9m).

The prolonged COVID-19 pandemic has brought significant uncertainty to global markets and economies, including the real money gambling sector. The Directors have performed qualitative and quantitative assessments of the associated risks facing the business and its ability to meet its short and medium-term forecasts.  The forecasts were subject to stress testing to analyse the reduction in forecast revenues required to bring about insolvency of the Company unless capital was raised.  In such cases it is anticipated that mitigation actions, such as reduction in overheads could be implemented to stall such an outcome.

The Directors confirm their view that they have carried out a robust assessment of the emerging and principal risks facing the business.  As a result of the assessment performed, the Directors consider that the Group has adequate resources to continue its normal course of operations for the foreseeable future. 

Dividend

During the year, Gaming Realms did not pay an interim or final dividend. The Board of Directors are not proposing a final dividend for the current year.

Corporation and deferred taxation

The Group received £0.1m (2020: £0.05m) in research and development credits in Canada.  A current year tax credit of £0.3m (2020: £0.05m) largely relates to the unwind of deferred tax of £0.1m (2020: £0.1m) which arose on prior year business combinations. 

Mark Segal

Chief Financial Officer

Consolidated Statement of Comprehensive Income

For the year ended 31 December 2021

Consolidated Statement of Financial Position

As at 31 December 2021

Consolidated Statement of Cash Flows

For the year ended 31 December 2021