Betmakers Technology Group Ltd (BET) Earnings Call Transcript

Okay. I'd like to thank everyone for joining us today on our Full Year 2026 Results Webinar. It's been a privilege to deliver the full year results to our shareholders over the last 12 months. I want to make just one point clear on the outset that today's session is focused on the results. We'll keep to that on the Tabcorp announcement, everything we've had to say in the announcement on August 10 has been said. The Board has unanimously recommended the scheme subject to the independent experts concluding it is in the shareholders' best interest, and there's no superior bid. Shareholders will receive the scheme booklet, including the expert's report later this year, and that's the document to make a decision on. I'm not going to add anything beyond that on today's announcement. Do you want to flip to the key slide here. Perfect. So over the last 12 months, the company has continued to deliver against the operating turnaround that we set in place several years ago. This is most dramatically shown through the positive EBITDA, up over 200% to $14.1 million over the last 12 months. In addition to that, revenue has grown at double digits on a constant currency basis. We're proud of that. The racing industry is a difficult industry. And in some parts, it's experiencing contraction. Other parts, it's experiencing growth, and the company was able to deliver a solid growth in the top line. In addition to that, gross margin also improved. We put forward long-term objectives of getting to a 70% gross profit margin. We are well on track to achieve that. And you can see the incremental improvement each year as we've delivered against that over the last several years. The commercial momentum also continues to deliver at pace. The team continue to have a very full pipeline of interest, which they convert into contracts at a regular basis. It continues to be robust and healthy, and we remain very comfortable and confident that there is significant market demand for our products moving forward. Having established a very solid foundation over the last 12 months, FY '27 looks to provide a very strong position for us to grow off this basis. We think there are several innovative products in our pipeline, which we're looking forward to bringing to market in addition to our core products, which have continued to resonate with our customers. With that, let me hand over to Jake to walk you through the details.

Thanks, Matt, and thanks to everyone who's jumped on to join the call today. Starting with our BetMakers mission and to reiterate a few things for those not as familiar with the story. Our goal is simple, to be the central scale platform that connects horse racing betting globally. Three things sit behind that for us. The first is our market-leading cost per bet. We cut out unnecessary intermediaries so operators run a cheaper, more scalable model. Our new platforms, GTX and Apollo are modern, lightweight and they're built for scale. Second, it's about margin realization through global trading, risk management, pool connectivity and optimized generosity, all in one place so our operators keep more of what they take. And thirdly, we're properly covering the full racing market offering, Fixed Odds, Tote, and Data together and complete via a single partnership for our operator customers. That completeness helps become part of our competitive advantage. On to the modern BetMakers technology stack. We're not a standard sort of per seat SaaS business. Our revenue is now largely success-based and success driven. So we grow when our customers grow, and we're incentivized to unlock new markets and new segments for them. The technology stack is a system of record for racing wagering end-to-end built for one vertical rather than adapted from something generic. And on top of that sits the orchestration layer. This is where the integrations, the relationships and the racing specific data that took years to build and refine sit. We're licensed to operate in all of the key regulated racing markets and are plugged directly into governing bodies, national wagering systems and key media rights holders. And the best part is AI is now accelerating all of this, and we have a stack of proprietary data within our ecosystem to feed into it. With that, I'll just pass to our CFO, Carl Henschke, who will provide a deeper update on the FY '26 finances.

Thanks, everyone, for joining, and thanks to all our shareholders for their support this year. The next part of the presentation will provide an overview of our financial results for FY '26. We'll start with a look at revenue growth for the year. As Matt said, we've been very pleased with the top line performance throughout FY '26, which we firmly believe continues to be driven by the positive impact our technology is having for our customers. The business has consistently delivered solid revenue growth each quarter when compared to PCP. The result for the full year is shown on the screen with statutory revenue of $92.6 million, resulting in year-on-year growth of 8.8%. Given the recent volatility in currency markets, we've also started to provide constant currency comparisons. If we were to rebase the FY '25 revenue to the same FX rates used for FY '26, the underlying growth rate was approximately 11.2%, which is very pleasing and is in excess of the 10% long-term goal set by the company. The pie chart on the right shows our revenue split by product type, which I note is different to the divisional split that we'll talk about shortly. As you can see, our Tote Products remain our main contributor to revenue and provide a strong recurring base of long-term contracts with important exposure to key international -- major international wagering markets. However, our digital revenues in pink, which in this instance includes both fixed odds and tote-focused digital products continue to grow as an important part of the overall revenue mix. Our content revenues, which are the third part of the pie in black, were approximately 15% of the overall revenue mix for FY '26. As noted further on in the presentation, we anticipate opportunities to grow our content product suite moving forward, supported by some of the network effects from the growth in our digital customer base and our network more broadly. This next slide provides a breakdown of revenue by division. There's a slide later in the deck that Jake will talk to, which also talks about the various products that support each of these divisions. GBS, which is on the left, had a very strong year, growing approximately 25% from $34.5 million to $43.3 million. The key contributor to this was the growth in the digital customer base, particularly our fixed odds digital platform and turnkey products. For FY '26, the growth in the domestic customer base was a particularly strong contributor, driven by our market-leading Apollo products. However, GBS also has an expanding set of international opportunities emerging, which we expect to drive a larger proportion of the growth in future periods. On the right is our Global Tote division. Revenues for GT were steady this year. There is an emerging near-term pipeline for this division. However, this was partially offset by some customer churn experience during FY '26. It is worth noting that given this is substantially all international revenues, there was impact from FX throughout the year. And if we were to look at the prior corresponding period on a constant currency basis, FY '25 GT revenues were only $48.8 million, and therefore, on an underlying basis, divisional revenues were actually up by 1.1% versus PCP. We've spoken throughout the year about our trajectory towards our long-term goal of 70% gross margin. We continue to believe that the business can operate sustainably at or above these levels. In FY '25, we saw a gross margin improvement from the replatforming of our customers onto the new technology. In FY '26, we saw a full year of this benefit, plus an important restructuring of our PENN content agreement at the end of the first half and the ongoing benefit of incrementally higher gross margin from our new digital customers, which we expect to continue to be a contributing factor to the improved gross margin going forward. This all leads to an adjusted gross margin for FY '26 of 66.9%. This was 2.8 points higher than FY '25. And as you can also see on the chart, the final quarter of FY '26 saw an unaudited gross margin of 68.5%. This continues to give us the confidence that we can show further improvement in gross margin as we move into FY '27. In terms of adjusted EBITDA, management and the Board are very pleased to continue to see the results from our fiscal discipline translate into significant adjusted EBITDA improvement. The company, as Matt mentioned, posted a record adjusted EBITDA result for the year of $14.1 million, up 205% on PCP. This was driven by a good combination of revenue growth, gross margin improvement and also prudent cost base management. We've reiterated numerous times recently that our technology-led business model is able to generate significant operating leverage. As we can see on the chart on the right, operating expenses were able to be reduced by $3.1 million, while revenue grew 8.8% or $7.5 million over the same period. A key driver of this outcome is the technology-driven efficiencies, including the synergies we obtained during the year from the acquisition of LVDC or GT Vegas as well as various other opportunities to replace legacy overheads and workflows with efficient technology solutions. The next slide shows our operating cash flow for the year. It's worth noting that we tend to use the 4C version of operating cash flow for these comparisons. The statutory version in the financial accounts takes into account, the movement in customer funds which is really a nonoperating movement and distorts the result. We had another solid improvement in operating cash flow of $5 million for the year. This was up $2.2 million on FY '25, which was also a strong year, but that FY '25 was boosted by some significant receipts in excess of revenue for the year. Therefore, the trajectory from FY '24 through to FY '26, which is up $14.7 million, provides a good indicator of operating cash flow improvement broadly following the improvement in adjusted EBITDA. In terms of cash, we remain well capitalized. Unrestricted cash, which excludes customer funds, was down only $2.2 million for the year, and it's worth noting that just over half of this decrease was from the acquisition of LVDC and the associated costs. We would anticipate further improvements in operating cash flow as the business scales and we continue to work towards consistent free cash flow generation. As many of you would have heard us say previously, management considers adjusted EBITDA to be the key indicator of our financial performance. This slide shows our progress over the last few financial years with respect to that metric. Since FY '23, we've been able to improve adjusted EBITDA by approximately $46 million based on the annualized adjusted EBITDA run rate for Q4 of about $18 million when compared to the FY '23 benchmark of approximately negative $28 million. This corresponded with a record adjusted EBITDA margin for that final quarter of the year of 18.2%, which was above the 15.2% for the FY '26 financial year. We consider ourselves well positioned to continue this trajectory into FY '27 as the company continues to execute its focused technology-led growth strategy. A couple of last points to make just because most of this has been covered, so I won't spend too long, but a few things to mention. As noted at the half, FY '26 includes $900,000 of a nonrecurring revenue catch-up. It's worth mentioning that this has been backed out of adjusted EBITDA, as can be seen on the reconciliation later in the deck. Capitalized costs were $7.3 million for the year, which was up slightly from last year. This reflects a larger investment in new products and particularly in some emerging gaming and vision technology products that are being readied for international markets. And lastly, amortization in FY '26 includes $3.2 million related to the acquisition of Sportech, which as at 30 June of this year, that acquisition will now be fully amortized. That's the end of the financial section of the presentation, and I'll pass back over to Jake to talk a bit more about our growth strategy moving into FY '27.

Thanks, Carl. And just to kick off to cover quickly on the BetMakers Global Footprint. I think broadly speaking, we have 4 customer types: wagering operators, racetracks, tech and media partners, rights holders and regulators. And we're working with the global leaders within our sport in both tote and fixed odds environments. The value we provide within our network effect for every new tote operator that makes the content, the data and the pools more valuable to everybody already in the network. And the same goes for our fixed odds network. That network is expanding each quarter, new customers and new regulated markets and some key partnerships announced just recently like the extension of our relationship with PMU, the National Tote Operator of France. The BetMakers product suite. We certainly believe it's unrivaled. It's separated and structured just on the next slide, Carl, within 2 key segments, fixed odds and the digital side of the business, which is coined as GBS in our financial statements, covering pricing and managed trading, data and form, vision, reporting, rights partnerships, official price, ontrack displays and integrity systems. The Tote business, which is the core quantum tote hosting engine, international pooling, interface management and our venue services. And sitting across both of those are our betting platforms, which are the enablers of our services, Apollo and GTX platforms, RaceBook+, the Embedded Racebook solution, our Global Race Day Control as well as our BetLine terminal and retail solutions. The scale advantage we're seeing is where these 2 divisions meet where we can now take the international tote network and push it into a growing digital operator distribution list and upgrade our tote customers with brand-new digital solutions to meet the growing needs of their own customer base. And finally, on to AI. The embedded AI culture and ways of working at BetMakers is something we're incredibly proud of, particularly through the course of FY '26. AI isn't a product line or a buzzword for us. It's becoming a pillar of how the business fundamentally runs. Internally, that's covering core technical functions such as AI-assisted web development, user journeys, automation through testing, automated translation and platform localization. At the wagering layer, we're seeing it across predictive pricing, real-time market movement, automated decision-making. Within our content hub, it's covering enriched form and data, natural language search across the network, automated vision production, which Carl touched on earlier as well as new betting prompts. And overall, we're heading towards an autonomous operating state through agentic support, self-healing, incident triage and AI-assisted trading, risk, and race day ops. We're doing all of this through a combination of our proprietary in-house built AI tooling and key vendor partnerships such as our partnership with Google, which has been pivotal in keeping the cost of AI down and the pace of our delivery of AI up. With that, I'll pass back to Matt for the outlook for FY '27, and then we'll answer a few questions. Thank you.

Thanks, Jake. So as we look to FY '27, the world continues to get more complex. Our customers continue to deal with new products, new product markets opening and tightening of gaming regulations around the world. New product markets like prediction markets, for instance, are causing some of our customers to reevaluate their existing products they bring to market and they look for partners that not only have, a, the best quality product that their customers want, but b, real efficiencies to be able to deliver cost savings to them. BetMakers is entering into this year with not only market-leading product, but doing so in what we think is the most efficient manner possible. And this is only possible on the basis of the technology rebuild the team have executed over the last couple of years. So I'm incredibly proud of that. I'm very optimistic about the future sales growth that the company is going to experience over the next 12 months or so. And in part, that's underwritten by the technology that we bring to market. You'll continue to see adjusted EBITDA growth, but I also will point to not only top line but gross profit margin growth and increasing free cash flow generation, really driven by the operating leverage this company has built now into its business model. So that's the formal part of the presentation. Let's hand back to Jake, and you can run questions for us.

Sure. I'll palm a few of these off to start and then handle a couple of the business and operational ones at the end. Perhaps with you, Matt, there's a general question, which I'll try and condense. From a Chairman's lens, you're a little over 3 years into a significant transformation. What stands out most about the period of that sustained business improvement and where could it get to in the future?