NeoGames has exceeded 2022 guidance with a total revenue increase of 149% year-on-year to $210.2m, largely attributed to its acquisition of Aspire Global.

Topline numbers

In Q4 2022, NeoGames generated revenue of $69.2m, compared to $12.3m during the fourth quarter of 2021.

NeoGames’ share in NeoPollard Interactive (NPI), a co-owned iLottery supplier with Pollard Banknote Limited, generated additional revenue of $14m, taking total revenue for the period to €83.2m.

This resulted in a total Q4 revenue increase of 291% compared to the prior year.

iGaming lottery revenue reached a quarterly record of $28.4m, indicating a 33.4% year-on-year increase and a 16.9% increase sequentially from Q3 2022.

Meanwhile, Aspire Global revenue reached $54.8m, reflecting a 27% growth measured in constant currency.

However, the impact of foreign currency exchange rates resulted in a 14.6% decrease, leading to a 12.4% growth in US dollars.

Adjusted EBITDA increased by 129% year-on-year to $18.1m.

For full-year 2022, NeoGames’ total revenue, including its share in NPI revenue, increased by 149% year-on-year to $210.2m, surpassing the high end of the 2022 guidance range of $197m to $208m.

This growth was primarily driven by the business merger with Aspire Global.

NeoGames’ standalone revenue for 2022 was $165.7m, a significant increase from $50.5m in 2021.

Meanwhile, the company’s share in NPI revenue rose by 30.6% year-on-year to $44.5m.

iLottery revenue was $98.1m, marking 16% year-on-year growth.

Aspire Global contributed $112.1m in revenue from 16 June 2022 (the date the tender offer was completed) to year end.

As measured in constant currency, Aspire Global’s revenue for 2022 showed a 19% growth on a full-year pro forma basis.

However, due to the impact of foreign currency exchange rates, there was a 13.4% decrease, resulting in 5.7% growth reported in US dollars.

Adjusted EBITDA was $54.5m for the full year of 2022, up 63.2%.

News nugget

NeoGames surprised investors and reported better-than-expected quarterly earnings of $0.22 per share, exceeding market expectations of a year-on-year decline in earnings.

The company beat the Zacks Consensus Estimate, which had predicted a loss of $0.09 per share.

Zacks noted that over the last four quarters, NeoGames surpassed consensus EPS estimates just once.

In Q3 2022, it was expected that the company would post earnings of $0.17 per share when it actually produced earnings of only $0.10.

However, Zacks noted that NeoGames’ shares outperformed the S&P 500 and added about 27% since the beginning of the year versus the S&P 500’s gain of 5.4%.

In spite of strong revenue growth, NeoGames posted a net loss of $0.8m in Q4 and a net loss of $19m for the full-year 2022 due to the amortisation of intangible assets related to the Aspire Global acquisition as well as other acquisition related expenses.

Nonetheless, NeoGames CEO Moti Malul said the company had made “tremendous progress” in 2022 and advanced its strategic goals.

“Our results underscore the advantage of our ability to serve customers on an integrated basis, whether they need solutions for iLottery, online sports betting, iGaming, or any combination of services,” he added.

Best quote

In February, NeoGames partnered with Intralot do Brasil to enter the Brazilian market and launched iLottery and an online sports betting solution in Brazil.

This was done for Loteria Mineira, which is the official lottery of Minas Gerais, the second-largest state in Brazil.

During the earnings call, Malul commented that NeoGames views this market entry as a test case. He added that at least three, and possibly up to five, states in Brazil are planning to enter the online lottery and sports betting market in 2023.

Matul said when he was in Brazil to celebrate the launch of LotoMinas iLottery, officials from other states participated.

He added: “We keep getting a lot of good questions as other states want to learn the dynamics of what we’ve done there. I think we’re also setting the role model for the other states when it comes to player protection, social responsibilities, responsible gaming, payment solutions and so on that regulators take a very close look at.”

Best question 

Given that growth at NeoGames was driven largely by acquisitions, it comes as no surprise that the firm’s management was asked during its earnings call about the potential for further deals down the line.

Macquarie’s Chad Beynon asked: “Even though you have an end-to-end solution, are there still opportunities out there where you would consider adding on to what you’re offering?”

In response, CEO Malul said the company was always assessing opportunities.

He added: “We still think that there’s good ways to grow from non-organic growth and to capitalise on opportunities that may present themselves in the market, and we’re looking at them actively.

“At the same time, we do not necessarily want to grow our leverage beyond where it is now in order to do those deals. So we would probably be able to do tuck-in acquisitions, and these are ones that we are looking actively to pursue in a disciplined way.”

Current trading & outlook

NeoGames has issued guidance for 2023, with total revenue expectations of between $235m and $255m.

However, this projection reflects a change in the presentation of revenue for certain Aspire Core customer contracts, which now require accounting on a net basis.

If these contracts were presented on a gross basis, the projected range would be between $323.3m and $350.3m.

NeoGames, which completed its acquisition of Aspire Global in June, has reported Q3 revenue of $73.3m, a significant upturn from $20.2m during the same period in 2021.

Revenue for the firm’s first full quarter post-acquisition increased by 262% compared to the same period in 2021, primarily as a result of the takeover.

Of the total, Aspire Global generated $48.5m in Q3, reflecting 8% growth as measured in constant currency, despite showing a 16% reduction in real terms caused by the impact of foreign currency exchange rates. In Q3 2021, Aspire Global generated revenue of €58.6m.

Further revenue of $11.1m (up 34.3% year-on-year) came from NeoGames’ share in NeoPollard Interactive (NPI), an iLottery supplier jointly owned by NeoGames and Pollard Banknote Limited.

NeoGames’ own iLottery services generated $13.6m during the quarter. When both iLottery operations are added, this segment brought in a total of $24.7m, representing a quarterly record and an increase of 22% compared to Q3 2021.

Adjusted EBITDA was $17.6m in Q3, compared to $7.5m during the third quarter of 2021, representing an increase of 135% year-on-year.

However, the Tel-Aviv headquartered company reported a net loss of $4.4m, or $0.13 per share, for Q3 2022, compared to net income of $1.5m, or $0.06 per share, during the third quarter of 2021.

NeoGames said the swing to net loss during 2022 was mainly due to a $0.23 per share impact from the amortisation of intangible assets related to the Aspire Global acquisition.

NeoGames CEO Moti Malul commented: “The strong performance where we grew revenue and profitability across the business is a great start for our first full quarter post completion of the combination.

“In iLottery, our top line results grew 22% compared to last year reaching an all-time quarterly record. In addition, iLottery adjusted EBITDA margins returned to the 40% level during the quarter.”

NeoGames’ iGaming and sports betting businesses grew approximately 8% on a constant currency basis “reflecting continued strength in our Pariplay and BtoBet offerings”, Malul said.

Aspire had acquired Pariplay in 2019 and BtoBet in 2020, and as a result of the takeover of Aspire, NeoGames subsequently acquired the entities.

NeoGames CEO Moti Malul: “We did experience headwinds during the quarter related to fluctuations in foreign currency exchange rates, serving as a reminder that we need to remain disciplined and focused on controlling what we can.”

“It’s early days in our integration efforts, yet we are already seeing the benefits from the combination as we advance our global leadership across iLottery, iGaming and online sports betting,” Malul said.

In addition, Malul highlighted that while the company believed the results were indicative of the underlying strength of the business, it remained aware of the macro environment.

“We did experience headwinds during the quarter related to fluctuations in foreign currency exchange rates, serving as a reminder that we need to remain disciplined and focused on controlling what we can,” he said.

Analysts also remained cautious. Zacks Equity Research said on the basis of NeoGames’ revenue only, without the revenue share from NPI, NeoGames came out with quarterly earnings of $0.10 per share, missing the Zacks Consensus Estimate of $0.17 per share.

Zacks Equity pointed out that NeoGames shares lost about about 39% since the beginning of 2022 while the S&P 500 was down ‘just’ 19.7%.

Nonetheless, Zacks issued a hold recommendation, indicating that the “shares are expected to perform in line with the market in the future.”

NeoGames’ recent business highlights included an agreement with the Georgia Lottery Corporation to supply NeoGames studio game content.

It also obtained licences in Pennsylvania and Connecticut for Pariplay, which is now licensed in five out of the six US states that have legalised iGaming.

Moreover, NeoGames said it signed additional content providers on the Pariplay platform. In October, Pariplay also entered into a content distribution agreement with ATG, one of the largest operators in the licensed Swedish market with a customer base of over 1.3 million.

Earlier in 2022, Aspire Global extended its cooperation with ITSP, one of the largest German gaming operators, to provide a complete turnkey technology and gaming content solution, expanding on its prior sport agreement in anticipation of the German market move to local licensing.

Following the release of its results, the company updated its fiscal year 2022 revenue guidance, including its share of NPI revenue, to between $197m and $208m, compared to the prior range of between $194m and $208m.