Member Info for redjester

No, rev share deals are based on the games hold, not the companies profits after tax. The increased tax means the operators has to lower the RTP to cover the tax. This reduces players funds, which hurts the performance. So Slingo games will have less hold from the UK, which will hurt our UK revenues.

This doesn't means no growth in the UK though. First of all they said performance had recovered by the end of the year after changes. Regardless, they can still grow the UK business by launching more/better games, or signing with new operators. But even if the UK doesn't grow, that still leaves 67% of the business which can. US growing at 20%. Future growth there will be lumpy as states come online but you also have other markets outside the UK and US.

I don't think the increased taxes are an issue. The Remote Gaming Duty tax will be paid by operators. GMR is a content licensor paid by rev share. Operators revenue will be down, but only in the UK which is only 23% of the revenue. I think the drop in UK revenue has masked the growth from the US.

I thought GMR was undervalued before today but a 7% drop on that update is nonsense. I just bought 25,221 shares.

I'm not hoping for a dividend though. The stock is easily worth 75p a share so I would rather they use some of their cash pile to speed up buybacks.

"Revenue from Continuing Business1 in H1 of $10.4 million". H2 is usually better due to NFL season but even without that, we should be looking at $20m. So P/S of around 1.5. Which is reasonable enough, if it wasn't for the cash balance.

The cash balance (including the 10m due in October) is roughly the same as the current market cap. So the entire business is being valued at their current cash balance? What am I missing? Looks like the reorganization costs are largely taken care of now. Headcount is down. OK, revenue dropped leading to an operating loss but still I can't understand the share price.

Lemonade311 you've got a point but it's what the people want . I'm guessing you're not a big online Bingo player haha. There are a few where the graphics are a bit better (money train, centurion, carnival) but for the most part it's the basic, retro-looking games that do best. Most of our slingo games are made in partnership with the other big slot companies and they are combining their best games with slingo. It's just funny because their best games look crap. Cleopatra, Davinci Diamonds or Starburst are ancient and look exactly like you describe, but are 3 of the best performing slot games ever. Or they are things like Monopoly, Tetris, deal or no deal, Britain's got talent and other brand partnerships that will appeal to people of a certain age. Our target market is people who like Bingo. Whatever site you went to look at the slingo games, if you look at their bingo section it will be a similar style.

I've been invested here for years and the share price has always seemed to be confusingly low. I think it's just because it's a boring company that doesn't get the press coverage or public interest so it flies under the radar. I've been adding to this since 2017 and even as the share price has risen it has been paying around 8% in dividends and special dividends most years. With zero debt and plenty of growth. I don't get it. Steady growth and reliable dividends just doesn't do it for today's investor.

To be fair, I didn't say no divi until we got to £1, just not yet. It could well be part of the mix before then. But the US market in particular still has a lot of room to grow and in the short term I think we would be better off focusing on that.

A divi at some point over the next 4 years if and when growth slows to single digits sounds fine. I can't see growth slowing to single digits any time soon though, certainly not within the next 2 years. Currently only around 13% of Americans can legally access an online casino(according to eilers and Krejcik), a number that will continue to grow as more states legalise. From the same report the market grew 30% in 2023, so 25% growth rate for GMR over the next 4 years doesn't seem crazy to me. From Gaming realms 2022 annual report North American Rev grew 122%, and 2021 North American Rev was more than all previous years combined. We are waiting to go live in Virginia this year as well as Greece (and probably more I'm forgetting) so 2024 already has some growth guaranteed. Not to mention the new partners we've gone live with in jurisdictions we are already up and running in or new games we have added to existing partners.

It is a lot of cash to be sitting on, and that cash pile will only grow if they have nothing else to spend it on so a divi in April could well be what they decide. But my guess is that is still a year or 2 away. But it's just my guess.

Also been here since 2017, traded in and out to bank some profit but mostly sitting on 350,000 shares at an average price of around 20p. I agree with your view of the business track record and growth but I don't think a divi is the best thing for us just yet.

My theory, completely made up based on what I would do if I was running the company, is that they will continue to grow to a value of around £1 per share before selling. The revenue growth is impressive, and the future looks good but they do struggle with integrations. From when they sign a deal to when the games go live on a website and start making revenue is still way too long. And they don't seem to be able to work on too many integrations at the same time. As America continues to legalize online gaming and the board signs more and more deals getting our games in front of more players in more jurisdictions this is going to continue to be a bottleneck for us. I think now is the time for grabbing market share by investing in their own capabilities. A divi would obviously help get us to that £1 target but I think there is still some more juice to be squeezed before they make that call.

It is a lot of cash to be sitting on though so who knows. Just my opinion anyway.

Https://www.youtube.com/watch?v=fGwb6IZpYkw

https://www.casinocitytimes.com/news/article/gaming-realms-extends-agreement-with-king-show-games-251285

https://www.finsmes.com/2023/04/after-a-decade-of-acquisitions-gaming-realms-doubles-profit.html

Really can't see anything I don't like in that report. p/e ~22 now, no debt, well positioned to take advantage of the growth in the US market while still expanding steadily into the more mature markets in Europe. If I had to nitpick it's still taking them a long time to integrate with new operators and aggregators but at least that gives us pretty much guarantied growth as we work through the backlog. 4ThePlayer finally getting going is really great news as they already have a lot of reach.

Social still making money is also really positive since it's essentially just an acquisition tool. Ebita still growing faster than revenue. Ops expenses growing but this is to be expected as revenue grows since a major cost is just license fees.

Personally I don't see a dividend coming for at least a year or 2. There's still a lot of land to grab and if they can continue to grow the games portfolio while growing earnings and managing costs they might get bought by Flutter, if not a game dev like Evolution gaming. Either way, reinvesting these earnings should super charge growth and I can see the P/E getting back into the 40-60 range without the valuation getting too out of hand.

Did anyone see anything concerning in the report? As it stands I can't see myself ever selling these shares.

Yeah agreed. It's a strange one to RNS in my opinion. It's interesting as it shows they are making good partnerships with recognizable brands but games are always going to take a long time to develop and developers will have to be moved from other projects or have it added to a backlog.

It's also commercially sensitive info from the operators side. An online casino isn't going to want to provide numbers on how much they make from each individual slot game supplier they work with or the commercial terms of each agreement. Even if this was discussed with GMR there is no way they can publicize it. So revenue projections for a new supplier are going to be difficult, especially with slingo being a new game format as operators don't know how their customers are going to react.

You're going to have to infer it from the size of the company, or the reach they have with customers (if talking about an aggregator).

The tetris deal is different again though. The Tetris company own that game, and are now licensing GMR to use their brand. So ALL of the previous deals we have signed with operators will benefit from this. Similar to the previous agreements with monopoly for example.

This is the real growth potential of GMR. If we sign with an operator we have a new cohort of players who can access an ever growing list of games. If we launch a new game, we are launching it on an ever growing list of online casinos because we keep signing new operators. While largely keeping the cost base fixed

Yeah I take your point re slingo. Like Turbo said it wasn't always their main focus and they do produce a limited number of other slots, blackjack, roulette etc and it would be good to see them round that side out a bit. But I think the majority of their growth is going to come from slingo, with the other games as sort of an added bonus for operators who sign with us.

On the new contracts dropping to the bottom line, I do think they could do a better job providing context and the expected impact each deal is having on revenue targets as it can be hard to compare an operator to a new territory to an aggregator. But more importantly they could be clearer on the timing. After a deal is signed it is likely taking 6 months to a year before that translates into revenue as there is integration work needed, and they don't do a good job of explaining that. We're a bottleneck in that regard as the devs in GMR can only work on a certain number of integrations at a time. 6 months from signing a deal to a player being able to access a game of slingo would actually be pretty quick. There's then at least 1 month lag before we get any commission from their play, and there are likely terms to offer cheaper or even 0 commission for the first 1 to 3 months to encourage the operator to push the games.

They do regularly mention the benefit of their current strategy being that new contracts add to the bottom line while costs remain fixed. EBITA growing faster than revenue with a 40% margin.

"Total revenue grew 10% from £7.7m in H1'21 to £8.5m in H1'22. Group EBITDA grew 12% to £3.5m2 (H1'21: £3.1m), representing a 41% EBITDA margin (H1'21: 40%)." -interim report

The market rates GMR at a 40+ p/e which I wouldn't say is cheap, but with profit before tax increasing 60% YoY in H1 it's justified. The growth will come from the US market, with 55% of revenue already coming from the US and only a handful of states currently regulated.

As for slingo being a risk I can't see how. Slingo is proving to be very popular with casino operators and is seen as premium content, meaning GMR can charge a higher commission than other slots providers. Without slingo we're just a run of the mill slots company and the 40 P/E starts looking very punchy

The article does a good job of highlighting a benefit of how the board have handled slingo from the start. By working with the big slots companies instead of against them they have been able to release some huge titles. Starburst, Rainbow riches, fluffy favorites'. These are all massive slots titles and to have a slingo version is a pretty big deal. Without slingo, if we were just a slots company with 60 or so well performing games, I can't see NetEnt agreeing to us to make a gaming realms version of their most successful slot game ever (starburst).

Not to mention the media brand partnerships which they have very well from the start. Shark week, deal or no deal, xfactor, Britain's got talent, etc. Which obviously comes from the founders history of launching foxy bingo.

"Here is the number of games in the top 25 by manufacturer representation: Light & Wonder, seven games; Everi, five games; Evolution, three games; Inspired, Gaming Realms and High 5 Games, two games each; Design Works Gaming, IGT, AGS and Ainsworth, one game each."

https://www.topuscasinos.com/news/ranking-the-top-performing-mobile-slots-this-month

They were asked on the last investor call about the potential to squeeze more out of margin as their games became more popular and without getting into specifics they claimed they were considered "premium content" and so already charged a high margin compared with other game providers.

Absolutely baffled by the share price but I've held this for about 4 years so you get used to that. 66% jump in pretax profits on a 10% jump in revenue just doesn't do it for today's investor.

Thanks for posting that.

Great results. Between the pipeline of new operators and the multi state deals in the US, growth is pretty much gtd. His guess of 3 or 4% the total UK slots is also a very good sign as more states regulate gaming.