Gaming Realms Regulatory News (GMR)

12 September 2023

Gaming Realms plc

(the "Company" or the "Group")

Interim Results

Content licensing revenue grew 37% to £8.8m after 12 consecutive half years of growth

37% increase in Adjusted EBITDA1 to £4.8m

Gaming Realms plc (AIM: GMR), the developer and licensor of mobile focused gaming content, is pleased to announce its interim results for the six months to 30 June 2023 (the "Period" or "H1'23").

Financial highlights:

· Total revenue grew 36% to £11.5m in H1'23 (H1'22: £8.5m)

· Group Adjusted EBITDA grew 37% to £4.8m (H1'22: £3.5m), representing a 41% Adjusted EBITDA margin (H1'22: 41%)

· Total licensing revenues grew 46% to £9.8m (H1'22: £6.7m)

• Content licensing revenue increased 37% to £8.8m (H1'22: £6.4m) with an EBITDA margin of 54% (H1'22: 52%)

• Brand licensing revenue increased 222% to £1.0m (H1'22: £0.3m)

· Profit before tax increased 74% to £2.4m (H1'22: £1.4m)

· Net cash at period end up 54% to £4.5m (Dec'22: £2.9m) demonstrating the cash generative nature of the Group's business model

Operational highlights:

· Launched with 25 new partners globally, including Bet365 in the UK, Betway, OLG (Provincial Lottery) and LeoVegas in Ontario and Pokerstars in New Jersey

· Submitted iGaming Supplier Licenses in British Columbia and South Africa and the Company was granted its Swedish Gaming Authority License

· Secured brand licensing agreements for Tetris and TAITO's SPACE INVADERS, both expected to launch in the second half of 2023

· Gained ISO 27001 certification, an internationally recognised standard for managing information security

· Released 5 new games into the market, including Slingo Cleopatra and Slingo Money Train. The Group now has 70 games in its portfolio (Dec'22: 65 games, Jun'22: 61 games)

Post period-end:

· Licensing revenue increased 20% in the two months post period-end compared to the same period in 2022

· Launched Slingo Originals content with Betclic in the Portuguese regulated market

· Released Slingo Cosmic Clusters

1 EBITDA is profit before interest, tax, depreciation and amortisation expenses and is a non-GAAP measure. The Group uses EBITDA to comment on its financial performance. The Group uses EBITDA before share option and related charges (Adjusted EBITDA) to comment on its financial performance above.

Outlook for FY23:

Gaming Realms has continued its growth through the first half of 2023, as the Company continues to execute on its core strategy of developing and licensing games globally to market-leading brands and operators delivering high margin revenues.

This Period has seen a record performance for the Group in terms of revenue and EBITDA, driven by our core content licensing business which has had 12 consecutive half years of growth.

This strong momentum is expected to continue into the second half of the year, given the Group is still entering new markets and releasing new games, having recently launched with Betclic in Portugal and having applied for a licence to supply its games to the South African market and to the Lottery in British Columbia.

The European market continues to be the largest contributor to content licensing revenues, having grown 38% in the Period when compared to the same period in 2022, launching 5 new Slingo games and adding 9 new partners.

Our revenues from North American content licensing have increased 37%, with the region accounting for 45% of content licensing revenue. New Jersey continues to be our leading market, but Pennsylvania and Michigan are growing strongly as we launch more games with new partners. As at 30 June 2023, we were live with 57 games in New Jersey across 20 partners, 18 games across 12 partners in Pennsylvania and 28 games across 12 partners in Michigan.

In total we have launched with 25 partners in H1 2023. This growth is supported by the launch of premium games, including Slingo Cleopatra and Slingo Money Train. With the upcoming launch of Slingo SPACE INVADERS and Tetris Slingo, we are confident of further growth for the remainder of the year and the Board remains comfortable with market expectations around FY23 financial performance.

Commenting on the first half performance, Mark Segal, Chief Executive Officer, said:

"We have delivered a strong first half performance as we have grown our international licensing business with the launch of our innovative Slingo content to a growing number of partners and players.

"The Group has a strong pipeline of new business and the outlook for the Group remains positive. We are seeing growth in our existing partnerships coupled with new operator, product and market launches, which gives us great confidence in terms of the longer term prospects for the business."

An analyst briefing will be held virtually at 11.00am today. To attend, please contact Yellow Jersey at gamingrealms@yellowjerseypr.com.

Enquiries

About Gaming Realms

Gaming Realms creates and licenses innovative games for mobile, with operations in the UK, U.S. and Canada. 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.

Business review

The Group delivered overall revenue growth of 36% to £11.5m (H1'22: £8.5m), driven by the Group's core content licensing business. 

The Group generated EBITDA of £4.5m (H1'22: £3.3m) and £4.8m before share option and related charges (H1'22: £3.5m).

The £1.2m increase in EBITDA generated compared with the prior period has seen the Group record a profit before tax of £2.4m (H1'22: £1.4m), an increase of £1.0m on the prior period.

Licensing

Licensing segment revenues increased 46% to £9.8m (H1'22: £6.7m), which is broken down as:

· Content licensing revenue growth of 37% to £8.8m (H1'22: £6.4m); and

· Brand licensing revenue increased 222% to £1.0m (H1'22: £0.3m).

The segment delivered £5.7m EBITDA in the period, a 57% overall uplift over the £3.6m in H1'22.

Content licensing

The core focus of the Group continues to be growing the content licensing business by way of expanding into new regulated territories, growing our unique Slingo games portfolio and developing deep relationships with new and existing partners to maximise value and engagement.

During the period under review, the Group went live with a further 25 partners in existing markets within Europe and North America. The Company was also granted its Swedish Gaming Authority license, allowing the Company to continue to supply its games to the Swedish market, and submitted license applications in both British Columbia, Canada and South Africa.

An additional 5 new Slingo games were released to the market during the period, bringing the Group's games portfolio to 70 games at the period end (H1'22: 61 games).

Slingo is a unique genre of game in the market, which is driving engagement with partners. It continues to prove highly popular with both partners and players.

This resulted in a 37% increase in content licensing revenues to £8.8m (H1'22: £6.4m). Total segmental expenses (excluding share option and related charges) increased 34% to £4.0m (H1'22: £3.0m), further demonstrating the operational leverage of the content licensing business.

After the period end, the Group began distributing its content in the Portuguese regulated market.

Brand licensing

Revenues from the Group's brand licensing activities, which are non-core, increased to £1.0m (H1'22: £0.3m). This is a result of two brand deals completed in the period, including a deal with Entain to launch Slingo Bingo which went live in May 2023.

Social

Revenues in the Group's social publishing business reduced 2% to £1.75m in the period (H1'22: £1.79m).

Marketing expenses of £0.3m (H1'22: £0.0m) have been invested during the period aimed at increasing player numbers, activity and revenues over a 12-month period. Management do not expect this level of marketing investment to be repeated in the second half of the year, as we expect revenues to be maintained. Social remains a business where we can further monetise our Slingo portfolio.

Excluding marketing expenses, segmental expenses increased 12% to £1.2m (H1'22: £1.1m) as a result of further investment in the development and operational team to support the Group's growth plan.

Cashflow and balance sheet

The Group's cash balance at 30 June 2023 was £4.5m, an increase of £1.6m from the £2.9m reported at 31 December 2022.

The current period increase in cash was largely driven by the £3.9m cash inflow from operations, offset by £2.2m development costs capitalised during the period and £0.1m acquisition of tangible and intangible assets.

The Group remains debt free following the repayment of the convertible loan with Gamesys Group in December 2022.

The Board continues to review the optimal use of the cash balance.

The Group's net asset position at the period end was £20.5m (31 December 2022: £17.9m).

Dividend

The Board of Directors are not proposing an interim dividend for the Period as it continues to execute on its strategy and invest in the growth of the business.

Consolidated statement of comprehensive income

for the 6 months ended 30 June 2023

* Comparative numbers for the period ended 30 June 2022 have been restated. See Note 1 for further details.

Consolidated statement of financial position

as at 30 June 2023

Consolidated statement of cash flows

for the 6 months ended 30 June 2023

Consolidated statement of changes in equity

for the 6 months ended 30 June 2023

Notes forming part of the consolidated financial statements

For the 6 months ended 30 June 2023

1. Accounting policies

General Information

Gaming Realms plc ("the Company") and its subsidiaries (together "the Group").

The Company is admitted to trading on AIM of the London Stock Exchange. It is incorporated and domiciled in the UK. The address of its registered office is Two Valentine Place, London, SE1 8QH.

The results for the six months ended 30 June 2023 and 30 June 2022 are unaudited.

Basis of preparation

The financial information for the year ended 31 December 2022 included in these financial statements does not constitute the full statutory accounts for that year. The Annual Report and Financial Statements for 2022 have been filed with the Registrar of Companies. The Independent Auditors' Report on the Annual Report and Financial Statement for 2022 was unqualified, did not draw attention to any matters by way of emphasis, and did not contain a statement under 498(2) or 498(3) of the Companies Act 2006.

This interim report, which has neither been audited nor reviewed by independent auditors, was approved by the board of directors on 11 September 2023. The financial information in this interim report has been prepared in accordance with UK adopted international accounting standards. The accounting policies applied by the Group in this financial information are the same as those applied by the Group in its financial statements for the year ended 31 December 2022 and which will form the basis of the 2023 financial statements.

The consolidated financial statements are presented in Sterling.

Restatement of comparatives

The comparative results for the period ended 30 June 2022 have been restated for the following items:

· Management believes the presentation of hosting costs as an operating expense rather than an administrative expense more accurately reflects the function of the expense. Therefore £601,196 of hosting costs incurred in the comparative period have been reclassified from administrative expenses to operating expenses. This reclassification has no impact on reported EBITDA or profit after tax for the comparative period.

· In the financial statements for the year ended 31 December 2022, the functional currency of a group company was changed, effective 1 January 2022. This change was omitted from the 2022 interim financial statements, which have been restated to reflect this change from 1 January 2022. The restatement has reduced the total amortisation charge by £15,079 to £1,737,493, and reduced the tax credit by £2,564 to £42,155. The overall impact is no change to the previously reported EBITDA and an increase in the reported profit after tax by £15,515 for the comparative period.

Going concern

The Group meets its day-to-day working capital requirements from the cash flows generated by its trading activities and its available cash resources. 

The Group prepares cash flow forecasts and re-forecasts at least bi-annually as part of the business planning process. 

The Directors have reviewed forecast cash flows for the period to December 2025, and consider that the Group will have sufficient cash resources available to meet its liabilities as they fall due.

Accordingly, these financial statements have been prepared on the basis of accounting principles applicable to a going concern, which assumes that the Group will realise its assets and discharge its liabilities in the normal course of business.

EBITDA

EBITDA is a non-GAAP company specific measure defined as profit or loss before tax adjusted for finance income and expense, depreciation and amortisation. EBITDA before share option and related charges (Adjusted EBITDA) is considered to be a key performance measure by the Directors as it serves as an indicator of financial performance.

2. Segment information

The Board is the Group's chief operating decision-maker. Management has determined the operating segments based on the information reviewed by the Board for the purposes of allocating resources and assessing performance.

The Group has two reportable segments.

· Licensing - B2B brand and content licensing to partners in the US and Europe; and

· Social publishing - provides B2C freemium games to the US.

Revenue

The Group has disaggregated revenue into various categories in the following table which is intended to:

· Depict how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic date; and

· Enable users to understand the relationship with revenue segment information provided below.

2. Segment information (continued)

EBITDA

2. Segment information (continued)

As per Note 1, the restatement of comparative results relating to hosting fees has also been reflected in the segmental information. In the licensing segment £440,153 has been reclassified from administrative expenses to operating expenses, in the social publishing segment the reclassification is £161,043.

3. Finance income and expense

4. Earnings per share

Basic earnings per share is calculated by dividing the result attributable to ordinary shareholders by the weighted average number of shares in issue during the period. The calculation of diluted EPS is based on the result attributable to ordinary shareholders and weighted average number of ordinary shares outstanding after adjustment for the effects of all dilutive potential ordinary shares. The Group's potentially dilutive securities consist of share options.

5. Property, plant and equipment

6. Intangible assets

7. Trade and other receivables

All amounts shown fall due for payment within one year.

8. Trade and other payables

The carrying value of trade and other payables classified as financial liabilities measured at amortised cost approximates fair value. All amounts shown fall due for payment within one year.

9. Share capital

The issue of 881,506 ordinary shares relates to the exercise of share options during the period. The increase in share capital of £88,150 and share premium of £16,961, totalling £105,111 is disclosed in the consolidated statement of changes in equity and consolidated statement of cash flows.

10. Share based payments

The share option and related charges income statement expense comprises:

IFRS 2 (Share-based payments) requires that the fair value of equity settled transactions are calculated and systematically charged to the statement of comprehensive income over the vesting period. The total fair value that was charged to the income statement in the period in relation to equity-settled share-based payments was £116,220 (H1'22: £253,775).

Where individual EMI thresholds are exceeded or when unapproved share options are exercised by overseas employees, the Group is subject to employer taxes payable on the taxable gain on exercise. Since these taxes are directly related to outstanding share options, the income statement charge has been included within share option and related charges. The Group uses its closing share price at the reporting date to calculate such taxes to accrue. The tax related income statement charge for the period was £129,836 (H1'22: £90,956 credit).

11. Related party transactions

Jim Ryan is a Non-Executive Director of the Company and the CEO of Pala Interactive, which has a real-money online casino and bingo site in New Jersey, Pennsylvania and Ontario. During the period, total license fees earned by the Group were $30,259 (H1'22: $10,401) with $23,180 due at 30 June 2023 (30 June 2022: $940). During the period the Group distributed its content to certain North American partners via Pala's B2B platform distribution network, with platform fees of $7,933 being incurred (H1'22: $108) of which $3,243 was owed at 30 June 2023 (30 June 2022: $108).

During the period £90,000 (H1'22: £75,000) of consulting fees were paid to Dawnglen Finance Limited, a company controlled by Michael Buckley. No amounts were owed at 30 June 2023 (30 June 2022: £Nil).

12. Post balance sheet events

On 2 August 2023 3,455,000 share options were granted to certain Directors and employees of the Group. All of the options vest on 30 June 2026. All of the options have an exercise price of nil pence.