FUNFF - FansUnite Entertainment Inc. (FUNFF) Q3 2023 Earnings Call Transcript

2023-11-15 14:13:09 ET

FansUnite Entertainment Inc. (FUNFF)

Q3 2023 Earnings Conference Call

November 15, 2023 10:00 AM ET

Company Participants

Prit Singh - Investor Relations

Graeme Moore - Chief Financial Officer

Scott Burton - Chief Executive Officer

Presentation

Prit Singh

Hello, everyone. Welcome to FansUnite's Q3 Fiscal 2023 Earnings Call. For those who are unfamiliar with FansUnite, FansUnite is a global sports entertainment and gaming company, focused on regulated and lawful sports betting affiliate market, which includes customer acquisition, retention, support and reactivation. FansUnite trades on the TSX, under the ticker FANS, F-A-N-S and on the OTCQB under the ticker FUNFF, F-U-N-F-F. My name is Prit Singh, I will be the moderator for today's call.

Before we begin, I would like to go over the legal disclaimers. I will pause here for a few seconds, so our viewers can read it.

On today's call, we will be covering FansUnite's Q3 fiscal 2023 financial and operational highlights as well as its growth outlook for the remainder of 2023. At the end of the session, we will host a Q&A session. If you have any questions during the webinar, feel free to send them in using the Zoom Q&A function at the bottom of your screen. If you are calling in to listen to the webinar today, please e-mail your questions directly to ir@fansunite.com. We will address these questions during the Q&A session. Our presenters today will be the CEO of FansUnite, Scott Burton; and CFO of FansUnite, Graeme Moore.

I will now turn the conference over to Graeme Moore, CFO of FansUnite to discuss the Company's Q3 fiscal 2023 financial results.

Graeme Moore

Thanks, Prit. Just everyone knows how this will be structured similar to prior quarters. I'm going to first speak to the statement of profit and loss for the three months ended September 30, 2023 or Q3 2023 as I often call it, and then I'll move to the 9 months ended September 30th thereafter or year-to-date. And then finally, I'll talk to the balance sheet. The one difference this presentation that I do want to highlight is the fact that we have added a section in our financials called discontinued operations, which is a result of the sale of McBookie and Chameleon that occurred in May of this year. Chameleon and McBookie made up our iGaming segment in the past, and the financial results for the iGaming segment have been moved to their own section on the statement of profit and loss. When speaking about the financial results below, current year figures as well as all comparatives are referring to continuing operations unless otherwise specified.

I do have a specific section that talks to discontinued operations. This is obviously very different than anything we've had in the past. So if there are questions, please, as Prit mentioned, e-mail ir@fansunite.com or submit them via the question function, and we'll be happy to get to them after.

So for the 3 months ended September 30, 2023, our revenue increased to $4.8 million, when compared to $4.3 million in 2022. This growth is a result of increased activity levels with existing customers throughout the year, compounded by the acquisition of multiple new customers, launch in new states and expansion in the bespoke research market. Our bespoke research market contributed $288,000 this quarter.

I do want to note that the increase in revenue was constrained by one of our operators experiencing a cyber attack, which led to inactivity for several days during the start of football season, which is one of our most active periods of the year. Our cost of revenue was $2 million in Q3 2023 compared to $2.2 million over the same period in 2022, and the gross margin percentage was 59% as compared to 50% in Q3 2022. So again, revenue was up, and our cost of revenue was down.

The improvement here primarily relates to a focus on higher margin operation, which has led to efficiencies realized through the sale of certain lower margin digital assets. The sale of digital assets such as Wagers and BetPrep has resulted in reductions in contractors, and led to improved margin as our focus has shifted towards live activation and research segment.

Overall, net loss from continuing operations for the quarter was $4.3 million, which compared to a net income of [$42.4 million] in Q3 of fiscal 2022. So I do want to say here, in 2022, we had a revaluation gain of $51 million which significantly changed our net income position. However, once we remove that, efficiencies were seen in selling, general and administrative expenses, which were roughly $8 million in the three-month period in 2023 as compared to $12.4 million in 2022.

Finally, improvements were achieved in other noncash income item through reductions in the expenses related to deferred and contingent liabilities, which is a direct result of the earnout restructure that we did in 2022.

Our G&A expenses decreased slightly to $448,000 in Q3 2023 compared to $487,000 in 2022. The company saw improvements in G&A expenses as the reduction in non-segment specific employees reduced the need for auxiliary spending. There were further gains seen from the reduction in softwares that were specific to the digital affiliate market as the company acted on targeted efficiencies found in the business.

Professional fees also decreased slightly to $293,000 compared to $305,000 in 2022. This decrease is a result of reduction in recruiting expenses, and AmAff now has a well-established team that's appropriately sized given the current revenue activity.

Salaries and wages decreased to $1.8 million in 2023 compared to $2.4 million in 2022. Last year you might remember that the AmAff executive team was reduced in line with the earnout buyout, which led to severance payments made in that quarter. Further gains were recognized over the year as a result of the reduction in executive salaries, largely in the AmAff business.

Sales and marketing expenses also decreased to $67,000 in 2023 compared to $291,000 in 2022. We curtailed a lot of our spending related to marketing the company in the public markets, given the current macroeconomic environment and just a lot of the traction we were seeing. The termination of agreements pertaining to a number of external consultants also contributed to reduction in the spend in this category.

Now if we pivot to the 9-month period or year-to-date, our revenue year-to-date has decreased to $17.2 million compared to $17.5 million over the same period in last year. This change is largely -- the fact that we had a decrease is largely related to the record revenues we saw in Q1 of 2022. So in Q1 of 2022, New York legalized sports betting. And after an initial huge boom, New York State actually changed their regulations which disallowed sports betting affiliate use in bars. We have a really significant bar network, that's one of the things we really rely on our live affiliate revenue. So not being allowed to have sports betting affiliate activity in bars has led to -- did lead to a significant decrease in 2023 revenue in New York when compared to 2022.

Again, I do want to mention here as I mentioned above that we also had a cyber attack on one of our major customers during the first couple weeks of the NFL season, which is always one of our busiest periods of the year.

Year-to-date, our cost of revenue is $6.3 million as compared to $8.1 million over the same period in 2022. The resulting gross margin is 63% this year compared to 54% last year. That is a massive improvement that I do want to say we are really proud of as a company and will look to continue going forward. So the improvement relates primarily to the continued gain in efficiency related to AmAff, which again we shifted our focus away from pursuing growth of our digital asset portfolio and focus on the live activation.

We also have focused on a continued diversification of Betting Hero business, including the growth of our high margin revenue streams such as research. These efforts led to the signing of a research contract with a premier U.S. sportsbook during the period. Overall, we expect margins to remain high as the affiliate business continues to gain efficiencies in existing markets, and the company acquires additional research contract.

Our net loss from continuing operations year-to-date is $14.3 million, which compares to a positive net income of $23.8 million in the prior year. As I mentioned above, this $38 million swing is due to a number of factors in both period -- both direction. Firstly, there was a decrease of share-based payment to $1.4 million as compared to $5.3 million in 2022. In 2022, we issued stock options as part of the earnout buyout. We issued warrants as part of the bank indebtedness, neither of which occurred in the current year. We also had an approximately $8 million reduction in accretion of the contingent liability in 2023. In total, our non-cash expenses totaled $17.7 million in 2023 as compared to $29.6 million in the same period last year. This $12 million improvement in net income was offset by the fact that in 2022, we had about a $52 million revaluation gain due to the restructure of the contingent consideration, and obviously we didn't have that same gain this year.

Our G&A expenses stayed roughly the same at $2 million this year compared to $1.9 million in 2022. The primary cause of this increase relates to travel expenses. As a couple of new states open and as we look to find a more efficient way to run our teams, our Betting Hero business has established operations in different states. As we look to spin up new teams and make sure we're operating as efficiently as possible, there are definitely some setup costs there. This is typical in a geographically distributed workforce, but we do expect this to come down as we get settled going into 2024.

Our professional fees increased to $1.4 million as compared to $1.1 million in 2022. During the current year, we had legal services rendered in relation into the sale of our BetPrep asset, McBookie and Chameleon Gaming's platform source code. The increase in legal fees was offset by the reduction in legal expenses related to the earnout buyout in the prior year comparative period.

Salaries and wages decreased to $6.1 million in 2023 as compared to $6.8 million in 2022. As previously mentioned, in September '22, the company reduced executive level headcounts in AmAff as part of the earnout buyout. This included some severance paid to the aforementioned executives, and obviously no such expense was present in the current year.

Sales and marketing also decreased to $376,000 in 2023 compared to $821,000 in 2022. The sale of Wagers and BetPrep contributed to a reduction in marketing spend when compared to 2022. The company also curtailed our spending related to marketing company in public market due to the macroeconomic environment.

As I previously mentioned, discontinued operations obviously are a big part, not necessarily of our future, but of our path. And so I do want to touch on them briefly here. When we look at discontinued operation, the majority of the impact can be seen as a result of Chameleon. So our net loss from discontinued operations for Chameleon in the 9 months ended September 2023 was $5.9 million as compared to $19 million in the same period in the prior year.

Chameleon had negative gross margin of $47,000 this year compared to positive $117,000 in prior year. Now the reason we had negative gross margin is, there were costs associated with winding up that iGaming segment, some data providers and such that we had to pay a little bit past the revenue was coming in. I'm happy to say that is all cleared up now, but just in case you're wondering, negative gross margin obviously stands out as a bit of a red flag.

There were selling, general and administrative costs of $5.7 million which compared to $7.8 million in the prior period. These were largely salaries and wages, professional fees, and G&A expenses that will not affect the company's financial position going forward. Also, in September 2022, we had a nonrecurring $11 million impairment charge that further increased the loss, which is why that $19 million last year, obviously, it wasn't all cash.

If I move to the balance sheet now, our total assets decreased to $61.5 million on September 2023 compared to $77.5 million at year-end. During Q2 2023, we sold McBookie, which resulted in a disposal of $1.2 million of total assets, and similarly the Chameleon gaming platform was sold resulting in the reduction in a $5.9 million in intangible assets. The intangible assets were reduced further by amortization of $14.7 million year-to-date. This was offset by increase of in investments of $2 million related to the share purchase warrants in Betr and an increase of $2 million in receivables related to milestone payments, both as a result of Chameleon sale. The decrease in total assets was also mitigated by the sale of BetPrep, which led to the recognition of about a $200,000 receivable.

Our total liabilities decreased to $26.7 million at September 2023 compared to $34.5 million at December 2022. The primary driver of the decrease in liabilities was the result of the repayment of $5.5 million of the long-term debt balance. Our contingent consideration decreased to $19.4 million as compared to $20.8 million at year-end, due to scheduled payments associated with the acquisition of American Affiliate.

Relating to our cash position, our company's cash position decreased by $624,000 at September as compared to a decrease of $9.4 million over the same period in 2022. Our increasing cash for the period end of September 2023 is largely due to the receipt of a non-brokered private placement of $3 million, a cash receipt of $3 million from the sale of Chameleon, and cash proceeds of $5.2 million for the sale of McBookie. Those above items were offset by $5.5 million repayment of long-term debt and about $600,000 of routine and early repayment interest as well as $2.3 million in earn out consideration paid during the 9-month period.

I do want to highlight here that our cash at September 30th was $2.3 million, which does put us in violation of our cash covenant with respect to our loan with Centurion. We reached out to Centurion in advance of September 30th in order to work with them as business partner. I'm happy to report that those talks are progressing well. We hope to have a waiver as well as a plan going forward in the near future.

Our AR was just under $6 million at September 30th. And if you add cash in AR, we were over $8.2 million at September 30th. So we are largely dealing with and Centurion is understanding and working with us here that we are dealing with the timing questions as far as collection. And so our plan is to work with them, make sure we aren't tripping a covenant just because a couple of clients paid on October 6th instead of September 29th.

As of September 30th, the company had net working capital of $1.5 million, which compared to a net working capital deficit of $4.2 million at year-end. The big liability here is obviously the $3 million U.S. deferred payment. We have a really good relationship with the parties involved and they understand the position we're currently in.

We're in talks around alternative arrangements that we will see them pay without impacting the business negatively, and they -- also everyone keeping in mind the covenants tied to our debt that I previously mentioned. An important part we'd like to highlight is that if you look at our financial statements, operating cash flow was negative $3.3 million. However, within that cash flow -- and this is one of the weird things where you separate discontinued operations in the profit and loss, but not within the cash flow. So within that negative $3.3 million is cash flows used in operation of $4.2 million, which is not recurring due to the sale of McBookie and Chameleon. So that is to say, all else being equal, our company generated positive cash flows of $900,000 from continuing operations in the first 9 months of the year.

Our work to become cash flow positive from the last 12 months is working. We are seeing positive results, and we anticipate seeing even more positive result as our focus shifts away from winding up those continuing operations and towards maximizing and profiting from our continuing operation.

That's all for the financial update on FansUnite, and I'll then now turn the call over to Scott Burton, our CEO.

Scott Burton

Thanks, Graeme. As you said, I'll talk about the operational highlights mostly for the third quarter of this year. And as with the previous quarters, Graeme mentioned a lot, but we really continue to focus on the operational and financial efficiencies. It's highlighted by the sale of McBookie and the Chameleon gaming platform and then moving Dragon Bet off of the Chameleon platform. They were our final B2B customer. The sale of both assets and the migration of Dragon Bet allowed us to focus on growing the cash flow positive side of the business, which is the affiliate.

We think that's the way forward to generate better shareholder value and we will continue to grow the affiliate business, increase margins and look to reduce costs as we move through 2024. September was when we completed the migration of Dragon Bet. That combined with the sale of the Chameleon source code to Betr, completed our transition away from business to business platform licensing. As a result of the transition, we expect to achieve annualized cost savings of approximately $7.8 million. This includes reductions in salary and selling, and then G&A costs, the general and administrative costs. The moves were necessary for us to reach the goal of being cash flow positive by the end of 2023, which is I think what we've been talking about every quarter for the last 3 or 4 quarters that we knew we had to be in that position by the end of this year.

In terms of the continuing operations that Graeme talked about, Betting Hero is our primary one. It's continuing to expand its U.S. footprint by participating in the launch of regulated wagering in Ohio, Massachusetts, and Kentucky. That business -- the affiliate business contributed significant revenue of $4.8 million and $17.2 million to the results for the 3 and 9 months ended September 30, 2023 respectively.

As part of the strategy to continue diversifying revenue streams and smoothing the seasonality of the North American sports calendar, the Hero team continued to grow lines of the business outside of live activations. So the Research segment has grown in the fiscal year including a contract signed with a premier U.S. based sportsbook during the period. They continue to do an exceptional job of servicing the live activation partners they have, while also growing their research, digital and hotline segments of the business. The continued diversification will add higher margin business and contribute to mitigating seasonal effects of the Betting Hero's revenues.

There's the other segment of the affiliate business that we haven't talked about a lot in the past. This is Props.com and that's our digital brand. And we can start to begin to look at our digital strategy more and that would be more of a focus as we have these discussions going forward. Over the past 12 months, as we've mentioned previously, our focus first was on reducing costs. We elected to move away from podcasts and other sites to focus on Props.com, which is our marquee affiliate site.

During the 3 and 9 months ended September 30th, we achieved cash savings associated with running Props of $233,000 and $586,000 respectively when we compare that to the same periods in 2022, so we're able to see substantial cost decreases in that time.

Once we got to a point where we had completed our cost review and rationalization of the digital affiliate business, we're able to move the focus to growing revenue on Props.com. For the 3 and 9 month period, revenue increased 282% and 571%, respectively, over the same periods in 2022.

Props also now sits on a proprietary affiliate platform that we've developed. The platform is now ready to scale, not just for Props, but for a number of other assets. So as we continue to grow Props, we can assess our library of other affiliate domains, which we have 20-plus that we own, and we can look to add them to this platform to add additional digital revenue to the company.

Going forward, we know sports betting and iGaming are going to continue to be legalized in more North American states. Betting Hero will maintain its aggressive expansion into new markets in partnership with our affiliate customers. And by entering into strategic partnerships with ancillary industry operators and growing its market research and consulting teams, Betting Hero continues to diversify its revenue streams and will add -- seek to add additional value to customers all year round. Recently, they've grown the research revenue stream which consists of value added reports for customers, providing them with insights and information needed to better serve their markets. And in addition, Props.com continued to see month over month growth and can serve as a launching point for additional digital revenues.

Consistent with our path to profitability plans, we've conducted strategic reviews on certain business segments to identify opportunities for both operational and financial efficiency. This review has led to sales of some of our assets such as the Malta B2B gaming license, our betting analytics brand BetPrep, McBookie and the Chameleon Gaming Platform.

So let's say the last year has been challenging, but our team has executed on our initiatives and secured our path to profitability now. And we put ourselves in a position of being cash flow positive, which means we can now get away from all of the restructuring we've been doing, downsizing or rightsizing the business, and just purely focus on moving forward with growth and growing both the digital brands and also the Betting Hero and look at other inorganic opportunities at the same time as the organic ones that are come from state openings.

So that's the formal part of the presentation. Thank you all for joining us and listening and the support. And we will move into questions-and-answers that will be moderated by Prit for us.

Question-and-Answer Session

A - Prit Singh

Thanks, Scott. Thanks, Graeme. As mentioned, we will now turn the call over to the Q&A session. [Operator Instructions]. Okay. Let’s get started with question. When can the investors and the viewers expect FansUnite to become profitable?

Graeme Moore

Yes. I can take this one. So, again, as Scott mentioned, this has been a focus for us for the last year. With all the changes that we have, the migration of Dragon Bet, Chameleon, McBookie, we're seeing those results. If you look at our adjusted EBITDA at the end of our MD&A, you'll see that for the 9 months ended, we're positive $1.1 million. For the 3 months ended, we're positive $200,000. So when we talk profitability -- net income is one thing and obviously, as long as we have intangible asset, amortization and share-based payments, that's going to take a while.

We are really focused. When we say profitable, we mean cash flow positive. So we're going to continue seeing even more savings in Q4. Obviously, as Scott mentioned, Dragon Bet wasn't migrated completely off onto their own platform until September of 2023, but we didn't get the full cost savings despite how positive all of those things are. So I think we are cash flow positive in Q3, if you look at continuing operation.

So now that our discontinued operations are more fully wound up, I think Q4, you will see truly cash flow positive. And then we anticipate every quarter after that going forward as long as, obviously, once we factor in the seasonality of the summer, but that'll be our focus for the next 6 months is enjoying and working hard through the busy part of the sports calendar and getting ready to make sure we can remain cash flow positive during the slow part.

Prit Singh

Can you expand a little bit on the company's strategy to achieve cost savings?

Graeme Moore

Sure. Yes. I mean, I think a lot of this strategy is what we've been executing over the last 9 months. So if you look at what we've done in McBookie and Chameleon, we've let 61 people go, which is approximately about 60% of our full time staff. If you compare what our headcount was at March of 2023 to what it is at September, so in the last 6 months, so that's very significant savings in headcount, which has always been our largest cost center.

As far as continuing, I think one of the main things that we will look to do now is we focus on optimizing Betting Hero. Scott and I from kind of a corporate standpoint have been focused on discontinued operations and making sure that, we maximize shareholder value as we wind those down. We'll now focus to empowering the Betting Hero team to make sure they're running as efficiently as possible. I don't think we'll see as significant headcount reductions or anything like that as we've done so far. They've always run a really lean team. They always have that entrepreneurial mindset that we love. And so we'll just work with them to make sure we're optimizing everything and adding our skill set to their significant skill set.

Prit Singh

Touching on Betting Hero, can you expand on their additional revenue streams?

Graeme Moore

Sure. So live activation is obviously kind of their flagship. That's what Betting Hero started with. That's where they built their name, and that's where, as Scott mentioned, pretty much today, all of their revenue comes from. The one -- when I talk about additional revenue streams here, there's two that we've talked about in the past. One is the research. So if we look at our bespoke research market, it contributed about $288,000 in this 3-month period, which is really strong. We're really happy with that. We've never had a $1 million year in research, and so the fact that we had $288,000 this quarter is something that we are really happy with. And as mentioned, it's really high margin. So it's not necessarily dollar for dollar on revenue there.

We also signed one of the major operators in the U.S. to recurring research engagement, which builds up this research and makes it less of a one-off where we have to constantly be selling and more of a recurring revenue base as we head into Q4, and this is one of the ways we plan on kind of shoring up the seasonality of the calendar next summer.

The second revenue stream that we've touched on in some of our investor presentations is the Hero Hotline. This is still pre-revenue, but it's definitely ramping up. Jai Maw, who's one of the Betting Hero founders, has spent a ton of his time proving out the model for our partners, making sure that when this launches fully, we will have a sustainable revenue stream. We haven't hit that stage yet, but we are really encouraged by the progress that's being made.

And one of the really great things about this launch is we are leveraging a lot of our skills and people that we have in other areas of the business. Though, it's not like launching hotline is like launching some of the other lines of business where it's a significant capital investment. We are able to leverage people that are doing other profitable things for the company into building hotline up in advance of launch, so that when it does launch, it can be profitable, not necessarily on day one, but really soon after.

Prit Singh

Just touching on Props.com. Was Props.com scaling its revenue? What is the company's strategy to grow operations?

Scott Burton

Yes. I'll take that one. As I said in our previous talk, it was really first about getting the costs in line on that whole digital affiliate side, which included some podcasts and a number of other domains we're trying to run. So we got it down to really just Props and wanted to get that operating very efficiently and in a way that we knew it could get to profitability and then use that as a model for other brands.

So we own a number of other domains in the affiliate space, and they're not being used right now. They're parked until we got this done, which is starting to see it now with Props. And in addition, we wanted our own platform to build on to reduce costs in the long run, but also give us some flexibility and then add increased value to the overall digital side of the business. So by having a platform that can support hundreds of different domains, it becomes quite a valuable product in the affiliate space.

So what we're doing now is looking at creating very high quality content, leveraging the people we have within Props, it's a smaller team running it now. But we're also leveraging some of the new automated content that you can get out there, which is turning out to be quite good. It's cost effective way to grow the content on the site, while not increasing headcount and cost significantly.

What we want to do now is get Props a bit stronger in terms of revenue growth. So once we've sustained that and moved to a cash flow positive product, we would then look to bring other domains online. And again these are all around the affiliate space, so they would be doing similar thing, which would be just driving traffic to either online sportsbooks or online casinos or both, and we think that we can start doing that in 2024 and then start to see the digital side of our business contribute quite a bit more than it has in the past, but do it profitably, and that's going to be the focus for that area of the business.

Prit Singh

A question on Dragon Bet. Can you provide more insight into why FansUnite decided to transition away from its B2B business?

Scott Burton

Yes. Obviously, I'd say it was a challenging decision to make. We sat down as an executive team of Board and looked at the overall environment and what was happening in sports betting industry, what was happening to other B2B operators, and then also what the outlook was for the current stock market condition and macro environment and the ability to raise capital going forward, and we decided that it was a part of the business that was starting to commercialize Betr.

So we had Dragon Bet and Betr and a good pipeline of business that we think we could have added to grow the revenue side of the business, but it was by far the largest cost center in the company. For us to continue to grow the revenue on that and try and take business from other competitors, we would likely need some additional capital in the next 12 to 24 months. And, again, in the current environment, we just couldn't accept the losses that we were getting out of the business and the potential requirement for more money to go into it.

So we have this opportunity to monetize what we had and take a return on the code base, while maintaining the right to use the code in the future. Things could change in the future, but for now, where we wanted to be and we've said for many, many months is the FansUnite would be cash flow positive by the end of the year. And we would not have been able to do that if we didn't make that change to move away from the business-to-business platform and everything that came with it. So that's the decision that we made, and it's put us in this position now of hitting our real target of being cash flow positive.

Prit Singh

Next question. Are you able to forecast a target quarterly period for when the remaining debt is anticipated to be paid off given improvements to EBITDA as well as the future $3 million part 2 cash payment from Betr in 2024? So I guess it's two questions.

Graeme Moore

Yes. It really is kind of two questions. So first, the EBITDA improvements. We don't anticipate using any improvements in EBITDA or cash flow generated in operations to repay our debt. We want to use that to reinvest in the business to pay other liabilities to grow, right? And so that's kind of where we are singularly focused as far as our EBITDA improvements. When you swing to the Betr payments, legally, these can be swept by Centurion, they have a right to kind of proceeds from asset sales, which these would be deemed. We anticipate that Centurion will exercise their contractual right here, and we'll sweep those payments, which would put us debt free in May of 2024. However, we will always work with them, and we always try and retain as much cash in the business as possible. But assuming everything goes as is currently forecasted, I would say May of 2024 is when that debt will be wiped off.

Prit Singh

Thank you. Just to follow-up to that question. How confident is management that the conditions underlying the remaining milestone payment from Betr will be satisfied?

Scott Burton

Yes. We're confident on that. We know their timelines. Obviously, they're in control of their timelines, but we know the underlying milestone payment and what relates to it. We know the tech team that's responsible for implementing it because they were largely ours. And we're in contact with them as recently as last week to discuss. So we're still very confident. It's a key part of their timeline for the product. So we're confident that'll get done and that remaining milestone payment related to the condition will be satisfied in 2024.

Prit Singh

Thank you. Next question. Salaries and wages were $1.8 million for the period. What is the range of expenses for this line item that investors can expect just going forward, appreciating there may be seasonal fluctuations?

Graeme Moore

Yes. It's a good question. Obviously, the seasonal fluctuations is a really important part of that. If I look to 2023, we had about $2.2 million in Q1 of salaries and wages, about $2.1 million in Q2 and then about $1.8 million in Q3. So I think that's fairly indicative of where we'll be hovering. Obviously, $1.8 million shows some of the efficiencies that we've gained. We've obviously reduced our corporate headcounts, just as a result of not having as many employees to support. So I would anticipate being a little on the low end of that while recognizing that the Q3 number of $1.8 million had July and August, which are 2 of our slowest months, and September, which is a busy month. So, I can't say that we'll be that low every quarter, but we should be hovering around kind of that $1.8 million to $2.2 million.

Prit Singh

Next question. Are there any other legacy assets such as source code from RNG games that can be sold off? It is acknowledged that source code for Chameleon can always be sold as has been previously explained given the terms and conditions associated with the Betr transaction?

Scott Burton

Yes. There are a few things in there, but the one that's been highlighted by the question is RNG games. And the answer is, yes. There's some assets there that can be sold off. We are actually speaking with a group now about that. So it's kind of come up to the top of the list of things to address again. The other parts of the business that we have sold off or dealt with still had significant costs tied to them. So we needed to get rid of those. And now we can continue our work on monetizing assets that are being used, and RNG games is one of those that we can do.

Outside of that, potentially, we sold our Malta B2B license. There's possible additional license sales that we could look at. And we'll look at our domain library as well. Talked about our affiliate platform, our proprietary affiliate platform that can now handle hundreds of affiliate sites effectively. So we will look to bring some of those online, but there may also be some that we decide we want to sell off. So we'll be looking at all of those things.

Prit Singh

Next question. Just wondering if FansUnite has any plans or still planning on buying back some of their shares on the open market?

Scott Burton

We extended the NCIB in anticipation that there will be a time where we'll look to do that. We haven't been doing it because we weren't at our goal of being cash flow positive, and we have some debts and liabilities that responsible for. Now we've got ourselves positioned where we know we'll be cash flow positive going forward, and we have a timeline on when the debt will be repaid, we can look at that. Again, we're not doing it immediately. It didn't make sense as a small cap company that wasn't generating cash to take valuable cash, knowing it's hard to raise money right now. So we weren't going to put that back into buying back stock or consider it until we got ourselves positioned. And we are now in a much stronger position. But Q4, Q1 will put us in, I would think, a really strong position. And then we can look to assess our cash position, what the stock is doing, and what's the best use of capital at that time.

Prit Singh

Just last question here. What are some catalyst investors can expect in the next 6 to 12 months?

Scott Burton

Yes. I'll take that. There's a handful of them. What we've talked about for so long was getting to this point. In the earlier calls this year, one of the catalysts would be showing that we'll be profitable.

As Graeme mentioned, if you look at the continuing operations and what cash flow was and we talk about being cash flow positive, we're there and we should be able to show it strongly in the Q3 numbers, Q1 numbers and going forward. So that was a big catalyst. I think Q4 results or year-end results will show how well we've done on that. We always have -- I'd say sort of the organic growth that we'll be seeing. There's going to be more states opening up in the U.S. So as states open up, our Betting Hero brands, our Props brand, we'll be able to monetize that. So we'll see some organic revenue growth with additional states opening up in next 12 months. Hopefully, we'll land one of the larger states, but we know of 2 or 3 that should be coming online early in the new year.

There's another area that's I think an exciting one for the potential and what it can do to the business. We'll see growth in the iGaming or online casino states coming online. So everything we've done to date has largely revolved around sports betting. You'll see, half the states have done something around sports betting. Much fewer states have addressed online casino, but we know they will. And when those opportunities come up, they will present us with better revenue, less seasonality and higher margins. So that's an area that I think people don't understand about the business and what's to come. So, yes, we'll continue to be a sports betting affiliate, but more and more we hope to see online casino affiliate opportunities and that's when we'll see a real, I think, a step change in terms of revenue and some margin improvements.

And then finally in 2024, which you know is in the next 12 months, we'll eliminate the debt, which will make us really a debt free cash flow positive business which I think at this time in the small cap tech gaming space is pretty rare. So I think we're an interesting opportunity for people to look at now that we've done the work that we've talked about. We've executed on it and we can now focus on moving into 2024 and getting back to growth and some of the more exciting things as opposed to restructuring and cost cutting.

Prit Singh

Perfect. Thank you. So I think that will wrap up the Q3 financial results earnings call. Thank you, Scott and Graeme. I'd like to thank everyone for joining us today. Just as a reminder to those, FansUnite does trade on the TSX under the ticker FANS, F-A-N-S, on the OTCQB under the ticker FUNFF, F-U-N-F-F.

We will have a recording of this webinar. Should you have any questions or would like a copy of the webinar, you can e-mail us at ir@fansunite.com. Also, if we did not get to attend your questions, please do e-mail us at the same address. Again, thank you, Scott and Graeme.

Scott Burton

Thank you.

For further details see:

FansUnite Entertainment Inc. (FUNFF) Q3 2023 Earnings Call Transcript