CA - FansUnite Entertainment Inc. (FUNFF) Q4 2022 Earnings Call Transcript

2023-03-31 16:07:10 ET

FansUnite Entertainment Inc. (FUNFF)

Q4 2022 Earnings Conference Call

March 31, 2023 10:00 ET

Company Participants

Prit Singh - Investor Relations

Scott Burton - Chief Executive Officer

Graeme Moore - Chief Financial Officer

Conference Call Participants

Presentation

Prit Singh

Okay, let’s get started. Hello, everyone. Welcome to the FansUnite Q4 and 2022 Year End Earnings Call. My name is Prit Singh and I will be the moderator for today’s call. Before we begin, I would like to go over to legal disclaimers. We will pause here for a minute, so our viewers can review.

On today’s call, we will be covering FansUnite’s key fiscal 2022 financial and operational highlights as well as its growth outlook for the remainder of 2023. After the presentation component of the webinar, we will be hosting a Q&A session at the end of the webinar. 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, you can e-mail your questions directly to ir@fansunite.com , again, that’s 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 full year and Q4 2022 financial results.

Graeme Moore

Thank you, Prit. Just everyone knows how this will be structured. I am going to first speak to the statement of profit and loss for the year ended December 31, 2022. All figures that I referenced should be interpreted as for the year ended. I will then move on to the balance sheet as we had some significant changes there that I would like to touch on. The major news for us this year is our revenue growth. In 2022, our revenue increased by 387% to $27.3 million, up from $5.6 million in 2021. The majority of our revenue came from American Affiliate, which we own for a full calendar year as compared to approximately 6 weeks of ownership in 2021. American Affiliate or AmAff as we call it, delivers strong operational results capitalizing on major U.S. sporting events including the Super Bowl, NCAA March Madness Basketball tournament and other events. They also participated in the launch of regulated sports betting in New York and other states and expanded their presence in existing markets that they operated in prior to 2021.

In addition to American Affiliate, our revenue from McBookie increased to $3.76 million in 2022 as compared to $2.81 million over the same period in 2021. This is primarily due to strong performance from the casino and an active sports betting environment surrounding the FIFA World Cup in Q4. The remaining $520,000 of revenue was generated from the recently launched Chameleon white-labels, which marks the commercialization of the company’s B2B operations. FansUnite had a cost of revenue of $12.45 million for 2022 as compared to $2.72 million in 2021.

Now, these numbers are a little misleading given the significant increase in revenue that I just mentioned. So I’d like to draw your attention to the gross margin. The gross margin in 2022 is 54% as compared to 51% in 2021. The improved overall gross margin percentage and dollars primarily relates to the increase in activity related to American Affiliate, which is both our highest margin as well as our highest volume business. Our net loss for the year was $61.27 million as compared to $17.05 million in 2021. And the increased loss was due in large part to the goodwill and intangible impairment and was offset by the gain on revaluation of our contingent liability.

Now, I will talk to the revaluation impairment in the balance sheet section. But I would like to bring everyone’s attention to the fact that outside of those two items, we had over $38.5 million in non-cash expenses included in that $61 million loss figure as compared to only $7.6 million in non-cash expenses in 2021. The nature of our company is that we were focused on acquisitions and growth until the end of 2021 and we used a combination of cash and stock to fund those acquisitions. Obviously, there is a price there and we see that in the share based payments of $6.7 million in 2022 as compared to $2.25 million in 2021 as well as the acceleration on liability – accretion on liabilities, which is essentially adjusting the present values of our contingent consideration a very accounting heavy entry of $10.6 million which compared to $1.4 million in 2021.

Operationally, the main operational expenses, salaries and wages, which increased to $14.4 million from $4.4 million in 2021 which was a result of increase in headcount. The company increased our average headcount to 95 people for the 2022 year as compared to 34 in 2021. The majority of new hires were attributable to the American Affiliate business, as well as our B2B segment.

General and administrative costs were our second largest G&A expense, which increased to $4.62 million up from $2.05 million, again due to the acquisition of American Affiliate as well as ancillary costs associated with the increased headcount. In the second half of the year, as Scott was mentioned, we shifted our focus from growth and acquisitions, to streamlining costs, and we took a hard look at how do we become cash flow positive as a company.

To that end, I am happy to note that our professional fees decreased from $3.5 million to $2.8 million, and our sales and marketing decreased from $3 million to $1.6 million. With no acquisitions or equity raises and the company moving from generating brand awareness to becoming an established company. I’m happy to see that we have seen reductions in these expenses and we will continue to pursue further reductions in 2023.

Okay, now for the balance sheet. Total assets decreased to $77.5 million on December 31, 2022, down from $177.9 million on December 31, 2021. During the year we amortize intangible assets by $21 million, and recognize an impairment loss on goodwill and intangibles of $71.7 million. This was further amplified by the settlement of net working capital adjustments owing to the vendors of American Affiliate.

Now, let me talk about impairment for just a second year. The IFRS rules and we – of course as a company report under IFRS are very clear that you cannot ignore market capitalization when looking at the book value of your assets. In the current economic environment that has a significant impact on all companies in our industry. GAN Limited who reported earnings their yesterday as well as Enthusiastic Gaming to name two both recognized impairment in the current year and both noted the market capitalization to book value discrepancy as a key driver there.

Our share price was $0.065 on December 31, 2022 as compared to $0.53 when we purchased AmAff. We do believe in AmAff and the future opportunities that it presents for us, particularly if or when states like California, Texas and Florida legalize online sports betting. However, as I mentioned, we could not ignore the fact that our market cap was out of sync with our book values, and thus we were forced to recognize an impairment loss. I would also like to note here that $67.6 million of that impairment related to goodwill and not to specific assets. The only assets that we looked at and identified a need to impair during the year were the BetPrep asset which was sold in January 2023 and our RNG games division, which we put on pause in Q3.

Total liabilities, of $34.47 million as of December 31, 2022 is a significant reduction from $94.6 million in 2021. Liabilities were largely comprised deferred contingent consideration of $20.8 million associated with the acquisition of American Affiliate as compared to $87.2 million for that same line item in 2021. The decrease in contingent consideration is due to a restructure of the obligation that was due to the former shareholders of American Affiliate.

As we noted in our Q3 earnings call, we restructured the earn-out to reduce our EBITDA multiple from 2.75 down to 1 and focused on the live activation side of the bedding of the business – our Betting Heroes. Related to the restructuring of the earn-out obligation, the company also added $8.23 million in bank indebtedness.

As of December 31, 2022, FansUnite had $2.91 million in cash on hand, which decreased by $11.06 million since December 31, 2021. The change in cash is largely due to a number of items. First of all, the payments of the remaining working capital amount, as I mentioned, that was due to the vendors of American Affiliate and settled in January 2022 as well as standard earn-out payments and the earn-out buy-out payment paid to the vendors of American Affiliate in Q3. Also salary expenses that were associated with the previously mentioned rise in headcount. And those two things were offset by the proceeds from bank indebtedness as well as cash flow associated with our affiliate segment.

For the year ended December 31, 2022, the company had increased levels of spending on our technology as we prepare to the launch of prospective white labels on Chameleon. As part of our continued mandate to maximize shareholder value management continues to evaluate all areas of the business and focus on high growth and strong margin arms of the company. That’s all for the financial update on FansUnite, and I’ll turn over the call to Scott Burton our CEO.

Scott Burton

Thanks, Graeme. I will touch on the operational side of the business for 2022 which is Graeme, mentioned a lot of things was quite a busy year for us. Throughout 2022 we focused the most of the back half on reducing costs while growing revenue. The main areas of growth came through the acquisition of American Affiliate in late 2021. As well as seeing a growth in the revenue of our McBookie site. We also saw the beginning of the recurring revenue on the B2B platform when we launched better in January and Dragon Bet in the fourth quarter of 2022. And then Betting Hero, we saw some good expansion there, it grew U.S. footprint by entering into newly open states, further cemented its position as the largest and premier live activation company in North America throughout 2022. The B2C site which is McBookie, operates in the UK and focused on the Scottish market. It saw substantial revenue growth in 2022. And compared to 2021, it was a World Cup year which always helps when a large part of their sports betting activity is around football, or soccer as we call it here in North America. So we were happy to see them reach an all-time record revenue for that site. We’ve seen that growth year-on-year since the acquisition in 2020.

B2B operations, we continue to develop and commercialize the Chameleon platform. April 19, we announced that we had entered into a memorandum of understanding for a licensing agreement with Lovell Brothers Limited to launch their new online sports book Dragon Bet. Later after that we signed a definitive agreement in July of 2022 they soft launch the site late September 2022. And then really started to push in October and they have exceeded all of our expectations, I would say so far. So we’re very happy with that site. Very happy with the Lovell Brothers and their operating capabilities and they are approaching $50 million in turnover to date. So that’s since October of 2022. And that success and the site being live in the UK has generated a whole new pipeline of potential business for us in the platform in that market.

So the B2B contracted revenue was additionally strengthened when we signed an agreement to provide our Player Account Management system also known as a PAM to Better Holdings in August of 2022. Better Holdings operates the U.S. brand called Better and they successfully launch their micro betting site using our PAM on January 1, 2023. In Ohio, we’re building on that successful launch with them. So with our first U.S. partnership and you’ll see us be getting additional licenses in the U.S. state by state in the coming weeks and months. In the year ended December 31, of 2022, our B2B revenue was $520,000. Prior to that, the first 9 months of the year was $138,000.

Additional licenses, as mentioned, we’re going to go after more in the U.S. So we’re in the process of doing that now. But we also received an AGCL license in the first quarter of 2022. That’s a gaming related supplier license from the Alcohol and Gaming Commission of Ontario. So our platform is now a fully registered platform for sports betting and internet gaming in Ontario. That was effective in April of 2022. And we’re still in discussions with some potential first partners to live in Ontario.

We also did not push things so we previously traded on the Canadian stock exchange and we successfully completed that uplift to the TSX and commenced trading on the Toronto Stock Exchange on July 5, 2022. It was a good positive step for the company. As we look to continue to introduce larger investment pools to the FansUnite story. Graeme touched on the debt and restructure. We did the AmAff acquisition. It was a much different time in the market and we looked at how things were going in the market and decided we needed to restructure that earn-out obligation.

On September 19, we announced that we entered into a definitive agreement with Centurion Financial Trust for the senior term loan of up to $12.35 million. And the whole purpose of that loan was to restructure earn-out obligations owed to some of the people under the definitive agreement with an AmAff in November 2021. The restructuring of that earn-out obligation is expected to reduce future shareholder dilution and it will allow us to retain more cash in the company going forward which both are positive things for us the business and the shareholders.

In Q4 of 2022, we received our GLI-33 Event Wagering System certification. That was from GLI or Gaming Laboratories International for the Chameleon iGaming platform that we’ve developed. That standard, the GLI-33 standard puts our platform through some pretty rigorous technical testing for sports and event wagering. As a result of that certification, we can now meet compliance requirements for most U.S. regulators, and it provides some good credibility for the company in the platform as a technology supplier ready to go into the U.S. sports betting industry. The next license that we added was for Ohio, and that was in the fourth quarter of 2022. We receive that license through the Ohio Casino Control Commission. And it gave us a sports gaming supplier license for that state. Legal sports betting open in Ohio on January 1, 2023. It’s expected to generate a sports betting handle of about $8.8 billion U.S. in the first calendar year was a lot of work for us to get ready in time and to meet the deadlines and get launched on January 1, but our team was able to do that in partnership with better. So better launch their first site in the U.S. in Ohio on January 1, 2023. Using our PAM and – Ohio is the first of a number of U.S. licenses that we intend to obtain. And we will be moving alongside our partners plan rollout for the U.S. state by state.

Moving to the affiliate operations, and specifically betting here we will talk about as it was the largest part of the revenue there. So that was a new line of business that we acquired November 2021. And it contributed $23 million to the results of ‘22. Betting here led the way they have very strong operational results in record setting activations, primarily led by the major U.S. events is where we see the big jumps for them the two big ones being the Super Bowl, and then March Madness basketball tournament, which we just held now. They continue to expand their footprint in North America, which they will do quite aggressively. So they obtained gaming supplier licenses in Maryland, West Virginia. And then in Canada, they got their license for Ontario. Their existing relationships that they already have with their partners and other states helps them launch on day 1 typically in most states, they have the ability to be live day 1 with existing partners. So it’s a big advantage that they have. And they only get that through the scale and the footprint that they have throughout the U.S.

As part of their strategy to diversify revenue streams and smooth out the seasonality of the betting calendar, they have started to grow other lines of their business, most notably is their research division and their Hero Hotline. On August 2022, an example of the business that the research side is doing is they signed a deal with Bankroll Group out of Philadelphia, Pennsylvania. It’s a sports betting bar as part of the strategic partnership, but before it’s betting here will help to build out their sports betting concierge team, focusing that on VIP customer engagement, customer acquisition, and then building relationships with gambling and sports betting companies that they can help facilitate through their existing relationships. We expect that part of the Betting Hero business to continue to grow and could be a major revenue line for them in the coming years.

When we call the B2C the direct to consumer side, McBookie is our site that we operate, and their revenues increased if the year ended December 31 as a result of their marketing efforts, leading to an increase of customers and activity on the platform. And then it’s always helped by having a major sporting event like the World Cup, which comes around every 4 years. Approximately $3.76 million of revenue this year is attributable to McBookie and that was compared to $2.81 million over the same period in 2021. Excuse me. So this is the portfolio now of revenue generating business that we’re focused on and we’ve talked a lot about how we’re leaning in heavily now into the revenue generating companies reducing costs and moving towards cash flow positive as quickly as possible.

So looking forward and past 2022 we will continue on with the work that we started in 2022 which is a SaaS and streamline business units to keep in line with the goal of profitability without impacting growth of any of our revenue generating segments, which we were able to do – excuse me. And as Chameleon moves out of its pre-revenue stage, we expect continued customer acquisition for that platform and more revenue growth, like we saw the fourth quarter of 2022. And we very focused on growing the cash flowing business segments, like Betting Hero. Betting Hero entered six regions in 2022. They’re already into two new states this year, and sports betting and iGaming become legalized in more North American states. We will continue that aggressive expansion plan into the new markets and continue to lead the way in live activation in the research side of the business.

So getting to the other sides of that business we are talking about the research and hotline. That’s actually I will cover that more a little later. I think we have some questions on that. So we will dive in deeper into what those two are doing when in keeping live our profitability plans. We have continued to conduct strategic reviews of the certain business segments. Identify opportunities for operational and financial efficiency. This review led to further asset moves such as the sale of wagers.com. And in 2023, we announced the sale of the betting analytics brand BetPrep.

To ensure, we had sufficient runway this year to execute on the plans, we took some additional capital from the recent financing that was led by Tekkorp Capital. Tekkorp is an investment firm run by a group of very well-known and gaming executives. They specifically advise and invest in public and private companies within the gaming industry. Them coming in I think helps reinforce our belief that we’re strategically heading in the right direction, and with significant upside potential with the current valuation.

So the expansion of regulated markets in North America, we are excited to continue to build on the momentum that we’ve got going now. We will do that both in current jurisdictions, we’re in current business lines, but then also expanding into new markets as they open up. So let’s say 2022 is a challenging year for not just our company, but the wider markets in general, we’re confident that we made very important changes to the company that puts us on a path to profitability this year. I think we will see a big transformation this year, as we move away from really the integration of the large acquisition we did streamline the business reducing costs and getting ourselves to profitability by the end of 2023.

So I think that concludes the formal portion of the presentation, probably to get Prit to come back in and run us through the Q&A.

Question-and-Answer Session

A - Prit Singh

Yes. Thanks, Scott. Thanks, Graeme. So for our listeners, we will move into the Q&A component of the earnings call today. [Operator Instructions] Our first question hear, what our FansUnite plan to accelerate its revenue growth and ultimately increase gross margins?

Graeme Moore

Yes. I can take that one. I mean, I think the way Scott ended his presentation is kind of a good way to start there. Again, 2022 was all about what is working for us, right? Which lines of the business are contributing to revenue growth and then if it’s not contributing to revenue and gross margin growth, let’s eliminate or reduce the parts of the business that don’t align with that that singular goal. I think we’ve done a really good job there. I think the long-term assets that we held on to are directly aligned to that growth and have a lot of potential for growth, obviously, American Affiliate, not just a live activation, the other two areas that they’re pursuing have a lot of potential. And as Scott mentioned, the B2B business as well, with $138,000 in revenue in the first 9 months, and $520,000 for the year end. A quick little back of the napkin math shows that we did about $380,000 in revenue in Q4 alone, a lot of that was tied to the growth and the setup of better so not necessarily something, I wouldn’t multiply that by four if anyone’s doing their own math, but definitely something that will see a lot of growth in for the four quarters for 2023. We also had, one quarter with better and – sorry, not even a quarter with better and one quarter with Dragon Bet. And finally, McBookie, again, when we bought McBookie for $2.2 million in 2020, they had done just over $700,000 in revenue in 2019. We had the goal to double their revenue in 2020. Obviously, 2020 was the pandemic year. So, when we bought them in March 2020, and sports shutdown April 1st, we were not super confident in our ability to hit that goal, but we did. They grew from $700,000 to $1.9 million, then $2.8 million, and now $3.8 million. So, every year I look at McBookie and I think, okay, maybe we are not going to grow as much as we did last year, and every year we continue to grow. So, I think focusing on the three lines of business that we have is how we will get there.

Prit Singh

Thank you. Next question here. Can you please explain your net loss figure?

Scott Burton

Yes. It’s a big number, right. I mean if you if you just take a look at the income statement, and you scroll there, and you see that $61 million number, it’s a little shocking. And I think we have tried to give some context to that number. Accounting doesn’t always necessarily reflect operations. And I think that’s a little bit of what we are seeing here this year. As I have mentioned, we have $68 million in goodwill impairment. And that is largely tied to the market cap, discrepancy to the book value of assets, again, very different market on December 31, 2022, compared to December 31, 2021. So, that’s a huge part. We did have $4 million of impairment of assets. I don’t want to look like we are pretending it’s all goodwill that is still there. Again, those are related to the shutting down of the R&G games, as well as the sale of the BetPrep asset. We also had one-time expenses related to the debt financing. I think those three things as well as a lot of share based payments that were associated either with the restructuring of the earn-out or continuing on from the AmAff acquisition. And so those things I think are the biggest players in that, that number being so much bigger than it was last year.

Prit Singh

Okay. Thank you. Next question, when does FansUnite expect to become profitable?

Scott Burton

Yes. Our target is to be profitable by the end of 2023. I think that’s the message that we have been repeating for the last few months ever since we felt confident that we could achieve it. And we still feel confident that we can achieve it. We have taken a lot of steps to focus exclusively on the high margin revenue generating aspects of the business that are starting to show results. The lines of business that we were really excited about that just weren’t getting there fast enough, we had to make the tough decision of how do we become profitable as a company. And that is, the three assets that I think we are left with are the best ways to do that. Of course, we are battling the macroeconomic environment. We can’t pretend, we don’t live in the world that we live in. So, there is always things that can derail that. But I think one thing that Betting Hero has always done is, we set goals, and they hit those goals. And so as long as we keep doing that as a company, I am confident we can be profitable by the end of 2023.

Prit Singh

Thank you. On that note, can you elaborate as much as you can on the performance of Dragon Bet and better in 2023?

Graeme Moore

Yes. I will jump in here. As I say, again, Dragon that’s done extremely well, that was a brand that didn’t exist before the launch, so brand new brand. We really like the team behind it. They have a very good history in mainly horse racing in Wales. And they have had some name recognition and the Lavelle name, not necessarily Dragon Bet. So, that launch is done very well. As I mentioned, they are already approaching might be over by now, the $50 million in turnover, which is quite a lot more than we expected in the first few months. And there is really no signs of them slowing at the moment. I think they are only going to continue to improve. Again, as a brand new brand with brand new online operators, there is so much I think low-hanging fruit that we have seen from the operations both from our side and helping them and their side on the marketing efforts and acquisitions. So, Dragon Bet is doing extremely well, better had a great launch in January, so they launched getting ready ahead to the Super Bowl. I think the Super Bowl showed us how much activity of micro betting site can generate. So, we are happy to be part of that and especially with the group that has the people involved that they do and with they’re pretty good. They are pretty aggressive, I would say expansion plans throughout the U.S. So, excited to be a part of that bam and follow their path and get more licenses in the U.S., which is our plan. Those are underway right now. We can’t speak to their numbers. That’s something we are not able to speak to, but very happy with the first date and looking forward to the additional ones.

Prit Singh

Thank you. As a reminder to our audience, if you have any questions, please do submit them to the Q&A function at the bottom of your screen. Alternatively, if you are calling in today, you can e-mail us at ir@fansunite.com, again, that’s ir@fansunite.com. Next question. Can you elaborate, a little bit of how much [indiscernible] betting here was getting in the Ontario market?

Scott Burton

Yes. I guess it’s a bit of a complicated one in Ontario right now. So, they are able to activate there. But we are not seeing actually any affiliate activity really in the Ontario marketplace. And that’s for the main reason is that there is still some uncertainty, and it’s a bit of a gray area on affiliate operations in Ontario. And what I mean there is, you can’t incentivize in Ontario, which means you can’t offer free spins, you can’t offer free money. So, everything you do to market has to be around the product. And if you go offside, you get in trouble. But it’s not the affiliates who get in trouble, it’s actually the operators. So, if an operator does a contract with an affiliate, and that affiliate does things that are not allowed, or considered allowed by the AGCO that it’s the operator who gets fined. So, what we are seeing right now is operators, I guess a little too scared to start signing affiliate deals. So, some of that is worked out. And it’s not necessarily black and white. So, we can see it through our involvement with the CGA. Primarily, I am on the board there and Jay from betting here, we have involved in a bit of a working group around affiliates. Working with the AGCO, we are trying to sort of iron out those issues. So, pretty confident that this year, they will be activating in Ontario, but right now, everyone is sitting on the sidelines until there is a little more clarity around how affiliates can operate and how operators can get comfortable that they are not going to face massive fines, because they can’t necessarily control either digital or live activation teams that aren’t part of their company.

Prit Singh

Okay. Thank you. There is a couple of questions around the outlook. So, can you tell us more about the acquisition of BetPrep by Stram Entertainment?

Scott Burton

Yes. So, we have talked a lot about how we have looked at all the lines of business and had to make some decisions on what to do going forward towards this profitability path. We really liked the BetPrep technology. We liked the founders. They are really great group of guys. But we just looked at it and within our sort of ecosystem, the path to profitability was going to be longer than I guess we could accept. And it was going to require additional investment in the team and things to get it there, which in our efforts, we just weren’t going to be able to support. So, we look to – like there is a few options where we could park it, and we could shut it down or we could see if there was a better home for BetPrep and the team. And we are very fortunate to find Stram and work with them. So, Stram Entertainment, UK based group that operates their main sites called Best Odds. They have done a very good job of developing that business and getting into the affiliate space. And when we looked at their assets, their team and the direction they were heading, we saw a much clearer path for best sort of BetPrep to generate revenue quicker through some of the products that Stram has. So, we made that deal to sort of partner with Stram, and effectively they acquired it on a 3-year buyout with guaranteed monthly payments. But then we also participated in the upside on a revenue share basis, so and it worked out well for everybody. The team gets keep going with that product. We immediately eliminated a big size burn from the company, monthly burns, that went away immediately. And then we still get payments over the next 3 years. So, that’s some. That’s what we ended up deciding to do with BetPrep. And I think it was the best thing for the company both sides.

Prit Singh

Okay. Thank you. Will you be doing a rollback or consolidation in the near-term?

Graeme Moore

No, there is no plans, hasn’t been a discussion at all at the Board level or the executive level. We have no intention right now doing any up-listings on additional exchange, like the Nasdaq. So, we don’t see there is a need for a rollback or consolidation. We did take additional money, so we are capitalized. And we are just focused on this profitability path.

Prit Singh

Okay. The next audience question rolls into that. So, on the additional money, what led Tekkcorp capital in your opinion, to make a strategic investment in FansUnite?

Scott Burton

Yes. I am excited to have Tekkcorp involved with the company and Matt Davey and his team. They have followed us for a number of years, probably since we went public. I mean their whole business is investing in gaming companies, both public and private. They know our team a bit. They more so know the Board. So, in various previous roles of the people at Tekkcorp, or our Board, they have worked with almost everybody on our Board in some capacity or have been involved through the previous deals. So, I think they have a high degree of respect for the Board members we have. They have got to know the operational team. And they got to see the path we are on and believed in it and believe that we are undervalued at this point, so they made the investment. And they are going to be a very close partner going forward. So and I have regular calls with different parts of their executive management team, to talk about strategy, to talk about opportunities and to talk about, basically just to get a lot of feedback from their experiences. They have run the biggest gambling companies in the world. And they have also got a lot of capital market experience. So, I think going forward, we are going to see as much value in that partnership as I think they are going to see on the upside in the share price on the invested.

Prit Singh

Okay. Thank you. As a reminder to our audience, if you have any questions, please submit them in the Q&A function at the bottom of your screen. Alternatively, if you are calling in today, you can submit them directly to our e-mail, ir@fansunite.com, that’s ir@fansunite.com. Next question here, on better, can you maybe elaborate a little bit on why you think better decided to use Fans TAM as opposed to competitor?

Scott Burton

Yes. I think people who are looking to move quickly on the flexible platform that can meet quite a variety of needs, and incorporates many different third-party integrations, which a number of existing platforms aren’t able to do at speed. They are a new group. They are a young group. They are an aggressive. They want to move fast. And I think that was one of the big things. I mean our teams have gotten to know each other well and work very closely, regular meetings, and that’s helped over the period of time. We will work with them. But I think a lot of that was the flexibility we have designed into the platform. And really making it purpose-built to go into a market as fraction as the U.S. So, each state has very different responsible gaming rules. All the rules around who can be on the site, all the rules around how much betting, how much people can lose in a month or different limits. We were built for that and not everyone is. And then when they also know that if there is third-party CRM or some other integrations they we want to use, we have never been prescriptive in what people can use on the platform. We don’t like to make decisions for partners. Whereas some of the other platforms who have done that, and I guess backed themselves into a corner on what their partners can use. We are really agnostic to everything in the third-party space. So, that’s being from CRM, to KYC to geofencing. All of that can be customized to the partner at a state level. So, when you are going into a market like the U.S., those are things that really need to be taken into consideration. And we are seeing that more and more. It was such a rush a few years ago to get into that space in the U.S. that a lot of brands, I guess sacrifice speed and flexibility of the platform in order to just get live with something. And now we are seeing a lot of those people reevaluate those decisions. And a lot of them will be coming up on the contract ending. So, it is a long sales cycle in this space. But typically, deals are going to be 3 years and as we are getting to 2023, I expect in the next year or 2 years, a lot of those early movers are going to be reassessing their platform. So, it’s a good opportunity for us.

Prit Singh

Okay. Next audience question here. Are you aggressively pursuing B2B, just expanding on your answer there?

Scott Burton

Yes. We have never had actually an issue on pipeline, and it’s all been still inbound pipeline is a request coming in. So, we are consistently doing demos, getting to NDAs, with a number of groups, talking through commercials. But we are also really cognizant of the plans that are in front of us for the U.S. expansion. So, we are balancing that and really focusing in on a few areas, we think we can execute well on and keeps the business fairly straightforward. So, with what we have got going now, we will have a lot of, I think growth just on the existing deal we have going into the U.S. And then we have got a number of potential clients that come to us in the UK, now that we have seen Dragon Bet. So, we are looking to add B2B partners. But we are being careful about who they are. We want to make sure now that we can support them, well, but they fit into our plans with what we want to do in the U.S. and then around the UK. So, we don’t have a business development team out there. So, I don’t think we need it right now, because the amount of stuff coming at us. But we will be looking to add partners onto that this year. But I think we expect to see possibly more out of the growth from the existing partnerships, more so than brand new partners.

Prit Singh

Thank you. Next question and last question, what are some catalysts investors can expect in the next 6 months to 12 months?

Graeme Moore

So, we will be continuing on the path that we have started. And the first one being, I think you will continue to see reduction in our operating costs or increases in the margin as we focus on streamlining existing operations. The 2021 acquisition, that was quite a quite a big acquisition and a large company to incorporate into FansUnite and it took time. We spent a lot of 2022 working on that, but we have started to see, and we will see more opportunities to bring down costs. And we already saw a margin increase in the last fiscal year. So, that’s something that we are going to continue on. And I think people will be able to see that in results. Revenue, so growth in revenue, especially from new lines of business from existing companies. So, we look at Betting Hero, then adding the research arm, and what they are calling the Hero Hotline, which is a basically a VIP concierge service for operators. That will be new revenue, which is great. Now that they are operating at scale on live activation, they can layer in these other services, that will be high margin businesses, and they can offer them to existing customers, additional state licenses, so you will see as putting in more applications. I think that process is going to be speeding up in the coming months. And then the main one that we are focused on and I think is the most – will do the most for shareholder value, I think what’s being recognized in the markets right now is not growth in the future, it’s can you get profitable and that’s our goal is to get to cash flow positive these years. I think that will be the major, major turning point for the company.

Prit Singh

Thank you. I believe that’s all the time we have. So, that will wrap up our Q4 and year end 2022 FansUnite earnings call. To our viewers, thank you for listening today. If you do have additional questions or we did not get to your question, please e-mail us at ir@fansunite.com, again that’s ir@fansunite.com. Thank you Scott Burton, CEO of FansUnite and Graeme Moore, CFO of FansUnite for attending the call today and taking us through the quarter and the year.

Scott Burton

Thank you.

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