Golden Matrix Group - Earnings Call - Q2 2025

Executive Summary

• Q2 2025 revenue rose 9.6% year over year to $43.2M, while gross margin was ~56%; diluted EPS was -$0.03 as operating spend and interest from debt actions outweighed gross profit gains.
• Management cut FY2025 revenue guidance to $185–$188M from $190–$195M, citing “customer‑friendly” sports outcomes in Europe; July revenue rebounded ~25% sequentially and vs. 2024 (constant FX).
• Meridianbet’s casino drove strength: GGR +29%, turnover $434M (+30% YoY), with online revenue +20%; user metrics were robust (active users +15% YoY, registrations +124%).
• Raffle segment hit records (RKings daily revenue records; >30,000 orders/day Aug 1) and remains a positive offset amid sports margin pressure.
• Near-term stock catalysts: guidance reset and visibility on sports margin normalization; medium-term catalysts include Brazil ramp (license through 2029), platform (Atlas) efficiencies, and improving leverage (<1.5x net debt/EBITDA).

What Went Well and What Went Wrong

• What Went Well
  • Meridianbet casino outperformed: GGR +29%, turnover $434M (+30% YoY), online revenue +20%, validating content and engagement strategy; “Casino turnover per player jumped 50% QoQ”.
  • Strong user acquisition and engagement: active users +15% YoY, new registrations +124% (Brazil launch), first deposits +165% QoQ; sports revenue per player +28% despite margin headwinds.
  • Raffle businesses posted standout performance; CEO: “RKings… beat the all‑time daily revenue record by 12%… and on August 1… an additional 40%, with more than 30,000 orders in a single day”.
• What Went Wrong
  • Sports betting margin compression from “customer‑friendly outcomes” in Europe; June sports margin 9.9% vs historical ~13.3% (favorites won more than usual), impacting revenue/mix.
  • Operating expenses rose $5.1M YoY (to $26.7M) including Brazil startup, higher marketing, regulatory cost increases in Serbia, and depreciation on Atlas; increased OpEx outpaced incremental gross profit by $2.4M in Q2.
  • Interest expense spiked ($1.48M in Q2) from debt prepayment and discount amortization; net loss -$3.73M vs +$0.02M in Q2 2024, pressuring EPS and adjusted EBITDA (-37% YoY to $3.45M).

Transcript

Speaker 1

Thank you, and good morning, everyone. Welcome to Golden Matrix Group Inc.'s Q2 2025 earnings call. We appreciate you joining us today. On today's call are Brian Goodman, CEO of Golden Matrix Group Inc.; Zoran Milošević, CEO of Meridianbet; and Rich Christensen, CFO of Golden Matrix Group Inc. At the conclusion of this call, the recording and supporting resources will be available on Golden Matrix Group Inc.'s IR website. As a reminder, today's call will contain forward-looking statements. Certain statements made on this conference call, including our responses to questions, may constitute forward-looking information within the meaning of applicable securities laws. These statements are based on various assumptions about future events, including market and economic conditions, business prospects, technological developments, and regulatory changes. While we believe these assumptions are reasonable, they are subject to risks and uncertainties that could cause actual results to differ materially.

For a complete discussion of these factors, please refer to our most recent 10-K filing and other public disclosures. Non-GAAP measures will be discussed, and reconciliation of these numbers can also be found in our recently filed 10-K and earnings press release available on our website. I will now hand it over to Brian Goodman, CEO of Golden Matrix Group Inc.

Speaker 2

Good morning, everyone, and thank you for joining us to review Golden Matrix Group Inc.'s second quarter fiscal 2025 results. Q2 was a challenging quarter with revenue growth of only 10% year over year, below our expectation of roughly double that. The shortfall was driven by unusual customer-friendly sports outcomes in our European business, with favorite teams winning more often than historical averages. Excluding this temporary impact, we would have remained on track to meet our full-year revenue guidance. Our analysis, supported by July's strong performance, confirms that this volatility is random and not indicative of underlying trends. With slower quarterly revenue growth coupled with continued investment to grow our active user base, our earnings declined. The operating leverage we have previously enjoyed worked against us during the quarter.

While we were able to identify and eliminate costs that will reduce our operating expenses by roughly $500,000 per quarter, it was not in time to benefit this quarter. We have recently built and deployed new state-of-the-art systems to support our raffle ticket businesses, and the implementation of this new technology is already showing excellent results. Our largest raffle ticket business, Arken’s Competitions, delivered several standout milestones this quarter, setting a new all-time daily revenue high of over $315,000, surpassing the next best day of $281,000. More recently, last week on the 1st of August, posted a remarkable all-time record in daily sales of over $440,000 for the day, which was driven by over 30,000 orders in one day. Additionally, gross profit in the month of July for Arken’s was over 26%.

This performance underscores the resilience, strong engagement, growing monetization potential of our raffle ticket businesses, and the massive potential that these businesses provide. I'll now hand you over to our CFO, Rich Christensen, to walk you through the financial performance for the quarter.

Speaker 0

Thank you, Brian, and good morning, everyone. I'll provide a summary of our second quarter of 2025's performance and then turn the call over to Zoran to discuss our operational highlights from Meridianbet. Please note that all income statement measures discussed, except for non-GAAP adjusted EBITDA, are on a GAAP basis. First, let's start with revenue. Total revenue for the second quarter was $43.2 million, representing a 9.6% growth over last year. Foreign exchange was a benefit of 4.5%. This was roughly 10% weaker than what we'd anticipated and was primarily due to the impact of customer-friendly outcomes within our European sports betting business. As Brian mentioned, we see this as an anomaly and have since seen July return to our expected growth trends.

If we were to exclude the impact of our prior year acquisition of Classics For A Cause and were to remove the 4.5% positive impact of foreign exchange, revenue was flat for 2024. Moving to gross profit, gross profit reached $24.4 million in the second quarter of 2025, reflecting a gross margin of approximately 56%. This is a 135 basis point improvement over the prior year. Our Meridianbet segment's gross margin of 70% was lower by 270 basis points compared to last year, primarily due to additional taxes assessed on gaming in Serbia. With the transition of our core operations to Atlas iGaming platform, our fifth-generation sports betting and iGaming platform, and releasing the second generation of Sports Recommender, we are now realizing meaningful economies of scale.

This migration has markedly enhanced operational efficiency, unlocked greater scalability, and elevated the user experience, delivering a seamless, intuitive, and increasingly personalized journey for our players across markets. Turning to the other two segments, GMAG improved 444 basis points due to improved supplier terms and product mix, and our raffle ticket businesses, which include Arken’s Competitions and Classics For A Cause, had a gross margin improvement of 546 basis points from the acquisition of Classics For A Cause, which carries a higher gross profit. Turning to operating expenses, operating expenses grew $5.1 million to $26.7 million in the second quarter of 2025. This included $1 million from the Classics For A Cause acquisition and $1 million in foreign currency from a weakening U.S. dollar. The remaining $3.1 million was primarily tied to our Meridianbet segments and reflects strategic investments to expand geographically, grow market share, and enhance gaming technology.

Specifically, they include, first, startup expenses for our Brazilian launch, second, marketing spend, including social media campaigns and team sponsorship aimed at player acquisition and retention, third, regulatory cost increases from higher minimum wages and taxes, primarily in Serbia, and finally, depreciation on our Atlas iGaming platform, which was deployed late last year. Additionally, we've made cost reductions that will reduce our operating expense burden by roughly $500,000 a quarter, starting in the third quarter of 2025. We had a net loss of $3.6 million or $0.03 a share. This was a decline of $3.6 million and $0.03 a share from prior year, and this was due to the increase in interest expense of $1.5 million, driven by our debt prepayment, which accelerated the amortization of debt discounts as well as accrued interest.

This, in addition to our operating costs growing by $2.4 million more than the incremental gross profit generated in the quarter, gave rise to this loss. Excluding the additional interest expense, adjusted EBITDA declined by $2 million or 37% to $3.4 million. Turning to liquidity, at quarter end, we had $22 million in cash and cash equivalents, and our net debt leverage ratio continues to improve, now under 1.5 turns. Now I'll hand it over to Zoran Milošević, our CEO of Meridianbet, to discuss operational highlights.

Speaker 2

Thank you, Rich. Meridianbet delivered solid operational performance in Q2, with revenue growing 16% year over year to $29.2 million. Online revenue, which represents our strategic focus, increased 20%, demonstrating strong momentum in our core growth channels. Our casino vertical was the standout performer. Gross gaming revenue surged 29%, with turnover reaching $434 million, up 30% year over year. We expanded our content library by 2,500 games, and the impact is clear. Casino turnover per player jumped 50% quarter over quarter to nearly $4,000. This validates our content strategy and player engagement initiatives. Key operational metrics remain strong. Active users expanded 15% year over year. New registrations climbed 124%, driven primarily by our Brazil launch. First deposits increased 165% quarter over quarter, showing quality acquisition. Sports revenue per player grew 28% despite challenging conditions. In Brazil, we are now fully operational with license through 2029.

This is projected to be a $5.6 billion market by 2025. Our experience in emerging markets across Africa and the Balkans gives us a playbook to capture share efficiently. When it comes to sports betting margins, June was a particularly tough month for all sports globally. When top soccer leagues finish in May, we're left with smaller leagues where favorites won more than usual. Players hated at parlays. For example, in June, our sports margin came in at 9.9% versus the historical average of 13.3%, as we had the convergence of major leagues' endings and an unusual pattern of favorites winning in remaining competitions. What is important is that we are positioned exceptionally well to offset this. Our diversified model means casino growth offsets sports margin pressure, and we are not dependent on any single vertical or outcome. We continue investing in our technology platform.

Sports Recommender (second generation) is now live. Our new loyalty system connects all retail touchpoints, and we have enhanced our streaming capabilities. They are the latest evolution of our proprietary technology. Turning to Expanse Studios, where the story is one of exceptional execution. Revenue jumped 652% year over year. We reached nearly 500,000 unique players, up 449%. This is our most profitable quarter to date. Key achievements include establishing 13 partnerships in the U.S. social casino segment, positioning us for the next regulation wave. Crossed 1,000 B2B partner milestones, giving us one of the widest distribution networks in the industry. We secured certifications in Brazil, Peru, Croatia, and Romania. Launched a successful new title, Gates of Olympia. The underlying metrics are equally strong. Gross gaming revenue surged 557%, and the game spins increased 273%. This shows real player engagement, not just distribution growth.

The Q2 demonstrates exactly what we've built: a resilient, diversified business that performed through cycles. Sports margin will normalize, as always do. Meanwhile, our casino vertical is accelerating. Brazil is ramping, and Expanse is hitting escape velocity. We operate with discipline, we invest with purpose, and we are building for the long term. The fundamentals are strong and getting stronger. Thank you. Back to you, Rich.

Speaker 0

Thanks, Zoran. As we look at our performance so far during 2025 and the impact of customer-friendly outcomes experienced in the second quarter, we are reducing our full-year revenue to between $185 million and $188 million, representing a 22% to 24% growth rate over 2024. We have seen July revenue growth from our European business recover, as expected, up both sequentially and over 2024 by roughly 25% in constant currency terms. This is a return to our expected trends and consistent with our transactional volumes. We remain focused on expanding our presence in regulated markets, enhancing our proprietary technology stack, and driving shareholder value through disciplined capital allocation. We are well-positioned to build on our success with a strong balance sheet and significant opportunities across both existing and new markets. In closing, I want to thank our global teams for their continued dedication and execution.

We look forward to updating you on our progress in the quarters ahead. With that, I'll turn over the call to Brian to wrap things up.

Speaker 2

Thank you, Rich, and thank you, Zoran. Golden Matrix Group Inc. is entering the next phase of its evolution as a leading force in the global iGaming market. The underlying businesses are healthy and robust. Leveraging our consistent performance, operational strength, innovative platforms, and expanding international footprint, we are well-positioned to drive the company's continued growth. Today's results underscore our financial resilience, consistency, and ability to deliver scalable, sustainable growth. With a focus on long-term success, we remain committed to profitable expansion while maintaining operational excellence. Looking ahead, we are excited about the opportunities in front of us, and we will continue to drive shareholder value through technology, leadership, strategic market expansion, and superior execution. Thank you again for your continued support, and we look forward to an exciting year ahead.