Lottery.com Inc. (LTRY)·Q1 2022 Earnings Summary

Executive Summary

• Q1 2022 revenue was $21.2M (+287% YoY) with gross profit of $18.0M; adjusted EBITDA was positive at $7.7M, while GAAP net loss was $(15.8)M driven by $22.2M non‑cash stock compensation expense .
• Revenue growth was primarily from LotteryLink credits; margins were unusually high due to prepaid promotional rewards that expired without being issued, eliminating associated COGS .
• Management launched Phase 1 of Project Nexus in Q2, secured B2C advertising approvals with Google and Meta, and reported strong balance sheet liquidity ($50.8M cash; $3.5M debt) as of March 31, 2022 .
• No formal financial guidance was provided for 2022 in Q1; operational targets were reiterated (five new domestic jurisdictions in 2022; B2C CAC in-line), and prior grocery affiliate campaign was paused due to a jurisdictional contractual conflict (pivoting to other states), a potential narrative mover for near‑term sentiment .

What Went Well and What Went Wrong

• What Went Well

  • “Year‑over‑year revenue growth of over 280%, and adjusted EBITDA of $7 million” (prepared remarks); full press release listed adjusted EBITDA at $7.7M, underscoring profitability on a non‑GAAP basis .
  • Strong liquidity and deleveraging: Cash $50.8M and debt $3.5M at March 31, 2022; debt decreased $38.0M vs prior year, largely due to convertible debt conversion at de‑SPAC .
  • Strategic execution: Phase 1 of Project Nexus launched; B2C campaigns expanded with Google/Meta approvals; user acquisition costs trending in line with expectations and historical CAC of ~$4 .

• What Went Wrong

  • GAAP loss widened to $(15.8)M (vs $(5.5)M YoY) mainly due to $22.2M non‑cash stock compensation and public company expenses; diluted EPS was $(0.33) .
  • Grocery‑chain LotteryLink pilot paused after discovery of a contractual conflict in the jurisdiction; program will pivot to other jurisdictions, but timing risk remains .
  • Working capital pressure: Cash declined by $11.8M vs Q4 2021 driven by a $14.1M increase in accounts receivable, largely from a master affiliate; terms were extended though management expressed confidence in collection .

Financial Results

Notes:

• Q1 margins were elevated due to expired prepaid promotional rewards associated with LotteryLink credits (limited COGS), an effect expected to normalize as affiliate programs utilize credits before expiration .
• Wall Street consensus estimates from S&P Global were unavailable for LTRY; beats/misses to consensus could not be assessed.

Balance Sheet Snapshot

Segment/Revenue Driver Commentary (qualitative)

KPIs – Transaction Metrics

KPIs – User Economics

Guidance Changes

Earnings Call Themes & Trends

Management Commentary

• “Our success in executing LotteryLink and our growth initiatives contributed to year‑over‑year revenue growth of over 280%, and adjusted EBITDA of $7 million... ended the quarter with a solid balance sheet, with nearly $51 million in cash and only $3.5 million in debt.” — Tony DiMatteo, CEO .
• “Operating expenses... include $22.2 million of expenses related to restricted stock awards... calculated using the share price immediately prior to the closing of the business combination... the expense is significantly larger than the current value of these RSAs.” — Ryan Dickinson, CFO .
• “We have successfully launched Phase 1 of Nexus... expected to significantly improve scalability, security and the ability to quickly implement new product updates and launch new products.” — Tony DiMatteo .
• “Customer acquisition costs have been trending in line with our expectations and only up a few dollars from our historical average of $4.” — Tony DiMatteo .

Q&A Highlights

• Marketing ROI and timing: LTV ~ $175, annual gross profit per user trending a little higher than ~$35; retention ~80%; CAC ~ $4 historically. Management expects DTC ramp to begin in Q2 and continue thereafter, supported by Nexus scalability .
• LotteryLink pause details: Jurisdictional contractual conflict unique to customer (exclusivity issue); pivot to other jurisdictions underway .
• Expired credits outlook: Expect more credits to be used (issued) in Q2 vs past, normalizing margins; affiliates ready to scale now that Nexus is live .
• Receivables extension: About half of AR not due until end of Q2; extensions provided for the other half; management confident in collection .

Estimates Context

• S&P Global/Capital IQ consensus for LTRY was unavailable via our data pipeline at the time of analysis; therefore, comparisons to Wall Street consensus for Q1 2022 revenue and EPS could not be made. Where estimates are not available, we default to company‑reported actuals and qualitative guidance [GetEstimates error: Missing CIQ mapping for LTRY].

Key Takeaways for Investors

• Q1 profitability on a non‑GAAP basis (adjusted EBITDA $7.7M) despite GAAP net loss driven by non‑cash stock comp; margins were temporarily elevated due to expired LotteryLink rewards—a dynamic likely to normalize as campaigns scale .
• Liquidity provides runway (cash $50.8M; debt $3.5M), enabling B2C scaling and product investments; deleveraging from prior convertible debt conversion reduces financing risk .
• Near‑term narrative hinges on: (1) resuming/pivoting grocery affiliate programs without jurisdictional conflicts, and (2) AR collections from master affiliate given extended terms; both were explicitly addressed by management .
• Project Nexus Phase 1 is a structural catalyst (scalability/security), supporting broader user acquisition and affiliate onboarding; subsequent phases (Q3/Q4 targets) can expand monetization vectors .
• B2C approvals (Google/Meta) and historically low CAC (~$4) support attractive unit economics; initial Q2 campaign data in-line with expectations .
• Lack of available Street estimates reduces near‑term “beat/miss” signaling; trading may instead react to operational updates (affiliate program normalization, AR collection, Nexus milestones) [GetEstimates error].
• Trajectory context: Q3 2021 revenue $32.2M (net income $11.2M) vs Q4 2021 $21.5M (net loss $(12.9)M) vs Q1 2022 $21.2M (net loss $(15.8)M), highlighting reliance on affiliate program timing and the importance of scaling durable B2C demand .

Appendix Citations

• Q1 2022 8‑K press release and financial statements .
• Q1 2022 earnings call transcript (prepared remarks and Q&A) .
• Q4 2021 press release and statements .
• Q3 2021 press release and statements .