Executive Summary

Q4 2021 revenue was $21.5M (+559% YoY) with unusually high gross profit ($18.3M) driven by LotteryLink credits—many prepaid promotional games expired before redemption, lifting margins; net loss of $12.9M was primarily non-cash stock comp ($15.5M) and one-time debt-conversion interest expense ($8.8M) .
Full-year 2021 revenue finished at $68.5M (pro forma $70.5M) and Adjusted EBITDA at $31.1M, showing profitability focus despite non-cash and one-time items; cash ended Q4 at $62.6M and debt at $3.8M after conversion .
Prior guidance: management had expected to meet/exceed $71M FY21 revenue (Q3 update); actual FY21 revenue of $68.5M fell short—an implicit miss vs prior guide .
2022 catalysts/risks: Project Nexus roll-out (Phase 1 early Q2, Phase 2 end Q3, Phase 3 end Q4’22), planned entry into five new U.S. jurisdictions, normalized gross margins as credits are used, interest expense expected to drop below $250K/quarter; elevated A/R expected to convert to cash in early Q2’22 .

What Went Well and What Went Wrong

What Went Well
- Explosive revenue growth: $21.5M in Q4 (+$18.2M YoY) as LotteryLink expanded and B2C sales increased despite no digital marketing spend .
- Exceptional gross profit: $18.3M in Q4, primarily due to prepaid lottery games expiring before redemption, eliminating associated COGS; management expects normalization as promotions roll out .
- Strengthened balance sheet: cash $62.6M at 12/31/21; convertible debt largely converted, leaving $3.8M debt outstanding .
What Went Wrong
- Bottom-line loss driven by non-cash/one-time items: Q4 net loss ($12.9M) included $15.5M non-cash stock comp and $8.8M interest expense tied to debt conversion .
- Quality/sustainability concerns: outsized margins came from expired prepaid games; management guided to more “normalized” gross margins as credits get utilized (30–40% expected over time) .
- Working capital risk: large Q4 accounts receivable tied to LotteryLink credits with collections expected in early Q2 ’22; terms extended for a master affiliate .

Financial Results

Revenue, profitability, EPS vs prior periods (chronological: Q2 → Q3 → Q4):

Metric	Q2 2021	Q3 2021	Q4 2021	Vs Est.
Revenue ($MM)	$9.1–$9.6 (prelim)	$32.2	$21.5	N/A (coverage unavailable)
Gross Profit ($MM)	N/A	$20.3	$18.3	N/A
Net Income (Loss) ($MM)	N/A	$11.2	$(12.9)	N/A
Diluted EPS ($)	N/A	$0.24	$(0.39)	N/A

Balance sheet snapshot and cash flow elements:

Metric	Q3 2021	Q4 2021
Cash ($MM)	$1.18	$62.64
Debt ($MM)	Convertible/current $8.91; non-current $31.57	Notes payable current $3.77; convertible debt $0 (converted)
Accounts Receivable ($MM)	$33.07	$21.70 (collections expected early Q2’22)

KPIs (where disclosed):

KPI	Q2 2021	Q3 2021	Q4 2021
Transactions per user	N/A	12.4	N/A
Tickets per transaction	N/A	3.8	N/A
Revenue per transaction	N/A	$9.52	N/A
Gross profit per transaction	N/A	$1.69	N/A
Gross margin per transaction	N/A	17.8%	N/A

Notes: S&P Global consensus estimates for Q4 2021 were unavailable for LTRY, so “Vs Est.” is not shown.

Drivers and non-GAAP context:

Q4 revenue and gross profit benefited from sale of LotteryLink credits (prepaid promotional rewards) to an affiliate; many expired before use due to delayed promotional launches, resulting in minimal COGS recognition .
FY2021 Adjusted EBITDA was $31.1M (adds back stock comp and business combination expenses), reflecting profitability of the model ex non-cash/one-time items .

Guidance Changes

Metric	Period	Previous Guidance	Current/Outcome	Change
Revenue ($MM)	FY 2021	“Expect to meet or exceed $71M” (as of Q3 2021)	Actual: $68.5M	Below prior guidance
Interest Expense (quarterly)	2022	N/A	Expected < $0.25M per quarter	New expectation
New Jurisdictions (count)	2022	Enter NY & NJ in 2022 (stated post-BC priorities)	Anticipate entry into five new domestic jurisdictions by end of 2022	Broader target
Project Nexus (timing)	2022	N/A	Phase 1 early Q2; Phase 2 end Q3; Phase 3 end Q4’22	New milestones
B2C Marketing	1H 2022	N/A	Tested campaigns in Q1; plan broader launches in Q2’22	Activation timeline

Earnings Call Themes & Trends

Topic	Q2 2021 (Q-2)	Q3 2021 (Q-1)	Q4 2021 (Current)	Trend
LotteryLink/affiliates	Preliminary Q2 revenue surge; sequential growth run-rate commentary	Major revenue/gross profit driver; dynamic pricing lifted unit economics	Credits drove revenue; expirations boosted margins; expect normalization as programs expand	Scaling; margin normalization ahead
B2C marketing/CAC	—	Improved profitability per transaction; app improvements	B2C growth despite no 2021 digital spend; testing for Q2 ’22 campaigns	Ramping in 2022
Project Nexus/tech	—	—	Phase timelines disclosed; scalability/security and new features roadmap	Execution milestones set
Regulatory/market expansion	—	Enter NY/NJ in 2022 among priorities	Aim for five new domestic jurisdictions in 2022	Higher ambition
Capital structure/interest	—	Debt convert post-BC; net proceeds add cash	Interest expense to fall < $250K/qtr in 2022	Reduced OI&E headwinds

Management Commentary

“In the fourth quarter and throughout 2021, we demonstrated our ability to execute our strategic growth initiatives… B2C sales increased … despite no digital marketing spending. LotteryLink… expanded and generated multiple revenue streams.” — Tony DiMatteo, CEO .
“The primary driver was the sale of LotteryLink credits… prepaid lottery games that were never redeemed due to the delayed timing of affiliates’ promotional programs… We expect many of the credits to expire resulting again in higher than normal gross profit [near term]… margins to more normalized levels [30–40%] as programs expand.” — Ryan Dickinson, President & CFO .
“We ended the year with $62.6 million in cash… and $3.8 million in debt following the conversion of $63.5 million of convertible debt into equity.” — Management .

Q&A Highlights

Regulatory expansion: progressing through New York courier application steps; timing dependent on regulators .
LotteryLink credits mechanics: typical 90-day expiration after redemption for a specific use; normalized gross margin range expected 30–40% over time .
Advertising credits: continued availability for affiliates; pricing/margins expected to hold .
Interest expense outlook: after conversions, quarterly interest expected below $250K in 2022 .
Working capital/AR: large AR from prepaid game credits expected to be collected, with some term extensions for a master affiliate; anticipated cash receipts early Q2 .

Estimates Context

S&P Global consensus estimates for LTRY’s Q4 2021 revenue and EPS were unavailable; as a result, no “vs. consensus” comparison is presented. We attempted to retrieve S&P Global estimates but no company mapping was available for LTRY at the time of query (coverage limitation).

Key Takeaways for Investors

Revenue quality/margin sustainability: Q4’s outsized gross margin was driven by credit expirations; margins should normalize as promotions scale—monitor gross margin trajectory and conversion of credits to usage .
Working capital conversion: Elevated AR tied to affiliate credits is expected to convert to cash in early Q2’22; cash collections are a key near-term de-risking event .
Operating leverage ahead: With interest expense dropping and stock comp non-cash, underlying Adjusted EBITDA generation (FY21: $31.1M) underscores potential operating leverage if growth persists .
Growth catalysts: Project Nexus (phased launches through 2022) and expansion into five new U.S. jurisdictions provide multiple shots on goal for user growth and product breadth .
Guidance credibility: Management previously expected ≥$71M FY21 revenue; actual $68.5M implies a miss—track 2022 communication vs delivery closely .
B2C ramp: Having tested campaigns and secured approvals, watch CAC/LTV dynamics as scaled marketing resumes; management cited favorable CAC historically .

Supporting detail and source citations:

Q4 2021 press release and financial statements, including revenue, gross profit, net loss, cash/debt, and FY 2021 non-GAAP reconciliations .
Q4 2021 earnings call transcript remarks and Q&A for margin normalization, interest outlook, AR collections, and regulatory expansion .
Q3 2021 press release for prior-quarter benchmarks, unit economics KPIs, and FY21 guidance reference .
Q2 2021 preliminary 8-K for earlier trend context (preliminary revenue range) .

Lottery.com Inc. (LTRY)·Q4 2021 Earnings Summary