Meridian Holdings, Inc. Q3 FY2024 earnings call

Management Statement and Operational Highlights

• Operational Performance: Third quarter reflects continued resilience and commitment to long-term growth, strengthening industry position and executing business goals. Scaled the business, delivered broad-based growth, and finalized Classics for a Cause acquisition which will add revenues and profits. October 2024 performance supported bullish outlook for ongoing growth.
• Financial Highlights: Q3 consolidated revenues grew 85% to $41 million, YTD revenue up 55% to $105 million. Q3 consolidated gross profit increased 39% to $22.4 million, YTD gross profit up 24% to $61.8 million. Q3 consolidated adjusted EBITDA was $4.3 million. Healthy balance sheet with over $38.4 million in cash and equivalents, short term debt $17.5 million, shareholder equity grew 60% to $94 million.
• Divisional Performance:
  • RKings competitions: Recovering from a customer acquisition channel challenge with strong October performance.
  • GMAG: Increased wagering, improved gross profit margin by diversifying game portfolio and using AI-driven customer retention strategies.
  • Classics for a Cause: Contributed significantly in two months since August acquisition.
  • Mixed Play: Showed growth in active players, cash deposits, and gross gaming metrics.
• Merdianbet Results: Total revenue growth, online and retail segment performance, online casino GGR margin improvement, sports betting and retail slot growth, Brazilian license progress, Expanse Studios growth, and AI tool implementations.
• Cost Efficiencies: Focus on implementing cost efficiencies and cost rationalization across the company by reducing redundancies, optimizing operations, and identifying synergies.

Segment Performance

• RKings competitions: Experienced a brief challenge with a customer acquisition channel in Q3 but is recovering; October 2024 revenue up 11.1% from September. Revenue contribution details not explicitly given in absolute % but showed recovery.
• GMAG: Q3 wagering grew 85% to $1.4 billion, year-to-date wagering up 115% to $3.6 billion. Third quarter gross profit margin increased to 26.2% compared to 24.7% in Q2 2024. Absolute figures: Q3 wagering $1.4B, YTD $3.6B; Q3 gross profit margin 26.2%.
• Classics for a Cause: Newly acquired in August 2024, contributed $2.1 million in revenues, $503,000 in EBITDA, and $253,000 in profit for two months of Q3. Revenue contribution: $2.1M, EBITDA $503k, profit $253k.
• Mixed Play: Q3 had over 14,000 active players (56% increase from Q2), cash deposits $1.5 million (25% higher than Q2), gross gaming wagering $15 million (67% increase from Q2), gross gaming revenue $575,000 (36% increase from Q2). Absolute figures: Active players Q3 ~14k, cash deposits $1.5M, gross gaming wagering $15M, gross gaming revenue $575k.
• Merdianbet: Total revenue up 16% Y/Y; online segment revenue up 19%, retail segment up 6%; online casino gross gaming revenue margin rose to 3.37% (highest since Q2 2023); sports betting revenue up 7.4% Y/Y; retail slot machine revenue up 17.5% Y/Y; Brazilian license progress; Expanse Studios added over 100 new partners, total spins in September $72.3 million (twice Q3 2023); AI Casino Recommender led to 10% increase in engagement with recommended games, AI Bet recommender improved user engagement; CSR initiatives including scholarships and responsible gaming campaigns.

Guidance

• Focus on implementing cost efficiencies and cost rationalization across the company by reducing overall costs through product synergies and removing redundancies.
• Operating efficiently with a focus on reduced costs and improved profitability through sales and marketing improvements, broader distribution, and identifying product and distribution synergies.
• Confident in the company's future prospects with a strong balance sheet, clear strategy, and world-class team, seeing opportunities ahead and on track to set new records in Q4.

Risks

• Forward-looking statements are subject to risks and uncertainties based on assumptions about future events like market and economic conditions, business prospects, technological developments, and regulatory changes. For a complete discussion, refer to recent 10-Q filing and other public disclosures. No specific detailed risks beyond general forward-looking statement disclaimers mentioned in the transcript.

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