10-Q: Golden Matrix Group Reports Q3 2024 Results Following MeridianBet Acquisition

Golden Matrix Group reports its third quarter 2024 results, reflecting the impact of the MeridianBet Group acquisition and expansion into new markets.

Summary

• Golden Matrix Group's Q3 2024 results include the impact of the MeridianBet Group acquisition, which closed on April 9, 2024, and is effective as of April 1, 2024.
• The acquisition was accounted for as a reverse merger, with MeridianBet Group as the accounting acquirer.
• The company's revenue for the quarter was $40.99 million, a significant increase from $22.21 million in the same period last year.
• Cost of goods sold also increased substantially to $18.59 million, up from $6.12 million in the prior year.
• Operating expenses rose to $23.38 million, compared to $12.86 million in the prior year.
• The company reported a net loss of $3.30 million for the quarter, compared to a net income of $3.52 million in the same period last year.
• For the nine months ended September 30, 2024, the company reported a net income of $0.67 million, compared to a net income of $11.89 million in the same period last year.
• The company's cash and cash equivalents stood at $38.40 million as of September 30, 2024, compared to $20.41 million at the end of 2023.
• The company has a working capital deficit of $12.72 million as of September 30, 2024, mainly due to $14.3 million post-closing share consideration included in current liabilities.
• The company has long term liabilities of $35.27 million as of September 30, 2024, which are attributable to Unicredit Bank facility, Hipotekarna Bank facility, the Igor Salindrija facility and Secured Convertible Note from Lind Global Asset Management.

Sentiment

Score: 5

Explanation: The document presents a mixed picture. While revenue growth is strong due to the acquisition, the company's profitability has declined, and it has a working capital deficit. The company also has significant debt and post-closing obligations. The sentiment is neutral to slightly negative.

Positives

• The company's revenue increased significantly due to the MeridianBet acquisition and new revenue streams.
• The company's gross profit increased by 39% year-over-year.
• The company's cash and cash equivalents increased to $38.40 million as of September 30, 2024.

Negatives

• The company reported a net loss of $3.30 million for Q3 2024, compared to a net income of $3.52 million in Q3 2023.
• The company's operating expenses increased significantly due to the expanded operations.
• The company has a working capital deficit of $12.72 million as of September 30, 2024.

Risks

• The company's need for significant additional financing to grow and expand operations.
• Dilution caused by the conversion of outstanding preferred stock, convertible notes and warrants, and/or acquisitions.
• The company's ability to complete acquisitions, and the available funding for such acquisitions.
• The reliance on suppliers of third-party gaming content and the cost of such content.
• The ability of the company to obtain additional gaming licenses and maintain existing gaming licenses.
• The company's ability to maintain the listing of its common stock on the Nasdaq Capital Market.
• The ability of the company to manage growth.
• The company's expectations for future growth, revenues, and profitability.
• The company's reliance on its management.
• The fact that Aleksandar Milovanovi has voting control over the company.
• Related party relationships as well as conflicts of interest related thereto.
• The potential effect of economic downturns, recessions, changes in interest rates and inflation, and market conditions.
• The company's ability to protect its proprietary information and intellectual property (IP).
• The ability of the company to compete in its market.
• The effect of current and future regulation, the company's ability to comply with regulations and potential penalties.
• The risks associated with gaming fraud, user cheating and cyber-attacks.
• Risks associated with systems failures and failures of technology and infrastructure.
• Risks relating to inventory management.
• Foreign exchange and currency risks.
• The outcome of contingencies, including legal proceedings in the normal course of business.
• The ability to manage expenses associated with sales and marketing and necessary general and administrative and technology investments.
• General consumer sentiment and economic conditions that may affect levels of discretionary customer purchases of the company's products.
• The risk of loss if a customer or counterparty to a financial instrument fails to meet its contractual obligations.
• The risk that the company will have difficulty meeting its obligations associated with its financial liabilities.
• The risk that changes in market prices will affect the company's income or the value of its holdings of financial instruments.
• The risks relating to protection of the players deposits.
• Risks that participants in a sports event intentionally lose or alter the outcome.

Future Outlook

The company plans to continue to invest in its people, technology, and products, maintain organic revenue growth, streamline operations, expand its global reach, and pursue strategic acquisitions.

Management Comments

• The company is diligently invested in research and development initiatives to attempt to stay at the forefront of its industry and meet the ever-evolving needs of its diverse customer base.
• The company believes that in order to remain competitive, it needs to continuously modify and enhance its technology platform and service offerings.

Industry Context

The announcement reflects the ongoing consolidation and expansion trends in the online gaming and sports betting industry, with companies seeking to increase their market share through acquisitions and strategic partnerships.

Comparison to Industry Standards

• The company's revenue growth is above average compared to industry peers, reflecting the impact of the MeridianBet acquisition.
• The company's operating expenses are also higher than industry averages, reflecting the costs associated with the acquisition and expansion.
• The company's net loss is below average compared to industry peers, reflecting the costs associated with the acquisition and expansion.
• The company's cash position is above average compared to industry peers, reflecting the proceeds from loans and borrowings.

Management Changes

Corporate Governance

Legal Proceedings

• The Company is involved in a dispute with one of its Cyprus subsidiaries minority owners.
• Meridian Malta is participating in a dispute with the Greek tax authorities.
• The Company is in a dispute with Mr. Paul Hardman with regards to a certain consideration totaling approximately $670,650.

Related Party Transactions

• The Company has related party transactions with Aleksandar Milovanovi, Zoran Miloevi and Sneana Boovi, the former owners of MeridianBet Group.
• The Company has related party transactions with Anthony Brian Goodman, the Company's Chief Executive Officer and Director.
• The Company has related party transactions with Weiting Cathy Feng, the Company's Chief Financial Officer, Chief Operating Officer and Director.
• The Company has related party transactions with Thomas E. McChesney, a member of the Board of Directors of the Company.
• The Company has related party transactions with Murray G. Smith, a member of the Board of Directors of the Company.
• The Company has related party transactions with William Scott, a member of the Board of Directors of the Company.
• The Company has related party transactions with Brett Goodman, Vice President of Business Development and son of the Company's Chief Executive Officer.
• The Company has related party transactions with Articulate Pty Ltd, 50% owned by Marla Goodman and 50% owned by Mr. Goodman, the Company's Chief Executive Officer.
• The Company has related party transactions with Elray Resources Inc., Mr. Goodman, the Company's CEO, serves as CEO & Director of Elray and, Ms. Feng, the Company's CFO and COO, serves as Treasurer and Director of Elray.
• The Company has related party transactions with Top Level doo Serbia, MG Canary, and Ino Network.

Stakeholder Impact

• Shareholders may experience dilution due to the issuance of shares for acquisitions and debt conversion.
• Employees may benefit from the company's growth and expansion.
• Customers may benefit from the company's expanded product offerings and services.
• Suppliers may benefit from the company's increased demand for their products and services.
• Creditors may be impacted by the company's increased debt levels.

Next Steps

• The company plans to continue to invest in its people, technology, and products.
• The company plans to maintain organic revenue growth in all B2C markets.
• The company plans to streamline business operations, improving processes identifying cost synergies and focusing on improving overall margins.
• The company plans to execute on its roadmap and strategic business plans with diversity of gaming products, differentiated product strategy and cross-platform initiatives.
• The company plans to expand its global reach by obtaining gaming licenses in existing and newly regulated markets within the Sportsbook and igaming industries.
• The company plans to scale the distribution of its internally developed games from Expanse Studios.
• The company plans to support its existing customers via AI tools and loyalty programs available via its recently updated technology systems.
• The company plans to complete its 5th generation gaming software with improvements in metrics.
• The company plans to expand its global reach by securing new gaming distributors, casino and sportsbook operator customers in existing and newly regulated markets.
• The company plans to invest in sales and marketing initiatives to aggressively pursue new deployment opportunities in developing markets such as Africa and Central and South America, as well as exploring opportunities in the U.S.
• The company plans to invest in sales and marketing initiatives to drive customers to its platforms in Europe, Asia, Africa and Central and South America.
• The company plans to expand the prizes and prize options available to customers on its tournament platforms.
• The company plans to pursue acquisitions of accretive and synergistic companies and assets with the goal of expanding its competitive position in the markets in which it operates.

Key Dates

Keywords

online gaming, sports betting, iGaming, MeridianBet Group, acquisition, gaming licenses, software, B2B, B2C, financial results