Gambling.Com Group’s Earnings Call: Mixed Sentiment with Growth and Challenges

Gambling.Com Group Ltd ((GAMB)) has held its Q3 earnings call. Read on for the main highlights of the call.Meet Your ETF AI Analyst Discover how TipRanks' ETF AI Analyst can help you make smarter investment decisions Explore ETFs TipRanks' users love and see what insights the ETF AI Analyst reveals about the ones you follow. The recent earnings call for Gambling.Com Group Ltd presented a mixed sentiment, highlighting robust growth in the sports data services segment and record revenue figures, while also acknowledging challenges in the marketing business due to unfavorable search dynamics and stagnant revenue. Despite these hurdles, the company remains optimistic about future growth, particularly in its data services, although current issues with search rankings are impacting the marketing segment’s performance. Record Third Quarter Revenue and EBITDA The company reported record third quarter revenue of $39 million, marking a 21% increase year-over-year. Additionally, the adjusted EBITDA grew by 3% to $13 million, showcasing the company’s ability to maintain profitability amidst market challenges. Sports Data Services Business Growth A standout performer in the earnings call was the sports data services business, which experienced over 300% growth year-on-year in the third quarter. This segment is becoming a significant future growth area for the company, highlighting its potential in the evolving market landscape. OpticOdds Revenue Doubling OpticOdds, the enterprise solution for sportsbook operators, demonstrated impressive growth by doubling its revenue year-over-year. This growth reflects an increase in both the number of customers and revenue per customer, indicating strong market demand. EGR Affiliate of the Year Award The company’s marketing business was recognized with the EGR Affiliate of the Year Award for the third time. This accolade underscores its leading position in the online gambling affiliate industry, despite facing revenue challenges. Strong Free Cash Flow Gambling.Com Group generated $9.6 million in free cash flow, with a robust cash conversion from adjusted EBITDA of 74%. This financial strength provides a solid foundation for future investments and growth initiatives. Flat Marketing Business Revenue The marketing business faced challenges with flat revenue year-over-year, attributed to less favorable search rankings and persistent low-quality search results in the gaming space. This has been a significant hurdle for the company. Decline in New Depositing Customers (NDCs) New Depositing Customers (NDCs) were down 13% year-over-year, impacting the marketing business’s performance. This decline highlights the challenges faced in attracting new customers in the current market environment. Reduced Gross Profit Margin The gross profit margin decreased to 91.2% from 94.7% in the previous year, reflecting costs associated with traffic source diversification and acquisitions. This reduction indicates the financial impact of strategic changes. Adjusted Net Income Decline Adjusted net income fell by 16% from the previous year to $9.3 million, primarily due to increased interest expenses. This decline points to the financial pressures the company is navigating. Challenges with Google Search Dynamics The company is facing headwinds from poor search dynamics affecting revenue, with expectations that Google will address these issues in the future. This remains a critical area of concern for the marketing segment. Forward-Looking Guidance During the earnings call, Gambling.Com Group revised its full-year guidance, expecting revenue of approximately $165 million and adjusted EBITDA of approximately $58 million, reflecting 30% and 19% year-over-year growth, respectively. The company noted improvements in search marketing dynamics since late October and anticipates generating more revenue from non-SEO channels than SEO for the first time in Q4, indicating a successful diversification strategy. In summary, the earnings call for Gambling.Com Group Ltd painted a picture of both challenges and opportunities. While the company is experiencing strong growth in its sports data services and maintaining record revenue levels, it faces significant hurdles in its marketing business due to search dynamics. However, with strategic diversification and a positive outlook for future growth, the company remains optimistic about overcoming these challenges.