Greetings, and welcome to the Gambling.com Group Second Quarter 2025 Earnings Conference Call. [Operator Instructions] Please note, this conference is being recorded. I will now turn the conference over to your host, Mr. Peter McGough. Please go ahead, Sir.

Thank you, Operator. Hello, everyone, and welcome to Gambling.com's Second Quarter 2025 Results Call. I'm Peter McGough, Senior VP of Investor Relations and Capital Markets, and I'm joined by Charles Gillespie, Gambling.com Group's Co-Founder and Chief Executive Officer; and Elias Mark, Chief Financial Officer. This call is being webcast live through the Investor Relations section of our website at gambling.com/corporate/investors, and a downloadable version of the presentation is available there as well. A webcast replay will be available on the website after the conclusion of this call. You may also contact Investor Relations support by e-mailing investors@gdcgroup.com. I would like to remind you that the information contained in this conference call, including any financial and related guidance to be provided, consists of forward-looking statements as defined by securities laws. These statements are based on information currently available to us and involve risks and uncertainties that could cause actual future results, performance, and business prospects and opportunities to differ materially from those expressed in or implied by these statements. Some important factors that could cause such differences are discussed in the Risk Factors section of gambling.com Group's filings with the Securities and Exchange Commission. Forward-looking statements speak only as of the date the statements are made, and the company assumes no obligation to update forward-looking statements to reflect actual results, changes in assumptions, or changes in other factors affecting forward-looking information, except to the extent required by applicable securities laws. During the call, there will also be a discussion of non-IFRS financial measures. A description of these non-IFRS financial measures is included in the press release issued earlier this morning, and reconciliations of these non-IFRS financial measures to their most directly comparable IFRS measures are included in the appendix to the presentation and the press release, both of which are available in the Investors tab of our website. I'll now turn the call over to Charles.

Thank you, Pete. Good afternoon, and thanks for joining our call today. We generated record second-quarter revenue and adjusted EBITDA, with revenue rising 30% and adjusted EBITDA increasing 22% year-over-year. Our marketing business generated all-time highs for second-quarter revenue, and the growth in our sports data business accelerated to where it's highly visible, and high-margin recurring subscription revenue accounted for 25% of total revenue despite the second quarter being the seasonally slowest quarter. These results provide clear evidence that even while we continue to deliver high growth quarter after quarter, we are also rapidly diversifying our business to include a broader suite of products, which serve a much larger addressable market. Diversification of traffic sources and revenue models is front of mind for our team. In the past 4 years, as a public company, we have multiplied both our traffic sources and our means to monetize that traffic and our growing audience. The business today is a varied matrix of relationships between traffic sources and businesses with a CRM platform at its center. To achieve this, we have embraced an omnichannel approach to engage high-intent users across the Internet, including with apps, e-mail, social media, YouTube, communities, and paid media. We've also broadened our ability to monetize our end users and B2B online gambling operator clients with the addition of new business models through the acquisition of RotoWire, OddsJam, and OpticOdds, and we'll continue to do so when we close on Spotlight.Vegas on September 1. Our focus on diversification also includes diversifying our go-to-market approach within our marketing business, as traditional search is becoming less central to our digital marketing strategy. While the development of these other marketing channels, like apps, e- mail, social media, and paid media, is still relatively early, the contributions are growing rapidly to the point…

Thank you, Charles. Second quarter revenue grew 30% year-over-year to a Q2 record of $39.6 million. Our marketing business grew 3% as we delivered more than 108,000 NDCs to our customers, in line with the year-ago period. Our marketing business grew in all of the regions where we operate, except for North America, where we had tough comparables with the year-ago period, including the tailwind from the launch of sports betting in North Carolina. Our sports data services revenue quadrupled to $10 million. Subscription revenue increased to 25% of total revenue. Inclusive of revenue share arrangements in our marketing business, recurring revenue was 51% of total second-quarter revenue. Gross profit increased 27% year-over-year to $36.9 million. Cost of sales of $2.7 million compares to cost of sales of $1.4 million in the year-ago period, reflecting costs associated with our successful strategy to diversify traffic sources as well as cost of sales related to the acquired OddsJam and OpticOdds businesses. Gross profit margin was 93.2% compared to 95.3% in the year-ago period. Operating expenses of $51.3 million included $23.8 million of charges related to the Hod Holding acquisition, of which fair value movements related to the outperformance of OddsJam and OpticOdds of $21.2 million, noncash amortization of acquired intangible assets of $2.2 million, and other acquisition-related costs of $0.4 million. Adjusted EBITDA increased 22% year-over-year to a second quarter record of $13.7 million, and adjusted EBITDA margin was 35% compared to 37% in the year-ago period. Adjusted net income for the second quarter rose 37% from the year-ago period to $13.4 million. Adjusted net income continued to be positively affected by translation effects relating to the strengthening of the euro versus the U.S. dollar when translating balance sheet items at quarter end. Adjusted diluted net income per share increased 42% from…

[Operator Instructions] And our first question will come from Jeff Stantial with Stifel.

Maybe let's start off, if we can, on the Spotlight.Vegas transaction. Starting off, Eli, can you just provide us with some of the metrics underlying the earn-out compensation? And then more high-level, Charles, I'm curious, just as you underwrote this transaction, sort of how did you come to understand the similarities and the differences in the user journey for live events versus sort of your legacy online gambling-focused sites? And as a corollary to that, what really gave you the confidence that your tech and experience would translate well over the live event space?

Yes. If I cover the first part of that question, as we manage, the intent here is to be very capital efficient and have a limited upfront payment and pay for performance. Essentially, we have an upfront payment of $8 million, which we expect to settle in cash. And then we have a 2-year earn-out component that is capped at an additional $22 million, so $11 million per year based on incremental EBITDA above a certain threshold for each of 2026 and 2027, and the effective multiple on that earn-out is 6x operating profit.

From my perspective, it was a very attractive acquisition. It's a bit -- I don't think any of our competitors were looking at this, right? It does involve a little bit of original thinking. We're looking for ways to monetize this audience we have and deploy the skills we have. And this is a perfect opportunity to do both. We have this incredible audience of people that want to gamble, that love gambling, whether it's online or land-based. These people visit Las Vegas. And when you look at the Spotlight business, it's -- there's not a million different ways to do digital marketing within the online gambling industry. We wouldn't have gone all the way to do full- blown ticketing outside of gaming. That's a step too far. But ticketing within gaming, it's gaming adjacent, there's some synergy there. And when we look at this particular business, it's still a relatively young business. There's a lot of things that our team can go in and do immediately to make a difference. It reminds us a lot of the Freebets.com acquisition. Those assets were not operated as well as they could have been, and it was our team that was able to unlock that value. Last but not least, it's always about people, and they've got a great team over there and a very strong leader, Doug, which we very much look forward to working with. And I think us combining our digital marketing skills with the technology platform that they have already, it exists and they don't have to build it is a very clear way to grow that business and do it under our roof.

And then maybe shifting gears and turning over to AI. Charles, some helpful commentary at the beginning of the call. I think we're all sort of grappling with figuring out how this looks and evolves and over the long term impacts your business. A bit of a 2-parter question here. First, I'm curious if you've done any work or seen anything in terms of sort of click-through rates for a typical high-intent AI search, and how that frames up against legacy search? And then second, how do you think about the potential for market share consolidation for traffic sourced through AI searches, and sort of how you're positioned to be one of those 1, 2, 3 sites that is ultimately searched or sourced by the main AI engines for a typical gambling search? And that's all for us.

Look, when Google or any other search engine puts an AI overview at the top of the search engine results page, obviously, fewer clicks make it through to the stuff below that. That shouldn't surprise anyone. In terms of market share, share of voice is probably a better way to put that in terms of these different AI agents, LLMs. If you have a Google search, you've got -- at least you used to have 10 results. Now it can be less. But it was a longer list than what you would get from an AI tool. On an AI tool, you're going to get 2 or 3 unless you specifically ask it for more. So you really have to be positioned to the extent there are positions on these generative AI tools, you need to be positioned kind of 1, 2. And the only way you're going to get there is to have industry-leading authority, which, of course, is what we've been trying to build for the past 20 years with Gamming.com, [indiscernible].com, Casinos.com. We have invested in big brands to rise above the fray and be the obvious go-to source for information on this industry. And our early indications show that we've got a very high share of voice on these new tools. And of course, it's growing very rapidly for us. It was -- it didn't exist a few years ago. So the growth rates are basically infinity, but it's going to be a big part of the future of the business.

And our next question comes from Ryan Sigdahl with Craig-Hallum Capital Group.

I want to go to the Google algorithm update. When I look at the guidance, it looks like EBITDA cut by $5 million in the back half of the year, despite some good guys layering in there as well with acquisitions in Missouri and FX and so on. So I'm curious when exactly that happened, what you've seen since that? And then if you're willing to quantify the other components and assumptions within guidance of the Missouri launch, how much that's contributing?

Yes, I'm happy to speak to that and give you some color on guidance for the rest of the year. So the latest Google algorithm update rolled out in the last kind of 30, 45 days within -- squarely within Q3. It is a reminder that this stuff still matters and search rankings are still a fundamental part of digital marketing. In terms of revenue for the second half of the year, our increase of $1 million at the midpoint for revenue guidance entails a small bit of additional revenue from Spotlight.Vegas, but the main drivers of the change in revenue expectations are an upward revision of sports data services revenue and a downward revision of the traditional search revenue due to the search rankings we've discussed. And that's partly offset by an increase in revenue from all the other non-SEO channels. In terms of the adjusted EBITDA, the higher proportion of revenue from non-SEO sources drives higher cost of sales, and we don't expect any meaningful contribution to adjusted EBITDA from Spotlight Las Vegas until next year. And we have also decided to accelerate investments into these non-SEO channels, as well as a very exciting, entirely new project, which is outside of anything we do today, which will drive further diversification and growth in 2026 and beyond. Everybody always loves to kind of opine or get our opinion on whether on pricing and operators, and demand, and everything. And that remains as is, okay? So when you look at these -- when you look at the margins coming down, it's entirely due to mix shift. I really want to stress that it's not margin compression per se. Our ability to monetize and the demand from the clients hasn't changed in any way. The margin profile of any given channel hasn't changed. It's just that the channel mix is changing.

Then just on Spotlight.Vegas. Can you give -- however you want to quantify it, but anything from the past few years, from a financial standpoint, I guess, was it growing? And was it profitable? And just to put the 2026 estimates a little more context around it?

Yes. If you look at 2024, it was growing nicely. It did over $30 million in platform turnover with -- and it was profitable. It's a lower- margin business at this scale. But as it scales, it quite quickly grows net margin revenues. At the moment, and our expectations for 2025 is that it's roughly breakeven, and that has to do with the macro environment in Vegas. We expect together with a little bit of a rebound and seasonal strength, and a little bit more efficient marketing, when we get our hands on that, we're guiding towards EUR 8 million of net revenue and EUR 1.4 million of incremental adjusted EBITDA for 2026.

And moving on to Barry Jonas with Truist Securities.

I appreciate the color you just gave on the EBITDA guidance change for '25. But maybe I wanted to dig in, in another way. I know you haven't guided '26 yet, but can you talk about how kind of '26 looks relative to your view 90 days ago, given all the changes we're seeing now? And maybe if you can't talk quantitatively, maybe just qualitatively.

Yes. Barry, happy to touch on that. So look, I think we get these search rankings back that brings back up the natural search revenue. But I think overall, we are seeing the effects of AI on search, and our expectations for search revenue going forward are not what they were in the past. Having said that, we are making a lot of progress on scaling up all these other channels, stuff that we kind of purposely didn't do in the past to keep all our focus on SEO. But now we've got this kind of extra bandwidth if we're not going all in on SEO, we can deploy some of our best people on scaling up apps, e-mail, paid media, et cetera. And as you can see in our results today, it's making a difference, and it helped us hit the numbers for Q2. So when I think about next year, it's just going to be less about search, but these other channels will scale meaningfully. And I think on the revenue, it's a different margin profile. So you have to kind of bear that in mind. SER is always kind of the highest margin, but we'll see healthy revenue growth from those other channels, and it won't flow through quite as well to the bottom line as natural search has done for years, but it will still absolutely be profitable. And when you pair it together with all the different ways we have to monetize the audience, we'll be in the best position of anyone to monetize people interested in online gambling.

And then in the past, you talked a bit about prediction markets in terms of opportunities there. Curious if any updated thoughts there in terms of search, but maybe also from the data or other avenues for revenue there.

Yes. So we've been spending a lot of time looking at prediction markets. It's a fascinating category. I really like it. It's not a big driver of our business yet, but I think it very well could be in a couple of years. I think these lawsuits are going to go to the Supreme Court, and you're going to have another PASA-like decision, which could throw the doors open and really create the next kind of chapter of growth for the whole industry in North America. But I'd like to kind of speak up for the player, okay? So much that's written about this industry is about the regulators, the operators, the businesses, obviously. At the end of the day, somebody needs to advocate for the player. And that -- maybe that role falls to me because I don't think too many people in the U.S. are doing it. And if you look at the state of sports betting in the United States, [Audio Gap] great. You don't have full access to these products in different states. You've got a ton of states with preposterous tax rates. That gets passed on to the consumer. You've got states with single operator monopolies, like how outrageous is that? That is so anti-consumer. It's kind of shocking that that exists. So when you look at the traditional gaming regulation model, state-based regulators, state-based legislation, I don't want to say anything bad about these people, and I wouldn't. These are very serious hard-working people doing their best to implement the laws that have been created. But at the end of the day, the consumer ain't getting the best deal. And that's why you still see these offshore sites with meaningful market share. And you're starting to see some state AGs actually complain to the…

And moving on to Clark Lampen with BTIG.

Charles, I guess if we go or focus on the sort of marketing piece of your business, if we strip out, I guess, the impact of algo changes, were you seeing any changes in behavior for sort of your core customers, I guess, whether that's incumbents or sort of challengers in the U.S. from a marketing standpoint, any meaningful changes in their sort of mix allocations to the affiliate channel overall? And then earlier, you sort of talked about, I guess, the margin profile of sort of different channels as we're trying to, I guess, sort of think about maybe digest the interplay of search LLMs and sort of attractions, has the view of, I guess, the structural margin opportunity or long-run EBITDA generation changed in any way?

Yes. No problem. Clark, to pick up on the second one, like long-term margin profile, I think we've been talking for years about 35% to 40%. And I think with the new guidance, we're at 36% this year. So we're still in that range. Obviously, we're more towards the bottom of the range, but that remains our outlook. We think we can dramatically grow revenue and have a very meaningful contribution to adjusted EBITDA with these other channels just within the search marketing business -- sorry, the marketing business. But I need to bring you back out of that to the sports data services business and everything else we're doing now, ticketing as of September. That's growing like a weed. It's a phenomenal business, incredible product market fit, super high growth. People love it. They can't get enough of it. That is increasingly the future of this business. And you can't -- when we talk about the business overall, you've got to get that part of it, it's airtime as well. In terms of mix allocation from operators, demand, all that, what has changed in the past kind of year or 2 is we've seen more and more deals, or shall I say, more and more traffic that we're delivering to our operators go over to them on a revenue share basis. So that's like-for-like North American revenue, and it does affect the comparability of the figures if the previous figures were more CPA driven. We are seeing a return on those investments on the rev share is profitable, but that's the only meaningful change, I would say. And that's not a Q1 to Q2 thing. That's just a kind of past 12 months thing.

Our next question comes from Chad Beynon with Macquarie.

This is Aaron on for Chad. Subscriptions are now about 1/4 of the business, as you noted. So you've grown that into a nice chunk of the business. Is there an opportunity to raise pricing? Or how do you think about the next steps to further grow this part of the business?

Among all the stuff we're doing, I think growth in the Sports Data Services business, in particular, OpticOdds, is the most straightforward. It's a product people love and need. We've got some new salespeople on the ground in new markets. There's a couple of product tweaks that need to be made to make it appeal to a broader to more different types of operators, if you will. But fundamentally, it's the best data that's out there, and it's not too terribly difficult to sell. So that's the clearest opportunity, I think, at this stage.

And then with regard to the RotoWire refresh, just interested to hear how that's going. What's changed, and maybe an early read on impact, if you can share that?

Yes. So we did the refresh in the middle of summer before NFL started, obviously. It's both a product and brand refresh. The RotoWire numbers are up double digits year-on-year through the first half, but we won't really see the full power of the new products and brand until we get through the start of NFL. So tune in November for the full report on RotoWire.

Moving on to David Katz with Jefferies.

Charles, just digesting the acquisition. Can you talk a bit more about what the drivers or success factors are for that business you're acquiring, aside from integration risk, where I think you've proven yourselves already? What drives that business long-term? And the overlap versus drivers of the core business, where they're different and similar, would help.

Yes. It's what I like to call digital fundamentals. So conversion rates across the board, following that customer journey, optimizing each step of it. And then, of course, marketing efficiency. They do a lot of -- they do a fair amount of paid media already, and they have decent tracking on it. And when we look at the numbers, they're actually pretty good, but it could be a lot better. I think fundamentally, they just have a small team, so they haven't been able to put the pedal to the floor on all the different opportunities that they have. We'll also be able to, of course, bring cash to invest in media as necessary. And there's -- as opposed to the affiliate business, where we are not providing the ultimate service, we're handing the user off to another company to do that. We lose control at some point. And it's always been a bit of a frustrating element of that business to us because when we hand the user off, okay, we hope that they do a good job of converting them, but they might not. With Spotlight, we own the whole thing, A to Z. So it's only our fault if a user doesn't convert. We can't blame it on anyone else. And having full control of that customer journey allows us to lean in a lot harder and deploy our skills across that full customer journey. There's a lot of things we could do to help our operators improve their conversion rates, but it's a delicate conversation to go to them and get them to change their landing page, their products. But when we own the whole thing, it's -- we can just go into it.

Our next question comes from Mike Hickey with the Benchmark Company.

Charles, Elias, Pete, congratulations guys on your Spotlight deal. Just 2 questions from us. I guess first topic on AI search disruption. Just curious, Charles, how you sort of assess the pace of natural search traffic at decay from these shifts to AI-powered search engines. And if you think you have sort of the runway here to recalibrate your business model to offset that, or if there could be, I guess, a more meaningful disruption to your growth profile in the near term? And I have a follow-up.

Yes. I mean Mike, thanks for the question. If you look at these generative AI experiences, they've been around for 2, 3 years. It's not -- this isn't new. It's been having an effect for some time. But we think a lot of that effect is -- we've already seen. People still need Google Search. It's not like it has no utility anymore. Clearly, it's still a useful product, and the AI experiences are using Google Search. What's behind a lot of these AI answers is the Google Search. So we are very realistic about the future of that channel. We've certainly brought in our expectations meaningfully. But I am also rather encouraged by our early results and the work the team has done to ramp up traffic from other channels. So I think we're going to be absolutely fine. There's just a couple of quarters here where we redeploy resources into other channels.

The second question on cost optimization. You've done obviously a number of very successful deals, now Spotlight joining sort of the portfolio. Do you feel like there's opportunities here to realize cost optimization or operational synergies across the group that could maybe help offset some of the incremental cost pressure on profitability that Surgery here in '25 and maybe '26?

Yes. There's an enormous amount of cost we could take out of this business and make it incredibly profitable, but we don't want to do that because now not the time to do that. We need to invest in these new channels and build out new capabilities. So we're leaning into our team. We're still hiring. Nothing has changed on our end. And we see opportunity, and we think we're very good allocators of capital. So we are in investment mode at this moment.

Moving next to David Bain with Texas Capital Bank.

Just 2 questions. One, just looking at past algorithm changes from Google, how long did it take you to rebalance previously? And if this can lead to share shifts, how this algorithm perhaps changes from different ones in the past?

Yes. Usually, 1, 2, 3 months sort of thing, we should have it back. I'd like to say that it's not -- the positions that we don't have in this particular moment in time have been picked up by operators, not affiliates. There's nothing to read into that. That's business as usual with Google search engine volatility. That does not mean that they're somehow Google now favors them more than affiliates and on some kind of long-term basis. It's just how it's working at the moment. So yes, we haven't lost -- I think on a relative basis to the peers, we continue to dramatically outcompete them, and our share of voice is, I think, way higher than the next -- than the #2 player in most of these markets. But a couple of operators have taken a few positions we had in a few key places. And the end of the year, I would think we had it.

And then my follow-up was just on OpticOdds. Are there some kind of KPIs that you believe would be helpful for us to understand that growth a little bit better? I mean, is it number of customers from the individual or operator standpoint, depending on which OpticOdds? Or is it -- has there been menu choice changes, pricing changes? Anything would be helpful.

Yes. Happy to give you some color there. So on -- it's 2 different businesses. It's OddsJam and OpticOdds. OddsJam is the consumer- facing business. OpticOdds is the B2B enterprise business. OddsJam clients is roughly flat, but the average revenue per user is up meaningfully as they are upselling. They're selling more to the same user base. And then on the OpticOdds side, they're signing up new clients left and right, and they are also quite meaningfully increasing the average revenue per user or client, shall we say, on that business. So excited.

And on that second one, should we sort of think about larger operators with more needs, or the operator base getting larger from just a number standpoint?

It's a mix. One thing that surprised us about this business is it's not all operators, right? I mean you've got start-ups. You've got professional betters, arbitragers, you've got apps, media companies. There's a lot of people need high-quality odds data. It's not just the operators. But even within the gaming ecosystem and service the operators, there's the platforms. We can do platform deals and then distribute it into all the operators that are on any given platform. So there's -- we've signed a number of different interesting deals, and we're -- I think the future is very bright for that. When you include RotoWire, we work with multiple members of the MAG 7. They come to us for our sports data to power, in part, their various offerings, including AI tools.

And this does conclude our question-and-answer session. I would like to turn the floor back over to Charles Gillespie for closing comments.

Thanks, everybody, for joining. We look forward to updating you on our Q3 results in November.

Ladies and gentlemen, thank you for your participation. This does conclude today's teleconference. You may disconnect your lines, and have a wonderful day.