Elys Game Technology, Corp. (ELYS) on Q2 2021 Results - Earnings Call Transcript
Operator: Good afternoon everyone. May name is Mike Ciavarella, Executive Chairman of Elys Game Technology. Our company trades under the symbol ELYS on the NASDAQ in New York and the NEO Stock Exchange in Toronto, Canada. Thank you very much for joining us and we look forward to being able to answer all of your questions at the end of the presentation. So for today's presentation, we are going to have myself and a number of folks in our management team, Matteo Monteverdi, Mark Korb, Alessandro Marcelli and Luca Pasquini, joining us from overseas as well as our Chief from USBookmaking Vic Salerno, Robert Walker, John Salerno, Bob Kocienski and may be some others will join in as well. Today we will go through our typical investor deck and during the presentation we will use forward-looking statements from time to time. Please do not rely on these statements and refer to our SEC filings as you would know. And of course today's presentation is an investor engagement. I mean lot of folks have been following our company for a number of years and we've been basically building the company on a step by step basis. We've taken a very savvy, very methodical approach to building our company and a lot of investors have been reaching out and wanted to get a little bit more information, so what I thought is, we would have this investor engagement to serve a number of purposes. The first one is to describe a little bit about the future of the company, which direction we're heading. The objective here is to start communicating more openly and more regularly and often with our investor audience, and obviously we'd like to discuss the position the company has taken and the opportunities that we're going to tackle. So just quickly I'll go through the investor deck, one page at a time here as you might be used to. I'll give a little bit of a snapshot of the company. The company has been around over 20 years. We've been in the regulated industry. We know the business very, very well. We have -- in the Italian market we have full operations there as a B2C company with owning our own technology stack. We operate in both the retail side which is the anonymous betting through betting shops, as well as the online channel where we offer our products and services on an online basis to PCs and mobile. We now have a team of about 115 people now around the world, they are both in Italy as well as the United States with our team now based in Vegas. We have completed the acquisition of USBookmaking where they've become part of the family here and were building out on a very cultural basis where we understand the business we all are very likeminded approaches to the industry and as I mentioned earlier, we've taken a very methodical approach to developing our company preparing for the U.S. market. In the -- our game plan going forward is to operate as a B2C business in the Italian market owning our own text stack and in the U.S. market we're going to be more of a B2B provider, where we are providing not only the technology, but we're also providing the know-how in the managed services that that we know this industry is very -- built upon. A quick snapshot here of our operations historically. These are the numbers that we generated in the year 2020. We approached about $575 million in total wagers. Of that we generated $37 million in revenue. We've had strong year-over-year growth, 44% and now our U.S. expansion is underway and we're trading at a very -- very fair multiple here in terms of from an investor's perspective there is a very good opportunity we're at a very low $100 million multi-cap. So when you look at our peer companies, we are very well positioned for investors to capitalize on this opportunity. So part of this story here is to talk about today is the USBookmaking transaction that we've recently completed. You will have on the call today, Vic, Bob, Rob, John and a number of other folks that are joining from USBookmaking, but what this has done here is given us a very important fundamental pillar of our business because of the fact that we are in an industry that is quite unique. We have now joined -- have the folks from USBookmaking joining our company are providing the know-how that we already have developed in the Italian market and now are going to be able to offer that similar trading capability in the U.S. as we expand. So one of the key things about our business is that it's a complementary business where we built out our retail operations in the Italian market under the Newgioco brand. We now have the USBookmaking brand in the U.S. market. And the idea here is the feedback, what the players are demanding to our Odissea team which is led by Luca, who is on the phone today or on the call today and they are able to better build the products and services that players are demanding. And that really is a feedback mechanism that we've established in the Italian market and now we're able to expand that in the United States. So just quickly on our product differentiator. It's a unique technology. It's built on one of the latest architectures, our micro services and what that means is, it's a highly scalable architecture and it's done in a very low cost with a limited footprint. We have multichannel functionality where the system is able to operate both in the online and the retail channels. Now what we have done essentially as I've described earlier is we have in the Italian market, the European market both channels operational. And what we did in terms of coming in the United States is we developed first the retail side and the fellows are going to be launching that very, very soon, and we're going to be then building upon our online channel to be able to launch the online channel as well in the United States. So essentially the system is quite agnostic, so we are able to integrate a number of variety of products without limitations. So in the U.S. our game plan here is to take the know-how that we have generated built upon that technology and we're going to be able to offer that services as an end-to-end provider and that service is going to be offered to both large resort style casinos, as well as smaller independent operators that can go right down to a small independent restaurant and bar. In terms of the growth opportunity here, we have -- we know that the U.S. market and the Canadian market, when you combine both markets is quite a large opportunity, a massive opportunity for any operator in our industry. So again, going back to our methodology and our logic as to why we developed as we did this, because we didn't want to be too top end, wanted to make sure that we had all of the pillars of our business built out first. You have to have the know-how and the ability to manage the risk in this industry, so this is why we came into the market as we did. And again, you can see it's a very large opportunity here, very massive opportunity and this is why we took our time coming into the market and we didn't want to go too quickly in terms of just jumping in with a repurposed European platform. So in terms of describing what our strategy here is in terms of coming into the market, one of the key points is that many of our competitors, many of our peer operators in this space easily could service large operators, but what we did differently is we're taking a different approach. We're demonstrating that we could service a small operator, so I think that that's going to be a bit of an edge here, because we're going to be launching probably the first restaurant based Class B operation in the United States, and that will allow us to prove that we can scale the platform down as opposed to only scaling the platform up. And to be operate as a small location, like for example, a location in DC, a restaurant bar, we're able to do that and scale our system down, so that we're able to do that in a very cost effective manner. And I think that that's what we're going to be able to demonstrate to folks that we're able to do it very cost effectively and also be able to scale up across the nation as the opportunities present. So in terms of the product we're ready to go in terms of the technology. We're also customer ready and commercially ready. So we basically have certified the product and gotten the engine ready for the U.S. trading as well as we have that first U.S. customer as I've described. And were also now with the USB team becoming part of the family here as I mentioned. Now we're able to expand into some tribal casino operations as well and we're going to be doing that very, very quickly here. In terms of the operations and again I'll skip through all of his because again I'd like to get to Q&A and that was the purpose of the conversation. So our operations are in terrific condition as of our last reported results. Mark Korb is on the line here today if anybody has Q&A about drilling into these numbers, but at the end of June we had a very strong cash balance and we have zero debt which is really quite remarkable for our industry, and that puts us in a very good position to be able to grow in terms of capitalizing on opportunities like we did with USBookmaking to be able to join us. In terms of our income statement, you can see that there's been a very steady strong growth in terms of our wagers. Our revenue also is heading in the right direction. Now what I wanted to point out on this slide here is our spend, and our spend in terms of investing in our future has been the last, the last three years have been investing into technology and U.S. operation. So we have used a lot of resources from operations, but on a go forward basis now we're going to be able to control those a little bit better. We don't have the extensive costs that we've had historically. And on the next slide I just wanted to point out some of our goals and milestones. So obviously the plan here as we go forward is to establish the first Class B sportsbook operation in the District of Columbia with additional locations to follow as soon as we launch, and again our theory in which we're going to expand a little bit on our Q&A was to launch our system, make sure that we have everything working perfectly, make sure that we're incomplete sync in terms of our risk management and bookmaking skills and plug that into the technology, and then expand from there, including going into the online channel. So we expect also to have some continuous growth through the appointment -- through the additional self-service terminals in the Italian market and the Italian market is also growing. We're going to optimize our land based operation as I mentioned earlier with both the U.S. market opening up now in the in the near future, and as COVID restrictions start to relax a little bit, hopefully without the variants, but the bottom line is that as those -- as our locations start to open up our land based operations in the Italian market also are going to be able to recover. So we planned of course an expansion of both B2B and B2C operations, both sides of the ocean, but particularly in the European market. We're now going to start expanding our operation and our know-how across Europe. And lastly, we already have commenced some of the strategic partnerships, and as I mentioned, it was a -- it's a fundamental development here with USBookmaking joining us and becoming part of the team and with our expansion opportunities not only in the United States and also in Canada. Turning to the next slide, you can see we've had some very good continuous growth, so we're proving ourselves in terms of our execution. It has been very methodical. We don't want to over expand and get to the point where we're not able to manage our expansion, so we've been doing this quite methodically. What you see on the screen essentially is historically all European operations with good growth in the bottom line as well, and going forward we're going to start seeing some U.S. and Canadian operations as well. And then as I described again we have a very highly scalable business and we've got some very strong growth behind us, but we're also very optimistic about our opportunities as we go forward. So within the next two to three years we expect about $50 million revenue and we're well on pace to achieve that in this year and again we're being very conservative with our growth model, but obviously with some of the opportunities that are presenting themselves us today, we'll be updating these results and these goals as we go forward. And a quick snapshot on our current key statistics where essentially we -- again we trade on the NASDAQ and NEO Exchanges in Canada and New York. We trade on the symbol ELYS and as of the other day we were trading which give about $100 million market capitalization. We have a few warrants and options outstanding, so very little overhang in terms of what we believe is the ability to raise a little bit of additional capital although our plan is to continue to grow organically and as opportunities present themselves we'll evaluate them on a case-by-case basis. And with that key statistic that key slide I'd like to now open the floor to the question and answers. So let's see what we've got, we have a very good audience today, so let's have a look. So with the team now, who will be all on the screen I believe and we'll be able to address these questions towards whoever they are.
A - Michele Ciavarella: So I've got a question here, so let's see, first question, I'll take this one here. So the first question is when do we expect to be entering the Canadian market? Interesting. So we've got Matteo Monteverdi on the line. Matteo has the task of Head of Special Projects. Matteo has taken leadership of our product roadmap, our technical development and preparation on each of the markets, so maybe Matteo you might want to enlighten the audience on some of the roadmap plans that we have for both the Canadian and U.S. markets.
Matteo Monteverdi: Yes thank you, Mike. Well, we are at the moment very focused on deploying our first installation in the U.S. market and particularly in DC. We consider that a critical and strategic stepstone in order to prove our technology in the U.S. market, but in particular also to get certified and to make sure then eventually we can export the same product and the same solutions in the other jurisdictions and particularly other jurisdictions in the U.S. and obviously in Canada. I will say that Canada is clearly one of the markets that we are at this point in time targeting for our expansion with the combination of the USB we will be able to provide not only a single technology platform which includes full sports betting and gaming, but also all the services components that would allow us to provide the full turnkey end-to-end solution. We believe and really should be speaking that Canada, the first market that we will see the light from our side is going to be Ontario, which also represents the largest markets. There are a couple of operators that we have engaged and we have ongoing discussions. Let me say, that Canada although has approved from a legislative perspective sports betting in I-casino is not yet clear what are the regulatory conditions and the relation frameworks and we're working with our partners to make that happen. So definitely this is something that will take our time around 2022. The focus however for now is very much expanding our presence in the U.S. market leveraging as I say the DC installation, but also helping the U.S. team to expand their footprint from the current jurisdiction serving to other markets. Mike, to you.
Michele Ciavarella: Yes, thank you very much, that's good. In fact, and what I'll do as well on that part, there's a couple of other questions that are related to international expansion as well as the U.S. expansion. And of course, what I'll do is I'll also give some of the guys at USBookmaking the opportunity to add to this as well because they're focussed on the U.S. as well. But in terms of the international opportunities, one thing is most important about our philosophy is because of the rapid growth of regulated markets both in U.S. and Canada that we've recently seen, our intent is to continue to expand in primarily in regulated markets. We want to continue to stay within those nine dots and not just stray outside of those areas. So, there are international markets that our Italian team led by Alessandro and Luca overseas that are looking at primarily in the European market and things of that nature and kind of areas like that. What we're going to stay away from is markets that could potentially give us some grief as those -- as the regulated markets in Canada and U S. continue to grow and expand and provide much more opportunity for us. So yes, we have an intent to grow not only in the U.S. and Canada, but also into international markets. Now maybe I can get some feedback from Bob or Vic or some of the team at USBookmaking as to what they view not only in terms of U.S., Canada, international, but also in the tribal market as well, which I think that you guys have a good forte on.
Victor Salerno: This is Vic. Yes, Mike we are -- at presently we are applying for license in Ontario and we only have the application in Alberta, and we also are looking south of the border also. So, we are investigating those. As far as the U.S. market that's over 600 different casinos, including the tribal casinos. So as you know, we're up and running about six different tribal casinos and where the expansion is coming on. At the same time, we feel that we have an opportunity for growth into B2B in that we spent over three years looking for a system that we felt was good for the U.S. and we finally found Elys, which had a system especially for retail that they built from ground up with the U.S. in mind. And that was really what helped us make the decision to become part of Elys. So, using that technology, there are other people in the business in the bookmaking business that are presently looking for systems to run their operations. So, I think there's a tremendous opportunity for the Elys system to capture that market has been done in the past.
Michele Ciavarella: Great thank you very much. Anybody else?
Bob Kocienski: Yes, this is Bob. I might add to what Vic said. You know this combination of Elys and USB is almost is likely to go up. I mean, we were looking for what Elys has and that’s a platform and a system and a stack, and some of it has been built out here on mobile site, but the reality is most of the systems used in the United States are remanufactured European systems that really don't handle business that occurs in the United States and likely to occur in Canada. What we are really we are enthusiastic about is we visited Italy about a month or so ago, is John Salerno came back and told me their system is ready to go. Okay, we've been looking for a system for three plus years and we found the one with Elys. We're excited about that. That allows us to go with and negotiate a contract providing all the service, no third partner services in the standard platform. We may have to use third party services for sports fees and things of that nature, but that's something we should think about tackling down the road. But we're enthusiastic about the opportunities that now become available to us that were very difficult for us to negotiate with clients because we now can provide a full turnkey solution.
Victor Salerno: For example, we didn't have an iGaming platform, so I don't know how this happened, but in some way iGaming got married to sports wagering, and we -- that's our business. All we do is sports wagering, and to find a company that can also play other part we go in and bid for locations. The problem was what we wanted to do iGaming to get an iGaming platform. Now with Elys we can provide that iGaming platform for our future customers.
Michele Ciavarella: I think Vic said it all, right Vic and Bob good. Thank you very much. I just want to -- quick comment, we've got a tremendous audience out there, thanks a lot everybody for joining us. It's really quite a remarkable feedback, so but and we've got a ton of questions here. So the way we structured this get out of it -- get the get the presentation of the way now answer Q&A. So, I've got a question here from one of the analysts that are out there. It's asking us to provide an update on Washington DC, and there's quite a few questions that are related to that, and again maybe an update on the license approval process et cetera, et cetera. Allow me basically to start that question and then I'd like to hand it over again to Matteo in terms of that. So the first thing is, we've kept -- we've been very prudent about the way we make announcements and it's just the way we roll. One of the things that we're not trying to -- what we're trying to do is, not give too much information when it's not required to be out there. For example, discussing too much about what stage we’re at in relation to the licensing process. It's quite a sensitive matter and I know that some of our peer groups they like the way a lot of you know noise and that sort of thing, that's not the way we roll. We keep our cards close to the chest. It's a very opportunistic industry, that's number one. For example, we were the first that started talking about the restaurant market, the bars, the small venue market and before you know it all the other guys want to enter that market. So we're being very cautious about what we say, but again I'll pass it over to Matteo, but what I can say is this, is that that process is well underway. And one thing I’m going to leave everybody with this thought, this company Elys is pioneering one of the newest vertical, the newest sectors in the U.S. sports betting industry. When we cut the ribbon, it's going to be the first small venue to be built Class B as they are calling it where it actually is a restaurant, bar or some other business that wants to offer sports betting and it's not just planting a kiosk there. They actually become almost like a mini casino. So Matteo and the team, both overseas with the engineering and the development of the internal controls and that sort of thing it's been a massive undertaking and we're well on the road on the preparation. So, what – I'd use the term it is like ketchup. It is, you have to have a lot of patience in this, but we don't see any barriers to getting the licenses done and we're just taking it one day at a time and as -- when the regulator is ready to issue the license, they will issue the license. But that being said, I'll pass it over to Matteo, maybe he can add some limited colour to that question.
Matteo Monteverdi: Yes well, I mean let me expand a little bit more on what you just mentioned. Clearly we are from a technology and product standpoint ready to go live any time Washington DC will approve our license and the license of our partner. Clearly the process to get license in this jurisdiction is quite a significant step given the circumstances that Mike was saying before. The fact we are enabling a restaurant, sports bar location to operate as a mini casino and the level of that internal controls, segregation of duty or the requirements to operate in a legitimate way under the regulatory framework that the DC Lottery is imposing are extremely onerous. The good thing is that the process is well under going. As I say we are ready any time that the DC Lottery will give us the green light. We don't foresee at this point in time any impediments that should stop in any form the process. The great thing is that we have created a model that once is live it's a cookie cutter model. We will be able to stand and scale across many other locations, not only Washington DC potentially, but the format can be easily exported to many other jurisdictions that are at this point in time are considering to allow the so-called Class B operators which are obviously restaurants and bars to offer sport betting products. We know that there are at least four or five other jurisdictions would have authorized this model others are obviously considering that and we believe that this specific business model will be an important driver of growth in the U.S. sports betting ecosystem. So, as I said we don't see at this point in time any roadblock from a technological and products standpoint we are ready to go live and to the deploy. We see finally also I would say from interaction with the lottery positive let's say feedbacks that everything should go smooth. But the opportunity here is not just single deployment per se. As I said the opportunity here is that we are to certain extent trailblazing new model that in our opinion could be an incredible opportunity given the scalability and at the same time giving that the fact that we can replicate it easily across multiple markets.
Michele Ciavarella: Perfect, thank you, Matteo, excellent. I've got a question here also now for that's requested of Alessandro. Alle, I think you're on the line, what is your strategy to continue to compete against competition in Italy and also what we're doing to gain market share there?
Alessandro Marcelli: Yes. Yes, we continue obviously to -- we are continuing to grow in Italy and particularly this moment after this pandemic there’s the all the shops on the territory had lot of problems for reopening. Our model is really the winning model because our model is to open a little venue, a little bar, a little shop that in this moment is growing. And for example, the old shop, the big one, the big venue now they are having some problem to have this thing turnover in the same revenue of before the pandemic. Our model with the little shop with the little web shop is the winning model at the moment. And a lot of the shops are joining us for that reason. We are really specialized on that channel, on the hybrid channel to use the online and the web license in little shops and it's really the killer application now because we are having so many requests for opening and in fact we are very, very happy for that. And this is very important for our growth in the future, really, because we are continuing growing and we are growing also after the pandemic that as you know, a lot of shops really has a problem to reopen. Instead we are on the contrary we are open more shops than before.
Michele Ciavarella: So and one other thing maybe I can add to that and Matteo you can also jump in as well in terms of this, there is a brilliant opportunity apart from expansion into U.S., Canada and international as I mentioned earlier, but there's a brilliant opportunity in the Italian market and you can't minimize that because it really is quite remarkable. It's almost like having another possible moment here in the next couple years where the -- in Italy it's a federal regulation, it's not a state by state or provincial process. Basically what's happening is there's an ongoing preparation for the next global renewal of licenses in the Italian market and the government is putting, the regulators are putting some very stringent parameters in that's going to make it not only very difficult for foreign operators to start operating in the market, but it's also going to essentially consolidate the market. So that's positioning the company in a very good way to be able to capitalize and expand, because there's a lot of small, smaller operators that number one are not of much interest to the large operators and they're too small on the other hand to be able to renew their licenses in the next couple of years. So it puts us in a perfect position to be able to capitalize on that and be able to roll up some of those operators and some of those businesses as Alessandro has just described, with the unique technology that the team at Odissea has put together and gives us this sort of a hybrid approach to being able to offer the product in the market. And as we all might know, that's a very, very competitive market. And to be able to have this unique technology aspect really puts us in a great position to be able to roll up over the next two years. So that's why even though we're quite conservative on our goals and objectives, we still feel very, very confident that we're going to be able to achieve those numbers going forward just in the Italian market, never mind what's going on in the U.S. Matteo, I don't know if you want to add maybe a little bit to that.
Matteo Monteverdi: No, you said perfectly. The Italian market is a mature market that needs to go necessary through a moment of consolidation. You have a lot of small operators that don't have their own technology stack. And clearly the ability, potentially to bring on board to our technology to consolidate under Alessandro leadership and valuable position is clearly, I would say, almost inorganic evolution over business at this point in time in the U.S. One of the critical success factors I believe, of the Italian team and engineering team has been the ability of put together, what I define a cross channel experience whereby you provide the most user experience between the retail channel and the digital channel, which has been absolutely critical in acquiring new player, retain them, monetizing them and at the same time, obviously, growing the bottom line. So we're really well positioned in the U.S. and not only we see an underlying addressable market that is growing year-over-year on a double-digit basis, but also the opportunity to further increase our market share organically and potentially inorganically through the consolidation of a market that needs to be obviously that will happen given the fragmentation that we see today.
Michele Ciavarella: Great, thank you Matteo. I got a question here that some of the question has been answered through our discussion. But what I'll do is I'll -- it's aimed towards to USBookmaking, so I'll allow the team from USB to take the floor on this one. It says, please and if everybody sees me looking at the screen, it's because my eyes are really bad. I'm getting old and I can't read, so I've got to get close. So it says, please comment on the gaming infrastructure in the U.S. market. What do operators really want? What do they really want is what's being asked here? And what do they have available versus what's the gap in what Gameboard has? And I know that, Bob and Vic, you guys talked a little bit about that earlier, what can, Elys Gameboard till, where other platforms have failed? And the follow up or the second aspect of that question is, is Gameboard the missing piece to your business? In other words, do these -- does the technology that Elys is bringing to the table now, never mind the -- as I described earlier, the interactive side or the digital platform that we're preparing, does it fill the gaps to allow you to approach your operator connections and present them with a full solution that you expect them to line up and sign on the dotted line as the question says, please comment?
Victor Salerno: Robert you want to?
Robert Walker: Yes, I believe it does as I said earlier Mike, this really fills in the boxes that we couldn't check before and good work. Going off of your Elys previous program we believe that there are a lot of smaller places that aren't being served now. And the advantage of Elys places is exactly what you said. As far as we are able to go down to smaller events, big companies, first of all they're not interested in these costs. It costs those locations too much money to get in the gig. We bring a great economical product to them that can serve everything they're looking for. And yes, Gameboard really does help fill our does fit like a glove.
Victor Salerno: Yes, I might add to that, that having Gameboard as part of USB now, we control our cost structure. Okay? And that becomes very important to us, because we used third party providers up until this point in time. And, they charge us whatever they want to charge us. If we want to be in business, sometimes we have to swallow the hook, okay, to get the deal. But now we can control our pricing and our bidding for these tribes, because we control the platform. We did not control the platform prior to July 15, when we did the transaction with Elys. So that and that gives us a great position from my standpoint, in this business. We now control our cost structure, very important.
Michele Ciavarella: Thank you guys, perfect. Okay and then the next question really is aimed at Luca and the technology team, but maybe we know we can get a little bit of feedback, both Matteo and Luca on this. It says, how do you see your sportsbook technology evolving to compete with newer sportsbook tech in the future? Well, I guess maybe allow me to start. One of the key, the key factors or the key reasons to look at our company is that we're built around the tech as Vic and Bob have just described. And obviously we actually feel confident because we have literally one of the newest betting technologies in the world. Okay, there are a few others that are similar architecture, but many of the ones that are out there competing as Vic and Bob has just described have -- are a bit older technology, monolithic architectures. They were developed many, many years ago. Think about when the internet came out and that's basically when this business went online. Prior to the internet being around, this industry was a bookie at the back of a bar. You know what I mean? So people would walk in and they would place their bet and the bookie would negotiate with them and that sort of thing. So when the industry went online, these technologies started to evolve. So what we're seeing today, in terms of what the guys have just described, is there's a lot of technology that's very powerful in terms of the -- being able to service large venues, but they're built on a monolithic frame rail and that makes it very difficult for them to maneuver as it relates to what players are demanding. Okay, so essentially, what we see here is our technology is built on the latest architecture. We don't have any technology debt, and we don't have any legacy layers, which are going to impede us to be able to continue to evolve and grow the platform. And one thing I can tell you from Luca’s team, is these guys are hungry. They want to know what the players are demanding so that they can code it and build the platform and build new features that essentially address what their demand is. So to a certain extent, if you go back to one of the slides that I described, what we actually have here in Elys Game Technology is not only the technology, but the feedback mechanism to be able to go and Alessandro has the feedback, he's got his finger on the pulse, he knows what the players are demanding. Same with the USBookmaking team, they've got their finger on the pulse. They know their market, they know what their tribal customers are demanding, versus their non-tribal or commercial customers and they can feed that back into the system. And then Luca and his team go to town and be able to -- and are able to code the platform properly. And to a certain extent, when Matteo was describing earlier about our go-to-market plan and our approach to the U.S. and the DC market, if you will, that cookie cutter approach. We could have easily repurposed our European platform. But I think that going back to what Vic had said earlier, they see enough of that. Okay? They've seen repurpose European platforms, they don't typically give you the right product for this particular market. So what we did is, we took from the moment PASPA was repealed in May of 2018, instead of jumping into the market with whatever we had, okay, well, like many of our competitors have done, what we did was we took time to understand the market better, create the technology, create the user interface to be able to react to what the players were asking for and demanding, all you need to do is get on a couple of chat lines and you can kind of see what players are complaining about when it comes to using their software or their mobile app or whatever the case may be, or even their ability to place a bet. A lot of those things, we wanted to make sure that we avoided the potential problems and pitfalls. So instead of jumping into the market, going back to my point, we took the time to develop the platform properly in its own environment for the U.S. And that's when the team from USBookmaking had a chance to see what we created. Now going forward, we're going to be able to have their feedback as well as Alessandro’s feedback feeding into the technology team. And we're going to be able to provide product that's unique to each market. So that's essentially what I believe in terms of the technology and why we're well positioned in terms of the company. It's really one of the only ones that actually has a B2C and that is able to understand the behavior of betters, what they're demanding, and be able to feed that into the engine and the technology to be able to create the product. So that's kind of what my response is to that question and I'm happy to have Matteo or Luca add a point if they wish.
Matteo Monteverdi: I'm not sure if Luca is, is online given the timing in Europe, but Luca, are you there?
Luca Pasquini: Yes, I am online, but I need to .
Matteo Monteverdi: Yes, I'll take care of that, if you don't mind. So, this -- Mike you said correctly. The fact that we are by DNA business to consumer organization so that we intimately know the players and the betting behaviors or the i-gaming behaviors in general, gave us definitely an edge in the market in understanding what are the critical requirements in order to have a better product. As a matter of fact, we internally say that we are not really a B2C company or a B2B company, we are a B2-all because we're capable really to identify what are the market needs and every single time to evolve our product accordingly to the new market trends. What is also extremely important is the quality of the engineering team. We have engineers and product people that have been in this industry now for over 15, 20 years. And they understand not only the technology, but understand the business of sports betting, which is another important element to build a very performing platform and solution. I believe that the combination with USB, in particular, the experience that Vic, Bob, John and Robert are bringing on the table, which is the deep knowledge of the U.S. betters and U.S. players will further augment our ability to bring into the market superior products, because we will tap into the knowledge, into their expertise to ensure that our future roadmap is going to be even more competitive than it is today. And the underlying architecture is designed to be localized and customizable to the needs of the market with minimal effort. So I think that we are in a very good position in this regard. I'm very confident and comfortable with the technology stack they we're bringing into the market. And obviously as product is never has never done, it's particularly in the technology space. But we have the key and the strong foundations to further evolve it and further improve it quite dramatically.
Michele Ciavarella: Thank you, Matteo. So I've also got here another question. I'm going to kind of move it along here because we've got, I still got a ton of questions, which is fantastic. I again, really much appreciate it. Another question here from Jack with Maxim Group. Mike, once your land based activity comes back in the Italian market, can you share your thoughts on gross gaming revenue? The ramp up that you expect to play out in Italy and Europe versus the ramp up growth you see playing out in the U.S? How can you see revenue split trending over time for Elys between U.S. and Italy, in the Italian market? So I guess the answer to that question is, as you've seen our projection in terms of our goals and objectives Jack, I think I think we've always tried to maintain a very conservative approach. I feel extremely confident that we're going to be able to hit those targets in a very rapid period of time in terms of what's going on in the Italian market. Now, we're taking it step-by-step and cautiously, we're -- want to make sure that everybody's safe. Of course, we are subject to government regulations in terms of restrictions, if COVID continues to come back into our communities. So again, we definitely see that if the land base, the location start to open up, as Alessandro mentioned earlier, we should see a decent ramp up again, a bit of balancing from the online and land based operations there. And again, the numbers that we provided in terms of goals and objectives, we're always very internally, we're very, we're very aggressive, we want to go as hard as we can. So we see those goals and objectives just being the Italian side of the operations. Okay, so on in the one of the slides, one of the slides in the presentation. In terms of the U.S., I'll put this over to the to the USB guys, but again, my thinking or at least my expert, my desire, but if I had my wish list is to duplicate what we're producing and generating in the Italian market, as we continue to evolve in the U.S. market within the next three to five years. So I think that's a quick wrap up, because essentially, it's taken us almost 20 years to get to where we are in the Italian market. So we're able to replicate it in the next three to five years. I think that's a pretty good success story from my perspective. Guys from USB, any ideas on what you guys perceive as potential growth in terms of gross gaming revenue?
Bob Kocienski: Well, the critical piece is when the state's approved gaming, and sports wagering, and what the structure that is. And we don't know until the legislator passes something what it looks like. For example, New York, is a 50% tax rate. Okay, we can't make money in New York. So we're not likely to pursue New York. Okay? But there are, what I would call friendly states, from a taxation standpoint, all the states have regulatory requirements that are rigid. We're highly regulated, we have to be licensed. We understand all that. But the larger states such as Texas and California haven't approved gaming yet. We don't know what that looks like. They're trying to project when the political process will finalize the bill and what that will look like is very difficult. But we do have a roadmap. We do know what exists today and we are out there beating the path very hard. We have planned next week for both Rob and John in the various communities. We're in constant contact with a number of properties in states that have approved legislation that we think are can be a profitable venture. We're really not interested in going into ventures where we can't turn a profit. That's not a good business model nor are we going to try and compete with the larger players who buy the business. We're going to earn the business. And I think with the turnkey system that we have and we can offer going forward, our opportunities will increase significantly. We do have revenue projections based upon business plan, which we submitted to the Elys at the time while we're discussing the transaction. They're projected on the basis that we will pick up about four or five properties a year for the next three or four years. Now, that could be one large property, it could be five small properties. It's amazing how one transaction can accomplish what, five or 10 did. Okay? And we're out there, we're talking to the folks. We're working hard and spending a lot of time with phones and meetings. And these things do not happen overnight. It's a process. We have to get gaming approval and we go through those processes. I'm not at liberty to share numbers at this time because it'd be so forward looking that it is hard to substantiate, nor do I want to mislead anyone. The fact is that our strategy is to pick up four to five properties a year over the next five years and we think that is achievable and we use a model internally, that those properties can generate a nice profit for our company.
Michele Ciavarella: Thank you. Thank you, Bob excellent. So there's a number of questions, and I'll answer them all together related to the DC license that actually Matteo covered very, very well. So I'll cover these off again, folks are asking again, what the status is. Again, we're subject to the process that's going on there. The regulator is working on it. We're working together with them and communicating in terms of what's required, what's needed, what's missing, but we don't see any barriers to it. We don't see any significant hurdles. We still need to get across the finish line and once we do, we're going to let everybody know. Okay? So in terms of the status, it's getting there. We're not -- we haven't got the licenses yet, but it's getting there and it's in progress as Matteo has indicated and we don't see any barrier here. We're actually really quite pleased with the developments and the progress. There's another question here, again, from Jack from Maxim Group in terms of what's going on in terms of let's see here, competitive -- our competitive advantage. I think we covered a lot of this stuff Jack, during the conversation here. I think Vic and Bob just described a little bit, Bob talked a little bit about what the target is. There's no reason why we should be going into markets that are not economical and makes no, it makes no economic sense to run a business where you're going to go buy business or take losses. There's no need, there's new markets that are opening up for us, they're more fair markets. So for all intents and purposes, not only were we prudent with our business build out, but we're also very prudent in terms of which markets we're going to approach. So that really kind of addresses that. And in terms of the size of us as an operator, we're very nimble. So even though there are some larger competitors, I mean, we're smaller, but we have a good solid engine and we feel super confident in it. And now you're plugged onto the technology, the amazing team that we've got now like basically on both sides of the ocean, and I think we are probably the one that everybody's got to be careful on and they've got to be looking over their shoulders about. Okay? So we feel extremely confident in terms of where we're positioned as it relates to the U.S. market. Next question, well, this one here is challenging to respond to. It says when do you expect to be cash flow positive? Here's the bottom line, basically, when you look at our current operations in the Italian market, if we were to take out all the money we spent on growth and development and capturing new market share, as Alessandro is working on overseas, all of the -- all of the expenditures related to developing the technology and the product. basically, once we get past all that, and we take that out, the gaming operations in the Italian market are actually cash flow positive. Okay? But we're recycling and we're using whatever proceeds we have available to us in a very intelligent manner. We're not overspending. Okay? And we're also being careful to make sure that we manage our balances and essentially, that's really quite critical. So maybe what I can do as well, I think we got Mark Korb on the line. He could maybe describe a little bit about extracting some of those expenditures that we've had in the past couple of years. And maybe perhaps one of the -- what effect it would have on the income statement or the cash flow statement if they were eliminated? Mark, I don't know if you want to add any color to that? If you're here, you're not on mute?
Mark Korb: All right gents, I was on mute. Sorry, ladies and gents. I was on mute. Yes, so if you have a look at historically, I mean, the company had a huge burden in terms of the convertible debt that we were carrying an episode of -- draining some of our cash flow. And if you have a look at where the business is going and where it came from, it's all about, sort of the one off expenditure that we've incurred on engineering and which we expense because we can't capitalize it. And developing the product for the Italian market, the U.S. market and every other market we operate in. And then also have a look at sort of the growth that we've been putting into the business in terms of U.S. headcount, and that's all ramping up to get into the U.S. market. So those expenditures unfortunately all add, to sort of like the startup phase that we in. And then, if you have a look, at what we forecasting and our growth, it all becomes about critical mass. So, we're gearing up for growth. We probably got, we probably added in $1.10 million and $1.50 million of annual expenditure in terms of headcount, and people and legal fees, and everything that goes with that growth. The legal fees and that won't be there permanently, it's probably about $700,000, or $800,000 a year that we are spending at the moment in terms of getting the licensing and all of the corporate work that we're undertaking. Now, when that goes away, and we settle into sort of the growth phase with the new management structure and the people involved and we start generating additional revenues, we anticipate we're going to become cash flow positive within the next, I would say, two to three years everything going according to plan.
Michele Ciavarella: Thank you, Mark, excellent. Okay, so again, I'll just kind of jump through a few of the many questions that are here and kind of lump them into some of the answers we've already provided. One question here says when, with Elys soon launching the platform as a service revenue model in the U.S. will be helpful to understand in broad strokes what the revenue potential is. So as Mark has just described in that answer going towards some of the responses that Matteo has described, as well as Bob, in terms of our expansion, essentially, the first step everybody is get that first location open, make sure that it's working perfectly, there's no bugs in the system. This is critical. That's the part that a lot of folks kind of miss that technologies do make mistakes. And the kind of business that we're in, you don't want mistakes, because a mistake could cost you a $1 million in one day. Okay? We're not selling sneakers and makeup, and that sort of thing. Well, if it doesn't work, you just bring it back. It doesn't work that way. Our industry is where our customers come in to do one thing, and one thing only, they come to take our money. That's the business that we're in. So if your technology makes a mistake, your customers are going to get all your money. Okay? So the bottom line is that we believe that by launching the system properly, as Matteo has described, once it's launched in the one single, small, little location, then the rest will come and build it and they will come. So the bottom line is that, get it launched, make sure there's no bugs, make sure it's working perfectly, let the USB team do their, perform their magic in terms of managing the risk as it's coming in, then basically, it's going to be a cookie cutter approach and the dominoes will fall. One operator will lead to another, will lead to another, will lead to another. And another factor that adds to that formula is the fact that now that we already have passed where we've gone in the history, and a number of operators have seen what is out there, they may have used one of our competitors platforms, they might now be able to know the difference. Because remember, two years ago, three years ago, when PASPA was revealed, all of us were in first place. Right? At the beginning of the season, all the teams are in first place. So all the operators were great, all the providers were great. Now, two years later, they're gone, hey, this doesn't work as good as we thought it would. And if you have some of the operators in the casinos out there that are losing money on their sportsbook, they're going to be out shopping for a new platform. So when we're ready to turn the key, we want to make sure that we've completely launched clean. We are -- our platforms working perfectly and we've got the guys that understand the market to be able to trade. So essentially, it's very critical in terms of our launch point. And when that happens, we're likely going to see our revenue and growth expand and going forward, as we've described. In terms of -- there was a number of questions in relation to the shelf offering that we put out there. I'll be very brief on that. It's an opportunistic offering. Basically what that means is when -- if we see opportunities that present themselves, we'd like to make sure that it's available and ready for us to do it. We capitalize on some of the rules that apply to be able to post it and put it up. So now it's there, it's a full shelf, we can use it when and if we need it. It's not something that we need to draw on for any particular reason, we were able to sustain or at least close the, the transaction with USBookmaking with the resources that we had available to us, we still have significant resources available to keep our plan going, as Mark has described. And essentially, if a great opportunity presented itself to us and the team all agrees that it's the right fit, it's not just an acquisition just for the sake of acquisition, that's when we're going to be able to capitalize on the shelf. So we'll use it if and when the opportunity presents. In terms of let's see, and here's a good question. My brother must ask this one, where do you see the stock price in the next month? I'm not answering that. That has to be my brother asking that question. So in terms of are we entertaining any buyout options? Not that I know of any you guys entertaining buyout options?
Mark Korb: No.
Michele Ciavarella: Big no on that one too. Okay, why is it taking so long for licensing in DC? Well, as Matteo has described earlier, very eloquently, it just takes time, you just have to go with the flow. And as I described, is we are doing something quite unique in DC. It hasn't been seen across the U.S., but there are a number of states that are now starting to replicate that. We still believe in our theory that the market is significantly larger in the small, smaller business establishments, the neighborhood establishments, like restaurants, bars, coffee shops. We still believe that that's going to be a far more faster growing market as more states open that up. Hence, that's the reason why we're building property in the DC under the DC licensor and we're doing things properly. It's really quite a remarkable venture and the guys have done a terrific job on that. So it is taking time, but that's because we're creating a brand new vertical in the market. Let's see here, there's a couple questions here. Okay, Jack again, here you are, jack. Let's see. Can you share some thoughts on the seasonality? Well, that will allow both the guys at USBookmaking and, maybe I'll let Matteo to answer that as it relates to Europe, but what do you guys think about the seasonality? What's the opportunity as the third quarter comes in, and football get started. Right? And in Italy, we got soccer that's gets, to get started. I think, Alessandro it starts this weekend, doesn't it, something like that?
Matteo Monteverdi: Yes. Well, you know, I will ask Vic to comment on that, he has over 30 years of experience. So I think U.S, betting in terms of .
Victor Salerno: Obviously it is only 30 years retail…
Matteo Monteverdi: I'm sorry, I beg your pardon. I want to make it .
Victor Salerno: That's not going to happen unfortunately. In the U.S. it is very seasonal. Right now we're in our slowest part of the season and our most unprofitable, unprofitable part of the season. Football season usually accounts for 60% of our revenue, so rest of the year is 40% and I'll let Robert expand on that.
Robert Walker: Well, I think people say why is baseball worse for us. We basically have a 10 deadline, 2.5% all theoretical whole percentage for the rest of the course. You have 4.5% and people actually better, so right now you're, we're doing a 2.5% line people, so more sophisticated player, very tough. We got lucky that the NBA season a little bit long this year. But normally in July and August it is just really horrible. We're coming out off our best season and then in November we have all the sports are running, so really November through March Madness is our bread and butter. Having said that, there's a lot of pressure almost 18 weeks of NFL. They added a week to the NFL, which we've been renting them out for 30 years, they took away one exhibition game we have one extra week for NFL, so but there's a lot of pressure to do well in those weeks because there's so magnifies for the entire year. It used to be if you had four football seasons, you had a four year. But I don't think that's the case more because college basketball. You know we're looking 300 teams in college basketball and it's a 19 event. So we're really going to be busy through Mark.
Victor Salerno: And for the analysts out there, it's very difficult to compare this present year to last year. Last year didn't exist, you almost have to go back to 2018, 2019 to give a realistic comparison of how we're doing. It's going to increase I think this is like Robert said, typical week in NFL, this is really unbelievable, is equivalent to more than a week of baseball one or one weekend. So yes, seasonality is definitely there in the U.S. as it is in Europe to sustain seasonality. And we just have to understand that. For so long, we just know when that time of year is and when the good times are and we're waiting for the harvest.
Robert Walker: Yes both -- No, we don't let people take a vacation until after March. So how busy it is.
Victor Salerno: And I think there's some things on our writing that regarding comment, maybe change that seasonality a bit, such as eSports. I think eSports is tremendous, a tremendous growth opportunity in our business. That's not committed from September through March this year. And there's appeals to the younger generation, we think there's a tremendous opportunity there. And that will start to change the seasonality. But that's the growth business, a growth segment of our business, that will begin fairly soon, and I think will grow at a fairly decent pace. I think seasonality as it exists today, is likely to change somewhat, especially with all the soccer that takes place up on American soil, the opportunity to brand soccer in a bigger way in the United States could affect that also. So I think eSports is something to keep an eye on.
Michele Ciavarella: Perfect. I've got a question here for Matteo. Actually, Matteo, is there a significant cost expense when we're expanding in state, in additional states? I think you touched a little bit upon that, but it has to do with maybe the design of our architecture?
Matteo Monteverdi: Yes, well, there are due to some regulatory requirements we're not allowed to operate from the cloud or via the same shared infrastructure. So one of the clause that we will see in every single jurisdiction will step in is the installation of a new system, which is very much hardware in this regard. The vast majority of the software for I would say, 90% along with all the integrations that we're working on to operate in the U.S. will be reusable. And clearly, if we land a large casino that is looking at specific elements, in terms of localization or customization, there might be some effort that we need to carry on in order to fit into that specific frame. But I will say the system today has been designed to be localizable and customizable, and about 75% or 80% of the cost of the infrastructure will be absolutely reused. So there are costs associated obviously to the hardware, very much depends on the, on some other variables, like for example, the number of customers that we're expecting, because we need to size the hardware accordingly. But the vast majority of the lifting now frankly is done.
Michele Ciavarella: So and the next question, thank you, Matteo. The next question is, can you comment on the status of discussions that we're having with potential other customers in land based locations in Canada and the U.S. as well? Are they really preliminary or are potential partnerships? Well, I guess the best way to answer that is this way, we will not discuss specifically anyone in particular, a potential customer or client that we -- who are we're talking, but we are -- even though we're in a growth stage, because we're capitalizing on a brilliant growth opportunity in the U.S. and Canada, we are a live active company. We generate a pretty good sizeable turnover, as we demonstrated in the presentation from our Italian operations, and we're constantly in dialogue with potential customers and clients. So that's an ongoing process. So that's the way I'm going to answer that, without getting too much, putting out there in terms of exactly who we're speaking to. But, but we're definitely talking to casino operators as well as small business venues as well and that's on both sides of the Atlantic. In terms of B2C expansion in Europe, are you looking at growing organically or in new markets or by way of acquisition? I answered this question earlier, so it's asked and answered. We are in a great position with respect to what's happening in the Italian market and the government force consolidation going on there. So that's clearly an organic type of opportunity that's presenting itself. We also have organic growth that we're undertaking in other markets like Spain, or France, or Germany and maybe I can lead Matteo to address any specific markets that we're looking at. But those are regulated markets that we might be interested in. But essentially, there's also some M&A opportunities, again, primarily with smaller operators that don't either anticipate they're going to renew, or they want to become part of a larger enterprise. So that basically is the way we're going to address that question. Let's see what else a couple questions, there's at least a few questions in relation to advertising dollars and things of that nature. One thing quite important is that in the Italian market, we're B2C, so we approach the client differently. In the U.S., Canada, you might not see us on every fridge magnet and across the nation, but we're going to be behind a number of several operators. So our spend in terms of getting out to the market is going to be primarily getting out to the operators, and they're the ones that are going to approach the market primarily. Now, that doesn't necessarily mean that at some point down the line, that we're going to be inflexible and not look at becoming a B2C brand somewhere in one of the states that might be available, particularly now that USBookmaking is on board that they can identify a market that might be worth looking at a B2C channel. What I can say in that sense is that, then the advertising dollars are redirected. And but we do have a good B2C backbone as Matteo described, having the experience in the Italian market, which Alessandro and his team have done a terrific job. So we're being able to, again, share and feedback on the information that's required. So again, we're not going to see us on the side of a bus in the United States, nor in the front of it. But the bottom line is that, you will not see us advertised primarily on a lot of these mainstream channels, but you will see us participating. Once we get the turn key, you will see us participating in more events like the one today. And this is the one we had this one today. So we can introduce our team, to the audience. This is an investor related type of presentation, but going forward, we're likely going to be on more business or commercial type of calls, where we're going to be reaching out to potential clients and operators. Let's see -- lot of people are saying they love what we're doing. Thank you very much. I appreciate that. Let's see. I think the guys that USB talked about eSports a couple question there. Maybe we can expand a little bit on it. What do you think a handle, it would be like on eSports? I'll give the first answer on that. Look in the Italian market, Alessandro and his team, we offer a betting on eSports. But it's very limited. Okay, number one, the primary reason for that is because there's a lack of organized regulatory bodies, okay, like the NHL, NFL, et cetera, et cetera. So there's a lack of organized bodies are regulated. So therefore, there's very limited products that our data providers provide us the lines on those events. But, it's a very small fraction. I think that could be an indicator as to what could potentially happen here. It's a huge market from a plane perspective. I was on the weekend with my granddaughter on the weekend and she's playing the Nintendo thing and everybody's competing against each other. So, bottom line is that it's a huge market from a planning perspective, from a betting and gambling perspective. I think it's a little bit different, but maybe the guys might have a little different perspective on it. But like, yes, Bob, go ahead. No, no,
