ASX:BET - FY23 Appendix 4E and Annual Report

FY23 Appendix 4E and Annual Report

Released 30 Aug 2023 - 11:04 AM

Announcement PDF 30 JUNE 2023 ANNUAL REPORT BETMAKERS TECHNOLOGY GROUP LTD ABN 21 164 521 395 Copyright © 2023 BetMakers Technology Group Limited CONTENTS CONTENTS�� 2 APPENDIX 4E�� 3 OPERATIONAL HIGHLIGHTS�� 6 CEO’S LETTER��7 DIRECTORS' REPORT�� 9 AUDITOR'S INDEPENDENCE DECLARATION�� 36 FINANCIAL STATEMENTS�� 38 NOTES TO THE FINANCIAL STATEMENTS�� 42 DIRECTORS' DECLARATION��88 INDEPENDENT AUDITOR'S REPORT��89 SHAREHOLDER INFORMATION��98 CORPORATE DIRECTORY�� 101 BetMakers Annual Report 2023 2 APPENDIX 4E Preliminary Final Report Name of entity: ABN: BetMakers Technology Group Ltd 21 164 521 395 Reporting period: Previous period: For the year ended 30 June 2023 For the year ended 30 June 2022 Results for Announcement to the Market $’000 Revenues from ordinary activities up 3.7% to 95,027 Loss from ordinary activities after tax attributable to the owners of BetMakers Technology Group Ltd down 56.5% to (38,781) Loss for the year attributable to the owners of BetMakers Technology Group Ltd down 56.5% to (38,781) DIVIDENDS There were no dividends paid, recommended or declared during the current financial period. COMMENTS The loss for the Group after providing for income tax amounted to $38,781,000 (30 June 2022: $89,234,000). This includes share-based payments expense of $8,349,000 (2022: $71,029,000). Further information on the 'Review of operations' is detailed in the Directors' report and Chief Executive Officer's report which is part of the Annual Report. Net Tangible Assets Consolidated 2023 $’000 2022 $’000 Net assets 150,596 189,286 Less: Intangibles (56,706) (65,762) Less: Right-of-use (ROU) assets (4,331) (4,873) Add: Lease liabilities - current 1,401 590 Add: Lease liabilities - non-current 3,308 4,630 Net tangible assets 94,268 123,871 2023 2022 943,541,600 904,456,198 REPORTING PERIOD CENTS PREVIOUS PERIOD CENTS 9.99 13.70 Number of ordinary shares on issue Net tangible assets per ordinary security BetMakers Annual Report 2023 3 APPENDIX 4E Preliminary Final Report CONTINUED Control Gained Over Entities Refer to note 31 'Business combinations' for further details. Loss of Control Over Entities Not applicable. Details of Associates and Joint Venture Entities Not applicable. Foreign Entities Details of origin of accounting standards used in compiling the report: Currently all accounting policies of the Group are consistent with those adopted by its ultimate holding company, BetMakers Technology Group Ltd. Audit Qualification or Review Details of audit/review dispute or qualification (if any): The financial statements have been audited and an unmodified opinion has been issued. Attachments Details of attachments (if any): The Annual Report of BetMakers Technology Group Ltd for the year ended 30 June 2023 is attached. Signed As authorised by the Board of Directors: ____________________________________________ Matt Davey Chairman Date: 30 August 2023 BetMakers Annual Report 2023 4 WE SIMPLIFY BETTING. BetMakers Technology Group (ASX: BET) is a leading provider of advanced technology and service solutions that empower racing and betting industry stakeholders to grow the sport of racing. Our solutions help monetise racing at every stage of the life cycle, with technologies and services delivered to bookmakers, parimutuel wagering operators, racing bodies, and racing authorities across the world’s major racing and betting markets. At BetMakers, our mission is to power excitement, growth and sustainability of wagering globally. BetMakers Annual Report 2023 5 OPERATIONAL HIGHLIGHTS • Invested in the development of the Next Gen wagering platform and managed trading technology, which the Company will leverage to enhance the technology solutions it offers Australian platform and North American ADW clients and to upgrade its embedded racebook solution. • Progressed international fixed odds racing product and content in the US and Jamaica and launched the USA’s first legal racing fixed odds mobile app. • Expanded content distribution rights and distribution partnerships in global markets including striking an enhanced content distribution relationship with Stronach’s 1/ST Content to extend Global Racing Network’s North American content into international markets. $95.0M +3.7% $99.0M +7.3% FY23 REVENUE GROWTH VS. FY22 REVENUE FY23 CASH RECEIPTS FROM CUSTOMERS GROWTH VS. FY22 CASH RECEIPTS FROM CUSTOMERS • Restructured board and management to accelerate the delivery of business optimisation and growth. • Commenced program to reduce and optimise the cost base. BetMakers Annual Report 2023 $41.0M CASH BALANCE AS AT 30 JUNE 2023 6 CEO’S LETTER Dear Shareholders, As CEO, I am pleased to provide you with BetMakers’ annual report for FY23 and to detail the Company’s performance in what has been a transformative year. In FY23 BetMakers undertook an operational restructure based on costs and efficiency, while delivering key objectives around the development of our proprietary technology and making significant progress towards the goal of generating positive operating cash flow by simplifying the global operating model and reducing and normalising the cost base. Each of BetMakers’ operating divisions - Global Betting Services, Global Racing Network, and Global Tote - advanced revenue-driving initiatives in FY23, including the international expansion of fixed odds platforms, renewal of current contracts with improved margins, deployment of enhanced technologies, and the rollout of new racing content to global wagering partners. The Company also implemented changes to senior management and board composition... ...To better position for profitability and for the execution of key initiatives by aligning key executive expertise to the areas that are intended to deliver maximum shareholder value for the Company. FINANCIAL PERFORMANCE The Company reported revenues of $95mil for FY23, representing revenue growth of 3.7% compared to the previous year, and adjusted EBITDA of $-27.8mil. BetMakers Annual Report 2023 Revenue growth was driven in part by the development and successful launch of the Next Gen wagering platform and managed trading services technology, and the expansion of content distribution rights and partnerships in global markets. In H1 the Company invested substantially in order to deliver new technology and new customers. In H2, after a comprehensive review of systems, processes, and operational procedures, the Company initiated a program to simplify the global operating model, consolidating key software offerings and streamlining global operations to reduce and normalise the cost base, create a more sustainable business, and remain agile and focused on the delivery of excellence in B2B global wagering technology products and services. With the execution of this strategic operational restructure, the Company was able to reduce product manufacturing and operating costs, staff costs, and administrative and corporate costs. PEOPLE BetMakers is committed to providing the members of our global workforce with opportunities to thrive in their careers and to participate in and benefit from a business that offers a long-term path for growth and sustainability. The strategic operational restructure, as outlined, resulted in an optimised global workforce, with operations and technology investment directed towards client-enhancing, revenuegenerating opportunities and an approximate 23% reduction in force from the Company’s December 2022 peak period. We expect the workforce level will normalise at approximately 440 in FY24. Key changes to the Board in FY23 included the appointment of Matt Davey as President and Executive Chairman. Nicholas Chan, formerly Non-Executive Chairman, remains on the Board as a Non-Executive Director. Changes in senior management - in addition to my appointment as Chief Executive Officer - included the appointments of Martin Tripp as Chief Operating Officer, Todd Buckingham as Chief Growth Officer, and the promotion of Chelsey Abbott into the newly created role of Chief People Officer, reflecting the Company’s emphasis on employee development. A COMMITMENT TO ESG In FY23 the BetMakers Board established the Environmental, Social and Governance (ESG) Committee. Through the work of the ESG Committee, the Company is able to identify and prioritise initiatives, helping BetMakers deliver on its goals and commitments whilst considering the impact that its actions may have on the environment, employees, communities, and corporate governance. We published the first ESG Investor Update in FY23 and are committed to building on this foundation through the continued development and implementation of ESG-focused initiatives. 7 ← Back to Contents DIRECTORS' REPORT KEY DEALS Throughout FY23 BetMakers delivered key strategic initiatives and deals that position the Company for future growth and profitability, including: • The first deployment of the Global Tote solution for Caesars Entertainment, in Iowa, under exclusive agreement to connect Caesars’ platform into pari-mutuel pools. • Delivery of the technology platform for MonmouthBets mobile, the first legal and regulated mobile application for fixed odds betting on horse racing in the United States. • Contract renewals and extensions with key Global Tote clients in the US and Europe, including nine Penn Entertainment racetracks. • The launch of fixed odds betting in Jamaica, at Caymanas Park, where BetMakers facilitates fixed odds wagering on track with expansion set for off-track venues and online. • The acquisition of ABettorEdge Pty Ltd ('Punting Form') and ongoing integration of its proprietary IP and AI for time-based ratings systems into BetMakers’ products. • Commencement of an arrangement with Stronach Group’s 1/ST Content for distribution of Global Racing Network’s race meetings into international wagering markets. • The significant expansion of content available for fixed odds wagering from New Jersey. • The securing of rights to offer thoroughbred racing content from Selangor Turf Club in Malaysia. BetMakers Annual Report 2023 • The launch of the Global Tote Hub, leveraging the Quantum™ tote engine technologies to enable access to international pools. FY24 EXPECTATIONS Following BetMakers’ successful efforts in FY23 to deliver new technology and new customers to the market, streamline operations, reduce headcount, and consolidate key software offerings, FY24 has been identified as a period to aggressively drive further simplification to the operating model and to retire legacy systems in order to establish a solid foundation for growth and generate positive operating cash flow. We intend to deliver growth by advancing current opportunities with Norsk Rikstoto, Penn Entertainment, and Caesars Entertainment, among others. We intend to utilise the Company’s full-stack Next Gen platform as the base to enhance our embedded racebook solutions for global sportsbooks, Australian platform clients, and North American Advance Deposit Wagering clients. We also plan to leverage our technologies for additional international tote commingling opportunities and will continue to pursue international fixed odds expansion, including securing new global racing content. Underpinning these growth and development initiatives will be a heightened focus on capital management with an opportunistic approach that is more able to adapt to challenging market conditions. BetMakers is working towards positive operating cash flows, growth, and efficient capital management to support future expansion, maximise client satisfaction, and deliver long-term sustainability. With a strengthened board and management team and a clear strategic pathway to scale and profitability, BetMakers views FY24 with confidence and enthusiasm. Regards, Jake Henson CEO 8 DIRECTORS' REPORT The Directors present their report, together with the financial statements, on the consolidated entity (referred to hereafter as the 'Group') consisting of BetMakers Technology Group Ltd (referred to hereafter as the 'Company', 'BET' or 'Parent Entity') and the entities it controlled at the end of, or during, the year ended 30 June 2023. PRINCIPAL ACTIVITIES The Group’s principal activities during the financial year were the development and provision of software, data and analytic products for the B2B wagering market and the production and distribution of racing content. REVIEW OF OPERATIONS The loss for the Group after providing for income tax amounted to $38,781,000 (30 June 2022: $89,234,000). The information presented in this Review of Operations has not been audited in accordance with the Australian Auditing Standards. All figures are in Australian dollars unless otherwise stated. The Directors consider EBITDA to reflect the core earnings of the Group. EBITDA is a financial measure which is not prescribed by Australian Accounting Standards ('AAS') and represents the profit under AAS adjusted for non-cash and significant items. The Group’s reconciliation of its statutory net loss before tax (‘NLBT’) for the current and previous year to adjusted EBITDA is as follows: 2023 $'000 2022 $'000 VARIANCE $'000 VARIANCE % Revenue 95,027 91,682 3,345 4% Gross margin 59,176 66,298 (7,122) (11%) Loss before income tax Add/(Less) back: Depreciation and amortisation Finance costs Share-based payments expense Impairment of assets Deal costs Impairment of receivables Gain on valuation of financial liabilities (53,399) (96,288) 42,889 (45%) 11,793 649 8,349 8,870 3,419 (7,500) 9,682 541 71,029 16,461 772 - 2,111 108 (62,680) 8,870 (13,042) (772) (7,500) 22% 20% (88%) (79%) (100%) - Adjusted EBITDA (27,819) 2,197 (30,016) (1366%) BetMakers Annual Report 2023 9 ← Back to Contents DIRECTORS' REPORT FY23 OPERATIONAL HIGHLIGHTS BetMakers is a leading B2B technology company servicing the global racing and online sports betting industries. The Group is defined through four divisions; Corporate, Global Betting Services, Global Racing Network and Global Tote. The Company achieved revenues for the year of $95,027,000, an increase of 3.7% compared to the prior year (2022: $91,682,000). The trading for the year was underpinned by: • Investment in the development of the Company’s platform and managed trading services technology; and • The expansion of content distribution rights and distribution partnerships in global markets. Consolidated 2023 $'000 2022 $'000 VARIANCE $'000 VARIANCE % Global Betting Services 43,078 40,607 2,471 6.09% Global Tote 45,289 46,939 (1,650) (3.52)% Global Racing Network 6,660 4,136 2,524 61.03% Total revenue 95,027 91,682 3,345 The financial year is best viewed in two halves, as the Company invested substantially during H1 to deliver new technology and new customers to the market, whilst H2 was focused on reducing the cost base and improving operational efficiencies. The FY23 operational highlights across the four divisions are outlined on the following pages. BetMakers Annual Report 2023 10 ← Back to Contents DIRECTORS' REPORT CORPORATE HIGHLIGHTS BOARD AND MANAGEMENT RESTRUCTURE On 31 January 2023 the Company announced a number of changes to the board and management team. The changes were intended to accelerate the delivery of business optimisation and growth, and ultimately to maximise shareholder value. The changes were as follows: MATT DAVEY Appointed to the Board as President and Executive Chairman. NICHOLAS CHAN Formerly Non-Executive Chairman, remains on the Board as a Non-Executive Director. TODD BUCKINGHAM Formerly CEO, was appointed to Chief Growth Officer, and stepped down from the Board. JAKE HENSON Formerly COO, was appointed Chief Executive Officer. As noted above, the intended purpose of these changes, collectively, is to enable the optimisation of the full potential of the business in an accelerated time frame. It is designed to align the skill base of the key executives to the areas that will deliver maximum shareholder value for the Company. In addition to the above changes: • Martin Tripp stepped into the Chief Operating Officer role. Martin has worked within BetMakers since 2021 as the Chief Product Officer. • Chelsey Abbott was promoted to Chief People Officer, with a focus on centralising the global People & Culture team. • Christian Stuart stepped down as North American CEO, with US staff now reporting into their functional areas. BetMakers Annual Report 2023 11 ← Back to Contents COMMENCED THE REDUCTION AND RIGHT SIZING OF THE COST BASE DIRECTORS' REPORT During H1 FY23 the Company invested significantly in progressing the development of the Next Gen platform and other client initiatives. Following this investment and upon reaching key product milestones, the Company commenced a full operational review to identify and address operational inefficiencies. The primary focus of the review is to deliver a cost base which corresponds with the current revenues. The Company has made significant progress during the year with key savings made possible by streamlining and consolidating key software offerings and leveraging technology monitoring and reporting capabilities. Upon completion of the strategic review, it is expected that the Company’s headcount will be approximately 440, a 23% reduction from the 31 December 2022 position of 568 employees. ESTABLISHED INTERNAL ESG FRAMEWORK In November 2022 the Company published its first ever Environmental, Social and Governance ('ESG') update. ACHIEVED ISO27001 CERTIFICATION The Company has invested in cybersecurity, procedures and regulatory frameworks during FY23. As recognition of the quality of some of this work, the Company obtained the global benchmark certification ISO27001 Information Security Management System in Australia and Sri Lanka. The document represents an engaged effort from numerous staff across all facets of the organisation and outlines the Company’s focus on delivering sustainable positive returns to stakeholders, taking into account environmental, social, governance and financial factors. This was a significant project across many areas of the business and is a testament to the quality improvements and focus of the business. SHARE BUY-BACK In July 2022 the Company commenced an on-market buy-back. During the year the company acquired a total of 30,626,884 ordinary shares at an average price of $0.394 per share. ENHANCED RACING TECHNOLOGY AND DATA In October 2022 the Company acquired 'Punting Form'. Punting Form uses proprietary IP and artificial intelligence to create sectional times and benchmarks for horse racing which are used for time-based ratings systems. The acquisition of Punting Form was undertaken to strengthen BetMakers’ position as one of the leading global providers of B2B data and technology services for horse racing. This acquisition completed on 1 November 2022. Whilst Punting Form technology contributes to all Company divisions, the results of Punting Form are captured within the Global Betting Services division. Please refer to Note 31 for further detail on the Punting Form acquisition. BetMakers Annual Report 2023 12 ← Back to Contents DIRECTORS' REPORT DIVISION HIGHLIGHTS Global Betting Services DEVELOPMENT AND LAUNCH OF THE NEXT GEN PLATFORM On 21 April 2022 the Company signed a technology, product and trading deal to launch a new Australian wagering operator, betr. Over the course of six months the team developed the bespoke Next Gen wagering platform that powers the betr brand. On 12 October 2022, betr launched, showcasing BetMakers' proprietary front end technology. Since the initial launch, BetMakers has continued to invest heavily in the development and enhancement of the Next Gen platform. This investment has resulted in a platform asset which the Company will leverage in other areas of its business including: • Enhancing the technology solutions available to our 25+ Australian platform clients; • Improving the digital experience across our North American Advanced Deposit Wagering customers; and • Upgrading the embedded racing solution for global sportsbooks. The platform and Next Gen operations of the Company are captured within the Global Betting Services division. BetMakers Annual Report 2023 OUR BIGGEST SPRING CARNIVAL EVER In spring 2022 the Company had its largest Spring Carnival ever with over 25 platform customers in the market. Some highlights from the Carnival include: • During Melbourne Cup week, our platform clients processed more than 4.7m bets; • More than 1.7m bets were processed on Melbourne Cup day alone; • The platform experienced peaks of over 8,000 bets per minute; and • There were no outages. PROGRESSED INTERNATIONAL FIXED ODDS RACING PRODUCT During the year the Company progressed its horse racing fixed odds offering in the US and Jamaica. In July 2022 BetMakers launched the MonmouthBets website. The initial launch leveraged BetMakers’ platform technology as operated in Australia. Since the initial website launch, BetMakers has continued to invest in the US fixed odds racing product, specifically, enhancing the content offering and launching iOS and Android applications. In addition to the advancements made in New Jersey, the Company also launched fixed odds wagering in Jamaica. Through the agreement with Caymanas Park, BetMakers will manage fixed odds wagering on all horse racing through channels including online, at off-track betting shops, and on track at Caymanas Park. 13 ← Back to Contents DIRECTORS' REPORT DIVISION HIGHLIGHTS Global Racing Network Global Tote PROGRESSED INTERNATIONAL FIXED ODDS RACING PRODUCT In addition to the platform progress made in New Jersey and Jamaica (as outlined above in Global Betting Services), BetMakers has also expanded the customer content offering. CAESARS RACING PARTNER BetMakers signed an agreement to become the exclusive provider of pari-mutuel racing services for Caesars Entertainment Inc’s brick-and-mortar retail sportsbook locations in Nevada. BetMakers is now able to offer customers in the state of New Jersey a fixed odds experience across 14 race tracks. ENHANCED CONTENT DISTRIBUTION RELATIONSHIP WITH STRONACH GROUP In April 2023 the Company executed a non-binding term sheet with Stronach Group’s 1/ST Content for distribution of BetMakers’ Global Racing Network race meetings into international wagering markets. This commercial relationship commenced 1 May 2023 and is providing extended distribution and monetisation of Global Racing Network’s North American thoroughbred content. BetMakers Annual Report 2023 Under the Agreement, BetMakers will provide middleware and software services to connect Caesars’ William Hill Liberty platform into relevant pari-mutuel pools. At the start of FY23 BetMakers launched the initial venue at Council Bluffs (Iowa). The Company is progressing the technical approval process in Nevada with a wider rollout deploying the middleware software solution into potentially 28 Nevada locations expected to be completed in Q3 FY24. NORWAY PROGRESS BetMakers is contracted as the tote technology and services provider for the country of Norway under a 10-year agreement with Norsk Rikstoto. BetMakers is continuing to work with the client to design and develop the wagering solution, with expected launch in Q3 FY24. 14 ← Back to Contents DIRECTORS' REPORT STRATEGIC FOCUS AND OUTLOOK The Company is focused on continuing to grow as a B2B supplier to the racing and wagering industries. The FY2024 strategic focus for the Company is: CONTINUE TO RATIONALISE THE COST BASE As noted above the Company commenced a full operational review to identify and address operational inefficiencies. The primary focus of the review is to deliver a cost base which corresponds with the current revenues. This review will continue during FY24 as the Company remains focused on: • Simplifying the operating model; • Retiring legacy technical platforms; and • Delivering positive operating cash flow and a solid foundation to support growth. DELIVER GROWTH With the operating model and cost base addressed, the focus will return to revenue growth. The two key levers in delivering revenue growth are: • Deliver on the key opportunities we have contracted; and • Focus on our strengths in racing and wagering technology solutions, looking to take our product into new markets and enhance the adoption of horse racing. FOCUS ON CAPITAL MANAGEMENT • The Company finished FY23 with a strong balance sheet with a cash balance of $41.0m. • The Company intends to take an opportunistic approach to strategic capital allocation. BetMakers Annual Report 2023 15 ← Back to Contents DIRECTORS' REPORT PRINCIPAL RISKS Identifying and mitigating business risks that may affect the Group’s strategy and financial performance is an essential part of the governance framework. This section outlines some of the key risks identified by the Group. They are not listed in order of importance or likelihood to materialise. RISK AREA DESCRIPTION Licensing and Regulatory The Group operates in heavily regulated industries and jurisdictions. Accordingly, there is an exposure to a range of risks relating to compliance with, changes to, or uncertainty in, the relevant legal and regulatory regimes in those jurisdictions. Changes to laws and regulations or failure to comply may have a material adverse effect on the Group’s business, financial position and prospects, or lead to license suspension or cancellation. The Group’s contracts with customers may require approval or consent of one or more Australian or foreign governments, gambling regulators or other regulators. There is a risk that such approval or consent may not be granted and, in such circumstances, the Group or the customer may become unable to comply with contractual obligations, potentially having a material adverse impact on financial performance. Technology and Software The Group’s business is based largely on the software, source code, technology and computer programs which comprise of its online wagering platforms. There is a risk that this technology and/or software may be superseded or displaced in the market by new technology offerings or software which customers perceive have advantages over the Group’s offerings. Furthermore, the Group’s systems can be affected by numerous factors including but not limited to data losses, computer system faults, failure of or suspension from key data feeds, data network failures, and catastrophic event such as natural disaster, computer viruses of power failure. Intellectual Property and Obligations There is a risk that failure or inability to protect intellectual property rights may have a significant adverse effect on operations, financial performance and competitive advantage. Further, there is a risk that operations, products, services or platforms may infringe the intellectual property rights of third parties. If any claim or litigation is brought against the Group which alleges an infringement on another party’s intellectual property rights, this could result in the Group being subject to significant liability for damages or losing the right to use the intellectual property. Security Software, Technology Breaches and Improper Access to Personal Data By their nature, information technology systems are susceptible to cyber-attacks with third parties seeking unauthorised access to data, networks, systems and databases. Further, third party suppliers may receive and store information from the Group or its customers and although this information is limited and subject to confidentiality obligations, if third party suppliers fail to adopt or adhere to robust security practices, any such information may be improperly accessed, used or disclosed. Reliance on Agreements with Sports and Racing Controlling Bodies The Group has in place various approvals and authorities granted by racing controlling bodies which permit the publishing and/or use of relevant race field information associated with those racing controlling bodies. There is a requirement to comply with certain terms and conditions, provisions, rules and regulations provided under the relevant State/Territory laws. Under such legislation, rules and regulations, the racing controlling bodies have the discretion to determine the types of bets the Group is permitted to take. A removal of one or more of these bet types may materially adversely affect business operations and financial position. Racing and Sports Products The Group is reliant on various state and international racing and sporting controlling bodies providing a regular program of events for the purposes of wagering. A significant reduction in the number of race meetings or sporting fixtures, or the occurrence of an event which impacts adversely on the global Racing or Sport industries, or which otherwise disrupts the scheduled racing or sporting program, may have an adverse effect on operational and financial performance. Consumer Env

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