Lottery.com Inc. (Nasdaq: LTRY, LTRYW) (“Lottery.com” or the
“Company”), a leading technology company that is transforming how,
where and when the lottery is played, reported financial results
for the first quarter ended March 31, 2022.
Tony DiMatteo, Lottery.com Co-Founder and CEO,
commented, “I’m pleased with our first quarter results and the
team’s continued focus on our core business and generating strong
Adjusted EBITDA. Once again, LotteryLink has demonstrated its
ability to contribute to our top and bottom line growth and expand
our user base with limited advertising spend. In our B2C business,
our focus on market testing and securing permission to advertise on
large digital media platforms has solidified our foundation to
launch accretive user acquisition campaigns over the balance of the
year.”
Mr. DiMatteo continued, “So far in the second
quarter, our B2C campaigns have been positive with solid increases
in app downloads versus the prior year period while achieving
relatively low customer acquisition costs. LotteryLink’s
promotional programs have generated new users and created interest
from additional national consumer brands looking to utilize
LotteryLink for their marketing campaigns. Additionally, we have
launched Phase 1 of Project Nexus. We believe that these positive
developments, combined with our strong balance sheet, position us
well for future growth.”
First Quarter 2022 Financial
Highlights
Q1
2022 Financial
Highlights |
|
Three Months Ended |
|
|
|
March 31, |
|
|
|
|
2022 |
|
2021 |
|
Change |
(in millions) |
|
|
|
|
|
|
|
|
Revenues |
|
$ |
21.2 |
|
|
|
$ |
5.5 |
|
|
$ |
15.7 |
|
|
Gross profit |
|
$ |
18.0 |
|
|
|
$ |
2.5 |
|
|
$ |
15.5 |
|
|
Net Loss |
|
$ |
(15.8 |
) |
|
|
$ |
(5.5 |
) |
|
$ |
(10.3 |
) |
|
Adjusted EBITDA |
|
$ |
7.7 |
|
|
|
$ |
(2.6 |
) |
|
$ |
10.3 |
|
|
Cash |
|
$ |
50.8 |
|
|
|
$ |
18.3 |
|
|
$ |
32.5 |
|
|
Debt |
|
$ |
3.5 |
|
|
|
$ |
41.5 |
|
|
$ |
(38.0 |
) |
|
1 - Adjusted EBITDA is a financial measure that
is not calculated in accordance with Generally Accepted Accounting
Principles in the United States (“GAAP”). See “Non-GAAP Financial
Measures” below for a discussion of the definition of Adjusted
EBITDA and “Reconciliation of Non-GAAP Financial Measures” for a
reconciliation of this measure to net loss.
First quarter 2022 revenue was
$21.2 million, an increase of $15.7 million, or 287%, from the
first quarter of 2021. The growth was primarily driven by the sale
of LotteryLink credits to a LotteryLink affiliate, primarily to
acquire pre-paid promotional rewards that may be issued by such
affiliate to consumers for their purchase of lottery games and
services from Lottery.com upon activation of an account.
First quarter 2022 gross profit
was $18.0 million, an increase of $15.5 million from the first
quarter of 2021. The increase was primarily driven by the sale of
LotteryLink credits to the above referenced LotteryLink affiliate.
As a result of the delayed launch of such affiliate’s promotional
program, most of the pre-paid promotional rewards expired without
being issued to consumers. As a result, the Company did not incur
costs associated with redemption of most of such LotteryLink
credits.
First quarter 2022 net loss was
$15.8 million compared to a net loss of $5.5 million in the first
quarter of 2021. The increase was primarily driven by the
incurrence of $22.2 million of non-cash stock compensation expense
and other increased personnel costs, which were offset by the
strong gross profit described above.
First quarter 2022 Adjusted
EBITDA was $7.7 million, an increase of $10.3 million from
the first quarter of 2021. The increase was driven by the strong
gross profit described above, partially offset by increased public
company expenses and higher expenses associated with the execution
of growth initiatives.
Cash as of March 31, 2022, was
$50.8 million, an increase of $32.5 million from March 31, 2021,
driven primarily by proceeds from the business combination with
Trident Acquisition Corp. in October 2021, and strong operating
results, partially offset by an increase in working capital.
Debt as of March 31, 2022, was
$3.5 million, a decrease of $38.0 million from March 31, 2021,
driven primarily by the conversion of the Company’s convertible
debt into equity, in conjunction with the business combination.
Update on Key Initiatives
- B2C User Growth
- Expanded B2C marketing campaigns
have launched in Q2 2022 and resulted in solid increases in app
downloads versus the prior year period
- Achieved customer acquisition costs
in-line with expectations to date in Q2 2022
- LotteryLink and
B2B
- Added new LotteryLink affiliates
since the beginning of the year, including the conversion of data
service customers
- Continued to develop pipeline of
new LotteryLink master affiliates and their sub-affiliates,
including national consumer brands
- Project Nexus
- Launched Phase 1 in Q2 2022, which
is expected to improve scalability, security and ability to
implement product improvements
- New Markets
- Remain on track for approval to
enter into five new domestic jurisdictions by the end of 2022
Upcoming Conference
Participation
Representatives from the Company plan to attend
the following upcoming investor conferences:
- B Riley FBR 22nd Annual
Institutional Investor Conference on May 26, 2022, in Beverly
Hills, CA
- Cowen’s 50th
Annual Technology, Media & Telecom Conference on June 1, 2022,
in New York City
Conference Call
This morning at 8:30 AM ET, the Company will
host a conference call to discuss its first quarter 2022 results. A
live webcast of the conference call will be available on the
Investor Relations section of the Lottery.com website at
https://ir.lottery.com. For those who cannot listen to the live
webcast, a replay of the conference call will be available on the
Lottery.com Investor Relations website.
To join by telephone, please dial 877-313-2495
or 929-517-0906 if calling from outside the U.S. The conference
code is 9189693. Please dial in a minimum of 15 minutes prior to
the start time to ensure a timely connection to the call. An
operator will register your name and organization.
About Lottery.com
Lottery.com is a leading technology company that
is transforming how, where and when lottery is played. Its engaging
mobile and online platforms enable players located in the United
States and internationally to remotely purchase legally sanctioned
lottery games. Fans and subscribers look to Lottery.com for
compelling, real-time results on more than 800 lottery games from
more than 40 countries. Additionally, commercial partners and
affiliates can utilize LotteryLink to provide Lottery.com products
to their customers. Through WinTogether.org, Lottery.com is
fundamentally changing how non-profit donors are incentivized to
action by gamifying charitable giving. In all that it does,
Lottery.com’s mission remains the same: an uncompromising passion
to innovate, grow a new demographic of enthusiasts, deliver
responsible and trusted solutions, and promote community and
philanthropic initiatives. For more information, visit
http://www.lottery.com.
Non-GAAP Financial Measures
This press release includes EBITDA and Adjusted
EBITDA, which are non-GAAP performance measures that we use to
supplement our results presented in accordance with U.S. GAAP. We
believe EBITDA and Adjusted EBITDA are useful in evaluating our
operating performance, similar to measures reported by our peers,
and regularly used by analysts, investors and other interested
parties in analyzing operating performance and prospects. EBITDA
and Adjusted EBITDA are not intended to be substitutes for any U.S.
GAAP financial measure and, as calculated, may not be comparable to
other similarly titled measures of performance of other companies
in other industries or within the same industry.
We define and calculate EBITDA as net income or
loss before the impact of interest income or expense, income tax
expense or benefit, depreciation and amortization, and Adjusted
EBITDA as EBITDA, as further adjusted for stock-based compensation
and certain other non-recurring, non-cash or non-core items.
We include these non-GAAP financial measures
because they are used by management to evaluate our core operating
performance and trends and to make strategic decisions regarding
the allocation of capital and new investments. The financial
statement tables that accompany this press release include a
reconciliation of EBITDA and Adjusted EBITDA to their most
comparable U.S. GAAP financial measures.
Forward Looking Statements
This press release contains statements that
constitute “forward-looking statements” within the meaning of
Section 27A of the Securities Act of 1933, as amended (the
“Securities Act”), and Section 21E of the Securities Exchange Act
of 1934, as amended (the “Exchange Act”). All statements, other
than statements of present or historical fact included in this
press release, regarding Lottery.com’s strategy, future operations,
prospects, plans and objectives of management, are forward-looking
statements. When used in this press release, the words “could,”
“should,” “will,” “may,” “believe,” “anticipate,” “intend,”
“estimate,” “expect,” “project,” “initiatives,” “continue,” the
negative of such terms and other similar expressions are intended
to identify forward-looking statements, although not all
forward-looking statements contain such identifying words. These
forward-looking statements are based on management’s current
expectations and assumptions about future events and are based on
currently available information as to the outcome and timing of
future events. The forward-looking statements speak only as of the
date of this press release or as of the date they are made. Except
as otherwise required by applicable law, Lottery.com disclaims any
duty to update any forward-looking statements, all of which are
expressly qualified by the statements in this section, to reflect
events or circumstances after the date of this press release.
Lottery.com cautions you that these forward-looking statements are
subject to numerous risks and uncertainties, most of which are
difficult to predict and many of which are beyond the control of
Lottery.com. In addition, Lottery.com cautions you that the
forward-looking statements contained in this press release are
subject to the following risks and uncertainties: our inability to
compete with other forms of entertainment for consumers’
discretionary time and income; economic downturns, inflation,
geopolitical and political and market conditions beyond our
control; negative events or media coverage relating to the lottery,
lottery games or online gaming or betting; our inability to attract
and retain users, including as a result of failing to appear in
Internet search engine results; our continued ability to use domain
names to promote and increase the value of our brand; adverse
impacts relating to the spread of, and governmental responses taken
with respect to, health epidemics such as the COVID-19; scrutiny by
stakeholders with respect to responsible gaming and ethical
conduct; our ability to achieve profitability and growth in the
newly-developed market for online lottery games; our inability to
profitably expand into new markets or capitalize on new gaming and
lottery industry trends and changes, such as by developing
successful new product offerings; the effectiveness of our
marketing efforts in developing and maintaining our brand and
reputation; failure to offer high-quality user support; adverse
impacts to user relationships resulting from disruptions to our
information technology; the vulnerability of our information
systems to cyberattacks and disruptions caused with respect
thereto, including an inability to securely maintain personal and
other proprietary user information; our inability to adapt to
changes or updates in the Internet, mobile or personal devices, or
new technology platforms or network infrastructures; the exposure
of our online infrastructure to risks relating to new and untested
distributed ledger technology; our inability to comply with
complex, ever-changing and multi-jurisdictional regulatory regimes
and other legal requirements applicable to the gaming and lottery
industries; geopolitical shifts and changes in applicable laws or
regulations or the manner in which they are interpreted; our
inability to successfully expand geographically and acquire and
integrate new operations; our dependence on third-party service
providers to timely perform services or software component products
for our gaming platforms, product offerings and the processing of
user payments and withdrawals; our inability to maintain successful
relationships and/or agreements with lottery organizations and
other third-party marketing or service provider affiliates; failure
of third-party service providers to protect, enforce, or defend
intellectual property rights required to fulfill contractual
obligations required for the operation of our business; the
effectiveness of our transition and compliance with the regulatory
and other requirements of being a public company; operational risks
including those arising from factors impacting the international
supply chain; limited liquidity and trading of our securities; and
those additional risks and uncertainties discussed under the
heading “Risk Factors” in the Form 10-K filed by Lottery.com with
the SEC on April 1, 2022, and the other documents filed, or to be
filed, by Lottery.com with the SEC. Should one or more of the risks
or uncertainties described in this press release materialize or
should underlying assumptions prove incorrect, actual results and
plans could differ materially from those expressed in any
forward-looking statements. Additional information concerning these
and other factors that may impact the operations and projections
discussed herein can be found in the reports that Lottery.com has
filed and will file from time to time with the SEC. These SEC
filings are available publicly on the SEC’s website at
www.sec.gov.
Lottery.com Inc. |
|
|
|
|
|
|
|
Condensed Consolidated Statements of
Operations |
|
|
|
|
|
|
|
Three Months Ended March 31, 2022 and 2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, |
|
|
2022 |
|
|
|
2021 |
|
|
|
|
|
|
|
Revenue |
|
$ |
21,150,892 |
|
|
|
$ |
5,461,539 |
|
Cost of revenue |
|
|
3,165,469 |
|
|
|
|
2,946,981 |
|
Gross profit |
|
|
17,985,423 |
|
|
|
|
2,514,558 |
|
|
|
|
|
|
|
|
|
Operating expenses: |
|
|
|
|
|
|
|
Personnel costs |
|
|
25,975,863 |
|
|
|
|
1,095,793 |
|
Professional fees |
|
|
3,055,039 |
|
|
|
|
2,415,198 |
|
General and administrative |
|
|
3,399,896 |
|
|
|
|
1,388,574 |
|
Depreciation and amortization |
|
|
1,373,925 |
|
|
|
|
367,259 |
|
Total operating expenses |
|
|
33,804,723 |
|
|
|
|
5,266,824 |
|
Loss from operations |
|
|
(15,819,300 |
) |
|
|
$ |
(2,752,266 |
) |
|
|
|
|
|
|
|
|
Other expenses |
|
|
|
|
|
|
|
Interest (income) expense |
|
|
(953 |
) |
|
|
|
2,472,048 |
|
Other (income) expense |
|
|
(2,436 |
) |
|
|
|
231,720 |
|
Total other expenses, net |
|
|
(3,389 |
) |
|
|
|
2,703,768 |
|
|
|
|
|
|
|
|
|
Net loss before income tax |
|
$ |
(15,815,911 |
) |
|
|
$ |
(5,456,034 |
) |
Income tax expense (benefit) |
|
|
- |
|
|
|
|
|
Net loss |
|
|
(15,815,911 |
) |
|
|
|
(5,456,034 |
) |
|
|
|
|
|
|
|
|
Other comprehensive loss |
|
|
|
|
|
|
|
Foreign currency translation adjustment, net |
|
|
(1,064 |
) |
|
|
|
- |
|
Comprehensive loss |
|
|
(15,816,975 |
) |
|
|
|
(5,456,034 |
) |
|
|
|
|
|
|
|
|
Net income attributable to noncontrolling interest |
|
|
129,222 |
|
|
|
|
- |
|
Net loss attributable to Lottery.com Inc. |
|
|
(15,687,753 |
) |
|
|
|
(5,456,034 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss per common share |
|
|
|
|
|
|
|
Basic and diluted |
|
$ |
(0.33 |
) |
|
|
$ |
(0.24 |
) |
|
|
|
|
|
|
|
|
Weighted average common shares outstanding |
|
|
|
|
|
|
|
Basic and diluted |
|
|
46,832,919 |
|
|
|
|
22,888,700 |
|
|
|
|
|
|
|
|
|
Lottery.com Inc |
|
|
|
|
Condensed Consolidated Balance Sheet |
|
|
|
|
Unaudited |
|
|
|
|
|
|
March 31, |
|
December 31, |
ASSETS |
|
|
2022 |
|
|
|
2021 |
|
|
|
(Unaudited) |
|
|
Current assets: |
|
|
|
|
Cash |
|
$ |
50,795,889 |
|
|
$ |
62,638,970 |
|
Accounts receivable |
|
|
35,796,548 |
|
|
|
21,696,653 |
|
Prepaid expenses |
|
|
12,843,029 |
|
|
|
13,896,638 |
|
Other current assets |
|
|
246,599 |
|
|
|
226,200 |
|
Total current assets |
|
|
99,682,065 |
|
|
|
98,458,461 |
|
|
|
|
|
|
Notes receivable |
|
|
6,500,000 |
|
|
|
- |
|
Investments |
|
|
250,000 |
|
|
|
250,000 |
|
Goodwill |
|
|
19,590,758 |
|
|
|
19,590,758 |
|
Intangible assets, net |
|
|
28,500,219 |
|
|
|
28,710,980 |
|
Property and equipment, net |
|
|
121,293 |
|
|
|
141,279 |
|
Total assets |
|
$ |
154,644,335 |
|
|
$ |
147,151,478 |
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS' EQUITY |
|
|
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
Trade payables |
|
$ |
2,559,846 |
|
|
$ |
1,006,535 |
|
Deferred revenue |
|
|
544,643 |
|
|
|
662,335 |
|
Notes payable - current |
|
|
3,477,339 |
|
|
|
3,771,340 |
|
Accrued interest |
|
|
180,281 |
|
|
|
176,260 |
|
Accrued and other expenses |
|
|
4,081,672 |
|
|
|
4,528,815 |
|
Total current liabilities |
|
|
10,843,781 |
|
|
|
10,145,285 |
|
|
|
|
|
|
Long-term liabilities: |
|
|
|
|
Other long term liabilities |
|
|
1,522 |
|
|
|
1,169 |
|
Total long-term liabilities |
|
|
1,522 |
|
|
|
1,169 |
|
|
|
|
|
|
Total liabilities |
|
|
10,845,303 |
|
|
|
10,146,454 |
|
|
|
|
|
|
Commitments and contingencies |
|
|
|
|
|
|
|
|
|
Equity |
|
|
|
|
Controlling Interest |
|
|
|
|
Preferred Stock, par value $0.001, 1,000,000 shares authorized,
none issued and outstanding |
|
|
- |
|
|
|
- |
|
Common stock, par value $0.001, 500,000,000 shares authorized,
46,928,367 and 46,808,251 issued and outstanding as of March 31,
2022 and December 31, 2021, respectively |
|
|
46,928 |
|
|
|
46,808 |
|
Additional paid-in capital |
|
|
263,022,161 |
|
|
|
240,411,298 |
|
Accumulated other comprehensive loss |
|
|
(1,719 |
) |
|
|
(655 |
) |
Accumulated deficit |
|
|
(121,919,207 |
) |
|
|
(106,232,518 |
) |
Total Lottery.com Inc. stockholders’ equity |
|
|
141,148,163 |
|
|
|
134,224,933 |
|
Noncontrolling interest |
|
|
2,650,869 |
|
|
|
2,780,091 |
|
Total Equity |
|
|
143,799,032 |
|
|
|
137,005,024 |
|
|
|
|
|
|
Total liabilities and stockholders’ equity |
|
$ |
154,644,335 |
|
|
$ |
147,151,478 |
|
|
|
|
|
|
Lottery.com Inc. |
|
|
|
|
Consolidated Statements of Cash Flows |
|
|
|
|
Three Months Ended March 31, 2022 and 2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three months ended |
|
|
March 31, |
|
|
|
2022 |
|
|
|
2021 |
|
|
|
|
|
|
Cash flow from operating activities |
|
|
|
Net loss attributable to Lottery.com Inc. |
|
$ |
(15,686,689 |
) |
|
$ |
(5,456,034 |
) |
Adjustments to reconcile net loss to net cash used in operating
activities: |
|
|
|
|
Net income attributable to noncontrolling interest |
|
|
(129,222 |
) |
|
|
- |
|
Depreciation and amortization |
|
|
1,373,925 |
|
|
|
367,259 |
|
Non-cash interest expense |
|
|
- |
|
|
|
1,841,807 |
|
Stock-based compensation expense |
|
|
22,174,488 |
|
|
|
2,160 |
|
|
|
|
|
|
Changes in assets & liabilities: |
|
|
|
|
Accounts receivable |
|
|
(14,099,895 |
) |
|
|
- |
|
Prepaid expenses |
|
|
1,053,609 |
|
|
|
894,872 |
|
Other current assets |
|
|
(20,399 |
) |
|
|
(54,853 |
) |
Trade payables |
|
|
1,553,311 |
|
|
|
(354,736 |
) |
Deferred revenue |
|
|
(117,692 |
) |
|
|
(2,039,113 |
) |
Accrued interest |
|
|
4,021 |
|
|
|
(605,961 |
) |
Accrued and other expenses |
|
|
(10,648 |
) |
|
|
1,512,125 |
|
Other long term liabilities |
|
|
353 |
|
|
|
- |
|
Net cash provided by operating activities |
|
|
(3,904,838 |
) |
|
|
(3,892,474 |
) |
|
|
|
|
|
Cash flow from investing activities |
|
|
|
|
Purchases of property and equipment |
|
|
(18,305 |
) |
|
|
(57,452 |
) |
Purchases of intangible assets |
|
|
(1,124,873 |
) |
|
|
(3,050,000 |
) |
Net cash used in investing activities |
|
|
(1,143,178 |
) |
|
|
(3,107,452 |
) |
|
|
|
|
|
Cash flow from financing activities |
|
|
|
|
Issuance of digital securities |
|
|
- |
|
|
|
108,332 |
|
Proceeds from exercise of options and warrants |
|
|
- |
|
|
|
895 |
|
Proceeds from issuance of convertible debt |
|
|
- |
|
|
|
19,282,619 |
|
Issuance of notes receivable |
|
|
(6,500,000 |
) |
|
|
- |
|
Principal payments on debt |
|
|
(294,001 |
) |
|
|
(4,856,250 |
) |
Net cash provided by financing activities |
|
|
(6,794,001 |
) |
|
|
14,535,596 |
|
Effect of exchange rate changes on cash |
|
|
(1,064 |
) |
|
|
- |
|
Net change in net cash and restricted cash |
|
|
(11,843,081 |
) |
|
|
7,535,670 |
|
Cash and restricted cash at beginning of period |
|
|
62,638,970 |
|
|
|
10,775,511 |
|
Cash and restricted cash at end of period |
|
|
50,795,889 |
|
|
|
18,311,181 |
|
|
|
|
|
|
SUPPLEMENTAL DISCLOSURES: |
|
|
|
|
Interest paid in cash |
|
$ |
- |
|
|
$ |
24,280 |
|
Taxes paid in cash |
|
$ |
- |
|
|
$ |
- |
|
Non cash investing and financing activities |
|
|
|
|
Stock-based compensation expense |
|
$ |
194,695 |
|
|
$ |
- |
|
Issuance of warrants |
|
$ |
241,800 |
|
|
$ |
- |
|
Conversion of convertible debt into common stock |
|
$ |
- |
|
|
$ |
935,000 |
|
Purchase of intangible assets through the issuance of convertible
debt |
|
$ |
- |
|
|
$ |
15,450,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lottery.com Inc. |
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of Net Income (Loss) to EBITDA and Adjusted
EBITDA |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
|
March 31, |
|
|
|
|
|
|
2022 |
|
2021 |
|
Change |
|
|
(in millions) |
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
(15.8 |
) |
|
|
$ |
(5.5 |
) |
|
$ |
(10.4 |
) |
|
|
Interest (income) expense |
|
|
(0.0 |
) |
|
|
|
2.5 |
|
|
|
(2.5 |
) |
|
|
Income tax expense (benefit) |
|
|
- |
|
|
|
|
- |
|
|
|
- |
|
|
|
Depreciation and amortization expenses |
|
|
1.4 |
|
|
|
|
0.4 |
|
|
|
1.0 |
|
|
|
EBITDA (non-GAAP) |
|
|
(14.5 |
) |
|
|
|
(2.6 |
) |
|
|
(11.8 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-cash stock compensation expense |
|
|
22.2 |
|
|
|
|
0.0 |
|
|
|
22.2 |
|
|
|
Adjusted EBITDA (non-GAAP) |
|
$ |
7.7 |
|
|
|
$ |
(2.6 |
) |
|
$ |
10.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lottery.com Contact:
Matthew Schlarb
VP, Investor Relations
(512) 585-7789
ir@lottery.com
or
Jody Burfening/Harriet Fried
LHA Investor Relations
(212) 838-3777
hfried@lhai.com
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