Gambling.com Group Limited (GAMB) Q1 2026 Earnings Call Transcript
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Overview
The earnings call presents mixed signals: revenue and EBITDA projections are modest, with a decrease in adjusted EBITDA. Positive elements include growth in sports data services, AI integration, and prediction markets. However, the Q&A reveals concerns about SEO volatility, increased costs, and lack of stock buybacks. The guidance is weaker, with a $5 million revenue reduction and increased costs. Despite some growth areas, the overall sentiment is tempered by financial caution and strategic uncertainties, leading to a neutral outlook.
Key Financial Performance
Revenue First quarter revenue was $40.4 million, flat year-over-year. The sports data services business grew 13% year-over-year to $11.2 million, while the marketing business declined by 5% due to challenges with search ranking and regulatory headwinds in the U.K. and Finland.
Sports Data Services Revenue Revenue grew 13% year-over-year to $11.2 million, driven by improvement on the enterprise side of the business and 94% new deal growth compared to Q1 '25. International partners increased by 178% year-over-year.
Marketing Business Revenue Revenue declined 5% year-over-year to $29.2 million, impacted by negative SEO trends, regulatory changes in the U.K. and Finland, and unfavorable outcomes in revenue share agreements.
Partnership Platform Revenue Revenue increased 3x year-over-year in Q1 as part of the channel diversification initiative, though it impacted cost of sales.
Gross Profit Gross profit declined 11% year-over-year to $34.4 million, with gross profit margin at 85%, down from 94% in the prior year. This was due to higher cost of sales and external marketing expenses.
Adjusted EBITDA Adjusted EBITDA was $9 million, down from $15.9 million in the prior year, with a margin of 22% compared to 39% in the prior year. The decline was due to higher cost of sales and external marketing expenses.
Adjusted Net Income Adjusted net income was $3.8 million, down from $16.5 million in the prior year. The decline was due to lower adjusted EBITDA, higher interest expenses, and tax charges.
Adjusted Free Cash Flow Adjusted free cash flow was $3.9 million, down from $10.3 million in the prior year, reflecting lower adjusted EBITDA and slightly higher capital expenditures.
Cost Savings from Restructuring The company initiated a restructuring to reduce headcount by 25%, expected to save $13 million annually. Approximately half of these savings will be realized in the second half of 2026.
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Operating Highlights
OpticOdds Growth: OpticOdds business grew by 94% in new deals compared to Q1 2025, with international partners up 178% year-over-year. Total active partners increased by 24% quarter-on-quarter. 86% of customers are now API customers, and the product has integrated with enterprise AI tools like Claude and Perplexity.
AI Integration: The company has been focused on AI adoption for 18 months, with 80% of new code generated by AI. They are transitioning to an AI-first organization, restructuring teams, and processes to fit this model.
Marketing Revenue Diversification: Non-SEO revenue exceeded SEO revenue for the second consecutive quarter, reflecting a shift in marketing strategy. Partnership platform revenue tripled year-over-year in Q1.
Regulatory Impact: Changes in U.K. and Finland regulations negatively impacted marketing revenue, with a modestly worse-than-expected performance in Q1.
Cost Savings from Restructuring: A strategic restructuring will reduce the workforce by 25%, saving $13 million annually. Half of these savings will be realized in 2026, with the full amount in 2027.
Revenue and EBITDA Guidance: Full-year 2026 revenue is expected to be $165-$170 million, with adjusted EBITDA of $45-$50 million. Margin expansion is anticipated in the second half of 2026.
AI-First Transition: The company is restructuring to become an AI-first organization, aiming for faster operations, smaller teams, and efficient growth. This includes a flatter organizational structure and increased AI usage costs.
Long-Term AI Strategy: The company has diversified its business to align with the AI revolution, including acquiring a data business and focusing on live experiences.
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Risk or Challenges
SEO Challenges: The marketing business experienced a 5% revenue decline due to negative SEO trends and low-quality search results, which have been ongoing for several quarters.
Regulatory Headwinds: Changes in U.K. and Finland regulations had a worse-than-expected impact on performance in Q1, affecting revenue and operational outcomes.
Revenue Share Agreements: Revenue from revenue share agreements was negatively impacted by unfavorable outcomes in the quarter, leading to a decline in the revenue share hold percentage.
Traffic Diversification Costs: Efforts to diversify traffic sources away from organic search have led to increased costs of sales and lower contribution margins, impacting profitability.
Restructuring and Workforce Reduction: A proposed restructuring will reduce the workforce by 25%, aiming for $13 million in annualized savings. However, this involves significant organizational changes and potential short-term disruptions.
AI Transition Costs: Increased AI usage has led to higher subscription costs, contributing to elevated operating expenses.
Marketing Revenue Decline: Marketing revenue declined due to regulatory challenges and unfavorable SEO trends, impacting overall financial performance.
Gross Profit Decline: Gross profit declined by 11% year-over-year due to higher costs of sales and external marketing expenses.
Debt Levels: The company has $121 million outstanding on its credit facility, which could pose financial risks if not managed effectively.
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Guidance & Outlook
Revenue Guidance for 2026: The company updated its full-year 2026 revenue guidance to be in the range of $165 million to $170 million.
Adjusted EBITDA Guidance for 2026: Adjusted EBITDA is expected to be in the range of $45 million to $50 million for the full year 2026.
Margin Expansion: Margins are expected to expand in the second half of 2026 and into 2027, driven by cost savings from restructuring and a mix shift in marketing revenue.
Cost Savings from Restructuring: The company expects to achieve $13 million in annualized cost savings from a 25% workforce reduction, with approximately half of these savings realized in the second half of 2026 and the full amount by 2027.
AI-First Transition: The company is transitioning to an AI-first operational model, which is expected to drive efficiency, faster product development, and reduced headcount. This transition is anticipated to result in significant operational changes and cost efficiencies.
Growth in Sports Data Services: Sports data services revenue is expected to continue growing, driven by the OpticOdds business and new partnerships, including a launch with Perplexity by the end of Q2 2026.
Marketing Revenue Diversification: The company expects non-SEO revenue to continue exceeding SEO revenue, with a focus on diversifying marketing channels and leveraging AI-driven audience monetization platforms.
Product Pipeline and Innovation: The company is optimistic about its product pipeline, including enhancements to OpticOdds, growth opportunities in the marketing business, and new innovative products under development.
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Shareholder Return Plan
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Key Q&A
Q:Can you discuss the behavior in the UK&I market, particularly after the tax changes in April?
A:The trends in the UK&I market remain consistent with Q4, with LTVs going down due to SEO and regulation. Traffic demand remains high, but traffic levels have decreased. Post-April, there are some positive signs of increased SEO traffic for Gambling.com, but the overall market is as expected.
Q:Can you comment on the U.S. marketing business and its dynamics?
A:The U.S. marketing business has seen growth, with NDCs up about 60% from Q4. The audience monetization platform is active and growing in the U.S. and Canada. The company leverages its scale and tools to support competitors and monetize audiences effectively.
Q:How did you consider the risks of transitioning to AI-first workflows during restructuring?
A:The restructuring was across the entire business, not just development. AI tools allow faster product development and content production while maintaining quality. The company focuses on leveraging AI to enhance productivity and effectiveness, with a strong emphasis on quality and direction.
Q:What has changed incrementally in guidance since Q4?
A:There has been a faster shift away from SEO channels, leading to a $5 million reduction in revenue expectations and a $5 million increase in cost of sales. However, adjusted operating expenses are expected to decrease by $5 million due to restructuring savings of $6.5 million, partially offset by $1.5 million higher marketing expenses.
Q:What is the timing and strategic impact of the management change?
A:The management change is choreographed to coincide with the AGM. Kevin McCrystle will officially become CEO after the AGM. The strategy remains aligned, focusing on AI-first workflows and resource allocation to high-ROI opportunities. The transition does not signal a change in overall strategy.
Q:How is prediction market revenue trending, and what growth is being seen?
A:Prediction market operators are keen to acquire customers, though CPAs are lower than sportsbooks. Affiliate traffic to prediction markets is increasing, and the company expects this to ramp up throughout the year. The growth is additive and shows positive momentum.
Q:What is the bridge for the adjusted margin guide down, and when will marketing expenses increase?
A:The adjusted margin guide down is due to $6.5 million in cost savings from restructuring, offset by $1.5 million higher marketing expenses and $5 million increased cost of sales. Marketing expenses have already increased on a run-rate basis.
Q:What is the company's approach to stock buybacks given current leverage and cash flow?
A:The company is focused on deleveraging the balance sheet and does not plan on stock buybacks in the short term. Improved free cash flow in the second half may open opportunities, but the primary target is deleveraging.
Q:How is the company diversifying non-SEO traffic, and when will SEO volatility become less impactful?
A:Non-SEO traffic now represents close to 60% of the marketing business, with growth in CRM, paid media, LLM referrals, and audience monetization platforms. The company is nearing a tipping point where non-SEO growth offsets SEO headwinds, with CRM being a compelling opportunity.
Q:What is driving OpticOdds partner growth, and how sustainable is it?
A:OpticOdds partner growth is driven by international market penetration, new features, and multi-product adoption. Customers increased by 24% from Q4 to Q1, with international penetration rising from 15% to 28% over the past year. Growth is expected to be consistent.
Q:Has the company considered rebranding from Gambling.com?
A:The company is considering rebranding, as Gambling.com represents a smaller portion of the overall portfolio. However, no details are ready to be shared yet.
Q:What is the gross margin trajectory with the shift to non-SEO channels?
A:Gross margins are expected to remain stable, with CRM offering high margins and paid media having significant costs. The overall margin should increase starting in H2, with EBITDA margins expected to return to the 30s.
Q:What are the trends in customer acquisition costs, particularly in Q2 and for major events?
A:Customer acquisition costs vary by market and product type. The World Cup is expected to bring low LTV customers, with prediction markets gaining mind share. Traditional operators focus more on casino products, with CPAs holding steady. The company provides strong LTV to maintain value.
Q:Review of Unclear Management Responses
A:Management avoided providing specific details on new product initiatives, stating they would only discuss them once live in the market. Additionally, while rebranding was acknowledged as a consideration, no concrete plans or timelines were shared.
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Earnings Word Cloud
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GAMB Transcript
Gambling.com Group Limited (GAMB) Q1 2026 Earnings Call Transcript
Unknown5-15
The earnings call presents mixed signals: revenue and EBITDA projections are modest, with a decrease in adjusted EBITDA. Positive elements include growth in sports data services, AI integration, and prediction markets. However, the Q&A reveals concerns about SEO volatility, increased costs, and lack of stock buybacks. The guidance is weaker, with a $5 million revenue reduction and increased costs. Despite some growth areas, the overall sentiment is tempered by financial caution and strategic uncertainties, leading to a neutral outlook.
Gambling.com Group Limited (GAMB) Q4 2025 Earnings Call Transcript
Positive3-12
The earnings call summary and Q&A indicate a positive outlook. The company shows strong growth in sports data services and OpticOdds, with optimistic guidance for 2025. Despite regulatory challenges in the UK and Finland, the company remains confident in its growth strategy and potential market expansions. Additionally, the introduction of new products and expansion into non-SEO channels are strategic for long-term growth. While there are challenges, the overall sentiment is positive, suggesting a stock price increase in the short term.
Gambling.com Group Limited (GAMB) Q3 2025 Earnings Call Transcript
Positive11-13
The earnings call summary reflects strong financial metrics with optimistic guidance, particularly in sports data services and new digital marketing channels. The Q&A section reveals positive sentiment towards product development, especially in OpticOdds and OddsJam, despite some unclear responses. The company’s cautious capital allocation and strategic investments suggest a focus on sustainable growth. The positive outlook on revenue and EBITDA growth, coupled with the potential benefits from Google updates, supports a positive sentiment. However, some concerns about margins and the U.K. market temper the outlook, resulting in a 'Positive' rating.
Gambling.com Group Limited (GAMB) Q2 2025 Earnings Call Transcript
Unknown8-14
The earnings call summary shows strong financial performance with 39% revenue growth and 56% EBITDA growth, but the Q&A reveals concerns. The Google algorithm update negatively impacted EBITDA, and management avoided specific guidance for 2026, leading to uncertainties. While new partnerships and market launches are positive, the impact of AI on search revenue and lack of detailed financial metrics for Spotlight.Vegas are concerning. Overall, the mixed signals and lack of clear guidance suggest a neutral stock price movement over the next two weeks.
GAMB Report
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