Reply To: Real Luck Group

#3699
Nick Hargrave
Keymaster

The below was just sent to shareholders / subscribers which highlights again our positive view of the kind of management at the helm here, alongside continued momentum in the business

Dear Luckbox partners and shareholders,

Recent Player Acquisition Successes Building On October’s Momentum

I am encouraged by our latest player acquisition efforts. As previously reported, Player Registrations for the first 26 days of October hit 24,411 which led to a monthly record of 25,000+ Player Registrations in October, and I am pleased to say, we continue to show that solid growth. In the ten-day period since the update in our October 27, 2022 press release, we have seen our player base increase from both our strong LATAM presence and other global markets.

Not only can we report record registration numbers, but Global Active players grew 16 fold from August and stakes placed across all our gaming verticals grew 252% compared to September. These results evidence our September and October success and demonstrate that we are executing on our growth plan of attaining positive monthly EBITDA in H1 2023.

We have, during the last three months, been more efficient in driving traffic than predicted. This is a clear indication that our growth strategy is spot on. In the coming months, we will emphasize maximizing the lifetime value of these players by enhancing our product, delivering rich retention campaigns and engaging with our player base more than ever before. We will also begin to scale our efforts in key global markets that we expect will deliver early stage revenue trends. These include further expansion into Latin America, Europe, and APAC.

Proposal By A Shareholder

As you are likely aware, a letter from an activist shareholder was recently published, which was critical of results the company has achieved to date. The activist has proposed a “take-under” of our company (i.e. an offer that we determined to be below our net cash value) and, alternatively, a wind-up of the company. We completely reject the interpretation of the status of our company as outlined in the letter, and see it as an opportunistic “grab” for Luckbox’s cash. Investors can read our response to that letter here.

I also want to take this opportunity to provide investors additional perspective regarding our initial strategy and progress. I am convinced that to build a great business you need a great product. Anyone can spend marketing dollars but to spend it responsibly, with good return, is much more difficult and that’s where the quality of the product makes a difference. That is why we decided to significantly improve the player focused platform before we engaged in any meaningful customer acquisition. Anything else would have been irresponsible and a waste of money. This has indeed taken longer than initially expected, but not too long. Our monthly cash burn is relatively small in comparison with our listed peers and it is these substantial improvements that made October a record month. November looks equally encouraging and we couldn’t be more excited to be a rapidly growing company, with a great product, great team and huge global market to attain.

In regards to our share price, the public markets have been on a downward trend since the favourable market environment in H1 2021. Many of our competitors have raised money and undertaken acquisitions during this period, still their share prices have not performed meaningfully better than ours. For example, year-to-date, our stock is down around 56% and our closest Canadian listed peers are down on average around 67% during that same period.

Luckbox’s Strategy – Focussing On What We Can Control

We have focused on what we can control; our cash burn has been less than what we budgeted per quarter in every quarter since I took on the CEO role. More importantly, we have a cash runway that is expected to bring us to positive monthly EBITDA in H1 2023, as we highlighted at our AGM in August. We are in this position of financial strength to drive our business forward, in large part because we did not invest in expensive ‘investor outreach’ campaigns to attempt to drive our share price as some of our peers did to little or no effect.

Our vision and passion as a company is to redefine the betting experience that will deliver long-term value to the business and shareholders. This strategy has meant a careful approach to provide the resources and time to develop these products.

Our cash preservation discipline, and more importantly our cash position, has not gone unnoticed. Given the lack of capital funding available for companies in our space, we have been approached multiple times with acquisition or asset purchase overtures which we believe would be completely destructive to shareholder value. We believe this recent activist shareholder letter is the latest attempt to gain access to the company’s cash. We remain committed to creating shareholder value at Luckbox by driving a strong underlying business.

In closing, I want to reiterate that unlike many other companies targeting esports, including some that I met recently at Global Gaming Expo, Real Luck Group’s balance sheet is strong, giving us ample room to execute on our strategy. On behalf of the company, I want to thank you for your continued support and interest.