Meridian Holdings Q3 2026: Brazil Bans Betting!

$Meridian Hldg(MRDN)$ released its Q3 earnings report on Tuesday, and the stock fell 24% to $6.24.

Here are the factors that I think drove this reaction:

• Slight revenue miss.

• A net loss of $13.3M, because of impairments.

• ADJ EBITDA of $0.4M, down from $4.8M a year ago.

• Brazil banned online betting, and Meridian wrote off its licence there.

• The 2026 revenue guide was cut to $195-198M, below the $209M analysts expected.

On the surface, this looks like a company whose growth story has ended.

However, Brazil was less than 1% of Meridian's revenue.

The market just took $25M off the market cap of a company for losing a business that brought in less than $2M a year. Most of the net loss is a non-cash write-down, and most of the revenue miss comes from football results that went the players' way.

So, in this report, I will go through the results, explain the Brazil write-down, and spend a full chapter on Brazil itself.

There is a decent chance the industry comes back, and if it does, Meridian could return to a market with far fewer competitors. I also built a new valuation model to 2031, with and without Brazil.

Disclosure: This is Issuer-Sponsored Research

Let's dig in.

1. Leadership Changes

A reminder that this is the first quarter with the new CEO.

In July, Meridian announced that Zoran Milošević, who has run the Meridianbet segment since 2008, becomes the CEO of the group. William Scott, the previous interim CEO, moved to the CFO seat and stayed on as Chairman, while Rich Christensen, the previous CFO, left.

Zoran took over on the worst possible calendar.

His first 3 months as group CEO included a World Cup with unfavorable results, a weak start to the European football season, and a president banning the whole industry in the largest market in Latin America. None of that changes my view of him as a manager, as he has scaled Meridianbet for 18 years through many regulatory changes across the Balkans and Africa.

There was 1 more change in October. Zhe "Scott" Yan, the financial accounting manager of the company, was promoted to Chief Accounting Officer, and he took over the principal financial officer duties from William Scott, who remains President, CFO and Chairman.

The former owners of Meridianbet gave the company 5 more years to pay them, at 0% interest.

Meridian still owed $15.6M to the 3 sellers of Meridianbet, a group that includes Zoran himself. The notes carried 7% interest and were due on November 9, 2026. On September 28, 3 days after Brazil announced the ban, they agreed to move the due date to November 1, 2031 and to drop the interest completely.

"The extension allows us to keep investing where we are growing." William Scott, CFO, Q3 2026 press release

Simply put, the people who know this business best chose to leave their money in the company for free, right when the news looked to be at its worst.

2. Overall Performance

• Revenue: $46M, -2.9% Y/Y

• Gross Profit: $24.8M, -6%, margin of 54%

• ADJ EBITDA: $0.4M vs $4.8M last year

• EBIT: -$14.9M, including $11.5M of write-downs

• Net Income: -$13.3M vs $0.6M last year

• EPS: -$1.05 vs $0.05 last year

• OCF: $4.8M, -32% Y/Y

Q3 2026 was a bad quarter, however, most of the damage comes from 2 sources that don't repeat every quarter, sports results and accounting write-downs.

2.1. Revenue

Meridian reported total revenue of $46M, a 2.9% decrease from $47.3M in Q3 2025.

As you can see in the chart above, this is the first Y/Y decline since the merger, after 2 quarters of growth above 16%

The decline came from RKings and Classics.

These 2 prize competition businesses lost $2.2M of revenue Y/Y, while the group as a whole lost $1.4M. Meridianbet, the core of the company, still grew 2%, and GMAG grew 5%.

Meridianbet growing only 2% needs an explanation as well, because it grew 23% last quarter. Customers kept betting, with deposits up 9% and betting volume broadly stable, but they won more often than usual. I will expand on this in the Meridianbet chapter.

2.2. Profitability

Gross profit fell 6% to $24.8M, and the gross margin landed at 54%, down from 55.8% in Q3 2025.

The margin actually improved a little from 53.5% in Q2, but on $4.2M less revenue

For a sportsbook, revenue is what is left after paying out the winners. When favorites win and games are high-scoring, players win more, and the same volume of bets produces less revenue. In Q3, the online sports betting margin was 7.4%, compared to 8.2% a year ago and 10.7% in Q2.

If the margin had stayed at the Q2 level of 10.7%, online sports betting revenue would have been $12.6M instead of $8.7M.

That is $3.9M of missing revenue on the same bets, and almost all of it would have dropped straight to profit. According to management on the earnings call, the World Cup results hurt July, and both August and September were also unfavorable, as the start of the European football season is hard to price while team statistics are still thin.

Meanwhile, costs went up as SG&A rose 5% to $28.2M.

ADJ EBITDA fell by $4.5M Y/Y to $0.4M, and the press release breaks down where the money went

• $1.6M of lower gross profit, mainly sports betting and the prize competitions

• $0.9M of bad-debt expense at GMAG

• $0.4M of higher marketing around the World Cup

• $0.4M of higher rent and utilities from new betting shops

• $0.3M of higher salaries

• $0.9M of other operating costs

Only the rent and the salaries are costs that stay.

The sports margin moves back and forth every quarter, the World Cup marketing ends with the World Cup, and the bad debt was a clean-up of old receivables at GMAG.

The Brazil Write-Down

The net loss of $13.3M scared everyone.

V

From the slide of the presentation, we see that $11.5M of the loss is non-cash impairment charges, split into 3 parts.

$5.5M is Brazil.

When Brazil opened its regulated market in 2025, every operator had to buy a 5-year federal licence for R$30M ($5.8M). Meridian received its licence in March 2025, valid until the end of 2029, and it also bought Magicbet777, a local domain with its player database, and moved those players to the Meridianbet platform. Both sat on the balance sheet as intangible assets, to be written down slowly over the life of the licence.

On September 25, the ban terminated all federal authorizations without any reimbursement of the fees. An asset that can't produce cash has to be written down to what it can still earn, which here is zero. So Meridian wrote off $4.1M for the licence and $1.4M for the Magicbet777 domain and players.

This money left the bank account in 2024 and 2025.

The write-down doesn't touch the cash balance, and there is nothing left to write off in Brazil, as the carrying value is now zero. Furthermore, Meridian owns 70% of its Brazilian subsidiary, so most of the $1.5M of losses booked to minority partners this quarter comes from Brazil. That is why the loss attributable to Meridian shareholders is $13.3M, while the total net loss is $14.7M.

The second part, $5.9M, is goodwill in the unit that holds RKings, Classics and GMAG, written down after continued operating losses. I explained how goodwill impairments work in my Q4 2025 and Q2 2026 reports, so I won't repeat it. What matters is the size.

After the $91.8M write-down in Q4 2025 and this one, only $3M of goodwill is left on the balance sheet. The company has very little left to impair

Looking at the chart above, the operating loss before write-downs was $3.4M. That is still a loss, and it is the number the new CEO has to fix, but it is less than a quarter of the $14.9M headline.

"We remain focused on improving margins and driving operational efficiency through more targeted marketing and promotional costs, continued optimization of our retail footprint and expected growth in higher-margin online casino, with a goal of returning to the profitability we demonstrated in the first half of 2026." Zoran Milošević, CEO, Q3 2026 press release

2.3. The First 9 Months

While Q3 was not great, on a 9-month basis the results still look ok.

• Revenue: $146.3M, +10% Y/Y

• Gross Profit: $79.8M, +6%

• ADJ EBITDA: $12.6M vs $14M last year

• Operating income before write-downs: $2.2M vs -$2.8M last year

• OCF: $17.7M, +3%

• FCF: $10.9M vs $2.5M last year

  

Revenue is up 10% and gross profit is up 6%, even with Q3 included. Before the write-downs, the company made an operating profit of $2.2M in the first 9 months, compared to a loss of $2.8M a year ago

The reported 9-month net loss of $8.8M is smaller than the $11.5M of write-downs.

In other words, the underperformance on the bottom line was largely caused by the law change in Brazil and by the impairments in the less exciting divisions, RKings, Classics and GMAG.

The core is doing ok.

Meridianbet grew revenue 16% in the first 9 months to $103.8M, with online casino up 21%, online sports betting up 12% even after the weak Q3, and retail casino up 24%.

There are also plenty of opportunities for growth left. The casino keeps taking share of the mix, Expanse is more than doubling its third-party revenue, Africa is growing 33%, Mexico is growing 55%, and the certifications in Ontario and New Jersey are still to come.

2.4. Balance Sheet

The balance sheet is the best part of this report.

Total debt fell to $24.1M, down 47% from $45.1M a year ago, and net debt fell 65% to $8.1M. This was the 7th quarter in a row of debt reduction.

Meridian repaid $9M of debt in 9 months without selling a single new share.

The share count is up 0.3% this year. For a small cap that just went through a merger, a ban in Brazil and 2 write-downs, that is rare.

The structure of the debt changed as well. Of the $24.1M, $15.6M is the interest-free money owed to the former owners in 2031. That leaves $7.8M of bank and other loans against $16M of cash.

2.5. Cash Flow

OCF for the first 9 months was $17.7M, up 3% Y/Y.

FCF grew more than 4x, from $2.5M to $10.9M.

The heavy investment phase is over, as capex fell from $12.7M to $4.6M, and the cash now goes to debt repayment instead.

In Q3 itself, OCF was $4.8M, down from $7M a year ago. Even in a quarter with almost no ADJ EBITDA, the business generated cash, helped by working capital.

2.6. Guidance

Meridian now expects 2026 revenue of $195-198M, which compares to an analyst consensus of $209M before the report. That is growth of 7-8% over the $182.9M of 2025.

The earlier guide called for 8-10% growth in the second half, but the new range implies Q4 revenue of $48.7-51.7M, between -2% and +4% Y/Y.

The outlook assumes no revenue from Brazil, continued weakness at RKings and Classics, and only a modest recovery in sports betting revenue from Q3. After 2 misses in a row, the team has set a bar it can more easily clear.

Q4 is historically the strongest quarter for betting, and the casino is growing 17%.

3. Brazil

On September 25, 9 days before the first round of the presidential election, President Lula signed Provisional Measure 1,394.

It bans all fixed-odds betting in Brazil, both sports betting and online casino, by every operator.

Deposits and advertising stopped the same day, the sites went dark on October 6, and on October 25 all 85 federal licences were cancelled, with no refund of the fees.

For Meridian, the direct damage is small. On the earnings call, William Scott said Brazil was less than 1% of group revenue, and the business was still losing money. The company kept an office with minimal costs and wrote the assets down to zero.

The bigger question is what happens next, because Brazil was the largest growth option in my original thesis.

3.1. Why Lula did it

Lula built this market himself.

Sports betting was legalised in 2018, but it was Lula who signed the law in December 2023. His own Finance Ministry designed the licence fee and the tax, and the extra revenue was part of the government's case for the law.

Each licence cost R$30M ($5.8M) for 5 years, and 85 companies paid, which brought in about $480M up front. On top of that, according to Brazil's tax authority, the government collected R$9B ($1.6B) from betting in 2025 and R$9.9B ($1.8B) in the first 8 months of 2026.

In December 2025, the government even raised the betting tax to help close the 2026 budget.

Then came the election.

In September 2026, Lula was tied in the polls with Flávio Bolsonaro, and he trailed badly among evangelical voters. A later Datafolha poll had him behind 62% to 29% in that group.

So he banned it by decree, 9 days before the vote.

Inside the government, the options on the table were banning only the online casino, restricting advertising, or banning everything, and he picked the most radical one. In October, he sent a letter to evangelical families listing the fight against betting among the actions of his government that "bless your families".

The man who approved gambling when the budget needed the money reversed it when he needed the votes.

He lost the first round but won the run-off on October 25 with 51.8%.

3.2. Why it can come back

The election is over, and Lula can't run again. The reasons for the ban are gone, while the costs of it are just starting to show.

The first cost is the budget.

The government itself estimates it loses about R$12B ($2.2B) a year if betting stays banned. The Senate's fiscal watchdog expects a primary deficit of about 1% of GDP in 2027 after the campaign promises, and gross debt is already at 82.9% of GDP, the highest since 2021. This is a government that raised the betting tax a year ago because it couldn't close the budget without it.

The second cost is football.

Of the 20 clubs in Série A, 14 had a betting company on the shirt. According to the Brazilian football confederation, 27 of the 40 clubs in the top 2 divisions had betting firms as their main sponsor, in deals worth R$1B ($180M), about 35% of their sponsorship revenue.

Both leagues are named after betting companies.

After the ban, 7 clubs played without a main sponsor. Flamengo says it has R$430M ($78M) a year at risk, Botafogo lost the largest sponsorship in its history while it is in bankruptcy recovery, and the company that sells the pitch-side advertising for the league is late on its payments to the clubs. Flamengo's president expects football to lose R$2-3B (

$360-550M

) next year.

Football is close to a religion in Brazil, and no president wants to be remembered as the one who bankrupted the clubs.

The third cost is that the betting didn't stop.

The Justice Ministry asked for the removal of 36,905 illegal betting sites in the first 5 weeks. The same players now bet on sites that pay no tax, check no IDs and sponsor no clubs.

Politicians love going back on their promises, especially when the promise costs $2.2B a year. Lula says betting "will not return". He said yes to it once already, when he signed the law that brought it in.

Now that he has won the re-election and can’t run again because of term limits, I wouldn’t be surprised for him to go the other way, blaming the courts and the budget issues.

3.3. Timelines

There are 2 roads back, the courts and Congress.

The Supreme Court.

The industry filed 4 cases against the ban, and Justice Luiz Fux is handling all of them. He held a 10-hour public hearing on November 3 and then froze every lower-court case until the Supreme Court rules. No date is set for the judgment.

Fux has said he is personally convinced that gambling addiction should be banned from sport. However, he also said the ban raises new questions the court has to weigh, such as legal certainty and legitimate expectations. Those are the industry's best arguments.

After all, 85 companies paid $5.8M each for a 5-year licence that the same government cancelled in less than 2 years. One federal judge already called it "a true confiscation" before her ruling was suspended.

Congress.

A provisional measure only lives for 120 days unless Congress turns it into law. The first 60 days end on November 23, and counting the recess, the measure lapses on March 4, 2027.

So far, 47 days in, the committee that has to review it hasn't even been installed.

Lawmakers filed 99 amendments, and most of them bring back sports betting while keeping the online casino banned. On February 1, a new and more conservative Congress takes its seats, with Bolsonaro's party as the largest in both houses.

"It looks like the MP was made to win the election. With the election over, I suspect the Planalto's bet is to let it lapse or push it to the STF and wash its hands." Carlos Portinho, Senate leader of the PL, November 2026

3.4. My estimate

I rate the chance of a comeback at 30%.

By a comeback, I mean the courts throw out the ban, or Congress lets it lapse, and Lula settles with the industry.

The shape of that deal is already visible in the amendments and in the talks between the clubs and the government: betting returns with higher taxes and much stricter limits on marketing, and maybe without the online casino.

It isn't higher than 30%, because 78% of voters support the ban, the judge in charge leans toward it, and the government's leader in Congress says there is no agreement on anything.

If it happens, I expect the decision in the first half of 2027, either from the Supreme Court or on March 4, when the measure lapses, and the sites back online in the second half of 2027.

3.5. How Meridian could come back as the winner

Before the ban, Brazil was a market of about $7.7B a year, with 85 licence holders and almost 190 brands, where 10 companies took 60% of the revenue. Meridianbet was a late and small entrant, fighting giants that had spent hundreds of millions on football shirts and TV.

The ban wiped that advantage out.

The player databases are frozen, the sponsorships are cancelled, and the marketing machines are switched off. Flutter wrote off $873M, closed its Betfair brand in Brazil and cut staff. The industry association says some operators are already considering judicial recovery, and its president doubts how many could restart even if the ban is lifted.

More than 3,500 people in the sector lost their jobs in the first 2 weeks.

Meridian, on the other hand, lost $5.5M of book value and almost no revenue. As the company put it in September, it entered Brazil on a conservative basis and didn't commit large-scale marketing spending. It has net debt of $8.1M, it generates cash, and it kept its office.

Furthermore, if betting returns with tight limits on advertising, the companies that won by outspending everyone lose their main weapon. A market where nobody can buy the front of the Flamengo shirt is a market where the product, the odds and the cost base decide, and that is how Meridianbet has competed in the Balkans for 25 years.

In the comeback scenario, millions of players are looking for a new place to play.

Many of the old brands are gone or broke by then. A company that arrives with a clean balance sheet, its own platform and its own casino games from Expanse can pick up players at a fraction of the old cost.

In my model, I assume Meridian reaches $40M of revenue in Brazil by 2031 if both sports betting and the online casino return, and $20M if only sports betting does. The $40M is about 0.5% of the market that existed before the ban.

4. Meridianbet

Meridianbet generated $33.1M of revenue in Q3, +2% Y/Y, which is 72% of the group.

The chart above shows 2 very different businesses inside the same brand this quarter.

Online casino grew 17% to $17.1M, the highest quarter yet.

It was $14.5M just 1 quarter ago. Casino revenue doesn't depend on who wins on Saturday, the margin is set by the math of the games, so it is a much steadier business than the sportsbook. The casino now offers more than 2,500 games and makes up more than half of Meridianbet's revenue.

Online sports betting went the other way, down 15% to $8.7M, for the reasons I covered in the Profitability chapter. Retail was stable at $6.5M.

The customer numbers kept growing through all of this:

• New registrations: 458,680, +25%

• Customer deposits: $101.1M, +9%

• Average deposit per depositor: $457, +18%

More people joined, and each of them deposited more money.

A sportsbook with growing deposits and a temporarily low margin is a healthy business having an unlucky quarter.

For the first 9 months, Meridianbet's revenue is up 16% to $103.8M, and the segment earned $13.5M of operating income. Africa is the fastest region, with 9-month revenue up 33% to $14.7M.

Meanwhile, segment operating income fell from $4.6M to $0.7M, and part of that is new betting shops and higher salaries that don't go away when the sports margin recovers.

5. Expanse Studios

Expanse Studios, the in-house game studio, had another strong quarter.

According to the slide above, revenue from third-party operators grew 114%, with unique players up 52% and gross gaming revenue up 71%.

The studio released 14 new games and now has 101 titles of its own. One of them, Gates of Olympia, became a top-3 game at Meridianbet's own casino in the first 9 months of the year.

Every game Expanse builds earns twice, once at Meridianbet's casino and once at other operators.

At Meridianbet, an in-house game means no fee paid to an outside provider, which lifts the casino margin. At other operators, it is licence revenue with almost no extra cost.

On the regulatory side, Expanse received further certification in Sweden. The 2 big ones are still pending, with the Ontario application under regulatory review and New Jersey awaiting approval.

6. RKings and Classics

This is the weakest part of the group, and Q3 made it worse.

Combined revenue fell 19% to $9.1M. RKings in the UK fell 21% to $7.2M, and Classics for a Cause in Australia fell 14% to $2M.

The company points to more competition, fewer customers taking part, and digital advertising channels that work less well than before. The average order at RKings was $13.49, down 2%, so RKings is losing buyers, while each of them spends about the same.

These 2 businesses are 20% of revenue and almost none of the profit.

Segment operating income was $0.1M in Q3, and the goodwill attached to them was just written down. On top of that, Australia changes its rules on trade promotions on January 1, 2027, and Classics has to change its business model to comply.

From that date, a prize draw only counts as a legal trade promotion if it comes on top of selling a real product at a fair price, and it can't run as an ongoing series of draws. Classics sells memberships with recurring prize draws, so it has to rebuild its offer before January, and the company warns in its 10-Q that it may have to suspend or stop parts of the business if the new model doesn't qualify.

Last quarter I wrote that I was curious what Zoran would do with these segments. After this quarter, I think the answer has to come soon. In the valuation model, I cut their growth from 5% to 3% a year, and even that assumes a turnaround from today's decline.

7. GMAG and Mexplay

GMAG, the B2B aggregator focused on Asia, grew revenue 5% to $3.7M, and its gross margin improved to 35.8% from 33.1%.

The segment still lost $0.6M at the operating level, because it booked $0.8M of bad-debt expense on old receivables from its content resale customers. Without that clean-up, it would have made a small profit.

Mexplay is reported inside this segment, and it is the part worth watching.

Revenue grew 55% to $0.9M, first-time depositors grew 35% to 4,438, and registrations reached 45,907.

With Brazil closed, Mexico is now Meridian's main bet in Latin America.

It is still small, at less than 2% of group revenue. But the management said on the call that Mexplay will be reported separately from Q4, which tells me they expect it to become big enough to matter.

8. Valuation

A market cap of $80M, TTM revenues of $196M, and ADJ EBITDA of $17.2M imply that the company is trading for 0.4x P/S and 5.1x EV/ADJ EBITDA.

In my Q2 report, those numbers were 0.9x and 8x.

The market cap is now about the same as what Meridian made in gross profit in the last 9 months.

Gross profit for the first 9 months of 2026 was $79.8M. For a business with net debt of $8.1M, positive FCF and no need to raise equity, that is a very low price.

The reason is that the market no longer believes in the growth story.

With Brazil closed and RKings shrinking, the stock is priced as if the first half of 2026 was the peak.

Analysts are cutting as well. According to TheFly, Freedom Broker lowered its price target to $11 from $17 after the report and kept a Buy rating. Even the lowered target is 73% above today's price.

9. Valuation Model

As usual, I built a valuation model to see what kind of returns Meridian investors could be expecting. This time it runs to 2031, and it comes in 3 versions, 1 without Brazil and 2 with Brazil.

Compared to my previous model, I made 4 changes:

• RKings, Classics and GMAG grow 3% a year, down from 5%.

• Brazil is removed from the base case completely.

• Dilution is 12% in total, down from 20%.

• The operating margin reaches 14% in 2031, 1 year later than before.

I lowered the growth of the smaller segments because of what Q3 showed.

The main reason for the lower dilution is the extension of the liability to the previous owners until 2031.

Before the extension, the $15.6M was due this November, and paying it could have meant issuing new shares. By November 2031, the company should generate enough cash flow to easily repay it in cash, so no new shares will be needed for it. Meridian produced $10.9M of FCF in the first 9 months of 2026, and the share count is up only 0.3% this year.

I still use 12% dilution, because I assume the company will issue some more shares. It leaves room for SBC and for M&A, which management could use to counter the Brazil slump. I think some M&A to add revenue is likely in the next 6 years, and it is already built into the revenue numbers of the model.

For Meridianbet outside Brazil, I use a CAGR of 8.7%. It grew 16% in the first 9 months of 2026, so this leaves room for more quarters like Q3. Mexico grows from $3.3M in 2026 to $13.5M in 2031.

Without Brazil, total revenue reaches $286M in 2031, a CAGR of 7.9% from $195M this year.

With an operating margin of 14%, and tax, interest and other expenses of 30% of operating income, net income reaches $28M in 2031, a margin of 9.8%.

The margin is the biggest assumption in the model.

In the first half of 2026, the operating margin was 5.6%, and in Q3 it was negative. Getting to 14% needs the casino to keep growing faster than the sportsbook, Expanse to scale, and the losses at the smaller segments to end.

With 14.2M shares outstanding in 2031, if Meridian trades for a P/E of 15-20, we could be looking at a $420-560M market cap and a $30-39 stock.

Looking at the table above, that would be an upside of 367-522% from today's share price of $6.34.

Discounting it back at 15% per year, we get a fair value of $15-20, which means the current price is a 57-68% discount to fair value.

My previous model pointed to $30-40 in 2030.

The new one lands in the same range a year later, with lower growth, a slower margin recovery and no Brazil. The upside is so much larger because the stock is so much lower.

9.1. With Brazil

For Brazil, I built 2 versions, as the amendments in Congress point to 2 different ways back.

Brazil A: only sports betting returns.

The ban is lifted in 2027 for sports betting, while the online casino stays banned. Revenue from Brazil grows from $1M in 2027 to $20M in 2031.

Brazil B: sports betting and the online casino return.

This version assumes a full return of online betting and the casino. Revenue from Brazil grows from $2M in 2027 to $40M in 2031.

In Brazil A, total revenue reaches $306M and net income $29.1M, and at a P/E of 15-20 the stock would be worth $31-41 in 2031. In Brazil B, revenue reaches $326M, net income $30.8M, and the stock $33-43.

In Brazil B, revenue increases by $40M, while net income increases by $2.8M. The Brazil operation in 2031 is less profitable than the core, with a net margin of 7% compared to 9.8% for the rest of the group, because of higher marketing expenses to win the players back, higher betting taxes, and the cost of relaunching in a market that was closed.

Brazil adds 4-10% to the 2031 share price. It is an option, and the thesis doesn't break from not having it.

Of my 30% chance for Brazil, I give 20% to Brazil A and 10% to Brazil B, as most of the amendments bring back sports betting without the casino. Weighting the 3 versions gives a 2031 price of $30-40 and a fair value today of $15-20.

9.2. What could go wrong

The margin is where this model can break, so I ran the numbers with lower ones.

If the operating margin only reaches 6% by 2031, about the level of the first half of 2026, and the market pays 10x earnings, the stock would be worth about $8.45, a gain of 33% in 5 years, or 6% a year. At a 4% margin and a P/E of 10, it would be $5.63, a loss of 11%, and at 7x earnings a loss of 38%.

So the stock doesn't need my model to be right to work from here. However, it does need the margin to recover to at least the level of the first half of 2026.

10. Conclusion

In my Q2 report, I wrote that the company shouldn't experience any issues in Africa, Brazil or Mexico.

Then the President of Brazil banned the whole industry by decree to win an election.

That is the kind of risk you take when you invest in gambling, but the reaction to it was out of proportion. Meridian lost a licence it paid $5.8M for and a business that made less than 1% of its revenue, while the stock lost $25M of market cap in a day, on top of the fall since September.

The quarter itself was weak. Sports results went against the company for 3 months in a row, costs went up, RKings and Classics lost a fifth of their revenue, and the new team had to cut guidance in its first full quarter.

Zoran Milošević has a real job to do on costs and on the prize competition businesses.

However, the core of the thesis held. The online casino grew 17%, registrations grew 25%, deposits grew 9%, and Mexico grew 55%. Debt fell for the 7th quarter in a row without a single new share, and the former owners, including the CEO, gave the company 5 more years to pay them at 0% interest.

Brazil is now a free option.

I give it a 30% chance of coming back in 2027, as the budget needs the taxes, the football clubs need the sponsors, and the election that caused the ban is over. If it does, Meridian returns to a market where the big spenders have been wiped out, with a clean balance sheet and its own technology.

In conclusion, Meridian is trading for 0.4x sales and about its 9-month gross profit, and my model shows a large discount to fair value even without Brazil. If Q4 shows the profitability of the first half coming back, this sell-off will look like an overreaction.

As always, investing in small caps comes with additional risks, and after a quarter like this one, execution matters more than ever.

Disclosure:

This report is Issuer-Sponsored Research. Global Equity Briefing has entered into a research and distribution agreement with Meridian Holdings Inc (

$MRDN

). The compensation may create a conflict of interest; however, the Analyst maintains editorial independence and all opinions expressed in this report are strictly his own. The Analyst agrees not to trade Meridian securities during the period of the agreement. The compensation received is a fixed fee and is not contingent upon the content of the report or the performance of the issuer's securities. This is not a recommendation to buy or sell any security. Global Equity Briefing is not a registered broker-dealer or investment adviser.