Good morning. On today’s agenda:

• Light & Wonder says icasino in US is a matter of ‘when not if’

• Better Collective is flying; Catena Media not so much.

• FanDuel is smashing it in OSB in Michigan and Pennsylvania.

Wonderful world, beautiful people. Click below.

Light & Wonder investor day

• Affirms 2025 adj. EBITDA target for 2025 of $1.4bn or a CAGR of 15%.

• Reaffirms net debt leverage target of 2.5x-3.5x.

Slimline tonic: Jamie Odell, executive chair at the new slimline and transformed Light & Wonder, told investors it had paved the way for “significant value creation” after completing the sale of its lottery business with the OpenBet completion also due in Q3. “We have significantly delivered,” he told analysts. “Things have changed materially.”

• “Games is a huge market,” said CEO Barry Cottle pointing to a $70bn TAM across gaming ($7bn), igaming ($27bn) and social and casual ($36bn).

• “Convergence is inevitable,” he added.

• Jefferies said the management team in place now have “demonstrated success in the past”. Much of the top team including Odell was previously at Aristocrat.

Breadcrumb trail: To get to the target $1.4bn of adj. EBITDA (compared to 2021’s $840m), Deutsche Bank said there were some bread crumbs of “incremental color” to give some clues.

• They noted that LNW is targeting $1.9bn of cumulative R&D and capex between 2022-25 with R&D expected to generate ~10% of revenue and capex ~7%.

• Assuming that $1.9bn represents ~17% of net revenue between  2022-25, it implies cumulative net revenue for the four years of ~$11.2bn.

When will I be famous? Dylan Slaney, CEO for igaming, said the key driver for online was legalization of igaming in North America. “We believe every state where land-based gaming is legal, igaming will eventually be legalized. It’s a question of when, not if.”

• “We have a decade of growth tailwinds ahead in the US alone, and whoever is first in line is going to have a huge opportunity.”

• Slaney noted Ontario had been LNW’s biggest ever market launch and was “a tremendous opportunity for future growth”.

Socially acceptable: With SciPlay management taking part in the day’s presentations, Truist noted the hopes for the cokany to outpace the broader social gaming market growth and its hopes to close the ARPDAU gap with peers as it “continues to churn out content”.

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Better Collective Q1

• Revenue up 74% to €67.4m; adj. EBITDA up 75% to €23.1m.

• The US was up fivefold and now represents 46% of revenue.

• NDCs of 360,000 up 95% YoY.

Share and share alike: The US is now Better Collective’s single biggest market, delivering what CEO Jesper Sögaard said was a “slam dunk performanced” driven by the New York launch and the media partnership with the NY Post. 

• He was also keen to stress that alongside the top-line growth, the company was also seeing a shift to revenue-share agreements compared to the previously dominant CPA agreements.

World in motion: Ex-US, Better Collective’s revenue were up 10% but EBITDA was down 7% which CFO Flemming Pedersen ascribed to lower sports margins. Sögaard also noted a strong move in the UK towards player retention as companies tightened up customer management procedures ahead of potential government measures.

Keeping schtum: No mention was made of the rumored Spotlight Sports Group acquisition. On the M&A market generally, Sögaard said that “in general” prices are “not significantly different” though any deal involving the US “tends to be higher multiples”.

Top bins: The same goes for esports where the company recently acquired Futbin for €105m. Since the acquisition of Futbin, it has been announced that the relationship between Fifa and the game developer EA Sports is to come to an end. 

• Sögaard said Futbin (the first part of the name stands for Fifa Ultimate Team) would be “equally relevant under a new name”.

• Jesper Sögaard noted that Futbin’s foundations and large audience could be “an important part of that transition.”

Catena Media Q1 

• Revenues up 11% to €45.2m; Adj. EBITDA up 2% to €25.6m.

• Organic growth down 9% on continued issues in Germany and the Netherlands.

• North America revenues up 32% to €29.5m or 65% of total.

• NDCs were up 9% to 171,918

Chocks away: The New York and Louisiana sports-betting launches during the quarter led to a doubling of US revenues for the group, with New York now Catena Media’s largest North American market by revenue, CEO Michael Daly said. 

• Daly added that while New York would not regulate icasino in 2022, “it is on the docket for 2023 as a viable option. But it will not definitely happen; and even if it doesn’t it is still moving forward and much faster than I anticipated.”

• The Lineups and i15 Media assets contributed 46% growth in North America and performed strongly in New York, but Catena said their figures would be included in the group’s organic growth after 12 months.   

Daly said Catena were “big believers” in CPA: “We get many questions about adopting revenue share models, but in New York we had the highest CPA rates to date. Bonus costs also mean a negative impact on revenue share and if affiliates were on that model it would mean they would be in the same negative spirals as the operators.” 

• “Players have five accounts on average and play on three: if we were on revenue share they would be going through one wallet, but we get CPAs every time we deliver that player to play on one of their accounts.”  

“Unspectacular” Ontario: The “low initial operator participation” had led to an “unspectacular” launch of OSB and icasino in Ontario and meant April revenues from the province were “slower than expected”, the group said, although it expects to grow significantly going into the rest of the year. 

Fading grays: Daly added that the transition of prior gray markets in Europe (Germany, the Netherlands) and Canada to full regulation meant there were short term impacts, such as Catena stopping all affiliate activities in other Canadian provinces.

• “Ontario is white and the rest of the provinces are black (market): in the short term that had an impact during April and we expect the overall legal market to overwhelm that trend, but April was a flux period.”

A yen for better: The recent granting of the first online casino license in Germany was positive, but Daly said the market has “been a drag” on the business. Japan generated “solid double-digit growth”, but the currency impact of a weaker yen negatively affected revenue in April and generally has made recruitment difficult.

Market reaction: Catena shares were down almost 12% in early trading compared to a 1% rise for Better Collective.

Earnings in brief

Playmaker saw revenues in Q1 rise 37% to $5.8m meaning trialing LTM revenues were up 78% to $25.4m. Adj, EBITDA was up 16% to $1.7m. Subsequent to the period close the company acquired the Sports Drop. The Morning Bark newsletter increased its readership to 372,000 and it has now launched a sports-betting-based Bark Bets newsletter.

Elys Game Technology said Q1 revenues fell 14.1% to $12.2m due to a pandemic-related loss of market share in Italy. Sequentially, revenues rose 5%. Losses increased to $2.1m from $0.6m in the same period last year.

Datalines

Michigan

• Sports-betting GGR in April rose 48.7% to $32.6m of which $30.7m came from mobile (up 50.8%). Handle 

• Mobile net revenue was $16.7m with promotions accounting for ~46% of GGR.

• GGR for icasino was up 39.6% to $132.4m, a 0.6% sequential rise.

Leaders: BetMGM claimed the combined top spot with 34.9% overall share, followed by FanDuel (22.6%) and DraftKings (14.1%). In OSB, FanDuel GGR share hit 49.6% (50.8% of mobile) followed by BetMGM (23.6%) DraftKings (11.8%).

Pennsylvania

• Retail casinos GGR for April of $309.4m was up 11.4% but down 4.8% vs. 2019.

• Sports-betting handle of $572.8m up 19% YoY but down 20% sequentially.

• Total sports-betting GGR of $49.1m up 36% YoY, up 1% sequentially.

• iCasino GGR of $113.1m up 22% YoY and down 4.2% sequentially.

Leaders: Wells Fargo estimated FanDuel combined sports-betting and icasino market share at 30.2% followed by Rush Street Interactive (20.5%), BetMGM (17%) and DraftKings (13.3%). In sports, FanDuel handle share is estimated at 39.8% and GGR share at 58.3%. 

• FanDuel’s NGR was $22.8m vs. $3.5m for DraftKings, $3.3m for Penn National/Barstool, $1.3m for RSI, zero for BetMGM and minus $0.1m for Caesars.

Penn National analyst update

Priced in: Looking at recent share price movements (Penn National is down 39% YTD), the team at Jefferies says this suggests the market is “either pricing in a recession or assigning no value to the company’s digital and media assets”.

• I’m a believer: Jefferies says they are a believer in regional gaming in uncertain times.

• “Historical data support our view that regional gaming GGR remains stable through wide-ranging cycles”.

Stand and deliver: They also suggest there is evidence of delivery in online with the launch of OSB and igaming in Ontario on theScore platform and the planned migration to its own trading platform for theScore (Q322) and Barstool (Q323).

• Meanwhile, Penn has “remained disciplined with promotional and marketing spend, leading to more manageable EBITDA than peers, ~$50M for FY22”. 

Key Dave question 1: “The appropriate level and tone of public profile among Barstool’s leadership has remained a matter of debate that we consider to be unresolved.”

• Key Dave question 2: Jefferies add that there also remain questions around the long-term value of Barstool as a media proposition once Penn acquires the remaining 64% it doesn’t already own.

• “These present longer-term intellectual challenges for the Street in so far as forecasting the revenue and profit potential, as well as whether the combination of land-based gaming, digital gaming and digital media would be valued fully on a SOTP basis over time.”

Dave Portnoy @stoolpresidente

I joined a twitter space tonight during the 2nd intermission of the Bruins game with known scumbag and coward @hblodget to ask a few questions since he never responds to me

May 13th 2022

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Startup funding news

UBET: The decentralized sports prediction platform UBET has raised $2.7 million in a seed funding round led by Shima Capital, GSR, Republic Crypto, LD Capital, Old Fashioned Research, Decimus and M6. Strategic investors from the sports-betting industry include Daniel Hannigan-Daley and David Hong. The company said the new cash would help fund product development and expansion.

Newslines

Make mine a Cosmopolitan: MGM Resorts has completed the $1.63bn acquisition of the Cosmopolitan.

Hard up: Payment firm Nuvei is now supplying instant deposits and payouts to the Hard Rock Sportsbook. Separately, the Hard Rock Sportsbook is launched in the state of Virginia as of Monday. 

Click step: BetClic moved closer to completing its merger with TV show production giant Banijay after Monaco’s state-owned investment trust SBM Monaco announced it would sell its 47% stake in Betclic Everest to FL Entertainment for €850m.

A wonderful world: Wondr Nation, formerly Mashantucket Pequot Interactive, was officially launched by the Mashantucket Pequot tribe to focus on expanding its digital footprint with other tribes and technology companies. Wondr is working with DraftKings on the co-branded Foxwoods online gaming and sports betting platform in Connecticut and soon in Puerto Rico.

National rollout: Operators are taking a more cost-effective approach to advertising by shifting their ad dollars to national campaigns, according to the analysts at Eilers & Krejcik. Online sports betting is legal in 21 states and 39% of the US adult population has access to OSB products and a shift to national advertising also allows operators to pre-seed markets that are candidates to legalize in the next year or two, the EKG team said.

Betting boots on: The Boot Hill Casino in Kansas is the first of six potential licensees to announce its sports-betting partners, announcing deals with DraftKings and Bally. The four casinos in the state can offer up to three skins while the state’s professional sports teams can also partner up.

What we’ll be watching

Parleh Media will be hosting a webinar next week about the Ontario market with Rick Wolf and Nic Sulsky as panelists. Click here for more info.

What we’re writing

Hiring in a time of talent scarcity: Scott Longley writes for iGB on the recruitment problems faced in the US right now.

US icasino: Staying on the theme of scarcity, Jake Pollard looks into US online casino for CDC Gaming.

Calendar

• May 18-19: Sportradar, DraftKings CFO Jason Park at the Moffett Nathanson Media Summit

• May 19: WE+M podcast, Acroud

Contact us

• Scott Longley scott@clearconcisemedia.com

• Jake Pollard jake@openmediaservices.com