Good afternoon. On today’s agenda:

• Genius Sports says revenue and EBITDA performance would have been even better if it wasn’t for currency fluctuations.

• AGS rejects Inspired Entertainment’s initial approach but talks will continue.

• GAN hurt by Coolbet downturn ahead of sports B2B launch.

Funky dollar bill.

Genius Sports Q2

• Revenue was up 27.3% YoY to $71.1m, adj. EBITDA was up 61.1% to $8.4m.

• Media up 109% to $15m, betting tech up 10% to $44.8m and sports tech up 75% to $11.3m.

Buck up: CFO Nick Taylor was keen to insist that the FX issues encountered over the quarter were a “presentational issue” rather than an operational risk. On a constant currency basis, revenues would have been 40% better and adj. EBITDA would have been 79.6% up.

• Net losses fell dramatically largely due to a huge cutting back of stock-based compensation which fell YoY from $414.5m to $23.6m.

• Taylor reiterated the company had “ample liquidity” to fund the business through to profitability in the second half of next year.

• A new line item in the accounts of restricted cash of $36m relates to the ongoing deal for English and Scottish football rights with Football DataCo.

Gram addict: The media segment grew at “phenomenal pace,” said Taylor, driven by programmatic ad sales. CEO Mark Locke noted the growth came despite the marketing pullback in the US undertaken by betting operators.

• Parlay-vous: COO Jack Davison noted Genius also saw the benefit from the operators’ focus on same-game parlays, suggesting that even if operators didn’t buy into Genius’ own parlay product, they still did well from a “high margin, high take rate” product.

• Game on: With the new NFL season approaching, operators are “focusing on in-game, handle and profitability”, added Locke.

Not buying it: Asked about whether Genius Sports would be looking at further NCAA rights deals, Davison said “we have enough for us to succeed as a business”. “You don’t have to win every rights deal,” he added.

• Rationale: Asked whether prices for rights had rationalized, CFO Nick Taylor said he couldn’t quantify any changes, but that rights holders were also evolving.  

• Taylor said there has been “an evolution in how deals are struck and how rights holders view the role they play”. 

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Inspired/AGS

• AGS said Monday it had rejected the initial bid of $370m from Inspired but added that talks are continuing.

Pay attention: Ahead of the news of the rejection yesterday, analysts at B Riley suggested the term ‘indication of interest’ infers there is “still significant undone due diligence” on the part of Inspired.

• “Further, AGS must evaluate a potential sale valuation well below historical supplier M&A, but well above its one-year trading price average,” the team added.

Money flows: The analysts suggested the doubling of free cash flow post-deal of ~$100m would enable Inspired to avoid a cash call to pay down debt while the sale of some non-core parts of AGS would also enable “even more rapid” debt paydown.

• Analysts at Roth said that even under a revised bid that values AGS higher and includes an equity component, they believe a deal could “still drive value while keeping leverage below 4.5x”.

Only upside: They add that the deal provides “synergy with sacrifice” with “almost no business overlap to cause dis-synergy”. “Instead, distinct, respective business areas, such as server-based gaming and virtual sports, should grow faster as a combined entity,” they added.

• Online: The team at Roth suggest a transaction could “accelerate” Inspired’s US expansion and specifically create a “more competitive iGaming content developer”. 

Check the guy’s track record: B Riley noted the track record of Inspired’s management team with both chairman and CEO Lorne Weil and president Brooks Pierce having worked with AutoTote in 2000 when it bought the then Scientific Games for $308m, taking it through to the merger with WMS in 2013.

🪜AGS share price, Aug 15

Gaming Innovation Group Q2

• Revenues up 37% YoY to record €22.1m, adj. EBITDA up 47% to €8.3m, adj. EBITDA margin up 2.5% to 37.5%. 

• GiG Media up 35% to €14.8m, platform and sportsbook revenues up 43% to €7.3m.

• Media revenues from the US were up 25% QoQ (+170% YoY) to 20% of GiG Media. 

• FY22 guidance maintained at €87-93m in revenues and €30-35m in EBITDA.

Media execution: GiG’s media division was once again the star performer for the group and CEO Richard Brown praised the unit for executing on the strategy it set out two years ago. 

• Dent: Brown said it “performed really well” in its core markets of central and northern Europe” and LatAm but GiG was “only making a dent in one or two markets there”.

Data point: Revenue share generated 58% of GiG Media’s Q2 revenues. 

Road movie: Despite achieving record revenues and EBITDA in Q2, Brown said the group “was only at the beginning of the journey” with regard to developing long-term growth.

• Booster: The acquisition of Sportnco had enabled GiG to become a “full turnkey solution provider” that could move quickly into sportsbook-led markets such as the US.

• Action film: With 15 brands in the GiG pipeline, Brown said he was expecting an “action-packed H2” made possible thanks to changes implemented in the delivery process in the past 18 months.

GAN Q2

• Revenue rose 2% to $35m while adj. EBITDA fell 58% to $1.5m.

• B2B revenue was up 36% YoY to $14.2m but B2C was down 13% to $20.8m.

• Forecast 2022 revenue revised down to between $142.5m-$152.5m vs. $155m-$165m previously.

• Adj. EBITDA forecasts down to between $10m-$15m from $15m-$20m prior.

At a loss: A $28.9m non-cash impairment against the value of the Coolbet tech tipped the company into a loss of $38.3m compared to $3.8m in the prior-year period. 

• CFO Karen Flores said the writedown “ties back” to the efforts to utilize Coolbet tech in the B2B arena in the US.

Medium cool: CEO Dermot Smurfit insisted Coolbet remained “healthy, profitable and growing” despite a grab-bag of problems in Q2 ranging from $2.5m of adverse FX issues to a “tightening” of operating conditions in Europe, a “poor start” in Ontario as well as a tough comparative period.

• Flores pinned the downward forecast revision on B2C and the aforementioned adverse FX as well as issues in Latin America plus a “softened” forecast in Ontario due to unforeseen strength of the competitive environment.

Roll away the stone: Smurfit said GAN “won’t get ahead of ourselves” on the prospects for the launch of GAN Sports and also its Super RGS games product. The sports product will debut with Red Rock Resorts in the Las Vegas locals market in the “coming weeks”.

• On the scene: He noted that the California ballot initiative could create “substantial” opportunities with tribal operators. 

• Down the pipe: More generally, he said with GAN sports there were “opportunities in the pipeline” both with tribal operators and in replacing incumbent sportsbook backend providers.

👀The GAN share price fell nearly 23% in after-hours trading

EBET restructure

• Q3 revenue came in at ~$18.2m with gross profits of ~$7.2m. 

• The formerly esports betting-focused operator confirms pivot to igaming.

CFKA: The company formerly known as Esports Technologies has confirmed a report of a restructure which sees it refocusing on its igaming business while shedding over half its staff. The move comes a little more than a month after it completed a $3.5m cash raise.

• If you prick us, do we not bleed? The plan also involves drastic cuts to operating expenditure in order to become profitable as of this month.

• Pulling the plug: Meanwhile, the company will reduce investment in “non-revenue-generating” esports products.

• Low expectations: It expects revenue growth to decline as it cuts unprofitable businesses. It said it does not expect to reach previous guidance for the FY of $70m.

Ay karamba: At the same time, EBET said it will be launching a “major upgrade” to its Karamba igaming business and will be looking to launch in Brazil, the Netherlands and Ontario in the last quarter of this year.

Gaming in Germany

** The Gaming In Germany event will be taking place in Berlin between Sep 19-20 featuring contributions from Ronald Benter and Benjamin Schwanke from the new German regulator. For more information on registering, go to https://www.gamingingermany.com/event-details/.

Earnings in brief

Galaxy Gaming: Revenue was up 20% to $5.7m while adj. EBITDA rose 10% to $2.35m. The company blamed adverse FX movements for “masking what was an excellent quarter and first half,” said CEO Todd Cravens. The company lowered guidance for the year to $22.5m-$23.5m and adj. EBITDA now in a range of $10m-11m.

Elys Game Technology: Losses rose 34% to $3.5m, GGR was down 14% to $12.7m due to restructuring and redundancy costs, the group said. Handle was down 15.2% to $186.4m for the quarter due to FX fluctuations, retail handle rose 733.5% to $1.8m following the easing of COVID restrictions.

Kings Entertainment: Lottery sales rose 18% YoY $446K in July while revenue increased  9% to $555.3K. The total number of customers increased 9% thanks to the return of a high jackpot in July.

Datalines

Massachusetts: GGR for July came in at $98.7m, up 3.1% YoY and up 21.1% versus Jul19. The Wynn Encore generated GGR of $64.7m, up 9.6% YoY and up 33.2% versus Jul19. Penn’s Plainridge Park’s GGR of $12.5m was down 3.5% YoY while the MGM Springfield was down 9.3% YoY to $21.5m.

Washington DC: GGR in July fell 33.3% to $1.2m. Caesars Sportsbook recorded the biggest handle at $4.3m and $378.6K in GGR.

Newslines

Pollard Banknote has extended its scratch game and related services agreement with the Minnesota State Lottery. The group will provide at least 70% of the state lottery’s scratch games in a deal during a four-year deal that is believed to be worth c$28m to the provider.

Australian betting technology provider BetMakers has amended the terms to the deal it has with NTD, the sports-betting venture setup by Tekkorp Capital and backed by News Corp Australia. The annual cap payable to NTD has been increased by AUS$2m per year during the initial 10-year term of the deal.

20Shots: The company behind the Fantasy5 F2P games has raised £400k from ven tuire capital firm Animal Capital, valuing the business at £5m. The company will use the funding to support the launch of its expanded free-to-play offering.

What we’re reading

Bullpen politics: MLB throws its weight behind Prop 27 in California.

On social

Adam Neumann’s Chief of Staff @AdamNeumannsCoS

Everyone’s shitting on Flow but it’s a better idea than 90% of startups I hear about

August 16th 2022

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Calendar

• Aug 17: Raketech, Sportradar Q2

• Aug 18: Catena Media Q2, Rank H1

Contact us

• Scott Longley scott@clearconcisemedia.com

• Jake Pollard jake@openmediaservices.com