Good afternoon. On today’s agenda:

• IGT settles its $415m class action suit over previously owned subsidiary DoubleDown.

• Gambling.com US rise but maintains guidance.

• Allwyn sees little macro impact as it prepares for UK Court of Appeal ruling on UK lottery.

Hold it down.

IGT settlement

• The settlement of the class action suit relates to former subsidiary DoubleDown Interactive’s social casino activities in Washington state.

Paying the price: IGT and former subsidiary Double Down Interactive have agreed to pay a combined $415m to settle the class action suit Benson v DoubleDown Interactive et al brought against the two in 2017. IGT will pay $269.7m while DDI will stump up the remaining $145.3m. 

• As a result of the settlement, IGT said it will accrue $119.8m of non-operating expense in Q3. In Q2 $150m was accrued.

• The settlement remains contingent on final approval from the Federal Court for the Western District of Washington.

Backgrounder: The case was brought at the same time that IGT sold DoubleDown to South Korean social gaming company DoubleU Games for $825m. The case argued that social casino gaming with tokens constituted illegal gambling in the state of Washington.

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Gambling.com Q2

• Revenue grew 53% YoY to $15.9m, North American revenue grew 342% to $6.2m, but adj. EBITDA was down 34% to $3.6m and adj. EBITDA margins were down 30% to 23%   

• The group reiterated FY22 revenue guidance of $71-76m and adj. EBITDA of $22-27m. 

Heads and tails: With Q2 revenues coming in at 18-20% of annual group revenues, CFO Elias Mark was asked if the group was being too conservative with regard to its FY guidance, especially with the NFL restart and strong H2 seasonality to come. 

• Mark responded that “a mix of headwinds and tailwinds” led it to “reiterate our guidance”.

• A weak euro in July and August impacted its decision to remain “cautious about having to make up the loss revenue from the currency headwinds”, while state launches in Ohio and Kansas would balance things out on the positive. 

• Strong trading in casino in North America, UK and Ireland was “why results came in slightly above expectations”, added Mark. 

CAC economics: Asked if it was feeling the pressure from US operators to drop its player acquisition prices, Gillespie said: “Honestly, it’s the opposite”.

• Pushing it: “Now that we’ve got a thriving business in the US with real momentum, we can have pushier conversations with our clients about what we want to charge them per NDC. That scale is very important from a pricing perspective,” said Gillespie.

• Mark added that “the affiliate channel tends to increase because we provide more or less guaranteed and efficient ROI”.

Shelf life: The group filed a shelf offering during the quarter, which CEO Charles Gillespie said was to give itself “maximum optionality, in the event that we need to raise some additional resources for M&A”. 

• US companies were the favored M&A targets.

• In Europe the group hadn’t seen any impact on consumer spending in its main UK and Ireland markets, “but, of course, we’re eyes wide open, like everyone else”, it added.

Allwyn Q2

• Revenue increased 23% YoY to €902m while adj. EBITDA was up 17% to €277m.

Limited impact: Management said the current inflation and rising energy prices had a limited impact on its cost base. Macroeconomic and political developments had some impact on consumer sentiment, but the “impact on demand for our products has been limited, reflecting their low price point and low average spend per customer”. 

• See you in court: The UK Gambling Commission awarded Allwyn the contract to operate the UK National Lottery in March, a decision that is being challenged by current operator Camelot. The Court of Appeal will be hearing the case in the coming month. 

Current trading was in line with expectations and H2 seasonality is expected to be particularly strong this year with the upcoming World Cup in November. CEO Robert Chvatal said he was particularly pleased with the group’s focus on online. 

Over the period the group increased its shareholding in OPAP to 50.05% and reached an agreement to acquire OPAP’s 36.75% interest in Kaizen Gaming, the parent company of sports betting brand Betano. 

NJ exchange launch

Direct to consumer: Prophet Exchange, the startup betting exchange operator, has gone live in New Jersey and a first for the US. The company says it can offer “better prices directly to the customer”. 

Four-year project: Prophet Exchange was founded in 2018 by CEO Dean Sisun and COO Jake Benzaquen. The company’s most recent funding round was in October 2021 when it raised an undisclosed sum from investors including Sharp Alpha Advisors and Berlin-based LeAD Sports & Health Tech Partners.  

• This is the world calling: COO Jake Benzaquen said being the first betting exchange in the United States regulated market “means the world to us”.

Earnings in brief

FansUnite: Q2 revenues were up 461% to $5.4m while net losses came to $15.9m. At June end, FansUnite had $8.8m of working capital. 

• B2B highlights included the group licensing its player account management (PAM) software to Betr, the recently announced micro-betting app fronted by Jake Paul and backed by Simplebet founder Joey Levy.   

Analysis in brief

Century Casinos: JMP reiterated its Market Outperform rating and $15 PT for Century Casinos following a meeting with the group’s senior management. The JMP team said the acquisition of the Rocky Gap Casino & Resort for $56m “made sense from an accretion standpoint at 4.9x for the OpCo, even using a REIT as a form of financing”.

• Further synergies of $7m-$10m and growth opportunities could also be generated by slots updates.

• War-torn: Business in Poland “has been slower than expected, driven by uncertainties with the (Ukraine) war on its border”. 

Datalines 

Colorado Jul22: Casino GGR up 6.9% to $101.5m, slots revenue was up 4.8% to $86.7m, table games revenue was up 21.1% to $14.7m 

Rhode Island Jul22: Casino GGR was up 3.6% to $54.4m, sports betting handle was up 14% to $25.2m but revenue was down 14% to $2.8m.   

Newslines 

Having recently obtained licenses in the US and Canada, sports betting platform provider FSB has opened an office in Medellin, Colombia, to develop its south American activities.

Pari mutuel and social wagering provider Colossus Bets has appointed Paula Cara Farcas as its new CEO and will focus on developing US activities.

On social

Joe Peta @MagicRatSF

As I mentioned Friday on @vsin with Gill Alexander (@beatingthebook) I spent the weekend in NJ betting sports on the Prophet Exchange (@prophetexchange) and for sports bettors who live in NJ or have access to the market, it's truly a game changer. Here's a 🧵of my experience:

August 29th 2022

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Calendar

• Sep 1: PointsBet FY, Codere Q2

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