Good afternoon. On the agenda:

• Sportradar makes a first-time adj. EBITDA profit in the US.

• Aristocrat touts its organic growth potential.

• Apollo gets out of AGS; shares tank.

• GAN misses guidance; shares slump.

• JMP initiates on Inspired; Roth dumps Esports Entertainment.

For the first time.

Sportradar’s profitable outlook

Sportradar said its US-facing operations hit profitability at an adj. EBITDA level in Q3, as group revenue rose 31% to €178.8m and adj. EBITDA soared 75% to €36.5m.

Early doors: The US segment at Sportradar achieved first-time profitability in the quarter, with a positive adj. EBITDA margin of 11% on revenues that rose 61% to €31.6m. On the call with analysts, CEO Carsten Koerl said the drive towards greater in-play in the US would help generate further profits.

• “It is mainly driven by what we can convert from pre-match to live,” he said.

• “There is a big trend here,” he said, adding that Sportradar was working with operators to “do whatever we can” to stimulate consumer take-up of in-play.

• Further state openings would help. “We didn't expect California,” he said, though he indicated the company continued to model for it after 2024.

• He noted that the US programmatic ad:s business was also “growing well”, but said Sportradar “doesn’t force clients towards minimum guarantees” of spend. “There is no huge obligation,” he added.

Guided by voices: Guidance for 2022 rose on revenues to between €718m and €723m, but adj. EBITDA only narrowed to between €124m and €127m. The company said this differential was due to the success of the ad:s business, which has a lower margin.

• Rest-of-world betting revenues rose 28% to €100.9m, while RoW AV was up 14% to €33.1m.

• Free cash flow increased 3% YoY to €33.9m and the company noted it prepaid €200m of its outstanding debt during the period.

• Koerl said the company was confident it could come through the current economic uncertainty relatively unscathed and that recent deals with FanDuel in the US and Kindred for media spend in Europe pointed to future growth.

• “Despite the turbulent market, we have exceeded expectations this year.”

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In the diary

Wheel meet again: FanDuel will be hosting a Capital Markets Day later this afternoon ET where it will talk about a “significant runway” for future growth, based on an estimate of a TAM of $40bn by 2030. In a pre-event press release it talks about, of course, “momentum for our FanDuel flywheel”. 

Aristocrat’s adjacencies boost 

FY22 revenues rose 17.7% to A$5.5bn and EBITDA was up 20% to A$1.8bn, thanks to strong sales in North America.  

Out of this world: CEO Trevor Croker said the group’s gaming product portfolio recorded an “exceptional performance” in North America, with unit sales up 66% with strong growth in “adjacent markets” such as VLTs, historical horse-racing machines in Kentucky and the New York lottery. 

• The group’s strong gaming performance offset headwinds in its social gaming division Pixel United caused by the war in Ukraine, the exit from the Russian market in March and tougher comps vs. the lockdown peaks of 2021. 

Call Anaxi: Croker added that Aristocrat was set on diversification with the launch of the Anaxi RMG division. The unit will develop its “build and buy” strategy, with an initial focus on the North American iCasino vertical. 

• Anaxi combines the recently-acquired Roxor Gaming with Aristocrat's CRM and BI platforms. Croker said he expected Roxor’s games and RGS platform to soon be licensed in three states.

• Croker noted the focus will be on publishing “adjacent iGaming content, leveraging the slots platform and, later on, we will think about aggregation”. 

• Content publishing is “a logical adjacency to enter, especially in North America where game performance and distribution are the key metrics”, he added.

Apollo crashes AGS

After market close on Monday, AGS announced that Apollo was selling its entire holding via a secondary offering, prompting a 17% drop at one point on Tuesday.

Separation stage: The news that Apollo was selling down its entire 22% holding in the gaming supplier came as something of a surprise to analysts. The team at Roth Capital noted Apollo’s “long-standing ownership” of AGS dating back to 2013, when it bought the company.

• They suggested the timing was “surprising” given the recent failed M&A activity involving a $370m bid from Inspired.

• The team noted that it was strange Apollo was willing to sell up for ~$6 a share when the Inspired bid was priced at $10 a share.

• They added that Apollo could have liquidity concerns: AGS is 4x levered and 100% of its debt has variable interest rates.

• Other analysts are more positive, suggesting the sale removes an overhang. Truist said the move could be due to PE fund life dynamics.

🌛AGS suffers as Apollo sells down its entire shareholding

Analyst takes

Speaking of Inspired, initiating on the company, the team at JMP suggested it had come through the worst of a choppy period and they “suspect earnings will be easier to digest moving forward in a clean operating environment”. 

• Along with the US iCasino opportunity, the analysts also suggested iLottery contract wins “are not baked into consensus estimates”.

Dropped: Roth Capital has dropped coverage of Esports Entertainment due to its recent exit from several esports-related businesses, adding that the company has “been struggling to remain a going concern since Q122”.

Downloads: DraftKings led the way in the latest download data with 37% market share, according to JMP. The analyst ascribed this to a shift in customer acquisition spend into Q4, which “could be the driving factor for the uptick in adoption”. 

See yesterday’s Due Diligence #1 for more on DraftKings fight to get to profitability.

Earnings in brief

GAN: Q3 revenues were flat at $32.1m, while adj. EBITDA was $2.1m vs. -900k loss in Q321. Despite a strong start to Q4 in October, CEO Dermot Smurfit said that ongoing currency fluctuations and an uncertain impact of the World Cup on the B2C business led it to withdraw full-year guidance. 

• “I take ownership of this as CEO and we’ll be further adjusting our cost structure and making operational improvements to deliver on expectations,” added Smurfit.

• Macquarie said GAN “needs to return to double-digit revenue growth to attract investor attention”.

🚨GAN shares drop nearly 7% following GAN’s overnight earnings

Codere Online: Q3 revenue rose 51% to €28.9m, helped by an 82% YoY leap in Mexico and a 29% climb in Spain. Net losses came in at €11.6m. The company said it had seen a stronger-than-expected performance from its online casino division.

Galaxy Gaming: Q3 revenue increased 12% YoY to $5.9m, while adj. EBITDA was down 5% to $2.3m. FY22 forecasts were adjusted downwards to $22.5m-$23.5m and adj. EBITDA to the low end of $10m-$11m.

Playmaker: Pro forma revenues rose 20% YoY to $10.1m, while pro forma adj. EBITDA was down 17% to $2.7m, excluding the recently-acquired Wedge Traffic. CEO Jordan Gnat said the acquisition of Wedge Traffic was a “bullseye”.

Regulatory lines

Texas: State Senator Carol Alvarado has pre-filed a casino and sports-betting bill in the legislature ahead of the next legislative session in January.

Massachusetts: Wynn’s Encore Boston Harbor is reported to have reached a “preliminary” agreement with Caesars for one of its online licenses.

Datalines

Staying with Massachusetts, GGR for October hit $97.3m, up 1.4% YoY and up 24.3% versus Oct19. Wynn Encore generated GGR of $62m, down 1.2% YoY and up 35.4% versus October 2019. 

Newslines

U.S. Integrity has announced a comprehensive partnership with BetSkybox, a sports-betting kiosk operation set to launch in January in Ohio.

Flows has announced an agreement with the Italian gaming service supplier Microgame for the provision of its no-code innovation platform.

World Cup balls: The AGA said up to 20.5m Americans plan to bet on the FIFA World Cup, which kicks off on Sunday. They estimate a combined handle across online, in-person and casual bets of $1.8bn.

Shutting up shop: Esports Entertainment Group has closed its UK-facing SportNation and RedZone sites, citing the “economics of operating a small igaming business” in the UK.

What we’re writing

Somebody’s watching me: Scott Longley on the promise of player tracking. For Covers.com.

California nightmare: The golden dream turns to ashes for the backers of Prop. 27. By Scott Longley for EGR.

What we’re reading

From beyond the grave: Mitch McConnell loses to the ‘Reid Machine’ in Nevada.

Cod semen: A $646 sushi tasting menu in the Bowery.

On social

Snore draw: ‘Only a few more sleeps to the World Cup’.

Calendar

• Nov 16: Flutter Investor Day

• Nov 17: Catena Media, Better Collective, Gambling.com

Contact

• Scott Longley scott@clearconcisemedia.com

• Jake Pollard jake@openmediaservices.com