Good morning. On today’s agenda:

• We are one: GeoComply acquires OneComply

• The Earnings+More readers poll results are in.

• DraftKings gets a vote of confidence from investors and analysts.

• Penn, not so much.

• The week ahead: big week for suppliers 

• Startup focus: the Unit

We get to carry each other, carry each other.

Comply buy

GeoComply buys OneComply as it broadens its compliance tech reach.

On the waterfront: David Briggs, co-founder of GeoComply, said of OneComply that it had “proved it can walk, now we want to help them run” after completing his firm’s debut acquisition. The deal for an undisclosed sum broadens GeoComply’s coverage within the betting and gaming compliance space.

• Everybody needs good neighbors: The 14 employee-strong OneComply is led by co-founder and CEO Cameron Conn and CTO Aaron Gould, and like GeoComply is based in Vancouver.

• Its services allow companies and individuals to navigate their corporate and personal licensing obligations.

• “First and foremost, we are clients of OneComply and we think they are brilliant,” said Briggs. “It’s got a lot of growing to do within the gaming sector.”

Unicorn: He denied the move was a prelude to the much-rumored GeoComply IPO. In January GeoComply took on new investment from Norwest Venture Partners and Arctos Sports Partners, which reportedly valued the business at over $1bn. In March 2021 it raised money from Blackstone and Atairos.

• Briggs said GeoComply “doesn't hide” from the IPO chatter. “But it is all about when does it make sense for the company,” he added. “That is not just about market conditions, it is whether there are benefits for going public”.

• He added GeoComply continues to be “pragmatic”. “I’ve been through boom and bust, and you rush into the public markets at your peril,” he added.

• “I would never want to go public in a bull market.” 

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E+M readers survey results

Advertising and marketing restrictions and regulatory fines are top of mind among Earnings+More subscribers, according to our recent readers’ poll.

Threats: The potential for more restrictions on advertising and marketing in the US and further regulatory crackdowns and fines in Europe are the biggest concerns for the 100 respondents to the Earnings+More readers survey.

• Asked about the biggest threat to the North American betting and gaming sector, 74% said their main worry was more restrictions on bonusing and marketing.

• 58% said regulatory crackdowns and fines are also top of mind.

• In Europe, it was regulatory actions and fines that were seen as the greatest threat to the sector, at 61%.

• 43% said the introduction of affordability measures were also an issue.

Opportunities: In terms of hopes for the next three years, 55% of respondents believe the most significant advance will be more iGaming/iCasino state openings in the US.

• 36% said new sports-betting states will be the most significant advance, with the same percentage also citing new product developments. 

• New entrants in the US market would be a significant development for 25% of respondents.

• 21% said the potential for an expansion in the number of black-market operators would likely be a development elsewhere. 16% said there would be an expansion in the number of crypto-gambling operators.

• Tech development such as the metaverse and AI got the vote from 32%.

Product set: On the question of which products will have the most impact in the next three years, 30% said same-game parlays, with in-play betting (22%) and live casino (18%) second and third respectively..

• Regionally, North America is unsurprisingly the geographic area that most respondents are interested in, at 55%, but it is Latin America that is seen as the second-most promising market by 33% of respondents. 

• Europe and Asia are then tied on 5%, with Africa on only 2%.

AI moves up the agenda: In terms of which areas they expect to provide growth in the next three years, new partnerships was the top answer, with 59%, followed by new geographic markets at 55%. Of potential tech developments, AI was viewed as the most likely game-changer at 36%.

Personnel: When it comes to hiring staff, over a quarter (28%) said it was more difficult to hire staff than previously, while 25% said it was just as difficult as before. 

• 17% said hiring had been easier in the past 12 months, while 9% said their firms haven’t been hiring.

• For the year ahead, a majority said they would be adding jobs, while 22% said they would be keeping headcount about the same and only 4% said they would be losing staff.

Respondent make-up: The survey was conducted on Earnings+More’s behalf by YouGov. The 100 respondents came from across the industry, from operators and suppliers to affiliates and consultants working in all aspects of the industry from operations to marketing, product and compliance and regulatory.

Derby daze

The Kentucky Derby this weekend achieved record handle and EBITDA for Churchill Downs.

All the Mage: The 149th running of the Kentucky Derby won by Mage generated wagering of $298m on the day, up 5.4% on last year’s running, and $412m in total, which was 5.2% ahead of 2022.

• TwinSpires handle for the race program on the day was $74m, up 9% YoY, with EBITDA of $14m-$16m.

DraftKings’ crowd-pleaser

Analysts and investors are cheered by another beat, raise ploy.

Friday I’m in love: “There’s more to like with every passing quarter,” said the team at Truist after DraftKings’ Q1 call last week, and they weren’t the only ones who warmed to the DraftKings’ message as the share flew up 16% on the day.

• Deutsche Bank analysts ascribed the volatility in the shares to the wide variety of long-term adj. EBITDA outcomes being written about for DraftKings.

• The DB team said DraftKings was an example of a “blue-sky stock where the narrative supersedes the financial results”.

• But they added that they didn’t believe that Q1 provided “considerably more insight” into the long-term prospects nor tightened the range of outcomes.

• Under/over: Instead, it “merely reinforced that DKNG can beat the bars it has set, and furthered management credibility around its under promise and over deliver strategy”.

Rabbit out of the hat: JMP was more succinct: “DraftKings has the best earnings surprise history in the space.” The team pinpointed DraftKings’ success in iCasino as setting up its likely outperformance in 2023.

• Noting the claim to supremacy in Q1 with ~26% share in the vertical, they suggested DraftKings has added around 200 bps of organic market share along with the 3% market share that came with the Golden Nugget acquisition.

• Jefferies said the Q1s “firmly supports” their thesis that top-line acceleration, bottom-line execution and declining capital needs are bringing profits and cash flow “nearer than expected”.

💯 DraftKings is up over 120% in the past year

Penn and ink

Analysts suggest lifeboat plans should be formulated for Penn’s online ambitions.

Late to the party: Writing in the wake of Thursday’s 13% share price fall, the analysts at JP Morgan aired their fears that “if/when” Penn executes in online other operators will already have bigger moats, meaning Penn will have left it too late to “achieve some level of scale”.

• This causes two related problems. One, it will be difficult to generate an attractive EBITDA, meaning the ROI on the $2.6bn spent on Barstool and theScore.

• Two, the combined enterprise won’t be attractive as an acquisition prospect.

Driven to distraction: The share price fall came in the wake of another Barstool social media storm, and the team at Roth MKM suggested Barstool was now  “more of a distraction than a value driver”. 

They noted the “stark contrast” between the implied $5 per share value of the online business currently vs. $90 at the height of OSB and iCasino enthusiasm in 2020-21.

• Portnoy & Co’s antics aren’t the only issue; as per the disappointing state-by-state market shares, Penn is “having limited success leveraging Barstool within OSB”.

•  “Instead, Penn found more success cross-selling theScore in Ontario,” they added.

• They suggested that if Penn can’t turnaround Barstool’s market share with the switch to theScore’s proprietary tech stack, “strategic alternatives seem like the next logical step”.

• Those could include a sale. As the Roth team added, the share price reaction last week indicates investors are questioning whether Barstool’s culture is “sustainable under public company ownership, particularly in heavily regulated gaming industries”.

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A big week for…

It’s time for the leading suppliers to face the analysts as IGT, Light & Wonder, PlayAGS, Inspired Entertainment, Sportradar, NeoGames and Genius Sports all report.

Easy does it: During IGT’s Q4 results CEO Vince Sadusky explained that supply chain issues had eased considerably during the second half of 2022, while online the PlayDigital division had gathered “good momentum” in the past year.

• Pivot table: For Light & Wonder it was all systems go in Q4, with CEO Matt Wilson pointing to 2022 being a “pivotal” year following the group’s disposal of its lottery and sports-betting divisions. 

• Previous M&A dance partners PlayAGS and Inspired also report this week, no doubt hoping to highlight what each other is missing. 

Bally-hoo: Last week’s announcement that Bally’s Corp had signed a new OSB and PAM supply deal with Kambi and White Hat Gaming showed that the Gamesys parent was enacting its switch away from operating a full in-house tech stack.

• It is also looking to sell DFS operator Monkey Knife Fight as it wrote off $464m linked to the MKF and Bet.Works acquisitions in Q4. 

• Long-term clarity needed: Robeson Reeves succeeded Lee Fenton as CEO as part of a seamless transition, but Jefferies noted that it was still evolving “strategies and leadership”, which will “obfuscate” longer-term earnings power. 

No junk: Wynn Resorts’ move away from Macau junkets showed it was not “solely a VIP organization”, said CEO Craig Billings in Q4, as he expressed confidence that Macau “difficulties are behind us”.  

• Mack the knife: Wynn went live with sports betting in Massachusetts and Billings said interactive would have had flat EBITDA cash burn but for Mattress Mack’s World Series bet. 

Also reporting are Sportradar, Genius Sports, NeoGames, GAN and Golden Entertainment.

Calendar

• May 8: GeoComply Challenger Series event

• May 9: IGT, Light & Wonder, SciPlay, PlayAGS, Bally’s, Wynn, Genius Sports, E+M Deal Talk

• May 10: Sportradar, Inspired, Everi, Golden, NeoGames, GAN, SBC North America

• May 11: Codere Online, NeoGames call, SBC North America

Startup focus – The Unit

Parade grounds: Founded in 2017, The Unit is a marketing and development agency with strong links to Grand Parade, with founder Paddy Casey having started out at the company (which was sold to William Hill) and Andy Clerkson on board as a strategic adviser. The client roster includes Low6, 10star and PlayStar Casino.

Square-bashing: The company is bootstrapped. “Following the sale of Grand Parade to William Hill, we then had the resources to put a team together and launch The Unit,” says Casey. 

Unit economics: Casey says the market opportunity comes from the US making an evolutionary leap forward ahead of what is being utilized in terms of martech in Europe. When the US markets started to open up, a lot of operators launched based on European models, which has not proven to be the ideal solution,” he says. 

• “As US consumers are becoming more educated, and with state launches now slowing down, it is now more important than ever for operators to focus on product improvements,” he adds.

• Further afield, the company is looking at opportunities in Latin America and Africa, which will definitely be interesting to watch.

EveryMatrix delivers iGaming software, solutions, content and services for casino, sports betting, payments, and affiliate/agent management to 200+ global Tier-1 operators and newer brands. The platform is modular, scalable, and compliant, allowing operators to choose the optimal solution depending on their needs.

EveryMatrix empowers clients to unleash bold ideas and deliver outstanding player experiences in regulated markets.

www.everymatrix.com.

Growth company news

Patrick Jonker has joined Blixx Gaming as CEO, which is part of the Happyhour.io portfolio. Jonker was previously CEO of Hero Gaming.

Homestand Sports has announced today a partnership with sports gaming software company Tallysight to bring integrated betting content experiences to Canadian sports fans.

Career paths

Catena Media has appointed Erik Edeen as interim CFO, replacing Peter Messner who will leave the company in early June. 

Microgaming has promoted Stephen Fisk to CEO with immediate effect. He replaces Andrew Clucas, who is taking on new opportunities in the industry. 

Gerard Griffin has been named as CFO at Sportradar. Griffin joins the group from Zynga.

Retail and online casino and sportsbook operator Affinity Interactive has appointed Halise Ekmen Uysal as CFO. 

Newslines

Cirsa: Blackstone is reported to be considering an IPO for the Spanish gaming operator, according to Reuters.

Rivalry has closed the initial tranche of its non-brokered private placement for gross proceeds of C$7m.

Boyd Gaming’s board has authorized an additional $500m share repurchase program.

An +More Media publication. 

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