17 Nov: 'So that's where the money went'
17 Nov: 'So that's where the money went'Better Collective, Catena Media, Endeavor Q3s, IGT Investor day, Churchill Downs analyst note +MoreGood morning. Super affiliates Better Collective and Catena Media offered a double slam of record results this morning as both benefited from triple-digit growth in their US operations. IGT held their investor day. Endeavor spoke about its OpenBet acquisition and the opportunities it is eyeing in sports betting. If you were forwarded this newsletter and would like to subscribe, click here; Winter is comingThis is what happens when an intense period of heavy marketing hits the top lines of the recipients of the largesse. If you wanted to make money out of the boom in US sports-betting - and the smaller boom in igaming - then being an affiliate is a good place to start. But in talking about Catena Media’s results, CEO Michael Daly let slip a phrase that may yet have more resonance than he intended. Germany’s new regulations introduced in July have shown that affiliates can make hay in any given market as long as operators' marketing wallets remain open. But when that period ends, there is not a lot they can do to change direction and to use the analogy, when the tide turns it will be affiliates that will be found to be swimming naked. So it was that Daly said “winter is coming” in the US and other northern hemisphere markets. He meant that a seasonal return to the home would herald a return to online activity over in-real-life experiences in the summer. Blood infusionBut the phrase has resonance as well when it comes to the marketing spend of the US operators. With operators openly talking about the elevated spending coming to an end - and some like Wynn publicly exiting the merry-go-round altogether - the third quarter 2021 might yet be a high watermark for the marketing dollars. The affiliates, meanwhile, will hold out hope for New York, and certainly what Better Collective had to say about Arizona (producing 62% of total US revenues) signals just how much a new state opening up can mean. ** Sponsor’s message: Venture capital firm Yolo Investments is home to €350m of equity in more than 50 of the most exciting companies across fintech, gaming and blockchain. It continues to build one of gaming’s most dynamic portfolios as it eyes up seed and A-stage opportunities across the sector. Its dedicated 28-company, €135m AUM gaming fund already houses holdings in fast-growing suppliers and operators, including Kalamba Games, SimWin and ThriveFantasy. Yolo Investments is also on the lookout for LPs as it looks to scale new concepts, including its high-roller live casino brand, Bombay Club. As a proud sponsor of Earnings+More from Wagers.com, Yolo Investments wants to hear from readers of this newsletter. Get in touch with your pitch, or for a chat. Better CollectiveThe top line
Margin call: With Better Collective’s historic sports win margins at an all-time low in Q3 at 63.3% vs. index average of 82.3% since 2018, CEO Jesper Sogaard said this was due to BC’s “good performance in (generating) NDCs and is the main reason” for the drop in win margin. He added that there were “no fundamental changes” in win margin trends, “you see that in bookmakers’” results, the decline “was mostly related to strong growth in NDCs”. Raising Arizona: Arizona’s sports betting regulations at the very start of the NFL season unleashed much pent-up demand. “That will normalize,” said CFO Flemming Pedersen. Arizona provided a “final booster to our Q3 US performance” and generated 62% of BC’s US revenues. With regard to revenue models, Sogaard said CPA was still the preferred affiliate model for US operators, but the group was having “ongoing dialogues with partners and I believe revenue share will grow over time”. Big Apple pie: Sogaard said the group was “quite pleased to have just nine bookmakers in New York, it creates a competitive dynamic, it’s great for our business.”
Scale it up: Publishing generated 40% of BC’s Q3 EBITDA and is now a “significant part of the business that we are actively working on”, Sogaard said. Having achieved proof of concept, he added that there was lots of “potential for more collaborations in any given media format” and “we can demonstrate our strong proposition to media groups”. Meanwhile, paid media (9% of EBITDA) was more unpredictable but “it’s a fine margin business and when we see it perform strongly we will scale that, that’s the attractiveness of paid media,” added Pedersen. Catena MediaThe top line
Unparalleled: “Very significant” and “exceptional” were all used by CEO Michael Daly on the earnings call as Catena posted record results driven largely by growth in North America and Japan. He was keen to point to where the future growth will come from new state openings such as New York as well as the new registration regime in Illinois and, at some point early in 2022, Ontario. New York, he said, was “one of the giants”.
To the stars: Tallying with the NFL season, Daly put the case that September was the yearly peak for US affiliation although he cautioned that it was hard at this stage, given Covid and the hard-to-model effect of new states opening during the season, to suggest an exact model. “Volatility is going to be unavoidable, and that is amplified by state launches. But this September went stratospheric.” European doldrums: Keen to promote the global effort at the company, Daly pointed out that Japan was now worth 9% of total revenues. But Europe remains mired in issues, whether that is Germany (where the downturn in business caused Catena to write off its previous investments there) or the Netherlands which has evidently got off to a slow regulated start. Asked if Catena had weathered the worst in Germany, Daly said: “I feel like it has troughed. The challenge is always the outside factors. It feels like we have reached a low point. The market has stabilized.” Endeavor Q3sTell me why: On the call with analysts, questioned about the deal to buy OpenBet from Scientific Games (which will complete in H122), CEO Ari Emanuel suggested it “made sense” for Endeavor because of the “completely different approach” it will bring. Pointing to the trends in rights, sports production and distribution, he suggested that adding sports-betting to the mix would be a “unique offering that nobody else can bring to the table”. An undertaking of great advantage, but nobody to know what it is: Emanuel was keen to promote the revenue synergies from the combination of Endeavor’s existing IMG Arena business and OpenBet. “I won't go into the specific number, but it's a large number,” he said. “We own the data and the feed on Arena,” he added. “They own all the content, the player wallets, integrity, et cetera. It's a one-of-a-kind offering that nobody else has in the marketplace.” IGT Investor day analyst reactionCatalyst shift: FY22 revenues were unchanged at $4.1-4.3bn, implying ~$1.6-1a.7bn EBITDA, but for Truist the key takeaway from the IGT investor day was the group’s shift from “a complex (and) levered cash cow to a higher-growth, lower-leverage, investor-friendly vehicle”. IGT also announced a $300m share buyback plan and was evaluating a potential listing of its digital gaming and betting divisions. But the “catalyst path from here is now likely more around execution/earnings,” said Truist. Digital dynamics: Jefferies for its part downgraded IGT to a hold. It said group strategy was not in question, “but with estimates unchanged and limited capital returns” in the near term, “we believe the upside in IGT is limited’. The potential listing of IGT’s digital units was “perhaps the most dynamic aspect” of the presentation and could generate $160m in 2021 revenues and +20% CAGR through 2025. At ~4% of total revenue a separate digital unit “would trade at a considerably higher valuation” than the rest of the group “but its addition to total value is relatively modest”, said Jefferies. Lighten up: Deutsche Bank said investors probably “lightened up into the event given” thanks to the recent strength of IGT shares and “the largely unfavorable trading history of gaming companies in the aftermath of investor day events”. With ~4% revenue CAGR from through to 2025 and $150m in savings to YE 2023, operating margins should rise to 29% from 26%, and operating cash flow to 2025 could reach ~$4bn, with ~$1.6bn of the total for capex and ~$2.4 bn in free cash flow. Churchill Downs analyst noteAt the double: Further to meeting Churchill Downs management, the team at Jefferies said redevelopment work at the group’s racetrack facilities in time for Derby Week 2022, in addition to its HRM projects and regional gaming properties, should enable CHDN to double its EBITDA in the long term. The Derby “should continue to grow on modest capital investment coupled with measured price increases,” Jefferies said, while the new HRM facilities will mean HRM EBITDA nearly doubling to $354m by 2023, from $178m in 2021. As a result, Jefferies raised CHDN 2023 guidance to $2.052bn and $885.3m for revenues and Adj. EBITDA from $2.027bn and $835.6m prior. FY21 and ’22 estimates were unchanged. Earnings in briefEsports Entertainment Group: Net revenues were up 86% QoQ to $16.4m and the adj. EBITDA loss was $2.7m vs. a loss of $5.5m in 4Q21. EEG’s acquisition of Sweden and Spain-licensed sportsbook BetHard was the main reason for its improved financial performance; the group is also hoping to receive its New Jersey license and shortly start trading in the state. CEO Grant Johnson said EEG expects to generate “more than $100m in revenue this fiscal year”. Galaxy Gaming: The Las Vegas-based table games developer saw Q3 revenues increase to $5.2m from $1.8m YoY, adj.EBITDA rose to $2.4m from $36K. The group also agreed to a five-year $60m loan to settle its dispute with Triangulum Partners, the entity headed up by ex-Galaxy chairman and CEO Robert Saucier. As a result, Galaxy will pay Triangulum c$39.5m as settlement. The rest of the funds were used to repay bank loans and expenses, with c$5.3m added to the company balance sheet. Lottery.com: Revenues of $32.2m compared with $1.6m in Q320 while gross profit hit $20.3m vs. 900K. Recall, the 80% acquisition of Mexico-focused affiliate sites JuegaLotto and Aganar was the main reason behind Lottery.com’s increased revenues. The group also completed its listing with the SPAC Tridents Acquisitions. As a result of the transaction, it received $42.8m in net proceeds and converted $60m of debt and interest into equity. Playmaker: The betting and gaming affiliate marketing company saw revenues rise 104% pro forma to C$6.3m while pro-forma adj. EBITDA was up 125% YoY to $2.6m. Trailing pro forma LTM revenue was up 85% at $20.6m. The company said it was seeing the benefit from its roll-up acquisitions of Yardbarker and Two-up as well as its organic growth from its Latin American-facing soccer sites. Recently announced acquisitions include VarksySports, SuperPoker and The Nation Network. “The integration of these companies is well underway.” said Jordan Gnat, CEO. DatalinesIndiana: September topped the sports betting records, with handle up 71.3% to $355.4m. Operators recorded strong margins of 9.5%, generated GGR of $33.9m, the state collected $3.2m in taxes the first time more than $3m have been generated by sportsoboks. Nearly half the handle, $148.6m, was generated by NFL bets, excluding parlays. The latter accounted for 26.2% of all stakes. DraftKings led for share of handle with 40.7%, FanDuel (24.1%) and BetMGM (11.6%) took second and third position. NewslinesQuickfire round: Microgaming has sold its Quickfire international distribution business and portfolio of online games to Games Global, a new entity headed up by former IGT and Lottomatica CEO Walter Bugno and Tim Mickley, ex-CFO of SafeCharge and Playtech. The transaction is expected to be approved in Q222, Microgaming will continue to “supply certain customers with its turnkey games platform” and continue to grow its sports betting technology business. In personnel news, CEO John Coleman has announced that he will step down from his role on 31 December and will be replaced by current Microgaming COO Andrew Clucas. Bragg no more: Richard Carter has stepped down from his role as CEO of Bragg Gaming with immediate effect. Paul Godfrey, chair of the board of directors, has been appointed interim CEO. Bragg founder Adam Arviv will take on the role of special advisor to Godfrey. The group said it had decided to look for a new CEO because of poor share price performance despite “consistently exceeding targets” in the past 18 months. Boot camp: DraftKings has agreed a market access deal with the Boot Hill Casino & Resort in Kansas in preparation for when the state adopts sports betting legislation and during the weekend opened its first retail sportsbook in Connecticut at the Foxwoods Resort Casino. DraftKings has also helped finance a three-year research grant that the non-profit International Center for Responsible Gaming (ICRG) has awarded to researchers at Bowling Green State University, Ohio to look into responsible gaming best practices and deliver peer-reviewed evidence. Spanish merger: Spanish gambling groups Orenes and R Franco have agreed to merge. Both groups operate casino resorts in the country, R Franco is also a slots supplier to the industry. R Franco president Jesus Franco told Spanish media: “Both companies are united by strong personal ties and a long history of success. This merger strengthens us in the face of the challenges we want to tackle and assures us of a promising future.” Superfeed me: Spotlight Sports Group will supply its Superfeed horse racing data to bet365 over the next three years. SSG said the deal will enable bet365 to enhance its horse racing content with data from US and French racing. The data is provided by SSG’s horse racing newspaper the Racing Post and covers all major racing markets. What we’re writingThe fight for market share in the US: for SBC Americas by Scott Longley. What we’re readingToken of affection: Fan tokens are coming to the NFL. From staples to blockchain: The Staples Centre becomes the Crypto.com Arena. Race is on: BetMGM CEO Adam Greenblatt talks to the London Times. On social.@DraftKings & @FanDuel want me to know this is my “final notice” to sign a petition for the constitutional amendment they are backing to expand sports betting in Florida. Calendar
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15 Nov: SPAC off, Wynn seeks online strategy
Monday, November 15, 2021
Wynn Interactive analyst reaction, Disney earnings call sports-betting comments, Codere earnings in brief, Wells Fargo Las Vegas visit, weekly preview +More
12 Nov: Weekend Edition no.22
Friday, November 12, 2021
Deutsche Bank hold on Penn National, GAN, Inspired Gaming, Golden Nugget Online Gaming Q3, SBC Europe Day 2 +More
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Rush Street Interactive, NeoGames, Zeal Network Q3s, SBC Europe day 1 review, Entain Sustain review, Digital Gaming Brand Matrix +More
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Sub-head: Scientific Games, Wynn Resorts Q3s, Fubo TV, Melco Resorts, Raketech Q3s, Playtech counterbid +More
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Tuesday, November 9, 2021
IGT Q3, New York licensees, Full House, Gaming Innovation Group, Bragg Gaming Q3s, DraftKings, Penn National analyst reaction +More
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