Feb 11: Weekend Edition no.33

Kambi Q4, LeoVegas Q4, MGM analyst update, earnings in brief, sector watch - affiliates +More

Feb 11

It was a big week for the Scandinavian listed sector with all the big names reporting. All have their own issues; the operators, most clearly, are fighting fires in regulated territories while Evolution is under attack from short-sellers and the future of Kambi is uncertain following the news that Kindred is seeking to loosen ties. The impression formed by recent results is of a corner of the online world still transitioning from an old business model (dot com) that is no longer fit for purpose. To coin a phrase, the Scandis lost an empire and are struggling to find a role.

Call me if you get lost:

Kambi Q4

Revenues down 26% to €34.9m, operating profit down 68% to €7.1m.
FY21 revenues up 38% to €162.4m, operating profit up 77% to €57m.

When we were kings: The migrations of 888 and DraftKings to their own platforms and the impact of various client exits from the Netherlands were behind the Q4 revenue drop. Kambi has swapped out DraftKings with two tribal operators and Affinity Interactive, but more key client losses loom with Penn/Barstool set to switch in Q3. More recently it has signed MaximBet (which is live in Colorado), and NorthStar Gaming which will launch in Ontario.

Instrument of torture: With Kambi now given the right to buy back the “unusual” convertible bond arrangement with founding client Kindred, it leaves the company as the master of its own destiny for the first time. That said, CEO Kristian Nylén said the company was happy to “leave the convertible in place” for now.

Asked whether any clients had expressed a worry about an imminent bid approach, he indicated that they were keener on having less of a reliance on Kindred.

CEO Kristian Nylén: “Compared to any other company in the industry, we were the only one with this kind of instrument in place.”

Crystal ball: As to the continuing relationship with Kindred, Nylén pointed out that while he hoped it would continue to be a partner beyond the new extension to 2026, “it’s a very long time until 2027”.

Fanning the flames: Asked about the rumors of a deal with Fanatics, the sports-apparel company said to be eyeing up a sports-betting entry, Nylen was blunt: “If I could say something, you would see it in a press release.”

Super Bowl betting

On Wagers.com: Why the handle figure for the Super Bowl this Sunday will hold real significance. Wells Fargo issued a note this morning suggesting U.S. regulated handle might top $1bn.

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Leo Vegas Q4

Revenue was flat YoY at €98.2m and the same with EBITDA at €11.6m.
FY revenue of €391.2m up 1%, adj. EBITDA down 19% at €44.6m.
The company has applied for licenses in the Netherlands and Ontario.

Coulda, woulda, shoulda: The good news was that the percentage of net gaming revenues from regulated markets rose to 74% from 67% this time last year. The bad news was that this was due to the exit from the previously grey market in the Netherlands.

LeoVegas fell back on the positive-but-for-the-nasties argument saying that ex-Netherlands and Germany, revenues would have been up 24%.

Gustav Hagman, CEO, on the Netherlands regulation: “I don’t have much to say. (It’s an) example of how you shouldn’t do it. Look to Canada for how you should do it. They (the Dutch) closed down the market, it was turmoil for operators, it’s not the best way to regulate a market; but they’re doing it, (and) we’re happy about that.”

Swede child of mine: In Sweden, LeoVegas said it led the market for mobile casino and its Expekt brand’s sports-betting revenues were up to 12% of total revenues (up from 9% in Q420). Hagman welcomed Sweden’s B2B licensing process saying it would help with channelization.

Big birds flying across the sky: On a more positive note, the group said adaptability to the changing regulations in Germany and Netherlands had meant a renewed focus on Spain, Italy and Ontario. The group has been active in Canada for the past three years and said Leo Vegas was the number 3 icasino brand in the market.

Playtech takeover saga

Mexican stand-off: The Times reported on market chatter Thursday that the Tekkorp de-SPAC with Caliente offshoot CaliPlay is nearing completion (WE+M sources suggest the news is imminent). The listing of the new entity in New York would crystallize Playtech’s stake in the business and value it at £700m at float. Playtech is still waiting on news of a potential bid from a consortium being put together by TTB, an Asian-based investment firm.

MGM analyst update

‘Beat, buyback, repeat’: The team at CBRE said that while the Omicron surge had caused some disruption, the long-term outlook remains unchanged. “Demand began recovering in February with occupancy tracking in the mid-70% range while March occupancy is back in the 80s,” they suggested.

That said CBRE said it will be tough to overcome the January occupancy gap mentioned on the call Wednesday and therefore expect EBITDA in Q122 to step down from the Q4 level.

Loadsamoney: The team noted MGM is “flush with cash” with around $9bn at its disposal. Share repurchases were front of mind with CFO Jonathan Halkyard and CBRE said total share buybacks since they were reinstated late last year will likely reach $3bn by the end of 2022.

Analyst at CBRE: “Meanwhile, MGM is still well capitalized to pursue major growth initiatives in New York and Japan, both of which could be significantly accretive to shareholder value. We believe there is too much potential in front of MGM to get off the boat now.”

Gaming app data

Appy hour: Looking at app usage data from Apptopia for January, Wells Fargo said the DAU stats for DraftKings, BetMGM, Caesars, FanDuel and Barstool suggest sports-betting handle in the U.S. rose 30% MoM to $9.6bn. This suggests it will beat the previous monthly record of $7.5bn in Oct21. Stripping out New York’s known $1.6bn, it implies ~8% MoM growth.

MoM stats

🚀 Caesars up 98% | 🚀 FanDuel up 25% | ⬆️ DraftKings up 15%

⬆️ BetMGM up 13% | ⬆️ Barstool up 6%

Sector watch - affiliates

New Year fireworks: Gambling.com started the year with a bang with two acquisitions; the deal for RotoWire worth $27.5m all-in, including $7.5m of deferred payment and the NDC Media buyout which, if all the earnout targets are hit, will be worth $69m.

Building a position: Both deals signal the importance of the North American market in affiliate-land. RotoWire is a U.S.-focused fantasy sports offering while NDC’s BonusFinder.com’s largest territory is Canada. Meanwhile, Gambling.com’s existing business will, according to this week’s trading update on Q4, see 90% growth in its North American segment.

Jefferies: “Gambling.com expects to provide a platform for BonusFinder to drive meaningful growth in the U.S. The bottom line is that the company expects the deal to be immediately accretive.”

Nuts! Joining Gambling.com in chalking up some early 2022 M&A, iGamingNuts, the Eastern Europe-to-Latin American unlisted affiliate, also strengthened its roster with the buyout of two Polish-facing sports-betting sites for an undisclosed sum. It’s a fair guess, given the backdrop of M&A activity sector right now, that iGaming Nuts has been the subject of takeover approaches itself.

Tuck it up: Looking at the Gambling.com trading update and its recent acquisition news, the analysts at Truist suggested there would be more deals involving the company late this year. Indeed, the likelihood is that once again the headline for the sector this year will be dominated by M&A. As noted in January, larger-scale M&A is more likely than not.

Newslines

Access fee: Fubo Gaming has signed a market access agreement with Caesars Entertainment that will enable it to operate in Missouri, Mississippi and Louisiana. Fubo Gaming’s sportsbook is currently live in Iowa and Arizona and the group has now secured access to a total of 10 states.

Licensed to IL: MGM officials reaffirmed Wednesday planned launches for Illinois, Ontario and Puerto Rico. The Illinois launch comes more than a year after its major rivals entered the market.

Buck up: Betway has signed a multi-year betting partnership with the NBA's Milwaukee Bucks. Betway is part of Super Group, which went public recently on the New York Stock Exchange and its latest partnership with the Bucks is part of its ongoing push into the US market. Presumably, there will be a provision in the contract around cruelty to cats.

Ring the changes: FSB has been named as the new sportsbook technology provider for the Hungarian State Lottery-backed SZRT Slovakia. The provider will power SZRT Slovakia’s newly-launched betRing sportsbook.

Ball game: BallStreet Trading has teamed up with Sporttrade (subject to a recent startup focus) for a $50,000 free-to-play live event for this weekend’s Super Bowl. Other partners include financial media brand Litquidity, and gaming entertainment company ESE Entertainment Group.