DraftKings hits the layoffs button
DraftKings announces restructuring, Evolution earnings, Better Collective’s Catena Media stake, optimism in Macau +More
DraftKings says it is letting go 140 staff as it seeks “operational efficiencies”.
Evolution claims the gap with the competition has never been wider.
Better Collective says it has taken a 5% stake in rival Catena Media.
Optimism abounds in Macau after January data shows real progress.
DraftKings layoffs
The market reacted well to the news of a reorganization that will see 140 jobs go mainly in Europe, Asia and the Middle East.
Buying the dip: DraftKings saw its shares rise nearly 10% yesterday after it said it was laying off 140 staff globally as part of a reorganization. The total represents 4% of DraftKings global workforce of over 3,400 across 13 offices. This includes offices in Sofia, Plovdiv, Tel Aviv, London and Dublin, alongside its main US hub in Boston.
“With an increased focus on operational efficiencies, we are constantly evaluating our teams to ensure they are best positioned to meet our company goals,” a spokesperson told CNBC.
The share price is now at its highest point since October last year.
JMP noted the job cuts came amid a degree of layoff turmoil in the tech sector and with the US online sector focusing more clearly on profitability. Notably, Bally’s also recently announced it was letting go 15%, or about 400, of its global online workforce.
Look on the bright side: JMP said the layoffs were a “positive” as it pointed to DraftKings’ focus turning to expense management and cash flow generation.
They noted it would also help reduce stock-based compensation, which is forecast to hit $584m in 2022.
It will also help with DraftKings G&A expenses. As E+M’s Due Diligence noted in November, this stood at $761m for the 12 months to September.
The JMP team also noted “additional cost levers” including the potential to lower promotional spend and other marketing efficiencies.
DraftKings share price reaction yesterday
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Evolution’s RNG target
Evolution says its live casino lead is wider than ever as it vows to reach RNG growth target.
Mind the gap: CEO Martin Carlesund said the gap between Evolution and its closest competitors had “never been wider” than it is currently, but also insisted it wouldn’t use that advantage in its pricing models with operators. “Yes, the gap has never been wider and that is because we are providing something spectacular,” he said.
“I have always felt we charge far too little for our products, but we shouldn’t increase the price just because we can,” he said. “We’re in a partnership with our operators.”
Copycat tactics: Carlesund added that competitors had mainly resorted to “copying what we do” with regard to product, but that Evolution would not use that to increase its pricing.
He added that the expansion of competitors such as Authentic Gaming and Playtech in the US was positive, but that markets shouldn’t be singled out. “We have huge competitors in Asia and Europe and we welcome it, it’s healthy.”
Evolution’s FY22 operating revenues rose 36% to €1.4bn with EBITDA up 37% to €1bn and margins rising slightly to 69.2%, but at the lower end of 69-71% guidance. Live casino grew by 41% thanks to “good leverage from investments”, but Carlesund once again said he was “not satisfied” with the 5.1% RNG growth rate.
Pump up the volume: Asked why the RNG growth rate had still not reached its double-digit target, he said RNG was “more of a volume business” while delays to the rollout of the company’s One Stop Shop was “later than expected, but still on track”.
100 club: Evolution released 88 new games in 2022, with 15-20 of them for live casino, and plans to launch more than 100 in 2023.
Carlesund said he was happy with the group’s RNG acquisitions, if not the growth rate. “But don’t lose sight; we’ve also added good margins and cash flow”, he said.
Exposure: Analysts at Regulus noted the 47% growth in Asia and now accounting for 33% of total revenues. “Investors curious about the dangers of gray market business practices need only look at 888 (which is a more compliant business, than many in our view), albeit Evolution is one-step removed from customer KYC and AML requirements,” the team added.
They also noted Evolution’s top customer grew its contribution by 69% to ~€200m of B2B revenue for Evolution.
“We suspect that this is 1xbet, which has another 20 live dealer suppliers and it would put it as by far the biggest online gaming business globally,” the team added.
Better Collective’s Catena stake
Super affiliate Better Collective has revealed it has taken a 5% stake in rival Catena Media.
In a brief statement released late yesterday, Better Collective informed the market it had snapped up a 5% stake in rival affiliate giant Catena Media. Catena recently said it had hired Carnegie as a financial adviser and that it had received approaches from third parties regarding the potential buyout of the entire business.
Catena Media this week completed the sale of its AskGamblers business to GiG for €45m.
It said this marked a stage in its aim to focus on North American affiliate opportunities.
Notably, Catena’s share price has risen nearly 47% in the past month, while Better Collective has enjoyed a 24% boost.
Analysts at Redeye said it was a “fair assumption” that Better Collective is interested in Catena Media’s assets.
“Following the recent divestment of AskGamblers and some other affiliate assets, the majority of Catena Media’s remaining assets are focused on North America, which we believe Better Collective could be interested in,” the team added.
🚀 Catena Media and Better Collective enjoy a decent start to the year
Affiliate M&A
Tipstrr buyout: UK sports media group Planet Sport, the media group behind Football365, TEAMTalk and Planet F1, has acquired the sports-betting affiliate Tipstrr for an undisclosed amount. Planet Sport said the acquisition will enhance its sports-betting content and enable it to develop subscription and other monetization models.
Tipstrr is a betting tips aggregator covering more than 20 sports, it processes more than 100k monthly tips and tracks their historical record.
Analyst takes
Entain: The team at CBRE suggested that after “normalizing all the puts and takes”, they estimate underlying online growth of around 6%. “Notably, that growth rate includes impact from the company's affordability actions in the UK,” they added.
On the upgraded EBITDA forecast, they noted this was driven by better-than-expected retail and the pushing forward of its Unikrn launch expenses into this year, as well as the SuperSport contribution.
Looking to FY23, CBRE is assuming low to mid single-digit underlying growth in online NGR, plus high single-digit contribution from acquisitions.
Macau reaction
The analysts welcomed the “rabbit out of the hat” performance from Macau in January.
Let the good times roll: The 82% YoY rise in GGR to $1.44bn suggested the mass market had “recovered significantly” beyond the 52% of 2019 levels represented by the headline number.
They suggested this would mean most operators would see a “meaningful” EBITDA contribution in Q1 and potentially even cash flow positive.
Assuming the recovery continues to gain traction, CBRE said their estimates for this year were likely too conservative.
Wells Fargo noted the January numbers were in line with “encouraging” commentary from Las Vegas Sands at the end of January.
Junk to junket: The demise of VIP will mean the GGR recovery will not need to hit previous volumes to be profitable, suggested Jefferies. With non-VIP profitability being ~3x higher, the team believed the focus will be less on absolute GGR levels and more on the revenue mix and the cost inflation metrics post-pandemic.
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Compliance+More
In today’s issue of Compliance+More there is further analysis of the likely repercussions from 888’s VIP revelations this week. Plus, DraftKings and FanDuel press the case for a New York tax rethink, the potential for iCasino gets an airing in New Hampshire and Pennsylvania is looking into esports betting regulation.
Datalines
Virginia: Sports-betting GGR rose 364.4% YoY to $47m, with handle up 18% to $503m in December. Historical horse racing GGR was up 1% to $31.8m, while casino GGR came in at $14.8m.
Growth company newslines
Stars in their eyes: A new pricing, trading and risk management service for licensed sports, gaming and lottery operators called 10Star, led by Magnus Hedman, has launched its offering.
Biztech Software’s trailblazing EPOS system, Arkle, has been chosen by Star Sports to power its progressive inter-shop functionality.
Newslines
VICI is providing a fourth loan, of $287.9m, to Great Wolf Resorts for the development of Great Wolf Lodge in Mashantucket, Connecticut.
Fifth Street Gaming and partner OJOS Locos Sports Cantina sports bar chain will open the rebranded Ojos Locos Sports Cantina y Casino, formerly Lucky Club, in North Las Vegas on February 6, according to local reports.
Betfred has become the official betting partner of the Vegas Golden Knights NHL franchise.
GeoComply joined the World Lottery Association as an associate member.
GiG says it has entered into a five-year supply deal with an undisclosed retail and online casino operator in Switzerland.
Calendar
Feb 2: Evolution, Penn Entertainment, Boyd Gaming
Feb 6-9: ICE London
Feb 7: The startup month, Red Rock Resorts
Feb 8: Kindred, MGM Resorts
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