Weekend Edition #91

GAN to seek what’s best for shareholders, Playtech’s LSports stake, RSI exits Connecticut, Entain TAB NZ deal +More

Mar 31, 2023

Good morning and welcome to the Weekend Edition. On the agenda today:

GAN announces strategic review, admits to “suboptimal” performance.
Playtech takes a stake in sports and betting data firm LSports.
Rush Street makes an early exit in Connecticut.
Entain signs partnership deal with TAB New Zealand.
On the Jobsboard this week: casino director, COO and Asia regional manager.

Breaking news

Kentucky became the 37th state to legalize sports betting after HB 551 passed the Senate by 25 to 12. It now heads to the desk of Gov. Andy Beshear who has already indicated he will sign on the dotted line. See Compliance+More next Tuesday for more detail.

GAN’s ‘fewer fires’ refocus

CEO Dermot Smurfit admits to “suboptimal” performance as company begins a rethink.

Medium cool: The good news for GAN came from Coolbet in LatAm and the WynnBet contract agreement for GAN Sports. The bad news was that other B2C markets, notably Ontario, were too competitive to warrant further investment and in iCasino provision where the Super RGS product is being outgunned on content.

Smurfit said the business was now focused on segments where it could “truly win”.
“Essentially, we are putting more of our wood pile behind fewer fires to ensure success,” he said.
He confirmed the exit from Ontario, “the most competitive market in the world”, where the “sheer number of entrenched operators” didn’t present a clear path to profitability.

Tijuana taxi: Smurfit said that in B2C the ambition was to be a “podium player” in the LatAm region, including Mexico where it has recently launched. B2C rose 19% in Q4 out of total revenues of $37m, up 21%, while B2B was up 26% to $14.1m. Adj. EBITDA improved to minus $0.4m (from minus $6m).

GAN has amended its content distribution deal with Ainsworth, which Smurfit said would save the company $15m.
It took a $137m non-cash impairment charge for the quarter related to that deal, tipping the company to a net loss of $147m vs. $12.6m last year.
Following the launch of WynnBet in Massachusetts in Q1, the company hopes to launch sports betting with Red Rock later this year.

Uh-oh: On the call, CFO Brian Chang warned of the potential of GAN violating one of its financial covenants associated with a $30m term loan agreed in April last year with Beach Point Capital, which could see the lender accelerate the debt.

“It is possible that we could have an insufficient cash flow to support our operations for a full year,” Chang said.
He added GAN would also take steps to “address its liquidity needs”.
Due to the strategic review, Smurfit said the company was unable to provide guidance for the year but stated Q1 revenue would be between $37m and $39m.

🎢 GAN falls 12% in AMC trading following a 14% rise on the day

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Playtech’s LSports investment

Annual report reveals Playtech has acquired a 31% stake in sports data provider LSports.

L of a deal: Buried in the notes to Playtech’s recent 2022 annual report, the company said it had bought a stake in the Israeli-based sports and betting data provider for €37m, valuing the business at ~€121m.

Playtech has an option to acquire an additional 18% of the business within the next three years, or should LSports be involved in any corporate transaction taking its stake to 49%.
As part of the same transaction, Playtech first bought a stake in, and then sold in its entirety, Statscore to LSports in November for €7.5m.
LSports has been active since 2012 and is headed by co-founders Idan and Dotan Lazar.
Playtech said in its annual report the acquisition represented an “attractive opportunity to increase its footprint in the growing sports data market segment”.

RSI cuts CT Lottery losses

BetRivers parent has opted to wind down its deal with the Connecticut Lottery.

It’s for the best: Rush Street Interactive has called a premature halt to its 10-year deal to provide the CT Lottery announced in Aug21, saying it was in the company’s “best interests” to wind down the partnership.

RSI was providing sports-betting systems for both digital and physical outlets.
It will continue to operate on behalf of the Lottery until a replacement is selected, with a transition expected in H223.

The EKG Line suggested this week that the $100m RSI committed to the deal was agreed against a different market backdrop and isn’t justified by the returns, given the lottery returned only ~$20m of NGR in 2022.

The analysts noted RSI is scaling back its US OSB ambitions and hasn’t “aggressively” contested new state launches, such as in Ohio and Maryland, and declined to take up its license in Massachusetts.

Entain’s TAB NZ deal

The betting and gaming giant has been selected as the preferred partner for TAB New Zealand.

Share the wealth: The new 25-year agreement will see Entain make payments of up to NZ$120m (or ~£61m) in return for an ongoing profit share. The agreement, which is subject to ministerial approval, will mean guaranteed payments to TAB NZ of NZ$1bn in the first five years, with NZ$160m due this year.

The press release said Entain was selected due to its operational expertise, the cultural alignment and its commitment to uplifting TAB NZ’s harm minimisation and responsible gambling efforts.
Analysts at Jefferies said the deal provided long-term access to a “difficult-to-penetrate” market.
As reported earlier this week by E+M, this might not be the only deal Entain is pursuing in Australasia with it thought to be now the lead bidder for PointsBet’s Australian trading arm.

ICYMI

As reported in Compliance+More this week, making waves for all the wrong reasons was William Hill, now part of 888, which reached a regulatory settlement with the UK Gambling Commission for a whopping £19.2m. The Commission’s CEO said the failings were so “widespread and alarming” that consideration was given to license suspension.

The subject was also addressed this week by Fintan and Jon on the Gambling Files podcast, as well as important issues such as Heathers: The Musical.

Also in C+M, there was good news on the OSB front as both North Carolina and Kentucky looked more likely than not to pass legislation.
On Monday, Compliance+More releases the first of its new monthly editions, the Career Path. Sign up here.

In Sharpr this week, there was a report on some more Entain news as the company announced a partnership between its Unikrn esports-betting brand and esports event organizer Blast.

In Earnings+More this week, the data month looked at the headway FanDuel is making in the area of iCasino, suggesting the company is making good on its promise to increase its market share in that vertical.

Also this week, DraftKings’ pay awards to its founders grabbed the attention, including the guaranteed cash CEO Jason Robins gets to fund his personal security and private jet usage.

XLMedia’s shift continues

The company points to its recent transformation from a casino-led to predominantly sports-betting affiliate provider.

Moving on: A move in the past three years from having zero exposure to the regulating North American OSB market to working with operators in 19 states as of Q1 this year highlights how much the profile of the affiliate provider has changed.

North American sports revenue more than doubled to $46m, or 65% of total revenues of $72m, up 24% YoY. Adj. EBITDA rose 18% to $18m.
In Europe, sports-related revenue fell 20% YoY to $7.6m and gaming was down 38% to $14.3m.
Q1 revenue was in line, helped by the launch in Ohio, while CEO David King said Massachusetts would be a “slow burn”.
The sale of its personal finance division continues.

Analyst takes

Wynn Resorts: Deutsche Banks suggested the value of Wynn’s UAE project was not yet being reflected in the share price and said the current low valuation multiple indicated a “lack of conviction in stabilized out-year forecasts”.

Regionals: February regional GGR grew 6% YoY and, assuming a positive March picture, the implication is for Q1 beats of between 1% and 8% across the gaming universe, suggested Macquarie analysts. “Moreover, we expect margins to be strong as well, at least for another quarter.”

Boyd Gaming: Having met with management in Las Vegas, JMP suggested the online strategy was “coming together”, even though the migration to the Pala Interactive platform won’t complete until Q4.

Digital growth will continue to come from OSB launches and Boyd’s skin revenues. JMP said it expected Boyd to generate $46m of online EBITDA in 2023.

Red Rock/Golden: JMP also met with the management at the pair and suggested that each had land banks that were “”underappreciated”. Red Rock, in particular, has parcels where gaming will be permitted.

Golden Entertainment, meanwhile, will continue to de-lever following its sale of the distributed gaming business for $322m. JMP suggested a REIT sale-and-leaseback on the Strat could raise $500m-$600m.

Earnings in brief

Allwyn: The European lottery giant, which now owns Camelot UK and also recently increased its shareholding in OPAP, reported a 24% YoY rise in FY22 revenues to €4bn, with adj. EBITDA rising 21% to €1bn. An earnings call will be held on Monday.

FansUnite: Revenue rose fourfold to C$27m for the year, helped largely by the contribution from the Betting Hero affiliate business. Recall, FansUnite recently completed a C$3m placement led by Tekkorp.

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Newslines

The Las Vegas Super Bowl Host Committee is pushing for the NFL showcase to be held in the city every four or five years, according to reports.

DraftKings has launched DK Horse, its first horseracing-specific app, in 12 states. More state launches are expected ahead of the Kentucky Derby on May 6.

MGM Resorts is investing $110m in a refit of the Spa Tower at the Bellagio.

Sportradar has integrated its digital marketing tool ad:s with Snapchat, thus enabling sportsbooks to target advertising the platform’s 750 million-plus users.

Hank Couture has joined Fanatics Betting & Gaming as its new COO. Couture joins from delivery provider DoorDash.

Better Collective’s latest media partnership is with Nigeria's leading news media group, Punch.

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