Kindred sale plans ‘accelerating’

Sale or breakup now more likely, Super Group’s US pledge, Playtech on course, Rivalry’s viral success +More

Earnings+More

May 25, 2023

Good morning. On today’s agenda:

Report suggests recent departures make Kindred sale more likely.
Betway owner will stay the course in the US despite losses.
Caliente and Snaitech provide Playtech’s Q1 growth.
Clucking hell: Rivalry goes viral with ‘chicken out’.

Breaking up is never easy, I know.

Breaking up

Report suggests disagreements over strategic review and subsequent high-profile departures make a Kindred sale more likely.

End game: A report from Bloomberg said Kindred is looking for first round bids to be lodged by the end of the month and that it was disagreements over the strategic review that were the cause of the high-profile executive departures.

Shares in the operator behind Unibet spiked 7% up just prior to close yesterday, valuing the company at SEK30bn or ~$2.8bn.
The news report suggested MGM Resorts (via LeoVegas), was a possible suitor, while Kindred and its advisers have approached Entain, Flutter and Evolution.
Kindred is working with PJT Partners, Morgan Stanley and Canaccord Genuity on its review process.
The report noted that activity investor Corvex has a stake both in Kindred and MGM.
👀 Corvex founder Keith Meister has a seat on the MGM board.

The getaway: Recall, in the wake of the strategic review announced in late April, Kindred has lost its CEO, CFO, CCO and CMO in quick order. Commenting on the recent departures, analysts at Goodbody said that the supposition is that the process is “moving quite quickly”.

🎢 Kindred spikes on sale rumors report

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Staying on

Super Group says US investments are ‘easily funded’.

Across the great divide: The Betway and Spin brands operator will push on with its attempt to crack the US despite losing almost €17m at an EBITDA level in Q1. It currently operates in eight states and has market access to five more, and COO Richard Hasson said the US opportunity remained “too big to be ignored”.

Talking about the planned spend of €70m this year and €80m in 2024, Hasson said the next three to five years are going to “require significant investments”.
“Some of you will look at this investment and ask if we have ever spent that much in a single market, but we don’t look at it that way,” he said.
The amounts involved are “manageable” and “easily” funded from cash flow.
Super Group’s cash at quarter-end stood at €246m, down 3% YoY.

You spin me round: Still, Hasson admitted Super Group’s focus globally remained iCasino, accounting for over 60% of Q1 total revenues of €339m, and would concentrate on OSB and iCasino states in the US. To that end it will be launching Spin brand iCasino operations in New Jersey and Pennsylvania in the coming months.

Super Group is targeting its first quarter of US EBITDA profitability in 2023 with FY profitability the following year.
“We’ve shown all over the world that we do not require significant market share to achieve profitability and the US is no different,” Hasson added.

Oh Canada: Revenues from North America were down 13% YoY to €130m, with the company blaming the transition to regulated operations in Ontario and FX fluctuations. EBITDA was €35m, down 46% YoY, or €51.4m ex-US.

Better news came from Europe, up 71% to €56m despite not yet being live again in Germany and the Netherlands.
Middle East and Africa was also up 35% to €88m.

Silence in court: Super Group said nothing on the call regarding the legal action launched by investors last week over its SPAC merger in 2022.

As E+M wrote on Monday, a shareholder in the Sports Entertainment Acquisition Corp. SPAC, which merged with Super Group, filed a complaint in the Delaware courts late last week alleging a lack of disclosure at the time of the 2022 listing.

Playtech upbeat

North America remains in focus for iCasino and sports-betting supplier.

Feeling the beat: “Strong growth” at Caliente and the announcement of a new partnership with Hard Rock were the highlights from a first quarter that also saw tailwinds, according to a brief Q1 trading statement.

Recall, as part of the deal announced in March, Playtech has taken an equity stake in Hard Rock Digital in exchange for $85m of investment.
Playtech said FY EBITDA would be “slightly ahead of expectations”, driven by live casino growth and further post-World Cup B2C progress via Snaitech in Italy.
At the time of its full-year report, the group set out a medium-term B2B adj. EBITDA target of €200m-€250m and B2C adj. EBITDA guidance of €300m-€350m.

If you’re happy and you know it: The group said measures aimed at its DACH-focused brand HappyBet were “beginning to take effect”, with EBITDA losses reducing slightly during the period.

Rivalry goers viral

Esports-focused operator enjoys record Q1 revenues, helped by iCasino launch.

Evidently chickentown: Extolling Rivalry’s own version of cash out, called ‘chicken out’, Rivalry CEO Steven Salz said the promotion had gone viral in CS:GO circles where chickens are a “visual motif”. The company successfully hijacked a CS:GO event in Brazil after dressing someone up in a chicken suit.

“This character is increasingly becoming beloved in the region,” he said.
Talking of the strategy, Salz said Rivalry works with hundreds of content creators and esports teams.
“We've put out many, many, many campaigns like chicken guy that are very word of mouth and virality driven.”
He noted that marketing costs were down 5% YoY in Q1.

Salz was talking after Rivalry delivered revenues up 150% YoY to C$12m, while net losses were halved to C$3m. He said the company was demonstrably executing on its strategy of reaching millennials and Gen Z consumers.

“Rivalry behaves much differently than our industry peers because we don't look at our business purely in the context of sports betting,” he said.
Balancing act: CEO Steven Salz said Rivalry had foregone the potential for outsized iCasino growth after making a decision to offer games with a higher return-to-player.
He added that a low RTP game would mean Rivalry would make money quicker upfront but at the cost of higher churn.
“A big part of our brand is the way that we handle and treat users in a manner that is more consistent with this being a casual product,” he told analysts.

Rivalry has $16m of cash on the balance sheet, no debt and welcomed a $10m investment from Pinnacle in late April.

Earnings in brief

CIRSA said debt reduction remained the top priority as its leverage ratio dropped from 4.1x to 3.9x EBITDA within net debt at €2.25bn at quarter end. Revenues rose 29% to €482m and EBITDA was up 28% to €118m.

Online gaming and betting revenues rose 56% to €16m, slot revenues from Spain were up 13% to €41m and casino revenues increased 32% to €91m.
Spain accounted for 51% of group revenues.

Scout Gaming: Revenues fell 3% to SEK6.5m while EBITDA losses were trimmed by 24% to SEK9.4m. B2B revenues rose 225% to SEK5.4m.

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Newslines

Lottery.com said it had received notice of non-compliance from Nasdaq over its failure to release Q1 earnings.

Calendar

May 23-25: CasinoBeats Malta
Jun 8: Gaming in Holland

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