Taxing times for Smarkets
Smarkets tax liability, Evolution Q3 preview, analyst takes – LVS and 888, BroThrow’s beef, Startup focus – SharpSports +More
Smarkets says a potential tax liability could occasion a fund raise.
Evolution heads the list of companies reporting this week.
BroThrow points to similarities between its logo and that of ESPN Bet.
The startup focus is all-in-one betting app experience SharpSports.
There’s one for you, nineteen for me.
Smarkets’ tax troubles
The betting exchange and sportsbook upstart admits to taxing times.
Be thankful I don’t take it all: The privately held UK-based challenger betting exchange and sportsbook operator has a tax liability that could force the company to seek further funding, according to its 2022 annual report. The operator has recorded an estimated provision of £12.8m in its accounts.
Smarkets doesn’t say which tax authority is responsible for the potential liability.
According to the report, it operates in the UK, Ireland, the US (Colorado and Indiana) and Sweden and has an operational hub in Malta.
Don’t ask me what I want it for: The report stated that if the tax provision materializes and settlement is demanded immediately in full, “coupled with a significant downturn in revenue” Smarkets’ ability to continue as a going concern “would be dependent on it securing additional funding”.
The company noted it would be “confident” in being able to obtain further funding.
Smarkets last received funding in Jun21 when it raised an unspecified amount in a Series B.
The round was led by Susquehanna Growth Equity, with participation from Passion Capital and Deutsche Telekom.
Not goodbye, just au revoir: The annual report showed revenues falling 11% in 2022 to £18.1m, while operating losses worsened by 6.5% to £17.9m despite “significant” cost-cutting being undertaken in Q4 last year. The company said the efforts, including a cutting of staffing levels, meant it had been “transformed” into a leaner organization with a “clear path to profitability”.
The cost-cutting included a “pause” on Smarkets’ US expansion plans where it launched the SBK Sportsbook in Indiana in Q122.
But the company added “this was not a goodbye to America”. “We are committed to re-engaging with a better and stronger product,” the report said.
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The week ahead
Evolution steps up to the plate on Thursday. A recent preview note from the analysts at Jefferies noted that post-Q2 there was some investor disappointment over what the company had to say about RNG games and the US.
The team suggested neither issue would be satisfactorily resolved in Q3, with “no expectation of a materially improved” RNG performance and still subdued US revenues.
They also noted the potential for more live casino competition in the US; in recent months Light & Wonder and Playtech have opened studios.
But still, with the cash pile growing, the team see the possibility of share buybacks, adding the company has board permission to undertake a 10% buyback, as yet unutilized.
Boyd Gaming reports tomorrow at a key moment in the regional gaming story. In a recent Q3 preview, the team at Truist noted that regional gaming revenues had been “largely flattish” YoY. Specifically for Boyd, the team suggested it will see something of an impact from the recent work undertaken at its Las Vegas Downtown properties.
Also reporting this week are Betsson and Churchill Downs, along with the REITs VICI and Gaming and Leisure Properties.
Calendar
Oct 24: Boyd Gaming
Oct 25: Churchill Downs (e), VICI (e)
Oct 26: Betsson, Evolution, Churchill Downs (call), VICI (call), GLP (e)
Oct 27: GLP (call)
Last call for Reputation Matters: This Thursday afternoon, October 26, Reputation Matters takes place at the Barbican in London featuring contributions from Matt Zarb-Cousin from Gamban; Dan Waugh from Regulus Partners; Nick Rust, ex-BHA CEO; Grainne Hurst from Entain; Stephen Ketteley from Wiggin; Kirsty Caldwell from Betsmart Consulting; and many others.
For tickets visit the Eventbrite page.
Quote of the week
Representative Steve Womack from Arkansas: “People learn by reading. You can learn by observation. And sometimes people learn just by peeing on the electric fence by themselves. That is a situation that is reminiscent of House Republicans right now.”
Earnings in brief
Francaise des Jeux: The state-owned lottery, sports-betting and online gaming operator said Q3 revenues rose 4% YoY to €1.88bn, helped by a 9% jump in sports-betting revenue to €360m. Lottery revenues fell 1% to €1.4bn due in part to a lack of high jackpot draws for Euromillions.
FDJ said it is targeting growth of 5% for the FY and an EBITDA margin of ~24%.
It said the recently completed acquisition of ZEturf made it the fourth-largest operator in sports and online gaming with 10% market share.
The company added the acquisition of Premier Lotteries Ireland is expected to be finalized in November.
Esports Entertainment: Having had a “comprehensive” look at the business, new CEO Alex Igelman said management has identified more than $4m of annual costs that can be taken out while total liabilities have been reduced by $51.8m since Jan23.
While revenue for the year to Jun23 more than halved to $23m, losses were also pared back significantly to $32.3m from over $100m in 2022.
The company recently announced a partnership with Oddin.gg to provide the backend to its esports-betting operations.
Analyst takes
Las Vegas Sands: The announcement of a $2bn share buyback means there is likely to be “significant” share-buying in Q4, suggested the team at CBRE. It is “well positioned to maintain its growth trajectory through development capex and return meaningful capital to shareholders, all while maintaining an investment grade balance sheet”.
The team at Macquarie agreed that the news was a sign of management’s “confidence in the trajectory” of both Macau and Singapore.
But the Jefferies analysts remained cautious.
“The macro context continues to pressure valuations and stock performance, despite better-than-expected results and forthcoming capital returns,” they added.
888: The team at Peel Hunt highlighted how the headwinds of regulatory cramping and poor sporting margins would intersect with the tailwind of the rising customer numbers from Q3. “Revenue will stabilize and grow,” they suggested, pointing to their forecasts for 6% growth in the UK and Ireland business next year.
Recall, last week 888 confirmed the details of its mid-September profit warning, saying Q3 revenues were down 10%.
To back up their optimism, Peel Hunt suggested that with the merger integrations now largely done the “promised benefits” should start to flow through.
The analysts forecasted group revenue to rise 5.5% next year to £1.81bn.
VICI: Having made an investment in bowling via a $433m sale-and-leaseback of Blowero’s 38 entertainment centers across the US, Truist noted VICI’s efforts to continue its investments in non-gaming assets.
Stay in your lane: “The Bowlero transaction is right up VICI's alley,” CBRE predictably posited.
However, the JMP team were less impressed, saying the transaction “somewhat dilutes the asset and credit quality of the operating portfolio”.
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Growth company news
BroThrow has beef: The social sports-betting startup is – quietly – kicking up a stink over what appears to be the clear similarities of its logo and that of the soon-to-launched ESPN Bet. Not only is there the emphasis on the stylized B, but also the choice of color.
👀 Bros from another designer?
Not LinkedIn: Brady Sharp from BroThrow noted his original “good-natured” posting about the logo clash has been taken down by LinkedIn. “We’re reaching out through our network to find the right group to talk to,” he told E+M.
He said the BroThrow logo and branding was the company's “starting point” when it was founded in 2019.
“It’s been on our website, social media accounts, pitch decks, merch, etc. ever since,” he added. “We submitted trademark filings in December 2020 that were registered in March 2022.”
He said the company is “strategizing with our IP counsel”. “But we all agree a conversation is the best starting point.”
Proving a point: The Arkansas-based BroThrow was the subject of a startup focus in May 2022 and Brady claimed the company was “proving what it set out to achieve”. “Our subscription model is thriving and half of our actives are paid subscribers, something we’re very proud of,” he said.
“Our referral program has been working and over three-quarters of our new users are coming from referrals this football season,” he added
“We’re in various stages of strategic dialogue with a small group of companies we’ve intentionally targeted.”
Startup focus – SharpSports
Who, what, where and when: Brooklyn-based SharpSports was launched in 2020 by Ryan Murphy (ex-Google, ex-Stripe) and Sam Coolidge (MS in Comp Sci, ex-pro sports bettor). The two met at Columbia University and following a few small projects and collaborations over the years they decided to build SharpSports, a sports-betting API.
The tool allows developers to read and write data to their users’ sportsbook accounts and empowers many of the industry’s sports-betting apps and tools.
Funding backgrounder: The company closed their seed round in late 2022, having raised $1.8m from the likes of Bettor Capital, Sharp Alpha, EKG, Vesper.us, the founders of Underdog and Betr and other angel investors.
The pitch: “Bettors want an integrated experience between their social, content, streaming and betting,” says Murphy. “SharpSports provides the integration layer so developers can deliver a unified betting experience across multiple platforms.”
The reaction to the product has been “strong”, with SharpSports boasting dozens of customers and serving over 150k bettors.
The company has focused on the US market because of the “strong tailwinds and investment since the PASPA repeal”, adds Murphy.
It recently signed a deal to provide integration services to SportsGrid, WagerScore, WagerWire and several others for this football season.
It also launched a beta for a new embeddable widget that helps bettors explore betting opportunities, and publishers increase affiliate link conversion rates.
What will success look like? “Long term, SharpSports wants to power the intersection of all major sportsbooks and content/tool providers in the industry,” toots Murphy.
In the medium term, it is focused on profitability.
Short term, the focus is on launching a suite of new products that help customers monetize, and hitting $1m in ARR.
Growth company career paths
BettorOff has announced that experienced gaming executive Kip Levin has joined its advisory board. Founder Alex Dubin said Levin will “help spearhead” the next phase of the social-betting startup’s growth.
Levin was previously COO at FanDuel and CEO of the recently closed down Fox Bet Sportsbook.
Career paths
Acres Technology has appointed David Bain as CFO. Bain was previously a senior research analyst and managing director of corporate finance at B. Riley Securities and has many years gaming industry experience.
BetComply, the London-based iGaming compliance advisory company, has named Daniel Brookes as interim CEO. Prior to the move, Brookes served as CEO of Rdentify.
Inspired Entertainment has appointed Ian Freeman as CCO of Virtuals, starting November 16. He most recently worked as chief revenue officer at FSBTech.
Carol Anderson will step down from her role as CFO of Mohegan Gaming at the end of her contract on March 31 next year. The company has begun the search for her replacement.
Datalines
Louisiana GGR increased 1% YoY to $287m, but same-store GGR was down 1.5%. OSB was up 28% to $36.1m and retail sports betting was up 19% to $5.5m.
Newslines
FanDuel is to offer bettors a complimentary three-months’ subscription to NBA League Pass, which provides live and on-demand games, as part of its partnership with the league.
The Mohegan and Soloviev Group bid for a casino in Midtown East Manhattan now includes plans for 1,325 apartments, with ~40% of those affordable housing, according to The New York Times.
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