26 May: Gamenet bemoans lack of licence visibility
Gamenet/Lottomatica Q1, Playtech AGM statement, Esports Entertainment M&A, US iCasino cannibalisation and regulation +breaking M&A
Welcome. This morning we have the latest news from Gamenet, its first quarterly results since acquiring the B2C operations of Lottomatica. Staying with Italy, Snaitech owner Playtech also updated the market on the sale of its financial trading division for a headline $210m. Esports Entertainment snapped up Swedish sportsbook BetHard for €16m and analysts at Deutsche Bank have delved into whether iCasino eats into offline casino business and if this puts further regulation in doubt. But first some breaking M&A…
Breaking news: SG acquires SportCast
Scientific Games has acquired the betting engagement, tech and pricing specialist SportCast for an undisclosed amount. SportCast has been active since 2013 and is widely credited with being behind the launch of the Bet Builder feature, which “allows players to build bets across multiple markets on a single game with instant pricing.” The deal will enable SG to focus on US pre-match and in-play bets and same-game parlays. Keith O'Loughlin, EVP Sports for Scientific Games, commented: "SportCast's technology and platforms will help us fuel the next wave of our data-driven, global sports expansion.”
Gamenet/Lottomatica Q1s
The top line
Group revenues were down 61% to €57m, pre-tax losses were €32.7m compared to profits of €11.7m in Q1 2020. EBITDA was down 73.9% to €11.3m, all figures were caused by lockdowns, the group said.
Online accounted for 99.7% of the group’s revenues at €56.9m and growth of more than 100% YoY. Online EBITDA was up 65.2% at €21.2m and €45.1m as part of the new Lottomatica structure incorporating IGT’s B2C machines acquired this year.
Net debt was €591.4m, multiple rising to 7.5x due to lockdown and no EBITDA contribution from retail. The group has no plans to refinance.
Numero uno: The acquisition of IGT’s B2C machines division for €950m was completed on 10 May and “creates one of the largest industry players in Europe with aggregated 2019 revenues of €1.6bn and €323m EBITDA,” said CEO Guglielmo Angelozzi. The deal increased Lottomatica volumes and share in all segments and “when you neutralise the COVID effect, it adds diversification and boosts our online presence to make us number 1 in Italy.” The group has planned for synergies of €54m within 24 months, implementation is “fully on track”.
Betting on licences: Italian operators are hoping to find a solution to the issue of gambling licence renewals, Angelozzi said when asked about the continued uncertainty around renewals. The permits are valid for nine years and operators pay for them upfront over a three-year period to spread out the cost. There have been frequent interactions behind the scenes with the regulator and Ministry of Finance, but so far there had been “no updates, approval of any law or decree” confirming renewals. Angelozzi said all stakeholders acknowledged that there had “to be an extension of the concessions and they should be free, to compensate for lockdowns.” The government however wants to include any decree in budget-related legislation.
“Betting concessions were due to be awarded in 2016 but in 2021 it’s still a case of paying annually,” said Angelozzi. “Gaming machine licences are set to expire in 2022, but the scenario is the same as with betting.”
Asked if Lottomatica and others could be on the hook for big upfront payments, he replied: “We can’t know, but historically that hasn’t happened and currently tenders can’t be run anyway.”
Taxing times: With retail outlets closed for the past year, the Italian government has deferred payment of gaming taxes, Gamenet will pay its tax instalments from May-June in November-December. When asked about the impact of the payments on cash flow, CFO Mario Bruno said the total amount for the year was set at €180m to be paid in six instalments, with “the next €60m to be paid in November-December.” This will have a negative impact on the company’s cash position, which will be partially offset by the county re-opening throughout June and Q2. As lockdowns ease, Q3 and Q4 are expected to build on Q2 improvements, added Bruno.
Playtech AGM and financial division sale
Finalto countdown: Playtech announced the anticipated sale of its financial trading division for $210m to a consortium led by Barinboim Group and backed by Leumi Partners Limited and Menora Mivtachim Insurance Limited. The structure of the deals will see Playtech receive $185m upfront, with a further $15m deferred for up to two years and a further $25m dependent on trading post-sale. (And yes, that doesn’t add up to $210m). The sale price is equivalent to 24 times adjusted FY2019 EBITDA, the last full year before the one-off boost of the Covid-affected Q120. The price is 3x 2020 adjusted EBITDA. After $139m of restricted cash is transferred with Finalto, Playtech’s net proceeds will be $61m. As and when the deal is completed - which remains uncertain due to current conditions - Playtech will use the cash to pay down debt.
Strength in numbers: Playtech also issued an AGM trading statement where it said strong online performances for B2B and Snaitech meant that as April-end it was ahead of EBITDA expectations. “This outperformance for the first four months provides comfort for the H1 outlook despite the loss of retail revenues in Italy that will impact Q2,” the company said.
Grass is greener: Looking to the US, as announced in February, the company pointed to its strategic multi-state, multi-product deal with the Greenwood Group, the company behind Parx, and had subsequently launched in Michigan with further unspecified launches this year and next. It added that it has plans to build live casino studios in Michigan, New Jersey and Pennsylvania. In LatAm it said Caliente continued to show strong growth while WPlay in Columbia was “building momentum.”
Shutting up shop: Delays in the reopening of the Italian retail market (as with Gamenet/Lottomatica above) were the blot on the four months of trading so far. The closures are now expected to be continued until the start of the first half. CEO Mor Weizer said online remains an “under-penetrated market”.
“The pandemic has significantly accelerated Snaitech's transition to the higher-margin online business and we expect the strong growth to continue.”
US iCasino: sowing regulatory doubt and eating into land-based activity?
The growth of US iCasino this past year might have a counter-effect on future regulation and hints at cannibalization of land-based activity, according to a report by analysts at Deutsche Bank.
Early days: The report avoids drawing definite conclusions because the US market is still in its earliest days, but the growth of NJ iCasino GGR just as “casinos in PA, NY, and NJ closed” prompted DB analysts to look deeper into the issue.
By the numbers: NJ iCasino GGR has grown 92% in the past 12 months, while Pennsylvania iCasino GGR averaged around $10m monthly in the first seven full months post-July 2019 launch and prior to the pandemic. That figure has reached $65m in monthly GGR over the last 13 months post-pandemic, states the report. GGR at NJ traditional casinos fell 17% in March and 9% in April relative to 2019. In PA, March was down 12% and April up 1% relative to 2019, which is “reasonable in isolation” and because of the pandemic; but when compared with other states “across the Northeast, Midwest, and Southeast, they stand out a bit,” say the analysts.
As a result, iCasino in both NJ and PA could be hampering offline activity “in light of the overwhelmingly strong performance in other drive-to-market states”; and as land-based casinos gradually re-open, “these findings could be evidentiary of some cannibalization of brick-and-mortar revenue from the iCasino vertical,” the analysts add.
Let’s get physical: When it comes to iCasino market share and player loyalty, the physical presence of brands like Rivers or MGM will be much more decisive than for sports betting, because “the consolidation of play with the local bricks-and-mortar facility is considerably more of a driver for the customer.” “Dominant iCasino market shares are likely to skew towards operators whose land-based facility is closest to the largest population bases.” The Rivers Philadelphia casino is a case in point: “Despite having no DFS base, limited sports betting traction, and a less recognizable brand, (it) commands a healthy iCasino market share, as the license represents skins linked to both Rivers Philadelphia and Borgata, which, like most Atlantic City casinos relies heavily on Philadelphia / Philadelphia Suburbs customers.”
Regulatory doubts: These trends could impact the pace of regulatory efforts for iCasino, which has been one of the key arguments for future favorable legislation and industry growth.
“The theme of the pandemic making iCasino legalization a likely source of funds for states, (is) far less likely now, post-bailouts, than perhaps was the case 6-12 months ago, especially given the lack of progress by frontrunner states, namely Indiana and Illinois. As such, we think the rollout of iCasino is likely to be a lot more challenging than most expect, and far more challenging than sports-betting.”
EEG acquires Bethard
Harder they come: Esports Entertainment Group has agreed to acquire the online sportsbook Bethard for €16m/$19.5m from parent company Gameday Group. EEG will also pay a 12% net gaming revenue share for two years and as a result of the transaction is raising its 2022 revenue guidance to $100-$105m. Recall, at the time of its Q3 results EEG announced FY 2021 guidance of $18m and $70m for 2022. Bethard generated $31m in revenues in 2020, it is licensed in Sweden and focuses on Scandinavian and Eastern European markets. EEG also counts UK bookmaker Sport Nation and esports website Vie.bet in its portfolio and its application for a New Jersey gaming license was approved on Monday. Both SportNation and Bethard operate on the SBTech (DraftKings B2B) platform. Grant Johnson, CEO of EEG, commented: "With this transaction, we expect to gain two new gaming licenses, including one in the strategically important Swedish market. At the completion of the license handover we will have six tier one licenses."
New Jersey Q1s
No stopping the Borgata: The Garden State’s hotel-casinos recorded net revenues of $564.7m in Q1, a 5.4% drop YoY. Gross operating profit increased 221.9% to $95.5m, occupancy rates were 52.4%, YoY this was 15.7 percentage points lower than in Q1 2020. Occupancy rates for 2020 excluded the duration of the hotel closure period of 16 March-July 2020. Borgata led the rankings with $120.6m in net revenues, Hard Rock was second with $89.4m and Ocean Resort pipped Tropicana to take third spot with $60.7m.
Newslines
Bally’s first rodeo: Bally has announced it is now live with its sports-betting debut in Colorado, Bally Bet. The company said the beta launch will be accompanied by limited marketing and will focus on the deployment, testing and refinement of the app and its content. Bally hopes to launch in three further markets this year.
FD-AP odds exclusive: FanDuel will be the official odds provider for the Associated Press news agency. The length of the agreement has not been specified, FanDuel odds will appear in AP’s daily sports and betting odds features, game previews and other sports stories and will have integrated FanDuel widgets. Yahoo reports that it’s unclear how often AP has entered into such deals to feature paid-for content in its news reporting. Senior AP management emphasised that it will retain editorial control of all content.
Learning the slingo: Gaming Realms has obtained a license to offer its products, in particular the popular Slingo Originals game, to operators working in Pennsylvania. Gaming Realms expects to go live in Pennsylvania and in Michigan in the near future.
Don’t look now: Webis has announced that its WatchandWager business has received a license to begin ADW operations in West Virginia. WatchandWager can now accept wagers from 25 states where online pari-mutuel betting is legal.
Refinancing: Boyd Gaming announced that it has priced its previously announced offering of senior notes due 2031 and increased the size of the offer to $900m from $750m. The notes will bear interest at a rate of 4.750% per annum. The proceeds from the offering will pay down existing debt.
What’s a Grecian urn? Betsson has announced it has gained licenses to offer sports-betting and online gaming in Greece and will be launching under its own brand name in a matter of weeks. Both licences are valid for seven years. The company said it will be launching with products designed to appeal to greek punters including Betsson 500k, a supper-accumulator game, and Betsson+ where players can create their own bet on the football player they choose in all big events this summer.
Calendar
2 June: Accel investor presentation
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