May 17: ‘We have a strong hand in Cali’, says GAN

GAN Q1, DraftKings analyst update, New Jersey, Louisiana, Massachusetts data +More

Earnings+More

May 17, 2022

Good morning. On the agenda for today:

‘Challenged’ GAN offers up positive B2B and B2C numbers.
Jefferies argue DraftKings is not facing a cash crunch.
The New Jersey data illustrates FanDuel’s success.

Disco Gardens. Sign up now:

GAN Q1

Revenue up 38% to $37.5m, adj. EBITDA rises sixfold to $3m.
B2B up 2.3% to $13.1m, B2C up 91% to $24.4m.

Want, settle for, get: While maintaining 2022 guidance on revenues of between $155m-$165m, CEO Dermot Smurfit said GAN’s previously stated revenue target for 2023 was now “more aspirational” and “contingent” on B2B market openings, including California and a hoped-for successful launch of Coolbet in Mexico.

CFO Karen Flores said the guidance was affected by the “cadence of international launches” with one market launch now penciled in for this year (Mexico) vs. the previously planned two.
Smurfit said the hopes for B2B remained an “unshakeable central tenet” for GAN’s strategy.
Flores also noted that 2022 was focused on “cash management”. Recall, GAN recently raised a $30m term loan to “provide incremental balance sheet flexibility” and provide for the potential for share buybacks.
She noted GAN hoped to be free cash flow positive by Q4. “We’re not quite there yet,” she said.

I stopped into a church: CEO Dermot Smurfit said GAN “would still have a hand to play” in sports betting in California if the mobile ballot measure went through but said that for GAN’s purposes, he was “particularly positive” on the tribal initiative.

Noting their existing relationships with regard to simulated gaming, Smurfit said GAN “(leans) in favor of the native American initiative on the basis of those fully developed long-term relationships that we have”.

Canadian dry: GAN has launched both B2B (with FanDuel) and B2C in Ontario with Coolbet’s “successful” transition from dotcom to dot-country. The company also recently launched the PlayEagle site in Michigan with the Soaring Eagle tribe.

No surprises: Analysts at Macquarie said that they believed the “most important factor for rebuilding investor confidence and the multiple is eliminating quarterly surprises, which was achieved in Q1”.

Jefferies: “The path for GAN holders has been challenging at a minimum, although we continue to believe there is value upside in B2B, particularly in the CA legalization where GAN should be a meaningful participant.”

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DraftKings analyst update

Burning up: Jefferies say the “funding crunch” that some suggest lays behind the recent price weakness “is an unlikely outcome”.

The crunch as outlined elsewhere points out that DraftKings has $1.77bn of cash and a $1.27bn convertible that doesn’t mature until 2028.
They said cash burn would be approx. $950m between Q222 and Q423 with an additional $675m should California open up.

The Nugget: Jefferies believe the Golden Nugget brand will fare better than DraftKings at acquiring gaming-only players given the bricks-and-mortar brand presence and database.

“We thus expect meaningful synergies from both revenue and marketing spend in our base case scenario ($300M).”

DraftKings gains Ontario license: Six weeks after the market launched in early April, DraftKings last Friday finally gained its license from the Ontario licensing authority. It will launch in the coming weeks.

Earnings in brief

Galaxy Gaming said revenue increased 38% to $5.9m while adj. EBITDA rose 58% to $2.7m. The table games developer said igaming revenues rose 58% to $2.8m, representing a sequential rise of 35%. The company nudged its revenue guidance for 2022 to $24m-$25m.

Datalines

New York - wk ending May 8: Betting handle was up 12.3% WoW to $331.6m and GGR was up 186.8% to $37m.

FanDuel remained as the top online sportsbook as it took $145.1m and 43.8% of the handle during that week. DraftKings was second with $78.8m and 23.8% of handle, Caesars Sportsbook was third with $52.2m and 15.7%, BetMGM was fourth with $31.3m and 9.4% of total handle.

On social

Daniel Stone @DanielStoneGC

FanDuel has extended its share of the New York online sports betting market to 63.5% on a rolling 4 week basis and is well on course to clear $500m in GGR from the state this year.

New Jersey Apr22: Sports-betting handle was up 23.9% YoY but down 17.3% MoM to $926.9m. Betting revenues were down 8.2% YoY to $50.3m due to the slowdown in sporting events, as a result books recorded hold rates of 5.4% vs. 7.3% in 2021.

Online casino revenues were up 27% to $136.9m. In icasino BetMGM was market leader with revenues of $39.9m, followed by Golden Nugget Online Gaming with $38.1m. The state collected $20.5m taxes.

Parlays generated much of the monthly betting revenues with margins on those wagers coming in at 17.9% and generating $35.2m in revenue on handle of $197.3m.

FanDuel-Meadowlands (also including PointsBet and SuperBook) recorded $33.3m or 66.2% of the state’s overall revenue. Resorts Digital, DraftKings and FoxBET were second with $7.4m revenue and Borgata-BetMGM were third with $4.5m in revenue.

On social

Flutter’s policy of letting FanDuel “lean in” while others pull back appears to be working.

Chris Krafcik @CKrafcik

Some evidence in NJ April '22 print of FanDuel making good on its recently articulated promise (see its 1Q22 trading update 'script) of continued, aggressive UA spending. We est. FanDuel captured ~59% OSB GGR share—an all-time best for the brand in NJ, according to our tracking.

Louisiana Apr22: Total casino GGR dropped 7.2% YoY to $218.8m with operators down across the board. Sports-betting net revenue came in at $3.3m on handle of $186m.

Neighborly note: A recent report from Eilers & Krejcik Gaming suggested the launch of Louisiana has had an effect on Mississippi with Q1 handle down 6.5% YoY. EKG noted the decline comes from state border areas.

Massachusetts Apr22: GGR increased 17.2% YoY to $99.2m. The Wynn Encore generated GGR of $63.7m, a 27% YoY rise. Penn National’s Plainridge Park’s GGR was up 3.1% YoY to $12.9m, MGM Springfield GGR was up 2.8% YoY to $22.5m.

Newslines

All systems go: 888's shareholders have approved the group's $2.4bn buyout of William Hill's non-US assets from Caesars Entertainment.

Bayes new funding: Berlin-based esports data provider Bayes has announced a new $6m funding round led by Las Vegas Sands and BITKRAFT Ventures. The new cash will be used to push towards a doubling of the company's strategic partnerships, investment in product development and 25 new hires.

Border line: China is considering limiting the number of times Chinese gamblers can enter Macau annually, according to a report from Inside Asian Gaming. The magazine noted there has not been any official statement though it chimes with recent reports that visa issuances had been tightened particularly for frequent visitors.

Signal: IMG Arena has announced the purchase of a controlling stake in Swedish artificial intelligence sports technology developer Signality. The purchase price was undisclosed.

(Almost) all day, and all of the night: Aspire Global’s BtoBet has penned an agreement with Ngnatat Sarl Trading, the company behind the Bet237 brand in Cameroon.

Kerbside pickup: Fan engagement platform Pickup has signed a deal with Nascar, enabling the “contextually relevant props” across NASCAR’s editorial, video, audio and onsite activations.