Aug 1: CaliPlay float latest victim of debt crunch
Playtech/Caliente, the week ahead, Lottery.com, the shares week, GLP earnings call, Lottomatica H1, startup focus - Betswap +More
Good morning. On today’s agenda:
Playtech says it's time for Plan B for the Caliente transaction.
Betting and gaming approaches a consequential week of earnings.
Lottery.com on the brink as it admits going concern doubts.
Playtech/Caliente
High and dry: On Friday, Playtech announced the plan that would have seen the Caliente joint-venture vehicle CaliPlay bought by the Tekkorp Digital Acquisition Corp. SPAC has been abandoned due to the escalating cost of capital.
Not over yet: Playtech said it continued to “explore alternative opportunities” with CaliPlay management to build a Hispanic-focused brand in the US with both parties also in discussions with TDAC. It said talks were in an early stage.
Debt crisis: TTB Partners, the erstwhile pursuer of Playtech, also pinned the blame for its failure to consummate a deal on capital market conditions. Elsewhere in the sector, 888 has also been struggling to find investors for its new £1bn of bond debt.
Trading update: In a brief statement, Playtech reiterated its mid-July statement that it was “trading ahead of expectations”.
The statement highlighted how its existing structured agreement with Caliente was driving the performance of the B2B offering.
It added that Snaitech has “seen excellent results” driven by online and a retail recovery as well as favorable sports results. It will present its H1 earnings on September 22.
Recall: In the wake of the TTB failure, speculation is rife over what happens next at Playtech. While sources have suggested the rumored return to the table of JKO is a “no-go”, there are suggestions that Aristocrat might also renew contact. Meanwhile, Entain are thought to be in prime position to snap up the Playtech-owned Snaitech.
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The week ahead
A hugely consequential week in the betting and gaming sector will see earnings from the biggest names in the sector.
Roll call: MGM Resorts and IGT (Tues), Caesars (Weds), Bally Corp, Penn National, Rush Street Interactive (all Thurs) and DraftKings (Fri) all report this week.
It’s a sin: Top of mind for the analysts early in the week will be what the Las Vegas operators are seeing in terms of any negative consumer reaction to the worsening economic situation with the US now officially in recession.
Boom: Recall, just last week the data from Nevada for June showed the boom times continuing on the Strip with YoY revenue up 22.7% YoY.
Bust: The mood music might not be helped by almost Biblical flooding that occurred on Thursday night including the flooding of the Circa Sportsbook (see below).
Be prepared: The analysts at Macquarie said the Strip operators were in a better position to handle the economy’s choppier waters due to “leaner cost structures”.
“Additionally, there is strong pent-up demand for work travel and conferences (+20% seq in June), which we think should help counterbalance a softer leisure consumer.”
The online focus remains on the prospects for profitability. Recall, a note from the analysts at JMP last week noted that recent promo data suggests there should be revenue beats across the board.
What we’ll be writing
First Tuesday: Tomorrow sees the debut of our new regular monthly newsletter focusing on the news and views about growth companies within the better and gaming sector.
In the first edition of ‘the startup month’ we look at the funding crunch, we have an insider view of Future Anthem’s recent fundraise and a startup (re)focus on SnapOdds plus all the latest funding and growth company news.
Later this week, sector watch will be taking a look at the situation regarding crypto, focusing on the news around the SEC investigation into Coinbase.
Lottery.com
The online lottery reseller is close to collapse as the shares plunge 64%.
Numbers up: The lottery reseller is on the verge of collapse after it announced on Friday it “did not have sufficient financial resources” to fund operations or pay existing obligations. It has furloughed staff, saying it didn't have the cash to pay $425k of payroll obligations.
Best of luck with that: Admitting there was a “substantial doubt” about the future of the business as a going concern, Lottery.com said it would be “forced to wind down operations” unless it was able to secure additional resources.
An unraveling: Intimations of trouble at Lottery.com came with a June 30 SEC release when it said auditors had raised concerns about non-compliance with state and Federal laws regarding ticket procurement as well as accounting issues. It led to the resignation of CFO Ryan Dickerson.
On July 11, chief revenue officer Matt Clemenson resigned after an internal investigation found that cash balances had been overstated by $30m and had “improperly recognised revenue”.
On July 21, CEO Tony DiMatteo resigned after the company said it was informed a day previously by independent accountant firm Armanino the accounts for FY21 and Q122 “should no longer be relied upon”.
Lottery.com share price performance July 29
The shares week
The share price reaction to PointsBet’s earnings on Friday suggests investor disappointment.
Rollercoaster: PointsBet ended up giving up much of its gains for the week on Friday trading in Sydney after it reporting its Q4 earnings. The share price dropped nearly 11% on the day after initially rising 11% in early trading. The shares still ended the week up just over 2%.
PointsBet share price, 29 July
Strong positives: Looking ahead to this week, the analysts at Jefferies suggest that given the “known trends” around Las Vegas, regionals, lottery and leisure trends they suggest strong earnings could drive positive stock performance.
Moreover, whether the underperformers, such as Caesars and DraftKings could prove to be the outperformers for the week.
Lottomatica H1
Revenue more than quadrupled to €806.2m while the company bounced back to a pre-tax profit of €98.7m from a loss of €77.4m in H121.
Virus-free: The results presentation pointed out that the LTM EBITDA figures of €433.9m are the first for over two years that don’t include any lingering Covid restrictions.
Bouncebacks: Notably, H122 EBITDA of €234m was 31.7% ahead of H119 and while retail betting and machines rebounded to €174.1m and €463.4m respectively.
Online also enjoyed a 27.3% YoY rise to €163.5m; it was driven by an 86% rise in icasino stakes.
Ambitions: While CFO Laurence van Lancker said North American M&A was not part of Lottomatica’s plans, he did dispel the suggestion on the call that there wasn’t room for acquisitions in Europe.
“There are some very interesting targets in Europe,” he said. “I wouldn’t say there was a lack.”
Political football: Asked about whether the political climate for betting and gaming would deteriorate after the September general election in Italy, CEO Guglielmo Angelozzi was sanguine, suggesting the parties vying for power had softened previous stances against the sector.
Off the agenda: “I think the approach to the sector from all of the parties in the last two years has changed a lot,” he said. “It has become a lot more objective and moved away from ideological positions.”
GLP Q2 earnings call
You zig, others zag: On a surprisingly fractious call at times - CEO Peter Carlino: “We didn't want to deal with guidance in the first place”; unidentified analyst: “Well, then don’t give guidance” - GLP reiterated the case put by VICI the previous day that the cost of capital for the gaming REITs was now more attractive - and arguably more attainable - than bank debt.
“My cost to capital may be advantageous for them or even just the fact that I'm open to transact might be better than where they find themselves in the current high-yield market environment,” said Steve Ladany, CDO, of the “shifted dynamic”.
Island life: Following the recent deal with Bally over (potentially) its two Rhode Island casinos, pending approval from Bally’s lenders on one of the properties, analysts at CBRE noted there was likely to be “more M&A on the horizon”.
Trouble every day: Meanwhile, Carlino made the bold claim that in any recession, regional gaming revenues were “essentially bulletproof”. Or as CIO Matthew Demchyk said, “drive through is better than fly through”.
Startup focus - Betswap
Who, what, where and when Co-founders Brent Winston (CEO) and Joshua Jackson (CTO) formed the company in June 2020. The Isle of Man-based company is a secondary marketplace for use by platform providers and sportsbooks to buy or sell bets.
Funding backgrounder: Betswap has to date completed pre-seed fundraise for an undisclosed amount from two high-net-worth individuals with a history of success in energy, oil and gas, blockchain and igaming/sports-betting.
Winston says Betswap is looking to do a further strategic round towards the end of Q4 this year or early next.
So what's new? BetSwap recently entered into supply agreements with OpenBet and Amelco and has recently entered into binding LOIs with clients of both OpenBet and Amelco It is actively discussing and negotiating to integrate its technology into some of the biggest sportsbooks in North America.
It expects to launch its marketplace technology with its active customers for the start of the 2022 NFL season.
The longer pitch: Winston says the opportunity here is quite large, suggesting that cashout only appeals to a limited percentage of users. “Many users stay away from cashout - there is no transparency, the experience is limited and broadly speaking, quite poor,” he says.
Betswap’s idea is that by integrating their offering, operators can “give power back to the users”, with them able to control when they sell a bet and for how much,
Winston says they see the resale of bets being prominent for parlays where the underlying events are spaced out, for futures and for other types of bets.
The thrill of the chase: With this done via a white label, users will only see the marketplace feature on the operator app in question.
Despicable meme: He adds that Betswap gamifies sports-betting in a similar fashion to the meme stock frenzy.
Buyers stay on the app to see if they can find any value bets; sellers stay on to see whether their bets are rising or falling.
North America is unsurprisingly the key market. “North American bettors are quite different in their behavioral patterns compared to those in the UK/Europe.”
Earnings in brief
BlueBet said net win rose 27.3% to A$12.8m on turnover that rose 31.3% to A$126.7m. The company recently secured market access to Iowa, its fourth US state, via a deal with Caesars. It will launch there under the brand name Clutch Bet. The company said it has cash balances of A$47.3m, giving it the “runway” to execute its “capital-lite” US strategy.
Analyst briefs
Evolution: The team at Redeye say the evidence of a growth deceleration in Asia combined with more progress in North America means that while forecasts remain largely unchanged following the recent Q2 earnings, the growth mix has “shifted”. This should be positive for the “risk perception” of Evolution.
VICI: The team at Macquarie said that with the multiples being paid for Las Vegas and regional gaming assets at record levels, it “bodes well for the outlook in the gaming REIT sector”. The team also noted that Caesars was “publicly shopping” a Strip asset at present, “one asset in a larger embedded pipeline”.
Datalines - Macau
Less than zero: GGR for July was down 95.3% to $49m, the worst monthly performance from the pandemic years. MoM the total was down 83.9% as the authorities closed all casinos for 10 days in compliance with China’s zero-Covid policy. Compared to July 2019, GGR represented just 1.3% of the total.
What am I bid? Separately, it was announced that the bidding for Macau’s new gaming concessions has officially opened. The process will run until September 14.
Newslines
Kindred has decided upon a share buyback program with the intention of buying up to 23m shares or around 10% of the company’s available stock.
Lioness’ share: Entain said it had taken 1.5m bets on yesterday’s Women’s Euro22 final between England and Germany with 14% of those bets being made by women.
What we’re reading
Extinction event: Red Rock’s decision to demolish its Henderson Fiesta property leaves room for smaller competitors.
On social
Calendar
Aug 2: IGT, Full House Resorts, Ceasars Entertainment
Aug 3: MGM Resorts
Aug 4: Bally Corp, Penn National, Golden Entertainment, Rush Street
Aug 5: DraftKings
Contact us
Scott Longley scott@clearconcisemedia.com
Jake Pollard jake@openmediaservices.com