Weekend Edition #81

Bally’s ‘roadmap rescope’, Smarkets redundancies, Kambi’s rose-tinted hopes, DraftKings’ Euro markets exit, BetMGM’s PA promos +More

Earnings+More

Jan 20, 2023

Good morning. In a packed edition:

Bally’s announces cutbacks after hiring ‘too many, too fast’ during the pandemic.
Smarkets also pushes the button on redundancies.
Datalines: BetMGM’s promo spend in Pennsylvania charted.
Kambi takes an optimistic view of potential sports-betting regulation.
DraftKings has cut back on its European DFS offering.
Catena Media admits to more writedowns on European casino assets.

Too much too young.

Bally’s online pullback

Bally’s announces it is cutting back its interactive workforce by 15% after the online arm “didn’t achieve” its goals for last year.

It’s not you, it’s me: The decision to reduce online operating costs is expected to mean $10-$15m in severance payments. In a letter to all staff and submitted in an SEC filing, CEO Lee Fenton said “companies that make decisive steps to effectively manage costs will be stronger and fitter in the future”.

Fenton said Bally’s mature markets (i.e. in the UK and Europe) were “facing into macro uncertainties”.
Meanwhile, the North American operation remains in the investment phase and “will take some time to come to fruition”.
Tortoise/hare: He admitted the company may have “over hired’ during the pandemic period when the business “continued at full pelt”. “I take full responsibility for that,” he added.

Right-size matters: Fenton said Bally’s was looking at how to “rescope our roadmaps to ensure they are right sized”. “This is an opportunity to reset the business.”

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Smarkets troubles

The betting exchange operator admits to liquidity issues amid redundancy news.

Welcome to the source of funds: Among reports of the company shedding 20% of its workforce, the UK-based company has admitted that the exit of high-spending customers caused by enhanced affordability and RG checks is causing issues.

The news follows a report in the Racing Post featuring an ex-Smarkets high-staking punter Joe Beevers, who complained about the affordability checks instigated by the company.
He told the Post he “wasn’t comfortable” with the amount of financial information he was asked to provide.
“I recently got a mortgage and didn't have to provide half as much personal information to people who lent me a six-figure sum," he said.

All hands: iGaming Next suggested the redundancies are across all parts of the business and that only staff working directly on product, increasing revenue, cutting costs or raising investment were guaranteed their positions.

SBK OK? Smarkets also runs the SBK sportsbook in the UK and in the US where it is licensed and operational in Colorado, Iowa and Indiana. The company was founded in 2008 and includes Passion Capital, Deutsche Telekom, and Susquehanna Growth Equity among its backers.

Datalines – BetMGM’s promo spend

Pennsylvania: Pennsylvania closed out the year with land-based gaming up 0.3% YoY to $279.7m in December. Total GGR across the 16 casinos in the state stood at $3.38bn for 2022, 5% up on 2021.

iCasino rose 32% YoY in December to $134.6m and ended 2022 at $1.36bn, up 35% on 2021.
Sports betting rose 88% YoY in December to $71.2m, ending 2022 at $597.4m.

Largesse: Sports-betting promotional spend moderated somewhat during the year at 33% of total GGR across the market. However, that number was dragged up by BetMGM, which comfortably handed out the most promotions and free bets as a percentage of GGR.

For 2022 as a whole, promotional spend equated to 81% of its GGR or $46.6m. Its market share for the year was 10%.
Market leader FanDuel’s promotional spend percentage for 2022 was 27% or $76.1m, followed by DraftKings at 31% or $34.7m.
FanDuel controlled 37% of GGR in 2022 and DraftKings 25%.

💰 Bling Kings: BetMGM outspent the competition on promotion in Pennsylvania

Louisiana: Casino GGR was down 2% YoY to $212m.

Nevada esports betting

The Sharpr newsletter reports on esports betting development in Nevada.

Sharpr

Nevada esports betting could kickoff on Jan. 26

Hi everyone, Cody here. It’s still early in the new year but we’re already seeing some significant developments occurring in the esports betting space. Namely, Nevada is closing in on regulatory amendments to permit esports betting that are one vote away from kicking off in the state next week. Now that’s spicy…

2 years ago · 2 likes · Cody Luongo

Optimistic Kambi

Kambi pins its hopes on hitting its long-term profit target on an optimistic view of potential regulation.

Blonde ambition: Brazil, India and Japan, along with the US states of California and Texas, featured among Kambi’s list of jurisdictions that would need to regulate in order for it to hit its “ambitious” target of €150m in EBIT in 2027. Analysts at Jefferies said the new target represents triple its own current FY25E forecast of €56m EBIT.

CEO Kristian Nylen said the hoped-for figure would also be achieved with the implementation of new features such as a third-generation trading platform, bet builder and a modularized offering.
The group did announce a client win in Brazil having signed Brazilian mobile fantasy sports operator Rei do Pitaco with its platform solution as and when (and if) the country regulates sports betting.
RDP has 13.6 million app downloads and is the leading fantasy betting brand in Brazil, Kambi said.

Diary date: Kambi will report its Q4 earnings on February 22.

DraftKings’ Euro DFS exits

A prioritization of the US means DraftKings is beating a retreat in some major European markets.

Reverse gear: Draftkings said the exit from the “passionate fantasy sports communities” in Austria, Germany, Ireland and Malta was made in order to “most effectively” serve its US sports-betting base, according to a spokesperson. Operations in the four will cease as of this coming Sunday, January 22.

DraftKings’ DFS offering has been operational in Europe since 2017.
It is believed that daily fantasy sports operations in the UK will continue under its existing UK license.

GeoComply/XPoint twist

The tussle between the geolocation providers over a patent case takes another turn via Twitter.

Reader, I married him: In a further plot twist to the patent case being pursued by GeoComply against XPoint, the gaming provider Out the Gate, which was cited in evidence submitted by GeoComply late last week, has issued a statement to say it did sign up to XPoint’s geolocation services after all.

In a letter distributed via Twitter, OTG president Joe Brennan Jr said the disclosed document was “outdated” and that OTG “identified areas of concern” with both platforms.
The letter went on to say that XPoint’s responsiveness and the fact it is licensed in New Jersey and other jurisdictions “is why we chose XPoint over GeoComply to be our provider”.
“I have 100% confidence in XPoint,” Brennan concluded.

A GeoComply spokesperson said: “We stand by our positions as conveyed to the Court and expect them to further address this particular issue soon.”

Catena update

Writedowns of €17.2m take the gloss off a 31% rise in North American affiliate revenues.

Write off: Catena’s Q4 numbers will feature non-cash writedowns related to a restructured casino affiliate asset as well as the pending sale of its financial trading affiliate arm. In a trading update on Thursday the company said revenues for Q4 would be up 15% YoY to €27.4m, with North America worth 78% or €21.5m. Adj. EBITDA will be down 4% to €12.7m.

Including discontinued operations, revenue was down slightly at €31.5m.
Group adj. EBITDA is expected to grow 14% to €10.8m, but operating profit will be affected by the impairments.
CEO Michael Daly said the group had benefited from the launch of OSB in Maryland in November and in Ohio on January 1, which he claimed was the “strongest ever launch period” for a US state sportsbook launch.
Catena has hired Carnegie Bank to advise on its strategic options and recently sold AskGamblers to GiG for €45m and its paid media division to Acroud.

🚀 Bid hopes: Catena’s shares up nearly 47% since the new year

Earnings in brief

Rivalry: Revenue for 2022 rose 130% to $21.7m on handle that was up 181% YoY to $186m. The company noted its proprietary iCasino offering contributed 30% of that handle and 15% of revenue or ~$3.3m.

The company said that 82% of its customer base was under the age of 30 and the average age of its players was ~25 years old.

Feels the Burns: FansUnite said its Scottish-facing McBookie business saw revenue rise 22% to £44.8m in 2022, with iCasino growing by 20% to £28.4million and sports betting up 26% to £16.5m. Gross win rose 44% to £2.4m.

Real Luck: The group behind the esports betting and casino brand Luckbox said monthly revenues had grown 120% in Q4, while QoQ player deposits were up 420%. CEO Thomas Rosander said the company will be launching a B2B product this year.

Analyst takes

Boyd Gaming: The regional gaming operator got a second vote of confidence this week as the team at Roth initiated Buy coverage. Despite the economic backdrop, the analysts said they saw the company as a free cash flow “compounder,” estimating 2023 cash flow of $555m.

With Boyd having “deprioritized” M&A, it means 80% of that FCF will go towards share buybacks and dividends.

M&A briefs

Playtika has made a ~$750m bid for Angry Birds developer Rovio. Analysts at Macquaries said the deal would “clearly advance Playtika’s strategy to expand in casual gaming”, adding millions in users, a recognizable franchise and in-app ads exposure.

Coming soon

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Growth company news

SimWin Sports has signed a deal with Sports Illustrated to be a presenting sponsor. Sports Illustrated will also become owners of football, basketball and soccer teams in SimWin’s virtual leagues.

Newslines

Mass approval: Bally’s Interactive, FanDuel, betr, DraftKings, Digital Gaming Corp (Betway) and PointsBet have been provisionally approved for an online sports-betting license in Massachusetts.

VICI closed the upsized underwritten public offer after having raised $1bn.

IGT and Greentube have signed a patent cross-licensing agreement that will enable IGT to offer its clients access to both IGT’s and Greentube’s remote game server (RGS) portfolios.

Betfred is up before the Nevada Gaming Control Board next Wednesday to seek approval to operate a sportsbook at Mohegan Las Vegas.