12 Aug: Entain: 'We've delivered'
Entain H1, LeoVegas, Bragg Gaming, NeoGames, Zeal Network, Acroud Q2s, Ainsworth H1 pre-announcement +More
Welcome to a very busy newsletter and what we can only call an onslaught of quarterly and half-year results. We start with the latest from Entain where Germany aside - and that is some aside in truth - the company appears to be firing on all cylinders. Germany also looms large at LeoVegas where the pullback caused the company to report a revenue reverse. Then there are a stack of numbers from (deep breath) Bragg, Neogames, Zeal Network, Acroud and Aristocrat.
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Entain H1
The top line
Net gaming revenues were up 11% to £1.79bn ($2.48bn) while revenue of £1.77bn was up 12%. Underlying EBITDA up 12% to £401.1m.
Online revenue up 29% to £1.56bn (the 22nd quarter of consecutive growth). Ex-Germany, online growth was 38%. Retail was down 46% to £191.3m with continued Covid-related closures.
BetMGM achieved H1 revenues of $357m while Q2 revenues of $194m were up 19% QoQ. As already trailed by JV partner MGM Resorts International, BetMGM achieved 22% market share overall in Q2 and 30% in igaming.
Best yet: For all the moving parts in the Entain business, the focus of the H1 results was very much on the US. As CFO Rob Wood said in his opening remarks, “investing in BetMGM will probably be the best investment we ever make.” Noting the market share differential between sports-betting (17%) versus igaming (30%), Wood was keen to emphasise how BetMGM was doing better in states where it was there from the start; where the percentage goes up to 22% versus market where it has come to market late. Asked about potential acquisitions in light of the DraftKings/GNOG deal, Wood said they were “comfortable with the complement of brands at our disposal.”
A Europe divided: If you were looking at buying Entain for more than just its share of BetMGM, the picture is bright overall albeit with the blot of Germany looming large. Online was up, driven by sport (up 55%) and new acquisitions Enlabs in the Baltics and Bet.pt in Portugal while further afield Brazil was the standout (up 155%). But Germany was the issue; while sport NGR was up 53%, gaming was down 34%.
“The biggest impact has been on gaming with the lack of policing creating an uneven playing field,” said CEO JetteNygaard-Andersen. She added that suppliers in particular were “not differentiating between compliant and non-compliant.”
Yin and yang: While the budget for new innovations - particularly in esports - is set for £100m over the next three years, the company is also looking at cost savings in both retail and online of c.£100m annually from 2023. One area of innovation already underway is the development of its in-house SSBTs in the UK retail estate.
“The golden rule we have as a group is that the priority is always customers and revenue over costs,” said Wood. “So we wouldn’t deploy new betting terminals just because it was cheaper. We are in trials at the moment and we have over 100 shops right now (with new machines) with rollout planned for the second half of next year.”
A Baltic base: Nygaard-Andersen said the company would remain disciplined when it comes to M&A. “We have a very strong pipeline and in terms of countries we are looking at the usual suspects,” she said. “We’re looking at building our central and Eastern Europe presence, building on Enlabs and we’re looking at opportunities in LatAm,” Nygaard-Andersen added. “Plus there are potential opportunities in adjacent areas. But every time we consider M&A we are really disciplined and we buy really smart.”
LeoVegas Q2
The top line
Group revenue was down 13% to €96.8m, excluding Germany revenue was up 3%. AEBITDA was down nearly 50% to €10.6m, margins were also down by nearly half to 10.9%.
Germany revenues were down 81%, accounting for just 4% of group revenues, North America accounted for 10% of group revenues and were up 33%, Nordics 41%. Sweden market share doubled and generated record NGR thanks to the relaunch of the newly-acquired Expekt sportsbook,
July revenue was up 3% to €32.8m, adjusted for Germany, group growth was 23% in July.
Taking the hit: Unlike other companies in the space, Leo Vegas management did not mention mitigation strategies or try to soften the impact of German regulations on their activities.
“We’ve taken the hit in Germany and are moving onto other markets, it is what it is and can’t get any worse,” CEO Gustaf Hagman said.
The group will keep an eye on the market in the hope conditions improve or strong enforcement from the tax authorities, but neither Hagman or CFO Stefan Nelson would speculate on how long that would take.
Putting in a shift: As a result the group has shifted marketing spend into Italy and Spain with positive results tied with the Expekt relaunch in Sweden, “we think it’s a strength and July is showing good performance,” said Nelson.
Beyond the shoreline: With North America (Canada) revenues up 33% and accounting for 10% of total revenues, the group is confident it has the know-how, tech and investment to perform strongly in the US. It expects to launch in New Jersey in Q122 with its own platform and player account management system, “a great strength in the US,” Nelson said, and is already in talks to launch in other states.
Bragg Gaming Q2
The top line
Revenue increased 27.6% to €15.5m ($18.2m), up 9% sequentially while organic growth was 25.5%. Gross profit rose 37.5% to €7m on margins which rose 330bps to 45.4%. Games and content accounted for 88% of total revenues.
Regulatory delta: Bragg said it would continue to mitigate the impact of German regulation, revenues are expected to hit c.€1.5m in Q4. Asked whether the group was being overly-conservative, CEO Richard Carter said
“a huge part of the German market (c.65%) is still being played offshore” and much will depend on whether regulators become “a bit more aggressive, that is the really big delta.”
Operators will ramp up marketing post-Summer and Bragg will release more content in Q122 , but “there are quite a few moving parts and we try to be as conservative as possible to give ourselves some upside into next year.”
Online branded: Carter didn’t expand on the likely US-EU revenue breakdown he expects Bragg to generate, but with its in-house games studio Wild Streak recently extending its agreement with IGT “a good chunk of that is going to be US and North America.” He added that Bragg will look to have some branded content over the medium term. “A lot of the major LAN-based operators in the US tend to have brand-licensing portfolio and it's similar in the online space, so we're currently looking at those options.”
NeoGames Q2
The top line
Revenues fell slightly by 0.6% YoY to $12.9m but the share of NeoPollard Interactive rose 434% to $8.5m meaning total revenues were up 47% to $21.4m. Adjusted EBITDA rose 6.6% to $8.3m.
Targets for the year have been increased to $75m-$79m vs. $73-77m previously.
Three in a row: Highlights from Q2 included continued outperformance in Alberta with the launch of draw games and growth in new and existing players. The company also signed a new deal with Lottomatica in Italy and subsequent to quarter end it announced a partnership with the Ukrainian lottery. The analyst team at Macquarie said contract wins and new state legislation were an “integral part of the NGMS investment thesis”. “But the raised guidance and better than expected results for three quarters in a row highlight the embedded growth opportunity in the existing business as NGMS ramps its existing contracts.” The earnings call will be held later today.
Zeal Network H1
The top line
Revenues for the first six months of the year increased 2% to €44.5m ($52.3m). Germany made up €41.8m of total revenues. Margins were down a notch at 12.3%.
Guidance for the full year is maintained at c.€95m in fiscal year 2021 adjusted EBITDA expected to reach at least €20m.
Instant karma: The group has applied for a license for instant win games in Germany. The process is being managed by the regulators and it could not provide a timeline on when it would be able to offer the product to its players. It maintained FY guidance and added that its current €90m jackpot meant trading was somewhat volatile and it could not update on Q3 trading.
Ainsworth Game Technology FY trading update
The top line
Ahead of its full year results later this month, Ainsworth said it expected FY revenues to June will be A$88m (US$64.8m) vs. the $72m achieved in H1. Underlying EBITDA will be A$14.4m compared vs. A$13.2m advised in May.
Australian revenues for the year will be A$39m, 39% ahead of FY20. FY US revenues are expected to be $88m, up 22% on FY20.
FY results will be released on 26 August.
Acroud Q2
The top line
Revenue up 74% to €6.2m (10.7% up sequentially) while EBITDA was €1.16m, down 22.7% (QoQ down 19.4%).
NDCs of 29,448 up 192% YoY but down 7.4% sequentially.
Going Dutch: Acroud is focused on the launch of the Netherlands market in October where the company says it has a “long history.” However, ahead of launch the company said it has “adjusted the product” to ensure compatibility, leading to a 17% YoY decline in affiliate revenue to €2.9m. Affiliate-as-a-service division revenues came in at €3.24m. Wagers.com Earnings+More will report on today’s conference call in an affiliate round-up later this month.
Newslines
The Inka trail: Betsson has strengthened its Latin American-facing operations with the acquisition of Inkabet for an initial $25m with a further $9m in earnout and deferred revenue due should revenue and EBIT targets be met. The price paid is around 3.8x LTM to June EBIT. Financing comes via Betsson’s existing credit facilities. Inkabet targets “western” South America (presumably Peru and Chile) and has been up and running since 2012. It achieved revenues of $25.2m in the year to June, up 146% YoY. Completion is expected within a month.
Boom times: Rush Street Interactive has taken a minority investment in NY-based gaming and betting content developer Boom Entertainment. As part of the agreement, RSI will integrate and offer Boom’s real money online casino and sports betting games to its players. Boom will also develop some exclusive gaming content for RSI. RSI will also receive access opportunities in Louisiana, Mississippi and New Mexico and expects to launch in Louisiana during the next football season.
A corner of a foreign field: The We-Ko-Pa Casino Resort and Betfred’s US operation have signed a market access agreement for Arizona sports-betting. The companies will partner to build a retail sportsbook at the recently-opened casino Fort McDowell and will also launch mobile and online under the Betfred Sports brand.
Messi start: Fresh from their signing of Lionel Messi from Barcelona, Paris Saint-Germain (PSG) have signed an exclusive three-year regional partnership agreement with Latin America online betting provider Playbetr. Hand-maiden to the deal was Sportradar’s ad:s division.
Off tropic: Kambi has announced a new partner in Island Luck, a sports-betting brand focused on the Bahamas. Established in 2009, Island Luck is the largest gaming company in the country, offering online sports betting, casino and lottery throughout the islands.
What we’re reading
Mob handed: Bloomberg on the recent events in gaming and betting.
Judging duel: The legal dust-up between Flutter and Fox Corp (paywall) over the value of Fox’s holding in FanDuel has a lot riding on it.
On social
Driving the market…
Calendar
13 Aug: Rush Street Interactive Q2, NeoGames Q2 earnings call, Sector watch - payments
Contact us
Scott Longley scott@clearconcisemedia.com
Jake Pollard jake@openmediaservices.com