13 Aug: Weekend Edition no.9
Rush Street Interactive Q2, Entain Capital Markets presentation, Inspired Entertainment Q2, Sector Watch - Payments +More
Welcome to the latest Weekend Edition after another extraordinarily packed week in betting and gaming. To round off our coverage we have the latest results from Rush Street Interactive and the latest comment from Entain on its Unikrn acquisition announcement. On top of that we have our latest Sector Watch, which looks at the recent earnings updates from the payments providers as well as our new occasional feature, Word of the Week.
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Rush Street Interactive Q2
The top line
Revenue was up 89% to $122.8m, net loss was down to $14m vs. $50.6m in Q220. Adjusted EBITDA loss was $6.6m vs -$3.7m in Q220. FY guidance raised to $465-$495m from $440-$480m, implying 72% YoY growth at mid-point.
Adjusted advertising and promotions costs were up to $36.9m (30% of revenue) vs. $7.4m in Q220. RSI had $361m on the balance sheet.
RSI has been selected as one of three companies to be allowed to operate mobile sports wagering in Connecticut. The agreement will also enable it to operate in 15 retail locations.
Boxing clever: RSI has taken a minority investment in Boom Entertainment and asked about scale or doing more M&A, CEO Richard Schwartz said: “Our customer service and user experience is what makes us successful.”
“We don’t feel we have to buy access to market share, we can focus on UX and CS to keep growing and that’s what we’ll keep doing. We pioneered community in casino and we’re going to do the same in sports-betting. It’s important to advance innovation but it must resonate with players and that’s something we focus on.”
For all the talk of marketing and innovation in the industry, product developments have to be “relevant to players”, Schwartz added
In-house differentiation: With online betting being mainly “transaction-based”, speed and the ability “to give players insights to make better decisions, reduce friction and build trust” are key. When it comes to casino, “lots of companies have similar games libraries” and the ability to build distinct products in-house is what differentiates operators. “It’s an area we’ve focused a lot on and will (continue to) focus on going forward,” said Schwartz.
From here to maturity: RSI has reached profitability in four states, New Jersey being one of them, but CFO Kyle Sauers wouldn’t reveal the other three and added that the investment mode would continue. “We’re getting profitable as markets mature and as new markets launch there will be investment that will outweigh the more mature markets short term, but we’re excited about these opportunities.”
Profitability was no doubt helped by the launch of live casino in New Jersey; the group said it was now in third spot for casino revenues in NJ and Pennsylvania and expects to reach the same stage in Michigan.
Building a house: Analysts at Macquarie, which recently initiated on RSI, said they were “even more constructive” on the company’s prospects. “With operations in the four major iGaming states, ongoing app updates, and strong share despite bonusing less than the competition, we believe RSI is well positioned to defend its early lead in US online casino,” they wrote.
“Further, we believe the recent DKNG-GNOG transaction is a major positive for iGaming focused companies such as RSI.”
The team at Jefferies noted the deal announced yesterday for RSI to be the exclusive online sports-betting partner to the Connecticut lottery alongside the recent announcement regarding market access in three further states via the Boom deal. “We maintain our view that the value of RSI is supported by its specific capabilities that are driving execution, and which are supported by the accelerating M&A backdrop and the continued proliferation of domestic digital gaming,” the Jefferies team added.
Entain Capital Markets Presentation
Jette 2: In its second presentation to analysts yesterday, Entain revealed its acquisition of esports-betting operator Unikrn for an undisclosed sum (the figure of $75m has been mentioned by industry contacts). One of the key issues to follow however will be whether Entain decides to enter the US market with Unikrn (regulation of esports betting permitting) and how or if that would affect the BetMGM project.
The deal forms part of Entain’s strategy to broaden its footprint beyond betting and gaming and into other areas of interactive entertainment.
“In looking for the right way to enter this market we engaged with a number of operators. Unikrn stood out as the most advanced business in this space by quite some margin,” said CEO Jette Nygaard-Andersen.
Big foot: The move into esports is part of Entain’s plans to widen its footprint into adjacent interactive entertainment sector, including casual and free-to-play games and media. “We want to be the world-leader in what we do,” she said at the top of the presentation. “And going forward we will be expanding that claim into other areas of interactive entertainment.” However, analysts at Jefferies noted that the new sidelines - at present at least - don’t actually move the dial. “Entain… has laid out a long runway of growth in existing and new markets, with differentiated tech playing a key role,” they said. However, “we do not foresee any material change to medium-term consensus estimates based on the Capital Markets day content.”
Meanwhile, the analysts at Peel Hunt added that there was so much material in the presentation “it made us feel it might serve as part of a negotiation with MGM.”
Inspired Entertainment Q2
The top line
Revenue increased 166.4% to $41.5m while adjusted EBITDA rose 289% YoY to $8m. Guidance for FY21 adjusted EBITDA bow between $28-30m.
Gaming was worth $16.2m (up $12m) while virtuals revenue rose to $8.2m and interactive was up 69% to $5.8m and leisure rebounded to $11.3m.
Company refinanced over the period, issuing £236m ($324.7m) of bonds and £20 secure revolver.
Modesty ablaze: With all Covid-retlated constraints on UK retail betting lifted in mid-July, Executive chairman Lorne Weil said “we can say with a modest degree of satisfaction that the narrative followed the script.” He added the business was now running “at full tilt” following the reopenings. He pointed out that Jul21 was fully ahead of Oct19 despite not being fully operational. August was even stronger.
Virtually there: LBO back to pre-Covid levels, business snack in positive territory in Greece and Italy on track. In North America, continued strength in Illinois and Canada and CEO Brooks Pierce said they expected to enter further VLT markets. In interactive, Pierce said NA was now the second largest market with only 65% market penetration in New Jersey. In virtuals, the company is hoping to get wider distribution for virtuals. “The product is fairly new in North America,” noted Pierce. Recall, virtual sports is regarded as an igaming product in the U.S.
Sector watch - payments
Moving in lockstep: As the betting and gaming sector looks into new verticals, the larger payment firms are doing the same as they think about how to service new business needs of their clients. Hence, it is only partly a coincidence that Paysafe should have bought Peruvian alternative payments firm Pago Efectivo in early August in the same month that Betsson bought the largely Peruvian-facing Inkabet. Paysafe said Pago Efectivo was particularly popular with Latam merchants operating in igaming, alongside other services such as travel and ecommerce. Paysafe will report its Q221 earnings early next week.
Grand central: Latin American volumes grew 105% for payment tech firm Nuvei, although this was still behind North America where growth hit 160%. The company’s North American operations will now be boosted by the Mazooma technical services business which was finally enveloped by Nuvei in early August. Mazooma represents an important expansion of the company’s North American payment options and include real-time payments for accelerated withdrawals. This has obvious benefits for online betting and igaming operators in the US and will be central to the sector’s success.
Join the club: Cashless gaming is also moving up the agenda in land-based gaming, as AGA boss Bill Miller alluded to during his Q2 presentation this week. Also this week, Everi announced it had signed up Penn National Gaming to its digital CashClub Wallet technology for deployment at the Hollywood Casino York. This follows on from previous installs at the Penn National Race Course and the Meadows Racetrack & Casino in Pennsylvania. “For Penn, we think the move to cashless highlights their leadership in the sector with omni-channel ramifications, while we could see this accelerating competitors' moves to cashless,” said the analyst at Truist.
Added the Macquarie team: From the operators perspective, the digital wallet provides a more comprehensive view of player spending and behavior, which should allow better management of the casino floor and responsible gaming.
Word of the week
Flywheel - your time has come: The word ‘flywheel’ has copped up a lot recently. It got a mention late last week when Penn National announced its acquisition of Score Media and Gaming. This was followed this week by Flutter when it used “flywheel effect” as part of its US deep dive in its presentation. Then David Gandler at Fubo TV employed flywheel to describe the new TV-betting-synced products the company is developing. And finally Jette Nygaard-Andersen at Entain gave it another airing yesterday when describing the company’s esports initiative. Do they co-ordinate all this over Zoom?
Weekly digest
Q2/H1 results, M&A and mega marketing budgets and are in full flight and of course DraftKing’s acquisition of Golden Nugget Online Gaming grabbed most of the headlines. The other majors were to the fore including Flutter, with the UK business press take on how ‘little’ Flutter took on the big US corporates (and won) being an interesting take. In Europe disruption to the German market continues to refocus the sector. LeoVegas has already drawn a line under it and many others - Bragg Gaming, Kindred, 888, Entain or Flutter are all affected - are heading (or have already made their way) across the ocean.
Newslines
I can see for miles: Bally Corporation has announced the acquisition of Telescope, a provider of real-time audience engagement solutions at live events. The company said the product will amplify the Bally’s Interactive, Bally Bet and Bally Sports brands. “Mobile technology continues to play an increasingly significant role in sports betting and iGaming, and Telescope brings an expert level of creativity, innovation, and effectiveness in the social and digital media space that we are confident will enhance our customers' interactivity and engagement with our products,” said Bally’s Adi Dhandhania, senior vice president of strategy and interactive.
Who sell out: DraftKings announced that the first NFTs made available on its Marketplace platform sold out immediately. The company said each respective edition drop was purchased instantly via primary sales at accessible prices ranging from $12-$100. The secondary-transactions market also saw tremendous engagement as thousands of users listed and sold NFTs within the community amounting to over $1 million in gross merchandise volume (GMV).
West Point: PointsBet has launched in West Virginia, the 7th state for the company. “Launching in West Virginia represents further progress for PointsBet and presents another tremendous opportunity we are excited to attack,” commented Johnny Aitken, PointsBet USA CEO. Pointsbet has also announced the appointment of Aonghus Mulvihill as Vice President of Global Sportsbook Trading.
Deep in the heart of Texas: Caesars Entertainment has announced its latest sports partnership, this time with the Houston Texans. As part of the agreement, the Caesars Rewards loyalty program will sponsor the free-to-play Schedule Pick 'Em game, available on the Texans official mobile app and fans will be able submit their matchup predictions for a chance to win exclusive prizes such as a paid trip to a Caesars Entertainment destination property, game tickets, and more.
On ice: Betsson subsidiary Perch Investments has acquired 28% of Slapshot Media for C$3m which it hopes will provide the platform for betsson tomlaunch in the Candian market. Betsson will also have call options to scale up the shareholding to 70 percent in the company (for maximum price of CAD 25 million, approx. SEK 173 million) over time. Slapshot Media specialises in creating localized sports content and provides marketing and managed services to the online gaming market in Canada.
Steel yourselves: Unibet has become an official sportsbook partner with the Pittsburgh Steelers and will include “robust digital collaboration” across social media channels, sweepstakes for fans to enter, and more. It is Unibet’s second NFL partnership.
Connecticut the dots: Sportech has said it has reached a 10-year commercial arrangement with the Connecticut Lottery Corporation to allow Sportehc to offer sports-betting across its retail estate in the state.
What we’re reading
We’ll be right back after these messages: Up to six sportsbooks are to be given license to advertise during NFL games.
On social
Wise up: A response to claims in California that the illegal market is worth $10bn.
Calendar
16 Aug: GAN, Elys Technology Q2
17 Aug: Raketech Q2
18 Aug: Truist investor discussion, GIG Q2, Crown Resorts, Tabcorp FYs
19 Aug: Aspire Global Q2, Rank FY
Contact us
Scott Longley scott@clearconcisemedia.com
Jake Pollard jake@openmediaservices.com