25 Aug: Catena Media hit by German hindrance

Catena Media Q2, Rush Street Interactive presentation, Kambi M&A, In-Play watch +More

Aug 25, 2021

Welcome. This morning Catena Media added to the tale from the week so far of problems in Germany dragging down an otherwise positive picture for the gaming affiliate sector. We bring you the latest from the company’s Q2 earnings call plus we have Rush Street Interactive speaking about Colombia, Kambi entering into esports, in-play product developments in the US and a fund-raising for Chalkline.

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Catena Media Q2

The top line

Revenue up 9% to €30.4m, adjusted EBITDA up 1% to €14.9m, margin was down to 49% vs. 53% in Q220. NDCs were up 34% to 140,025 during the period

North American revenues were up 37% and accounted for 41% (33% Q220) of group revenue. Organic growth of 9% and 17% excluding Germany.

Sauerkraut: CEO Michael Daly said Catena had been “on a journey” in Q2; given the choice that trip would have rerouted around the car crash in Germany. Asked about the decline in German revenues, CFO Peter Messner suggested that a broad 50% fall since the end of last year and the introduction of the ‘tolerance’ period in October has worsened in the second quarter.

Daly said the “darkest days should be ending” though he admitted that timings were uncertain. “You are putting your finger up in the air at present to sense the direction of the wind,” he said. He didn’t elaborate on how things will improve in Germany, but said he expects the industry to work out a new rulebook as the situation settles. “Germany will continue to be the talk and the focus for many months to come,” he added. “There is opportunity there and we expect to exploit that opportunity in the months ahead.”

Happy days: Catena is in a better position in North America which, Daly pointed out, was the “fastest-growing market for sports-betting and casino in the world” and presented an “unparalleled opportunity” for Catena. The company’s casino vertical “exceeded expectations” in Michigan and the group recently added the Lineups.com site to its offering, which Daly said would give Catena “even more upside.” Daly suggested that the weak current trading, - 2% organic, 11% ex-Germany - will improve as the sporting calendar gets busier. “The end of the quarter will obviously be stronger than the start,” he added.

Rush Street Interactive presentation

Latin lessons: Addressing the subject of opportunities in Central and South America during the Craig-Hallum online gaming conference yesterday, RSI CEO Richard Schwartz said the Colombian-facing Rush Bet launched in 2018 had proved to be a useful testing ground for the U.S. offering. “We needed a live market,” he told investors. “We identified Latin America and Colombia in particular as a chance to mature the product.” Pointing out that RSI “started from scratch, Schwartz admitted that when it took the decision to launch in Colombia no one in the company even spoke Spanish.

“What may surprise people is that a lot of our innovation comes from there,” Schwartz added. “It is a single market and you find things out and test things that come back to the U.S. There is a lot of sharing between the two.”

Into gear: Of the other markets RSI is looking at, Schwartz had a special mention for Mexico, saying it was “extremely exciting” and shares “efficiencies” with bordering U.S. states, while Brazil and Argentina also got mentions. “But he warned that patience was needed. “It takes years to get going there,” he said.

In-Play watch

Micro-wave of the future: DraftKings caused quite a splash yesterday on gambling Twitter with its announcement that it will soon be offering a wide selection of micro-bets after it signed a deal with provider Simplebet. It is the second deal involving DraftKings and in-play betting following its recent tie up with Genius Sports and its BetBuilder product. DraftKings is to an extent playing catch up with FanDuel on its in-play offering, CEO Jason Robins recently spoke about how the move to its in-house backend had enabled it to add single-game parlays and noted that not only were customers asking for the product but it also was more profitable. “I think that we certainly have seen evidence across other companies in the marketplace that same-game parlays have a higher yield,” he told analysts a fortnight ago.

Props drop: More props bets news came yesterday with the announcement from provider SportsIQ. The group said it had reached agreement with FansUnite Entertainment for the provision of in-play player props markets. SportsIQ has recently signed deals for its props betting product with IGT, Bet.Works (now part of Bally) Chalkline and Betclic. SportsIQ says its product provides “tremendous automation and minimal suspensions to provide the highest quality product.” In May, SportsIQ raised $7m in seed funding from investors including Harlo Equity Partners, Velo Partners, the Kraft Group, former PartyGaming and Caesars Interactive CEO Mitch Garber, Fenway Sport Group president Michael Gordon and Inner Circle Ventures.

Kambi M&A

Hola Abios: Kambi has made a move into esports with the acquisition of global esports specialists Abios for up to SEK270m ($31m). The company was founded in 2013 in Stockholm and provides data, odds and visualisation services to operators including Kindred, LeoVegas and Pinnacle Sports. Kambi said that in 2020 Abios generated revenue of SEK18m. CEO Oskar Fröberg and CTO Anton Janér will remain in their leadership roles following the acquisition. Kristian Nylén, Kambi CEO, said of the deal that adding esports has “long been under careful consideration” at Kambi. “In Abios, we gain the esports DNA we keenly sought, and which complements the heritage and experience we already possess in sports betting,” he added.

Chalkline funding round

Chalk it up: Free-to-play and customer acquisition platform Chalkline has raised $2.7m from a Series A funding round led by Parlay Capital Holdings. Speaking to Wagers.com Earnings+More, CEO Daniel Kustelski said the ongoing excitement surrounding the U.S. betting and gaming space was a help in being able to source pitching opportunities, but that “doesn’t change the fundamentals of what investors want to see.” Still, since Chalkline began raising money in 2016 when sports-betting was not yet legal, the current funding round was “certainly easier than that one.”

How to spend it: Kustelski said the money would enable Chalkline to build out its product capabilities and the commercial team. “We’ve got a half-dozen open positions right now, with more coming soon,” he added. “Adding more great people is really the next phase of the company’s growth.” Asked whether in the current heightened climate of M&A activity, Chalkline had received any approaches, Kustelski said “inbound happens in all shapes and sizes, as you’d imagine,” but the group was focusing on the fundamentals.

Newslines

It’s official: IMG Arena has a license application pending in Illinois to be an official league data provider, according to the Illinois Gaming Board website.

Howwzat: Rank Group said this morning that HMRC has decided not to appeal the VAT tribunal decision over its long-standing claim and that negotiations will now begin over the size of the claim, which Rank expects to be around £80m. Analysts at Peel Hunt said the news was “excellent on simple valuation grounds.” “It also removes any residual pressure on Rank’s balance sheet (Rank had £50m of net debt on an IFRS 16 basis at 30 June) and puts management back in a position where it can plan for the long term in terms of investment,” they added.

At Play: PlayUSA got some press yesterday for its projections that the new football season will generate bets worth some $20bn. The site said that $12n of that will come on the NFL and $8bn on college football.

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What we’re reading

Don’t touch that dial: You might want to shelf that TED talk on the great convergence between sports, sports streaming and sports-betting, just for a bit.

Budge over: Penn National retires slots in Pennsylvania to make room for a sportsbook.

Don’t @ us: Esports is not a sport.