27 April results: Evolution growth, Super Group listing +More
Evolution Q1, XLMedia, Gaming Realms FY, CDI, Super Group call reviews
Welcome to today’s edition of Earnings+More on a packed day for results. We start with Evolution’s first-quarter numbers.
Evolution Q121
The top line
Revenues soared 105% YoY to €235.8m (32.8% QoQ rise). EBITDA up 150% to €160.1m (66.4% QoQ). Live casino (77% mix) accounted for the majority of revenue growth, up 60% YoY; RNG (33% mix) up 6% YoY. Integration with NetEnt completed nine months ahead of schedule.
All about the margin: The truly impressive number comes with YoY margins rising a whopping 1220 basis points to 67.9%. The margin improvement is ahead of expectations and was attributed to “continued high demand.” This will be improved further by the addition of Big Time Gaming (deal announced earlier in April, €450m cash and shares) which in 2020 achieved margins of 88% on revenues of €33m in 2020. For reference, EBITDA margin for FY20 was 59.2%.
Live casino continues to drive strong revenue growth at 60% annually and generated 77.9% of revenues per game type. Net Ent contributed 22.1% of revenues but growth of just 6%. Big Time Gaming had revenues of €33m in 2020 and EBITDA of €29m.
Think you’re Big Time: Speaking of Big Time Gaming, there was no hint of any change of strategy when it comes to Megaways licensing. On the earnings call, Carlesund said: “Of course, we see the potential for taking BTG into our distribution channels, which are bigger than what BTG has alone.”
When asked about the tension between wanting to be the number one supplier of online casino games and operators not wanting to be beholden to one large supplier, Carlesund replied:
“Evolution wants to be the best company, it’s not arrogant, we want to be humble but (we also) don’t understand why we can’t say that. We want to work with operators and expand the market, so that they see us as a partner”
Forward looking: Comparatives for the second quarter will provide a tougher challenge due to the “pandemic effects” on the NetEnt business in the prior year period.
Regulation-lite: The geographic splits show growth across each region with the standout revenue increases coming from Asia (€53.2m compared with €20.8m in Q1 2020) and the US (€21.6m compared with €7.1m in Q1 2020). The addition of NetEnt has marginally improved the percentage of business form regulated markets, now at 40% (vs 38% in Q1 2020).
Europe generated 60% of group revenues during the quarter, with Asia (23%) in third and the US (9%) in third.
Responding to demand: Carlesund said the group was constantly looking at building new studio capacity to “increase supply and respond to demand. We’re building studios in Europe and the US to supply current demand, not (to target) a new state. The aim is to build a network of studios, build redundancy and increase reliability and stability.”
Super Group investor presentation
Super troopers
If leaving them wanting more is a new dictum in the world of SPACs then the investor presentation from Super Group was a winner. Presumably more detail will follow once a prospectus is filed with the SEC but for now the limited disclosures from yesterday’s half-hour call will have to suffice.
What's new: Super Group, its Betway sports-betting and assorted Spin casino brands, will float via the merger with the Sports Entertainment Acquisition Corp. SPAC in a deal which has a pro-forma enterprise value of $4.54bn or 13.3x estimated 2021 EBITDA.
The company will float on the NYSE. The current owners of Super Group - remaining unnamed in the presentation - will retain ownership of over 88% of the company at float. They will also receive $465m in cash from the deal. Notably, no PIPE investment is involved.
The presentation revealed NGR in 2020 hit $1.1bn (up 28.5% on 2019) while EBITDA came in at $259m, up from $55m in the prior year.
NGR is forecast to hit $1.5bn+ this year and $1.5bn+ in 2022. EBITDA for those two years is forecasted at $350m+ and $420m+ respectively.
A breakdown by product wasn’t provided in NGR terms but there was a GGR breakdown; online gaming on 2020 hit $1.4bn while sports-betting came in at $331m.
In GGR terms, online gaming is forecast to rise to $1.6bn+ in 2021 and $1.7bn+ in 2022. Sports-betting is projected to move up to $550m+ and $700m+ respectively.
Geographically, Super Group is truly global, being licensed in 23 territories excluding the US. The US element to the equity story will be provided by a proposed acquisition of Digital Gaming Corporation (DGC), which previously had a licensing agreement for the Betway brand (announced in February). DGC currently has licences in five regulated states (New Jersey, Pennsylvania, Indiana, Iowa, and Colorado) and has market access deals secured in five further yet-to-be-regulated states.
Oh Canada: The Americas is the largest territory at 43% and within that Canada is presumed to account for the lion’s share. This is problematic depending on what percentage of current Canadian revenues are derived from gaming. Canada’s new single-event sports-betting bill will test the limits of grey market online activity for those that take up a licence. In the risk factors, the company said its growth prospects “depend on the legal status of real-money gaming in various jurisdictions, predominantly within Canada, from which we already generate significant revenue.” Also of note in the risk factors at the end of the presentation was the disclosure that Betway also licences the brand on a third-party basis in China and Thailand.
XLMedia FY20
The top line
XLMedia has somewhat recovered its footing after being hit in the early part of last year by changes to the Google algorithm. FY20 revenues fell 31% to $54.8m; gross profit fell 36% to $34.3m. Adjusted EBITDA down by two-thirds to $12.2m.
US move: The most significant move for XLMedia came earlier this year when it announced it was buying the Sports Betting Dime business. That deal was funded by a £27m rights issue. This was in addition to the CBWG business in December last year. Stuart Simms, CEO, said on the earnings call that CBWG was outperforming in terms of traffic hitting over 550,000 monthly visits. Meanwhile, he said Sports Betting Dime was also doing well traffic-wise and “our challenge is to monetise that.”
More M&A? Asked whether there was room for further acquisitions, CFO Iain Balchin pointed out that the cash raised for the SBD deal was heavily oversubscribed and that as of now the company has around $38m sitting on the balance sheet. “That gives us a reasonable pot of money to look at tuck-in acquisitions.” He added that the company has an M&A pipeline in the US and in Europe.
CPA modelling: Related to the US push, the presentation showed that revenue share now represented 73% of ‘conversions’. In comparison, in total revenue terms CPA was worth 20%, suggesting that the majority of new sign-ups is coming from the US. The shift in favour of CPA is in line with the experience with other affiliates in the US where the CPA model is preferred to revenue share. Rev share was down at 17% for the year. Casino was worth 61% of total revenues, sports at 22% and bingo at 2%. Finance contributed 15% of the total.
I can see for miles: Clearly burned by the experience at the hands of Google last year, Simms said that as part of his strategic turnaround plans he “wanted to make sure we were operating a very clear and transparent white (hat) environment. We feel very confident in the cleanliness of the traffic from (Sports Betting Dime).” Asked about whether changes regarding Apple tracking transparency changes - and other questions around GDPR and Google - might mean for XL and the affiliate sector, Simms was similarly upbeat.
"The short answer is that some of the changes Apple is making could be a benefit to our business,” he said. Pointing out that the changes were about programmatic advertising, he said they “amplify and support us as an industry.” “We absolutely get the benefit from using our first-party data. That means we are a valuable acquisition engine for the customer or we are a very good retention tool.”
Gaming Realms FY20
The top line
The mobile games content provider saw revenues climb 66% to £11.4m; licensing revenue up 81% to £7.5m (up over 100% in 2H20); social publishing revenue up 41% to £3.9m. Company back into positive territory on EBITDA level (before share option and related charges) at £3.3m compared to £0.2m loss in 2019. Licensing EBITDA more than doubled at £3.7m. Pre-tax losses “significantly reduced” to £1.5m. Current trading “marginally ahead” of expectations.
Top draw names: GR significantly added to its client list, launching with 26 new partners over the year including 888casino.com, DraftKings, Paddy Power Betfair and Sky Betting & Gaming. Also added licensing deals for ‘Slingo’ game with Playtech, NetEnt, and Inspired Entertainment. A further nine new partners have been added so far in 2021 and has entered the Italian market with Goldbet and Sisal. The company also recently launched the Slingo Starburst colab with NetEnt.
US bound: GR expects to launch in Michigan next month and Pennsylvania later in the summer. Say analysts at Peel Hunt: “It is clear from Gaming Realms’ success in New Jersey that Slingo has staying power; the New Jersey online gaming market doubled in size in FY20 and, despite intense competition, Gaming Realms maintained its 3.5% market share.” Revenues from UYS increased to £2.4m from £1.7m.
Churchill Downs 1Q21 earnings call
The top line
Churchill Downs’ gaming vertical was the Q1 standout with the segment producing record EBITDA of $82.4m, up 72% on the prior year period. Total net revenue was up 28% to $324.3m.
It’s Twins: The renamed and relaunched TwinSpires online business is now up and running in Michigan (launched in January) and Tennessee (March) and yesterday the company announced it has also launched in Indiana, Pennsylvania and Colorado.
The offering is now on the Kambi platform. The company didn’t break out any figures. The TwinSpires horseracing segment saw revenues rise to $93.1 million, up 39% on the prior year period. CEO Bill Carstanjen said the accelerated channel migration to online throughout the pandemic had remained “surprisingly strong”.
Derby Day: The Kentucky Derby is taking place this weekend and Carstanjen said he was happy facilities were“back open generally across the country, even though there are restrictions within those facilities”. He added that the group had good visibility on the returns it would generate from this year’s event despite not being “able to have the full contingent of fans that we normally would have because of COVID”.
New competitors and horseracing B2B both welcome: Carstanjen welcomed industry competitors entering the horse racing vertical (BetMGM recently said it was working on a racing product) but cautioned that it’s a very different vertical to sports-betting. He also didn’t rule out working on a B2B basis with operators wanting to enter the space. The technology challenge of integrating a tote-based horseracing platform hadn’t been undertaken yet, but could be done if the right deals came up. “And we are never afraid of that,” he added. “We will look to find opportunities within that to better monetize our content and further the economics of TwinSpires as well.”
Scope of Kentucky activities to be clarified: CDI’s land-based outlet at Derby City Gaming delivered record net revenue of $32.9m, a 52% rise on the prior year period. Carstanjen said he would lay out a more complete picture of future projects at both Churchill Downs racetrack and Derby City gaming “at or before our next earnings call”. However, he ruled out for now the large hotel-based plans at the track due to the risk of continued Covid-related travel disruption. He said plans for the venue had been segmented into three different projects.
iGaming: all for one, but not yet: When asked about integrating horseracing customers with sports bettors and the potential that could present for cross-selling and promotions, Carstanjen said:
“We think it is important, but it's not something we are addressing as a top priority right now. We have been focused on converting to GAN and Kambi and testing making sure that (technology) works. As soon as we can get around to the common wallet, we will. “
The group's migration from SBTech to Kambi has been completed in Indiana and Pennsylvania, a mobile product is live in Colorado and the migration of its New Jersey player base will take place during the second quarter.
Newslines
Hoop Dreams: Jeff Bezos and Drake are among the big-name investors in the sport startup Overtime which is “geared” to those with attention spans which only stretch to highlights (read Millennials and below). Of note, Overtime is thinking beyond just an amateur basketball league and is looking into sports-betting among other efforts, including NFTs.
Entain ups Tabcorp bid: Entain has upped its offer for Tabcorp’s wagering and media business to A$3.5bn following the Australian group’s rejection of an initial A$3bn bid. In a statement Entain emphasised the value of the bid in terms of “cash and certainty of deliverability”. The sale is part of a broad strategic review at Tabcorp; other suitors include Apollo Global Management and Matthew Tripp, founder of Sportsbet, who is backed by the Murdoch family and a number of fund managers. Entertain, which runs Sportingbet in Australia, said a combined business would “create a leading, integrated multi-channel and multi-brand wagering company” in the country.
And on social media:
Earnings calendar
27 April: Boyd Gaming Q121
28 April: Kindred Q121, Kambi Q121, 888 trading update
29 April: Betsson Q121, Flutter Trading statement, Gaming and Leisure Partners Q121
30 April: MGM Growth Properties Q121
5 May: Aspire Global Q121, Bet-at-home Q121, Golden Entertainment Q121, MGM Resorts International Q121
Contact us
Scott Longley scott@clearconcisemedia.com
Jake Pollard jake@openmediaservices.com