29 Jun: SciGames sets up sportsbook sale or IPO
Scientific Games strategic review, Gambling.com IPO, Spain Q1 GGR, Colorado May GGR, Gaming in Holland & Germany webinar, newslines +More
Good morning. Scientific Games’ decision to sell or list its lottery and sports-betting divisions could generate $5.6bn and help the group reduce its long-term debt. If SG decides to sell it would raise the prospect of either an operator acquiring a major in-house platform or, more likely, another B2B specialist acquiring serious sports betting volumes. The affiliate Gambling.com has also decided to emulate Catena and BC and list in the US, E+M’s Scott Longley takes part in Gaming in Holland & Germany webinar, Spain’s Q1 GGRs overcome ad-versity and Colorado May GGR.
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Scientific Games strategic review
Open questions: The company has decided to divest its lottery and sports-betting businesses in order to rapidly shrink its long-term debt and zero in on a more gaming-focused entity. Each business will be either sold, separately listed via an IPO or using the SPAC route and the news immediately set the hare running on the most likely outcomes for both businesses. Most of the speculation surrounded the future of the sports-betting business, which includes among its clients for at least some of its services the likes of Flutter, Entain, WynnBet and Golden Nugget. Analysts at Jefferies said the unit “should have high desirability in the current environment” and should trade for between 12-14x LTM revenue while the comparatives for the lottery business would suggest a multiple of 10-12x trailing EBITDA. Jefferies priced the proceeds from both sales/floats at $5.6bn.
Feel the Burns: The biggest question appears to hinge on whether one of those erstwhile clients would be interested in bringing the platform in-house or whether an existing supplier, potentially in another vertical, might wish to add a somewhat respected sports platform to their offer. One notable corporate name on the ticket is Oakvale Capital (principal partner Daniel Burns), which has been involved in some high-profile gaming and betting-related corporate actions in recent years including the sale of Big Time Gaming to Evolution and the Genius Sports SPAC. Also doubtless taking notes right now is the Tekkorp SPAC headed by ex-SG CEO Matt Davey. The company itself said little during the earnings call on either the timing or the quantum of the processes.
“We are far enough along in the process that it made sense to get it out there,” said CFO Mike Eklund. “Today is about getting everyone aligned internally. Plus we believe we can get this to a logical conclusion very soon.”
Reconstruction time again: One trend noted by the analysts at Truist that will play into the sale/IPO process is the current trend among operators to unbundle their procurement processes with “more decisions based on quality of each product.” Should the de-consolidation be successfully executed, Truist said it will turn attention to similar movies at IGT and Everi. “Concurrently, we could see even more attempts for more cohesive M&A (e.g. around similar digital and content thematics),” they added.
Debt forgiveness: The goal of lessening the debt servicing is clearly a top priority for SG. In the recent Q1 earnings presentation the company said net debt stood at $8.5bn and interest expense in the quarter was $124m. Jefferies noted that the hoped-for $5.6bn influx of cash could see Scientific Games reduce its net debt ratio to 2.4x.
Jeux sans frontières: As for the remaining integrated gaming business, the company made it plain it hoped for more from iGaming and saw opportunities for further mining of the omni-channel seam. “We will be a cross-platform global game company,” said Barry Cottle, President and CEO. “Collectively, we are well along on this journey. Layer on that a rapidly de-leveraged balance sheet, (and) we will be a more nimble and flexible organisation.” Truist suggested the deal sets Scientific Games up “nicely” for more M&A.
Gambling.com IPO
The top line
An SEC filing said Gambling.com Group achieved revenues of $28m in 2020, up 45% YoY. The company said that between 2017-20 it had achieved a CAGR of 35%.
Revenues from European-facing operations rose to $16.2m in 2020, UK and Ireland came in at $5.3m. Revenues from the US rose over 100% to $4m and the rest of the world contributed $2.6m. Revenues from casino sites was 86.3% of total revenues, sports-betting 11.4% and other 2.3%. Net income in 2020 hit $15.2m in 2020 after a net loss of $1.9m in 2019. Adjusted EBITDA rose threefold to $14.6m. No details were given on either Q1 or current trading.
Peer review: Taking advantage of the buoyancy of the online sports-betting and gaming affiliate sector, Gambling.com has moved to attempt a float in the US. It achieved 104,000 NDCs (up 31.6% YoY) from a smaller selection of sites than its major rivals (32 compared to thousands under the control of rivals Better Collective and Catena Media). It also said it achieved an average YoY quarterly growth rate of 33% achieved since 2018, compared with 15% for BC and 10% for Catena. Gambling.com is relatively reliant on its top customers: in 2020 55% of revenue came from the top 10 customers with 20% from the number one client.
Beating Google: The SEC document suggests Google algorithm changes are a net positive for its sites. “We believe that Google and other search engines are increasingly adept at identifying the truly high-quality content that deserves prominence. Our investments in content, product and website delivery have thus naturally resulted in strong rankings without significant additional effort,” the company said.
Webinar - how listed iGaming firms will approach Germany and Holland
Forlorn casino hope: The lack of regulated online casino in Germany will cause “structural problems” for some, Earnings +More’s Scott Longley noted, as bigger operators with a sports betting focus “will be most intent on remaining in the market and growing share”. Sports-betting can be used to build up brand loyalty in the hope that online casino will get regulated, but Longley added that such a scenario was hopeful at best and had not been borne out in other European markets such as France. Co-panelist Kelleher concurred and said “scale will be hugely important:”
“(A company like) Entain has the scale to withstand losses in Germany over a long period of time; but it has taken 10-15 years to get to this stage, so it’s not looking hopeful that there will be a change of regulation,” Kelleher added.
Industry lobbying and raising the issue of illegal operators and channelization rates are unlikely to sway regulators, he added.
Going Dutch: Despite a high tax rate, Holland’s regulation of betting and casino verticals will bring more certainty to investors. However, the standstill period, with licensed groups that previously operated in the country having to wait nearly three years before they are able to market their products, will mean a national operator like Holland Casino will have a major advantage, Kelleher said.
Spanish Q1 GGR
The top line
GGR of €240.1m was 3.8% ahead sequentially and a 10.2% YoY rise. Betting contributed 46% of the total, casino 41.5%m, poker 10.4% and bingo 1.5%. Other games totalled 0.7%.
The triumph over ad-versity: It is perhaps dangerous to read too much into any one data set, all the more so given the disruption caused by the pandemic and comparisons with prior periods are tricky. The effect of the advertising ban that came into force in October last year was to boost marketing spending for 2020, up 25% to €464.3m, a rise that was largely due to a 53% rise in promotional and bonus spend. As can be seen from the monthly breakdown provided by the regulator, this boost occurred in the months leading up to the introduction of the rule changes:
In the context of the new regulations, which include a prohibition on marketing to new players, the rise in promotion spend just ahead of the introduction of the new rules makes a lot of sense (though the coincidence of the post-first wave of the pandemic muddies the waters). It also worked; new accounts surged 139% sequentially in Q3 and 30% YoY.
Long haul: Arguably, the short-term effect of the new regulations in the months leading up to their introduction and in Q1 will be to solidify the positions of the leading operators with medium-term savings on marketing falling directly to the bottom line. This possibly amplifies one predicted outcome of the harsher advertising climate. Sources suggest ad bans tend to have more longer-term impacts, in particular on the chances of new entrants making a splash.
Colorado May GGR
The top line
Handle up 1.8% to $249m, GGR down to $15.2m, net revenue down nearly 50% MoM to $5.9m. State taxes down to $635,640 from $1.1m in April. Nearly $246.5m of the total handle was bet on mobile.
Hoop dreams: The NBA saw most of the bets at 34.9% followed by MLB in second with 19.7% share of the bets. The NHL was third with 6.2%, table tennis managed to hold on it its top four sport with 4.1%, just ahead of soccer/football. Parlays were the favoured bet types for Coloradans with 17.5% of all bets.
Newslines
Chapter and verse: Brooklyn-based sports-betting start up Verve Gaming has joined the Sportradar Accelerator programme and has signed a partnership for exclusive live sports data provision. Verse is a P2P gaming product built by former Barstool Sports Syracuse viceroy interns Dan Zimmerman and David Roden and will launch in the fall.
Slingo your hook: Gaming Realms has announced that its Slingo Originals game has been launched in Michigan with BetMGM. GR has also signed up further operators in Michigan for the licensing of its games.
Brazilian play: Newly Toronto-listed affiliate operator Playmaker has announced the acquisition of another Brazilian-facing football site Fanáticos Por Futebol to add to its roster of Latin American-facing sites. No financial details were disclosed. The acquired site has over 4.5 million social media followers with nearly one million on Instagram alone generating more than 33 million interactions every month.
Skrill & cash: Paysafe has integrated its e-wallet solution Skrill and eCash product paysafecard with FOX Bet in the state of Michigan. The two groups already collaborate in Colorado, New Jersey and Pennsylvania. The Paysafe solution will now also support payouts for FOX Bet players, paysafecard is FOX Bet’s first integrated eCash solution for players who prefer cash.
What we’re reading
Gulf course: An interesting delve into the effects of the ongoing crackdown by China on online operations in Asia in Asia Gaming Brief: “Dubai had been one of the key hotspots for the Chinese operators, but they are on the edge of their seats,” said Danny Too, general manager of Cherry Interactive. “Some of them for safety reasons have stopped their operations.”
Calendar
8 Jul: Entain Q2 update
14 Jul: Casino Beats Summit, Malta Dday 1
15 Jul: Casino Beats Summit, Malta day 2
Contact us
Scott Longley scott@clearconcisemedia.com
Jake Pollard jake@openmediaservices.com