6 May: LeoVegas' German rout +More
LeoVegas, Everi Q1s, UKGC monthly data, Aspire earnings call recap
Welcome to today’s newsletter. This morning we have the latest from LeoVegas and from Everi overnight and take a look at the latest monthly data from the UK Gambling Commission. We also have a recap of Aspire Global’s Q1 analyst call yesterday (during which we had a technical glitch). Later today, Penn National, AGS and Golden Entertainment all publish earnings and we will post the news from them in tomorrow morning’s newsletter.
DraftKings reports its Q1s Friday afternoon UK time/before market opening ET and we will be sending out an extra newsletter looking at what the company says and the reaction from the analysts.
We start today, though, with LeoVegas’ problems in Germany.
LeoVegas
The top line
Q1 revenues increased by 8% to €96.7m (€89.4m Q120) with organic growth in local currencies of 8%. Adjusted EBITDA was €10.9m (€9m Q120) with adjusted margins of 11.3% (10% Q120). Adjusted earnings per share were €0.07 (0.06 Q120). The number of depositing customers grew 12% YoY to 462,386 (413,269).
Germany continues to impact operators. Excluding that market, LeoVegas’ organic growth was 19% during Q1. Preliminary revenue for April came to €32.7m (€37.5m Q120), a 13% drop YoY, excluding Germany, revenue grew 4% during the month.
Home on the Reichweite: Revenues from Germany for LeoVegas more than halved in the first-quarter with the percentage of total revenues from the country down to 6% from 15% in Q120. The problems continued into the current quarter; preliminary revenue in April was down 13% for the group but excluding Germany it achieved growth of 4%. CEO Gustav Hagman said Germany was now a “massive black market.”
“At the moment it’s the Wild West there, 70-80% of the players have shifted to the black market”, Hagman told analysts on the earning call.
The company is pinning its hopes on the long arm of the German tax authorities once the Interstate Treaty kicks in on 1 July. “From 1 July the legislation will be enforced by the tax authorities” who are expected to be aggressive in their enforcement actions and “there is also talk of blocking payments, which is a good sign”.
German offset: The drop in Germany was offset by strong growth in Italy, Spain and Canada, Hagman said. The group is active in discussions over sports-betting regulation in the province in Ontario, these “are highly promising, the legislation seems fair and healthy and we want to get licensed.” In Sweden, it said the strength of the brand had enabled it to grow on a yearly basis “for the first time since the temporary Covid-19 restrictions were implemented in July 2020”.
Great Expektations: Sports-betting will be a major focus for Leo Vegas with major acquisition drives planned for the Euros, Copa America and Tokyo Olympics. The group is confident Expekt will perform well in the Swedish target market thanks to its history and brand awareness there. For Expekt, CEO Gustaf Hagman did not set a specific growth or revenue target, “but with 9% of our revenues currently coming from sports and with us launching such a great brand we wouldn’t be surprised if the figure reached double digits fairly soon.” LeoVegas will complete the acquisition this month and migrate all its betting activities onto the Kambi platform to launch in time for Euro 2020.
In-house rules: The migration of online casino Royal Panda onto the group player account management system has completed, while the launch Blue Guru games studio and the LeoVentures investment in SharedPlay will see even more focus on in-house games development. The group didn’t provide guidance and said it was part of utilising its experience and knowledge in the casino vertical “to gain a larger share of the value chain, this is important for future revenues.” It will also develop B2B revenues with the division, the first game is expected to go live in Q4 and “20 more games will be launched in the next 24 months,” Hagman added.
Everi
The top line
Revenues up to $139.1m in Q1, net income came in at $20.5m, adjusted EBITDA increased to $75.4m, all quarterly records. Gaming revenues came in at $76.1m (compared to $67.5m in Q119) while fintech revenues were $63m (up from $56.2m in Q119).
Upper class: “The complementary balance between fintech and gaming segments has never been better,” said CEO Michael Rumbolz of the record results. In gaming, the increase of premium Class II and III games has helped drive a doubling of premium-unit installs. Rumbolz said they were now going toe-to-toe with the “very best” suppliers in the space for Class II and III.
Growth opportunities: COO Randy Taylor also said the company was seeing encouraging interest in its igaming content provision with revenues up 50% sequentially Q420 to Q121 due to Michigan going live in Q1. The company sees more scope for leveraging its historical land-based games into online.
BAAS levels: In the land-based arena, he said there was increased interest in the digital cash wallet from the tribal operators and the company is now offering a ‘banking as a service offering’ that can work across properties and states. “We’re going at the pace of our operators,” Taylor noted of the cashless and digital pivot. “The space is very high for us and we have a lot of projects in flight.” This includes discussions around omni-channel payments solutions.
Analysts at Macquarie noted: “We find Everi’s FinTech business the most attractive business in Gaming Tech, processing over 114m transactions per year and has cashless technology, which could build and shift those transactions to a customer’s phone.”
Ship share gains: Asked whether there was an added dynamic to the increase in ship share, Rumbolz said there was ”nothing I see that is systemic that would stop us realizing these gains.” As for gaming tech Q1 read-across, analysts at Truist said the cautiously optimistic comments from the company on current trading should be viewed as a positive for their peers, albeit Everi benefits from higher recurring revenue mix.
UK March and Q1 data
The UK Gambling Commission has published payer and revenue data for March supplied by online operators representing 80% of the total UK market. The data shows how the continued effects of the pandemic and its associated lockdowns have affected player behaviour.
Total revenue for March came in at £542m, a sequential increase of 4%. The GC cautioned against making comparisons with the prior year period due to there being no retail betting this year compared to last (the lockdown only closed retail in late March 2020).
The Q1 figure totaled £1.69bn with betting worth 49% of total GGY or £794.3m, slots accounted for £573.7m of the total and other gaming totalled £208.2m. Of the rest, virtuals chipped in £23m, eSports £5.1m, poker was £29.1m and other betting products amounted to £6m.
The GC said GGY benefited from the Cheltenham festival in March - taking place behind closed doors for the first time - but with operator margins lower than in previous months. Slots, meanwhile, hit a new monthly peak for the period from last March at £202.9m. The previous best month was December when GGY hit £199.7m.
At 6.2 billion, the number of spins was up 12% MoM and active slot players at 3.3 million was up 10% MoM. Both were new highs. While the total number of slots sessions increased by 23% to nearly 1.2 million, the average session length decreased 1% to 21 minutes. Note, this session length figure has barely moved during the year, oscillating between 21 and 22 minutes. There has been a more significant move in the number of sessions above one hour; in March 2021 this number was 2.7 million compared to 1.9 million in March 2020.
Aspire Global analyst call recap
Aspire Global published strong Q1s yesterday, record revenues up 42.6% to €48.1m, EBITDA increase of 64.2% to €8.6m and post-tax earnings up 140% to €6.1m. CEO Tsachi Maimon said the group would focus on the US, regulated markets like Germany and Brazil and reiterated 2021 guidance of €200m revenues and €32m EBITDA.
American pie: Asked how much US business Aspire Global could still aim at, Maimon replied:
“Many people are already asking: what is left to fight over? A lot actually: and not just the new states (set to regulate). There is also disappointment with the existing products that launched early because operators wanted to go live fast. That’s one reason we want to enter.”
The other reason is that with so many tier 1 operators acquiring their own tech platforms, suppliers approaching or working with them should be wary of losing major clients sooner or later. “Which is why we want to target tier 1, but also tier 2,3 and 4,” he added. “We also come with a broad set of products and services, most suppliers come to market with one product. We have four or five that we can sell into the US and that’s another reason why we believe we can succeed.”
Sports switch: With BtoBet integrated into its Aspire Core platform and gaining certification in the UK, Maimon said the group would be able to reach more operators and show off its new sports solution in the hope of shifting them from their platforms. “The switch (to Aspire Core) will enable more synergies and growth. The UK is the first trigger that will enable us to go live in other regulated markets with sports betting.” The company said it expects to have its first brands migrated to Btobet in time for Euro 2020 and the rest for the start of new football season in August.
Gaming a go-go: The Pariplay gaming aggregation platform (Q1 revenues €10m, up 220% YoY) was particularly efficient for business wins with major operators and still had to go live with more than 20 partners. “We’re signing lots of deals, there is a big pipeline and we’re prioritising ROI on the launch schedule,” Maimon commented.
M&A always on: AG paid off its matured bond with a €10.3m bridge loan from the company’s major shareholders in early April, but CFO Motti Gil said it didn’t mean this excluded it from going for good M&A opportunities. “The fact that we repaid our loan on (the) maturity date gives us credibility and the ability to raise funds if we need to. Currently the focus is mainly on synergies but should there be good opportunities we would be able to move quickly.”
Newslines
Maryland data: GGR $162.1m in April, down 11% MoM. MGM National Harbor at $62.4m, GLP’s Hollywood Perryville $8.5m, Golden Entertainment’s Rocky Gap $5.7m, Ocean Downs $7.7m and Maryland Live at $58.2m. No YoY comparison; vs 2019, April was up 11.6% on Apr19.
It’s built, but will they come? Bernstein analyst Vitaly Umansky says Macau’s mass-market segment should grow in 2022 as long as there are more news developments such as SJM’s Grand Lisboa Palace. “I’ve always been a big believer that Macau is a build it and they will come story, so as long as Macau continues to develop new resorts and features and the border stays open, the prospects on the mass side are exceptionally strong,” he tells AGBrief.
What we’re reading
Robert Lenzhofer, CEO & Co-Founder at Hölle Games, has a written a valuable piece of analysis on LinkedIn looking into turnover tax and RTP issue in Germany.
Earnings calendar
6 May: Penn National, AGS, Golden Entertainment
7 May: DraftKings, Century Casinos
10 May: Bally Corporation, Scientific Games, Inspired, Full House
11 May: Accel, FuboTV
Contact us
Scott Longley scott@clearconcisemedia.com
Jake Pollard jake@openmediaservices.com