888 issues a profit warning

Operator blames regulatory restrictions, XLMedia’s poor H1 +More

Earnings+More

Sep 28, 2023

Good morning. On today’s Earnings Extra agenda:

888 issues a profit warning, blaming “significant” impact of compliance.
Betting and gaming affiliate XLMedia bemoans lack of US state openings.

Everyone's sad they lost what they thought they had.

888 profit warning

The operator blames regulatory challenges for below expectations FY EBITDA.

Call me if you get lost: 888 this morning blamed the “ongoing significant impact from compliance changes” across regulated markets for a predicted unquantified shortfall in FY23 profits.

Saying the performance across the group has been mixed, it said Q3 revenues would be down 10% YoY to ~£400m.
It added that it now expects Q4 to be sequentially higher but down single digits YoY.
The company also blamed customer-friendly results for impacted win margin in the UK and internationally.
It singled out once again the impact of changes in the UK made to comply with the harsher regulatory regime on safer gambling practice.
It also said it has seen a “short-term impact” from changes to its marketing as it moved focus onto more “higher-return marketing”.
The company said retail was performing in line.

Honestly, I’ve got this: Recall, 888 posted an H1 loss of £32.5m in mid-August, which the company also blamed on continued regulatory impacts from licensed markets. The operator reiterated its cash position, saying that with ~£162m of cash balances and undrawn credit facilities of £150m it had more than £300m of liquidity.

At the time of the H1s, the company blamed the cost of servicing its £1.66bn of debt for the first-half loss.

Hospital pass 2: The task of turning the ship around falls to incoming CEO Per Wideström, who starts in mid-October, and newly appointed CFO Sean Wilkins. Current executive chair Jon Mendelsohn said 888 was “making significant strides to improve the quality and long-term sustainability of our revenues, but performance in Q3 has been below our expectations”.

He reiterated the company was targeting revenues of over £2bn in 2025.
888 said synergy delivery was “on track and significant cost savings are being delivered” that have helped mitigate the poor revenue performance.
However, adj. EBITDA margins for FY23 are now expected to be at 18-19%.

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XLMedia slide

The betting and gaming affiliate confirms previously indicated earnings slump in H1.

Undersized: The company blamed a lack of new state launches in the US for a 33% slide in revenues for H1 to $29.4m. Adj. EBITDA was also down 39% to $6.5m as it reduced its headcount by 14%. Revenue derived from US sports betting almost halved to $16.2m while revenue from media partnerships fell by 40% to $12.2m.

After taking into consideration earnout payments worth $3.4m and a $24m corporate tax payment in Israel, the company has cash balances of $7.4m.
Post-period, the company sold three dot-country ‘casinos’ domains for $4m.
For the rest of the year, it said revenues from its European sports arm are expected to grow YoY.
For the US business, however, it said performance will “continue to benefit from period revenue spikes resulting from new online sports betting state launches in the US, however the timing, number and scale of launches will vary significantly”.

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Newslines

Betsson said it has been awarded a license to offer online sports betting in France. The operations in France will be run in collaboration with a local partner with a launch expected to take place during the fourth quarter of 2023 under the Betsson brand.

Better Collective has announced it is seeking a joint listing on the Nasdaq Copenhagen. It is currently listed on the Stockholm version of the exchange.

Calendar

Oct 8: GeoComply Challenger event, Las Vegas
Oct 9-12: G2E, Las Vegas

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