Apr14: Weekend Edition no.42

Super Group Q421, the week at ICE, Canadian VLT expansion, Q1 earnings outlook, sector watch - streaming +More

Apr 14, 2022

Good morning. ICE ends today and all involved, attendees, exhibitors and (most likely) the organizers can now relax. Exhibitor numbers were down (as flagged for many weeks), but footfall seemed high in the first two days though many delegates said they found the calmer and more spacious environment more pleasant than the heaving crowds and blaring music that is usually the background setting of ICE.

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Super Group FY21

FY21 revenue up 45% YoY to €1.3bn, adj.EBITDA up 60% to €289.5m.
Revenue mix was 65% casino, 29% sport, 6% other.
Geographic mix was North America 45%, Asia 25%, Africa and the Middle East 17%, Europe 11%, LatAm 2%.
Q4 NGR up 14% to $362m, adj. EBITDA down 2% to $69m.
2022 guidance reaffirmed at revenues of $1.4bn, adj. EBITDA of $354m.

Northern exposure: Bearing in mind Super Group’s North American (read: Canadian) exposure, most of the analysts’ questions during the webcast centered on its activities in Ontario. The group said the province’s OSB and icasino regulation would not change how it operates or the guidance it had issued for 2022.

Neal Menashe, CEO: “We’ve seen how New York has behaved with huge bonuses and no tax rebates on the spend. You can’t change strategy just because of a new market, Ontario is no different and remember it’s only one province in Canada.”

Blessed: Main brands Betway and Spin are not yet licensed in Ontario but are operating with the blessing of the Alcohol and Gaming Commission with whom Super Group is in regular contact with regard to obtaining its license.

Asked if there would be any blackout period between now and when it gets licensed, Menashe said: “No, no delay from when you roll in from the dotcom to local regulation.”

Dual-brand strategy: With cross-sell from OSB to icasino proving to be less of a factor than hoped, Menashe said sports bettors were very different to igaming customers.

Different strokes: Menashe said “specific igaming customers versus sports-betting are very different.”
“Betway customers are very different to Spin customers and that’s why we have both brands and can attract each type of customer. That applies to Ontario and that’s why we move province-by-province.”

US backgrounder: The Betway brand is currently live in six states (Iowa, Colorado, Indiana, Pennsylvania, New Jersey and Arizona) with access to 12 more via its partnership with soon-to-be-acquired Digital Gaming Corporation (DGC). The transaction is set to complete in H2.

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The week at ICE

Digital spread: ICE finally took place after a two-year plus break and while the numbers were down - a rumored 80 exhibitors, mainly land-based companies, canceled stands - there was relief at getting the event away.

One of the unforeseen consequences of their decisions has been that online gambling companies continued to expand further into the Excel.
The chatter on the expo floor was that BetConstruct wanted to take over the (mega) space usually occupied by Novomatic.

What they said:

Das System ist kaputt: Jessica Maier, head of government affairs at Play'n GO, on Germany’s stop-start regulatory process:

“The regulator is still being set up and the lack of clear thinking around enforcement also sends worrying signals to operators that are committed to regulated markets.”

Infinity loop: Ulrich Gilot, head of media at Betsson, on why the new media giants will rule online media.

“They have been busy reinforcing their closed loops and already control 80% of worldwide media space. With cookies being phased out, companies will have to decide on brand building vs. contextual and experience-based advertising.”

Naive melody: Chris Lynch, head of gaming at Citizens Capital Markets and former BetMGM head of corporate development, on why simplicity in gaming content doesn’t mean lack of quality.

“Quality is subjective. In the US it doesn’t mean complexity and it’s a nascent market with nascent consumers, so they might not understand the complexities around a Megaways jackpot.
“The focus on quality must be there, but it needs to be tailored towards consumers that might not get overly-complex games.”

We’ll be ready when we’re ready: Adi Dhandhania, COO North America Interactive at Bally Corporation, on launching much later than all its competitors in New York.

“Our view has always been that you must have the right product when you launch.

“Whether on day 2 or day 90 there is lots of bonus spend and customers are not loyal to betting brands and bonuses to match bets and we don’t want to get into that mix. We’ll do it when we have the right product and won’t overspend.”

Everybody’s (un) happy nowadays: Crispin Nieboer, partner at Tekkorp Capital, on why operators are never happy with suppliers:

“I spent eight years at William Hill, so I have great experience at being unhappy with suppliers.
“However I would encourage operators to focus on their skills and think about that if they bring these things in-house. The likes of FanDuel, DraftKings or bet365 spend $100m a year on technology. So think about scale because once you get into that fight it can be hard to keep up.”

Breaking

Building blocks: Eilers & Krejcik’s US Sports Betting Market Monitor is reporting that sports merchandise giant Fanatics is developing its own sportsbook technology using source code from supplier Amelco.

In da zone: Meanwhile, streaming specialist DAZN is said to be close to launching its own sportsbook in Ontario via Sportradar’s sports-betting platform Optima. For more on DAZN, see sector watch below.

100 club: According to E&K, the Fanatics deal is the largest ever for Amelco, beating the rumored $100m deal it recently struck with Hard Rock. Amelco’s source code is already used by brands such as Fubo (Vigtory), Fox BET and Play Up.

Fanatics’ long-term OSB strategy is to own the entire tech stack, Amelco is expected to handle most functionalities initially with Fanatics gradually taking over as it builds its operational teams.

Canadian VLT expansion

Machinations: IGT and Inspired separately announced deals to bring a new swathe of VLTs to Canada.

IGT’s deal with the Atlantic Lottery Corporation will see the company provide 1,375 machines.
Inspired Entertainment has agreed an expansion on its deal with the Western Canada Lottery Corporation for a further 700 Valor machines in Saskatchewan following on from the 100 machines it already operates in the province.

Analyst reaction: Macquarie said Inspired’s deal would be worth $5.6m in EBITDA. They noted that total Valor cabinet sales in the US were now over 700. “This gives Inspired a solid foothold to showcase to other provinces the performance of its cabinets,” they added.

Q1 earnings outlook

Setting the bar: The question pondered by analysts at Wells Fargo is whether the upcoming Q1 earnings will be good enough for investors worried about consumer recession risks.

“Similarly, we do not expect many Q1 beats to be followed by Q2-Q423 estimate raises (we believe the buy-side has already begun lowering estimates).”
The analyst caution that investors are likely to look through whatever Q1 positivity is discussed about gaming trends and look instead to cautious consumer commentary elsewhere.

Key topics: For Strip operators, eyes will be on visitation trends and asset sale updates; for locals early Q2 trends will be the focus while for OSB and igaming, investors will be looking for signs of “moderating” promo spend and Ontario updates.

Sector watch - streaming

Dancing on my own: Analysts at Lightshed noted the significance of Disney announcing that hit TV show Dancing With The Stars will move after 16 years on ABC to its Disney+ streaming offering.

“Disney CEO Bob Chapek taking content off of broadcast TV and pushing it to Disney+ is an important signal to investors,” the team said.
“Perhaps the most interesting aspect of the DWTS shift is that it moved to Disney+ and not Hulu (which Disney only part-owns).”

The weakening of linear TV: Lightshed say that as streaming “becomes the ‘future’ for almost every legacy media company”, then the best content will be pushed to streaming.

“With scripted and unscripted programming moving to streaming TV, the only content holding the legacy bundle together is live sports and live events (such as award shows).”

But even here, the past year has shown an “increasing push of live sports to streaming” with tech companies “finally starting to get serious about live sports.”
The net result will be more cord-cutting, accelerating from mid single-digits to high.

Staying with sports: DAZN CEO Shay Segev has raided his old firm Entain to hire Sandeep Tiku as the company’s new CTO. Tiku was most recently COO at Entain.

M&A lines

Fertitta Entertainment, owner of the Golden Nugget in Nevada and three other states, has bought the Wildwood Casino & Hotel in Colorado for $43m. The deal was first signed in November.

Snapping up a snipp: Bally has bought a 9% stake in Toronto-listed digital marketing promotions and loyalty software provider Snipp for $5m. At the same time, Bally will become the exclusive gaming partner for Snipp’s Gambit platform and Snipp will also provide its loyalty platform to Bally’s land-based business.

Newslines

Super fail: Intralot has paid the Washington DC Lottery $500K in compensation for the failure of its mobile betting app GambetDC during the Super Bowl. Intralot did not update the iOS version of the app in time and GambetDC went offline hours before Super Bowl LVI and came back online the next day.

Live free-play: F2P provider Chalkline has launched a set of new in-play staking games designed to drive engagement during major sporting events.

Patent signs: IGT has signed a patent cross-licensing agreement with Aristocrat that includes patents related to game features and remote game server (RGS) technologies. Financial terms of the agreement have not been disclosed.

Party time: Entain brands bwin and Party Poker have launched their online poker sites in Ontario, meaning the province now has four licensed operators. PokerStars is also expected to launch when it receives a license from Ontario’s Alcohol and Gaming Commission.