Fanatics prepares to challenge

King lays down the gauntlet, Sportradar’s AI move, GAN’s refocus, NeoGames on the rise +More

Earnings+More

May 11, 2023

Good afternoon. On today’s agenda:

Fanatics has the ‘luxury’ of being a second-mover, says CEO Matt King.
Sportradar points to potentially transformational AI investments.
GAN shies away from giving forecasts in shadow of ongoing review.
NeoGames talks up iLottery advances.
Melco and Golden head up earnings in brief.

Uptown in the penthouse or downtown with the mob.

Cashing in on fans

Matt King, CEO of Fanatics Betting & Gaming, says the company has built a challenger sportsbook ‘from the ground up’.

Fair warning: Fanatics will jumpstart a consumer revolution in sports betting and gaming, according to the CEO of its betting and gaming division. “You can see that consumer technology is disrupting most sectors but not sports betting,” Matt King told the audience at the SBC North America Summit in Meadowlands, New Jersey yesterday.

The opportunity Fanatics is taking advantage of is to “build a digital sports platform that can service all fans”.
“I think we are uniquely positioned to do that,” he added.
King noted that the split among the 500-strong Fanatics betting and gaming workforce was around 60/40 from outside and inside the sector.
“The advantage of second-move is you can see where you want to go and you can build the team and the product from day one.”

Bovvered: Fanatics is yet to go live with an OSB product in the US, although it has opened retail operations in Maryland. But King said the company was “not necessarily in pursuit of market share”.

“The reality is we are focused on building a product that people really love,” he said.
The sports-betting platform, as and when it launches, will see its consumers plugged into Fanatics existing rewards system FanCash.
“We believe FanCash is the currency of sport, a singular thing we can plug throughout the system,” he said.
“The money we would spend in acquiring customers, we can invest in player rewards,” he claimed.

A nation of millions: Fanatics will be immediately tapping into a ~95m-strong consumer database, which King said already contained the “vast majority” of existing US sports bettors. “We are the one true sports brand that will operate a sportsbook,” he said, claiming Fanatics came with “Amazon-like brand equity”.

“A significant chunk of that fanbase will intuitively get it,” he added.

Pay to play: Fanatics will be launching initially in only one or two states, but King noted that market access deals were now up to 40-50% cheaper than before. Partly, this was down to there being fewer competitors but also companies were “writing big cheques that ultimately didn’t reward them with market share”.

With fewer competitors it was now a “more rational” market.
“We are the best capitalized new entrant. That has really resonated with market access partners,” he said.
“This is a 10-year journey and we’re going to move methodically through that.”

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Radar signals

Sportradar says investments in AI point to future transformation.

Chain gang: Sportradar said its efforts to move customers up the value chain had paid dividends in Q1 as managed betting services and its live odds offerings saw YoY revenue growth of 40% and 29% respectively. Total revenue rose 24% to €208m while adj. EBITDA was up 37% to €37m.

Big ten: The US segment saw 55% YoY revenue growth to €40m.
“The US business is already showing results of our investment in both top-line growth and operating leverage,” he said, noting the third straight quarter of positive adj. EBITDA which came in at €7m.
Chief strategy officer Ulrich Harmuth made the point that due to the new NBA deal kicking off in Q4, US profitability would be temporarily halted by the amortization of the initial costs for the new deal.
CEO Carsten Koerl said Sportradar has “doubled down” on its expansion into the College space having recently announced a partnership with the Big Ten network.

Go to VAR: Koerl said of Sportradar’s investment in AI and its Computer Vision project that the industry was in a “transformation process”. “We are replacing human beings collecting sport information with digital systems,” he said. “That's a continuous process and it will be rolled out over most sports.”

“What it provides is much deeper insights into the sport and we can create new value creating products for our clients,” he added.
“It's probability creation which we can do with this massive new data which we get,” he noted.
“The market is very hungry for data and for the products which are based on this.”

Snap, crackle and ’Tok: Asked about the move to take the advertising business into Snapchat, Koerl said the thinking was to take it further into the social ecosystem, including with TikTok and Facebook.

“There are a lot of talks here,” he said.
Snapchat was “naturally a very good partner for us in this” and paid social is a “very interesting segment for us, and you will see more rollouts here”.

GAN’s gambit

GAN will focus on B2B in North America and B2C in Latam as Q1 revenues drop.

Early days: CEO Dermot Smurfit said it was too early to provide details on the progress of GAN’s strategic review, but overall group focus will be on B2B partnerships in North America and its B2C Coolbet brand in Latin America.

Recall, as part of the review the group agreed a new financial agreement with Sega Sammy three weeks ago.
Smurfit said the B2B focus will be on GAN Sports’ partnership with Wynn Resorts in the US and the ongoing PAM and iGaming agreement with FanDuel in Ontario.
Action stations: He added that 2023 will be “a rollout deployment story for Wynn Resorts nationwide” and Station Casinos was set to launch in the summer.
Revenues dropped 6% to $35m in Q1 and adj. EBITDA was $0 vs. $3m in 2022 due to a “decrease in contractual revenue rates of our largest B2B customer” and currency fluctuations in B2C, the group said.
CFO Brian Chang noted that the partnership with Sega Sammy enabled the group to lower interest rates from 15% to 8%, which resulted in $4m in savings, while amendments to the Ainsworth contract had enabled a $9m gain in Q1.
The group did not issue FY guidance and Smurfit said ongoing “commercial discussions with B2B clients” did not close in time for reporting.

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NeoGames‘ iLottery hopes

Strong combo: Revenues were up 187% to $64.m and adj. EBITDA rose 137% to $20m in Q1, reflecting the business combination with Aspire Global, the group said in its release. Business highlights focused on iLottery, with the states of Virginia, US, and Minas Gerais, Brazil, as the first state lotteries to launch and operate a completely cloud-based iLottery program outside of Europe.

Cloud control: CEO Moti Malul said the group’s experience with cloud-based deployments in Europe had “encouraged” Virginia to roll out the solution.
“The solution allows [operators] to improve efficiency and scale more easily,” he added.

iLottery revenues were up 9% to $14m, share of revenues from the NeoPollard Interactive venture rose 61% to $15m and net revenues from Aspire Global’s casino and OSB verticals were $35m. On a gross basis these climbed to $60m and were up 20% YoY, the group said.
Whiter than white: In the UK, Malul said the group had “already taken steps to mitigate the potential future impact” of the gambling act review White Paper, which he said was “in line with our expectations”.

Earnings in brief

Melco Resorts: Revenues rose 51% to $717m while adj. EBITDA nearly quadrupled to $191m, as Melco said that Macau’s recovery has been faster than anticipated. The company noted that mass market GGR during the recent Golden Week had exceeded 2019 levels.

Golden Entertainment revenues were up 2% to $278m but adj. EBITDA was down 8% to $62m due to rising labor and staffing costs and “disruption of the STRAT from ongoing room renovations”, the group said.

The group sold its distributed gaming business in Nevada and Montana for $322m and the Rocky Gap resort in Maryland for $175m, and CFO Charles Protell said the proceeds would be invested in its local casinos in Nevada and reduce leverage.

Inspired Entertainment revenues increased 9% (20% cc) to $66m with adj. EBITDArising 5% (15% cc) to $21m in Q1. All group segments were up, gaming rose 26%, virtuals 42% and interactive 38%. During the quarter, Inspired signed a partnership to develop NFL-branded virtual sports-betting content and renewed its gaming machine contracts with Whitbread, Stonegate Group and JD Wetherspoon – three of the largest UK pub chains.

Social casino operator SciPlay’s revenues rose 18% to $186m and adj. EBITDA was up 21% to $53.5m in Q1, thanks to increased engagement levels and record average monthly paying users.

CEO Josh Wilson said the group was “outpacing the social casino market for the fifth consecutive quarter” by investing “in key growth drivers” and developing its own proprietary systems.

Raketech revenues rose 24% to an “all-time high” of €16m in Q1m with EBITDA up 20% to €6m. CEO Oskar Mülhbach noted that organic growth was up 24% and the group’s core affiliate marketing revenues increased 32% to €11m, thanks to “exceptional results from rest of world and a solid performance from flagship assets in the Nordics”.

Predictions gone wrong: Sub-affiliate revenues were up 44% to €4m but US revenues were down 21% due to an “unfavorable outcome in sport-betting predictions” related to Raketech’s US subscription offering.

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Newslines

EveryMatrix and Future Anthem have teamed up to deploy the latter’s real-time personalization product Amplify.

Kambi has signed an on-property sportsbook partnership with WarHorse Gaming, a division of Ho-Chunk in Nebraska.

Calendar

May 11: Gambling.com, SBC North America day 2
May 16: Better Collective
May 17: Catena Media, Acroud
May 18: Aristocrat

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