Share handouts analysis sees Flutter shine vs. DraftKings
Share-based payments analysis, jobs losses in Gibraltar, Lottomatica shares watch, startup focus – SharpStakes +More
Share-based payments under the microscope at Flutter US and DraftKings.
Careers+More looks at the looming job losses in Gibraltar.
Lottomatica shares on the up.
Startup focus is Gen Z-friendly SharpStakes.
I can't tell if I'm a king pin or a pauper.
Flutter US wins out
Accounting standards can be interesting: A substantial difference in the amounts of share-based payments that Flutter US and DraftKings issue to their employees helps explain why the former will be generating substantially more EBITDA in the next two years, according to new analysis from Jefferies.
Yes, accounting standards: Flutter recently released restated accounts in line with US GAAP reporting standards vs. its previous IFRS reporting. While this doesn’t affect top-line figures, it does change how analysts view the numbers at the EBITDA level. Crucially, the new reporting includes disclosures around divisional share-based costs, highlighting a difference between Flutter US and its major rival.
As per previous commentary, in the past three years DraftKings has handed out $1.66bn in share-based payments.
In comparison, the share-based payments for the same period at Flutter US total $617m.
Jefferies suggested this differential won’t close any time soon. For 2024 the team estimates DraftKings share-based payments at $400m vs. $122m for Flutter US and in 2025 they estimate DraftKings at $406m vs. $130m.
The differential: The treatment of share-based payments exacerbates what the Jefferies team identifies as an existing margin differential between Flutter US and DraftKings. It means, for instance, that going by what Jefferies terms further adj. EBITDA, Flutter US will generate $630m this year vs just $85m for DraftKings.
By 2025, the differential between the two on this metric means Flutter US will still be generating more than double DraftKings at a further adj. EBITDA level or $1.23bn vs. $582m.
💵 Flutter US vs. DraftKings adj. EBITDA pre- and post-share-based payments
Beg to differ: The team at Jefferies pointed out there is a wide variation in the treatment of share-based payments among analysts and that their approach is to reflect this element of the balance sheet as an operational cost.
Analyst upgrade: Flutter got a vote of confidence from analysts at JP Morgan, who noted the company comes with a “strong moat” of strong product, scale and brand. The team added it continues to “reinforce its positioning despite increased competitive intensity (especially in the US) and ongoing regulatory headwinds.”
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+More
The AGA predicts legal wagering on March Madness will hit $2.72bn this year or roughly twice the amount bet on the Super Bowl LVIII.
Fanatics has launched betting operations in Arizona.
EveryMatrix has opened its new development hub in Bucharest, Romania, while also reaching a milestone of 1,000 employees.
By the numbers
New Jersey: B&M GGR was down 1.6% YoY to $212m while iCasino rose 28% YoY to $182m. Sports-betting revenue was up 24% to $67.6m on handle that rose 28% to $1.08bn.
Massachusetts: Handle in February dropped 17% to $530m and GGR was down 26% to $51.8m. DraftKings stretched its lead to 6% by GGR, with FanDuel on 27% market share.
Iowa: OSB GGR in February rose 15% to $13.6m on handle that rose 14% to $221m. DraftKings maintained its lead at 43% of GGR, followed by FanDuel on 34% and BetMGM on 8%. ESPN Bet grabbed 4% of GGR share and 5% of handle share.
The week ahead
Sportradar will release its latest numbers on Wednesday. The company recently announced an extended exclusive deal with the German Bundesliga as well as launching a ‘future of tennis betting’ product in association with the ATP.
The next day, super-affiliate Gambling.com will round out the sector’s reporting schedule with the company sure to face questions about what role it will play in the current wave of M&A.
Careers+More – Gibraltar job losses
Canary in the coalmine: Gibraltar stalwarts such as Entain, William Hill and Lottoland are considering job cuts among their staff in the jurisdiction, but this only reflects wider pressures across the European gambling space, according to Gibraltar gambling commissioner Andrew Lyman.
Speaking to E+M, Lyman said there were indications that ~10% of jobs were at risk out of a total of gambling industry staffing on the Rock of ~3,600.
Ich bin ein Berliner: “This is about a number of disparate things happening across the European-facing industry,” Lyman said, noting issues such as the troubled German market partial liberalization and the variety of ad bans and marketing restrictions in various jurisdictions as well as the introduction of harsher regulatory measures in the UK.
“When we have had redundancies in Gibraltar before, those people tend to get reabsorbed into other operators,” he said.
“I can’t say hand on heart that all the people losing their jobs will get jobs elsewhere. But the medium-sized operators are not losing staff right now.”
I get knocked down, but I get up again: Lyman noted how, in 2019-20, bet365 went down to less than 100 when it moved its “critical mass” to Malta. “But they have built back up to north of 200 again and have concentrated their international marketing center here,” he added.
Gibraltar is an expensive place for those working in the industry to rent or buy a home, Lyman added. “There has always been an issue here about middle-ranking and below jobs being harder to fill,” he said.
Uptown, top ranking: “So what we are seeing more is middle-ranking and upwards jobs being here and less of the CRM work.
He also noted a “greater use of regtech.” While there hasn’t been a move as yet to full automation, “there is a transition taking place but it’s slow.”
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Analyst takes
Golden Entertainment: Truist initiated its coverage of Golden Entertainment with a glowing Buy recommendation. Following recent divestments, the team hailed Golden’s “back-to-basics” re-emergence as a Nevada-only operator.
Nevada offers favorable population trends and a stable low-tax regulatory environment, and, hopefully, an end to recent construction disruptions and labor disputes.
Truist sees solid EBITDA and free cash flow growth ahead and believes the current valuation doesn’t reflect the company’s improving fundamentals.
“Golden now has one of the best balance sheets in gaming,” wrote the Truist team, “with an appetite for increasing capital returns and M&A.”
Furthermore, the analysts reckoned Golden’s real-estate portfolio, which includes the Strat, could be worth as much as the entirety of its current equity value, with the operations essentially thrown in for free.
Bally’s: After discussing with investors, Deutsche Bank said the international interactive segment at Bally’s – the Gamesys business – should be valued at 7.5x-8.5x adj. EBITDA. DB is forecasting ~$330m of adj. EBITDA this year, suggesting the business is worth $2.48bn-$2.87bn.
Recall, Bally’s is currently subject to a bid from major shareholder Standard General that values the whole business at ~$684m.
Regionals: JMP suggested the regional casino sector will be able shake off the weather-related downturn in January with February data, pointing to a normalization and conversations with management indicating the first two weeks of March also experienced growth.
“A resilient consumer is encouraging, with comps starting to ease in March, including the favorable backdrop of flat and +1% YoY comps in Q224 and Q324, respectively,” JMP added.
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Markets+More
Lottomatica: Mentioned in despatches as one potential buyer for any of the outlier businesses that rival Entain might look to offload in any rationalization process, the Italian-focused betting and gaming operator enjoyed a neat 9% rise in its share price last week.
Recall, during its Q4 call with analysts, CEO Guglielmo Angelozzi said further M&A would necessarily have to wait until the company had digested its recent SKS deal.
🇮🇹 Lottomatica’s shareholders enjoy a positive week
Startup focus – SharpStakes
Look sharp: “We loved tech and more than that we loved to hustle,” says Shubs Kaushal, CEO and co-founder of SharpStakes, of his university friendship with fellow co-founder and COO Jaiden Sarai. The idea for SharpStakes came last March “when we saw that sports betting was such an ambiguous area with no one our age knowing how betting really works.”
“The idea is 70% of Gen Z say they want to bet with a strategy, yet 60% never bet,” he explains. “It’s because the current tools out there aren’t built for them.” It’s about “making betting strategy fun.”
Pocket money: SharpStakes hasn’t raised yet. “We have been lucky to be revenue funded,” says Kaushal. “From day one we focused on monetization and profitability.”
Sharp dressed man: The big opportunity, says Kaushal is that Gen Z needs a “trusted no BS platform” that supports their betting needs. “Placing a bet is a transaction, but what about before and after placing a bet? That user journey can be better curated for this demographic.”
The reaction has been “really positive,” he says. “A side bonus is people’s outlook on betting changes to be more positive and responsible after using the site.”
By its first anniversary, SharpStakes plans to release a new and improved app, with additional features and products “on the horizon.”
The sharp end: “We want SharpStakes to be synonymous with Gen Z betting,” says Kaushal ”To the point where using it feels like a no brainer.” In the medium to long term, its goals revolve around user growth and increasing value.
US expansion should see revenue “in the low seven figures by next year,” he adds.
“While we’re a long way from an exit, we’re sure our brand will attract the eyes of many media conglomerates.”
Growth company news
Daily fantasy sports operator ThriveFantasy is reported to have failed to secure additional funding, which could result in a shutdown of the business, LegalSportsReport reported.
Sparket has expanded its partnership with the World Jai Alai League.
Calendar
Mar 20: Sportradar, Zeal
Mar 21 Gambling.com
Mar 26: Flutter, Bragg Gaming
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