Sportradar’s game, set and match

Sportradar CEO talks revenues and ATP, Playtech’s Hard Rock deal, Jason Robins’ taxonomy, Super Group and Inspired earnings +More

Earnings+More

Mar 15, 2023

Good morning. On today’s agenda:

Sportradar’s better-than-expected earnings and potential ATP deal.
Playtech signs a strategic deal with Hard Rock Digital.
DraftKings’ CEO predicts the iCasino and sports-betting winners and losers.
Super Group and Inspired lead the other earnings results.

Let's go down to the tennis court.

Advantage Sportradar

Sportradar serves up better-than-expected earnings as FY22 revenues rose 30% to €730m.

Love match: CEO Carsten Koerl noted Sportradar was still in the exclusive discussion stage with ATP and said that any final agreement was not included in the guidance for next year. He added that any deal wouldn’t begin until 2024.

Sportradar announced earlier this week it was in talks with the ATP about becoming its data, streaming and integrity partner, potentially taking over from Endeavor’s IMG Arena.

Asked about the potential for rights inflation, Koerl noted the deal with the ATP would be on a commission basis. “From that perspective, it should not have a negative impact on the margins,” he added.
“If we are delivering a rights deal, we don’t want to do a deal that dilutes our earnings.”

By the numbers: Q4 revenue was up 35% to €206m while adj. EBITDA was up 64% to €35m, with the fast-growing segment being the US, which was up 77% to €41m, while the rest of world betting segment was up 51% to €106m.

The 30% FY22 revenue leap fed adj. EBITDA growth of €126, up 25%.
Koerl said growth comes from moving clients up the value chain, including moving them onto the managed trading services platform.
Koerl noted the MTS division achieved 56% growth YoY and said that in H2 the unit had a trading volume of ~€19bn, which he said was comparable with a top 10 global betting operator.
The digital marketing business ad:s saw growth of 65% YoY, while revenue derived from US betting clients was up 101%.
The outlook for 2023 is for revenue to come in between €902m and €920m (25% up at midpoint) and adj. EBITDA at €157m-€167m (up 29% at midpoint).
Debt free, wherever we may be: The company noted it pre-paid €200m of debt in the quarter and is currently debt-free.

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Playtech’s Hard Rock move

The supply and equity stake deal with Hard Rock is another long-term strategic move for Playtech.

Rock of ages: Playtech said it doesn’t expect to see a noticeable impact on B2B revenues until 2024 after announcing its latest iCasino tech and content strategic agreement with Hard Rock Digital. As part of the deal, Playtech will take a low single-digit investment in the business for $85m.

Playtech said HRD’s gross assets amounted to $69m, while the business made a net loss in 2022 of $76m.
The press release noted Hard Rock now operated in “select” US states, including Arizona, Indiana, Iowa, New Jersey, Ohio, Tennessee and Virginia.
It added that Hard Rock also plans to enter international markets.

Robins’ taxonomy

The DraftKings’ CEO sets out the good, the bad and the ugly for future operator hopes.

Solving the puzzle: Jason Robins took to LinkedIn to suggest there would be three types of companies in the coming years in the sports-betting and iCasino space.

The under-capitalized: If these companies don’t “act quickly” they “may end up gone forever”.
Well-capitalized but struggling: Can compete in an era of easy money but “cannot reduce spending without also dramatically harming their ability to compete”.
Well capitalized but with a plan: Not yet cash flow positive but know they need to “accelerate their path to profitability” and do it in a “sophisticated manner”.

The company you keep: Three guesses for which bucket Robins believes DraftKings falls into. Versus the “hatchet” needed by the second group, DraftKings is among those that can “use a scalpel, methodically carving out expenses in areas that do not damage competitiveness”.

Chris Grove from Acies, asked in his own post: “What cuts are available that don’t impact competitiveness?” Marketing pullbacks impact OSB market share, while “saving on product is a dangerous game in competitive markets”.

“It also raises the question of why investors are demanding profits out of a nascent industry that is still very much in the land-rush phase,” he added.
“That feels like a gross overcorrection… kneecapping companies with unrealistic expectations.”

March Madness betting

Analysts at EKG suggest the tournament will exceed the amount bet on the Super Bowl.

Court side: Handle for this year’s edition of the tournament is expected to come in at $2.59bn, according to EKG, which is 2.5x that of the recent Super Bowl – with the increase coming due to the number of games being played.

EKG said they used a ground-up approach in each regulated state, based on game locations, individual team representation and state-specific levels of NCAAB fandom.
The team suggested 30-35% of all betting will be in-play, with 10-15% bet via same-game parlays (SGP).
The team estimated Nevada will be the largest single market with 15% of handle, followed by New York (13%) and newly opened Ohio (11%).

Meanwhile, the AGA has suggested a quarter of all Americans (68m) will wager $15.5bn during the tournament, including 31m who will place an online or retail bet.

Super Group takes stock

The operator is assessing which states are “commercially feasible” as it points to US losses of $70m in 2023.

The hateful eight: COO Richard Hasson said the operator behind the Betway and Spin brands would not follow a strategy of having a “large footprint” in the US “just for the sake of it”, after the company saw Q4 group revenues drop 4% to €329m while adj. EBITDA declined by 74% to €18m.

Betway is live in eight states but recently failed to enter the Massachusetts market at launch, delaying its entry until next year.
In Europe, Hasson noted the company was still waiting to hear back from the regulators in both Germany and the Netherlands about restarting operations.
Despite this, Europe grew to 18% share of Q4 revenues, up from 10%.
America’s percentage share fell to 41%, caused by the transition to a regulated market in Ontario. CEO Neal Menashe said this was in line with expectations.

Analyst takes: The team at Regulus noted that only ~50% of revenue was domestically regulated and suggested the New York listing and US presence “brings the group under much closer regulatory scrutiny”.

“888 has recently demonstrated the dangers of assuming that what goes on in gray markets stays in gray markets,” the analysts added.

Inspired looks at bolt-ons

Following the near-miss with AGS last year, Inspired says any M&A this year will be in a minor key.

Tuck shop: Executive chairman Lorne Weil said Inspired would be looking at “tuck-in acquisitions” this year, saying the company didn’t feel the need to pay “unnecessarily high prices to buy earnings”.

Recall, AGS rejected a $370m bid in September after failing to agree on a price.
Inspired said both revenue and adj. EBITDA were up 17% in Q4, to $79m and $26m respectively.
Digital now represents over 50% of group EBITDA, which hit $100m in 2022.
In gaming, Inspired delivered 7k new Vantage machines to Paddy Power and Betfred, while Weil said the AGC market was “quietly building”, partly as a result of machine stake restrictions in UK betting shops.

Virtually there: Weil extolled the “amazing trajectory” of virtuals where Inspired enjoyed margins of 83%, while CEO Brooks Pierce looked to North American growth where he said operators were “coming round” to the product’s viability.

iLottery expansion in North America has been slower than expected, although Inspired has launched in the Dominican Republic where it can “refine the product” and test content.

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M&A lines

Entain has bolstered its esports offering with the acquisition of the esports betting developer Sportsflare for $13m from Tiidal Gaming. The deal is dependent on shareholder approval.

Sportsflare will presumably bolster Entain’s Unikrn business, which it acquired in 2021 and relaunched later last year, initially in Brazil and Canada.

Newslines

OpenBet will supply its OSB platform to OPAP as part of a new agreement with the Greek lottery operator.

Where we’re (likely) going

Don’t forget your toothbrush: With the permission of Clarion, Rokker has undertaken an optimum location exercise for the next host city for ICE, presuming it moves from London.

Applying filters such as size, food, nightlife and weather, Rokker’s top three are Barcelona, Athens and Berlin.

Calendar

Mar 16: FL Entertainment
Mar 21: Due Diligence
Mar 23: Better Collective CMD
Mar 28: The Data Month; 888 Investor Day

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