Sunk! Games Global abandons float
Games Global IPO cancellation, Flutter momentum continues, Penn’s ESPN Bet downgrade, Deal Talk – Tipico +More
Games Global cancels IPO, says it will return.
Flutter confirms US primary listing as FanDuel shines.
In +More: EveryMatrix earnings, New York in April.
888 officially changes its name to Evoke.
Penn suffers a downgrade on ESPN Bet pessimism.
Deal Talk takes a look at Tipico’s ownership.
I've given up the game, I've got to leave.
Abandoned float
That is why I have always failed while others have succeeded: Games Global has dramatically postponed its $2bn+ float on the New York Stock Exchange, saying that while investor interest was “strong,” the board has decided that it is in the “best interests of its stakeholders” to delay the offering.
The Isle of Man-based online gaming supplier’s IPO was announced in mid-April when it filed its prospectus.
Current owner Zinnia was set to sell a portion of its stock as part of the float but would have remained as a majority shareholder.
The greater the odds, the greater the challenge: CEO of Games Global Walter Bugno said, while the company was “disappointed” not to be going ahead with the float, meetings with investors during the IPO process had “further cemented our confidence in our strategy and that what we are building at Games Global is unique.”
He added that with the strong balance sheet and “meaningful growth,” an IPO at this point in time was an “accelerator, not an absolute necessity.”
The prospectus had said that in the last nine months of 2023 Games Global generated revenues of €273m, representing a YoY increase of 23%. Adj. EBITDA for the same period rose 10% to €121m.
The closet ploy: Bugno said Games Global would return to the process at a later date; “We will continue to monitor the capital markets going forward and make the appropriate reconsiderations as to an IPO in the future,” he added.
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Futter’s American dream
We are No. 1! FanDuel maintained its position as the leading brand in the US in both sports betting – 52% of NGR and 46% of GGR – and iCasino, where it claimed 27% GGR share in Q1. “Our investments in customer acquisition and product innovation means we are embedding future profits into the business as we continue to scale,” said CEO Peter Jackson.
Jackson added the company was “always confident that 2024 was the year where we would try and take market leadership.”
Carolina on my mind: Jackson noted the recent launch in North Carolina was among its most successful, with “an incredible” one in 20 adults in the state signing up. CFO Paul Edgecliffe-Johnson added that FanDuel “won the state as far as we can see” but noted this came at a cost in terms of extra cost of sales.
Jackson said that with each new state launch “we find we get even better at refining our playbook in going to market.”
“The extent to which customers are able to get onto the best product early, they stick with us,” he added.
“It's important to get in early. We find that actually the acquisition costs in doing so for the benefits of our scale really help us.”
USA! USA! USA! The company confirmed the US will be its primary listing as of the end of May after receiving shareholder approval. It has also transferred its headquarters to New York “reflecting just how fundamental the US is to our long-term future growth,” said Jackson.
By the numbers: Group revenues rose 16% YoY to $3.4bn while adj. EBITDA was up 47% to $514m. US revenues were up 32% to $1.41bn with adj. EBITDA coming in at a positive $26m vs. losses of $53m in the prior-year period.
UK & Ireland revenues rose 12% in constant currency terms to $861m with adj. EBITDA of $268m, up 20%, while international saw revenues manage a 6% increase and adj. EBITDA rose 20% to $173m.
The only black spot was Australia where revenues fell 2% in constant currency terms to $329m and with adj. EBITDA down in absolute terms by 2%.
The company maintained its 2024 targets for US revenue of $6bn at mid-point and adj. EBITDA of $710m, while ex-US revenue is forecast at $7.85bn at midpoint with adj. EBITDA of $1.73bn.
In terms of US adj. EBITDA, management noted the bulk of the profits would be more “backend weighted” for the year vs. the previous expectation of ~30% contribution in H1.
On the lookout: Internationally, the company completed its MaxBet acquisition in Serbia in January. In terms of further global M&A, Jackson said “as long as they are strategic and the financial economics work, then we are actively looking for businesses like that.”
But he also noted share buybacks were a possibility. “If there's capacity to return cash to shareholders, we absolutely will do that,” he said.
“As we think about how rapidly the EBITDA will grow in this business over the course of 2024 and beyond, there will be capacity to do all those things,” he said.
Trifecta: “Invest into the business, make acquisitions and return cash to shareholders.”
+More
Henry Birch is the latest name linked with the top job at Entain, according to Sky News, which reported the former Rank and William Hill executive is in discussions to take up the permanent post vacated by Jette Nygaard-Andersen back in December.
Sphere and loathing: In its FYQ3 earnings, Sphere Entertainment said the venue in Las Vegas generated $170m in revenue. The Postcard from Earth feature accounted for over $1m in average daily ticket sales on the days it ran during the quarter.
Boyd Gaming has increased its share buyback limit by $500m, meaning it now has the ability to repurchase up to $721m of shares.
Lottery.com has engaged Cohen & Company Capital Markets as its financial advisor to help oversee and structure its acquisition strategy, which is backed by a $150m loan facility from United Capital Investments.
Regional casino foot traffic was down nearly 3% YoY and off by over 10% vs. the April 2019 numbers, according to data from analysts at Jefferies, who pointed out Penn Entertainment was the most exposed to the decrease in traffic during April. (For more on Penn see below).
That don’t impress me much: Shania Twain has debuted her headlining residency at the Caesars-owned Planet Hollywood Las Vegas’ Bakkt Theater.
Sportradar’s AI-driven personalized odds technology, Alpha Odds, boosted profits by 15% during the UEFA European Championship qualifying matches.
By the numbers
New York: Sports-betting revenue rose 32% YoY to $449m on handle that rose 27% to $1.96bn. FanDuel increased its lead in market share by GGR to 49.5%.
Earnings in brief
IGT: Revenue was up 1% YoY to $1.07bn, which the company said was driven by strong global lottery growth and partially offset by the timing of Gaming & Digital product sales. Adj. EBITDA was down 1% to $443m. IGT’s call with analysts will take place later today, Tuesday.
EveryMatrix said Q1 net revenue rose 66% YoY to €39m while EBITDA more than doubled to €22.3m. Over the period, the company achieved accreditation for the new regulated market in Peru and launched its iCasino content with DraftKings in New Jersey.
iCasino revenue was up 83% YoY to €19.9m while the OddsMatrix sports division enjoyed a 78% revenue uplift to €10.5m.
Platform revenue, including the PAM system, saw revenues rise 28% to €7.3m and the affiliate platform, including Deep CI, saw revenues climb 39% to €1.4m.
Alongside the 27k+ games available on its SlotMatrix platform, the company’s in-house studio Armadillo also released a number of titles.
888 becomes Evoke
Proustian: 888 has officially confirmed its change of name to Evoke, which it said is a “symbol of our new direction.” It added that the new name “builds on our strengths and allows us to move forward as one multi-brand group with a united strategy, vision and identity.”
“It also better reflects our mission to make life more interesting and vision to delight players with world-class betting and gaming experiences.”
Evoke will trade on the LSE under the ticker EVOK.
🤦 It’s EVOK not Ewok
Penn’s ESPN Bet downgrade
Higher for longer: ESPN Bet’s high-cost structure will increase the time to scale and the execution risk, said the analysts at Bank of America, who have downgraded the Penn Entertainment stock to a Hold.
The team added that Penn’s balance sheet deterioration “could take years to recover from and limits strategic flexibility.”
You’re coming in too low: The team pointed to the more recent state-by-state data to suggest that, at ~4%, ESPN Bet’s market share is some way below the targeted 10%. The company said it is hoping for product improvements before the start of the NFL season.
But by then there will likely be rising competition, it will likely need to spend more to re-engage with customers and it faces execution risk with the opening in New York.
“Put simply, ESPN Bet’s $1bn cost base appears meaningfully too large for its current revenue,” the team wrote.
“Without a big acceleration – and soon – it looks hard to scale to profitability, leading to higher for longer losses that we think place significant risk on Q4 and 2025 estimates.”
Drilling down: BofA pointed out the most incremental change from the recent Q1s was what the company said about attracting the more casual bettor, a cohort that is “spending less than expected.”
“Some of this is product driven, but it’s concerning that monetization is so far below Tier 2 operators and even Barstool,” the team added.
Moreover, maintaining user excitement until the product improves “could be hard.”
“Losing users and winning them back could be expensive and require more promotional dollars or incentives.”
Scaling up: The analysts noted OSB requires scale for it to work, a point that has been proven previously by DraftKings, FanDuel and BetMGM. For ESPN Bet to compete, the team argued, it would need to double or triple its revenues to reach material profitability.
BofA estimated ESPN Bet is run-rating to $1bn in annual operating costs in 2024.
This would require $1bn-$1.5bn in net revenue to breakeven versus a new revenue forecast of just $480m.
They added that current consensus estimates for losses of $55m in 2025 “seems unrealistic.” BofA now estimates losses of over $200m for 2025 but added this “is not conservative” and that losses closer to $250m might be nearer to the reality.
The online missteps to date have had a “material impact” on the balance sheet.
The analysts pointed out that lease-adjusted leverage has gone from 4.1x in 2021 to an expected 7.5x peak this year and $2bn of net debt.
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Deal talk
Tipping the balance: The rumor that Tipico’s US platform is up for sale threw the spotlight back on the parent company and in particular its long-term private equity ownership. The largely German-facing betting business has been owned by a number of CVC Capital Partners’ funds since it was originally bought in 2016 for €1.3bn.
By rights, given the length of ownership, a sale of Tipico is now long overdue.
But as sources pointed out, the various ‘sales’ between funds have left the valuation multiple that CVC would be seeking via a sale as relatively high. “It’s too rich for most tastes,” said one.
Fortune favors the brave: One potential exit might be via a merger with another entity, with sources suggesting the company might have been “taking a look” at Fortuna. Its future is also currently clouded with owner Penta Investments reported to be weighing up a potential sale.
According to reports, it has hired Morgan Stanley to advise on a sale that could fetch up to €2bn via an auction process.
Some form of merger might broaden the options for CVC because it would diversify Tipico away from its German-centric roots.
“Fortuna’s in their [Tipico’s] wheelhouse,” said one corporate development source. “It has a mixture of retail and online but it has been losing market share and it needs some fixing.”
The only buyer in town: Any such move to merge with Fortuna “wouldn’t be an exit” for CVC. But it could maneuver a situation whereby Tipico becomes more attractive to what sources identify as its “only natural buyer” right now, which is Flutter.
But the problem with that idea is that Europe isn’t Flutter’s focus right now (See earnings report above.)
“I’m not sure Flutter would want to say to US investors that its best use of capital right now is a German bookie,” said one investment adviser.
Do the math: Another obvious issue is price expectations. Sources suggested Tipico currently generates around €350m of EBITDA a year and, with CVC likely to seek at least a double-digit sale multiple, any buyout fee would need to start at ~€3.5bn.
“This is not the time for Flutter to be looking at buying anything in Europe, and especially Germany,” said one adviser, who opted for anonymity.
“Yes, it is a local hero and by our estimates it controls half the market, but I’m not convinced,” they added.
“But that said, should Germany’s regulations around iCasino be relaxed, you could be getting a bargain.”
Moreover, any buyer would be “getting a great company” that has “done a great job” of managing through the pandemic and Germany’s regulatory troubles. “Look back 15 years and no one would have paid any attention to Tipico,” said the advisor.
The month in deals
Just last week, private equity house Brightstar snapped up gaming provider AGS in a $1.1bn deal.
Super Group looked in house as it bought out its sportsbook backend supplier Apricot.
Sports data analytics provider Sports IQ was bought by DraftKings for an undisclosed fee.
Calendar
May 15: Sportradar, Codere Online
May 16: Gambling.com, Aristocrat
May 17: XLMedia
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