Month: July 2022

Handle for the 12 months to the end of June 2022 was 65.4% higher than $520.6m in FY21, the first full financial year of legal sports betting in the state following the launch of its regulated market in December 2019.

Of this total, $670.3m was wagered via DraftKings’ online offering and $190.8m at retail sportsbooks across New Hampshire. The operator secured exclusive rights to offer sports betting via the New Hampshire state lottery in November 2019.

Turning to gross gaming revenue and for the 12-month period reached $51.6m, up 32.3% from $39.0m in FY21. 

Some $44.0m of total yearly revenue was generated through online sports wagering and the remaining $7.6m came from retail activity.

The NH Lottery reported that the state recouped $23.9m in taxes from sports betting during the 2022 financial year, $20.6m of which was from online betting and $3.4m retail.

Meanwhile, results for the final month of FY22 were also published, with the state’s handle for June 2022 amounting to $53.6m, up 36.7% from June in the previous year, but down 30.0% from $76.2m in May 2022 and also the lowest monthly total since August 2021.

Players spent $41.6m betting online during June, as well as $12.0m at retail locations.

Revenue increased 23.1% year-on-year to $4.8m, but this figure was down 15.8% from $5.7m in May 2022. Almost all revenue came from online betting, with revenue here standing at $5.6m, compared to just $170,804 from retail wagering.

Tax generated from sports betting in the month amounted to $2.2m.

Reporting directly to Clarion Gaming managing director Stuart Hunter, he joins Clarion Gaming as preparations for the 2023 edition of the show begins. The event runs from 7-9 February, returning to its traditional slot, and already 90% of stand space at ExCeL London has been booked. 

Most recently Ventris [pictured above, left] served as director of the London Book Fair, responsible for the brand’s global strategy and delivering the April 2022 edition of the event, which attracts around 20,000 visitors per year. He has a background in marketing and previously ran events in the travel industry. 

“Andy has enjoyed a glittering career working with stakeholders to grow and develop brands across a number of contrasting sectors and in five continents,” Stuart Hunter commented. 

“The London Book Fair plays an important role within the publishing industry, as ICE does for gaming, and the most recent event which Andy led faced similar industry challenges and opportunities as ICE.

“Having worked in a startup sports events business early in his career, Andy also is driven by an entrepreneurial spirit, a culture that also underpins and drives the gambling sector,” Hunter added. “I am delighted to have him on board as we welcome the land-based suppliers back to ICE in February 2023 and partner with our stakeholders to deliver gaming’s pre-eminent international in-person event.”

Ventris described ICE London as a “formidable brand”, which every event professional aspires to work on. 

“I’m hugely excited to be joining the team, working with clients to deliver first-class solutions and bringing my insight and events knowledge to the exciting and dynamic space in which ICE operates,” he said.

One of his first duties as event director for ICE London was attending last week’s ICE European Casino Association Summer Symposium, which brought together C-level executives from across Europe for a day of networking and discussions. 

The event was “a fantastic opportunity to meet many of the casino industry’s thought-leaders literally within days of joining Clarion and I look forward to continuing my industry education in August with a trip to meet with our Las Vegas-based partners,” Ventris said. 

“This is a really exciting next step in my career and I am relishing the journey.”

The Royal Decree, published in the Belgian Official Gazette, will come into effect from 20 October, with the deposit limit to apply to all players across all verticals.

Each week will be calculated on the last seven days of activity and will move continuously, the decree said, with all players’ limits to be reset to €200 when the decree enters into force in October.

However, the decree also set out a provision for players to request an increased deposit limit. The operator in question must first notify Belgium’s Gaming Commission (BGC), which will then check with the National Bank of Belgium whether the player is listed in the Central Individual Credit Register of the National Bank of Belgium as being in default of payment.

If the player is not listed, the deposit limit may be removed three days after the request was made, meaning the player will be able to deposit an unlimited amount with that operator. 

The BGC will continuously monitor those players who have had their deposit limit removed to ensure they are not in default of payment. Should a player be flagged, they will have their weekly deposit limit reinstated.  

Similarly, players may also request a lower deposit limit than €200, which the operator must process immediately. Such requests must be made to each operator with which the player has an account.

“In order not to risk becoming a problematic gambler and to keep the game fun, it is recommended not to spend more than 5% of your income for this purpose,” the regulator said. “If you win €2,000, this means that your deposit limit should not exceed €25 per week.”

The new Royal Decree comes after Belgium’s Council of State last month upheld the BGC’s interpretation of a number of rules, including its decision to enforce deposit limits even though the planned steps for these limits to be increased cannot be implemented yet.

However, it did also overturn some restrictions, such as one on minimum self-exclusion times.

Affiliate marketing pays external publishers to generate traffic/leads for them. There are two main revenue models for wagering affiliates: revenue share and cost per acquisition (CPA).

Under a revenue share arrangement, the affiliate receives a long-term trailing commission that is a percentage of the gross losses of the referred customer. The CPA model involves just a one-time payment per customer. Generally, a customer acquired through an affiliate is recognised only once they have made a deposit, effectively aligning incentives between affiliates and operators.

Affiliates are often characterised as a ‘necessary evil’ in many industries, as they can be an effective acquisition channel, but come at the cost of control.

In our experience, they are a critical channel for emerging wagering markets like the US. In mature markets like Europe and Australia, affiliate marketing is not a growing revenue opportunity. Consequently, we are currently focused on affiliates that are well-positioned to grow in the burgeoning US market.

In the US, operators are competing to land grab and acquire as many customers as possible. Operators in the US, big and small, have been spending up to $1,000 to acquire a customer in their pursuit of crucial market share. However, marketing budgets are now coming under serious pressure.

As the cost of capital and the importance of profitability have increased, operators are far less willing to overpay for customers without clarity on their lifetime values.

As discussed in our last column, multiple US-only operators, such as Churchill Downs and Wynn Resorts, have rapidly reduced their marketing activities, with a stronger focus on profitability. Despite this headwind, affiliates are well-positioned to generate significant earnings from their US operations. 

Better Collective

With 2000+ content sites and applications, Denmark-based Better Collective (BETCO:SS) is an industry-leading affiliate. Over the last 18 years, Better Collective has won over 250 operator clients (including bet365, FanDuel and Coral), which market their brands through Better Collective’s website portfolio, leveraging the company’s >65 million monthly visitors across all sites. 

Better Collective is the largest listed affiliate, with a valuation of $760m. It generates circa $280m per year in revenue, with the US already contributing 46% of this total, demonstrating the size of the opportunity stateside.

The company’s US business grew revenue and EBITDA by 435% and 469% respectively in the first quarter of this year. As the US has a slow state-by-state roll out, we believe that US affiliates will be very successful over the next 5 years, depending on the pace of legalisation. 

Niche audiences in each US state will be particularly valuable assets in future m&a activity once the US market matures. We are confident that targeted media channels, such as podcasts, newsletters and radio shows, will be crucial acquisition tools for operators looking to develop niche audiences. We already see affiliates like Better Collective focusing on such opportunities, exemplified by their May 2021 $240 million acquisition of The Action Network, which has various podcasts and a daily newsletter. Launched in 2018, The Action Network’s media platforms primarily provide sports news, insights, odds and proprietary betting tools and data. The company also has subscription products, such as Action Pro.

Better Collective is still led by its founders, Jesper Søgaard (CEO) and Christian Kirk Rasmussen (COO), who each own 19.4% of the company. We are impressed by Better Collective’s management, who have completed 27 acquisitions since 2017. Despite the execution risk associated with an M&A heavy strategy, the company’s adjusted earnings per share (EPS) have grown from $0.28 in 2017 to $0.67 in 2021, an industry-leading compound annual growth rate of 24.5%.

Within its peer group of publicly listed affiliates, Better Collective is the only business which has generated a positive capital return for investors since listing. The company is led by a well-aligned and proven management team, which is focused on growth despite operating in a relatively mature industry. 

Since inception in August 2019, Waterhouse VC has achieved a total return of 1,874% as at 30 June 2022, assuming the reinvestment of all distributions. See our long-term performance table below.

Please note the above information in relation to Catena Media, Gambling.com, Raketech, XLMedia, Better Collective, Churchill Downs and Wynn Resorts is based on publicly available information in relation to the company and should not be considered nor construed as financial product advice. Waterhouse VC has a position in Better Collective. The information provided in this document is general information only and does not constitute investment or other advice. Readers should consult and rely on professional investment advice specific to their individual circumstances.

Pontus Lindwall, CEO at Betsson [pictured above] said the business saw progress in most areas throughout the quarter, and spoke highly of its sportsbook progress.

“Betsson’s second quarter featured continued good growth with all-time high revenue and further investments to support our expansion,” said Lindwall. “The group’s organic growth was 13%, mainly driven by Latin America, Central and Eastern Europe and Central Asia, where we see long-term growth potential as these markets still have a low share of online gaming.”

“The sportsbook business showed a strong development in the quarter – gross turnover increased by 20% and the margin was 8.3% (8.5%) – leading to all-time high revenue.”

Latin America is now Betsson’s largest market. In Q2, it accumulated revenue of €45.7m, up significantly by 86.2% year-on-year. Revenue from Central and Eastern Europe and Central Asia rose by 23.4% to €61.1m.

Betsson said these were all-time record revenues for both regions.

Elsewhere, revenue from the Nordics was down by 5.7% to €51.2m. Betsson attributed this decline in the 2020 European Championship taking place during Q2 2021, providing “favourable results” and “high activity levels”.

The decline in revenue in Western Europe to €24.8m was credited in part to Betsson’s withdrawal from the Dutch market, to comply with licence measures outlined by the Dutch regulator, meaning that there was no revenue from that segment for the quarter.

Referring to Germany, Lindwall said that the country’s market is “marked by low levels of channelisation, due to extensive restrictions, high taxes, and an unclear licensing process.” Lindwall said due to this, Betsson applied for just one online casino licence in Germany, through its subsidiary Zecure Gaming Ltd.

The quarter’s overall revenue was 7.8% higher than in Q2 2021. Casino revenue accounted for €122.2m of this, up by €1.6m yearly, while sportsbook revenue rose by 22.4% and made up the remaining €61.6m.

The total cost of services for the year added up to €67.5m – more than €10m higher than in Q2 2021 – and brought the gross profit to €118.8m, a yearly increase of 2.6%.

The total operating expenses for the quarter came to €89.6m, leaving the operating income at €29.2m. This was 22.7% lower than in the second quarter of 2021.

Marketing incurred the highest expenses throughout the quarter, totaling at €30.5m, followed by personnel costs and other external expenses at €29.8m and €25.8m respectively.

Following financial income and expenses, which added €2.2m to the total, and tax, which saw a loss of €2.8m, the net income totaled at €28.6m – down 14.1% yearly.

Cash flow from operating activities came to €37.8m, which included €1.1m that came from changes in working capital. This was 32.8% less than the previous year- however, Betsson said that was due to a positive effect from the collection of VAT in Q2 2021.

Net debt is -€19.8m, which now puts Betsson in a net cash position, as opposed to Q2 2021 where net debt was €14.6m.

Earnings before interest, tax, depreciation and amortisation (EBITDA) for the quarter totaled at €39.3m, down 16% year-on-year.

Meanwhile, cash flow from investing activities resulted in a loss of €14.8m. This mainly consisted of investments in Betsson and earn-out for Latin American sportsbook Inkabet, which Betsson acquired last year.

Sportsbook turnover also hit an all-time high, totaling at €991.3m, a yearly rise of 20.5%. This was despite the fact that several high-profile sporting events occured in Q2 2021.

For the year to date, Betsson’s revenue stands at €356.4m – a rise of 7.9% year-on-year. Gross profit is at €225.8m, down by 3.5%. Total EBITDA stands at €72.7m, a loss of 11.6%.

Total net income also fell, by 13.4% to €49.4m. Operating income for the year is currently €52.8m, while operating expenses are €173m.

The number of registered customers drew close to 25 million in Q2, while the number of active customers dropped by 0.7% to 1.2m compared to the previous quarter.

In June, Betsson issued a number of bonds adding up to €90m under a three-year contract, at an interest rate of 6.5%. The bonds are set to mature in 2025.

The process began earlier this year, when Corvex Management became Kindred’s second-largest shareholder this year and immediately called for the board to pursue a sale.

At the time, Evert Carlsson, chairman of Kindred, said the business remained confident in its current strategy.

However, iGB understands that its board has taken steps to assess interest from prospective buyers. These included European giants Entain, 888 and Tipico, as well as private equity businesses such as Apollo Global and Blackstone. However, there was little interest in pursuing the opportunity.

Among the operators involved, consensus has been that the business had not been “able to update its business model as markets regulate” meaning an acquisition was not considered valuable at the current price.

Kindred shares currently trade at SEK77.66 (£6.35/€7.44/$7.59), giving the business a market capitalisation of SEK17.64bn. The business’s earnings before interest, tax, depreciation and amortisation in 2021 was £94.9m, which is about one fifteenth of its market cap.

One person with knowledge of the sale process noted that Kindred had declared a greater focus on regulated markets in recent years, but suggested further progress was needed.

“In my opinion, this is because there had not been a change in management,” they said.

Another source noted that other factors such as raising debt to make an acquisition of this scale played a part for others not moving forward with the opportunity, as did the strategic fit for operators that were strong in the same regions.

In the private equity sector, meanwhile, regulatory hurdles involved in owning a gambling business – and the time commitment involved in these – were cited as issues.

Another source with knowledge of the situation said that Kindred’s efforts to build its own sportsbook had added to uncertainty.

With a sale appearing unlikely, Corvex – which owns 10.12% of Kindred – may take further steps to accelerate a potential deal, sources suggested. This could involve either pushing for a management change, or encouraging the board to make an acquisition. However, even taking these steps would not guarantee a deal would be reached.

Kindred declined to comment on the matter, as did Entain and 888. Representatives of Tipico and Corvex did not respond to requests for comment.

Spain’s Royal Decree on the Commercial Communications of Gambling Activities entered into force in November 2020, banning sponsorship deals with operators, with the aim of reducing minors’ exposure to gambling ads.

Advertising on TV and radio is also now restricted to the hours of 1am to 5am, a measure that extends to videos on YouTube, while across other social channels, operators are only permitted to share ads with their followers. 

Age gating must be used online to help reduce minors’ exposure to gambling, and while promotional bonuses are prohibited, operators are able to target registered and verified customers with special offers.

JDigital and media association la Asociación de Medios e Información (AMI) both submitted appeals to the country’s Supreme Court, challenging the advertising regulations. 

While the AMI appeal was not successful, the Third Chamber of the Supreme Court in May this year raised a question of unconstitutionality in relation to the restrictions.

In response, Jdigital has now said the Supreme Court’s decision emphasises the need for a rethink over the restrictions and is urging the government to discuss the matter with the igaming industry.

“The Supreme Court’s decision reinforces Jdigital’s claims that the rules governing online gambling advertising in Spain infringe on the freedom of enterprise and unjustifiably harm the main players, the licensed operators, in this legal and regulated activity,” Jdigital said.

“More than a year after Jdigital filed the administrative appeal against the regulation, the Association is convinced that it has taken the right steps to preserve and protect the interests of the sector and its users.

“The current scenario makes it more necessary than ever for the regulator and the Ministry of Consumer Affairs to open a window of dialogue with the online gambling ecosystem to study fair and proportionate legislative ways that are in line with the reality of the sector and do not harm operators and related industries.”

React Gaming commenced trading yesterday (20 July) under the symbol ‘ITMZF’, having upgraded to the OTCQB from the Pink market.

The OTCQB is a trading platform operated by the OTC Markets Group for early-stage and developing US and international businesses.

The group will also continue to trade its shares on the TSX Venture Exchange in Canada under the ‘RGG’ ticker.

“We are very pleased to be trading on the OTCQB, as it will facilitate trading in our stock for US investors and help expand our retail and institutional base to a larger pool of investors south of the border,” React Gaming interim chief executive Leigh Hughes said. 

“This is also an important step in our growth strategy, as a large portion of our esports and igaming activities and opportunities are linked to the US market, considered to be one of the largest markets in the world.” 

The new listing follows widespread changes at the business, which rebranded from Intema Solutions in April this year following its acquisition of Livestream Gaming owner Loot.Bet in February.

Last month, it was also announced that Hughes was to become interim chief executive of the group after Laurent Benezra revealed he was to step down as president, chief executive and director

Benezra, who took over at React Gaming in 2019, remains in a consultancy capacity.

Hughes is an entrepreneur and venture capitalist with over 20 years of experience working with private and public companies across the globe, particularly in North America, Australia and the Asia-Pacific region.

Live casino drove most of the growth, growing 36.7% year-on-year to €278.5m over the three months to 30 June, compared to 6.1% to €65.5m for RNG games.

Despite slower growth for the RNG segment, CEO Martin Carlesund was bullish on Evolution’s slots business.

“As I have stated earlier when it comes to RNG, our ambition is double-digit growth and I find the result in Q2 as a good step towards that goal,” he said. “I’m pleased with the development of our RNG business in Q2 2022.”

RNG is set to be an increased focus for the business going ahead; as analysts Regulus Partners noted, “with live maturing in most markets, pressure is now on to turn RNG around”.

Last month, Evolution announced the €340m acquisition of slot developer Nolimit City The business trumpeted this acquisition along with the upcoming release of 54 of the year’s planned 88 launches later this year. However, Regulus pointed out that “the real underlying drivers seem to be increasingly geographic rather than product-led”.

This can be seen in the company’s growth pattern in different markets, it explained. The mature UK market remained stagnant year-on-year, and actually declined quarter-on-quarter, with the upcoming white paper on the review of the 2005 Gambling Act adding regulatory uncertainty to the mix.

This compares to 69% year-on-year growth for live dealer in Asian markets and 70% in the rapidly expanding North American market. The market that bucks the trend is the mature Nordics region, where revenue was up 31%.

Asia is now Evolution’s largest market overall by market share.

Profit for the three months to June 30 came to €200.9m, compared to €144.4m for the same period last year – a 39.1% increase. For the wider six month period to 30 June the amount was €398.6m compared to 276.4m for the same period the previous year.

Meanwhile, earnings per share amounted to €0.94 for Q2. Operating expenses increased to €129.4m – which the business attributed to increased personnel, the launch of new tables in the company’s studio and general expansion. Cash flow from operating activities increased to €380.3m, in which Evolution stated that increased profitability was the cause.

Carlesund said he was “happy but not content” with Q2 €238.2m EBITDA on the revenue, representing a 69.3% EBITDA margin – a 34% year-on-year increase. This compares to a €467.0m total for the six month timeframe.

In terms of risk, Evolution sees most of the danger in regulatory uncertainty in Europe, where the largest slice of their licences are. Such events as the upcoming UK white paper, gambling advertising bans in the Netherlands and Belgium, and increased Danish anti-money laundering controls as examples of such uncertainty.

“The development of laws and regulations relating to the supply of gaming services that Evolution provides is a central risk factor for the group’s future earnings,” the supplier explained in its results.

“Since most of Evolution’s licensees are active in Europe, the legal situation in the EU is of particular interest and is continuously monitored and managed by the Group.”

However, the business reported positive results in Singapore, where revenue at Marina Bay Sands doubled year-on-year.

This marks the first set of results since Las Vegas Sands completed the sale of its US operations for $6.25bn.

Robert Goldstein, CEO of Las Vegas Sands, said the results in Singapore were constructive to the company’s overall recovery.
“While pandemic-related restrictions continued to impact our financial results this quarter, we were pleased to see the recovery in Singapore accelerate during the quarter, with Marina Bay Sands delivering $319m in adjusted property EBITDA,” said Goldstein.

“We remain confident in the recovery of travel and tourism spending across our markets. Demand for our offerings from customers who have been able to visit remains robust, while pandemic-related travel restrictions continue to limit visitation and hinder our current financial performance.”

The company’s Macau operations – including The Londoner, The Venetian, The Parisian and Sands Macao – brought in a combined $374m of revenue, down 56.2% year-on-year.

Each of the operators experienced revenue falls this quarter. Much of the revenue was from the Venetian Macau, which totalled $150m, a 61.6% fall from Q2 2021. The Londoner Macau, along with the Plaza Macau and Four Seasons Macau, each brought in $79m in revenue – decreases of 58.2% and 36.8% respectively.

The Parisian Macau, Sands Macau, ferry operations and other revenues made up the remaining $66m in Macau revenue.

All casinos are currently shut in Macau, as the region continues to deal with the Covid-19 pandemic.

They are set to reopen from 23 July.

Conversely, Marina Bay Sands accumulated $679m in revenue, more than double what it made in Q2 2021.

This was mostly helped by casino revenue at the property, which grew by 124.2% year-on-year. Food and beverage revenue also doubled to $48m, while convention, retail and other revenue more than doubled to $20m.

The remaining revenue consisted of intercompany royalties and at $28m, and a loss of $36m from intersegment eliminations.

Capital expenditures across all three properties totaled $198m. This consisted of construction, development and maintenance. Marina Bay Sands received $97m of capital expenditure and Macau received $67m, while corporate and other areas received $34m.

Earnings before interest, tax, depreciation and amortisation (EBITDA) for the Macau operations was a loss of $110m. For Marina Bay Sands, it was a gain of $319m.

The overall revenue fell by 10.9% from Q2 2021. It was mostly made up of casino revenue, which totaled at $709m. This was 14.1% less year-on-year. Mall revenue was the second highest, staying level year-on-year at $148m. Rooms revenue fell to $97m from $115m yearly, while food and beverage revenue grew by $13m to $63m. Convention, retail and other revenue increased by 64.7% to $28m.

Operating expenses resulted in a loss of $147m.

Expenses came to $1.19bn for the quarter, down by 9.1%. Resort operations was the highest area of expense, making up $842m of the total costs, though this declined 9.6% year-on-year. Depreciation and amortisation costs amounted to $256m, while corporate, pre-opening, development expense and amortisation of leasehold costs made up the remaining costs.

Following interest income at $14m, interest expense at $162m, and other expense at $9m, the loss from continuing operations was $304m – a further $18m compared to Q2 2021.

After considering income tax at $110m, the total net loss for the quarter was $414m, 47.8% higher year-on-year.

For the year to date, revenue is $1.98bn, a decrease of 16% from the first half of 2021.

Operating expenses thus far are $2.43bn, with an overall operating loss of $449m. The overall loss from continuing operations is $780m, and after considering the accumulative income tax of $112m, the total net loss for the year to date is $892m, an increase of 59.2% year-on-year.

Last week, Las Vegas Sands lent $1bn to subsidiary Sands China, which will be repayable on 11 July 2028.

Las Vegas Sands stated that the loan was to support the “working capital and general corporate purposes of the group.”