Month: March 2023

The payments platform total revenue grew in 2022 by 0.6% from the previous year.

The company has undergone multiple strategic and operational changes to the business. It expanded into the Ohio sports betting market, contributing to the 25 different US states in which Paysafe offers its services. 

Reflecting on the FY22 and Q4 results, Paysafe CEO Bruce Lowthers, commented: “We are pleased with our progress and fourth quarter financial results, including 8% year-over-year constant currency revenue growth,” he said. “When I joined Paysafe, we said our focus would be on returning to growth in the back half of the year and into 2023, and we have done exactly that.

“We have recruited high-calibre talent, simplified and re-positioned the business and re-built our sales organisation, which is driving early success in cross-selling and multi-product client wins.” 

As of the final day of 2022, total cash and cash equivalents were $260.2m, total debt was $2.60bn and net debt was $2.40bn. 

Q4 results 

Looking at the financial performance in the fourth quarter; revenue increased by 3% from $371.6m in the previous year’s Q4 to $383.6m in 2022. Not including the $17.6m lost to foreign exchange rates, the revenue increase would have been 8% year-on-year.  

Notably, Paysafe reported a net loss $33.7m for the quarter, down from the $90.3m profit the business achieved the previous year. The payments platform attributed this huge loss to fair value gain on the remeasurement of the warrant liability and income tax benefit in 2021. In addition to increases in interest expense and share-based compensation expense in 2022’s Q4, the year-on-year decrease is significant.  

Adjusted earnings before interest, taxes, depreciation and amortisation (EBITDA) for the company rose by 2% from $105.5m to $107.6m year-on-year. Due to the impact from changes in foreign exchange rates, the company reported this figure would be around 6% were it not for the unfavourable loss.   

Full-year results 

Shifting now to FY22, revenue for the full year increased by 1% from $1.49bn to $1.50bn year-on-year. Paysafe attributes this to revenue growth from Merchant Solutions by 10% that offset the 9% loss Digital Wallets experienced. Again, the company notes the loss from changing exchange rates as a contributing factor in the overall revenue. 

Net loss this year was a tremendous $1.86bn, compared to 2021’s $111.0m. However, this is due to non-cash charges from the impairment of goodwill and intangibles from 2022.  

In contrast to Q4, adjusted EBITDA for FY22 decreased by 8% from $433.9m in 2021 to $410.0m in 2022. The company notes foreign exchange rates, business mix and the war between Russia and Ukraine as contributing factors to the loss.  

These factors also impacted the net income loss of 26% from $185.8m to $137.0m year-on-year.  

Plans for 2023 

Bruce Lowthers highlighted customer-centricity as key to the business’ plans in the year ahead.  

He commented: “Looking ahead, we remain relentlessly focused on client experience, product innovation and further sales transformation to fully leverage our assets globally and capture meaningful growth opportunities for years to come.”  

According to Victor Rocha Indian country is under attack from conservative organisations that don’t like sovereignty, which includes tribal gaming rights.

“We’ve been sleeping with one eye open since Columbus landed,” Rocha, a member of the Pechanga Band of Luiseño Indians and chairman of the convention, says.

“This is the latest in the long line of threats we’ve had to deal with. It has the potential to be foundational that tribes would lose their exclusivity of government.”

The threats come as tribal gaming experiences a strong recovery as the US emerges from the Covid-19 pandemic.

Tribes have been renovating and expanding their properties to add hotel rooms, entertainment options and other amenities to attract guests by creating fully fledged resorts like Las Vegas.

A 2022 report released by the National Indian Gaming Commission shows tribal gross gaming revenue totalled $39bn in the 2021 fiscal year. This represents an increase of 40% over 2020 and 13% higher than fiscal year 2019.

The $39bn figure, the highest in history, is edging closer to the $53bn GGR reported in commercial gaming.

Lay of the land

There are 510 gaming operations operated by 243 federally recognised tribes in 29 states. Of those, 43 gaming operations reported more than $250m in gaming revenue and accounted for more than 50% of total revenues.

Tribes have come a long way since Congress enacted the Indian Gaming Regulatory Act in 1988 to regulate the conduct of gaming on Indian lands. They have the right to regulate gaming, as long as it is not prohibited by federal or state law. Doing so helps continue the progress made with revenue that pays for education, housing, health care and other needs.

At the time of IGRA’s enactment, Indian gaming brought in about $121m in gross gaming revenue while Nevada casinos reported $4.1bn. 

Tribal goes commercial

With their growth over the last 35 years, tribes are capitalising on their success through diversification, venturing off their reservations and acquiring commercial casinos.

A year ago in April, the San Manuel Band of Mission Indians in Southern California reopened the Palms Las Vegas under its ownership. It acquired the property from Red Rock Resorts for $650m in May 2021.

Last December, through its Hard Rock International arm, the Seminole Tribe of Florida took over the operations of The Mirage from MGM Resorts International for just over $1bn. Major renovations are planned, including a guitar-shaped hotel on the Las Vegas Strip.

Tribes are continuing to face threats to their exclusivity for gaming in some states, however.

Last November, California tribes fought off a sports betting ballot initiative by MGM Resorts International, DraftKings, FanDuel and others. The commercial operators spent hundreds of millions of dollars to get a piece of the sports betting pie in a state where tribes can offer slot machines and blackjack, as approved by voters in 1998 and secured by negotiated compacts. 

Despite 82% of voters in November coming out against commercial gaming having a role in sports betting, those same executives said they might bring the issue back before voters in 2024.

Susan Jensen, executive director of the California Nations Indian Gaming Association (CNIGA), says what tribes in California face is also a threat to other tribes across the US.

It’s important to win the support of the public and lawmakers to project their rights like California tribes did in November.

Latest court cases

In February, tribes won a victory in federal court in Washington state when a judge dismissed a lawsuit by card room operator Maverick Gaming. This challenged a state law that allowed only tribes to offer sports wagering. That case has been appealed and could ultimately wind its way to the US Supreme Court.

“They are saying this is a race of people, and that’s illegal,” Rocha says of the latest court cases tribes are facing. Maverick seeks to change the definition of tribal government to a race of people and take away sovereignty, he says.

“They are telegraphing from 10,000 miles away that we’re going to take this to the Supreme Court, and we’re concerned because this is a reactionary conservative court. If Roe v. Wade [the 1973 Supreme Court case that legalised abortion in the US] isn’t safe, then are we? That’s the question people are asking themselves.”

Tribes are awaiting a ruling from the US Supreme Court on a November hearing Haaland v. Brackeen. In that case, the high court is considering whether native American families get preference in fostering or adopting children under the Child Welfare Act.

The case was brought by a non-native Texas couple, and uses similar arguments against tribal sovereignty that are used in gaming. It’s viewed through the lens that it’s about taking gaming rights.

“It can be very scary what that can mean,” Jensen said of the issue when she spoke at the recent Raving Next gaming conference in New Mexico. “States can start preparing for that. In California, we have some legislative language already written up in case of a negative ruling. We’re holding that in our pocket.”

IGRA comes in for criticism

It’s not only court cases that are upsetting tribes these days. Some tribes are critical of IGRA, which sees it as an infringement on sovereignty. If gambling, or specifically sports betting, is illegal in a state that allows other forms of gambling, tribes don’t have the right to enact it.

Such is the case in Idaho where tribes face competition from tribal casinos in nearby Washington but can’t offer sports betting without state approval.

“We can’t help and look at ways and maybe there’s a loophole where we can get in and offer sports betting,” said Laura Penney, CEO of the Coeur d’ Alene Casino Resort and Hotel at the New Mexico conference.

“We are looking at that. Many say it’s just an amenity but it does enhance an overall gaming experience. There are issues of opening up our gaming compact and perhaps providing an amendment to have sports betting. It’s needed to stay competitive and bring revenue to our property.”

Meanwhile, sports betting in Florida is currently being decided in the courts. A case pending in the US Court of Appeals for the District of Columbia is deciding whether to reverse a district judge’s invalidation of a 30-year agreement between Florida and the Seminole Tribe of Florida.

This agreement would give the Seminole Tribe a monopoly over sports betting and even allow mobile wagering. The tribe would also be allowed to add craps and roulette.

The case was brought by a group of plaintiffs, among them the owners of a commercial casino and poker room, who argue that voter approval is required for gambling expansion.

It could impact how agreements between states and tribes are handled in future and hinges on whether the US Secretary of the Interior, who oversees tribal gaming, was right not to intervene in the agreement between Florida and the Seminoles under IGRA.

Bureau of Indian Affairs proposal

The Bureau of Interior Affairs, which is overseen by the Secretary of the Interior and Native American, Deb Haaland, has since proposed new rules that would allow tribes to offer mobile and online wagering off their reservations.

“The tribes have been restricted by IGRA and so the tribes are looking for and need these new proposed [Bureau of Indian Affairs regulations] to keep up with the industry,” says Rocha. “Being able to have mobile wagering is a workaround.”

The proposed regulatory changes, however, may prompt pushback, some sources argue. They suggest an update to IGRA itself would be more effective.

The value of Class II gaming

Some tribes are paving a new direction outside of state compacts and seek federal oversight.

In January, the Rincon band of Luiseño Indians in California announced it is leaving Class III gaming. It will give up the classification that allows slot machines, table games and electronic games but requires a state compact for Class II gaming, that allows bingo and non-banked games under the jurisdiction of the National Indian Gaming Commission. It would save the tribe in state taxation and other fees and not subject it to gaming regulation under compacts.

“They are flexing that sovereign muscle,” Rocha says. “They don’t have to have a compact. The state government won’t be their partner. It’s always been an issue for tribes. That’s why Class II is a theme of our show. With Class II gaming, if you have the imagination, it’s a way to expand gaming without having the state as your partner.”

State compacts

States are required to negotiate compacts in good faith under IGRA and allow them to file lawsuits, but the US Supreme Court has struck that down. This changes compact negotiation according to Glenn Feldman.

The Arizona-based attorney successfully represented the Cabazon Band of Mission Indians over their high-limit bingo before the US Supreme Court. That 1987 ruling led to the passage of IGRA and paved the way for tribal casinos.

“That’s a weakness in the Act that has come back to haunt tribes,” he says.

Some have suggested a congressional fix or the Department of Justice and Department of the Interior filing a lawsuit against states on behalf of tribes on compact – something considered a long shot.

“I think a lot of people are waiting to see what happens to the Brackeen case this term,” says William Wood, an associate professor of law at Southwestern Law School and a tribal government attorney. Wood appeared at a tribal gaming conference at the University of Nevada Las Vegas alongside Feldman last week.

According to Feldman, initially there was hope the current Supreme Court was a pro-tribal majority but that’s not turning out to be the case.

Expansion in one region impacting operations in another

The potential for gaming expansion in some regions has attracted the attention of tribes who fear new options in one state will impact their operations in another. The prime example is Texas, where the legislature is deciding whether to allow gaming after repeatedly rejecting overtures in the past.

The Las Vegas Sands Corporation continues to spend millions of dollars in lobbying for that expansion.

The concern is if Texas allows gaming, it will impact residents who for years have driven to Oklahoma, Louisiana and New Mexico. If that happens, some have suggested the tribes be allowed to open casinos in Texas.

There’s already a tribal foothold in the Lone Star state. In June 2022, the US Supreme Court allowed the Ysleta del Sur Pueblo tribe near El Paso and the Houston area Alabama-Coushatta Tribe of Texas to regulate electronic bingo games on tribal lands.

“It’s not ours but theirs”

Jan Jones Blackhurst, chief executive in residence at the University of Nevada Las Vegas International Gaming Institute and member of the board of directors at Caesars Entertainment, stressed at the UNLV conference the importance of tribal gaming.

It takes care of the health, education, housing and other needs of current and future generations of tribal members, she said. In contrast, commercial gaming looks to the next quarter’s earnings.

Caesars, which manages tribal casinos, stayed out of the fight for the legalisation of California sports betting unlike other commercial operators.

“We’re respectful, and we understand it’s not ours but theirs,” Jones Blackhurst said at the conference. She went on to explain that the commercial gaming industry should pay more attention to how the tribes govern themselves, how they build up their own communities and how it’s important for their members and the people around them to be successful.

Tribes are willing to go off-reservation and use the law and their ability and success to build better and sustainable businesses, she added.

“I look at how difficult the law made it for tribes to succeed and, for some, made it impossible,” Jones Blackhurst said. “It has begun to occur to me that instead of feeling it is tribal gaming and commercial gaming, commercial gaming should look at tribal gaming and learn how it operates and how it has a vision and emulate that.”

Revenue for the group stood at €1.07bn (£1.52bn/$1.81bn) for the 12-month period ending 31 December – a 3% fall from the €1.1bn the company achieved in the same period of the previous year.

Land-based casino increased as a proportion of the company’s total revenue, moving from 29.4% to 32.4%, generating €346.7m. Lotteries stood as by far the largest single segment at 56% of the company’s total at €600.0m – a 1.1% decline from the previous year.

The company saw a 16.9% year-on-year fall in its betting segment, which fell to €123.8m in revenue for the year.

Overall in 2022, 49.7% of revenue came from physical points of sale, while 50.3% came from online channels.

However, the rise of offshore and illegal offerings has bitten into the company’s market share.

“Veikkaus Oy’s share of the Finnish digital gambling market has been in decline for many years. It stood at just over 50 per cent by the end of 2022,” said the business.

However, the business’ online gaming vertical saw declines in both absolute and relative terms, falling from 13.5% to 11.6% from €149m to €123.8m

Veikkaus also achieved €4.9m in other profits from the business’ non-gaming operations, such as food or drink at the organisation’s land-based properties, which was a decline of 34.4%.

Increased costs eat away at profits

In terms of expenses, Veikkaus paid €36.3m in lottery taxes for the year, down by 39.8%. However, material and service costs at €132.5m were the highest costs of the period, rising by 3.3%.

Costs related to employee benefits came in at €85.5m. The company was also hit with €48.4m in depreciation and impairment charges, alongside $101.8m in miscellaneous costs.

From this total, the company reported €671.0m in net income, which – as a state-owned monopoly – will be distributed to a number of specific ministries.

Veikkaus also reported €343,210 in financial income, alongside €684,888 in finance costs.

The profit before tax totalled at €670.6m, down by 1.3% year-on-year.

Consumer uncertainty

The period stood as the first full year since the onset of the Covid-19 pandemic where the organisation’s land-based operations – which include a number of gaming halls as well as two casinos – were in operation throughout the entire year unaffected by pandemic restrictions.  

Despite the lack of restrictions, the business continued to see weak demand at its retail outlets.

“Consumer behaviour at the physical points of sale has not, however, returned to the same level as before the coronavirus pandemic, as can be seen in the figures for visits to Veikkaus gambling halls,” said CFO Regina Sippel.

“In addition, the mandatory loss limits introduced in 2021 for slot machines have reduced the volume of slot machine gambling,” she continued.

The CFO also highlighted the macroeconomic environment as a factor in reduced revenue, specifically pointing to the hit to consumer confidence and purchasing power.         

“The war in Ukraine and the resulting increase in consumer uncertainty and reduced purchasing power have also affected demand for Veikkaus games,” she said.

International subsidiary

Following the December 2021 passage of the country’s Lottery Act, Veikkaus opted to launch a new international B2B subsidiary Fennica Gaming, which was now permitted.

The new organisation’s operations did not significantly affect the company’s revenue in 2022, reporting €174,500 turnover for the year.

“The experiences gained regarding the interest and functionality of the games in different markets have been promising, and the high-quality games, technical reliability and high-quality customer cooperation have brought positive feedback to the company,” said CEO Olli Sarekoski.

“In the future, as the business becomes established, Fennica Gaming is expected to grow into a significant component in Veikkaus’ business.”

Last June, KSA imposed a cease-and-desist order on Gammix for illegally offering games to Dutch customers without holding the relevant licence, placing it in breach of the country’s Gambling Act.

At the time, the regulator said it had visited two of Gammix’s websites – Rantcasino.com and Nordslot.com – on several occasions to see whether it was possible to place a bet from the Netherlands.

KSA said that it was able to create a player account from a Dutch IP on both websites, which involved supplying a full name, date of birth, address details and nationality, as well as make a deposit and play online games.

In response, KSA said it would order the operator to pay a penalty of up to €1.4m per week for each week it failed to exit the country’s market, with a maximum penalty of €4.4m.

Gammix previously stated that it did not agree with the decision, but this was rejected by the regulator.

Following further checks, KSA said it was still able to gain access when registering as a Dutch player. As Gammix failed to take action and stop offering online gambling in the Netherlands, KSA has now ordered Gammix to pay the maximum penalty of €4.4m.

“We must continue to fight illegal supply,” KSA chairman René Jansen said. “An order subject to periodic penalty payments is often effective within administrative law to stop a violation. Not in this case, because the violation has not completely ceased, so we take the next step. 

“We do not want an order subject to periodic penalty payments to be ignored, because that would make the remedy less effective. Anyone who violates and continues to continue must pay. It’s that simple.”

Under the deal, SB22 will provide ZingSports with its sports betting platform that includes a built-in player account management module, AI-driven promotional capability, advanced betting engine and omnichannel capabilities.

Players will be able to bet on a range of sports including basketball, baseball, football and soccer across a variety of market such as in-play wagering and player props.

The new offering will include free-to-play and, pending regulatory and licensing approvals, real-money wagering,

Read the full story on iGB North America

Players in the state will be able to place bets on a wide range of sports events, including those that feature Massachusetts-based teams such as the NFL’s New England Patriots and the Boston Celtics of the NBA.

Bet types available to players will include same-game parlays, player props, special odds and boost selections, while customers will also have access to a number of promotions exclusive to the state.

Read the full story on iGB North America

FansUnite launched the placement earlier this week at a price of CA$0.08 per unit, with the aim of raising aggregate gross proceeds of CA$2.0m.

Tekkorp, an investment business focused on the global digital gaming industry, agreed to acquire 13,750,000 units of the financing, securing more than half of the units available in the offering.

Read the full story on iGB North America

According to the former Gala Bingo operator, the closures could impact 151 of Buzz Bingo’s 2,456 employees, representing 6.1% of the total workforce.

The bingo chain pointed to a host of factors that have influenced the company’s decision, including changes in customer behaviour that have led to overall reduced numbers post-pandemic.

This fall in custom, combined with rising operational and energy costs, has meant that the nine affected clubs are no longer “financially viable”.

“In common with the entire leisure and hospitality sector, Buzz Bingo has failed to see customers return to the high street in the same numbers as before the pandemic,” said Buzz Bingo CEO Dominic Mansour. “This, coupled with a squeeze on family finances brought about by rising inflation and energy prices, alongside a jump in our own operating costs means we have no real option other than to cease trading in nine of our locations.

“Believe me, no-one wants to make the call to close clubs. However, it is my belief that it’s these decisions that will allow us to restructure the business for long-term growth and to protect the livelihoods of our colleagues for the long run.”

Challenging environment

The operator has faced a challenging environment since the the Covid-19 pandemic transformed the country’s retail landscape.

Despite the government relaxing most preventative measures throughout 2021 and 2022, the company reported a £51.9m operating loss in Q2 2022. This was an improvement from the £141.9m loss the business reported the year before and indicated that further work was required.  

In March 2021, asset management firm Intermediate Capital Group purchased a majority stake in Buzz Bingo from its previous owner Caledonia Investments.  

The study analysed results from a randomised online experiment, wherein academics from the university created an online game and gave each of the 1,500 participants a £5 bonus.

However, participants did not have to gamble if they didn’t want to. Out of the total participants, 579 – or 25.4% – chose not to gamble.

The participants were divided into three groups. Each group played the game under slightly different conditions.

One group played the game with a Take Time To Think slogan displayed in the background, another group played with the slogan displayed in the background as well as in a pop-up window that the user had to close to keep playing, and the third played the game with no slogan present.

Susceptibility measures, including the number of spins and whether the individuals would normally play casino games, were considered.

In total, 13,590 spins were made.

The report stated that even though the messaging was displayed more prominently for certain participants compared to what they would typically see on a gambling website, the results showed “no credible effects”.

Lukasz Walasek, associate professor of psychology at the University of Warwick and co-author of the study, explained that the slogan had minimal, if any, effect on the betting behaviour of the participants.

“The messaging had little to no effect on people’s gambling behaviour,” said Walasek. “The study did not reliably change the amount people bet, and it certainly didn’t have the intended effect of reducing the time spent gambling.

“Whether or not they received the message, people spent similar amounts of time placing each bet, made similar numbers of roulette spins, and played for a similar length of time overall.”

Stronger messaging

Professor Elliot Ludvig, professor of psychology at the University of Warwick, said that safer gambling messaging needs to be stronger, but also needs to be tested correctly to have a maximum impact.

“If the industry is to be successful at preventing gambling harm, awareness messaging should be strongly worded, but independently developed, tested and validated in order to better inform and educate people about gambling and its risks.” said Ludvig. “There’s a clear formula on alcohol labels for example, that outlines how someone can moderate their alcohol intake. On tobacco labels, the warning is very stark.

“Safer gambling messages could take on a similar format. It should be obvious how gambling addiction can take hold of people. Clearer messaging would also create greater transparency around certain games and how the wider industry works.”

Take Time To Think was first introduced in October 2021.

Pollard Banknote’s fourth-quarter revenue for the three-month period ending 31 December stood at CA$126.9m (£78.0m/€87.5m/US$92.3m), an 8.9% increase from the $116.5m the company achieved the same period the previous year – itself a quarterly record.

This increase was driven by strong sales in the business’ charitable gaming, egaming system and ilottery divisions, which were not significantly affected by consumer pressures during the year.

“Consumer demand remained very strong in most of our lines of business throughout 2022,” said Pollard co-CEO John Pollard. “Charitable gaming continued to see exceptional demand for all paper products including pull-tabs and bingo paper, with revenue increasing 21% over 2021 and over 50% compared to 2020, now far exceeding our pre-pandemic revenue.”

These were also factors in the company’s quarterly net income more than doubling to $10.5m, compared to $5.2m in Q4 2021.

Reduced margins

However, when looking at the full-year results, the supplier actually saw net income fall 2% from $19.7m to $19.3m. The company’s adjusted earnings before interest, tax, depreciation or amortisation (EBITDA) also fell 4% year-on-year from $84.0m to $80.5m.         

This squeezing of profit margins in the face of record revenues primarily resulted from problems in the company’s instant ticketing division, which found itself far more exposed to inflationary pressures than the organisation’s other verticals.

The business has repeatedly referred to this issue during financial reports throughout the year.

In particular, costs rose dramatically for the raw materials utilised by the business, such as paper and ink, as well as being affected by price increases in packaging and freight. According to Pollard Banknote, many inputs saw costs spiral up to 30-50%.

The company’s total costs of sales over the year rose 8.8% from $368.2m to $400.5m. The company said that this $32.3m is largely the consequence of the aforementioned increases in price in the instant ticketing segment.

“Our instant ticket customer contracts are primarily long term with fixed pricing,” said John Pollard. “As such, in the short term we were unable to pass on these significant cost increases and our instant ticket margins underwent a very negative reduction.

“These input cost increases were introduced throughout the year, resulting in the negative impact on profits worsening as the year progressed.”

While the business has not experienced any further cost increases in this division so far in 2023, Pollard Banknote warned that it did not necessarily mean that they were not coming.

“The large cost increases incurred during 2022 were done in stages throughout the year, with most of the higher costs being absorbed by the end of 2022,” said the business. “On a year-over-year basis, our manufacturing costs will be higher in 2023, reflecting these higher cost levels in place for the entirety of the year.”

Projected outlook

According the company’s statements, it sees “significant opportunities” in the short- and long-term ilottery market. Pollard Banknote is involved in providing services in this segment through its NeoPollard subsidiary, which is a joint venture with NeoGames.

Through this JV, the business has been involved in supplier ilottery games since 2014, when the company first received a contract with the Michigan Lottery.

While the company said that the uptick of ilottery in the US had been a slow process, it argued that “with the recent significant investments in our state-of-the-art ilottery platform and game content library, we are confident Pollard is well positioned to take advantage of these opportunities.”