Shares in 888 are trading more than 18% higher following the release of the company’s full-year 2022 financial results and a Q1 2023 trading update.

Topline numbers

888’s total reported revenue for 2022 was £1.24bn, an increase of 73.9% year-on-year. 

That figure includes revenue from William Hill’s non-US assets, but only after 888’s acquisition of the brand was completed in July 2022.

On a pro-forma basis, calculated as if 888 had owned William Hill throughout 2021 and 2022, total revenue across the business was £1.85bn in 2022, representing a 3% decline on the prior year.

Reported adjusted EBITDA came to £217.9m for the year, up 82%, with growth driven by the William Hill acquisition.

The firm also had an adjusted profit before tax of £80.5m, a year-on-year decrease of around 10%.

After exceptional costs and adjusting items of £184.8m, however, the business declared an actual reported loss before tax of £115.7m.

This was a result of amortisation of acquired intangibles, impairment of historic US goodwill and William Hill technology no longer under development, as well as transaction fees for the acquisition and the resulting integration and restructuring costs.

In Q1 2023, according to the company’s trading update, 888 generated £469m in revenue, down 4.9% year-on-year.

Declines across the UK and Ireland online and international business segments were partially offset by 8.5% growth in the company’s UK and Ireland retail operations, which accounted for £140m or 31.4% of total Q1 revenue.

News nugget

888 expects to recover between 40% and 50% of the revenue lost following its suspension of all VIP accounts in the Middle East earlier this year.

In January, a compliance investigation saw the company suspend all VIP activities in the region after discovering that KYC and AML procedures had not been properly adhered to.

Of the suspended customers, many are expected not to return to the business. 

However, 888’s board said it expects to recover as much as half of the revenue lost from the account suspensions as some customers are reactivated.

Robust policies and procedures have been put in place to allow the accounts to be reopened, the business said, but the account closures are likely to cause headwinds for full-year 2023 of between £25m and £30m.

Speaking on the firm’s full-year 2022 earnings call, executive chair Lord Mendelsohn said following the action in the Middle East: “We have invested significantly in our compliance team with the drive for higher standards, headed by our new chief risk officer Harinder Gill, who joined the group last summer. 

“I’m highly confident that our policies and procedures are robust, and this failure was isolated to a very specific cohort of players. We have found no further issues and we do not anticipate any further actions here,” Mendelsohn concluded.

In other news, 888’s board said it is making good progress with its search for a new CEO, while CFO Yariv Dafna has agreed to remain in his position until the end of 2023 to provide continuity to the firm’s board and executive team.

Dafna had previously announced that he would stand down from his role in March this year.

Best question

The best question on this call came from Francesco Barbato, credit research associate at JP Morgan. He asked what measures 888 had taken in the UK in advance of the Gambling Act review white paper, which is expected to be published next week.

In response, Lord Mendelsohn said: “We’ve rebuilt the entire team, rebuilt processes and enhanced our whole risk approach. We have implemented a number of measures around protecting customers from rapid losses, reducing 30-day net deposit limits, implementing third-party vulnerability checks, and other hard stops pending assessments of safer gambling and anti-money laundering. 

“We’ve done more to introduce protection of customers in retail and reduce the spending triggers there. We’ve also looked at additional training for our retail colleagues which they’ve done extremely well at adopting, we’ve got a more coordinated approach to monitoring all those things and we’ve enhanced our AML processes.

“So we’ve got a pretty comprehensive range of things that we’ve done to make sure that in the UK and indeed across the business in all jurisdictions, we’re doing as much as we can to ensure that we’ve got the highest possible standards and the safest possible experience for our customers.” 

Best quote

888 strategy officer Vaughan Lewis: “The business has quickly changed from one that is competing at low scale in a huge range of markets to one that is laser focused on maintaining and building really strong and sustainable positions in three core markets and five growth markets.”

Current trading and outlook

888’s focus for the immediate future is the reduction of its net debt/EBITDA ratio, which currently stands at around 5.6x on a pro-forma basis.

The business intends to reduce that figure to under 3.5x by 2025, through a combination of growing its EBITDA and paying down its debts.

888 is also targeting annual revenue in excess of £2bn, an adjusted EBITDA margin of more than 23% and adjusted earnings per share of more than 35p by 2025.

Investment bank Peel Hunt noted that the 2022 results and Q1 trading update were broadly in line with expectations, adding: “We see ‘no news’ from this highly leveraged business as good news,” and reiterating its Buy recommendation and 150p target price.

Peel Hunt also noted that the business is on track to deliver £87m worth of operating cost synergies in 2023, with more to come in 2024.

With recent market launches in Ontario, Virginia and Michigan, alongside the launch of 888AFRICA, “there is plenty going on commercially to encourage us that 888 can return to top-line growth,” the firm added.

GAN is set to refocus its B2C business on Latam and European markets, according to a new strategy revealed alongside its Q4 and full-year 2022 financial results.

Topline numbers

Group revenue in Q4 totalled $36.9m, an increase of 21.4% year-on-year.

Of that, $22.8m came from the firm’s B2C operations via its Coolbet brand, up 18.7%, with the remaining $14.1m coming from GAN’s B2B segment, up 26% year-on-year.

Adjusted EBITDA for the quarter came in at a $368,000 loss, reduced from a $6m EBITDA loss in Q4 2021.

After accounting for expenses including a $137.1m non-cash impairment charge, the business declared a net loss of $147.7m for Q4.

GAN said the impairment charge in the current quarter was a result of material reductions in its expected future cash flows from the B2B segment, a strategic decision not to pursue and invest further in its original content strategy, and a re-assessment of its growth strategy related to the B2C segment.

Those figures brought full-year 2022 revenue to $141.5m, a year-on-year increase of 14%, while annual adjusted EBITDA came in at a positive $6m, compared to a $2.8m EBITDA loss in full-year 2021.

Total net loss for 2022 was $197.5m, compared to a $30.6m net loss in 2021.

News nugget

Following the publication of its results, GAN has launched a company-wide formal strategic review process to evaluate how it can speed up its path to profitability and “a more attractive return profile”.

The business has engaged B. Riley Securities as its financial adviser to assist with the evaluation process, and is “well into discussions with multiple involved parties and simultaneously evaluating numerous options for the go-forward organisation of the company.”

However, GAN also noted that: ”there can be no assurance that the review process will result in pursuing or completing any transaction, and no timetable has been set for completion of this process.”

A renewed strategy in GAN’s B2C segment will also see the business turn its focus away from highly competitive markets including Ontario, to focus more closely on high-growth opportunities such as in Latam.

After announcing the withdrawal of Coolbet from the regulated Ontario market earlier this month, CEO Dermot Smurfit provided an update on the rationale behind the exit as well as the firm’s renewed focus on Latam markets. 

GAN CEO Dermot Smurfit: “We think we’ve got a very real shot at a podium position in Mexico. Mexico has the advantage of being an existing regulated market and the sports-led operators have relatively weak sports betting experience to the consumers, so we think Coolbet has got a very serious advantage.”

While the business maintains a B2B presence in the US, it now intends to focus its B2C efforts more closely on less competitive, higher growth markets where the Coolbet brand has a better chance of standing out against the crowd. 

Smurfit said in the firm’s earnings release: “It has become apparent to us that the capital requirements to gain market share for initiatives such as SuperRGS as well as in certain competitive markets for sports betting like Ontario, Canada do not provide a path toward achieving an acceptable ROI in a reasonable period of time. 

“As such, we have elected to allocate capital away from these endeavours and toward more appropriate growth strategies. Accordingly, we are focused on leaning into the value that GAN Sports has demonstrated thus far and being a market leader in emerging Latin American markets through our B2C operations.”

One key Latam market for the business is Mexico.

Fielding questions on today’s earnings call, Smurfit added: “We think we’ve got a very real shot at a podium position in Mexico. Mexico has the advantage of being an existing regulated market and the sports-led operators have relatively weak sports betting experience to the consumers, so we think Coolbet has got a very serious advantage.”

Best quote

GAN CEO Dermot Smurfit: “[In Mexico,] you just don’t see the kind of competitive promotional-oriented mania that we saw in Ontario during the first several months of that market’s launch, where a lot of the US brands were pushing north very aggressively, combined with the entrenched operators who’d been there for for many, many years.”

Best question

The best question on today’s call came from Chad Beynon at Macquarie Securities, who asked what rates of retention Coolbet had seen from new customers acquired during the 2022 FIFA World Cup.

In response, CEO Smurfit said: “There’s always effectively the business equivalent of a hangover after a major soccer event like the World Cup. 

“Industry expectations would be that you’re doing a great job if you see 40% retention quarter-on-quarter, and thankfully we’ve outperformed that expectation. 

“So we’re seeing great and very significant evidence of continued stickiness of the Coolbet sports betting offering and user experience.”

Current trading & outlook

Due to the commencement of its strategic review, GAN said it is unable to provide guidance for the full-year 2023 at this time.

Interim CFO Brian Chang said in the earnings release: “Given the range of potential outcomes related to the strategic review, we do not feel that we currently have an adequate level of visibility to confidently provide guidance for 2023 within a reasonable range.

“That said, we do expect a relatively swift resolution to the strategic review process and hope to be in a position to provide our financial outlook for 2023 at some point in the near future.

“In the meantime, we are acutely focused on supporting our key initiatives such as GAN Sports and seeking additional ways to manage our cost structure and improve our return profile.”

Indeed, following the end of the reporting period in early 2023, GAN Sports has launched with its third client in the US in the form of WynnBet at Encore Boston Harbor.

GAN’s retail and mobile sports betting launch with Wynn in Massachusetts is expected to be followed by a nationwide rollout on a state-by-state basis, with the partnership eventually extending across 18 US states.

Commenting on the firm’s past performance and future outlook, CEO Smurfit concluded: “While 2022 saw many important achievements, our profitability execution did not meet our expectations for the year. We understand that we have plenty of work to do in 2023 to improve our return profile and deliver better returns for our shareholders.

“We anticipate that the strategic review will facilitate that process with a renewed focus on higher ROI opportunities.”

Questions remain for the company’s financial future, however. During the earnings call, interim CFO Chang laid out a significant uncertainty for the business with regards to a term loan credit facility it currently holds.

He said: “Given our cash flow and net losses for the LTM period ended December 31 2022, and updates to our 2023 budget and long range plan, there’s the potential that the company could violate a financial covenant associated with its term loan in the future and result in a potential acceleration of our credit facility.

“If our lender were to accelerate the debt, it is possible that we could have an insufficient cash flow to support our operations for a full year following the date of issuance of consolidated financial statements.

“We are in continued negotiations with our lender and expect further amendments to the credit facility as needed to maintain compliance with the future financial covenants, but we cannot make any assurances regarding the likelihood, certainty or exact timing of further amendments to the credit facility.”

“We are in continued negotiations with our lender and expect further amendments to the credit facility as needed to maintain compliance with the future financial covenants, but we cannot make any assurances regarding the likelihood, certainty or exact timing of further amendments to the credit facility.”

AUTHOR

XLMedia has released its full-year 2022 financial results, showing a 10% year-on-year increase in revenue as the group embraces a new operating structure. 

Topline numbers

XLMedia’s audited 2022 results fell broadly in line with previously issued guidance reported by iGaming NEXT in January.

Total revenue for the year came to $73.7m, up 10.2%, with $71.8m coming from continuing operations (up 24.2%) and $69.6m coming from XLMedia’s core affiliation business (up 27.5%).

Non-core business areas include the discontinued personal finance division, affiliate network revenue and external agency revenue.

Adjusted EBITDA across the group was $16.7m, down 6.7%, however the figures suggest that adjusted EBITDA from the core business ($18.2m, up 24.7%) was negatively impacted by losses in non-core business segments.

North America was the company’s highest earning region in 2022, generating $47.7m in revenue, up 114.9%.

Of the North American revenue, the vast majority came from sports betting, at $46.4m (up 111.9%), while iGaming generated just $1.3m (up from $0.3m).

European operations showed a more equitable split between sports betting and iGaming, albeit biased in favour of online casino.

The European iGaming segment generated $14.3m in revenue, a reduction of 37.6%, while sports betting in Europe generated a further $7.6m, down 20%. 

Operating profit from continuing operations totalled $5.1m for the year, up more than fourfold from $1.1m in 2021. Overall profit for the year from continuing operations was $2.4m, down from $2.8m.

Discontinued operations, however, left the business with an $11.8m loss in 2022, compared to a $2.8m profit in 2021. That was largely the result of a $10.7m impairment charge.

News nugget

Growth in North American markets alongside a reduction in European revenue appears to be in line with XLMedia’s expectations and objectives for the future.

The business is nearing the end of a restructuring process which has seen it turn its core focus away from European iGaming and towards US sports betting.

XLMedia said its strategy going forward is “to diversify our revenue streams in North America while expanding our footprint, optimising our sustainable gaming business and upgrading and innovating our European sports sites.”

Since beginning its restructuring, the business has made significant changes to its senior management team with the introduction of David King as CEO in July, as well as the appointment of Caroline Ackroyd as CFO.

Other senior management changes in 2022 included the appointment of Karen Tyrrell as chief people and operations officer with responsibility for European sports and gaming, the promotion of Elizabeth Carter to CMO, and the addition of Peter McCall as company secretary and group legal counsel.

Overall staff numbers, meanwhile, have been reduced, with the business entering 2022 with 267 staff and ending the year with 193.

“This major programme of change is now largely complete, and we anticipate a more stable operational base going forward,” XLMedia said.

Following the end of the reporting period, Kevin Duffey took up his new role as president of XLMedia North America in early 2023.

Duffey was the founder of Saturday Down South, one of XLMedia’s US sports media sites, and has now been tasked with overseeing all of XLMedia’s North American assets.

Those assets include acquired businesses such as CBWG, Sports Betting Dime and Saturday Football Inc, the integration of which into XLMedia’s core business has now been completed, the business said.

The integration of those acquired businesses saw the departure of the founders of Crossing Broad, a Philadelphia-based sports blog, and Elite Sports NY.

Best question

A highly topical question came from one of the listeners on today’s earnings call, referred to only as Natalie.

Natalie asked how the business intends to leverage the possibilities offered by new AI technologies, and what the related opportunities and threats would be.

In response, CEO King said: “We don’t use it at the moment to generate content. And indeed, in traditional search, Google puts a premium on ‘EAT’, meaning expertise, experience, authority and trust. 

“Therefore, we have been putting a premium on creating content that fulfils those obligations, and we’ve looked very carefully and done a number of tests in the world of ChatGPT. 

“We obviously see lots of opportunities and indeed have already started using this technology to educate ourselves about word selection and optimisation in our casino brands.

“We think that there’s a lot of use for selectively targeting these tools at specific areas of expertise, applying them to our own content, and educating ourselves not just through our own A/B testing, but also through using these tools to learn what others have done and apply that to our optimisation programmes.

“We also see opportunities to actually educate these tools to help us in creating our content and updating our content on a more regular basis.

“By writing high quality content that meets the ‘EAT’ criteria, we think we can then apply technology and AI to enhance and republish that content, to give the user a more fulsome experience.”

Best quote

CFO Caroline Ackroyd on XLMedia’s debt arrangements: “We’re providing sufficient headroom for investment in organic growth. The business currently has no debt arrangements in place, but this remains a consideration for the future if working capital or acquisitions present a reason for the board to put this in place.”

Current trading and outlook

XLMedia said it has “enjoyed a strong start to 2023 with Ohio going live in January 2023 and Massachusetts going live in March 2023,” though it noted that no additional state launches have been confirmed for the remainder of the year.

With regards to its North American strategy for the remainder of the year, the business holds two key priorities.

One is to increase its focus on iGaming markets in the US, of which there are currently seven regulated state markets. 

XLMedia holds a presence in just one of those markets at present, however, and said building its gaming presence is a key priority for the business.

Another of the firm’s key objectives is to turn towards rev share model agreements with operators in the US, where currently it operates on a principally cost-per-acquisition (CPA) basis.

In 2022, CPA agreements generated 69.4% of core revenue, at $48.3m, while rev share deals generated 26.6% at $18.5m.

XLMedia is currently in discussions with several of its US operator partners to shift its agreements from pure CPA to hybrid deals, offering reduced upfront costs to operators but allowing the affiliate to benefit longer term from the players they refer.

Sportradar registered impressive growth across all business segments throughout 2022 during its first full year of trading as a public company.

Topline numbers

Q4 revenue came in at €206.3m, 25.4% ahead of the prior-year period.

Revenue is divided into four business segments: US, Rest of World Betting, Rest of World AV, and Other.

Sportradar’s US segment was the fastest growing area of the business in Q4, where revenue increased 77.3% to €41.2m.

Rest of World Betting was the largest segment by revenue, however, growing 28.8% to €105.9m. 

Rest of World AV revenue climbed 17.4% to €41.8m, while the Other segment generated the remaining €17.4m of Q4 revenue, up 54.1%.

Those figures contributed to significant growth for full-year 2022. 

Total annual revenue reached €730.2m, up 30.1% compared to 2021.

Group adjusted EBITDA for Q4 was €35.1m, up 64.3%, and for the full year was €125.8m, up 23.4%.

The business declared a full-year profit of €10.5m, down 18%. This came despite reporting a €33.3m loss during Q4.

News nugget

Sportradar was able to pay off an outstanding €420m term loan debt in its entirety during 2022.

Meanwhile, the business generated positive cash flow and ended the year with more than €240m in cash, with total cash and undrawn credit facilities totalling €464m.

That was helped in no small part by the firm’s managed trading services (MTS) division registering 75% growth in Q4, thanks to a strong performance during the FIFA World Cup.

MTS trading volume was at least twice as high during the tournament in November and December when compared to any other month throughout 2022.

Sportradar also signed a number of new multi-year agreements with US market leader FanDuel for the provision of data from the NBA, NASCAR, the Turkish Basketball Federation, Australian cricket competitions and tennis.

During 2022, the firm also acquired AI solutions start-up Vaix.

According to London-based advisory firm Regulus Partners, Sportradar’s 2022 results proved a successful shift “from a waterfront betting content distribution model to a rights-led model,” as the rights to exclusive sports data become an increasingly significant part of the business.

After the reporting period, Sportradar noted it was in discussions with the ATP over an exclusive six-year rights deal focused on data, streaming and integrity.

Regulus added, however, that “in a rights-led data model, we are unlikely to see a 4x blended turn on the cost of the rights portfolio (i.e. a 25% cost of rights) being sustainable, in our view. 

“Pushing the increasing cost of rights onto larger betting operators has proved to be relatively easy (if painful) in visible domestically regulated markets, but it becomes much more challenging in the long-tail of betting operators which Sportradar historically serviced effectively.”

Best quote

Sportradar CEO Carsten Koerl: “When annualising our Q4 trading volume, we traded €19bn, which is comparable with the liquidity of a top 10 global betting operator.”

Best question

The best question on today’s earnings call came from UBS MD and leisure analyst Robin Farley. 

She asked management what percentage of the bets processed using Sportradar data were in-play, as opposed to pre-match.

Koerl said that while Sportradar does not give a specific breakdown on a quarterly basis, the business noted the proportion of in-play bets in the US is far behind where it stands in Europe.

“In Europe we see around 80% of all bets are in-play. In the US, that varies, depending on the sport, between 15% and 35%,” he revealed. 

Sportradar’s active participation is much higher when it comes to taking in-play bets, he added, suggesting that any percentage point increase in in-play mix would result in additional revenue of €1.2m for the company. 

“And that has practically no cost, because we have the deployment systems and the products in place,” he added. 

Koerl concluded there is a general trend that US markets follow international markets eventually, and that in-play participation should continue to increase.

Current trading & outlook

Earnings for 2022 came in ahead of previously stated expectations. For 2023, the company expects revenue to fall between €902m and €920m (representing growth of between 23.5% and 26%) and adjusted EBITDA between €157m and €167m (up between 24.8% and 32.8%).

NeoGames has exceeded 2022 guidance with a total revenue increase of 149% year-on-year to $210.2m, largely attributed to its acquisition of Aspire Global.

Topline numbers

In Q4 2022, NeoGames generated revenue of $69.2m, compared to $12.3m during the fourth quarter of 2021.

NeoGames’ share in NeoPollard Interactive (NPI), a co-owned iLottery supplier with Pollard Banknote Limited, generated additional revenue of $14m, taking total revenue for the period to €83.2m.

This resulted in a total Q4 revenue increase of 291% compared to the prior year.

iGaming lottery revenue reached a quarterly record of $28.4m, indicating a 33.4% year-on-year increase and a 16.9% increase sequentially from Q3 2022.

Meanwhile, Aspire Global revenue reached $54.8m, reflecting a 27% growth measured in constant currency.

However, the impact of foreign currency exchange rates resulted in a 14.6% decrease, leading to a 12.4% growth in US dollars.

Adjusted EBITDA increased by 129% year-on-year to $18.1m.

For full-year 2022, NeoGames’ total revenue, including its share in NPI revenue, increased by 149% year-on-year to $210.2m, surpassing the high end of the 2022 guidance range of $197m to $208m.

This growth was primarily driven by the business merger with Aspire Global.

NeoGames’ standalone revenue for 2022 was $165.7m, a significant increase from $50.5m in 2021.

Meanwhile, the company’s share in NPI revenue rose by 30.6% year-on-year to $44.5m.

iLottery revenue was $98.1m, marking 16% year-on-year growth.

Aspire Global contributed $112.1m in revenue from 16 June 2022 (the date the tender offer was completed) to year end.

As measured in constant currency, Aspire Global’s revenue for 2022 showed a 19% growth on a full-year pro forma basis.

However, due to the impact of foreign currency exchange rates, there was a 13.4% decrease, resulting in 5.7% growth reported in US dollars.

Adjusted EBITDA was $54.5m for the full year of 2022, up 63.2%.

News nugget

NeoGames surprised investors and reported better-than-expected quarterly earnings of $0.22 per share, exceeding market expectations of a year-on-year decline in earnings.

The company beat the Zacks Consensus Estimate, which had predicted a loss of $0.09 per share.

Zacks noted that over the last four quarters, NeoGames surpassed consensus EPS estimates just once.

In Q3 2022, it was expected that the company would post earnings of $0.17 per share when it actually produced earnings of only $0.10.

However, Zacks noted that NeoGames’ shares outperformed the S&P 500 and added about 27% since the beginning of the year versus the S&P 500’s gain of 5.4%.

In spite of strong revenue growth, NeoGames posted a net loss of $0.8m in Q4 and a net loss of $19m for the full-year 2022 due to the amortisation of intangible assets related to the Aspire Global acquisition as well as other acquisition related expenses.

Nonetheless, NeoGames CEO Moti Malul said the company had made “tremendous progress” in 2022 and advanced its strategic goals.

“Our results underscore the advantage of our ability to serve customers on an integrated basis, whether they need solutions for iLottery, online sports betting, iGaming, or any combination of services,” he added.

Best quote

In February, NeoGames partnered with Intralot do Brasil to enter the Brazilian market and launched iLottery and an online sports betting solution in Brazil.

This was done for Loteria Mineira, which is the official lottery of Minas Gerais, the second-largest state in Brazil.

During the earnings call, Malul commented that NeoGames views this market entry as a test case. He added that at least three, and possibly up to five, states in Brazil are planning to enter the online lottery and sports betting market in 2023.

Matul said when he was in Brazil to celebrate the launch of LotoMinas iLottery, officials from other states participated.

He added: “We keep getting a lot of good questions as other states want to learn the dynamics of what we’ve done there. I think we’re also setting the role model for the other states when it comes to player protection, social responsibilities, responsible gaming, payment solutions and so on that regulators take a very close look at.”

Best question 

Given that growth at NeoGames was driven largely by acquisitions, it comes as no surprise that the firm’s management was asked during its earnings call about the potential for further deals down the line.

Macquarie’s Chad Beynon asked: “Even though you have an end-to-end solution, are there still opportunities out there where you would consider adding on to what you’re offering?”

In response, CEO Malul said the company was always assessing opportunities.

He added: “We still think that there’s good ways to grow from non-organic growth and to capitalise on opportunities that may present themselves in the market, and we’re looking at them actively.

“At the same time, we do not necessarily want to grow our leverage beyond where it is now in order to do those deals. So we would probably be able to do tuck-in acquisitions, and these are ones that we are looking actively to pursue in a disciplined way.”

Current trading & outlook

NeoGames has issued guidance for 2023, with total revenue expectations of between $235m and $255m.

However, this projection reflects a change in the presentation of revenue for certain Aspire Core customer contracts, which now require accounting on a net basis.

If these contracts were presented on a gross basis, the projected range would be between $323.3m and $350.3m.

Flutter Entertainment continued to dominate leaderboards in key markets throughout 2022 as it grew full-year revenue by more than 27% year-on-year.

Topline numbers

Flutter generated revenue of £7.69bn during full-year 2022, an increase of 27.5% year-on-year.

Of that total, £5.09bn, or around two-thirds, came from the group’s operations outside of the US, amid annual revenue growth of 9.6%.

The remaining 33.8% of revenue, at £2.6bn, came from Flutter’s FanDuel-led US operations, where revenue rocketed by 87.2% year-on-year.

Non-US operations generated £1.3bn in adjusted EBITDA, up 4.1%, while US operations generated an EBITDA loss of £250m, compared to a £243m EBITDA loss for 2021. 

(On a constant currency basis, however, EBITDA losses from the US shrank by 6%.)

As a result, overall group adjusted EBITDA came in at £1.05bn, up 4.4% year-on-year.

The number of average monthly players (AMPs) across the group throughout 2022 was 10.2 million, up 25.8% year-on-year, driven by increased numbers of players both in and outside the US.

News nugget

Flutter’s market dominance in several key markets was laid bare in its 2022 results.

FanDuel’s leadership position in the US, where it holds 50% of sports betting market share and 21% of iGaming, is widely recognised across the industry.

Meanwhile in the UK & Ireland, Flutter is also the number one operator by market share, with 38% of sports betting and 22% of iGaming.

In Australia, where Flutter operates its mass market Sportsbet brand, the business also holds the top spot for sports betting with 48% market share. Online casino is illegal in the country. 

Following its acquisition of Sisal in August 2022, the operator also now holds the market-leading position in Italy.

That scale allows Flutter to launch into newly regulating jurisdictions with relative ease, as was demonstrated in Maryland towards the end of 2022, and in Ohio following the end of the reporting period.

Market share across those two states has shot to 50% already according to Flutter’s figures, with more than 6% of the states’ combined adult population using the operator’s products.

They were Flutter’s most successful launches ever. In Ohio, first-month customer acquisition as a percentage of the state population was three times higher than in New York following its launch last year.

Flutter made combined strategic investments in Ohio and Maryland of $78m in Q4 2022, consisting predominantly of pre- and post-launch generosity and brand content to acquire customers, which is intended to create greater future value by front-loading investment now.

In Q4 specifically, Flutter posted positive US EBITDA of £31m, excluding its investments in those two new state launches. The operator reported a full-year EBITDA loss of $313m in the US. For comparison, closest market-share rival DraftKings reported an EBITDA loss of $722m over the same period.

Best question

Also referring to the balance between investing in future growth and short-term profitability was the best question on Flutter’s 2022 earnings call, which came from Craig-Hallum analyst Ryan Sigdahl.

With many operators guiding to positive EBITDA at some point this year, he said: “Our thesis is that some of those had structural challenges scaling to meaningful profits beyond that. 

“We agree with you that FanDuel can and will, but how do you think about the need to achieve positive EBITDA now, versus making investments in the near-term to build the business that can earn potentially billions in profits longer term?”

In response, Flutter CEO Peter Jackson said: “I think the important thing is that we’re compounding the advantages we have in the market. 

“We’re continuing to see higher levels of hold against our handle than our competitors do. The parlay penetration was fantastic in things like the Super Bowl, and the product offering that we have there is the best in the market, and we’re continuing to develop and improve it. 

“So we have a structural advantage in revenues, and we know that we are more efficient than anybody else from a customer acquisition perspective.”

CFO Jonathan Hill added some additional colour on Flutter’s strategy regarding profitability. 

“Some of our competitors are targeting getting to profitability in Q4 of this year,” said Hill. “We’ve never targeted getting to profitability this year. 

“We said it was a resultant outcome of [the building momentum among cohorts of US customers]. So this is not the be all and end all target. We expect it to happen because of the cohorts.”

Hill made reference here to the below slide in Flutter’s results presentation, demonstrating that each new group of customers brought in by the operator has required increasing levels of investment each year since 2018, but that as the investment in each new cohort grows, so too do the resulting revenues.

Best quote

The idea of growing momentum in the US market was also the topic of the best quote from Flutter’s earnings call, which came from CEO Jackson. He said:

“The strong performance we’re seeing in the US is not just being driven by recently launched states. I think the benefits that we have are compounding.

This was once again supported by an accompanying slide, which Jackson said demonstrated improvement in revenue performance and more efficient marketing, thus “powering the flywheel”:

Current trading and outlook

Flutter said trading in the first eight weeks of 2023 was in line with expectations, with the US continuing to deliver strong growth across existing states, and following successful launches in Maryland and Ohio.

Flutter has already acquired more than 1.2 million customers in those two states in 2023, it added.

The US remains on track to deliver positive EBITDA for the full-year 2023, it said, which will mark the first time any US sports betting operator has delivered a full-year profit since the market began to open following the repeal of PASPA in 2018.

“The group is currently at an earnings transformation point and we look forward to delivering future growth and progressing further against Flutter’s strategic priorities in the coming year,” commented Jackson in the firm’s financial report.

Non-US revenue is also benefitting from strong momentum in the UK & Ireland and in International, which is helping to offset the impact of a “more challenging environment and tough comparatives in Australia,” Flutter added.

For 2023 across the group, Flutter said it expects capital expenditure of between £480m and £500m, alongside adjusted depreciation and amortisation charges of another £480m as a result of increased US product investment, as well as group investment in casino studios and shared platforms.

In a note sent to investors, Regulus Partners said of the firm’s performance: “There are reasons to be positive for each of Flutter’s divisions. Perhaps most crucially, Flutter is clearly showing that a strong central investment in product and technology can drive revenue synergies as well as cost synergies.

“If Flutter’s capex is anything to go by, it is hard to see how disruptors dent Flutter’s market share in key markets without a radical shakeup of the customer proposition (which in fairness the online gambling sector is due for).”

Lottery supplier IGT generated total revenue of $4.23bn in full-year 2022, while managing to reduce its net debt leverage ratio from 3.5x to 3.1x.

Topline numbers

In Q4, IGT generated total revenue of $1.09bn, a modest 4.1% ahead of Q4 2021.

The business is divided into three segments, the largest earner of which was its Global Lottery division, which generated $639m of revenue, although that represented a 7% downturn year-on-year.

Next up was the Global Gaming segment, generating $389m amid a 21.2% increase over the prior-year period.

IGT’s PlayDigital segment, meanwhile, generated the remaining $65m in revenue after growing 54.8% year-on-year.

Total operating income for the firm was $230m in Q4, up 23.7%, while adjusted EBITDA totalled $419m, up 8.3%.

IGT was also able to pay down some of its net debt during the period, ending the year with $5.15bn of net debt compared to $5.92bn at the end of 2021.

Despite an increase in operating income, IGT posted a net loss of $31m for the quarter compared to a $55m net income in Q4 2021, as a result of a $95m loss on foreign exchange costs due to fluctuations in the euro/dollar exchange rate on debt.

Turning to the full year 2022, total revenue came to $4.23bn amid a 3.3% increase compared to 2021.

Total operating income for the year was $922m, up 2.2%, while adjusted EBITDA reached $1.66bn, 1.3% behind 2021.

Net income for the full year was $414m, up 62.4%, following a $278m gain on the sale of IGT’s Italian commercial services business, lower income tax and interest expenses, and reduced losses related to the retirement of debt, among other factors.

On a constant currency (CC) basis, the results would have been somewhat more favourable than the real figures posted above – for example, full year adjusted EBITDA was up 4% in 2022 on a CC basis, according to IGT.

News nugget

In addition to reducing its net debt leverage from 3.5x at the end of 2021 to 3.1x at the end of 2022, IGT signed a number of new or extended supply contracts during the year.

It was awarded multiple lottery facilities management contract extensions, including a four-year extension in New York, a seven-year extension in Georgia, a 20-year extension in Rhode Island and a three-year extension in Missouri.

The business also won a new 10-year instant ticket printing and services contract in Texas.

CEO Vince Sadusky commented on the new Texas contract: “We potentially have a greater opportunity on the printing side as we don’t have a significant share of that business, and there are some printing contracts coming up. 

“That business is interesting. They’re typically shorter duration contracts, and also there’s been a trend for multi-vendor contracts on the printing side, unlike facilities management which would be impossible to administer.

“So we think we’ve got some opportunity coming up both in 2023 and 2024. I think with the significant investment we’ve made in our print line, as well as our patented technology like Infinity Instants, we’ve got the ability to earn some business, and I think that was an area that wasn’t a significant focus for the company many years ago.”

Best question

JP Morgan VP Jemma Permalloo asked whether IGT’s priorities had changed in recent years with regards to its desire to have an Investment Grade (IG) credit rating.

“I remember in the past you have said that getting to an IG rating would be great but that it was not a priority for IGT. I want to understand if there has been a slight change in your commitment to trying to get to an IG rating, because obviously that would mean a cheaper cost of capital,” she asked.

IGT CFO Max Chiara responded: “I think at the end of the day it’s a matter of where you land on the metrics. If you have an ability to stay within those investment grade metrics, it’s inherent with it to target the investment grade rating.”

Best quote

The best quote also came from Chiara as he elaborated on his response to Permalloo’s question:

IGT CFO Max Chiara: “The truth of the matter is Covid has taught us a lesson. Low-leveraged companies are probably better positioned to weather unexpected storms than highly leveraged companies.”

He added: “With that philosophy in mind, the importance of maintaining tight control on both costs and on cash, and targeting those metrics, definitely supports our value generation trajectory.”

Current trading and outlook

IGT said it expects revenue of around $1bn in Q1 2023 with an operating margin between 22% and 24%.

For the full-year 2023, the firm expects revenue between $4.1bn and $4.3bn in 2023, with an operating margin between 21% and 23%.

Affiliate group Better Collective referred a record 580,000 new depositing customers (NDCs) to its operator partners in Q4 2022, helped by the popularity of the FIFA World Cup.

Topline numbers

In Q4 2022, Better Collective generated revenue of €86.1m, a 63.2% year-on-year increase demonstrating organic growth of 44%.

Of the total, €41.3m was considered recurring revenue, an increase of 81% compared to Q4 2021.

Q4 EBITDA before special items totalled €35.2m, up 115.4% at an EBITDA margin of 41%.

The number of NDCs referred to operators by Better Collective during the quarter was an all-time high of more than 580,000, up 117% on the comparative period.

Of those NDCs, some 78% were sent on rev share contracts.

Those figures brought Better Collective’s full-year 2022 revenue to €269.3m, up 52.1% year-on-year, or 34% on an organic basis.

EBITDA before special items for the year was €85.1m, up 52.5%, on an EBITDA margin of 32%.

NDCs for the full year hit more than 1.68 million, up 96%, with 76% of those being referred on rev share contracts.

Geographical breakdown

Driven principally by Action Network, Better Collective achieved its previously stated target of exceeding $100m of revenue from the US during 2022.

The business achieved this milestone in spite of moving some $15m of revenue from upfront cost-per-acquisition (CPA) contracts to rev share deals, it said.

The US figure represents an annual growth rate of 102% in the region, helped along by revenue of €34m (up 71% year-on-year) in Q4.

US revenue therefore represented around 38% of the group’s total during the quarter.

In Europe and the Rest of the World, meanwhile, Q4 revenue hit €52.2m, up 59%, and accounting for some 62% of total group revenue.

News nugget

The FIFA World Cup played no small part in driving Better Collective’s record Q4 results.

The tournament helped to grow revenue in Europe and the Rest of the World by 59% to €52.2m, as more than 300,000 NDCs were referred to operators as a result of the tournament alone.

The performance exceeded the company’s expectations revealed CEO Jesper Søgaard, with the number of NDCs referred exceeding more than the last four men’s World Cups and European Championships combined.

Indeed, compared to the 2018 World Cup, the firm’s performance improved tenfold, “a true testament to how far we have come in just four years,” according to Søgaard.

Given that the majority of customers were referred on a rev share basis, there was a “short-term dampening effect” on performance, but the CEO insisted this would bring the business a long-term benefit for the future.

The launch of legalised sports betting in Maryland, meanwhile, helped grow US revenue by 71% to €33.9m, together with a busy North American sports calendar in Q4.

Best question

As Better Collective increases the number of partners it works with on a rev share basis, Hjalmar Ahlberg of Swedish investment bank Redeye asked whether operators in the US are becoming more open to striking that kind of deal with affiliates.

In response, Søgaard said: “We now have six partners in the US we are working with on rev share agreements, up from four in Q3. 

“We do see progress with more partners where we are working in a very aligned way and also in more of a strategic partnership way, with the aim of us being closer to the partner and ultimately able to to integrate better with them.

“So I think it’s a good development we see, and we sense that it’s also an acknowledgement of the position we have in the American market, with the brands we own becoming must-have brands for these partners to be featured. 

“We’ve even seen the Action brand being highlighted in one of the big sportsbook’s reporting in their webcast, so it is really a testament to the quality of the brands we own.”

Best quote

CFO Flemming Pedersen on the possibility of more M&A activity at Better Collective:

“Right now there’s a mismatch between public valuation and private price expectations, to be honest. So, until that gets into sync again, I think in general there will be more muted activity. It’s not the interest rates, as such. It’s more the public valuations – the multiples that we’re trading at are basically below the expectations of the targets we’re looking at.”

Current trading and outlook

January 2023 was a record breaking month for the affiliate, with revenue in excess of €37m, up more than 40% year-on-year.

Those figures were helped by the statewide launch of sports betting in Ohio, while the growth recorded came on top of a strong comparative period in January 2021, during which New York state launched its own legalised betting market.

The business has a revenue target of between €290m and €300m for the full year 2023, with EBITDA before special items between €90m and €100m, and a net debt to EBITDA before special items ratio of under 2x.

Following the end of the reporting period, Better Collective signed new media partnerships with football-focused online news portal Goal.com and Polish media business Wirtualna Polska.

It also signed a smaller asset deal for a sports media in an emerging market, for which the price was $4.3m including an upfront payment of $3m.

The firm said it will undertake one-off costs for investments in 2023 to help it establish a stronger presence in Latam and other emerging markets where regulation is in place or expected in the future.

Including an investment to be made in building a proprietary technology platform for display advertising, the initiatives are expected to add around €10m in additional costs in 2023.

Swedish affiliate and software as a service (SaaS) company Acroud AB achieved 53.2% year-on-year revenue growth in Q4 2022, largely thanks to the performance of recent acquisitions.

Topline numbers

Total revenue for the quarter came in at €10m, up from €6.5m in the prior-year comparative period.

Although that represents a growth rate of some 53%, on an organic-only basis, revenue was down 3.3% compared to the previous year.

Adjusted EBITDA in Q4 came to €2.5m, more than double the €1.1m posted in Q4 2021.

The firm’s overall loss after tax was €20.3m, compared to a €356,000 loss in the prior-year period.

When adjusted for items affecting comparability and currency effects, however, the firm declared an adjusted profit after tax of €564,000, compared to a €264,000 adjusted loss in Q4 2021.

Items affecting comparability included an impairment charge of €18m (related to the writing down of asset values from the firm’s acquisition of Highlight Media in 2016) and an earn-out revaluation costing €2.9m.

Those figures brought Acroud’s full-year 2022 revenue to €30.9m, up 24.8%, or 6.9% on an organic-only basis.

Adjusted EBITDA for the year was €7.6m, up 40.4%, while the firm posted a loss after tax of €18.4m, compared to a €719,000 profit after tax in 2021.

When adjusted for items affecting comparability, including the €18m impairment charge, adjusted profit after tax for the year was €1.5m, up 42.5%.

News nugget

Acroud’s recently acquired affiliation business – now known as Acroud Media – helped the company grow its number of new depositing customers (NDCs) by 160% to 84,086 during the quarter.

Q4 was the first quarter incorporating the new business segment, which is now “firing on all cylinders,” according to Acroud CEO Robert Andersson.

The business segment comprises mainly sports betting revenue driven by rev share deals with operators, which Andersson said gives it “a very stable and secure long-term revenue stream.”

The acquisition of Acroud Media helped the company’s iGaming affiliation division overtake the SaaS segment as its largest earner.

The acquisition also introduced sports betting revenue as the biggest vertical within that division.

While Acroud did generate some sports betting revenue prior to the acquisition, it remained below the amount earned from both the casino and poker verticals.

Overall, the affiliation segment generated €6.3m in revenue (up 134.8%) – or 63% of all revenue – while the SaaS segment generated the remaining 37% at €3.7m, down 4.2% year-on-year.

Best quote

“I would lie if I said it did not annoy me.” Acroud CEO Robert Andersson on rev share being negatively impacted by unfavourable sports results.

The disadvantage of Acroud’s rev share agreements with operators is that they are negatively impacted by unfavourable sports results. 

“This happened to us towards the end of December when all favourite teams in the English Premier League won,” Andersson commented. 

“I would lie if I said it did not annoy me. However past results show that such hits occur only a few times during a calendar year and that revenue always comes back over time.”

Best question

Equity research analyst at Erik Penser Bank, Rikard Engberg, asked Andersson to explain a year-on-year reduction in sales via Acroud’s network model SaaS offering.

The network model offers SaaS products built for affiliates and content creators to track their operational KPIs, in addition to providing access to a large pool of clients, deals and campaigns that would otherwise be out of their reach.

Andersson said in response: “We have had a slight shift in focus and model there, and we are working a little bit more on lower volume but higher quality, trying to help those that deliver higher quality NDCs rather than just bulk.

“We’re kind of promoting them and this is all on revenue share, so it takes a little bit of time for this to have an effect. With that said, also some of the bigger clients will move on and these are normal fluctuations in the business.

“We do foresee continued growth going forward over time. With the network, it’s also quite a low margin business and costs directly correlate to payouts to the sub-affiliates. So that’s why you will see that when revenue decreases quite a bit, costs will also go down and the impact on EBITDA is not that great.”

Current trading and outlook

Positive momentum in Q4 has positioned the company to achieve its goals in 2023, Andersson said.

Those objectives include achieving 20% organic EBITDA growth and optimising the company’s capital structure by lowering its net debt/EBITDA ratio and lowering its gross debt.

Acroud’s net debt/EBITDA ratio fell to 2.5x as of December 2022, which Andersson said meets the target the business had set to reach by December 2025.

The company has a new management team in place, which aims to further strengthen the cooperation between Acroud’s subsidiaries and create a smaller, optimised organisation.

Changes to the company’s structure have led to a one-off restructuring cost of €98,000 in Q4 2022 but will lead to annual cost savings of €660,000, according to Andersson.

Looking to the company’s preliminary results from 2023, revenue in January totalled €2.3m, an increase of 35% year-on-year.

In February, Acroud appointed Tricia Vella as interim CFO following the resignation of Roderick Attard.

The recruitment process for a permanent CFO is still in progress, the company said.

Gaming Innovation Group (GiG) reported a new high-water mark for revenue in Q4 2022 and revealed more details about separating its two core business units.

Topline numbers

GiG’s total revenue for Q4 2022 was €26m, representing a 44% increase year-on-year and an all-time high for the company.

Adjusted EBITDA for the quarter came in at €10.8m, up 71%, at a margin of 41.4%.

Breaking the figures down by business segment, affiliate arm GiG Media delivered all-time-high revenue of €17.8m, demonstrating all organic year-on-year growth of 40%.

Adjusted EBITDA for GiG Media was €8.9m, a 52% increase year-on-year, at a margin of 50%.

Elsewhere, the firm’s Platform and Sportsbook division also reported all-time high revenue of €8.2m, up 54%, of which 24% was organic.

Adjusted EBITDA for the division came in at €1.8m, at a margin of 22%.

Finally, GiG generated positive cash flow across all its operations of €8.5m, a significant increase from the previous year’s figure of €4.9m.

For the full year 2022, GiG reported revenue of €90.1m, a 36% increase on 2021.

GiG Media revenue totalled €61.7m for 2022, up 37% compared to 2021, with adjusted EBITDA of €29.6m, up 41% year-on-year.

The Platform and Sportsbook business generated annual revenue of €28.3m, a 33% increase year-on-year. Adjusted EBITDA for the segment came in at €4.6m, up 163% on 2021.

News nugget

The big news this morning was that GiG has decided to investigate separating its media division from its platform business to establish two independent publicly listed companies.

GiG believes the split will allow the two businesses to grow much faster than in the current corporate structure.

CEO Richard Brown said the decision to initiate a strategic review into separating the group came as a result of the strength of the group’s performance over the last few years.

While the two business units already operate separately, establishing separate structures would better serve the company’s capital allocation principle, according to Brown.

Focusing and dedicating resources to each unit would ultimately drive shareholder value, he added.

While the strategic review will start immediately, Brown said that there is no fixed timeline for the separation. He said there was no rush as the businesses were performing well in the near term.

GiG stock is currently dual listed on the Oslo Stock Exchange and Nasdaq Stockholm. A location for the separate listings will be explored in due course.

In addition to its financial success in Q4, GiG also reported all-time high player intake, with first-time depositors (FTDs) reaching 115,900, up 91% year-on-year.

Best quote

Brown’s reply when asked during the firm’s Q4 results call whether the decision to split the group was a result of limited synergies between the two business entities:

“The decision is not about realising any synergies. It’s about what the opportunities for each businesses are as a group or independently in the long term.”

Best question

Brown was asked about both the historical performance of and GiG’s future plans for the acquired AskGamblers site.

While he was reluctant to comment on the past given the data was disclosed by a competitor (Catena Media), he stressed the brand has “always been a very powerful force within the affiliate marketing space”.

“It has obviously been affected by regulatory changes, but this has impacted the entire industry, and more importantly, it’s in the past,” Brown said.

“I’m not too concerned about what the historical elements were,” he added. “We see a lot of opportunity, we have a strong belief in our own marketing technology and operating principles that we think we can take assets and, as we’ve demonstrated that on our own asset portfolio, really grow them and drive them forward.”

When asked whether the firm had identified any low-hanging fruit or whether it was more of a long-term progress, he said it was a combination of both.

“In any post-merger integration plan, you’re going to be identifying both the short, mid, and long-term opportunities. As with all, we are not going to rush anything, we are going to execute correctly and effectively for the long-term strength of the website portfolio.”

Current trading and outlook

The company said that January has developed positively, and revenue was up 29% compared to the same period last year.

GiG has also reaffirmed its long-term financial targets. The company aims to achieve annual organic revenue growth of around 20%.

Additionally, GiG’s target is to achieve an adjusted EBITDA margin of more than 50% by 2024.

Investors reacted positively to GiG’s separation plans and the company’s Q4 results. Shares in GiG were trading around 2% higher at the time of writing.