Toronto-listed iGaming company FansUnite reported positive EBITDA of C$4.3m in Q2 2023, compared to a C$11.1m EBITDA loss in the prior-year comparative period.
Reporting its Q2 financial results, the company revealed that it generated revenue of C$5.3m during the quarter, an increase of 13.7% year-on-year.
The cost of revenue was reported at C$2m, down from C$2.8m, giving the business a gross margin of C$3.3m, up from C$1.9m in Q2 2022.
Still, the business reported a total comprehensive loss for the quarter of C$1.3m, although that represents a significant closing of the gap towards profitability compared to the C$11.6m comprehensive loss it reported in Q2 2022.
The C$5.5m sale of FansUnite’s B2C McBookie brand in May generated a gain of C$4.4m for the business, it said, while the C$10m sale of its Chameleon gaming platform to Betr generated a gain on sale of C$3.1m.
“We are excited to announce a significant increase in revenue and gross margins during the second quarter of fiscal 2023,” said FansUnite CEO Scott Burton.
“During the quarter, we saw a 14% increase in revenues year-over-year while our overall gross margins exceeded 60% due to our focus on higher margin operations. This renewed focus allowed us to record an EBITDA of C$4.3m during the quarter which was up from a loss of C$11.1m during the same quarter last year.
“Following the sale of McBookie and the Chameleon iGaming Platform, we will focus more on growing business segments that produce significant cash flow.
“We intend to achieve this goal by scaling our affiliate business segment, led by Betting Hero, which has generated substantial revenue and high gross margins as well as identifying more opportunities to improve our operational and financial efficiency.”
Microbetting start-up Betr has entered into a definitive asset purchase agreement with FansUnite for the source code related to its Chameleon online gambling platform.
Chameleon is a GLI-approved iGaming platform offering player account management (PAM), a sports betting engine and online casino management, enabling companies to launch and operate their own sports and iGaming brands.
Under the terms of the agreement, Betr will acquire the platform’s source code as it currently exists, while FansUnite will retain the use of the platform and source code, as well as the ability to further maintain and develop it.
Further, FansUnite retains the ability to sell any future improved versions of the platform to another buyer in the future. Future sales would not include any enhancements made to the platform by Betr post-close.
Betr will acquire the platform for total consideration of around C$10m, comprising C$3m in cash upon closing and C$2m in Series A2 preferred shares in Betr, to be settled through warrants.
Further milestone payments worth C$5m will be payable over 12 months following the close of the transaction, upon completion of certain integration milestones, and will also be divided into C$3m in cash and C$2m in warrants to purchase preferred shares in Betr.
FansUnite and Betr background
At present, FansUnite provides the PAM system for Betr’s operations, which it said makes Chameleon an “excellent fit” for Betr’s long-term strategy of owning its own technology platform.
Betr has also engaged 28 FansUnite employees or contractors to continue work on the platform, while the parties have entered into a transition services agreement with respect to certain transition services to be provided post-close.
“This is a transformational transaction for FansUnite and we are excited to move forward as a business that is a dominant player in its sector with the ability to execute on a profitable growth strategy,” said Scott Burton, CEO of FansUnite.
“With the completion of this sale, we will reduce annual costs, ensuring we can execute on our strategy to generate positive cash flow this year.”
Betr CEO Joey Levy added: “This is a transformational transaction for Betr that enables Betr Gaming to fully control our ability to execute against our core strategy, while also capturing a material amount of gross margin for our business model.”
Levy also said the purchase will allow the business to begin developing its ‘V1’ of the Betr product, after launching its so-called ‘V0’ in Ohio shortly after the brand was first announced in order to build its user base, gather feedback and prove its concept to the market as quickly as possible.
“Finally, we are thrilled to have been able to execute this acquisition in a cost-effective manner consistent with how we have rolled out Betr Gaming and Betr Media from both market access and talent acquisition standpoints to date – by entering into strategic transactions that feature an equity component to align incentives with our partners who believe in Betr while helping Betr preserve cash,” Levy concluded.
Two sales in a week
The news of FansUnite’s sale of the Chameleon source code follows on from an announcement last week that it had secured a buyer for its wholly-owned subsidiary and Scottish-licensed online gambling operator McBookie.
After acquiring the business for C$2.2m in 2020, FansUnite agreed a sale of the business for more than C$5m in cash, to an arms length private buyer whose details were not revealed.
Upon the announcement of the sale, FansUnite pointed out that under its ownership, McBookie had delivered three consecutive years of revenue growth, with a gross win increase of 451% and a turnover increase of 305%.
Under the deal, directors Paul Petrie and Damian Walker will continue to serve as directors of the business.
FansUnite said a portion of the proceeds of both sales will be used to repay money owed to investment trust Centurion Financial Trust, reducing the amount of an outstanding loan by approximately C$5.5m.
“With both the recent sales behind us, we can focus additional resources towards our highest revenue and margin businesses, such as Betting Hero and the affiliate business,” said FansUnite CEO Burton.
“[Betting Hero is] a dominant operator in the live activation affiliate space, and has added two new business lines to its offering with Hero Hotline and Hero Research.
“Both new segments are gaining traction, and we believe they have the potential to be as successful as the primary business of Betting Hero while driving profitability for FansUnite,” he concluded.
FansUnite has announced a non-brokered private placement of units of the company led by Las Vegas-based strategic investor Tekkorp Capital.
FansUnite is a combined B2B and B2C business in the regulated gambling sector.
The company operates betting brands including McBookie, in addition to providing its iGaming platform to B2B partners. FansUnite subsidiary AmAff also operates affiliate brands including Betting Hero and Props.com.
The private placement will see FansUnite offer units at a price of $0.08, for aggregate gross proceeds of $2m.
Each unit will consist of one common share in the capital of the company and one common share purchase warrant, with each warrant entitling the holder to purchase one common share at a price of $0.12 for three years after closing.
FansUnite said proceeds from the offering will be used for general corporate working capital purposes.
Tekkorp Capital has agreed to acquire 13.75 million units of the financing, worth $1.1m at a price of $0.08 per unit.
“We are active investors in the sports and gaming industry and look for great businesses with strong leadership in market segments we like,” said Matt Davey, founder & chairman of Tekkorp Capital.
“The team at FansUnite tick all the boxes for us and we are happy to support in their journey to grow the company and shareholder value for all investors.”
FansUnite CEO Scott Burton added: “This private placement offers us an opportunity to work with a strategic investor group consisting of top executives who have helped build and grow some of the largest gaming companies globally.
“They have expressed a strong interest to support our strategy in achieving our profitability and growth targets. To date, we have made great strides in maximising cost efficiencies while executing initiatives to improve our top and bottom line.”
The closing of the offering may occur in one or more tranches, the first of which is expected to close this week on 9 March.
In a recent interview with iGaming NEXT, Tekkorp Capital founder Davey shared some insight into how the business approaches investment opportunities within the sector.
Toronto-listed iGaming business FansUnite generated revenue of $5.5m in Q2 2022, representing a more than fivefold increase over the $970,000 generated in Q2 2021.
FansUnite offers a variety of B2B and B2C products to the market. Its B2B offerings include white-label solutions via its Chameleon gaming platform and RNG casinos games via its Askott Games subsidiary.
Meanwhile, FansUnite’s B2C offerings see the business act as both an operator and affiliate, running brands such as the Scotland-focused McBookie Sportsbook and a variety of US-facing affiliate brands through its American Affiliate subsidiary.
While revenue increased sharply year-on-year during the second quarter, the results reflected a dip from the firm’s Q1 2022 results, which showed revenue of $9.7m, bringing FansUnite’s total revenue for the first six months of 2022 to $15.1m.
Still, that result for H1 2022 demonstrated an annual growth rate of some 640% when compared to H1 2021’s $2m in total revenue.
Growth in Q2 revenue was mirrored by a 5x increase in the company’s net loss, which skyrocketed from $2.9m in Q2 2021 to $15.9m in the latest quarter, including non-cash expenses of $9.5m.
The widening net loss was driven by an increase in selling, general and administrative expenses, from $3.3m in the prior-year period to $15.4m in Q2 2022.
Those figures brought the firm’s total net loss for the first half of 2022 to $25.1m.
As of the end of the period, the business held $12.2m in total current assets including $4.8m in cash and cash equivalents.
Key achievements during the quarter included signing a long-term licensing agreement with Welsh bookmaking service provider Lovell Brothers Limited, operators of the DragonBet brand, to launch a new online sports betting portal on FansUnite’s Chameleon iGaming platform.
The business was also approved for listing on the Toronto Stock Exchange on 30 June, before it began trading on 5 July following the end of the reporting period.
After the end of the quarter, the company’s Betting Hero affiliate brand also signed an agreement with Bankroll, a luxury sports bar experience expected to come to Pennsylvania this autumn.
Finally, FansUnite revealed that last week on 24 August, it entered into an agreement to license its proprietary player account management (PAM) software to Jake-Paul backed micro-betting specialist Betr.
“During the second quarter, we captured significant growth with revenue of $5.46m, an increase of 461% compared to the same period last year,” said Scott Burton, FansUnite CEO.
“Our B2B and B2C segments continued to deliver strong operational results, which were primarily driven by American Affiliate and McBookie.
“Additionally, this quarter saw us strengthening our operations to lay the groundwork for continued growth as we have entered a licensing agreement with Welsh bookmaker DragonBet and expanded American Affiliate’s presence in the United States through its live activation arm Betting Hero.”