Bet On It: Rush Street Interactive said to explore potential sale

Welcome to the latest edition of “Bet On It,” where The Fly looks at news and activity in the sports betting and iGaming space.

SECTOR NEWS: Rush Street Interactive (RSI) is exploring strategic options including a potential sale, Gillian Tan and Christopher Palmeri of Bloomberg reported, citing people with knowledge of the matter. The company’s representatives have approached potential buyers including DraftKings (DKNG), a source told Bloomberg. DraftKings “speaks to a variety of companies regarding various matters in the normal course of business, and it is our general policy not to comment on the specifics of any of those discussions,” a spokesperson for the company told Bloomberg. Shares of Rush Street Interactive jumped 13% to $6.90 before being halted for volatility following the report.

Gambling.com (GAMB) announced that it will expand its presence across the United Kingdom and other European markets through a definitive agreement to acquire Freebets.com and related assets. Closing is expected at the beginning of April, subject to customary closing conditions. Gambling.com Group anticipates that these assets will produce revenue of approximately $10M and incremental adjusted EBITDA of approximately $5M during the nine months from April to December. The company will acquire these assets for a total consideration of between $37.5M and $42.5M, consisting of $20M paid on closing, $10M paid on the six-month anniversary of closing and between $7.5M and $12.5M to be paid on the one-year anniversary of the closing subject to the revenue performance of the assets during the remainder of 2024. Gambling.com Group expects to fund the purchase price from existing cash on hand, borrowings under the recently announced credit facility and future cash flow.

MGM Resorts (MGM) is exploring the sale of its casino operations at Ohio’s Northfield Park and in Springfield, Massachusetts, Gillian Tan and Christopher Palmeri of Bloomberg wrote, citing people with knowledge of the matter. MGM is working with financial advisers, but the discussions are preliminary and may not result in any action, sources told Bloomberg. A spokesperson for MGM declined to comment on the discussions.

Elys BMG Group (ELYS) announces that the Grand Central H-Street Sportsbook will host its grand opening at 625-D H Street NE in Washington, D.C., on March 21, 2024. The grand opening begins at 10 A.M. EST with an invitational event with media and government officials, followed by the general opening of wagering windows and kiosks at 11:30 A.M. EST.

The Sportradar (SRAD) board of directors has approved a $200M share buyback program given the strong business fundamentals and confidence in the long-term profitability and cash flow outlook. The Company anticipates commencing purchases under the program when the next trading window opens, which is following the reporting of its Q1 2024 earnings results.

Gambling.com announced the closing of a new credit facility with Wells Fargo Bank, National Association in the principal amount of $50M, comprised of a $25M revolving credit facility and a $25M term loan facility. The new credit facility matures on March 19, 2027, and, subject to approval by Wells Fargo, may be incrementally increased by up to $10M in the aggregate. The credit facility is expected to be used for general corporate purposes, to settle deferred consideration, and to fund potential growth opportunities.

Sportradar and the National Basketball Association, or NBA, announced the launch of enhanced betting-related functionality within NBA League Pass, powered by emBET, Sportradar’s over-the-top, or OTT, solution. Sports betting content, such as point spreads, over-unders, and money lines, will be integrated into the NBA’s live streaming platform. “emBET is an exciting innovation for NBA fans, making in-play betting more engaging and immersive,” said Patrick Mostboeck, Sportradar Senior Vice President of Audiovisual. “Through our exclusive partnership with the NBA, we’re committed to develop next-generation, value-added products and services, like emBET, to drive fan and bettor engagement.”

RESHUFFLING: DraftKings announced that Jason Park, DraftKings’ CFO, will become the company’s chief transformation officer, effective as of May 1. In this newly created role, Park will lead initiatives to deploy technologies to capture additional operating efficiencies as well as oversee the integration of the proposed acquisition of Jackpocket. Alan Ellingson, DraftKings’ senior VP, finance and analytics, will be elevated to CFO, effective as of May 1. Park joined DraftKings as CFO in June 2019 and oversaw the company’s transition to the public markets.

BRAND MOMENTUM: February saw minimal changes in rankings across categories, with Bet365 rising to fourth place in Google Search Interest Score and ESPN Bet climbing to fifth place, indicating slight shifts in market dynamics. Private operators experienced some fluctuation, with Bally claiming the top spot in momentum score, while FanDuel and DraftKings slipped to third and fourth places, respectively. Conversely, BetMGM rose to second place from third in the previous month. FanDuel is operational in 19 states, whereas DraftKings operates in 24 states, reflecting their widespread presence in the market. Globally favored names include Flutter Entertainment (FLUT), DraftKings, and Rush Street Interactive, with DraftKings and FanDuel maintaining strong market share performance across various metrics and generating significant gross gaming revenue, or GGR. The market share of BetMGM has exhibited increased volatility, competing closely with Bet365 in rankings. The firm maintains a positive outlook on iGaming-focused operator RSI, anticipating robust returns in the coming years due to superior economics and higher margins. Despite varying legalization timelines across states, the expansion of sports betting and iGaming is expected to continue. The firm is closely monitoring developments in Missouri and Georgia regarding legalization in 2024. Additionally, the recent entries of ESPN Bet (PENN) and Fanatics are noteworthy for their potential impact on market shares.

SEEKING REGULATION: US Representative Paul Tonko from New York is expanding upon his previous efforts regarding sports betting advertisement limitations with a broader legislative proposal, Matthew Waters of Legal Sports Report highlighted. Tonko unveiled the SAFE Bet Act on Tuesday, which is set to be officially presented later in the year. This legislation will concentrate on three primary aspects of sports betting, aiming for federal regulation if enacted: advertisement, accessibility and utilization of artificial intelligence. Tonko expanded on the legislation in a virtual press conference. “Since the 2018 Supreme Court decision that allowed sports betting to become legalized in a widespread fashion the sportsbook industry has been operating in a Wild West, largely unregulated environment,” Tonko said during the Zoom press conference. “You can clearly see this in the wall-to-wall advertisements that you can catch anytime you watch a sporting event or just scrolling through social media. Even worse, these advertisements are largely predatory in nature, with big gambling companies offering hundreds if not thousands of dollars in so-called free or bonus bets. These have one clear purpose: to hook and retain a new generation of consumers.”

SHOT DOWN: Gambling companies challenging a deal that allowed the Seminole Tribe to offer online sports betting statewide can’t make their case directly to the Florida Supreme Court, justices unanimously ruled Thursday, CBS Miami Team reported. The decision is the latest in a string of legal defeats for pari-mutuel companies West Flagler Associates and Bonita-Fort Myers Corp., which have fought the sports-betting plan in state and federal courts. The cases stem from a 2021 gambling deal signed by Governor Ron DeSantis and Seminole Tribe of Florida Chairman Marcellus Osceola Jr. The 30-year deal includes a “hub-and-spoke” provision allowing the Seminoles to accept mobile sports bets placed anywhere in the state, with the wagers run through servers on tribal land. The state court challenge – filed by the companies and an owner, Isadore Havenick – alleges that the deal violates a 2018 constitutional amendment that restricted casino gambling. The deal, which is expected to bring in billions of dollars for the state, was ratified by the Legislature. Thursday’s ruling did not address the merits of the lawsuit but turned down the companies’ petition for what is known as a “writ of quo warranto,” which means “by what authority” in Latin.

EARNINGS RECAP: Gambling.com fell just short of EPS estimates but beat revenue consensus in its fourth quarter earnings report. Charles Gillespie, CEO and co-founder of Gambling.com, commented, “Our fourth quarter results extended our strong record of delivering high top-line growth and attractive margins. With consistent execution over the years, and especially over the past four years in North America, we have established one of the strongest and highest-growth performance marketing businesses in the online gambling industry. Our operating momentum continued throughout 2023 and the undeniable power of our capital efficient business is on full display in our full year results which include a 42% increase in revenue to $108.7 million, a 53% rise in Adjusted EBITDA to $36.7 million and 71% growth in Free Cash Flow to $16.2 million.” The company’s FY24 revenue view of $129M-$133M also beat analyst consensus. Gambling.com noted that it expects FY24 adjusted EBITDA $44M-$48M. Elias Mark, CFO of Gambling.com Group, added, “The strong value we create for our online gambling operator partners is evident in the 56% increase in the number of NDCs we sent to them in 2023. Consistent with our capital efficient DNA, nearly all of our revenue growth in 2023 was organic which we again converted into Free Cash Flow at a very high percentage. We are positioned to further our operating momentum in 2024 as the mid-points of our revenue and Adjusted EBITDA outlook reflect growth of 21% and 25%, respectively.”

Sportradar also posted Q4 results this week, surpassing last year’s benchmarks. Carsten Koerl, CEO of Sportradar, said: “2023 was another dynamic and successful year for the Company delivering our 3rd consecutive year of more than 20% revenue growth, improved profitability, and margin expansion. We are pleased with our growth momentum, fueled by our best-in-class content portfolio, innovative product roadmap and technology capabilities. For 2024, we plan to continue to scale our business globally, targeting at least 20% growth in revenue and adjusted EBITDA. Given our market leadership and confidence in the long-term profitability and cashflow outlook for the Company, we have authorized a $200 million share buyback program. We remain laser focused on disciplined execution of our growth strategy and delivering tremendous value for our clients and our shareholders.” The company anticipates revenue of at least EUR 1.05B, representing year-on-year growth of at least 20%. Adjusted EBITDA of at least EUR 200M, representing year-on-year growth of at least 20%. Adjusted EBITDA margin of approximately 19%. Guidance assumes a Euro to USD exchange rate of 1.07. Citi lowered the firm’s price target on Sportradar to $15 from $17 and kept a Buy rating on the shares. The analyst updated the company’s model to reflect the Q4 results, updated currency rates, and the firm’s latest outlook.

ADDITIONAL ANALYST COMMENTARY: Needham raised the firm’s price target on Sportradar to $16 from $15 and reiterated a Buy rating on the shares. The company’s 20244 will mark a substantial investment year for new sports rights, including deals with the NBA, ATP, and secondarily renewals with NASCAR, the Bundesliga and a new deal with CONMBOL, the analyst tells investors in a research note. The firm adds however that Sportradar should be able to generate a 20% adjusted EBITDA CAGR in the coming years, driven by revenue growth in FY24 and then operating leverage in FY25 and FY26.

PUBLICLY TRADED COMPANIES IN THE SPACE INCLUDE: Accel Entertainment (ACEL), Bally’s (BALY), Boyd Gaming (BYD), Caesars (CZR), Churchill Downs (CHDN), DraftKings (DKNG), Flutter Entertainment (FLUT), Gambling.com (GAMB), Gan Limited (GAN), Genius Sports (GENI), Las Vegas Sands (LVS), MGM Resorts (MGM), Penn Entertainment (PENN), Rush Street Interactive (RSI), Super Group (SGHC) and Wynn Resorts (WYNN).