Amaya’s Q1 2016 results and earnings call produced plenty of material for analysts to think about, including plans to launch sports betting in the regulated markets in France and Italy.
The rollout is hoped to be complete before the beginning of Euro 2016, one of the largest football tournaments in the European calendar. The first matches begin on Friday, June 10.
Results can be read here. The results presentation is here. A transcript of the earnings call is here.
Long promised sports betting plagued by delays
Amaya investors have been disappointed by the slow rollout of the company’s new sportsbook vertical.
In the French market, PokerStars is the No. 2 online poker provider behind local operator Winamax. Winamax launched its first sports betting operations in June 2014.
By November 2014, PokerStars’ country manager for Italy, Marco Trucco, said that sports betting was coming to the Italian market. “We need to open the house of Stars even to those who are not yet poker enthusiasts,” said Trucco, “then add sports betting as soon as the product is ready.”
But it was not until mid-June 2015 that PokerStars launched its first sports betting product. The launch in Spain followed the company’s policy of testing new products in a smaller segregated market before bringing them to the dot-com/dot-eu player pool.
At the end of 2015, PokerStars announced that it would be using the BetStars brand for sports betting, and the pace seemed to step up.
Regulators hold the final say for Amaya
The French and Italian markets have national regulators, and Amaya is to a large extent reliant on its efficiency to get the necessary licenses in place before sports betting can launch.
Interim Amaya CEO Rafi Askenazi told investors:
“We are currently working with ARJEL and we are really hoping that this process with the regulator in France will be finalized before the Euro. The plan that we have is yes, we do want to have it before, but it’s really not up to us. It’s a process which is going on with the regulator in France.”
With regard to Italy, Askenazi was slightly more confident, saying that “Italy is actually quite imminent.”
France and Italy are two of the top four markets in the EU
The Italian market is only smaller than the UK and Germany in terms of total sports betting activity.
Online sports betting has been legalized since 2002, and this has given time for the market to learn and develop to what is now maturity. The regulator has gradually increased the range of sports that are permissible and the betting options that players can exercise.
Over the past three years, sports betting has grown rapidly with top-line revenues increasing from €191.5m in 2013 to €278.7m in 2015, according to figures from the first edition of Eilers’ European Online Gambling Tracker.
The market leader is Bet365, which took in €346.2 million in bets during the first quarter of 2016, representing a market share of 35.7 percent — figures from Italian news source Agimeg.it.
In France, ARJEL’s Q1 2016 report recorded €272 million in sports wagers, an increase of 34 percent over Q1 2015. Net revenue to operators was €82 million, 30 percent up on the previous year.
Both markets are big and growing and have strong regulatory protections that make them attractive for major operators.
Picking up a marketshare of anything over 10 percent will make a material contribution to Amaya’s revenues.
Current sports betting revenues are around $5 million
One figure not in the Q1 results document that was given out in the earnings call was the approximate revenue that sports betting is generating.
Amaya CFO Daniel Sebag told investors that the current figure is around $5 million for the quarter, out of $21 million for sports betting and casino combined.
Investors will be looking for that figure to multiply significantly in the reports for Q3 and Q4 this year. Q2 is not likely to record much in the way of gains.
“Our sportsbook offerings remain in investment mode as we continue to add resources and introduce product improvement and enhancement,” Askenazi told listeners on the earnings call.
Sebag reinforced the point. He said that sportsbook earnings would be recorded as a separate line item when they exceeded five percent of total revenues. When asked if that would be in Q2, he replied, “Right now Q1 is only about $5 million, so I think you have to wait a bit more than that.”
Additional sports revenues will also come from other markets
Denmark, Ireland and the massive U.K market should also create extra sports betting revenues this year. After securing a license, BetStars will launch in the regulated Danish market shortly, and is already operating in Ireland. The U.K is benefiting from an “initial marketing campaigns for the BetStars brand.”
Sebag said that sportsbook was available in only 41% of the “overall addressable market that we can launch in. So we still have at least like 12%, 13% to grow from a sportsbook point of view.”
The KPI to watch will be “quarterly active unique players.” This quarter, they reached approximately 170,000. This number should rapidly grow into the millions.
