BREAKING NEWS: King departs from FanDuel, Flutter US listing timeline lengthens
Game of thrones: Flutter has announced the surprise departure of FanDuel CEO Matt King who is leaving for unspecified pastures new. The news will impact the hopes for a separate listing for FanDuel – the company said it would “affect the timing” without giving any specifics and said it will “continue to keep this option under review.” The departure will disappoint the analysts. “We viewed the FanDuel listing as a way of narrowing the material valuation gap between Flutter and its US-listed peers,” said Jefferies this morning.
IGT
The top line
Revenues were up 25% to $1bn and ahead of street consensus of $876m. Adjusted EBITDA was up 72% YoY to $450m, well ahead of $309m consensus thanks to the ongoing economic recovery and structural cost savings. YoY growth in iGaming was 85%.
Lottery was up 48% YoY at $749m in global revenues, adjusted EBITDA rose 133% and to $447m, way above street consensus of $326m. Operating income was $260m, compared to operating loss of $218 million in the prior year period.
Global same store sales (SSS) grew by a record 32%, in the US and Canada the rise was 28% and 52% in Italy for lottery SSS. IGT’s gaming verticals were down 14% YoY to $266m revenue, but up from $250m sequentially. Adjusted EBITDA was down 30% to $19M.
The company closed the sale of its Italy B2C business for €950m and will use $650m of those proceeds towards paying back its €850M debt. The group said it would save $60m in interest payments. IGT has net debt of $7bn ($7.3bn 2020 YE) and $204m in free cash flow.
All things must pass: Both CEO Marco Sala and CFO Max Chiara said the cost reductions and banking actions executed in early 2020 were bearing fruit with $200m expected in FY savings. Sala however cautioned against overenthusiastic forecasts: “It should be acknowledged that some of the growth (in the past 12 months) is due to betting shop closures and a lack of entertainment options.” Still, the analysts were cheered by the recent disposal of the Italian B2C arm. Barry Jonas at Truist said it meant “no Italy gaming tax risks anymore.”
Potential iGaming split, but no M&A: Carlo Santarelli of Deutsche Bank said IGT’s iGaming division is on a run rate of $230-$250m for the year. Asked if it would consider breaking it out as a separate entity, Sala said if the growth continues “then of course we will consider breaking it out as a separate segment”. The group has had enhanced visibility in online since reorganising in Q320 and interactive channels are “driving phenomenal growth: $170m in 2020 and Q1 speaks for itself,” Sala added. Both executives however ruled out the possibility of M&A deals on the digital side of the business. “Not for time being; we have all we need to grow on the digital verticals.” Still, Santerelli said in a note that the online business was “inexplicably underappreciated.”
Distributed iGaming content: IGT will continue its North American focus on iGaming content as it is “what is driving revenues”. It could also collaborate with third-party studios to best optimise its vast games library. “We enjoyed 80% iGaming revenue growth with 25% market share in the US and 50% in Canada,” Sala said. He also pointed out that it is not as simple as launching them online and expecting returns to come in.
“You have to turn them into very good digital games. That can mean changing game mechanics or payouts and we sometimes work with third party studios to achieve this, as we did with Wheel of Fortune/Megaways in New Jersey and now it’s in Michigan, Canada and Italy.”
Driving down debt focus: Chiara said the maturity schedule on the group’s debt was stable saying the company had taken “significant actions.” Jefferies said that the results from the quarter, along with the delivering demonstrated the company’s business merits, and was supportive of a higher valuation.
