Focus on profitability and deleveraging…

…exposure to affiliate business and B2B…

…but risks remain

New focus on profitability…
The relatively new Gaming Innovation Group (GIG) was established in 2012 and expanded rapidly into the various areas of the iGaming chain until practically present in all parts of the ecosystem. The company endured some growing pains, as some endeavours did not deliver immediate profit contribution. Today, the company has pivoted towards making its business leaner. For example, it shut down its game development operations to narrow the focus and improve cash flow. It also sold its business-to-consumer (B2C) brands Rizk, Guts, Kaboo and Thrills in a EUR 31m deal to Betsson. The proceeds were then used to repay the company’s SEK 300m bond (’17-’20).

…with new explicit attention on affiliate business and B2B
GIG is currently exposed to two segments of the iGaming value chain. It has an affiliate marketing division (+50% EBITDA margin). On top of that, GIG has a Business-to-Business (B2B) cloud-based platform model focused on providing an omnichannel solution to land-based clients (such as HardRock) to help them transition into the online gambling business. Lastly, GIG has a commercial sportsbook that it built from the ground up, but which has yet to make a mark on the sports betting landscape and is not yet profitable.

Risk areas still needs to be addressed
We view GIG as a high-risk business case due to the inherent nature of the business and the current financial profile. We note that GIG has a long-term bond due in June 2022 coupled with a commitment (one part of the bond agreement) to deliver break-even EBITDA in its sportsbook by Q3 2020e. The sportsbook has posted LTM revenue of EUR 0.9m vs. LTM costs of EUR 7.6m; it is obvious that GIG has a large gap to close over a relatively short timeframe. However, on top of previous cost initiatives, management initiated further cost cuts in April/May, which should reduce costs by EUR 400,000 per month.

info@introduce.se (Introduce.se)

ABG Sundal Collier - Introduce.se