Scout Gaming Group - Daily fantasy sports

[Fisu]

Scout Gaming Group operates in Europe’s growing DFS (Daily fantasy sport) market. Scout offers DFS solutions to gaming and betting companies, as well as B2C through its own website fanteam.com. The product is similar to Liigapörssi (Finnish fantasy sports game) or what Draftkings offers in the USA, with the difference that Scout seems to be one of the few that also offers a B2B solution.

With Scout’s solution, client companies can offer their customers DFS services through Scout’s platform, which connect to the same “pool,” allowing all customers to benefit from increased prize money.

The market in Europe and America is currently inverted: in America, DFS has long been permitted and very large, and now casino and gambling games are growing from the grassroots level, whereas in Europe, casino and gambling games have been large, but DFS is growing rapidly.

The popularity of FPL (Fantasy Premier League) or simply the domestic Liigapörssi (Finnish fantasy sports game) well illustrates the market potential; in neither is money used, but rather it’s done for fun and sport.

Growth has been rapid, and new major clients have been announced at a good pace, last week Sweden’s largest gambling company ATG. Today’s published Q4 report.

1379141.pdf

The valuation is not cheap by traditional metrics, but growth is strong, and it is not slowing down simply due to already agreed-upon clients, and the market potential is large. Let’s see what the market’s response to today’s earnings report will be.

“The start of the year has been strong and we are expecting continuous heavy growth!”

“Scout Gaming continues to meet strong demand at the same time as we have so far only touched the long-term potential. We have updated our internal assessment of the potential size of the European fantasy sports market and currently estimate it to amount to between SEK 5.5-7.0 billion at Gross Gaming Revenue level, which means approximately 2-3% of the entire total online gaming market in Europe. It is an attractive market and we do everything we can to consolidate and expand our position to competitors.”

“During the quarter, we launched a number of customers, including Parimatch, which also launched odds-based products from Scout Gaming. However, we are not yet live with real money gambling on Norsk Tipping. Launch with real money is expected to take place as soon as the Norwegian Ministry of Culture has given final approval. During the first quarter, we are expected to launch a beta with Betsson in selected markets. Global rollout is expected to continue during the year and in the coming years. After the end of the quarter, we also entered into an agreement with the largest Swedish gaming operator ATG. Launch is expected later this year. We have also continued dialogues with several major potential customers.”

Finally, an analysis of the company by the main owner, Topline Capital Partners LP (23.8%), which estimates the price to be approximately SEK 1000 by 2027.

https://www.docdroid.net/r1i4tpY/scout-gaming-scout-ss-writeup226527-1-pdf

[Gorran]

Toi b2b on kyllä supermielenkiintonen yhtälö tässä dfs-scenessä. Kyseessähän on käytännössä monopoli ja mikäli ottaa tuulta alle, niin voi olla hurjaa laukkaa. Tulee mieleen pokeriverkot back in the days. Euroopassa igaming taloja on kuitenkin kuin sieniä sateella…

[Piit]

Mitä metriikkaa seuraatte Scoutin osalta. Oisko tästä tulevaisuuden evo:ksi? Olisikohan ns. sauma tankkailla tätä casea.

[Gorran]

Esim y2y kasvua, uusien asiakkaiden clousauksii ja näiden tosialllista liittymistä Scoutin verkkoon ja peleihin, turnauspoolien aktiivisuutta ja suosiota ym…
Evo case olis aika topcase, vähän kuin artikkeli maalailee, muttei mahottomuus…

[Fisu]

Tätä uutista ei ollutkaan Scoutin omilla sivuilla.

Stockholm, 25 February 2021

We are thrilled to announce that RBV and Scout Gaming are in negotiations to establish an esport fantasy league that leverages RBV portfolio of investments and Scout Gaming leadership in fantasy sports data analytics.

“We want our portfolio companies to work with market leaders in all categories. Scout Gaming is recognised as the best fantasy sports provider in the Nordics, and one of the leading ones in the world. Esport Fantasy leagues are catalyst of data analytics, monetisation and brand exposure. We want to make fantasy leagues a great stage for unknown players to show their skills, develop a fan base and become heroes!” Says Carlos Barrios, RBV CEO.

“The opportunity to tap in the esport grassroot movement is massive. Scout Gaming will be exploring with RBV and RBV portfolio companies how to tap that opportunity. “says Andreas Ternström, Scout Gaming CEO

The potential partnership between RBV and Scout Gaming is part of RBV wider initiative oriented to serve as catalyst of the esport and gaming grassroot and startup community . For that purpose, RBV invests in assets that act as loudspeaker, data generator and testbed for gamers and entrepreneurs to interact, show their gaming and business skills under the values of fair-play, innovation and non – toxicity.

https://rightbridge.se/news-2/

[Gorran]

Vaikuttaa vasta aiesopparilta, joten ei vielä ylittänyt firstnorttilaisen tiedottamiskynnystä. Itselle tuo esports maailma aika tuntematon. Pitää sisällään ilmeisesti aika paljon hypeä ja kohinaa. Mutta jos ennusteita katsoo niin ES tulee kasvamaan kohisten.
Osarista vielä mielenkiintoinen huomio: Norsk tipping ei vielä livessä, mutta Norjan pankki tullut mukaan 10 suurimman omistajan joukkoon 2,5 pinnan osuudella. Tämähän voisi rohkaista myös Suomen Vekeä kun rajanaapurin monopolikin on hyppäämässä liveen (Vekehän yritti kieltää jo liigapörssit ym. arpajaislakiin vedoten)

[Fisu]

Mielenkiintoinen huomio tuo Norjan pankin omistus, paljon liikehdintää ollut top-5 alapuolella. Huomioitava myös, että ei paljon ole lappuja markkinoilla top-10 ulkopuolella.

Tähän helpotukseksi vielä syyskuun loppu vs. joulukuun loppu.

[Fisu]

Expressenin kanssa tehty Manager-peli heidän käyttäjilleen, on näköjään saanut tehdä joukkueen myös MM-hiihtoihin. Scoutin etu on heidän in-house vedonlyönti-/kerrointiimi, joka pystyy nopeasti lajista kuin lajista laittamaan turnauksen pystyyn. Kuten tehtiin E-urheiluun keväällä kun muut urheilusarjat menivät kiinni.

Jossain aiemmassa viestissä oli puhetta Veikkauksesta, ja tästä oli tuossa pääomistajan analyysissä seuraavasti:
“Veikkaus,the state-owned Finnish operator witha monopoly as the only licensed operatorin Finland. However, important to note is that Finland is a grey market and generally does not block non-regulated sites. While Finland is discussingincreasing industry regulations in the coming years, thismeans Scout is not expected to launchin Finland before 2022.”

[Gorran]

Joo ei se Veke taida olla kovin ripeä liikkeissään (vaikkakin heidän “Product Development Specialistin” nimen perässä on linkedinissä myös “dfs”). Näistähän saa vihiä sitten julkisista hankitailmoituksista jos niikseen tulee.
Asiasta toiseen: Tosta omistajalistasta huomioisin SIA Optibetin. Sen omistaa Enlabs, josta tehtiin tänään korottettu ostotarjous Entainin toimesta. Entain taas aika iso tekijä, mm Bwin, Ladbrokes ym. Norjan pankki sielläkin suuromistajana. Eli tästä voi seurata scoutille uusia suuria asiakkaita jos em. kauppa menee läpi ja Entain päättää panostaa Scouttiin, missä olisi itse osaomistajakin.

[Gorran]

Bc2 puolella Fanteamille tuli appi (vasta soft launch/ios) ja sportsbookille oltaisiin lähitulevaisuudessa lisäämässä odotettua live bettingiä. Aika lapsenkengissä ollut tämä bookie-toiminta, mutta edistysaskelia molemmat.

[Fisu]

Johdosta Joakim tankkasi perjantaina 2555 osaketta, hyvä signaali myös tälle yritykselle kun johdosta tulee lisäyksiä rytinässä.

[Fisu]

I was reading some comments on Seeking Alpha, and here’s a comment from the main owner:

"Good comments. I share your distaste for B2C because of the competitive intensity of acquiring and retaining customers. Casino and betting products are commodities, so it is difficult to earn a sustainable competitive margin. However, Scout’s B2C product does not have any real competition. Thus, it should retain customers much better than a typical B2C online casino and have attractive long-term sustainable margins. In the US, DKNG and FLTR have high valuations ascribed to their B2C offerings because there is less competition in DFS and the US is a growth market.

Regarding the comparison to EVO, Scout generates revenue from B2B and B2C (which is lower margin). I think Scout will do 25-30% EBITDA margin on their B2B business once they have €10M of B2B revenue.

If my math is right, they will not need to do another equity raise because they will reach profitability in 2021. However, they might decide to raise more cash to grow faster. Assuming they deploy that capital well, it would increase the per share value of the business."

It’s interesting that Scout strongly invests in and markets its own fanteam.com site, and reports good growth in earnings, even though the main owner isn’t enthusiastic about it.

Let’s hope that the main owner’s estimate of a 25% - 30% EBITDA margin with 10 million euros in B2B revenue holds true. It should be achievable as early as the beginning of 2022.

[Gorran]

Scoutti just doesn’t open up more detailed figures in the quarterly report between B2B/B2C, so it’s difficult to follow how their relationship develops. In any case, it should be noted that Norsk Tipping, Betsson, and the newest newcomer ATG are not yet live. I believe these will serve as a good trigger in the future for the targeted EBITDA. However, it must be noted that sometimes guaranteed prize pools in tournaments are not met, but for example, in the 250k€ UCL tournament, there’s already ~260k€ in. (This should be noted because it’s difficult to achieve a positive operating margin if guaranteed prize pools have to be paid out of one’s own pocket too often).

The free float is indeed interesting in this case: Insiders own over 25% and have been net buyers for a long time. Directly and indirectly, insiders hold about 20% in the top 10, so a quick calculation shows that the top 10 and insiders together own about 80% of the shares

[Fisu]

Q1 is going to hit some pretty impressive growth numbers, as Q120 was slowed down by corona and revenue was SEK 8.7m. Would it be between 100% and 150%?

If we consider Q4 SEK 16.9m on top of:

• During the quarter (Q4), we launched a number of customers, including Parimatch, which also launched odds-based products from Scout Gaming
• During the first quarter, we are expected to launch a beta with Betsson in selected markets
• The start of the year has been strong and we are expecting continuous heavy growth!

[Gorran]

20m SEK broken? Q4 could still function as a boost in comparison:
NBA (season started 23.12)
NHL (season started 14.1)
300k€ wcoff (ended in January. Wouldn’t these be recorded on a payout basis?)
PL (13 gameweeks in both quarters, but a permanent increase from 50kgtd → 75kgtd)
I quickly looked at Betsson’s biggest brands and didn’t find any references to DFS yet, so it won’t have an impact on Q1.

[Piit]

What’s the risk here that big players will set up their own DFS league/brand? So far, they’ve gone with Scout, but I’m trying to understand this risk in this case. Definitely mispriced stock - hard to say which way

Ps. Scout has been properly tanked now

[Gorran]

Good question, Piit! The DFS scene is dominated by FanDuel and DraftKings. With the exception of the UK, Europe is very much in its infancy, and there are hardly any opportunities to play DFS even outside of Scout’s networks. Although there are many betting companies operating in Europe, I don’t really see anyone else having the muscle to challenge the aforementioned duo. I would also consider creating a completely new DFS brand from scratch uncertain, because it would cost an insane amount, and for example, acquiring Scout completely would be cheaper at the current price. On the other hand, competition wouldn’t automatically be bad, as it would build or at least accelerate a larger DFS market in Europe, if only this “new” competitor doesn’t eat Scout alive.

What are others’ thoughts?

[Piit]

How would DK come to Europe? That could also accelerate scout growth? That’s a good point…

[Gorran]

It is possible to play in Europe, at least in the UK and Germany, but marketing is practically only targeted at the USA.

[Gorran]

They’re investing nicely in the coming summer, at least. There will probably be a press release about this later.