Honest opinion of the Q1 earnings call First and foremost the analysis on this company has been great, especially the last 24 hours. Keep it up!
There have been mixed thoughts on the recent earnings call and for what it's worth I would like to give my honest opinion.
Some positive notes I took from the call which I was excited to hear about was that 75% of the bettors who placed a bet were from the media app. This is phenomenal because customer acquisition cost is significantly less than competitors. The NBA deal is great because it will give us exposure to the league if the NBA promotes our brand similar to how they promote Draft Kings & William Hill at arena's and related events. It also provides us with direct NBA data which will be used to offer more betting markets (lack of betting markets has been a common complaint I've seen on the reviews for the app) and sharper spreads. One piece of info they left out which I would be interested to know are the financial terms of this NBA deal. Did we pay the NBA an upfront fee or provide them with a royalty of our betting revenues.
I finally fully understood the value of FUSE, nobody else in this space has this integration which sets us apart from our competition. Being able to build a bet slip on the media app is extremely unique and improves the speed of creating and placing a wager directly from where you do your research. Finally, Levy did mention they are also exploring additional market access deals like the one they made with Penn National. I know it's a long way out until we are in 5-10+ states but this would be a great PR for us. If you recall the deal with Penn pushed the SP up about 28% the next two trading days.
Some negative notes I took from the call were about the lack of additional states we are launching into in the near future. They are expecting to launch in Indiana later this year (sounded like more of a Q3/Q4 launch in my opinion), but I did have expectations of at least 2 additional states, possibly even 3 by year end and this looks very unlikely now.
I thought the 8.8 million in handle was fine, the key for me on this is what is this number the next 2-3 quarters from now. If the growth in handle is flat that would be a major red flag. The 242k of gaming revenue is obviously low but the house doesn't always win big in the short term so I'm not concerned and I feel fully confident we will normalize to the average of about 7% which Levy confirmed as well. At the 7% rate, it would have equated to about 620k of gaming revenue for the quarter. The number I didn't particularly like which they reported was the negative net gaming revenue of 26k. At this early point in the launch when there are heavy promotions and free bets offered, this number can only be bad. Every online sports book has a big first time deposit bonus offering and then periodically continue to offer smaller bonuses as a loyalty offer so in my opinion, the net gaming revenue figure will dramatically improve over time.
I believe Levy wants to build out the app, develop new integrations, improve the user experience, get user feedback, offer more betting markets and prop bets, improve the administrative components of the online sports book before expanding. There are positives and negatives to this approach so we'll just have to see how it all unfolds. I personally think it's fine because users first impressions of the app are important and the fact that we are not taking the approach of spending boatloads on marketing but rather initially focusing on the media users which has shown to be successful thus far. I think short term it's going to take longer than expected but in the long term still it's still a great hold and I will reevaluate the next couple of quarters.
I would like to disclose I hold 70k shares and I bet on sports for a living. Good luck to us all!