Blue-sky potential awaits this Canadian online casino and sportsbook stock

The government of Ontario’s new online gaming market, including online casinos and sports betting sites, has been thriving in its first year.

With a total national addressable market of C$8.5 billion, Ontario has set this market off on fire as the perfect place to launch, being the province with the most professional sports and a C$3.3 billion share by 2026.

iGaming Ontario (IGO), a subsidiary of the Alcohol and Gaming Commission of Ontario (AGCO), introduced new standards for gaming operators, allowing online casino and sports betting companies to operate in the province. Up until then, traditional sports betting (i.e. single-event sports betting) had been illegal in Canada. This new market has some emerging online gaming companies, like NorthStar Gaming Holdings Inc. (TSXV:BET), ready for the future.

The Toronto-based company owns and operates a casino and sportsbook gaming platform. The NorthStar Bets sportsbook provides real-time news, stats, analysis and scores directly in the betting environment along with the most popular online casino games.

Since its market debut in March 2023, NorthStar has already seen a lot of success with its offering that combines high-quality sports journalism with betting / casino games in Ontario. Following its acquisition of iGaming marketing and managed services company Slapshot Media Inc., this business is ready to bring its unique slice of the market to the rest of Canada.

For investors eager to engage the esports and online betting market, this represents an exciting entry point, having already proven success in Ontario. Let’s take a closer look at what NorthStar Gaming has to offer and what sets it apart from everything else in this market.

The platforms – Kambi and Playtech

Not all vendors are created equal and when the company received a C$12.25 million investment from Playtech in December 2022, it earned significant leverage in the marketplace.

NorthStar and Playtech signed a software and services agreement that provides NorthStar the right to expand across Canada, supported by Playtech’s strategic advice, specifically regarding online operations, managed services, and market expansion. Beyond being just a vendor, Playtech’s investment brings them into the fold and established a relationship that everyone has built upon.

Speaking on this partnership, NorhStar’s Chief Executive Officer and founding partner, Michael Moskowitz said that Playtech’s unparalleled expertise in the gaming industry will accelerate his company’s growth and rapidly expand the user base.

“We are focused on executing our strategic vision, which will see us continue to provide a best-in-class consumer experience, while also expanding NorthStar to new markets.”

One of the largest business-to-business (b2b) software provider platforms, Playtech manages the operational side of the company’s business, from player accounts to digital marketing, Playtech has its finger on it.

Kambi is a leading, independent sportsbook partner based out of Spain that handles roughly 40 per cent of sports betting in the United States and serves as sportsbook services provider to NorthStar.

While many other companies offer an “a la carte” menu from Playtech and Kambi’s offerings, NorthStar is one of the very few that has effectively merged it all together into one experience. In essence, this leverages potentially hundreds of millions of dollars worth of research and development costs they have incurred since their inception to NorthStar for free. The team doesn’t need to build a platform stack from scratch to do business, the whole operational framework and payment structure is already in place. As NorthStar generates revenue, everyone behind the scenes makes money. This also frees up the NorthStar team to do what it does best, which is player acquisition and quality journalism.

Backed by Torstar

“Go big or go home” is a common phrase in the sporting world and NorthStar’s exclusive advertising partnership with Torstar Corp. fits right in with that line of thinking.

Torstar is one of the best-known Canadian mass media companies known for the Toronto Star, along with its 150-plus other newspapers, including a minority stake in the Canadian Press, as well as digital sites and other media investments. Torstar drives viewership and users towards NorthStar Gaming, which leverages this premium exposure within Torstar properties to drive customer acquisition and reduce player acquisition costs.

With national exposure from multimedia ads, Torstar’s traffic has spread the word about NorthStar by promoting its app well in advance of its fully regulated debut to regions outside of Ontario.

Betting on a national growth strategy

In May 2023, NorthStar completed its acquisition of Slapshot Media Inc., a Canadian iGaming marketing and managed services company that provides managed services to Spreads.ca, an iGaming site.

NorthStar acquired 100 per cent of Slapshot’s issued and outstanding shares for C$1.8 million, payable in 3,272,727 common shares of NorthStar at a value of $0.55 per share. The purchase price for the transaction is subject to customary, post-closing adjustments for working capital.

The vendors of Slapshot will also be entitled to a separate earn-out of up to C$500,000 based on its revenue performance for the 12-month period after the closing.

The company stated that its goal is to open up the Canadian market to its brand outside Ontario, and materially expand the addressable market available via its relationship with Spreads.ca.

“The acquisition of Slapshot expands our ability to enter new markets faster as we look to introduce NorthStar Bets to consumers across the country,” CEO Moskowitz said. “We are hyper focused on growing the reach of NorthStar and this strategic acquisition and partnership further positions NorthStar for rapid growth into new markets within Canada.”

While it may appear to be a relatively small acquisition for NorthStar, it actually has the potential to be hugely transformational for the business.

Once other provinces regulate online gaming as Ontario has, NorthStar intends to have its fully regulated platform ready to roll by Q4 2023.

Brand building, relevance, locality

Key to developing a premium brand image to appeal to a high-end customer, the team has turned to opportunities in near real time to drive relevance with sports and casino players, reinforcing its “made in-Canada” roots. One of the company’s most interesting and unique facets is its original sports news and gaming content.

Journalism is what initially drove this company and to this day, still does. While other ventures turn to celebrity endorsements, NorthStar provides content and writing that effectively serves as brand ambassadorship. This is how the company acquires players and is the key strategy to be different and win in the market.

Sports betting and online gambling can be a competitive landscape, but NorthStar, despite being a smaller operation than the likes of DraftKings or FanDuel, has already seen success attracting an audience based around the legitimacy of its writers and credibility of its content.

“They’re critical,” CEO Moskowitz said in an interview with Stockhouse Editorial, speaking of his team of writers. “They’re the secret sauce, the uniqueness of what we do. What our content team does, is they really help to differentiate us and elevate us and provide that premium offering. They are very creative, frankly, they all have a passion for sports. These guys live and breathe this every day. You get around the bullpen with them and you hear what they’re talking about, and they’re chatting about the game or the trade, or the series, or the odds. This is what they do. They have experience and more importantly, a passion for sports. These are professional individuals that come from the industry.”

A veteran technology executive in his own right, CEO Moskowitz explained that what drove him to establish this brand and ramp it up to a national presence was the passion behind starting something from scratch.

“Developing this ourselves the way we want to,” he said. “For me, personally, it was doing something in Canada, then, in the U.S. and abroad, I wanted this for a very long time. It’s the advantage that, I think most importantly, to have this huge, growing, massive market opportunity that’s ahead of us, that infancy will lead to significant growth and changes in the industry. We wanted to take advantage of that.”

Financials

In the company’s latest results for fiscal Q1 2023, NorthStar logged impressive financial growth:

• Total wagers were recorded at C$139.5 million in Q1 2023, an increase of 24 per cent from Q4 2022
• Gross gaming revenue was C$4.4 million in Q1 2023, an increase of 8 per cent over Q4 2022
• Gross margin was C$1.2 million in Q1 2023, an increase of 20 per cent from Q4 2022

Comparing these figures to the company’s full-year 2022 financials shows a steady upward trajectory.

Investment corner

The online betting and sports markets are on the cusp of exceptional growth in Canada. Looking at global trends where regulated, this is already the case. Offering a premium product to a premium player with associated revenues per player is a strategy that could pay off exceptionally well for NorthStar Gaming, especially given its first-mover advantage in this space.

NorthStar Gaming Holdings is a new brand in the marketplace. Having the expertise of sports and gaming journalists in-house, delivering daily content in volume paints this brand in a different light. This team knows sports betting better than anyone else and this company’s performance is how they show it. The sports betting market is on the way up and one of the best ways to keep on top of it is to follow the company at northstargaming.ca.

This is sponsored content issued on behalf of NorthStar Gaming Holdings Inc., please see full disclaimer here.