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Aspire Global
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===Core=== Core is AG’s proprietary platform and managed services, which comprise all the technical, regulatory, and administrative requirements of operating an iGaming brand. The technical platform can be offered in isolation or combined with the range of managed services. From a technical perspective, the platform provides everything from back-end configuration to the user interface and integration with third parties, eg content providers. From an operational perspective, the managed services cover everything from regulation and compliance including licence administration, payment processing and risk management, CRM including data analysis and business intelligence, customer support and player value optimisation. Use of the platform means that operators do not need to invest resources in developing/running their own technology or full-service platform, leading to a faster and more efficient route to market and ongoing operating cost efficiencies with a high level of professional services. While all operators have different cost structures given different product offers, market positioning, etc, Edison Investment Research highlights that bet-at-home’s ‘other’ costs (ie excluding duties, marketing, and personnel costs), which includes expenses for platform, represented c 16% of GGR. AG’s management has estimated that the full product suite of platform and managed services can lead to operating cost savings of 20% for the operators. The platform is very ‘sticky’, given its access to certifications/licences and the analytical tools available. In addition, management claims that the platform’s up-times are higher than those of competitors. Hence, once a client is on board, there would have to be a very good reason for it to leave given the inconvenience of changing the licence/certification, having to integrate with another provider and the loss of analytics. The relatively consistent increase in the number of partners/brands that use the platform (see Exhibit 5) provides proof of AG’s competitive positioning. The key services include: * Licences and platform certifications in regulated markets: AG has gaming licences in regulated markets including the UK, Denmark, Ireland (sports betting), Sweden, and Malta. The Maltese licence covers all .com markets. AG is in the process of applying for a sports betting licence in Germany. When an operator joins and uses AG’s Core platform, it is able to access all of the licences and therefore does not need to apply for its own licence in a country, which can be time consuming and expensive. In addition, the Core platform is certified in other regulated countries including the US, Mexico, Colombia, Portugal, and Russia so that operators with licences in those countries can take advantage of AG’s technological expertise. * Compliance and regulations: AG’s in-house regulation and compliance teams monitor all operations and keep up to date with changes in regulations to ensure the platform is compliant with all required laws and regulations. It also provides ongoing training, regulatory updates, and marketing guidelines to partners. * Data analysis and intelligence: customers are provided with on-demand data analysis, business intelligence and analytical tools that enable them to monitor their own performance and help them maximise player profitability with the use of sensitivity analysis on customer acquisition costs and potential changes in marketing strategy. * CRM: AG believes its recently launched Aspire Engage is the most advanced CRM tool in the market. It allows operators to market to their players on any device in real time with relevant attractive promotions according to pre-defined segmentation. The CRM services offered include campaign management, player segmentation and retention analysis, tools to enhance customer conversion, the management of bonuses and promotions, and tools to manage responsible gaming. * VIP management: AG’s most experienced employees work closely with the operators’ most valued customers to improve customer loyalty. * Payment processing and risk management: AGs platform is integrated with a number of alternative payment providers and solutions, other than credit and debit cards, to provide seamless and safe management of player deposits and payouts. Alternate payment providers include Worldpay, PayPal and Adyen as well as local services including Trustly in Sweden, Neteller, Skrill and Paysafecard in the UK, and Giropay and Sofort in Germany. With respect to fraud management, the platform has quick Know Your Customer (KYC) processes and a highly secure fraud prevention scheme. * Customer support: AG provides unique tools for its operators/clients to communicate with their players. Those tools have real-time data so the information will be updated at all times. Since the IPO in 2017, management has continued to invest in the platform to improve the speed, availability, and reliability of the underlying technology, as well to improve the breadth and quality of the services offered. In 2018, the platform moved from a pure casino focus to adding sports betting, with the aim of targeting new audiences and partners. The Core platform generates revenue from three sources: * Set-up fee: a fixed set-up fee is charged immediately after the signing of an agreement with a new client. In FY20, these represented less than 10% of AG’s Core revenue. * Mark-up on supplier services: AG charges a moderate mark-up on charges for services provided by third parties such as fees of games providers and payments service providers. In FY20, mark-ups represented 15–20% of AG’s Core revenue. * Split of net gaming revenue (NGR): NGR is gross gaming revenue (ie total bets wagered by customers less their winnings) less any bonus and jackpot contributions. When a partner brand launches on AG’s platform they both share the NGR. To limit downside risk, a minimum platform fee is charged, which is automatically replaced by a share of revenue once it has been exceeded. In FY19, this represented more than three-quarters of AG’s Core revenue. Management believes its greater focus on a revenue share model than its peers aligns AG’s interests better with those of its customers. As AG is the licence holder, it receives the revenue direct from the players of the games and then distributes the partner’s share of NGR, which is recognised as a royalty payment within distribution costs. This is different from many peers that receive a fee for proving the platform. Core’s financial performance At 57% of group revenue (GGR) and 60% of group EBITDA in FY20 (56% and 57%, respectively on a pro forma basis), Core is AG’s most important segment from a financial perspective. Its GGR revenue has grown from €30.0m in FY16 to €92.7m in FY20, a CAGR of c 33%, during which time EBITDA increased from €7.2m to €16.1m, a CAGR of c 23%. Core’s revenue growth has been driven by increasing the number of clients and brands that use the platform, and the revenue earned from each. At the end of FY20, the platform had 42 clients and 86 brands versus 22 clients and 44 brands at the end of FY16. In our forecasts Edison Investment Research assumes the number of brands operating on the site increases by 4–5 pa, and average revenue per brand increases by 5% pa, resulting in c 10–11% organic revenue growth to €101.9m in FY21 and €112.9m in FY22. The EBITDA margin has trended down from 23.9% in FY16 to 17.4% in FY20, due to management’s deliberate focus on increasing exposure to regulated markets, in which operating costs are higher and AG provides more favourable terms to clients in these markets versus unregulated markets. Despite having higher operating costs, increased regulation provides greater certainty about the operating environment for operators, excluding competition issues. Edison Investment Research assumes the EBITDA margin is stable versus FY20 in our forecast years, as management expects increased scale and greater automation to offset the ongoing shift to regulated markets.
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