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Aspire Global
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==Company description: Online gaming infrastructure<ref name=":0" />== AG is an online gaming technology, managed services, and content company with two main reportable business segments – B2B and B2C – that target different parts of the iGaming value chain. The names of the segments denote the main customers served and, by definition, the products offered. ===B2B (69% FY20 pro forma revenue, 78% pro forma EBITDA)=== B2B offers customers, the online gaming operators, everything that is required to operate a successful iGaming brand for casino games and sports betting. B2B’s revenue has grown from €30.0m in FY16 to €110.9m in FY20, a CAGR of c 39%, and EBITDA has grown from €7.2m to €20.9m, a CAGR of c 31%. Within B2B there are three reportable sub-segments: * Core is the proprietary, industry-leading platform and services that manages every aspect of the customer’s requirements to launch and operate a successful iGaming brand. These include the underlying technology platform and managed services that help customers with regulation and compliance, payment and processing, risk management, CRM, and support. The platform can be offered on its own or in combination with the managed services or content. In FY20 Core’s reported revenue was €92.7m and EBITDA was €16.1m; on a pro forma basis it represented 56% of revenue and 57% of EBITDA. * Games is a relatively new division that was formed on the October 2019 acquisition of Pariplay, a leading games creation and aggregation platform that offers proprietary and third-party games to operators. In FY20, Games contributed revenue of €16.0m and EBITDA of €4.2m, representing 10% of revenue and 15% of EBITDA on a pro forma basis. * Sports is the online sportsbook platform provider BtoBet that was acquired in October 2020. It contributed revenue of €2.2m and EBITDA of €0.6m to AG’s FY20 results. On a pro forma basis, its revenue of €6.8m and EBITDA of €2.1m represent 4% and 7% of the group total, respectively. ===B2C (31% FY20 pro forma revenue, 22% pro forma EBITDA)=== B2C operates proprietary online casino brands, including Karamba, and sports brands that use AG’s B2B technology and services (above), and markets them to AG’s own online customers. In February 2021, the board of directors instructed management to conduct a review of the B2C segment in order to identify how to enhance its future growth prospects, the outcome of which may include a disposal of the segment or a merger. In FY20, B2C’s revenue of €51.0m and EBITDA of €6.2m represented 31% and 22% of the pro forma group total, a lower margin of 12.1% versus the group average of 16.7%. On a pro forma basis, that is including 12 months of BtoBet’s revenue and EBITDA, AG’s revenue was €166.9m and EBITDA was €28.5m. Depending on the segment, AG may disclose a number of revenue figures. Management discloses revenue gross of VAT, which is similar to how the online gaming operators, for example bet-at-home, report revenue, and also net of VAT. It reports revenue gross of VAT, as unlike most other B2B peers, it receives net gaming revenue (NGR) directly from the ultimate customers, that is the players of the games, before sharing the revenue with the operators, expensed further down the income statement. This is in contrast to the majority of its peers, which receive their net share of revenue from the online gaming operators. As a result, it is not possible to directly compare reported revenue and EBITDA margins versus peers. It makes the use of sales-based multiples analysis versus its peers meaningless too. Management’s commentary on revenue and profitability, specifically EBITDA, is typically with reference to revenue including VAT, therefore Edison Investment Research will be consistent with management’s narrative. For some segments, AG also reports a higher revenue figure that includes inter-segment revenue, which Edison Investment Research does not use. In addition, the company includes share-based payments in EBITDA whereas Edison Investment Research customarily excludes them. At the divisional level, share-based payments are not disclosed, therefore in the commentary on the segments and group performance Edison Investment Research will use management’s definition of EBITDA, but our presented EBITDA numbers in the financial summary use our definition. The difference is not material; in FY20, share-based payments were €0.5m, equivalent to c 40bps on EBITDA margin. ===AG’s evolution=== The company was founded in 2005 as NeoPoint Technologies, initially focused on the online scratch cards market, and the subsequent launch of a proprietary online slots site in the UK in the same year. In 2008 AG acquired its first online gaming licence in Malta and the company signed B2B partnerships in eight markets. In 2014, the online lottery business NeoGames was transferred to a separate company and subsequently sold by AG, and the remaining company, whose focus was the current Core business, was changed to AG. Since 2014, AG has focused on improving its B2B offering by investing in its technology, extending the product offer, and increasing the number of proprietary brands. In so doing, AG has extended its geographic reach of online licences and certifications, as well as withdrawing from certain countries so that by the end of 2020 it and its clients operate in 26 markets across Europe, the US, South America, and Africa. A sportsbook was initially launched in FY17, which was subsequently added to the platform in FY18, extending its reach beyond the core of casino games. The acquisition of Pariplay, a global online game studio and aggregator, was completed in October 2019, and this was followed by the acquisition of BtoBet, a leading sportsbook, which completed in October 2020. In July 2017, the shares were listed on the Nasdaq First North Premier Growth Market in Sweden at a share price of SEK30, valuing the company at SEK1,323m. ===Geographic presence=== AG is based in Malta and has a physical office presence in Bulgaria, Gibraltar, India, Israel, Italy, North Macedonia, and Ukraine. Under EU law, Maltese gaming licences are effective in all EU member states due to the freedom of movement within the EU, as long as online gaming is legal in the respective member country. It has a broad global presence with customers in 26 countries across Europe, Africa, Latin America, and the US. In these countries, AG either has a licence to operate its platform or services, or its platform is certified in those countries, with the operator customer holding its own licence. In FY20, AG’s source of revenue on a reported basis (not including the full effect of the recent Sports acquisition, which has greater exposure to Africa and Latin America) was: the Nordics €16.4m (10% of total), UK and Ireland €35.1m (22%), rest of Europe €98.2m (61%) and rest of world €12.2m (8%).
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