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ELYS: Expanding Strategic Relationship to Leverage Growth Opportunities

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By M. Marin

NASDAQ:ELYS

READ THE FULL ELYS RESEARCH REPORT

Elys Game Technology (NASDAQ:ELYS) recently expanded its strategic partnership with Sportradar, a leading provider of sports betting and sports entertainment products and services worldwide, in order to offer a broad range of planned live, in-game wagering options at U.S. retail sports betting locations the company intends to open. The new agreement will give Elys access to Sportradar official pre-game and in-play data for major U.S. sports. Sportradar offers data coverage encompassing more than 60 global sports. ELYS expects this to enhance its product portfolio for live streaming sporting events and to create new opportunities in the important U.S. sports betting market. The company intends to open the first U.S. locations in Washington DC.

The company operates in the international leisure gaming industry and is a licensed gaming operator in Italy, offering a variety of lottery, casino and sports betting options there through both an onsite physical retail channel and a digital platform via its proprietary betting software, the Elys Game Board, that is integrated with a built-in player gaming account management system and sports book. We believe recent initiatives highlight the importance of the company’s growth strategy and of the North American market to that growth strategy.

Industry forecasts support expectation of significant market opportunity in the U.S. For example, Morningstar forecasts that U.S. sports betting can reach $6.2 billion in industry revenue by 2024. Other industry forecasts are even higher, supporting ELYS’s expectation that the U.S. sports betting and online gaming market represents a sizable opportunity for its platform.

Financial Update

The company also reported preliminary 4Q20 metrics showing year-over-year revenue advances and suggesting market share gains. ELYS recently reported 4Q20 preliminary net gaming revenue of about $13.1 million, up 26% compared to $10.4 million in 4Q19. Web-based gross gaming revenue advanced roughly 69% year-over-year. By comparison, year-to-date revenue through 3Q 2020 was about flat year-over-year ($24.7 million compared to $25.1 million), reflecting the economic downturn caused by the COVID-19 pandemic and the closure of many retail venues that form the basis for much of the company’s bricks-and-mortar channel.

Benefits of Omni-Channel Strategy

Players have shifted from bricks-and-mortar to online during the pandemic, with the above-noted roughly 69% year-over-year advance in web-based gross gaming revenue. ELYS’s turnover, or betting handle, has grown from about $122 million in 2016 to $454 million in 2019 and is expected to continue to rise as the company pursues expansion initiatives. Management believes the Elys platform is highly scalable and can continue to support its growth initiatives and expansion, reflecting the company’s entrance into new markets combined with potential M&A transactions and the anticipated growth of the e-sports sector.

In Italy, ELYS’s 4Q20 online gaming performance advanced 65% compared to a roughly 37.5% year-over-year revenue improvement in the nation’s online sports betting sector, according to Italian news agency AGIMEG, suggesting market share gains for ELYS. The company attributes the gains to its omni-channel distribution approach, among other factors.

The company’s earlier 2020 results also illustrate the benefits of the omni-channel strategy, we believe. For instance, some 82% of turnover was web-based in 3Q 2020 compared to 40% in the same period of 2019. Players have shifted to online access during the pandemic; ELYS expects these sources of turnover – and fee revenue – to revert to more normalized levels post-COVID-19.

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