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NWGI: Expanding Internationally and At Home Organically and Via M&A

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By M. Marin

NASDAQ:NWGI

READ THE FULL NWGI RESEARCH REPORT

Newgioco Group (NASDAQ:NWGI) 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.

NWGI’s Elys Game Board platform has been active in Italy since 2015. The platform enables all forms of customer payment from both onsite and digital gaming. Elys can also integrate with products from other gaming companies to support payment for online casino, poker, lottery and horse racing, among others, and is being upgraded to enable integration with e-sports and daily fantasy sports. Turnover, or betting handle, has grown from about $122 million in 2016 to $454 million in 2019. NWGI believes that the Elys platform is highly scalable and can continue to support its growth initiatives and expansion.

Expanding In Attractive U.S. Market

NWGI’s strategy is to expand its gaming platform on a B2B basis in new international markets including the U.S. A 2018 Supreme Court ruling that the Professional and Amateur Sports Protection Act (PASPA) is unconstitutional and that states can regulate sports gambling individually opened the door to NWGI’s U.S. expansion, as many U.S. states now allow sports betting, with more expected to come online.

The company believes that the U.S. sports betting and online gaming market represents a substantial opportunity to deploy Elys as a SaaS to tribal and independent casino and gaming operators. Elys complies with industry technology standards and is expected to enable smaller operators that cannot invest in building their own back-ends to provide online gaming operations. The company has obtained GLI-33 certification and currently in the process of obtaining regulatory approvals in Washington, D.C. to establish its first U.S. operating location. The strategy will be to roll the platform out to various gaming operators to process sports bets on a SaaS basis through Elys.

Reflecting the anticipated importance of the U.S. market, NWGI established a U.S. subsidiary, Elys Gameboard Technologies, LLC, opened U.S headquarters and relocated its CEO to the U.S. Earlier this year, NWGI hired former Sportradar and IGT senior executive Matteo Monteverdi as President of the company to lead its U.S. operations and to oversee development of the U.S. platform and personnel to expand throughout the U.S.

The company has signed deals to deploy the Elys platform at select locations in the U.S. These include multi-year agreements with Fleetwood Gaming and the Chippewa Cree Tribe in Montana, and with Grand Central, LLC in Washington, DC. In 4Q 2019, NWGI transacted several sport bets that represented firsts in the U.S.

International Expansion

To benefit from the expected market growth and industry consolidation, other aspects of NWGI’s growth strategy include expanding in its home market of Italy organically and through M&A, as that market undergoes consolidation, and through M&A in other markets. For example, NWGI recently acquired virtual sports technology developer Virtual Generation Limited. In addition, the company plans to install 400 kiosks in Italy that potentially could augment revenue by up to $18 million per annum.

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