Online bingo operator hits its Stride

Online bingo operator hits its Stride

Monday, September 19, 2016
UK-listed operator grows ahead of acquisition completions

Online bingo operator Stride Gaming says its recent acquisitions have catapulted the company to fourth-biggest operator in the UK as recent trading shows revenues powering ahead of market expectations.

Stride recently completed the Tarco, Netboost and 8Ball deals announced at the end of July which saw the company lay out an initial £30m which could rise to £70.2m depending on earnouts. Stride funded the deals with a placing which raised £27m.

The UK-listed said on Monday in a statement to the London Stock Exchange that revenues of at least £47m for the year to the end of August were ahead of expectations while EBITDA would be not less than £12.3m, compared with £7.3m the year previous. The company will report its full-year figures later in the year.

Chief executive Eitan Boyd said that alongside the acquisitions, the organic growth meant the company now had “sufficient scale and increased market share”. The various deals in July saw the company add nearly 100 bingo brands to its roster and take its estimated market share from 5% to 10%. Alongside Stride’s existing Kitty Bingo and Lucky Pants Bingo brands, the company added Moon Bingo and Robin Hood Bingo from Tarco, marketing assets from Netboost and a broader brand portfolio from 8Ball.

In a note published this morning, house brokers at Canaccord Genuity said that they expected the acquisitions to provide an “excellent strategic and financial fit”. It said the deals were consistent with Stride’s statements at the time of its IPO in May this year that it hoped to be a consolidator within the online bingo space.

“Synergies from the acquisitions could be material,” added analyst Simon Davies. He noted that the Tarco assets produced historically low lifetime value per customer of £113 which was under a quarter of the level achieved by Stride’s existing assets. “As such, there is significant scope for operational improvement, even before Stride starts to tackle cost synergies.”

Meanwhile, 8Ball’s “key strength” is its low-cost customer acquisition strategy where the focus on SEO brought in customers with CPAs as low at £18, compared to the Stride average of £100.

“The multi-brand business model in the bingo vertical allows for improved customer retention, as customers who become inactive can be reactivated on other brands; and it also allows for improved acquisition, because it can specifically target different customer demographics,” said Davies.

Stride Gaming’s share rose 13% at one point on the day of the trading statement to 274p, valuing the company at £181m.

London has become the epicentre for online bingo. In early September, JackpotJoy (formerly Intertain) announced it was moving its listing from Toronto in Canada to London in order to seek a more appreciative investor base. Meanwhile, Rank has also announced its intention to launched a further combined land-based and online brand called Luda Bingo and Sun Bingo has been relaunched after its move to the Playtech platform.

Totally Gaming says: Given the ambitions of Stride Gaming, it’s hard to believe we won’t see further M&A activity within the online bingo space in the near future. Canaccord Genuity makes the point that it has been sub-sector largely ignored by the larger full product operators to date but the scale of the larger players at the top of the market makes them harder to ignore.

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