OpenBet and organic growth benefit NYX

OpenBet and organic growth benefit NYX

Wednesday, August 31, 2016 Posted by Andy McCarron
Supplier adds 11 new customers with more to come

The evidence from NYX Gaming’s second-quarter results proves the company has emphatically joined the front rank of online gaming’s platform providers and suppliers alongside Playtech, Microgaming and Net Ent.

The company’s financial results for the three months to June, the first results to include a contribution from the OpenBet acquisition in May, show total revenues rising to C$35.2m (£20.6m) compared to C$10.7m in the same period last year. Much as OpenBet contributed a large slice of the increase, with approximately six weeks of revenues included in the figures, organic growth also amounted to C$13.7m or 28% growth year-on-year.

The company has grown on all fronts. It now has a headcount of 1,040 including 537 engineers. It has a library of over 750 proprietary games and also sources over 900 more from third-party suppliers. NYX’s client roster now includes many of the biggest names in online gambling, including William Hill and Sky Bet which each contributed to the OpenBet buyout to the tune of, respectively, £80m and £20m in return for convertible preference shares.

It added 11 clients in the quarter, including Sisal, Luckia and Pala Interactive, launched 21 client sites including MyBet and SNAI, and has a pipeline of 23 committed new clients yet to sign. It released 26 new games over the quarter and saw its total of unique game installations or game instances across its distribution network grow from 17,990 as of the end of the first quarter to 21,547 as of the end of June.

Commenting on the company’s performance during a conference call with analysts on Monday, chief executive Matt Davey pointed out that the company’s position as a challenger to the biggest suppliers in the space has been a long time coming, adding that the company wasn’t the only provider and supplier looking to gain scale via acquisition. “A number of other suppliers have been active on the M&A front,” he said.

Indeed, OpenBet wasn’t NYX’s only acquisition this year (or even in May). The company also bought out the UK-focused game developer BetDigital late in the month for a further £3.5m upfront and potential £24.5m earnout.

The activity came at a price. Alongside William Hill and Sky Bet convertibles, to pay for OpenBet NYX secured £125m secured lending facility, consisting of a £120m (C$227.5m) term loan and £5m (C$9.1m) as-yet-unused revolving credit facility. When added to outstanding borrowings, which paid for previous acquisitions including the deal with Amaya for the CryptoLogic and Chartwell operations, total debts stood at C$276.8m as of June, up from C$59.8m at the turn of the year. The new debt also comes with a hefty interest rate – 7.25% above Libor for the secured term loan which has a term of five years.

What the company needs is to see some profits flow through. At present the costs – including the augmented administrative and personnel figures – helped push the company towards a pre-tax loss of $27.7m in the second quarter, though acquisition and restructuring expenses of C$13.4m were also a contributory factor as was the C$15.4m one-off cost of extinguishing debt. Still, the cost of the current debt ballooned to C$8.04m in the quarter from less than a quarter of a million dollars in 2015.

NYX is listed in Toronto, alongside Amaya and, for the present at least, Intertain. But with the latter opting recently to attempt to move listing to London in order to seek a more receptive investor base, there were questions on the analyst call over whether the company might also seek an alternative listing given the degree to which investors in Toronto have somewhat turned their backs on the sector.

Davey didn’t duck the question but suggested the company was content to stick to the knitting for the time being. “Our focus is on delivering a clean set of numbers, and if the market continues to discount us, then we will look at it again,” he said.

Totally Gaming says: The organic growth rate at NYX is impressive, as is the long list of new launches and clients and if the OpenBet acquisition beds in sufficiently, the company will cement its place as a key provider and supplier in the online gaming space. There is no better way of banishing fears over debt levels and profitability than above market trend near 30%-plus revenue growth.

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