Esports Entertainment expanding fast and leading the next generation of esports betting

• Allows esports fans to bet on their favorite esports teams and events
• Takes a percentage of each wager on the platform but otherwise has no interest in the outcome
• Based in Malta and governed by the US Securities and Exchange Commission, as well as other regulators in multiple jurisdictions

What Esports Entertainment does:

Esports Entertainment Group (NASDAQ:GMBL) is a licensed online gambling company focused on the growing world of professional video gaming – and the only esports company currently listed on NASDAQ.

Much like traditional sports gamblers betting on their favorite teams, Esports Entertainment’s proprietary Player-to-Player (P2P) wagering system allows e-sports fans and enthusiasts to bet against one another in support of their favorite ePremiere League (ePL) teams. The ePL is a partnership between Electronic Arts and the English Premier League, which is the most-watched sports league in the world. 

With an estimated 350 million game enthusiasts worldwide, wagering in the space is already in the billions of dollars globally, Esports Entertainment takes a percentage of each wager on the platform but otherwise has no interest in the outcome.

The target market skews younger: the average esports enthusiasts are men in their twenties, with many in their prime between the ages of 18 to 28.

The market is growing. Many US universities have set up esports teams and offer scholarships to players. Additionally, esports will have a role in the Paris 2024 Olympics, according to reporting from Inside the Games.

This is further supported by the 190 esports teams around the world that have already become affiliate partners of the company for the purpose of generating income from their fans’ wagering. No e-sports team had previously signed with any wagering site.

The company also operates Vie.gg, a proprietary betting exchange platform that allows fans to wager on a variety of esports games, including Call of Duty, Overwatch, League of Legends and PlayerUnknown’s Battlegrounds.

How is it doing:

Esports Entertainment has been busy this spring with multiple acquisitions. In May, the company signed an agreement to acquire Spain- and Sweden-licensed sports betting operator Bethard Group Limited, which operates the business-to-consumer arm of Gameday Group PLC.

The company will pay €16 million ($19.5 million) in cash and a 12% net gaming revenue share for two years, the company said. Bethard generated $31 million in revenue in 2020, and as a result of the transaction, Esports Entertainment raised its fiscal 2022 revenue guidance from $100 million to $105 million.

Speaking of new frontiers, the New Jersey Division of Gaming Enforcement (DGE) accepted the gaming license application of its subsidiary GMBL that same month. The agency’s acceptance will allow the company to submit its software to the DGE testing lab and apply for a transactional waiver. The company expects to complete this process and be live taking bets in the state by the end of its fiscal first quarter. 

On the financial front, the company saw $5.4 million in revenue during its fiscal third quarter ended March 31, more than double its fiscal second-quarter revenue of $2.4 million. Gross profit was $3.1 million, triple its $1 million profit in the prior quarter. 

The company attributed its revenue bump in part to its recent acquisitions of online casino operator Lucky Dino and live event provider Esports Gaming League. With the acquisition of Lucky Dino, unique active players in the month of March across iGaming brands rose to above 40,000, with average revenue per player surpassing $80, the company said. 

Also in May, Esports Entertainment signed a binding letter of intent to acquire the esports content and media business of Holodeck Ventures Inc, including its staff, production studio and all intellectual property. 

Meanwhile, its subsidiaries EGL and Helix eSports have partnered with Riot Games to host the Summer 2021 North American LCS Proving Grounds League of Legends esports tournament. The tournament will take place in three two-day periods spread over three weeks, the company said, beginning on July 12-13, followed by July 19-20 and the grand finals on July 26-27.

Inflection points:

• Earning a transactional waiver to take bets in New Jersey
• Forging more partnerships with prominent professional sports organizations and franchises
• Securing 5% of the $3.6 billion esports wagering market with its VIE.gg platform — and generating $180 million in revenue in the process

What the broker says:

In a May 25 report titled, “Esports Entertainent Group Inc Jersey Shores Up Its Gambling Strategy,” Noble Capital issued the company a repeat Outperform rating and a $20 price target after the New Jersey Division of Gaming Enforcement approved its gaming license application in the state.

Next, the company’s Vie gambling software platform will go through regulatory testing labs to determine if the software is compliant and meets regulatory standards, the firm wrote, which could take anywhere from 3 to 10 weeks. It could then be granted a transactional waiver and potentially open to accept bets from customers as soon as August.

“We believe that the company will focus on marketing efforts to raise awareness in New Jersey of its Vie sports and esports betting platform, with a budget to be determined,” Noble wrote. “In addition, the company is in discussions to seek sports betting licenses in additional states. The experience gained from the New Jersey process will be valuable for future state gambling license reviews.”

Noble estimates $70 million in revenue for fiscal year 2022, assuming roughly $3 million from the Vie gambling platform, with about $1 million from New Jersey. 

“We believe that this estimate may be conservative should the company carve out a niche in sports betting and that esports gambling develops more rapidly,” Noble noted.

What the boss says:

After GMBL’s gaming license application was accepted by the New Jersey DGE, CEO Grant Johnson discussed the company’s future.

“This is a major step for us in our growth strategy in the US,” Johnson said in a statement “According to a study from data firm Interpret, over 50% of US esports fans said they are likely to engage in esports betting so we are confident that demand will be strong. Securing access to what is currently the largest market for sports betting in the US is very exciting. We are also in discussions with partners and regulators in additional jurisdictions to continue our expansion plans.”

Contact Andrew Kessel at [email protected]

Follow him on Twitter @andrew_kessel

Story by ProactiveInvestors