Gaming Sector Insights by Juel Simkins

Introduction

• Presenter: Stephanie from GA Huddle
• Guest: Juel Simkins, Managing Director of Houlihan Lokey's Technology Group, Head of Gaming Sector
• Topic: Recent report by Houlihan Lokey on the gaming sector

Research Methods in Gaming

• Experience: 25 years in gaming industry
  • Roles include investment banker, equity research analyst
• Research Approach: Hand-to-hand combat
  • Regular conversations with CEOs, CFOs, Boards
  • Keeps up with trade publications
  • User experience with gaming products (e.g., sports betting apps)

Sports Betting Mergers & Acquisitions (M&A)

• Fanatics' Acquisition of PointsBet:
  • No surprise; positive momentum in the industry
  • Early data from NFL season shows high engagement
• M&A Trends:
  • Increased activity anticipated
  • Smaller entities may look for exits due to capital constraints
  • Larger entities seeking to fill gaps in their tech stack
  • Sifting through the fallout from 2020-2021
  • Activity expected to be episodic and based on specific needs

New Entrants: ESPN Bet

• ESPN's Entry into Sports Betting:
  • Strong brand with a wide reach
  • Potential challenges due to older demographic and competitive landscape
  • Likely to require significant marketing investment
  • Critical to integrate with Penn National/Entertainment
• Market Standing:
  • Only 5 years post-PASPA; industry in early stages (2nd or 3rd inning)

DraftKings' Profitability Race

• Strategic Shift:
  • More discipline around cash burn and customer acquisition
  • Success with products like same-game parlay
  • Seamless state-to-state user experience gives competitive advantage
• National Brand Presence:
  • Operating in multiple states with iGaming
  • Focus on profitability and growth sustainability

Role of Tribal Operators

• Tribal Strengths:
  • Significant access to capital
  • Experienced management teams
  • Potential to supplant traditional commercial gaming
  • Gradual increase in M&A activity expected
• Examples:
  • Mohican Tribe in Connecticut, Soal, Poarch Creek

Investment Insights

• Preferred Stocks:
  • Recommends B2B providers like Genius Sports, Sportradar
  • These entities benefit from overall industry growth
  • Less volatile compared to individual sports betting apps

Conclusion

• Upcoming Reports:
  • Anticipation for Houlihan Lokey's future insights on gaming

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