hello I'm Stephanie here with the ga huddle and I'm also here with juel Simkins today who is the managing director of hulahan Loki's Technology Group and the head of their gaming sector we're here to talk to him about a recent report that was produced by hulahan luki and the first question we have is what kind of research does the firm do each year on the gaming sector well I and I've been in the gaming industry for roughly 25 years as an investment banker as well an equity research analyst so I'd say a lot of my research is dayto day hand toand combat you know talking to CEOs CFOs Boards of directors in the industry obviously following all the different trade rags and information really also I think you know someone that's going to cover this sector has to be intimately aware and involved in the product and I I will confess uh I live in New Jersey and I've got about probably 30 sports betting and online gaming apps on my phone so I think you have to understand the product to really uh cover the industry and have your finger on the pulse you'll be well placed to answer our next questions then if you're a sports betting fan um we were going to talk about how we've seen some sports betting m&a this year most notably the fact that Fanatics acquired points bet and recently as part of NFL Week 1 it was the third place most downloaded sports betting app was that a surprise to you did you expect that yeah not not a huge surprise I mean listen there's a lot of momentum overall in the industry I think right now as it speaks we're in week five probably by time this records week seven of the NFL but you know all the channel checks and data we've been doing have been really positive in terms of momentum for the broader industry so it doesn't surprise me a lot of these new and emerging apps are getting a lot of traction particularly given some of the marketing and and Buzz that's out there in that big push in the leadup to the season great and what kind of other m&a do you expect to see either later this year or next year either in sports betting or the gaming sector as a whole yeah I would say you know by the velocity of the phone calls that I'm getting over the last couple of months as some of these deals have been announced you know I think everybody is really looking at their business and looking at different opportunities you know those that maybe are capital constrained um are pro possibly looking for an exit or alternatives for their business those that are looking to kind of plug in and fill different holes in their portfolio or sort of their capabilities amongst their broader Tech stack and that have access to Capital liquidity are looking at some of the I'd say sifting through some of the wreckage that we've seen in that 2020 2021 Fallout of lot of capital chasing the space folks potentially burning through capital and again being a sort of a a more difficult position of what can they acquire attractively so uh we think there's going to be a lot of uh additional m&a in space and things are certainly heating up but it's certainly going to be a little bit more episodic and really dependent upon different companies needs and where they sit in the ecosystem within gaming but overall activity is certainly uh accelerating at this point definitely as far as uh new players and different companies in the industry as well we've seen ESPN bet uh come onto the scene too how do you think they're going to do especially with the big Network Media power they have yeah listen ESPN is a very uh powerful brand it's obviously been around a long time it has a huge following I would say it certainly skews a little bit to a more older demographic right we all follow the news around cord cutting and and the structural changes that are happening to cable and broader media so I'd say on one hand I I think we're interest to see how things shake out just given their brand given their reach given the consumer footprint and sort of how they potentially you know tie in With Pen National um or pen entertainment um going forward um I would say we are still somewhat skeptical right it is a very competitive industry you've obviously seen dra the big you know three DraftKings B MGM FanDuel um gain a lot of market share to dat so sort of coming in as sort of the the new entrance despite their scale and reach you're going to have to put a lot of marketing and customer acquisition behind developing that brand people aren't necessarily going to show up or switch or add a third fourth fifth or Sports fifth sports book I'm probably an outlier with 20 30 sports that's my day job but most people are really uh you know going to play three or four apps and getting in that them to sort of Select that next one and what's in it for me as a consumer you know easier said than done but you know again um you look at this industry where we're only call it five years post paspa we're still very young industry here at least in the US from a regulated perspective so it is still you know if I was going to put it in baseball terms you know second or third inning uh of this industry sure I was gonna say I wonder if it'll be app number 31 on your phone um one of the apps that's probably definitely there uh DraftKings is working on its race to profitability and we did see some improvement in Q2 uh what do you think about how they're going to do in future yeah let's and I I spent you know the first two-thirds of my career as an equity research analyst so I used to be a talking head going on things like CNBC and Bloomberg talking about stocks and uh talking to institutional investors whether it's your Wellington's Fidelity TR and and hedge funds and I think listen they got the message that you know burning you know a ton of cash without any hope of turning a profit was not going to was not going to be the right message to the investment community so I think their you know turn and their performance really reflects you know moment around some of their products like same game parlay reflects more of a dis discipline around customer acquisition and and also probably more of a focus on retention you know they certainly are benefiting from the fact that they are operating in a number of states they've got iig gaming as well as a number of states and they listen to their credit you know they have built a a national brand uh you know one personal analogy I just came back from a trip to Boston to visit um some clients up there and I happen to be at the Red Sox game and you know given that had their app on my phone I was able to instant in instantly open up the app place a w place a couple of Wagers unfortunately two of them were wrong I had the under and I had the Red Sox winning but you know the ability to go seamlessly from state to state and not really have to worry from a consumer perspective whether I can place a vet and just open up the app and play um certainly gives them a lot of ease some of their competitors are maybe not operating in other states or in every state or don't um you know have the brand reach right so they really are you know top of mine brand and and we'll see what happens over the next couple of quarters or years in terms of that pivot towards profitability and whether that's sustainable or not I'm sorry about your Red Sox loss it's it's okay I'm a Phillies fan but I figure him I'm at the game I might as well went in Boston exactly I'm wrong um the hulahan Loki report actually mentions that tribal operators could potentially supplant traditional commercial gaming and I wondered what advantages you think the Native American trimes have have there too well you know first and foremost you know they are uh most of them have significant access to Capital right you look at some of the tribes that are operating whether in California Texas Florida um you know these are very powerful organizations that are incredibly sophisticated have come up the learning curve over the last 20 30 years have very seasoned and experienced management teams right so we were talking earlier about access to Capital and kind of the Hales and the Have Nots right these are essentially think of them as Sovereign Nations and you know think of them as uh you know Middle Eastern Oil you know Deep Pockets with lots of resources uh as well as patience and really a longterm view I would say some groups are more Progressive than others some are more worried about I'd say protecting their Turf and and not having you know digital um competition right so we saw a very cloudy and mixed message in California last year around the initiative to legalize sports betting um with that said there are tribes that we talk to on a daily basis that are very Progressive that are are already operating in the digital gaming space or like you have a group like The mohagen Tribe in Connecticut that's one of the leading operators in the space and has a very experienced team um running their digital business right so groups like that are looking for m&a are looking for uh you know ways to enhance their technology offering so I think it's it's there's certainly an unknown at this point some of these groups in terms of what their play is longer term but I think you know gradually over the next couple years um they are going to be some of the most active acquirers in the space um they are very active in the landbased traditional gaming side whether it's seol or porch Creek and others um and I would expect really no different uh as kind of the industry evolves over the next couple of years okay our uh final question for you today is possibly a fun one or a challenging one as someone who's a a sports better yourself uh if you were to invest in a sports betting operator stock who would you buy from and why uh you know I would would prefer to stay away from some of the individual stock Halls at this point I I do think you know there are some interesting uh plays out there I think if I was an investor in the space right now some of the B2B providers out there that really I'd say ultimately benefit from the rising tide right it's hard to you know sit here and say okay DraftKings is going to be the winner FanDuel is going to be the winner points bet Rush Street some of the kind of you know individual publicly traded operators right obviously you know points bet ultimately monetized um you know to Fanatics I do think you know there's some interesting plays out there whether it's the Geniuses or The Radars right who will benefit from the rising tide right whether it's whether OSB Works DFS sweep Stakes all the other gaming products out there make it or not um this industry will only continue to grow and those that have access to the data and the rights that is highly valuable they obviously have to figure out ways to continue to monetize their products and services but I think you know be probably ultimately is a longer term and maybe less volatile winner well thank you so much for joining us today and we will all look forward to hulahan L's next report all right was a pleasure thank you very much thank you