In the realm of modern business, where numbers tell tales of triumphs and plans, Fansunite (FANS.T) is emerging as a protagonist with a promising story to share. The sports betting company has made a paradigm shift from promise to delivery in recent months, trimming back to a high margin, high growth core, and is starting to show the markst why it should be confident going forward.
As we dissect their Q2 fiscal 2023 financial results and peep into their roadmap for the remainder of the year, the narrative unfolds that revenue and gross margins have made significant positive change. During this period, a notable 14% surge in revenues was observed compared to the same quarter last year while gross margins crossed the 60% mark after structural changes.
This strategic shift has borne remarkable fruit—FansUnite boasts a commendable EBITDA of $4.3 million, a remarkable leap from the loss of $11.1 million reported in the corresponding quarter of the prior year; a phoenix-like rise that allows those paying attention to buy in before the masses take notice.
Fansunite CEO Scott Burton (who, full disclosure, serves alongside me on the board of UK football club Altrincham FC) sold Scottish bookmaker McBookie and the Chameleon i-gaming platform for a fat profit, cashing in on non-core assets and steering the company toward those business segments that spill cash. This entails an emphasis on scaling their affiliate business domain, steered by Betting Hero, a segment that has dazzled with significant revenue and fat gross margins to date and relies a lot less on regulatory changes than the Fansunite business model of yore.
In the second quarter of fiscal 2023, total revenue swelled to $5.3 million, and those gross margins scaled an impressive 62% peak—an outstanding 70% increase from the 41% seen in Q2 fiscal 2022.
The EBITDA spotlight is a blinding one, with $4.3 million shining through in Q2 fiscal 2023, in contrast to the previous year’s Q2 where a somber loss of $11.1 million saw the stock price lay down. A net loss of $500,000 in Q2 fiscal 2023 is a striking shift from the net loss of $15.9 million in Q2 fiscal 2022.
That shrinking loss is affordable; unrestricted cash rose to $3.5 million by June 30, 2023, up from $2.9 million at the end of December 2022. As for net working capital, it escalated to a substantial $6.1 million, a complete turnaround from the ($4.2) million figure from December 31, 2022.
The second act, the operational highlights, is equally riveting. Selling McBookie to a third party for $5.5 million in cash, and the Chameleon gaming platform’s source code for $10 million to Betr Holdings Inc., added substantial wind to FansUnite’s sails.
The sports betting scene, like most flash in the pan market trends over the last 5 years, turned out to be a money pit for many, where a patchwork of local regulatory changes promised big returns only for the well-funded giants in the space to burn through most of their cash trying to out-market each other in whatever county, state, or province decided on a given month to allow one form of gambling or another.
Fansunite saw that coming and zigged into affiliate marketing, the sub-sector that saw the most success in the online poker boom of 15 years ago, when online casinos would spend $1000 to attract a customer with $500 to spend. Now they’ve laid their claim to that space with Betting Hero, there’s only one plate they need to keep spinning, instead of 12.
With a newfound strategic direction, FansUnite is set to conquer, with a dazzlingly inexpensive market cap and a ton less risk. Focusing on the lucrative affiliate segment, their aims include growing Betting Hero and Props.com operations while treading into North American markets when regulations embrace sports betting and i-gaming. Betting Hero’s additional revenue streams—the Betting Hero Hotline and Betting Hero Research—are poised for growth in ways that will continue to bang on their margin.
Retail investors, in my opinion, screw up when they chase a rise rather than bendding in before the rise happens. There’s a sense that FANS is starting to leave the station right now and, if you’re going to take a position, this might be the level to chime in.
I’m adding.
— Chris Parry
FULL DISCLOSURE: Fansunite is an Equity.Guru marketing client and we own stock in the company.