Following a review of the company’s operations in the US, 888 agreed to sell certain B2C assets.
Hard Rock Digital has not disclosed any details about the assets it will be purchasing, or financial terms. The 888 Group did say that the transaction would be completed in stages.
The sale of 888’s shares will take place in the fourth quarter this year, subject to regulatory approvals.
This sale deal comes only a few weeks after the launch of 888’s strategic review. The process started in March when 888 announced it was looking at “potential alternative” ways to increase value for its group.
During the review, partial or complete sales of US B2C businesses were considered. This action won’t affect the group’s existing B2B agreements in the US.
The group’s gross margin was less in the US, according to 888. It added that this reflects the “significant” costs associated with operating on the market, including market fees, licences, and duties.
The current structure of 888’s business is not optimized for returns.
Exiting the US in a controlled manner
At the time of launching its review, 888 stated that it was also considering a controlled withdrawal from US B2C activities. Hard Rock Digital has sold only a few assets to 888, and this is now the case.
In order to exit the assets of its remaining B2C US operations in a controlled manner, 888 began a process. By the end of this calendar year, the group planned to completely cease these operations. This is also subject to approvals by regulatory agencies.
The company said that exiting US B2C will result in an annualised EBITDA benefit of around PS25.0m ($31.6m/EUR29.2m). From 2025, 888 plans to invest PS10.0m in growth and value-creation initiatives.
In relation to US exit, the operator anticipates net cash costs one-off of around PS40m. It said that this includes a brand license termination fee, which was already announced. Payments will be made from 2024 to 2029.
Sports Illustrated: Stepping aside
The operator is currently operating in four US states, Colorado, Michigan New Jersey, and Virginia. Only one state has the real 888 casino, which is located in New Jersey.
Other operations are operated in partnership with Authentic Brands Group, and Sports Illustrated as a brand. SI Sportsbook, SI Casino and SI Sportsbook are all located in Michigan.
According to the Strategic Review, both 888 and its partner have agreed that this partnership will be terminated. The 888 Group will provide $25.0m from its available funds, and an additional $25.0m over the next five years.
888 set for major rebrand
In the group’s financial goals announced last week, the combined net effect of selling and exiting US B2C was already included.
They were also released as 888 published its full-year 2023 results. The revenue increased from PS1.24bn up to PS1.70bn. Adjusted EBITDA rose from PS217.9m down to PS308,3m. The net loss also decreased from PS120.5m down to PS56.4m.
Sean Wilkins, the chief financial officer of the company, admitted that the results were “disappointing” in a conference call to discuss the earnings. Per Widerstrom, the CEO of the company, praised the “new chapter” that the rebranding proposal brought.
Unexpectedly, 888 announced that Evoke will be rebranded, subject to shareholder approval during the next AGM. This will, according to 888, “better represent the strength of the multi-brand operation model”.
Widerstrom said that the proposed rebranding represents a “new dawn” for business. Widerstrom said that while “888” has “great brands for customers”, Evoke will create a clear direction for the business.
Reset 888 Value Creation Plan
This week, a new Value Creation Plan was also announced. Widerstrom, along with the leadership team of senior executives will implement this plan in order to develop a “long-term strategy for success”.
The group will “reset its operating model” with a view to achieving PS30m in additional cost savings per year. Six strategic initiatives will be announced by 888 to help it in its effort.
Two categories will be used to simplify the market approach. First, the core markets are covered (UK, Italy Spain, and Denmark) and second, the markets will be optimised with an increased focus on investment.
The group will aim to increase efficiency by increasing the adjusted EBITDA-margin by c100 basis point per year. The group also aims to have a more disciplined approach in capital allocation with leverage below 3.5x at the end of 2020.
