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Score Media and Gaming (SCR.TO)(SCR) saw legal sports betting on its platform surge 46 per cent on a quarterly basis. The Toronto-based company is expanding its gambling business into a growing number of American states, as anticipation builds for legal single-sports in Canada.
The media and gaming company, known as theScore, reported a net loss of $17.57 million after the closing bell on Tuesday, compared to $10.45 million in the same quarter last year.
The company booked $5.59 million in revenue for the three-months ended Feb. 28, and $12.9 million in negative adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA). Analysts polled by Bloomberg expected the company to report $8.98 million in revenue, and an adjusted EBITDA loss of $8.26 million in its second quarter.
While theScore significantly missed analyst expectations, its “theScore Bet” app-based sports-gambling platform saw record betting action. theScore’s gaming handle, the amount of money in wagers handled in the quarter, climbed to $81.6 million from $55.8 million in the previous period.
“theScore had a very active and productive fiscal second quarter, including quarterly record results across our gaming and media operations,” John Levy, theScore’s chairman and CEO, told analysts on a post-earnings conference call. "Consumers prefer the convenience of being able to bet anywhere and at any time via a mobile app."
However, net gaming revenue in the second quarter amounted to a $2.4 million loss, after subtracting the cost of free bets, promotional costs, bonuses, and fair value adjustments on open bets. The loss was partially offset by stronger quarterly revenue from the company's sports and esports media divisions.
With single-sports gambling illegal in Canada, theScore has placed significant focus on American states where the pastime is allowed. The company has launched its platform in New Jersey, Colorado, Indiana and Iowa. It also listed its stock on the Nasdaq in February, raising US$186.3 million.
"theScore is one of the few ways for investors to invest in a pure-play mobile sports betting operator with access to emerging opportunities in both the U.S. and Canada, and the only operator with unique and fully integrated sports media and sports betting ecosystem," Levy said.
In Canada, the company has been a vocal backer of Bill C-218, legislation that would amend the Criminal Code to permit provinces to allow bets on individual sporting events. Most legal sports bets in Canada must include at least two events, known as parlay wagering. Currently, horse races are the only single sporting event that can be bet on legally.
While the legislation has faced minimal opposition, Levy appeared before the House of Commons’ Standing Committee on Justice and Human Rights last month to speak in its favour. The bill has returned to the House for a third reading, before potentially moving to the Senate for final approval. Levy told members that “time is of the essence” to prevent billions from flowing from Canadian betters to unregulated and off-shore gambling platforms.
In February, Deloitte Canada projected that within five years of legalization, Canadian sports betting could grow from $500 million to nearly $28 billion in legal-market wagering.
Levy said Ontario has been the most proactive province in preparation for legal single-sports gambling. The Ford government has indicated that it will not cap the number of operators that it licences, as it seeks to establish a competitive market that will serve sports gamblers and limit social risk.
Levy hopes to leverage loyalty in a market where his company formally operated a sports television network, before selling it to Rogers Communications (RCI-B.TO) in 2012 for $167 million.
"Ontario is home base for theScore. We have a tremendous user base here. We have a brand and a legacy relationship here with customers that goes back 20 years to our TV business. The kids who were watching Tim & Sid on our TV network when they were 12 years old are now 25, 30 years old, engaging with our app and betting on sports," Levy said.
"We just can't wait to unleash the power of that."
Jeff Lagerquist is a senior reporter at Yahoo Finance Canada. Follow him on Twitter @jefflagerquist.