Hacksaw Gaming IPO

One of the most interesting developments in the iGaming world lately is the Hacksaw $HACK IPO. No one wrote about it deeply, so let’s see the important tidbits and its implications.

20% of sales came from a cryptocurrency casino, but they only invoice in fiat currencies.

• Their second biggest customer is also 16% of sales.

• The 10 largest customers accounted for 74% of sales. One growth lever here is to sign more customers (they plan to sign 10 each month!), and upsell them more. They probably haven't reached Evolution’s scale, where they practically cannot sign more customers.

• 12 percent of the company's revenue was generated from bets where the company can verify (i) that the player is located in a jurisdiction with a local licensing framework, and (ii) that these bets have been placed with an operator holding such local license. So basically the totally clear, regulated revenue is 12%. But unfortunately, Hacksaw didn’t publish numbers that can be comparable to Evolution figures.

• Geographic share of revenues by end users:

  • South America: 5.47%

  • Europe: 54.09%

  • Asia: 21.66%

  • North America: 15.08%

  • Other: 2.91%

• 30-35% of revenue comes through aggregators.

• 5% revenue from sweepstakes.

• Their number one game, Wanted Dead or a Wild, is responsible for 14% of sales. Try their top games before you invest in the company. Personally, I don't really like their games. For me, it's not screaming “high tech” or “innovation” (unlike NoLimitCity); it's just a 1000th slot game. However, the numbers are there, and they are popular. It's always tough to invest in a product that you are not particularly passionate about, but as an investor, it's your job to differentiate between what you like and what the world likes.

• I calculated the cumulative revenue for their biggest games:

  • Wanted Dead or a Wild: €724m

  • Le Bandit: €220m

  • Chaos Crew: €74m

  • Le Pharaoh: €53m

  • Chaos Crew II: €44.76m

• The cost for each game was a few million euro maximum. The cost to run these is also close to zero. It’s a damn good business.

• Investors are betting on the longevity of Wanted Dead or a Wild and the innovation engine.

• 5% of their revenue comes from their openRGS platform, where they give their tools and distributions to third-party developers, in exchange for some percentage of the GGR. It is a complex topic, and one needs to dive very deep to understand this. I believe it's fine, and I don't see great risk with this business line, and it has a lot of upside potential if slots will become more commoditized and the games will flow through them.

• They have only 170 employees; 76 work in game development, and they started with 56 total employees in 2020. They only released 151 slot titles during the lifetime of the company. It’s a small company. I look at them as a startup, and if I invest in the company, it will be startup investing from my side.

• They claim to have 15 notable competitors in the space. I’m not sure if I would like to invest in a pure-play RNG company. In the live casino space, Evolution has one notable competitor, two if you count Playtech too (sorry, not sorry). Fierce competition, low barriers to entry, and hard-to-differentiate products make it hard to believe that a company can be on the top and growing heavily for 10-20 or even more years. Evolution's struggle in the space also makes me more conservative here. We already saw large brands lose their touch and fall behind the fashion cycles of RNG games.

• 61% of the GGR came from "old" games. So here, investors are clearly betting on the innovation engine and/or geographic expansion. I personally have a hard time believing that their leading games will do very well on a 5-year plus timeframe.

• Hacksaw is able to have a game ready for release in approximately 22 weeks, only using two developers to develop one game. Sounds like good business economics, but on the flip side, it's showing the low barrier to entry and the commoditization of slots.

• They hinted they might do some M&A and might go to other verticals like live casino. My advice to them: Please don’t, for your own sake.

• One potential red flag: They had one month of declining average bet, and they blamed Trump and the tariffs and market instability?

• About the possibilities of their games being copied or stolen: "The risk of infringement is inherent, systematic, and impossible to completely eliminate." Same risks as $EVO.

• They are offering games with high volatility, so the quarterly results can be affected significantly by these random events.

• They are probably around the 3rd place in the slots race, but as an investor, I prefer market leaders. See the book titled ‘Only the Best Will Do’.