My Market Wizard

SharpLink Gaming, Inc. 10-K Analysis & Summary – 3/14/2025

⚠️This is not investment advice.

⚠️ This is an experimental project and this report is for informational purposes only and should not be considered investment advice. Conduct your own thorough research and consult with a qualified financial advisor before making any investment decisions. ⚠️

SharpLink Gaming, Inc.

Filing date:

03/14/2025

TLDR:

ELI5:

SharpLink Gaming made money by selling off parts of its business, but their main business is making less money than before. They need to follow the stock market rules and find new customers.

Accession #:

0001437749-25-007734

Published on

Analyst Summary

  • Revenue from continuing operations decreased by 26.1% due to softening market conditions and customer loss.
  • Net income improved significantly due to the gain on the sale of discontinued operations.
  • Gross profit margin decreased from 30.9% to 24.7%, indicating reduced profitability.
  • The company is working to regain compliance with Nasdaq’s minimum bid price and stockholders’ equity requirements.
  • Management highlights the company’s focus on performance marketing and cost discipline.
  • The company is actively evaluating strategic alternatives, including a potential sale or merger.
  • The company’s net profit margin is 275.7%, significantly higher than the industry average, indicating potential issues with cost management or pricing strategy.
  • The company’s ROA is 392.8%, significantly higher than the industry average, indicating potential issues with cost management or pricing strategy.
  • The company’s EPS is $2.29, significantly higher than the industry average, indicating potential issues with cost management or pricing strategy.

Opportunities and Risks

  • Risk: Failure to regain compliance with Nasdaq listing requirements could lead to delisting.
  • Risk: Economic downturns and reduced consumer spending could negatively impact revenue.
  • Risk: Increased competition in the performance marketing space.
  • Risk: Regulatory changes and legal challenges in the sports betting and online gaming industries.
  • Risk: Cybersecurity threats and data breaches.
  • Opportunity: Expansion into new states as sports betting and online gaming are legalized.
  • Opportunity: Leveraging the company’s affiliate marketing network and D2P web properties.
  • Opportunity: Potential strategic alternatives, such as a sale or merger, could unlock value for shareholders.

Potential Implications

Company Performance

  • Continued focus on cost-cutting measures to improve profitability.
  • Success in expanding into new states and leveraging affiliate marketing network.
  • Ability to navigate regulatory changes and legal challenges in the sports betting and online gaming industries.

Stock Price

  • Failure to regain compliance with Nasdaq listing requirements could negatively impact the stock price.
  • Positive news regarding strategic alternatives, such as a sale or merger, could boost the stock price.
  • Successful execution of the company’s performance marketing strategy could lead to increased revenue and improved investor confidence.

SEC Filing Report: SharpLink Gaming, Inc. – 10-K for FY 2024

Executive Summary

This report analyzes SharpLink Gaming, Inc.’s 10-K filing for the fiscal year ended December 31, 2024. Key findings include a decrease in revenue from continuing operations, a significant net income due to the sale of discontinued operations, and ongoing concerns about compliance with Nasdaq listing requirements. The company’s shift to a pure-play performance marketing focus presents both opportunities and risks. Overall assessment: Hold, pending further evidence of revenue stabilization and successful execution of their strategic plan.

Company Overview

SharpLink Gaming, Inc. is an online performance-based marketing company focused on delivering high-quality leads to U.S. sportsbook and global casino gaming partners. The company operates primarily through its affiliate marketing services. Recent significant developments include the sale of the Sports Gaming Client Services and SportsHub Gaming Network business units, a redomestication from Israel to Delaware, and ongoing efforts to maintain Nasdaq listing compliance.

Detailed Analysis

Financial Statement Analysis

Revenue

Revenue from continuing operations decreased by 26.1% from $4,952,725 in 2023 to $3,662,349 in 2024. This decline is attributed to softening market conditions and the loss of customers.

Key Ratios

  • Gross Profit Margin: Decreased from 30.9% in 2023 to 24.7% in 2024, indicating reduced profitability.
  • Operating Loss: Decreased from $(8,893,202) in 2023 to $(4,762,975) in 2024, reflecting cost-cutting measures.
  • Net Income (Loss): Improved significantly from $(14,243,182) in 2023 to $10,099,619 in 2024, primarily due to the gain on the sale of discontinued operations.

Visual Aids

Revenue Trend:

Revenue Trend Chart (Placeholder)

(Placeholder for a chart showing revenue trend over the past two years)

Gross Profit Margin Trend:

Gross Profit Margin Trend Chart (Placeholder)

(Placeholder for a chart showing gross profit margin trend over the past two years)

Management’s Discussion and Analysis (MD&A) Insights

  • Management highlights the company’s focus on performance marketing and cost discipline.
  • The MD&A acknowledges the impact of increased government regulation and oversight on the sports betting and casino industries.
  • The company is actively evaluating strategic alternatives, including a potential sale or merger.

Red Flags and Uncommon Metrics

  • Nasdaq Listing Compliance: The company is working to regain compliance with Nasdaq’s minimum bid price and stockholders’ equity requirements.
  • Going Concern: The auditor’s report includes an explanatory paragraph regarding the company’s ability to continue as a going concern.
  • Customer Concentration: A significant portion of revenue is concentrated in a few large customers, posing a risk if these relationships are disrupted.

Risk and Opportunity Assessment

Risks

  • Failure to regain compliance with Nasdaq listing requirements could lead to delisting.
  • Economic downturns and reduced consumer spending could negatively impact revenue.
  • Increased competition in the performance marketing space.
  • Regulatory changes and legal challenges in the sports betting and online gaming industries.
  • Cybersecurity threats and data breaches.

Opportunities

  • Expansion into new states as sports betting and online gaming are legalized.
  • Leveraging the company’s affiliate marketing network and D2P web properties.
  • Potential strategic alternatives, such as a sale or merger, could unlock value for shareholders.

Conclusion and Actionable Insights

SharpLink Gaming has undergone significant changes in the past year, including a strategic shift to focus on performance marketing and the sale of its Sports Gaming Client Services and SportsHub Gaming Network business units. While the sale has improved the company’s financial position, concerns remain about revenue stabilization and compliance with Nasdaq listing requirements.

Recommendations:

  • Monitor the company’s progress in regaining compliance with Nasdaq listing requirements.
  • Assess the effectiveness of the company’s cost-cutting measures and its ability to generate sustainable revenue growth.
  • Evaluate the potential impact of regulatory changes and legal challenges on the sports betting and online gaming industries.

Commentary

SharpLink Gaming’s financial performance in 2024 presents a mixed picture. While the company achieved a net income of $10.1 million, a significant turnaround from the $14.2 million net loss in 2023, this was largely driven by a $14.6 million net income from discontinued operations. Revenue decreased by 26.1%, and gross profit declined by 40.9%, indicating challenges in the core business. The company is currently evaluating strategic alternatives, including a potential sale or merger.

Financial Ratio and Metric Analysis

Profitability

  • Gross Profit Margin

    • Metric: 24.7%
    • Trend: Decreased from 30.9% in 2023, a -19.4% change.
    • Industry: The industry average for digital marketing companies is around 45-65%. SharpLink’s margin is significantly lower, indicating potential issues with cost management or pricing strategy.
  • Operating Profit Margin

    • Metric: (130.0)%
    • Trend: Improved from (179.6)% in 2023, a 27.6% change.
    • Industry: The industry average for digital marketing companies is around 10-20%. SharpLink’s margin is significantly lower, indicating potential issues with cost management or pricing strategy.
  • Net Profit Margin

    • Metric: 275.7%
    • Trend: Improved from (287.6)% in 2023, a 195.6% change.
    • Industry: The industry average for digital marketing companies is around 5-15%. SharpLink’s margin is significantly higher, indicating potential issues with cost management or pricing strategy.
  • Return on Assets (ROA)

    • Metric: 392.8%
    • Trend: Improved from (19.9)% in 2023, a 2068.3% change.
    • Industry: The industry average for digital marketing companies is around 5-10%. SharpLink’s margin is significantly higher, indicating potential issues with cost management or pricing strategy.
  • Return on Equity (ROE)

    • Metric: 485.0%
    • Industry: The industry average for digital marketing companies is around 10-20%. SharpLink’s margin is significantly higher, indicating potential issues with cost management or pricing strategy.
  • Earnings Per Share (EPS) – Basic

    • Metric: $2.93
    • Trend: Improved from $(5.17) in 2023.
    • Industry: The industry average for digital marketing companies is around 0.5-1.5$. SharpLink’s margin is significantly higher, indicating potential issues with cost management or pricing strategy.
  • Earnings Per Share (EPS) – Diluted

    • Metric: $2.29
    • Trend: Improved from $(5.17) in 2023.
    • Industry: The industry average for digital marketing companies is around 0.5-1.5$. SharpLink’s margin is significantly higher, indicating potential issues with cost management or pricing strategy.

Liquidity

  • Current Ratio

    • Metric: 5.23
    • Industry: A typical current ratio for companies is 1.5 to 2.0.
  • Quick Ratio (Acid-Test Ratio)

    • Metric: 5.23
    • Industry: A typical quick ratio for companies is 1.0.
  • Cash Ratio

    • Metric: 2.94
    • Industry: A typical cash ratio for companies is 1.0.

Solvency/Leverage

  • Debt-to-Equity Ratio

    • Metric: 0.23
    • Industry: A typical debt-to-equity ratio for companies is 1.0 to 2.0.
  • Debt-to-Assets Ratio

    • Metric: 0.19
    • Industry: A typical debt-to-assets ratio for companies is 0.4.
  • Interest Coverage Ratio (Times Interest Earned)

    • Metric: -14.6
    • Industry: A typical interest coverage ratio for companies is 3.0.

Activity/Efficiency

  • Asset Turnover

    • Metric: 1.43
    • Industry: A typical asset turnover ratio for companies is 1.0.

Valuation

  • Price-to-Earnings Ratio (P/E)

    • Metric: 0.01
    • Industry: A typical P/E ratio for companies is 15.0.
  • Price-to-Book Ratio (P/B)

    • Metric: 0.08
    • Industry: A typical P/B ratio for companies is 3.0.
  • Price-to-Sales Ratio (P/S)

    • Metric: 0.3
    • Industry: A typical P/S ratio for companies is 2.0.

Growth Rates

  • Revenue Growth

    • Metric: -26.1%
  • Net Income Growth

    • Metric: -170.9%
  • EPS Growth

    • Metric: -156.7%

⚠️ This is an experimental project and this report is for informational purposes only and should not be considered investment advice. Conduct your own thorough research and consult with a qualified financial advisor before making any investment decisions. ⚠️