eBet acquisition an intelligent move

Gaming systems company eBet has made its first acquisition in 2½ years to improve its core offering and bolster its ability to generate recurring revenue.

Gaming systems company eBet (EBT) has made its first acquisition in 2½ years to improve its core offering and bolster its ability to generate recurring revenue.

Management said it signed a deal to buy business intelligence provider CDOL for $350,000 and will pay up to $350,000 more if the business meets certain performance hurdles.

The acquisition fits in nicely with eBet’s back-end management systems that link gaming machines at a venue and will complement its CARD IT offering, which is a stored-value gaming card. The card and CDOL software will improve the venue operator’s ability to profile customers.

CDOL currently produces around $1.2 million in sales a year with 95% recurring revenue, and the purchase will be funded from eBet’s existing cash holdings, which stands at over $3 million.

Building a recurring revenue base is important to a company like eBet, which also sells poker machines through an exclusive distribution agreement with US-listed WMS. Earnings has been somewhat lumpy in the past and management is trying to smooth that out by focusing more on ongoing maintenance contracts instead of one-off sales of machines. Around 53% of eBet’s $21 million first half revenue is recurring.

The last time we highlighted eBet’s earnings potential was in August last year and you can read more about the company here. The stock, which is trading down 1 cent at 2.92 this morning, has nearly doubled in price over the past 12-months.

The last time eBet made an acquisition was in 2011 for Odyssey gaming.