Weekend Edition #86
PointsBet says no to Mass, SIS sale, Bally’s new broom, Churchill Downs focuses on HRMs, sector watch – affiliates +More
Good morning. Welcome to the latest Weekender. In today’s edition:
PointsBet declines a license in Massachusetts.
SIS has a £200m sale notice hung up.
Bally’s new boss indicates a new approach for online.
Churchill Downs confirms that HRMs will be its focus for the long term.
Gaming REITs report record earnings.
PointsBet balks in Boston
Having gone through the application process, PointsBet has decided against taking up a license in soon-to-open Massachusetts.
Out of the running: The number of licensees set to hit the starting line on March 10 was reduced to nine yesterday after PointsBet became the latest company to withdraw their application.
In a statement, the company said the decision had been taken to focus on the current 14 live states in the US and Canada, which already provide an “immense TAM for us to go after”.
The statement added a word of thanks to the MGC for their “consideration of our application” and “deeming PointsBet suitable for licensure."
Of the nine that were given the go-ahead yesterday, only seven are set to go live in March, including Barstool, BetMGM, Betr, Caesars, DraftKings, FanDuel and WynnBET. The remaining two licenses, Bally Bet and Fanatics, each reportedly told the Commission they would launch in May.
Another licensee, Betway, has said it will not launch for another year.
Alongside PointsBet, bet365 is also reported to have quit the process early.
Pullback: In its most recent trading update, PointsBet said it had renegotiated its marketing deal with NBC having relinquished its rights to certain national advertising assets and allowing NBC to do a deal around the NFL with BetMGM.
CEO Sam Swanell said at the time that PointsBet was now “focused on certain jurisdictions” and its efforts were not apportioned equally.
Further reading: E+M’s Deal Talk in early January questioned whether PointsBet had enough runway to reach profitability in the US.
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SIS up for sale
The betting content supplier is being primed for a £200m sale.
ITMA: Oakvale Capital has been tasked with finding buyers for the largely bookmaker-owned SIS, according to Sky News. Entain, William Hill and Betfred are on the shareholder list alongside investment trust Caledonia.
Joy of a toy: The company, led by Richard Ames, previously CEO at toy and model manufacturer Hornby, was formed to supply pictures of UK racing to betting shops and still owns the Racing Channel.
Bally’s rethink
New CEO at Bally’s confirms the company is reassessing its OSB platform options.
Not.Works: Former online COO Robeson Reeves, who is set to take over from departing CEO Lee Fenton at the end of March, admitted Bet.Works, bought in the summer of 2021 for $125m, was “not the right platform” for Bally Bet and that the company was evaluating third-party options.
The comments came as the company confirmed the news from the pre-announcement 10 days ago that writedowns related to Bet.Works and the up-for-sale Monkey Knife Fight left it recording a net loss of $476.8m for Q4.
The group confirmed Q4 revenues of $576.7m, up 5% while adj. EBITDA rose 22.8% to $145.8m.
Asked how he would differ from his predecessor, Reeves said he would “drive the data further, making sure that we’re leveraging technology”.
Analysts at Macquarie suggested the “moon shot” of becoming a vertically integrated North American sports-betting operator had come to an end.
JMP noted Bally’s was going through a “transition year to get the product ramped in newer jurisdictions and focus on better aligning the cost structure”.
Play how it lays: The group will focus on its iCasino expertise in the US and Reeves pointed to its launch in New Jersey four months ago as “a perfect example” of playing to Bally’s strengths. Bally’s is also live in Ontario and will soon launch in Pennsylvania.
Outside the US, the Gamesys business enjoyed a 12% rise in revenues in the UK.
Reeves attributed this to market exits and an increase in its share of wallet from UK players.
National brand: Having closed its acquisition of the Tropicana in Las Vegas in September, retail president George Papanier said owning the property was part of Bally’s plan to be a “national company”. He added that the group was evaluating development opportunities there, but was “not interested in standing other people's mistakes”.
Leaseback pushback: With regard to its $1.7bn Chicago resort project, Papanier said the group was “comfortable” with its funding arrangements and would “always view our land bank as a tool to grow the business if it’s the right opportunity”.
ICYMI
iCasiNO: This week on Compliance+More, we reported Indiana online gaming legislation bit the dust, while the efforts in New York also appear doomed. In Earnings+More’s latest edition of Due Diligence, the arguments in favor of tax and regulatory changes were also examined.
Also in Compliance+More this week:
The UK VIP tangle.
UK casino closures show a sector struggling ahead of the White Paper release.
On Earnings+More this week:
DraftKings’s share price is up 85% in the year-to-date.
Caesars says Las Vegas is having a moment.
Churchill Downs keeps on going
After swallowing its largest ever transaction last year, Churchill Downs said it wasn’t slowing down this year.
All you can eat: CEO Bill Carstanjen said Churchill Downs had “built and scaled” the business and was set to “digest and harvest” the benefits from the $2.75bn acquisition of Peninsula Pacific, which completed in November.
While he said there was no guarantee of the company successfully landing its pipeline of potential deals, it would “keep going at it”.
Carstanjen said the five-to-10-year focus for the company was the HRM market, with the PPE deal offering a route to further growth opportunities.
Revenue for 2022 came in at $1.81bn, representing a 13% uplift, while FY22 adj. EBITDA was up 22% at $764m.
After largely pulling back from the online battlefield, Carstenjen noted Churchill Downs had limited the hit to EBITDA from online in 2022 to €1m.
History lesson: Analysts at JMP suggested the HRM story was “one of the most impressive” across the gaming space, noting its contribution to total revenues at Churchill Downs was now 22% from just 7% in 2019.
They added that commentary around the upcoming Kentucky Derby was “encouraging”.
REITs report
Earnings from gaming REIT giants VICI and GLP hit the tapes yesterday.
The 101ers: Buoyant numbers came from the leading lights of the gaming REIT sector, with VICI showing Q4 revenue growth of 101% to $770m and GLP also achieving record revenues in the last three months of 2022 of $336.4m, up 13%.
The team at Jefferies noted VICI’s activity since quarter-end, including completing the buyout of the MGM Grand and Mandalay Bay properties, the deal for four properties in Canada and the raising of $5bn in new notes.
GLP has also been busy, completing the $635m Bally’s transaction, becoming, as JMP suggested, “another prominent tenant”.
Caesars analyst takes
On the level: The team at B Riley suggested forecasts for EBITDA at Caesars Las Vegas operators to be essentially flat in 2023 were too low. “We struggle with consensus,” the team added, suggesting the strengthening group picture, new events (including F1) and the ongoing return of older visitors and international traffic bodes well for the year.
Online analysts at CBRE said Caesars long-term target of an annualized EBITDA of ~$550m “now seems very feasible”.
They suggested further growth would come from the new standalone iCasino app, branded live tables and marketing segmentation similar to what the company has achieved in OSB.
Earnings in brief
Galaxy Entertainment: The Macau operator said it was “cautiously optimistic” after a solid performance from CNY. Q4 net revenue was down 39% to HK$2.9bn while the company registered an adj. EBITDA loss of HK$200m, an improvement on the HK$600m loss in Q3.
The Lottery Corporation said its efforts to develop omni-channel products had led to a strong increase in active customers as the newly demerged entity reported a 7.5% rise in revenues to A$1.9bn and a 15.8% leap in EBITDA to A$409.4m in H123.
CIRSA: Land-based casino was the driver as CIRSA saw revenues rise 31% to €496m and EBITDA jumped 28% to €154.6m. Highlights included the performance of the E-Play24 brand and expansion in LatAm.
Tote operator Webis said torrential rainfall in northern California and race cancellations had led to a 4% drop in handle to $38.2m and a net loss of $330k in H1. The group said the B2B market was “getting tougher, with certain operators willing to take wagers at an almost zero percent margin”, and will focus on its B2C activities.
Sector watch – affiliates
Big week: With Better Collective now owning 5% of Catena Media, the two produced their results within 12 hours of each other this week as rumors swirled about BC’s intentions for its erstwhile super-affiliate peer.
Jewel in the crown: The For Sale sign was effectively hung up on Catena late last year when it said it had been approached about selling all or part of the business.
This came after it sold the Ask Gamblers business for €45m to rival GiG.
The likelihood is that Better Collective is enticed by the prospect of owning Catena’s North American-focused assets, which produced €21.5m of revenue in Q4 or 78% of total revenues of €27.4m.
BC’s own US business, meanwhile, saw Q4 revenues come in at €34m.
What do I get? Catena’s assets include the market-leading LegalSportsReport.com and Lineups, as well as the more recent assets gained from the i15 Media acquisition. However, an unspecified proportion of its North American revenues came from its relationship with Virtual Gaming Worlds, which runs the social casino brand Chumba.
Real riches: VGW is an Australia-headquartered and US-focused company that runs social casinos on a sweepstake model.
The group said it recorded revenues of A$3bn and operating profits rose more than 50% to A$550m in FY22.
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Newslines
Winning ugly: Elys Game Technology has announced a deal to run a retail sportsbook out of The Ugly Mug restaurant in Washington, DC.
GiG will expand its relationship with News Corp. into Ireland.
Hacksaw Gaming will supply its online slots and scratchcard content to William Hill.
What we’re reading
Huddle Up on why Penn bought Barstool for $551m.
Calendar
Feb 28: The Data Month, IGT, Codere, Endeavor
Mar 1: Light & Wonder, Golden Entertainment, Rush Street
Mar 2: Flutter FY
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