MGM continues to build

MGM's expansion plans on all fronts, analysts react +More

May 02, 2023

Good morning. On today’s Earnings Extra agenda:

Breaking: Bally’s signs up to Kambi and White Hat.
MGM Resorts’ confirms Push deal, shows Q1 earnings booming.
Plus, VICI’S earnings ahead of today’s earning call.

Breaking news

Bally’s signs with Kambi and White Hat: Kambi and White Hat Gaming will supply OSB and PAM solutions to Bally's as the operator junks its previous in-house solutions.

Bally’s this morning said it will integrate Kambi’s betting and White Hat’s solutions to “support the relaunch” of its OSB platform Bally Bet in seven states and four retail gaming locations by the end of 2023.
Back to the source: Bally's will have an “option to acquire” part of Kambi's online and retail technology source code should certain key performance metrics be met.

The exercise of the option would see both groups enter into a separate long-term outsourcing agreement in relation to Kambi's range of modularized services.
It provides a boost for Kambi which has in recent years lost both DraftKings and Penn/Barstool as clients which have each moved to their own in-house tech stacks.
PAM oil: White Hat Gaming will supply its cashier, RGS, managed services and wallet solutions as part of its PAM product along with OSB and iCasino content.
The Bally’s agreement follows recent partnerships for White Hat with WynnBet and BetMGM.
Kambi was up nearly 10% in early trading.

MGM Pushes on

MGM confirms Push Gaming acquisition as future projects point to global focus.

Pushed up the agenda: Talking about the deal to buy a majority stake in Push Gaming, CEO Bill Hornbucke said MGM is “building a fundamentally strong business” in tandem with LeoVegas via its bolt-on acquisition strategy. MGM didn’t confirm reports in late April that the deal, which is expected to complete in Q3, was worth €150m.

Asked about whether MGM was contemplating more transformative M&A, Hornbuckle said the strategy for future deals remained focused on three key pillars.
“We want to get into the content business and ultimately transferring that from digital to bricks and mortar and vice versa,” he added.
Second, MGM is “interested” in live dealer. “There is nothing that suggests that, given the nature of our business, we should not be in that business.”
“And ultimately, we would like our own sports-betting technology for the rest of the world.”
“We've looked at everything,” he added. “There are some things that would be substantive out there but it's too early to tell.”

FCUK: Notably, following the release of the White Paper on gambling in the UK, Hornbuckle suggested that via LeoVegas the market was one that would be concentrated on release in the UK,

“For us, with LeoVegas, the opportunity presents itself to look into that market and push on,” he added.

That old thing? As previously broadcast by JV partner Entain, BetMGM saw “improved economics” with the business on track to hit 2023 revenue guidance of between $1.8bn-$2bn and to be EBITDA profitable by H2. “We’ve all become a lot more disciplined,” Hornbuckle said.

Q1 revenues as communicated came in at $476m, up 76%. MGM’s losses hit $82m which CFO Jonathan Halkyard said were the peak expected quarterly losses for the year.
While extolling the 28% leading iCasino market share, Hornbuckle noted the competition was trying to catch up.
“We've got another couple of years to mature this business and see where it ends up,” he added. “And then we'll take it from there.”

Been around the world and I, I, I: Hornbuckle said the recent news about the certification of the Osaka, Japan project was a testament to MGM’s “perseverance” as it paves the way to the company breaking ground on the ~$10bn project by late next year or early 2024.

With a five-year build, he said the opening was being penciled in for the first half of 2030.
Hornbuckle also noted that plans for New York remained on track with the company hoping to submit its plans to expand its existing Empire City in Yonkers property in the summer.
Total spend on the project, including the licensing fee, would be ~$2bn and Halkyard hinted that sale and leaseback of the property might be on the cards.
“As we plan for that project and think about the ways in which we will finance it and the best way to allocate our capital, doing a sale-leaseback with VICI at some point certainly could make a lot of sense for us.”

Boom-bang-a-bang: Earnings in Q1 were boosted by the return of MGM’s Macau operations to something like its pre-pandemic bulk. GGR at MGM China was at 78% of 2019 levels or $663m which bettered the ~50% of 2019 GGR hit marketwide.

Adj. EBITDA of $169m for MGM China, meanwhile, was at 88% of 2019 levels.
“If you walk around the street, you can already see the pre-COVID hustle and bustle atmosphere has reemerged,” said Hubert Wang, COO at MGM China.

Brass in pocket: Halkyard said the return to normalcy in Macau had helped push Q1 cash flow across the business to $564m less capex.

“We're in an enviable position financially,” Halkyard added with net cash at quarter end of $1.3bn.

Blinding lights: Total revenues rose 36% to $3.9bn with the Las Vegas Strip properties contributing $2.2bn (up 31%) of net revenue and property level adj. EBITDA of $836m (+41% YoY). Total Q1 adj. EBITDA came in at $1.1bn, up 65%. Hornbuckle noted once again the extent to which the Strip was “fueled” by the sports and event calendar.

Halkyard noted Las Vegas strength was currently being driven by weekend rates. “That’s where the real pricing power has been,” he added.
Hornuckle added that the “quality and consistency” of entertainment and sports programming throughout Las Vegas has been a “catalyst for the permanent transformation and strength and demand of our offerings,” he said.
“We’ll see Formula 1 for the foreseeable future,” he added. “There are estimates that will bring in $1bn to the Valley.”
Regional gaming also chipped in a 6% rise in revenue to $946m although property level adj. EBITDA was flat at $313m.

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MGM quick takes

Uptown top ranking: The team at Macquarie said MGM was benefitting from its moves to position itself as more upmarket in Las Vegas, noting that buying the Cosmopolitan, consolidating CityCenter and divesting the Mirage “will lead to further outperformance”.

Wells Fargo analysts said the earnings report “ticked all the boxes”.

Feeling the heat: The team at Truist said that although MGM said forward bookings are up YoY each month through to November, a seasonal slowdown was also priced in.

On the Push Gaming deal, the team said they were “not surprised” to see MGM growing online via LeoVegas “given the company owns 100% of the revenue stream vs. 50% of the broader BetMGM JV”.

VICI in brief

VICI: The gaming REIT saw revenue more than double in Q1 to $878m while AFFO was up 73% to $529m as the company said it had benefited from “opportunistic accessing of liquidity”. During the quarter VICI invested in Canada through the acquisition of four casinos and marking its first international foray.

It reaffirmed its guidance for 2023 for AFFO at up to $2.15bn.

Diary note: VICI will conduct its earnings call on Tuesday morning, BMO.

Analyst takes

Macau: The April data was tracking ahead of forecasts, according to the team at Jefferies who said the GGR tally of $14.8bn meant the YTD GGR tally was tracking 38% below 2019 levels vs. the 54% figures from January.

Wells Fargo noted the figures for April had likely been given a boost from the run-up to Golden Week this week.

Esports Entertainment’s new cash

Esports Entertainment has completed a private placement of new unsecured Convertible stock with an unnamed institutional investor worth $4m after expenses. It recently announced a $15m debt exchange with the Alto Opportunity Master Fund, also in exchange for new Convertible Preferred Stock.

The company confirmed it now has shareholders’ equity in excess of the minimum demanded under Nasdaq’s listing rules.

Growth company funding news

Betty: The Canadian-based iCasino startup has completed an undisclosed funding extension round led by Happyhour.io align with Seth Young, industry angel investor Mark Mariani, Endzone Media and Milwaukee Venture Partners.

Startup Month

The latest edition of the Startup Month will be sent later this morning including a look at the issues faced by female founders in the betting and gaming space as well as a new startup survey from the aforementioned HappyHour and an Inside the Raise with Prophet Exchange.

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Newslines

Let them eat cake: Caesars said it will renovate the Jubilee Tower at Horseshoe Las Vegas and integrate it into Paris Las Vegas with the new name, the Versailles Tower.

Totally tropical: Meanwhile, Caesars online has launched a second iCasino brand in Pennsylvania under the Tropicana name.

Star Entertainment: Private equity groups Bain Capital, Apollo, Blackstone and Oaktree Capital have all expressed an interest in providing funding to the Australian casino group.

Calendar

May 2: Caesars Entertainment, E+M Startup Month
May 3: Flutter, Rush Street Interactive
May 4: Penn Entertainment, Red Rock Resorts, DraftKings (earnings)
May 5: DraftKings (call) – E+M Earnings Extra

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