Caesars hails online frugality
Caesars positivity, IGT’s lottery pull, Kambi deals, DraftKings’s promo spend +More
Caesars positive on Vegas and online.
IGT up for the fight to retain the Italian lottery.
Kambi champions ‘landmark’ deals.
Wells Fargo takes a peek at DraftKings’ promo spend.
Sock it to me now, tighten it up.
Tight ends
Caesars trumpets strength in Vegas and online profits.
Reverse ferret: From once boasting of being willing to stomach losses of up to $1.5bn in its online division, its digital chief Eric Hession touted the promo spend at its OSB and iCasino businesses was “among the lowest in the industry” even as online revenues flatlined, up 1.4% to $215m. He said absolute promo spend was down ~$50m YoY.
Revenues were “negatively impacted by lower year-over-year hold in both our online sports-betting and iCasino segments, which we believe to be temporary”, he added.
The online business achieved $2m of adj. EBITDA profit in Q3 vs. a $38m loss this time last year.
Hession noted this was the second consecutive quarter of digital EBITDA profits, meaning the division was now positive on a trailing 12-month basis.
How to sell it: “As we head into 2024, we believe that our product in both sports betting and iCasino are significantly improved from prior periods and quite competitive,” Hession added.
Speaking of the new Caesars Palace-branded iCasino app, Hession said the “thesis” was “following exactly the script”, with a higher percentage of slot players vs. the previously table-focused offering.
Sharing in the joy: Talking of the current dispute with the Culinary Workers Union in Las Vegas, CEO Tom Reeg said he was optimistic a solution could be reached, adding the workers should be “participating in the results that we've been delivering”.
The Las Vegas segment saw revenues rise 4% to $1.12bn with adj. EBITDA flat at $482m. Total revenue rose 3.7% to $2.99bn with regional up 2.3% to $157bn.
Adj. EBITDA was up 3.1% to $1.04bn.
Paying down the mortgage: CFO Bret Yunker said the increased cash flows meant the company was able to reduce its debt by $700m in the period. Total leverage was now down to 3.9x. Reeg added that since taking over the business three years ago, management had “constantly” found “new opportunities to squeeze cash flow out of the business”.
Asked about potential M&A, Reeg noted the lowly level of the Caesars share price meant share buybacks were more attractive.
“It’s going to be very difficult for me to find an external opportunity [where] I have the same level of conviction,” he added.
Wherever I lay my hat: On regionals, Reeg said the company was “not seeing” the anticipated consumer slowdown. “We’re seeing stability in the customer,” with the only weakness coming in properties where there were competitive openings.
“If you want to hang your hat on something that feels soft, Atlantic City feels soft, but that's not particularly news at this point,” he added.
As with Boyd’s earnings last week, he added that unrated play is “where you see the volatility, but our database is strong enough that it's able to withstand that decline”.
“As the pandemic ended, people didn't want to get on a plane and regionals carried Vegas. Then regionals had the tough comp versus stimulus and Vegas carried regionals.”
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IGT’s Italian front
Duke it out: CEO Vince Sandusky said IGT was up for the fight to retain the contract to run the Italian lottery should it face competition from Flutter subsidiary Sisal. “We'll see what the competition is,” he said. “We feel very confident.”
He said the results from the Italian lottery contract continued to be “absolutely outstanding”.
“We've taken a very old lottery and continued to innovate and drive incremental sales,” he added.
Recall, last week during an investor day in Italy, Flutter said Sisal could launch a bid to run the Lotto.
Investors are seemingly yet to be convinced – IGT shares dropped nearly 4% on the day.
A lottery winner: The global lottery segment saw revenues rise 5% to $601m, a rise that the company attributed to a strong same-store Italian outcome. This was from total revenue that rose 6% to $1.06bn, net of the commercial services business sold in Sep22.
Global gaming revenues rose 8% to $409m, helped by installed base growth.
PlayDigital revenues were flat YoY, with organic growth offset by the exit from certain “legacy” jurisdictions for the acquired iSoftBet business.
F.O.C.U.S: Asked about the ongoing strategic review, Sandusky noted the gaming arms had remained focused on growth. “Nothing keeps people focused on operations better than having success,” he added.
He added that the review was “not done because of any dissatisfaction with any one of the businesses”.
He said that the alternative path of continuing as now is “still valid and still potentially available” to the company.
Kambi climbs
Transfer deadline day: “Landmark” deals for sportsbook platform provision with LiveScore and Svenska Spel were the highlights post-quarter close, with both operators switching from previous providers. CEO Kristian Nylén said the deals provided “validation” for the strategy of product differentiation.
The company also signed contract extensions with ATG in Sweden and Rank during the period, while it also went live with BetMGM in the UK via its existing deal with MGM-owned LeoVegas.
Q3 revenue rose 15% to €42m while adj. EBITDA rose 42% to €6m. The revenue boost included the previously communicated €3.4m transition fee from departing client Penn Entertainment.
CFO David Kenyon said Kambi will see more such fees flow through until next summer.
Promise kept: Recall, when LiveScore raised £50m from a strategic investor Ringier in September last year, CEO Sam Sadi told E+M the company was open to moving away from the DraftKings-owned SBTech platform.
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Earnings in brief
Lottomatica remains on track to achieve the guided revenues of €1.63bn-€1.69bn and adj. EBITDA of €570m-€590m after seeing Q3 revenues rise 6% on a pro-forma basis to €375m.
Online revenues rose 35%, with Lottomatica claiming its combined market share of 21% across Lottomatica, Goldbet and BetFlag made it the market leader in Italy ahead of Flutter’s combined market share.
Betmakers Technology remained confident it would be cash flow breakeven by the end of FY24 after it said its EBITDA losses improved YoY to A$767k ($486k) from a A$6.5m deficit this time last year. This was after a 9.3% improvement in revenue to A$26m. It closed the quarter with cash on the balance sheet of A$36.2m.
BlueBet: The Australian-based operator maintained it was taking market share after Q124 GGR rose 6.7% to A$19m ($12m), while NGR was up 7.5% to A$14.4m. It said active customers in Australia rose 21%.
It noted its US-facing ClutchBet was now up and running in Colorado and Iowa, with a launch in Louisiana upcoming.
However, US operations are less than nascent – handle stood at $6.8m in Q1 with GGR at $200k. The business made a loss at NGR level of $100k.
Analyst takes
DraftKings: Looking at the promo data from Michigan and Pennsylvania, the team at Wells Fargo noted the “broad concerns” that DraftKings was “becoming more promotional”. The team pointed out promos as a percentage of handle increased by 140 bps and 220 bps respectively, while the rest of the market was down by 100 bps and 120 bps in each state.
The analysts suggested three possible explanations: a move to more free bets over odds boosts, promo compression into the start of the NFL season and a high level of new customer acquisition.
“It's tough to reason why DraftKings would suddenly promote more heavily,” the team added, given its not losing share and previous management comment on a “flat” promo environment.
The beat goes on: Separately, the team at JMP suggested consensus expectations for an EBITDA beat of only $10m in Q3 are too pessimistic.
They estimated the EBITDA beat would be ~$24m
Flutter: Having attended the analyst day in Milan late last week, the team at JMP came away convinced the company is eyeing a bid for further lottery concessions in Italy via its Sisal subsidiary. Noting Sisal already has one concession, JMP reported Flutter as saying it will look to “leverage its omni-channel and its deeper foothold in the market”.
They added that Flutter said it intends to participate in the early 2024 RFP process “if the economics make sense”.
More broadly, JMP said Flutter international division CEO Daniel Taylor suggested the global industry was “ripe for consolidation”.
“We believe consolidation and new market expansion in Eastern Europe, and Central/South America, like Peru, will be markets to focus on moving forward,” they added.
Datalines – Nevada
Puts and takes: The 7% rise of Strip GGR to $741m came despite a decline in slot drop, which analysts suspected was due to the outages at MGM’s properties caused by the cyber attack. Nevada overall was up 2% to $1.27bn, with the Locals market down over 6% to $225m.
CBRE noted the drop in slot volume was the first since the post-pandemic reopening.
Macau
Getting back: GGR climbed 31% MoM to $2.42bn in October, some 400% better than this time last year, helped by a booming Golden Week during the month. For the first 10 months of the year, GGR was up 316% YoY to $18.4bn, which is 69% of 2019 levels.
Newslines
DraftKings has reached an agreement with the Passamaquoddy Tribe, which it says paves the way for an OSB launch in Maine. It will be the company’s 25th state.
Canadian operator NorthStar Gaming and Playtech have closed the previously announced C$10.3m ($7.4m) funding round. Playtech already owns 16% of NorthStar after converting a previous loan.
Esports Entertainment has announced it is to acquire a 30% stake in Czech Republic-based esports betting and content producer Drafted.gg, with the right to buy the remaining 70% depending on performance.
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Calendar
Nov 1: Sportradar, Bally’s, Rush Street Interactive
Nov 2: Entain, Penn, DraftKings (e), Golden Entertainment
Nov 3: DraftKings (call)
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