DraftKings, Penn lead sector gains
DraftKings ups guidance, Penn’s ESPN Bet plans, Entain’s strategy update, analyst takes +More
DraftKings FY23 adj. EBITDA losses could be less than $100m.
Penn investors react well to news of pre-Thanksgiving launch for ESPN Bet.
Entain says it is willing to put more money into BetMGM in 2024.
Rush Street and Bally’s analyst takes.
BettingJobs’ Jobsboard features CEO and CMO roles.
'Cause it's easy once you know how it's done.
DraftKings ups guidance
Under-promising and over-delivering is habit forming.
Crushing it: As is now customary, DraftKings once again used its earnings announcement to up its guidance for the full year, saying its adj. EBITDA losses will now come in at $95m-$105m. This compares with predicted losses at the start of this year of $400m at midpoint and its last guidance of $190m-$220m in August.
At the same time, its revenue expectations have risen to between $3.67bn and $3.72bn versus a predicted $2.95bn at midpoint back in February.
The new revenue guidance implies growth of 64-66% YoY.
For FY24 the company now predicts adj. EBITDA profits of $300m, which the team at Wells Fargo noted “still potentially leaves room for further beat/raises”.
The postman always delivers: Deutsche Bank suggested that “given high expectations”, the company needed sizable beats on both the net revenue and adjusted EBITDA lines, “and we believe these results delivered on that front”.
In Q3, revenue rose 57% YoY to $790m while adj. EBITDA losses were pared back to $153m.
Both metrics were “well above” consensus, according to Deutsche Bank.
Notably, sales and marketing expenses fell 2.6% to $313m.
Sportico’s Eben Novy-Williams noted this was the first time this metric had been negative for DraftKings.
The switcheroo: Jefferies said the quarter “continues to raise the horizon level” for DraftKings, supporting its thesis that the leading online operators led by DraftKings are “pivoting from investment spending to profits through product advancement”.
“In short, we believe this transition has considerable room to evolve,” the team added.
DraftKings is “one of the best (if not the best) growth stories in gaming today” and it will be a long-term winner in Interactive, said the team at Truist,
Note: DraftKings will host its earnings call with analysts later today.
💥 DraftKings up over 7% in post-close trading
** SPONSOR’S MESSAGE ** Originally founded in 2003, BettingJobs grew rapidly and quickly matured into the full recruitment service provider we are today. We are a globally renowned resource for making qualified connections worldwide.
Our industry experts will be attending SiGMA Malta 2023. If you are a candidate seeking your next iGaming role or a client in need of professional hiring advice, contact us to arrange a confidential meeting at the conference.
Penn sets the date
Plugging away: Ignoring signs of macro pressures on its regional casinos, the markets warmed to Penn Entertainment’s announcement, sending its shares up 14% as it set a November 14 launch date for ESPN Bet in 17 states. Jay Snowden, CEO, said the pre-Thanksgiving date meant it could take advantage of a hectic sports calendar.
This includes the Super Bowl rematch of Kansas City Chiefs vs. Philadelphia Eagles, which will be televised on ESPN’s Monday Night Football, where the brand will be promoted via odds attributions and editorial integrations.
He noted it “wasn’t hard” to persuade the first two personalities at the broadcaster to “get involved in creative and commercials”.
“We no longer have to speculate about how committed to ESPN Bet ESPN is,” he added.
The long game: Asked about what success would look like, Snowden said he hoped to see market share grow over time. “What we don’t want to have is a giant splash in the first month or two and then you leak market share,” he said. “That would not be deemed a success.”
Snowden said losses for the interactive division would peak in Q423/Q124 but with “losses in every quarter of 2024”.
The first two years of ESPN Bet would be “where these cumulative losses are” and then from the third full year onwards Penn anticipates the business “inflecting to breakeven and better”.
Casino floor: In Q3, despite falls in three out of four regional segments, the casino business total revenues were higher than forecast at $1.62bn. However, adj. EBITDA was below forecast, slipping by 5.7% to $445m, but this was driven entirely by the cash spent on the ESPN Bet transition from Barstool.
The team at Deutsche Bank noted management said property level performance was “largely stable”.
Entain strategy
Money pit: In comments to analysts during Entain’s strategic update yesterday, CEO Jette Nygaard-Andersen seemed to indicate both partners in the BetMGM JV were ready to put more money into the business in order to “drive more market share”.
“What we see is an opportunity to take more share,” she added.
“We really want to win and if that means investing into the business, then we're pretty open to that and we’re sure our partner is as well.”
She added that the specific amount of investment needed hadn’t been decided yet. “That’s a discussion for us together with our partner.”
Let my people talk to your people: This appears to mark a reverse from previous comments, particularly from MGM Resorts, which has indicated on several earnings calls that it believed there was no need for BetMGM to get more cash because it was moving to self-sustainability.
Just this September, CEO Bill Hornbuckle suggested during a Bank of America event that neither parent expected having to inject any more “substantive reinvestment” in the business.
Listening ears: Nygaard-Andersen also signaled that Entain’s strategy for bolt-on acquisitions has come to an end. Noting the skepticism of recent deals – particularly the pointed shareholder criticism of the £750m deal for STS in the summer – she said “we’ve listened”.
“I hope it's clear from our presentations that we are laser focusing our capital and investment where we can derive the best ROI for growth and market focus,” she said.
“To be clear, that means that we are looking at a much slower pace of M&A going forward.”
Peak drift: The strategy update came after Entain confirmed the details of its September revenue warning. After a 5% fall in pro forma NGR in Q3, the company yesterday warned of a ~£45m hit from poor sporting results in October. All this plus the impact caused by the bribery case £585m settlement with HMRC announced in the summer.
CFO Rob Wood said the slowdown was due to cooling key markets and the ongoing hits from regulatory impacts in core markets such as the UK, Germany and the Netherlands.
In the UK, he added the number of restricted customers “jumped in the summer and have continued to rise”. “So the impact hasn’t peaked just yet.”
For 2024, Wood warned that pro forma online growth will be single-digit negative in H1 followed by a low-to-single-digit positive in H2.
Long arm of the law: Nygaard-Andersen said that since she joined the business in early 2021, it had performed a “significant portfolio shift” with 100% of revenue from regulated or regulating markets. Barry Gibson, chair, noted Entain has exited ~140 “inappropriate” unregulated markets, costing the company around £100m in annual EBITDA.
But the regulatory clean up was the “right thing for our business”.
He noted US regulators had a “very long reach in terms of what they consider when you’re applying for a license”.
ICYMI
In Compliance+More this week, the comments from ex-BHA CEO Nick Rust regarding the ”existential threat” posed to UK horseracing by the proposed financial risk checks was the lead from last week’s Reputation Matters event.
Also this week, UK racing launched a parliamentary petition calling for the government to rethink its affordability plans.
Meanwhile, also in Compliance+More, in the US Maine is tipped to open its OSB market today, Friday, while the Seminole has announced dates in December for the launch of retail betting at its six casinos in Florida.
Earnings in brief
Golden Entertainment: The owner of the Strat in Las Vegas said its Nevada segment had seen an improved performance driven by the recent renovations at the property.
However, the exclusion for most of the quarter of the acquired Rocky Gap casino and the sale of the distributed gaming business in Montana meant revenue fell nearly 8% to $258m.
Adj. EBITDA was down 13% to $53.2m.
Playstudios: The social gaming operator saw adj. EBITDA up 38% to $13.5m on revenues that rose ~5% to $75.9m. The company said the profit improvement was due to operational efficiencies, revenue diversification and cost containment.
Analyst takes
Rush Street: Improvements in the underlying product offering in iCasino lie behind the company’s successful Q3, suggested the team at JMP, who noted “success is being driven through multi-player games, creating engagement and loyalty to the platforms”. They added that RSI has “leveraged its free-to-play and tournament product offerings, leading to higher levels of revenue”.
Over at Jefferies, the team suggested Rush Street “remains among the more under-noticed names in our digital gaming coverage, which should change over time”.
Bally’s: The stock market reaction on the day after Bally’s results, down 15% on Wednesday, was an overreaction, said the team at Truist who suggested investors were spooked by delays to new developments and the company’s existing leverage.
** SPONSOR’S MESSAGE ** EveryMatrix delivers iGaming software, solutions, content and services for casino, sports betting, payments, and affiliate/agent management to 300+ global Tier-1 operators and newer brands. The platform is modular, scalable, and compliant, allowing operators to choose the optimal solution depending on their needs.
EveryMatrix empowers clients to unleash bold ideas and deliver outstanding player experiences in regulated markets.
What we’re reading
Gulf digest: Dubai puts casino plans on hold but Abu Dhabi pushes on, says Bloomberg.
Newslines
Gnomic: Playtech has acknowledged rival Lottomatica’s success in the bidding for Italian-focused operator SKS365, saying it would “continue to take a prudent and rational approach” to future acquisitions.
Hungary national lottery operator Szerencsejáték has gone live with its revamped TippmixPro online sportsbook via a partnership with EveryMatrix-owned OddsMatrix.
Calendar
Nov 3: DraftKings (call)
Nov 7: Melco Resorts, Red Rock Resorts, AGS
Nov 8: GiG, Everi, Full House, MGM, Accel
Nov 9: Flutter, Light & Wonder, Bragg Gaming, Super Group
CEO – Africa
Chief Marketing Officer – Asia
Head of Operations – Remote/North America
An +More Media publication.
For sponsorship inquiries email scott@andmore.media.
