888 promises bright new dawn
888 trading update, DraftKings downgrades, Flutter and Caesars takes +More
888 confirms compliance-related declines, promises bounceback.
In +More: HG Vora’s Penn board complaint, Sportradar’s FanID.
By the numbers: Massachusetts, New Jersey in December.
Adverse results in November lie behind DraftKings’ Q4 estimate cuts.
Analysts trim revenue forecasts for Flutter and Caesars.
While the chief puts sunshine on Leith.
888 trading update
888 points to sequential improvement as Q4 shows overall revenue decline.
I see the light: Revenue of £424m in Q4 was 5% higher than the Q3 total but still represented a 7% YoY decline as 888 suffered from compliance-related setbacks in the UK and globally. FY23 revenue was down 8% to £1.71bn.
The international business was the worst performer, showing a 16% YoY decline to £129m in Q4. For the FY23, international revenue was also down 16% to £517m.
The company blamed “significant impact” from compliance issues in what it still calls dotcom markets.
Hot meze: Recall, this time last year the company admitted to serious compliance breaches regarding its VIP business in the Middle East. The blow-up cost previous CEO Itai Pazner his job.
Remake, remodel: In the UK, 888 said revenues of £165m were 4% down, affected by “customer mix changes” caused by the further implementation of RG measures as well as a change in marketing focus. FY23 revenues were down 8% to £658m.
The company said synergy delivery and a “focus on efficient marketing” meant adj. EBITDA for the UK and Ireland would be “significantly higher” YoY despite the revenue reduction.
The retail business saw a 1% decline in Q4 to £130m but was up 3% in FY23 to £535m. This was despite a 3% decline in the retail estate.
Roll with the punches: New CEO Per Widerström said the figures represented “foundations for sustainable and profitable growth.” But he added the company needed to be “more proactive in adapting to changes in regulation and technology.”
“The financial performance of the group must improve,” he added.
Through a glass darkly: Looking ahead, 888 said adj. EBITDA for 2024 is now expected to come in at the low end of consensus of £340m-£397m.
With cash at hand of £125m as of the end of December and an undrawn £150m of its revolving cash facility, 888 said it has total liquidity of £275m.
Getting the band back together: The update highlighted a raft of recent appointments, made in the months since Widerström took the reins.
They include new CFO Sean Wilkins, CTO Rik Barker, Ian Gallagher as chief product officer, Fredrik Ekdahl as general counsel and, most recently, chief growth officer Jeffrey Haas.
Diary date: 888 will report its FY23 results on Mar. 26.
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+More
Activist investor HG Vora has said in a letter to Penn Entertainment that its practices around the staggered terms for board appointments were in violation of Pennsylvania’s corporation laws.
The Ontario Lottery and Gaming Corporation is in the final stages of reviewing bids to operate Caesars Windsor, according to the Toronto Globe and Mail.
Crumbs: Sportradar has launched FanID, an end-to-end first-party marketing solution combining the first data clean room for the sports industry with the company’s proprietary marketing activation technology. The company said the offering gives rights holders and brands “personalized fan engagement in a post-third-party cookie world.”
What we’re reading
Commanding heights: “There is nothing unlawful in monopolies that emerge this way.” The FT on GeoComply’s rise to geolocation dominance.
By the numbers
Massachusetts: The pattern appears set now with ESPN firmly ensconced in third place in Massachusetts, with handle (8%) and GGR (7%) some way distant from the market leaders DraftKings (50.5% GGR) and FanDuel (33% GGR).
Total GGR came in at $62.2m for the month on $659m of handle.
New Jersey: The picture was more mixed for ESPN Bet in New Jersey where GGR market share was mired at a mere 3% for the month, notably behind both BetMGM (7%) and Caesars (6%) in third and fourth.
Total sports-betting GGR was up 25% YoY to $109m while iCasino GGR of $180m represented growth of 19% YoY. B&M casino was up 8% to $231m.
DraftKings analyst takes
Delayed reaction: A bad run of results in the NFL in November means Q423 estimates for DraftKings might be out of whack, according to two notes issued early yesterday.
Referencing recent management commentary, Jefferies said the two consecutive negative hold weekends of football in November will have hit revenue by ~$100m and with 70% flow through to the bottom line.
A solid December followed, but the damage done means the Jefferies team has lowered its Q423 revenue estimates to $1.15bn.
Est. adj. EBITDA falls to $121m from $199m prior.
Less heavy with the scalpel were the team at Wells Fargo, who trimmed their Q4 revenues to $1.23bn, only 2% below consensus, with adj. EBITDA now down to $158m.
Shuddering halt: Noting that low hold is a “legitimate risk” for any sportsbook and reaffirming their own belief in the long-term picture, Wells Fargo acknowledged DraftKings remains a “momentum play.”
The team also noted the prospective Q4 earnings miss comes when the company has a “tricky” near-term set-up.
ESPN Bet has just launched, BetMGM appears to be approaching 2024 as an investment year and there are “no major positive catalysts on the horizon.”
More analyst takes
Flutter: Ahead of tomorrow’s trading update the team at Wells Fargo suggested investors will be cautious given concerns about a Q4 earnings miss in the US (see above). The team indicated US revenues will be 7% lower than the Street forecast at £1.12bn. The team has also lowered its H223 US EBITDA forecast to £71m vs. £83m prior.
Group H2 revenues are forecast at £2.55bn while group EBITDA for the second half is tipped to come in at £739m.
On the upcoming dual listing, Wells Fargo said the move would offer US investors a “more diversified, large-cap, digital-gaming alternative” to US OSB pure-play DraftKings.
Caesars: Also taking a knife to forecasts is CBRE, which has lowered its adj. EBITDA estimate to $945m from $951m, partly because the team believed Las Vegas labor costs would be higher than forecasts while the F1 weekend in November had less upside than initially thought.
The F1 benefits skewed upscale, benefitting Caesars Palace but not so much the company’s other mid-range Strip properties.
The bad sporting results also contribute to the lowered Q4 estimates.
Looking long-term, the CBRE team noted Caesars bonds have seen a 250 bps improvement in borrowing costs in recent months as interest rate hike fears have receded.
They added that a “dislocation” between how the credit and equity markets value the company is clear, with the first viewing Caesars more favorably than just three months ago.
Partly this is rates driven but it is also due to casino cash flow resilience, the digital profits inflection and more debt paydown.
“With the refinancing environment more advantageous today, future borrowing costs could step down, allowing for incremental deleveraging and ultimately accelerating FCF that should lead to long-term equity value creation,” the team said.
Gamification, mobile gaming, AI, UX enhancements and design and responsible gambling are just some of the trends that are set to dominate the iGaming industry in 2024 as it seeks to harness those new technologies and their benefits to millions of consumers across regulated markets worldwide.
Read the Sof2Bet feature and let us know your thoughts on what we should look out for in 2024!
Calendar
Jan 18: Flutter Entertainment
Jan 30: PointsBet
Feb 1: Rank
Feb 6-8: ICE, London
Feb 7: Disney
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