Chasing losses: BetMGM ‘invests to grow’ as market share dips

BetMGM trading update, Boyd’s beat, Disney commentary, Wynn smashes it, Red Rock’s new customers +More

Feb 09, 2024

BetMGM hits its target for 2023 as it enters “investment year.”
In +More: Super Bowl bets, Caesars’ debt repayments.
Boyd Gaming beats forecasts.
Disney’s Epic investment pushes ESPN Bet into the background.
F1 moves Wynn Resorts into top gear in Las Vegas.
BettingJobs’ Jobsboard includes VP of product and sales director roles.

I see a red door and I want it painted black.

BetMGM playing market share catch-up

The red and the black: BetMGM said yesterday it made an EBITDA loss of $67m for FY23, despite the company reaching profitability in the last three quarters of 2023. Revenue for the year came in at the upper end of the $1.8bn-$2bn target, at $1.96bn, while same-state growth hit 14%. Losses were ahead of consensus estimates of $82m-$90m.

CEO of BetMGM Adam Greenblatt said the “attainment of EBITDA profitability” for much of 2023 “validates the effectiveness of our business model.”
The MGM Resorts/Entain joint venture reiterated its target of $500m in adj. EBITDA by 2026.

In the dark: The analysts at Jefferies noted no guidance was given for this year, although the company’s previous comments talked about it being an “investment year” to help address recent market share losses. Consensus has the company making $2.48bn, or ~27% up YoY, while EBITDA losses are estimated to come in at $73m.

Podium for now: JMP said BetMGM was taking a “one step back to take two steps forward” approach by investing more this year.
The company said it had 14% market share across OSB and iCasino in the 28 markets where it is live in North America, including Ontario where it disclosed its market share to be 22%.
👀 A note from the analysts at Wells Fargo yesterday suggested BetMGM has shipped 2 ppts QoQ to 13% in combined OSB/iCasino share, while for FY23 it estimated BetMGM’s share had fallen by 5 ppts YoY to 14%.

Adding fuel: Greenblatt reiterated the message from the December investor meeting that the additional capability brought by the Entain-acquired Angstrom along with the potential from a “largely untapped” Las Vegas omni-channel opportunity would propel the business forward.

With the latter, the company announced just this week a rejigged app in Nevada. It noted yesterday that single-wallet capability was expected later this year. In 2023 Nevada was worth $64m in GGR.
Meanwhile, it expected that adding the Angstrom capability on pricing and modeling would improve its SGP and live SGP product offerings.
JMP noted that to fund the product developments BetMGM has “lowered the intensity around free money” it offered via promos as a percentage of GGR.
They added that the product investment was similar to what DraftKings did in 2022/23.

Typing… Jefferies said the ownership structure at BetMGM “remains in the conversation” but while there was no mention in the update, the “fluidity of leadership and direction” at Entain leaves open the discussion regarding remaining partners, merging or a “myriad of other permutations.”

Venture capital firm Yolo Investments manages in excess of €500m in capital across 100 exciting fintech, gaming and blockchain companies. The Yolo Investments' Gaming fund, regulated by the Guernsey Financial Services Commission, has taken positions in fast-growth suppliers and operators, including Dabble and Enteractive. Yolo Investments (yolo.io) wants to hear from readers of this newsletter. Get in touch with your pitch, or for a chat about innovative products which can plug into our investment ecosystem.

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Bowl bets: Chiming with analysis earlier this week from EKG, the team at Macquarie also estimated $1.5bn will be bet on this weekend’s Super Bowl. They added that the best-case scenario for the sportsbooks would be a 49ers win in a low-scoring game.

They posit that the worst case would be a Chiefs win combined with a total above 47.5pts, which the team estimated could lead to a negative hold rate of -14%.
They added that some operators (i.e. Penn/ESPN Bet, BetMGM) will use the Super Bowl as an “opportunity for acquisition and to spend more on promos.”

Caesars has repaid its outstanding 6.25% senior secured notes due 2025 in full, plus accrued and unpaid interest. The repayment forms part of Caesars refinancing of its 2025 debt maturities, including the $989m in 5.75% senior secured notes it confirmed repayment of earlier this week.

Golden Matrix shareholders will meet on March 19 to vote on the proposed $300m purchase of Meridianbet, which will operate as a wholly owned subsidiary. The acquisition would give GMGI access to B2C iGaming ops for the first time.

Playtech and Hard Rock Digital have launched the first set of games under their partnership, delivering online slots, live dealer and table games through HRD’s Hard Rock Bet platform in New Jersey.

Inspired Entertainment will provide its virtual sports products to Kambi’s sportsbook platform.

What we’re reading

Switch hitter: Las Vegas mayor Carolyn Goodman has rowed back on her comments that the A’s should work out a deal to stay in Oakland and now says they are welcome in Las Vegas. Via the Las Vegas Review-Journal.

Disney earnings commentary

Epic proportions: Disney’s venture into OSB got shunted into the background during the Q4 call as the company’s “skin in the game” $1.5bn equity stake in Fortnite producer Epic Games stole the headlines. CEO Bob Iger noted it was Disney’s “biggest entry into the world of video games.”

Iger said Disney felt it had to get into the gaming space “as soon as we possibly can in a very compelling way.”
Recall, $1.5bn is the figure Penn will be paying Disney for the naming rights for ESPN Bet. As Chris Grove noted on X, it appears to be an “interesting value transfer.”

One-stop channel hop: Disney announced a day ahead of the earnings that ESPN’s full channel suite will be going DTC in the fall as part of a package deal with FOX and Warner Bros. Iger said Disney’s mission was to “make ESPN into the preeminent digital sports brand, reaching as many sports fans as possible.”

He noted that the ambition for ESPN was to make it available as a stand-alone and “highly interactive” digital destination.
Iger said this ESPN app would have “integrated betting, integrated fantasy” along with ecommerce elements.
“I can't tell you right now how that ultimately will fit into all of this, except it will be a progression,” he added.

Boyd earnings reaction

Another good print: The Las Vegas Locals-to-regional operator appeared to surprise the analysts with forecast-beating Q4 earnings, up 3.4% to $954m, and while adj. EBITDA was down 1.3% to $356m, it was ahead of consensus by ~8%.

The team at Deutsche Bank said the “key story from the print” was the quality of the earnings.
Notably, Locals continued to grow despite the new competition from Red Rock’s Durango opening (see below) while Downtown Las Vegas is set for “healthy growth” this year.

Build it and they will come: On the earnings call, CEO Keith Smith said the optimism for Las Vegas was supported by the “continued strength of the southern Nevada economy.” He noted that Las Vegas ranked #1 for job creation last year.

“With billions of dollars in projects under development across the Las Vegas Valley, the construction sector continues to serve as an economic engine,” he added.

Wynn wins

Different gear: F1 in November helped Wynn Las Vegas find “another gear” as adj. EBITDA for that property alone of $271m – up 24% YoY – zoomed past consensus forecasts of ~$228m. Las Vegas revenue came in at $697m, up 19%.

Analysts at CBRE noted the high-end international draw of the race “played perfectly” into Wynn’s properties on the Strip.
Wynn’s Macau operations were also ahead of consensus with revenues at $911m, while property adj. EBITDA hit profitability at $297m.
Total group net revenue rose 83% to $1.84bn while adj. EBITDA stood at $630m, up over 220%.

‘What a quarter, what a year’: CEO Craig Billings was understandably upbeat on the call with analysts. “It’s more evident than ever that we are the go-to spot for the best customers attending citywide events like F1,” he said.

Next on the agenda, of course, is the Super Bowl. The company noted that forward bookings were double last year.
“It’s all about February,” Billings said of the current quarter. “We expect record hotel revenue over the Super Bowl.”

Sphere joy: Billings noted that with Wynn being the closest property to the Sphere “as the crow flies” its emergence as the premier venue in Las Vegas had been additive to its business. “We see an uptick in terms of very high-quality occupancy,” he said.

“I think it's incredibly novel,” he added. “It's incredibly unique, and it's yet another kind of only-in-Vegas experience that you can have.”

Debt note: Post-results, Wynn announced a private add-on offering of $400m to a previously announced $600m offering of 7.125% senior notes due 2031. The new money will fund the repurchase up to $800m of outstanding 5.5% senior notes due in 2025.

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Red Rock boost

Rocks that I got: The new Durango property, which opened in December, is performing better than expected, attracting new customers and giving a one-property boost to the Las Vegas Locals market.

With only 27 days of operation in the quarter, it helped push Las Vegas revenues up 9.5% to $459m while adj. EBITDA rose 6.5% to $220m.
FY24 revenue for the group rose 4% to $1.7bn while adj. EBITDA came in flat at $746m.
CFO Stephen Cootey noted the property was “profitable from Day 1” and that visitation was “off the charts.”

The big game: Lorenzo Fertitta, vice-chair, said the company was “pretty positive and pretty excited” about Sunday’s Super Bowl. “It feels like it's shaping up to be one of – if not maybe the best weekend from a big event standpoint that Las Vegas has seen,” he added.

Earnings in brief

Century Casinos: In releasing preliminary earnings, the company said it was experiencing revenue and cost headwinds in several of its markets, helping to explain the below consensus guidance for revenues at $143m at midpoint and adj. EBITDA at $25m (midpoint), 6% down on consensus.

In Poland, the company’s two casinos licenses expired during Q4 but, under government regulations, it still had to pay for costs during the quarter. New licenses have been issued and the plan is to reopen in the coming months.

Svenska Spel: Sweden’s state-owned gaming operator saw Q4 NGR fall by 3% YoY to SEK2.12bn ($202m), although the sports and casino segment was up 7% to SEK576m. Pre-tax profit for the group fell 31% to SEK486m. FY23 revenue was down marginally at SEK8.03bn.

In its accompanying report, interim CEO Erik Strand said the company had produced a stable performance despite “zero growth” in the gaming market.

XLMedia: In a pre-close trading update, the UK-listed gaming affiliate provider said FY23 revenue of ~$50m and adj. EBITDA of ~$12m would be in line with market expectations. It added that as of the end of December cash in hand had reduced to $4.8m due to deferred acquisition payments, media partner minimum guarantee payments and other exceptional costs.

The company noted it had suffered a downturn in the US due to the switch from Barstool to ESPN Bet and a lack of state launches compared to 2022.
2024 will be a “year of consolidation” the statement added, as shares fell nearly 8% on the day. The shares are down nearly 42% in the past six months.

🤏 Extra large to extra small: XLMedia shares in a slump

Calendar

Feb 13: Catena Media, MGM Resorts International
Feb 15: Betsson, Penn Entertainment, DraftKings (earnings)
Feb 16: DraftKings (call)
Feb 20: Caesars Entertainment

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