Entain calls the shots

Entain eyes US profitability in 2023, Barstool makes youth advance, Rivalry also mines younger demo seam, shark news +More

Earnings+More

Oct 13, 2022

Good morning. On today’s agenda:

Entain eyes US profitability by FY23 as NFL Q3 NGR soars 90%.
Nardini suggests Barstool is attracting the ‘first generation’ of legal sports bettors.
Similarly, Rivalry says it is hitting the spot with Gen Z players.
Rank suffers on soaring energy costs.
Acroud makes a mystery buy in the sports affiliate space.

You’ll never go in the water again.

Entain eyes US profitability

Group NGR up 2% for Q3 with online up 1%, while it guides to FY22 NGR of $1.3bn as NFL NGR soars.

Confidence game: NGR in Q3 from the NFL soared ~90% to $400m with same-state revenues rising 50%. The company said it remained confident of “reaching sustainable positive EBITDA” in 2023. BetMGM now has 23% OSB market share and 31% iCasino share.

No rush: CEO Jette Nygaard-Andersen said profitability in the latter part of 2023 will be “the first milestone”.
“There is no hurry from us or our partners,” she said. “There will be more opportunities after that, whether it’s IPO or M&A.”

White heat: Nygaard-Andersen said the recent political turmoil in the UK meant “the new government has lots of pressing issues facing them”, but that it was “very much pro-industry, pro-choice and against nanny-state prescriptions”.

Of the white paper, though, she said Entain was “cognisant it might be slipping down the list of priorities”, but the “soundings we’re hearing are sensible.”
Pick and mix: CFO Rob Wood said inflationary pressures varied considerably according to geographies.
“In the Baltics, inflation is running at more than 20% and there has been a double-digit drop off in spend per head, but active numbers are still great and we know it’s cyclical and we will come out of it.”

In Brazil, Entain said it expects the highly competitive environment to settle after regulations are signed off following the presidential elections this month.

Bets of luck with that one: In Germany, Wood said Entain was waiting on a regulator clampdown on unregulated gaming. “It should be all upside from here,” he said, presumably crossing his fingers.

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Nardini’s youth pitch

The CEO of Barstool Sports says the media disruptor is a part of a generational change that includes a brand-new sports-betting audience.

Help save the youth of America: During yesterday’s keynote chat with then AGA’s Bill Miller, Erika Nardini, the CEO at Barstool Sports, said Barstool Sportsbook was “creating the first generation of legal sports bettors”.

“I love this demographic,” she added. “I work with twentysomethings in sweat pants all day. It’s dirty and it doesn't smell great.”
She suggested what was compelling for this audience was seeing “change”. “They are not compelled by three people sitting in suits at a desk projecting authority.“
“In an era of attention, it is an outright war for attention and you have to be able to use social media to get it.”

More from G2E day 3

Not in my name: The number of “rejectors” of the NFL’s embrace of sports-betting is a very small number, according to Jonathan Nabavi, VP public policy and government affairs at the league. “It’s maybe not as problematic for them as they once thought,” he said.

Here comes the judge: Prop bets around Aaron Judge’s charge towards the American League home run record “really took off”, suggested Leo Villalobos, counsel for sports betting and compliance at the MLB.

G2E investor takeaways

Positive energy: After a series of management meetings, the team at Wells Fargo have issued a series of updates for Bally, Caesars, Penn, Wynn and Churchill Downs. The continued strength of the Las Vegas revival is a common theme with Caesars saying international visitation has come back even stronger than expected.

Top gear: Wynn said when F1 comes to Las Vegas in November 2023 it is shaping up to be “one of, if not the most profitable weekend of the year”.
Penn is bullish on this week’s announced developments, with management saying it is confident of achieving double-digit free cash flow returns. Interactive EBITDA is also set to improve once the “drag from paying Kambi is removed” in 2023/24.
The team reported Bally was looking at international online M&A, with the focus on deals in the <5x EBITDA range.

Rank feels the heat

Heating costs rise by nearly 50%, though total revenues are up by 2% helped by digital and Spanish operations.

Climate change: Rank warned it “will be exposed” to the full impact of rising energy costs in March when the UK government’s energy support comes to an end. It said it would be focusing on initiatives to mitigate these cost pressures “as much as possible”.

Grosvenor Casinos saw like-for-like NGR fall by 5% to £75.3m, but 12% growth in digital to £48.9m and 24% growth in the Spanish Enracha arm (up to £8.2m) saw group LFL NGR up 2% to £165.7m.
The company warned of continued pressure on the casino business outside London where NGR in Q3 tumbled by 17%. London venues were up, however, by 21%.
Grosvenor online was up 25% in Q3 post-migration to in-house platform.

Analyst slashes target price: The team at Peel Hunt responded to the trading update by cutting their price target by more than half, saying they expected underlying EBIT to fall to £21m.

Acroud’s mystery buy

The affiliate company buys an unnamed affiliate rival for €5.1m.

Seeking clarification: Acroud said it has bought 60% of a target company – which the press release confusingly appears to name as itself – for €5.1m, which will add €9m to annual revenues and €4m of EBITDA. Acroud will then have an option to buy the remaining 40% of the ‘target company’ by 2028.

E+M is seeking clarification from the company as to which entity it has bought.

Rivalry’s esports driver

Q3 revenues rose 93% YoY and 35% QoQ to $7.1m on handle that rose 203% to $70.3m.

Big youth: The esports to traditional sports-betting operator pointed to the demographics of its users to suggest it was proving its model of appealing to Gen Z and Millennials. CEO Steven Salz said that 82% of Rivalry’s active users were under 30.

Speaking to E+M, Salz noted that Rivalry’s esports audience – which contributes 90% of handle – trends even younger than with traditional sports.
“We must have the most esports-skewed audience,” he said.
He noted Rivalry was benefitting from a surge of betting on Valorant, the fastest-growing and most-popular esports game on PC right now.
Salz said Rivalry thrived on the speed of change within the esports world. “The games change every four months. It’s TikTokification in action,” he added. “We love that.”

About that shark

It bites: According to the floor manager at the Palms, the San Manuel Band of Mission Indians has been landed with a five-year $275k per annum lease for Damian Hirst’s ‘The Unknown (Explored, Explained, Exploded)’ three-piece shark. “Is that art?” the discerning employee mused.

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Datalines

Indiana: September land-based casino GGR hit $191.7m, down 1.5% YoY and 15.3% above 2019. Sports-betting AGR rose 49.5% to $51.2m on handle of $382m, up 7.7% YoY and up 61% MoM.

Newslines

The UK Gambling Commission has fined GGPoker £672,000 for social responsibility and anti-money laundering (AML) failures.

MGM Resorts is investing $100m for the remodeling of Mandalay Bay’s convention center.

Jumbo Interactive said it expects to complete the £18.3m acquisition of UK lottery manager and digital payment business Starvale next month.

IGT has signed a seven-year contract extension with the Georgia Lottery to continue operating its class lottery and iLottery products.

The Pollard Banknote-NeoGames joint venture NeoPollard Interactive also announced that it had signed the Georgia state lottery as its latest iLottery client.