28 Jul: Boyd buoyed by high margin new normal
Boyd Gaming Q2, Bally Corporation Q2 pre-announcement, XL Media trading update, Melco Resorts Q2, Inspired Entertainment analyst comment, Playtech H1 update +More
Good morning and welcome to today’s newsletter which features the latest news from Boyd Gaming, where all the talk was about the record margin expansion. While the revenue increase had been prefigured by regional monthly GGR releases, what was new was the over 1.6k basis point leap in margins over pre-pandemic period. Analysts were positive despite yesterday’s reintroduction of the mask mandate in Nevada. We also have the news from earlier this week of Bally Corporation’s similarly upbeat Q2 pre-announcement, a trading update from XL Media which suggests it is still struggling to shed its Google update worries and an analyst initiation note on Inspired Entertainment.
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Boyd Gaming Q2
The top line
Revenue more than quadrupled YoY to $893.6m (up 18.6% sequentially and a 5.6% increase on Q219) with net income coming in at $113.7m compared to a loss of $108.5m in the prior year period. Total adjusted EBITDAR hit $385.4m from $16.1m in Q220, up 23.8% sequentially.
Company-wide margins came in at 43% while the Las Vegas locals unit hit 57%. The overall figure represented a 1.6k bps expansion on Q119.
On the earnings call, the company reiterated its FY21 forecast of $20m in EBITDA being generated from the FanDuel sports-betting partnership (5% ownership) and its own Stardust igaming operations.
Peaky blinder: Talking about the record margin performance, Kevin Smith, president and CEO, believed it was sustainable. “This confidence stems from the fundamental driver of these results: our more efficient business model, our ability to target our core customer and the consistency of the customer base.” CFO Josh Hirsberg added that Boyd was now “more comfortable with our business shifting to a high-margin business.” Macquarie noted the 57% margins achieved in the Las Vegas locals unit were “some of the strongest margins we have ever seen across all of gaming.” However, management cautioned against simply multiplying the Q2 figures by four to get to a year-end revenue and EBITDA projection.
“Q2 was probably a little peaky,” said Hirsberg. “So it’s probably not fair to take Q2 and times it by four. It would be a little aggressive.”
Off the hook: While Boyd is not a big convention business in Vegas, Hirsberg did have some insight into what we can expect from some of Boyd’s peers in their upcoming results. “One thing we have seen that may be applicable is that the forward bookings at our hotels are beginning to match 2019 levels.” Smith added that at the company’s one convention hotel, the Orleans, in June “the phones were ringing a lot and we were beginning to book a lot of business.”
Bally Corporation Q2 pre-announcement
The top line
Revenue is set to hit between $258-268m while adjusted EBITDA will range between $80-84m. The figures compare with consensus figures of $229.7m on revenue and $61.1m on EBITDA.
Confirms $2.7bn Gamesys purchase will close in Q4. The Q2 earnings report will be released on 9 August.
Shall we dance? Bally Corporation has found that such is the strength of the rebound in land-based gaming, it no longer needs to either issue any further equity or draw on a previously disclosed commitment from Gaming and Leisure Partners in order to fund the Gamesys transaction. Instead, it will refinance its debt via one or more capital market transactions (expected to include either a public or private bond offering) and existing credit facilities. Like a Prom Queen fielding multiple dance requests, though, Bally is “still evaluating investment options with potential strategic partners.”
Melco Resorts Q2
The top line
Operating revenues up 222% to $566.4m and operating losses trimmed to $128.1m compared with$370.8 million in Q220. Adjusted Property EBITDA hit $79.1m compared with negative $156.3m in prior-year period.
It’s getting better: Confirming recent commentary on the steady but slow recovery in Macau, Lawrence Ho, CEO, said that when it came to the vaccination programme in China and Macau “things are getting better with each passing week.” “The sooner we get to herd immunity, the more borders will open up,” Ho added. He added that one effect from the pandemic is a likely delay in the concession renewal timeline.
“Our thinking is that next June (the Macau government deadline for concession renewal) is very tight so I wouldn’t be surprised if they extended the current licences for one or even maybe two years,” said Ho. “All the concessionaires have been working closely with the government for many years so I don't expect any surprises.”
Election night: On Melco’s preferred IR option in Yokohama in Japan, Ho said the company was not too worried about the outcome of the upcoming mayoral election (late August) which features a number of anti-gambling candidates. “We don’t worry too much about things that are completely outside of our control.”
XLMedia H1 trading update
The top line
Revenue is expected to hit $32m, up 15% on the same period last year while EBITDA should come in at $2.9m, down 17% on the prior-year period. Cash balances stood at $38m at the end of June vs. $24.8m in Jun20. Revenue guidance for FY21 remains at between $65-70m.
Good dimes: The good news for XLMedia is that European sports-betting revenues saw record organic growth over the first six months of the year (in line with the boosted revenues spoken about last week by European operators Betsson and Kindred). There was also a positive impact from the recently acquired Sports Betting Dime business (completed Mar21) and personal finance also continued to provide a “consistent performance.”
Tailing off: However, the online casino sites continue to lag. Hit by successive changes to the Google algorithm and despite XL’s best efforts to rectify content issues, the sites continue to be penalised in the search rankings. Various remedial efforts have been made but XL said on Monday that “tail revenues continue to deteriorate and new revenue is being built from a smaller existing asset base.” A move to a distributed services model is expected to result in a workforce reduction of 15%. As of the end of 2020 the company had circa 320 employees.
Inspired Entertainment analyst initiation
Almost like being there: New coverage of Inspired Entertainment from analysts at Truist suggests virtual sports is an “emerging high-growth” product that could be set to benefit from long-lasting Covid-related tailwinds. In initiating coverage, Truist pointed out virtual sports is currently only live in NV, PA and NJ but suggested that over time it could be worth between 10-15% of the total US and Canadian sports-betting. Among Inspired’s virtual sports customers are BetMGM, Caesars and DraftKings. Truist say the virtual and online gaming positives outweigh the historic risks to Inspired from its gaming machine exposure in the UK, where regulatory pressures weigh heavily. They also suggest Inspired could be involved in M&A activity, either as a buyer (net debt to EBITDA ratio is set to fall to 2x by 2023) or a seller with virtual sports potentially igniting buyout interest.
Playtech H1 trading update
Feeling the heat: Playtech said its online divisions will perform above expectations when it reports its H1 figures in late September as the Caliente B2B deal and the Snai online arm come in above expectations. Combined, they will offset the weakness caused by longer than expected retail closures in Italy. The company added that it will update on the sale process for the financial business Finalto in the coming days.
Newslines
Game for a laugh: “There’s no reason we can’t play in the broadcast space, the sponsorship space and the comedy or personality and opinion space,” Barstool Sports CEO Erika Nardini told Sportico after announcing a multi-year deal as the new sponsor and broadcast partner for the Arizona Bowl college football games. Barstool replaces CBS and takes the game off linear TV.
Woof: Toronto-listed sports-betting and gaming affiliate Playmaker has announced its first significant transaction since listing in June with a buyout of California-based sports and entertainment digital publisher Yardbarker for up to $24m, with $10m in cash and a further $8m in shares. A further $4m in shares is contingent on EBITDA performance in the next two years. Yardbarker attracts over 4m unique users per month across a range of NFL, NBA, MLB, College Sports, and NHL offerings and its email, the Morning Bark, has over 350,000 subscribers.
Marching in: Caesars Entertainment has secured naming rights for the next 20 years to the New Orleans Saints Superdome stadium. The newly-renamed Caesars Superdome will host the 2025 Superbowl as well as the annual Sugar Bowl and College Football playoffs alongside, of course, all Saints’ regular season games.
By golly wow: DFS start-up Betcha, headed up by Jason Shapiro, has raised $4m in new investment from a host of betting and gaming angel investors, including 888 founder Eyal Shaked, Tekkorp Capital CEO Matt Davey and former DraftKings head of sportsbook Sean Hurley. Also on the roster of investors is LA-based venture houses Sinai Ventures and Muse Capital.
Tipico Today: Tipico will be the exclusive sports-betting and igaming provider of the US media giant Gannett whose titles include USA Today, the Indy Star and Detroit Free Press. As part of the agreement the Germany-based operator will spend $90m with Gannett in advertising and affiliate fees over a five-year period and expects to launch in New Jersey and Colorado by the Fall. Gannett will also have the right to acquire a minority interest in Tipico’s US business if performance targets are met over the course of the deal. The two groups will integrate content across the USA Today network of sports and betting sites from the start of the NFL season. Tipico will also co-brand all Gannett’s NFL Wire Team sites and rename its For The Win site to ‘Bet For The Win, powered by Tipico Sportsbook’.
Going out on loan: IGT has extended its term loan facility from €860m to €1bn and the average maturity date of its debts to around five years. Based on the balance and interest of its current debt, the group said the new agreement would result in approximately $65m in lower annualized interest expense. During IGT’s Q1 update CFO Max Chiara said the group would focus on driving down debt.
Brooking no argument: Paysafe has appointed Mark Brooker as a non-executive director. Most recently Brooker was COO of the UK based online ticket retailer Trainline and comes with a broad igaming experience, having held senior roles at William Hill and Betfair. He will be working closely with chairman Bill Foley, who took Paysafe public earlier this year and has invested $640m into the Wynn Interactive venture via his Austerlitz SPAC.
What we’re reading
Value for money: Can a revamped UK Tote provide value and attract punters?
An IPO for the masses: Robinhood makes room for the little guy.
What we’re writing
Responsible gambling and the supplier challenge for iGB
Calendar
28 Jul: VICI Properties, Pointsbet, Churchill Downs
29 Jul: Red Rock Resorts, GLP
2 Aug: Bet-at-home
3 Aug: IGT, Caesars, Skillz
5 Aug: Golden Entertainment
6 Aug: DraftKings, Century Casinos, MGM Growth Partners
Contact us
Scott Longley scott@clearconcisemedia.com
Jake Pollard jake@openmediaservices.com