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888 grim tidings; Fubo quits
888 revenues decline in Q3, Fubo says it is shutting its sportsbook +More
Good morning. On today’s agenda:
888 issues a poor trading update, blaming the UK and the Netherlands for declining revenues.
Fubo quits the sports-betting business citing a “challenging macroeconomic” backdrop.
The latest data from New Jersey remains buoyant.
Earnings+More’s Deal Talk monthly newsletter issued later today focuses on US market exit strategies.
888’s grim trading
Total Q3 revenues were down 7% YoY to £484m, with William Hill in the UK down 14% and 888 down 5%.
888 blamed enhanced player protection measures in the UK and the exit from the Netherlands for a poor third quarter. Total online revenue – including 888, William Hill Online and William Hill International – was down 10%.
The UK total across all brands was down 13% to £171m driven by a reduction in average spend per player, which fell by 14% YoY.
888’s exposure to the Netherlands was 4% for its own brand and 6% for William Hill International.
The company also updated on its debt situation showing that 35% of interest costs are fixed.
It said that, on current spot rates, interest rate costs for H222 will be £75m and ~£150m for 2023.
However, looking at forward interest rises, debt costs will increase to £170m next year.
Gross debt stands at £1.81bn, while the company has £336m of cash and undrawn debt facilities.
Forward outlook: Looking ahead, the company said it expects Q4 to represent an improvement on Q3, though likely flat YoY. It said it “expects” adj. EBITDA for H2 to “meet the current market expectations”.
888 said it was “cognisant of the increased cost of debt” and the impact of poor trading in the UK.
It added it was “taking steps to ensure the operating model of the enlarged business is appropriate to address these near-term headwinds, while also being able to deliver on the strong potential of the enlarged business”.
Quick analyst takes: The team at Regulus suggested 888 has “gone long on UK macro, UK policy retail and debt risk at a time when each has soured beyond anyone’s expectations”.
“All 888’s significantly improved operational skills will be needed to combat these headwinds,” the team added.
Peel Hunt said the debt pile now “overshadows the business”, but the debt is covenant-free and a “comprehensive refinancing” can be achieved once “success with William Hill can be demonstrated”.
Diary note: There was no accompanying call. 888 is hosting a capital markets day on November 29.
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Fubo axes sportsbook
In a statement overnight, the TV streaming platform cited “macroeconomic conditions” for the decision to cease all sports-betting operations immediately.
Cord cut: Fubo only launched its sports-betting operation earlier this year but by August it had embarked upon a strategic review of the business. The company said then it was taking steps to de-risk the business and had made the decision to “no longer go down the wagering path independently”.
Now it has opted to stop going down the path entirely, saying that continuing with sports betting would “impact our ability to reach our longer-term profitability goals”.
The statement added that while “multiple parties expressed interest in the business” none would have “allowed Fubo to lower its funding requirements and generate sufficient returns to shareholders”.
Where now? When it launched in late 2021 in Iowa, Fubo said its sports-betting business would be at the “unique intersection of two expanding markets: sports wagering and digital sports entertainment”.
The smell of Vigtory: Fubo bought the Vigtory business in January 2021 to implement its sports-betting ambitions. Vigtory was only founded in 2019.
In the latest issue, we discuss the potential for US market exits. Read the latest insider insight when it is sent this afternoon.
Penn Entertainment: Jefferies said after meeting management that regional demand remains robust and that favorable digital trends were evident. The analysts noted that Penn management believes digital remains a “key differentiator” as the company sees cashless functionality driving higher visitation and spend.
Longer term, Penn will be looking to rebrand the company to better include Barstool/theScore brand in its model with a single wallet across channels and re-imagining the loyalty program.
Las Vegas: Responding to G2E last week, the team at Macquarie said it was “not naive” to believe the story of continuing consumer strength in gaming. But they noted that “every management team is on heightened alert”.
Golden Entertainment: Jefferies also remained positive here, suggesting that, notwithstanding seasonal weakness in August, trends remain “historically high”. Post the Rocky Gap sale, shareholder returns “should accelerate while reviewing incremental growth opportunities”.
New Jersey Sep22: Casino GGR was up 1.3% YoY to $251.7m, iCasino GGR was up 10.3% to $135.2m and sports-betting revenue was up 18.9% to $98m. Handle dropped 14.3% to $866.7m, while margins rose to 11.3% vs. 8.2% in Sep21.
Mobile GGR was up 23.9% to $88.2m, offline sports-betting GGR was down 13.2% to $9.8m.
Leaders by GGR: FanDuel led with 46% market share, followed by DraftKings (21%), and Caesars and BetMGM (10% each).
Deutsche Bank said this was the fifth consecutive month of YoY declines in handle, “which could be due to a combination of the scaling back of promotions and the impact of New York launching mobile”.
Michigan Sep22: GGR at Detroit’s three commercial casinos dropped 6.3% YoY to $103.4m. Slots and table games revenue was down 5.7% to $100.8m. Sports-betting handle at the resorts was down 42.8% to $18.5m.
Betting content provider Tallysight has signed Minute Media as its latest publishing customer. The company will provide betting content, tips and monetization services to Minute Media’s sports news outlet FanSided.
Bally’s Corporation has agreed a union deal with the Chicago & Cook County Building & Construction Trades Council for the supply of the trades workforce for the construction of its $1.7bn casino in downtown Chicago.
Greenwood Gaming’s Parx Casino and BetParx have extended their casino and betting sponsorships of the Philadelphia 76ers.
L7 Entertainment is the latest operator to obtain an Ontario license for its LuckyDays iCasino brand.
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