9 Jun: Conference touches on SPAC slowdown fears +More
iGaming Next conference notes, DraftKings fireside chat, Caesars Entertainment analyst reaction, Genius Sports right issue, France GGR Q1, Illinois GGR May, Ohio GGR May, Galaxy Entertainment analyst
Good morning. Welcome to today’s newsletter which is packed with coverage from Day 1 of the iGaming Next conference yesterday, a fireside chat with DraftKings’ Jason Robins speaking to Goldman Sachs’ Stephen Grambling from Monday evening, and analyst commentary on Caesars, Galaxy and much more. We will be following what is said later from both day 2 of iGaming Next and SBC’s Digital North America event which starts today. But first, some commentary from yesterday’s panels on M&A and the investment backdrop.
If you have been forwarded this email and wish to subscribe, click here:
iGaming Next Day 1 conference notes
White heat: On a panel dedicated to discussing trends in M&A, Mohit Kansal, partner at Clairvest, made the obvious point about the “euphoric” M&A backdrop being driven by events in the US. “You have all this capital chasing deals to capture that growth.” Asked by panel host Julian Buhagiar from RB Capital which deals had surprised him, he mentioned the DraftKings deal for VSiN (see below for more on DraftKings and media).
“This was a move to go upstream,” he said. “This is a big step forward for them and it opens the floodgates. They are all looking for an edge. They are moving upstream and buying media assets. So could they buy a media network? Who knows? Maybe they might buy rights? That I feel is on the horizon.”
SPAC in black: The panel also discussed the future of SPACs. Kansal suggested that the PIPE market - that is those putting extra money into a de-SPAC deal - has “largely dried up.” “It’s been more challenging to do deals as a result,” he added. “But a slowing doesn’t eliminate the fact that there are a huge amount of SPACs on the sidelines trying to do deals.” But Buhagiar was more worried. “SPACs can adversely affect the (M&A) market,” he said, suggesting that the equal and opposite reaction to the current frenzy might be a period of nothing being bought. “I think SPACs will be the weapon of mass destruction in the gaming industry. It will deplete good capital in the acquisition space.” Buhagiar also predicted a wave of consolidation among slots developers (maybe he has some on his advisory books?): “I think there will be a ridiculous amount of slots companies acquired,” he suggested. “In terms of content, and creativity, you can see there will be consolidation.”
A media message: The investment theme was picked up on a later panel by Thomas Allen, analyst at Morgan Stanley and Andreas Aean, partner at Copenhagen-based investment firm Symmetry Invest. Thomas said that from an his standpoint he had “never seen such an influx of other investors looking at this space.” “I spend more time on my phone with internet and media investors than gaming investors,” he added. Meanwhile, Aean spoke specifically about the affiliate side and suggested he can see the operators only wanting to work with the big affiliates. “They can really roll up this industry.” Note: Symmetry has a close relationship with the founders at Better Collective and is invested in Gaming Innovation Group (GiG) which has a large affiliate business.
Agenda setting: Thomas also spoke about the issue of gambling and ESG, saying the US industry “needs to be aware of it and be focused.” It was also the subject of a panel hosted by E+M’s Scott Longley which featured Kelly Perry, director of ESG at Edison Group, and Liesbeth Oost, sustainability manager at Aspire Global. Both pointed to the way that ESG - and particularly governance and societal elements of the equation - have risen up the agenda for the investment community in recent years, a trend that the gambling sector “absolutely needs to be aware of.”
DraftKings digital fireside chat
iCasino to the fore: DraftKings’ Jason Robins was quizzed by Goldman Sachs’ Stephen Grambling on Monday as part of the investment bank’s Travel and Leisure Conference. The general commentary was similar to comments made in the Q1s, including suggestions that the only surprise from the recent pandemic was the “accelerated growth” in understanding that gaming will be “much larger than we expected” pre-pandemic.
Ball-gazing: When it comes to what will happen to the online audience when the pandemic restrictions fade, Robins said it was impossible as yet to know what might happen. “We’re being cautious in our back end of the year guidance,” he said.
“If I had to guess there will be a bit of a slow down back to more pre-pandemic levels on customer acquisition. But I don’t think it will go back below. And on the retention side, I think that will hold up quite nicely. We aren’t seeing any deterioration in our cohorts; we will know some more as we get through the remaining months of the year and we get to the NFL season.”
Time team: Looking at the prospects for profitability, Robins suggested that the UK should be used as a proxy for how the US market might look a few years down the line. In terms of the shape of the market and margins being hit across the industry, he said “it’s like having a time capsule on what the market might look like.” He added, though, that “if anything, margins might be a little better.”
VSiN city: Talking about the VSiN acquisition, Robins hinted that more M&A in the media space might be on the agenda. “Media is an area we have for a long time believed to be synergistic and complimentary to our gaming business,” he said. “Most of where we acquire our customers has been through media.”
Caesars Entertainment analyst coverage
Right move: The sales of Tropicana Evansville ($480m) and the pending sales of Horseshoe Southern Indiana ($250m) and Harrah's Louisiana Downs ($16m) in Q3 means the portfolio reconfiguration is largely complete. Although management said it didn’t expect to market a Strip asset “until it was fully run rating synergy inclusive results”, the analysts said discussions with interested buyers could take place in H2 with a potential announcement of a transaction by year end. Meanwhile, Caesars expects to announce a buyer in late Q3 for William Hill’s non-US assets. It expects the sale to raise around $1.5bn and will put it towards paying off debt.
Band on the run: In Vegas, the analysts expect Caesars to outpace its peers in group business given its existing book of H221 business and the addition of the Forum Convention Center to its portfolio. Caesars also confirmed the continuing high-margin story countrywide which in 15 of its 36 properties were running at over 50% in April. Deutsche Bank noted that the regional market recovery is expected to continue. The laggard, they noted, is Atlantic City.
High hopes: With the group set to be live in 21 states by year-end, Deutsche expects management to break out the sports and iCasino business in the coming months and for Caesars to become a “prominent” betting and icasino player. Deutsche Bank said the $150m in net revenue in Q1 meant Caesars was tracking in line with the lower end expectations for the year of between $600m to $700m “despite little marketing/promotional activity to date.” However, it did warn that the push to “accumulate” market share would come at a “somewhat meaningful cost.”
“By the start of the NFL season, we expect Caesars to be complete, or largely complete, with their rebranding of the sports assets to Caesars, and we anticipate considerable spend through the partners around customer acquisition.”
Noting the partnerships with ESPN, CBS and the NFL, the analysts also said Caesars would be relying upon its Total Rewards database of 60 million customers, 15 million of which were active within the last 18 months.
Macquarie gaming analyst note
Looking at trends leading up to and beyond Memorial Day last weekend, the analysts at Macquarie have suggested US gaming GGR is trending up by mid to high double-digits QoQ for Q2, helped by the record performance of slots in Las Vegas. “Bottom line,” the team said, “we’re expecting mid to high single digit EBITDA beats for 2Q, at this point. In addition, strong GGR should help suppliers as well.” In Macau, however, Macquarie have lowered their Q2 estimates due to continued fears over the Covid outbreak in Guangdong and how that might affect Chinese visitors.
Galaxy Entertainment analyst note
One over the eight: Morgan Stanley analysts have run the rule over the eight Macau operators and have alighted on Galaxy as being the best placed to outperform, as and when Macau returns to a more solid growth pattern. As mentioned above, the outbreak at Guangdong is still weighing on visitation rates from China, but Galaxy outperformed in 2020 and into Q121. The analysts point to Galaxy’s growth potential (with phase 3 and 4 of its property expansion to come), its strong balance sheet (US$3.7bn in net cash) and the low likelihood of the company losing out in the upcoming (and long-anticipated) concession renewal.
France GGR Q1
La belle France? France’s regulated iGaming operators recorded a 35% increase in Q1 GGR to €587m, with sports-betting once again driving the sector and pari-mutuel horse racing enjoying record staking levels. The amount bet on sports by French players rose 79% YoY to €2.2bn and operators recorded GGR of €357m, a record since regulation in 2010. Active player numbers rose 19% to 3.1 million, 2.5 million of them are sports bettors. Online horse racing stakes of €481m represented a 60% annual rise and best ever quarter, online GGR was up 48% to €110m. Online poker was up 23% to €120m. Regulator ANJ said the figures “illustrate the acceleration of the digitalisation of gambling”. National lottery operator and sportsbook Française des jeux recorded a 46% rise in Q1 stakes to €1.1bn across online and retail channels.
Illinois GGR May
A Rivers runs through it: GGR fell 9.4% compared with May19 at $107m. The Rivers Casino outperformed with $41.4m (or circa 39% market share) down only 4.9% on the two-year comparison but up 14% MoM. It was followed by the Caesars properties with a combined $29.6m, down 14.9% on May19 and 7.2% MoM. Penn National was at $20m, down 8.9% on 2019 and up 4.9% MoM. Boyd’s Par-A-Dice was at $5.7m, down 14.1% on May19 and down 5.2% MoM.
Ohio GGR May
Keep on running: May GGR rose 23.5% on May19 to $209.2m but sequentially it was down 3.6% on April. Penn’s four casinos generated $73m, up 26.2% and down 5.9% MoM; MGM’s Northfield Park generated $25m, up 14.4% vs May19 and also up 1.9% MoM. Caesars Scioto Downs (slated to soon be sold off) was up 27.6% at $21.3m (down 2% MoM) and Jack Cleveland saw $22.5m in revenue, up 25.1% on May19 and down 6,6% MoM, the Hard Rock Cleveland generated $19.7m, up 4.6% vs May19 and down 7.3% MoM and the Thistledown hit $19.1m in GGR, up 50.7% on May19 but 2.2% down MoM.
Newslines
Please sir, can I have some more? Less than two months after listing via a de-SPAC, Genius Sports is tapping the market with a right issue, selling 12m shares while founding shareholders (mainly Apax but also CEO Mark Locke) are offloading a further 8m shares between them and Goldman Sachs has the option to purchase a further 3m. With the share price closing at the $19.82 mark on Tuesday, and should GS take up its option, it represents a total $456m raise of which the company will receive circa $240m. The cash will be used for “general corporate purposes”. Genius says it reserves the right to issue a further 3m shares at a later date. The stock dropped over 7% on opening in the wake of the news having come off its highs of $24.93 in late May.
Boyd up: Boyd Gaming has closed its previously announced offering of $900m aggregate principal amount of 4.75% senior notes due 2031. As also previously announced, the cash go towards the redemption of notes dues in 2026.
Parks and recreation: MGM Resorts International has announced the hiring of Tilak Mandadi as its first chief strategy, innovation and technology officer. He joins from Disney where he was head of digital and CTO for Disney Parks and Experiences and previous to that he was at American Express.
Uh-Hao: Las Vegas Sands is facing a mega-billion lawsuit in Macau lodged by former partner Asian American Entertainment Corporation, headed by Taiwanese businessman Marshall Hao. Hao is seeking damages of around 70% of Sands’ Macau profits from 2004 to 2022. Reuters calculations put the figure at around $12bn. The trial starts next week.
What we’re reading
A dog’s dinner: Dogecoin is gaining acceptance as a medium for betting transactions according to this piece from Asia Gaming Brief.
What we’re writing
California soul: California looks set to get a referendum on sports-betting but not until 2022. For Legal-Sportsbetting.com.
Tweet of the day
The bears game…
Calendar
9 Jun: iGaming Next Bright Future (Day 2), SBC Digital North America (Day 1)
10 Jun: SBC Digital North America (Day 2)
Contact us
Scott Longley scott@clearconcisemedia.com
Jake Pollard jake@openmediaservices.com