Barbarians at the factory gates
Evolution beset by ‘frontier troubles’
Evolution hit by Georgia strikes and Asian cyberattacks.
In +More: BetMGM’s Swedish launch.
Is LVS signaling a potential retreat from New York bid?
Earnings in brief from Betsson, Churchill Downs and Monarch.
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Trouble and strife
Georgia on my mind: Evolution CEO Martin Carlesund flashed up a picture of an “amazing free gym” as he suggested the strike action in Georgia was being undertaken by only a small proportion of the workers in the country.
Carlesund was speaking after Evolution released Q3 numbers showing revenue up 15% to €519m while adj. EBITDA rose 12% to €356m.
Investors were apparently relieved the disruption in Georgia wasn’t worse, sending the shares up 13% in early trading.
Carry on at your convenience: However, the analysts at Regulus noted that while the disruption in Georgia has been described as being “stable,” the operation there is “too big and historically too efficient to be easily replaced.”
One out: On the call, Carlesund suggested the numbers of those actually engaged in industrial action were ~500 out of a workforce close to 8k.
All out: But while saying the business was “not hostage” to the strike, he admitted it “makes thousands unable to go to work.”
He acknowledged there had been outbreaks of vandalism as well as violent behavior and harassment of staff.
Regulus said that to put Georgia’s importance in context, it should be borne in mind that the next largest dealer pool is in Latvia with ~3.2k employees and where the average salary across the country is ~2x higher and “labor laws are stricter.”
Carlesund admitted capacity was currently running at ~60% in Georgia and wouldn’t improve any in Q4.
Attack, attack, attack: Meanwhile, cyberattacks have also negatively affected the Asian-facing business. He said criminals were using “advanced technology” to intercept the company’s video feed, manipulate it and redistribute it without authorization.
He added that Evolution had seen “more advanced and significantly increased activity,” suggesting this was now a “new reality to some degree.”
Carlesund said it would “probably take a couple of quarters” before the business was “back to the path” it was on previously. “It won't be a light-switch maneuver.”
Asia accounted for €202m in Q3 or 39% of total revenues and Regulus noted growth in the region was flat QoQ. Moreover, the team added that the “cycle of disruption is likely to mount” while the source of the trouble was “unclear.”
“Whatever the reasons and potential upside, Evolution’s period of easy Asian growth with few questions asked and no local response now seems to be over,” Regulus added.
Infamy, infamy, they’ve all got it in for me: Making an analogy with ancient Rome, Regulus went on to say that Evolution’s era of “easy conquests” was at an end while dangers lay ahead.
“If it is not growing through the quality of its product, the engagement of its people (only a few of whom currently seem recalcitrant it must be stressed), and in places where the rule of law protects it, then it is inviting its decline and fall.”
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+More
BetMGM has launched in Sweden, its third international territory after previous debuts in the UK and the Netherlands. It has been launched under the umbrella of the MGM Resorts-owned LeoVegas business.
High Roller Technologies, an online gaming VIP operator, has launched an IPO in New York, offering 1.25 million shares at a price of $8 per share. The offer, which also includes a 45-day option for underwriters to acquire up to an additional 187,500 shares, will close on Thursday.
The company said it plans to use the proceeds to invest in user acquisition, market expansion and launching additional brands.
EveryMatrix has signed a multi-year agreement with BetGoodwin to power its UK business with the Tier 1 provider’s award-winning turnkey technology. It becomes the latest FSB Technology client to commit to a continuation with EveryMatrix since its acquisition earlier this year.
Scout Gaming has signed a multi-year extension to its agreement to provide bet365 with fantasy sports products.
FDJ has exercised its squeeze-out rights in relation to the recently completed acquisition of Kindred.
Going cold on New York
Who's been eating my porridge? Asked about the prospects of gaining one of the three downstate casino licenses in New York, CEO Robert Goldstein said Las Vegas Sands remained in the process but was worried about whether the market would be impacted by iCasino cannibalization.
“The only concern is the ongoing strength of online gambling,” he said. “We can’t ignore what’s happening in New Jersey, in Pennsylvania and in Michigan.”
He said LVS would “love to be in New York with the right capital structure and the right licensure process.”
But he wanted to keep an eye on New Jersey where “sometime in the next year or two” iCasino will exceed land-based revenues. “Which is pretty exceptional,” he added.
Ignorance is definitely not bliss: Asked whether this meant LVS would reconsider New York if it legalized iCasino, Goldstein added “it goes beyond that.”
“Whether it’s New York or Michigan or Florida, any place that’s online, it makes you stop and scratch your head,” he said. “You can’t ignore the impact on land-based revenue.”
Juddering halt: Turning to the company’s actual, as opposed to prospective, earnings, during the last call, Goldstein said the company was discussing internally whether there was a new paradigm at play in terms of higher hold rates in Singapore.
Safe to say, those discussions have likely ended after what Deutsche Bank suggested was Marina Bay Sands’ run of good luck came to an “abrupt end” in Q3, with VIP hold at the property coming in at a “paltry” 1.75%.
This contributed to a lackluster quarter for the headline numbers, with revenue down 4% at $2.68bn while adj. EBITDA fell by 14% to $908m. Alongside the MBS hold issue, the company also suffered from further Londoner renovation disruption in Macau and Chinese macro weakness.
Goldstein remained positive on China, believing the economy would “grow and flourish” and that Macau would “grow along with it.”
Recall, Macau-related stocks bounced significantly higher at the end of September on news of the Chinese government’s economic stimulus measures.
Grant Chum, VP of Asia, pointed out that Macau was showing resilience before the measures “have the chance to make any impact.”
Yacht rock: On the renovation disruption, Goldstein said that with work near enough complete at the Londoner and on the recent MBS expansion, the company was now “pretty much clear sailing.”
“We’re going to stop telling you about the rooms undergoing disruption or difficulties,” he promised. “No more excuses.”
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Earnings in brief
Churchill Downs: Revenues rose 10% to $629m while adj. EBITDA came in at $235m, up 7%, with the increase coming through all segments and led by live and HRM revenues, which rose 12% while adj. EBITDA was up 15%.
The analysts at Truist noted this helped offset some weakness in the gaming operations.
Still, the team said Churchill Downs remained the “diamond in the rough,” with growth levers available and the potential for further M&A.
Call and response: Churchill Downs will host a call with analysts later today.
Betsson: After reporting an 11th successive quarter of growth, the company said revenue came in up 18% to €280m while EBITDA rose 17% to €80m. In the earnings release, the company spoke about what the acquisition of Sporting Solutions from FDJ will bring to its sports-betting capabilities.
It will primarily contribute to “faster and more flexible odds setting,” alongside stronger risk management and enhanced scalability for the sportsbook product.
Monarch Casino Resort: The company saw revenue come in 4% up at $138m while adj. EBITDA hit $51m, a rise of 3%. The team at Macquarie suggested, however, that investors would want to know “what’s next” for the Black Hawk, Colorado operator.
It “remains well positioned for another opportunity to grow, particularly given a net cash position,” the team added.
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Earnings calendar
Oct 24: Boyd, Churchill Downs (call), GLP
Oct 25: Kindred
Oct 29: Caesars Entertainment
Oct 30: MGM Resorts
Nov 1: VICI Properties
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