Beat, raise, draft, kings
DraftKings ups FY guidance, Barstool’s balancing act, Red Rock’s solid earnings, sector watch – esports betting +More
Good morning. On the Weekender agenda:
DraftKings offers customary beat and raise; call later today.
Red Rock boosted by Vegas migration.
Analysts ponder the risk/reward for Penn from its Barstool association.
Meanwhile, its shares take a hammering following this week’s furore.
A look at what Rivalry is doing better than its esports competition.
Jobsboard by BettingJobs includes CMO and Branding Manager roles.
This is not how I woke up but it’s how I look now.
DraftKings’ familiar pattern
Revenue growth for 2023 of up to 44% is predicted, as Q1 beats forecasts.
Rinse, repeat: With revenues of $770m, up 84% YoY, and adj. EBITDA losses trimmed back to $221m, DraftKings comfortably beat forecasts in Q1, helped by favorable hold and continued operational improvements.
Once again, the company raised FY23 guidance with revenue now predicted to come in at $3.1bn-$3.2bn, while FY adj. EBITDA losses will be at $290m-$340m compared to previous estimates of up to $450m.
Scream if you want to go faster: Following the launch in its home state of Massachusetts – where it narrowly failed to beat rival FanDuel to top spot – DraftKings is now live in 21 states plus Ontario, Canada. The company said in the press release that it continued to acquire customers faster and more efficiently in debut states.
Goodbye flywheel, hello snowball: JMP said there was evidence of DraftKings “creating a snowball effect” as it was able to reinvest to drive greater retention.
🍆 DraftKings was up nearly 10% in post-close trading
Quick takes: Wells Fargo said DraftKings likely had “more beats and raises in the tank”. However, Deutsche Bank added that although the beats were “healthy”, they “don’t see a meaningful read through” to the medium- or long-term story.
The DB team noted that Q2 could potentially be breakeven before losses return in Q3 and Q4.
Roth MKM analysts suggested 2023’s improved picture represented a “pulling forward of demands” rather than a growing TAM. “Next year we expect revenue to slow as we lap 2022’s [market] share gains,” they added.
An FYI: The DraftKings call with analysts will take place later today, after which Earnings+More will release an Earnings Extra edition.
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ICYMI
In Earnings+More this week, Flutter reported quarterly earnings on Wednesday when CEO Peter Jackson said he “wouldn't be waiting to catch us” given the growth the company was seeing across the board.
In the same edition of the newsletter, Caesars also proclaimed its digital self-sufficiency.
Earlier this week, the latest E+M Startup Month looked at how female founders face more hurdles than their male counterparts. Meanwhile, gaming sector behemoth MGM Resorts reported its earnings on Monday.
On the Gambling Files this week Jon and Fintan spoke to Las Vegas resident and super-lawyer Jennifer Gaynor to discuss all things Vegas, including the success of turning the city into a truly all-encompassing experiential venue.
In Compliance+More yesterday there was a report on the UK Gambling Commission’s plans to move quickly with large elements of the White Paper. Meanwhile, on Tuesday the NFL’s positioning with regard to gambling was criticized following the recent high-profile player suspensions.
In Sharpr yesterday, Cody Luongo and his team looked at the news that esports organization G2 Esports has announced a partnership with Counter-Strike: Global Offensive skin gambling site CSGORoll.
Red Rock’s Valley story
It’s all about migration to Las Vegas for Red Rock Resorts.
Go east: Red Rock Resorts’ medium-term story is being boosted by the recent levels of migration from California to the Las Vegas Valley, suggested vice-chair Lorenzo Fertitta, who said there was a “totally different mix” of people, including business owners and retirees.
“They’re bringing their wealth with them to Las Vegas. I think it’s a completely different dynamic than what we’ve seen in the past.”
CFO Stephen Cootey said Red Rock’s target was to tap into high-growth areas in and around the Valley. This includes the Durango project, which remains on course for a Q423 opening.
Fertitta said the company expected the property to be “busy from the time we open up”.
Buffer zone: Scott Kreeger, president, noted that since reopening post-pandemic Red Rock has enjoyed 11 consecutive quarters of margins above 45%. “I think this quarter is the second- or third-best quarter for margin in the company’s history,” he added.
Net revenues rose 8% to $434m while adj. EBITDA was up 9% to $194m.
Fertitta also noted Las Vegas’ potential resilience to any recessionary downturn.
He said Las Vegas “has a lot of things” that can “buffer” what might be happening elsewhere in the macro environment.
JMP analysts noted they were seeing “no signs of the consumer falling off”.
From A’s to Z: Management noted that under the current plans for the Oakland A’s move to Las Vegas, Red Rock would retain a parcel of the land set aside for the stadium.
Analyst takes – Penn
Analysts suggest Penn will have to bear the risks of further social media storms if it is to benefit the upsides from the audience Barstool brings.
Events, dear boy, events: The past two days have highlighted the clear downsides of being tied to the Barstool brand as the issues around the sacking of Ben Mintz for airing racist slurs overshadowed Penn’s online progress.
Truist said the questions raised over what Barstool looks like post-Penn’s acquisition were “potentially more impactful” than the issues around yesterday’s earnings miss.
“Investor concerns stem [from] the immediate and longer-term implications of tighter guardrails on Barstool revenues and consumer perception.”
Lost in music: Deutsche Bank noted it wasn't just the online story that was obscured yesterday and that “likely lost in the noise” was its forecasts for property level EBITDA “actually moving higher”. But they added that the margin decline in the bricks-and-mortar business was the “most concerning aspect of the quarter”.
DB said Penn was “somewhat catalyst starved”. It is difficult to envision regional casino growth, returns from projects are two to three years off, new launches online will not be needle moving and the M&A environment is “benign”.
The shares week
Portnoy in a storm: The stout defense of Barstool Sports and its content policies by CEO Erika Ayers on the Penn Entertainment call yesterday may only have made matters worse as far as investors were concerned.
The shares responded to the sacking of a high-profile employee and Dave Portnoy’s ‘sorry, not sorry’ Twitter posting by falling 10% yesterday.
Still, Portnoy declared himself unworried by the drop.
🩼 Penn Entertainment shares suffer social media fallout
Analyst takes
Rush Street Interactive: The push towards profitability will be helped by the group’s cost controls, suggested JMP, who said it was “more impressive” than the 5% revenue beat. For Roth MKM the implication was that core markets are “generating enough growth” to drive operating leverage and profitability in 2024 and 2025.
Sector watch – esports betting
Right approach: Rivalry keeps on attracting praise for its approach to esports betting as Q4 GGR rose threefold to $9m and CEO Steven Salz announced a $10m investment in the company from bookmaker Pinnacle.
Rivalry is also attracting praise because of how it contrasts with other esports-focused operators such as Esports Entertainment and Entain’s Unikrn.
Industry correspondent Ollie Ring alighted on this in a recent edition of his newsletter: “Rivalry’s results show the value of esports as a betting proposition, substantially more so than other ‘disruptors’ in the past.”
Compare and contrast: EEG’s strategy of focusing on OSB (Bethard) and iCasino (LuckyDino) gray operators to supplement its esports-wagering activities failed, Ring said.
As for Entain’s acquisition of Unikrn in 2021, taking it offline and relaunching in Dec22, Ring said the UK group had “managed to absolutely annihilate any brand recognition Unikrn had built up through a prolonged absence and lack of interaction with the esports community”.
.exe file: Rivalry currently generates 12% of its revenues from iCasino, and Ring said its Casino.exe portal is “unique and something that gamers will likely identify with more than your typical slots”. This will help it reach profitability this coming year, he added.
Other operators should “take a leaf out of Rivalry’s book and use authenticity”, he concluded.
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On social
Oh Portnoy, oh Portnoy, oh Portnoy.
Newslines
White Hat Studios has been approved to launch its iCasino games in Connecticut.
Kambi has extended its sportsbook partnership with the Scandinavian bookmaker Paf. The firms have been partners since 2011.
Calendar
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May 11: Raketech, Codere Online, SBC NA day 2
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