DraftKings turns a profit
DraftKings turns a profit
Debut profit at DraftKings, Bally’s relaunch hopes, Red Rock, AGS, Accel and FL earnings in brief +More
Good morning. On the Weekender agenda:
DraftKings makes its much-anticipated debut profit.
Bally’s readies its North American online relaunch.
Earnings in brief from Red Rock, AGS and Accel.
The shares week looks at affiliate XLMedia’s recent run-up.
BettingJobs’ Jobsboard includes CTO, head of VIP and country manager roles.
Do you remember the first time?
Stand out
DraftKings’ shares enjoy a post-trading rise as the company hits its debut profit.
Ta-da! DraftKings’ much anticipated first-ever profitable quarter has duly arrived after the company posted Q2 adj. EBITDA of $73m on revenues that rose 88% to $855m. As is its custom, it also raised guidance for the FY with adj. EBITDA losses expected to be better by $100m at between $190m and $220m.
Revenue forecasts also rose to $3.46bn-$3.54bn, up 10% at midpoint and representing YoY growth of 54-58%.
DraftKings predicted adj. EBITDA of $150m-$175m in Q4 but didn’t provide a forecast for the current quarter. It said 2024 would be its first-ever profitable year.
The FY figures include the anticipated investment in the launch in Kentucky.
The company said its unit economics are “outstanding, with older states generating more than enough cash to fund investment in new states”.
The shares were up 12% in post-close trading.
Make your own luck: The company said the move to profitability had been strong retention and acquisition metrics and expansion into new territories. While the increase in cost of sales broadly kept pace with revenues, up 70% to $467m, sales and marketing expense has clearly been pegged back, up only 8% YoY to $199m.
Analysts at JMP suggested the figures provide further evidence of DraftKings’ success in gaining “impressive” market share across both OSB and iCasino “as well as lucky hold”.
“The operational excellence, higher structural hold and lucky outcomes had a direct positive impact on results,” they added. They noted that a 560 bps improvement in adj. gross margin beat estimates by 40%.
Jefferies said the quarter proves that “operators are pivoting from investment spending to profits through product advancement”.
Mr Brightside: Wells Fargo said they were impressed with the Q2 numbers. “Cohort profitability, declining promos and higher structural hold are causing EBITDA to inject more sustainably than we envisioned,” the team wrote.
They added that “things could get fairly interesting” in late Q4 when it reports Q3 numbers, with the potential for “further upside” and with a further rise in Q4 outlook also a possibility.
A bear writes: The team at Roth MKM said DraftKings had benefited from a “competition lull” as well as lucky win rates.
“YoY comps and market share gains get more difficult in H223.”
Diary date: DraftKings will hold its analyst call later today at 8.30am ET.
** SPONSOR’S MESSAGE **
What would you do with $100k in cash? Are you game…?
ICYMI
Ollie Ring’s Esprouts reported yesterday on the news that not only has Twitch added two more sites to its banned list of gambling-related content, it also appears to have banned sponsorship of “skins gambling”.
“It’s vague as you’d like, and absolutely stinks of Twitch just noticing more recent hubbub around skin betting,” writes Ollie.
“Are they banning the broadcast of skin gambling? Or just the sponsorship and affiliate world of directing to these marketplaces?”
You can also read more on Twitch’s move in Cody Luongo’s Sharpr this week and in yesterday’s edition of Compliance+More.
In one of two episodes this week, Jon and Fintan from The Gambling Files spoke to Northridge’s Melanie Ellis about the UK’s plans for financial risk checks.
On the same subject, it is worth reading Compliance+More’s report from earlier in the week on how Racing Post editor Tom Kerr laid into the government ‘s plans.
In LosIngresos+Mas this week, we report on the controversies that have emerged in Brazil following President Lula’s signing of the Provisional Measure, which gave the green light to sports betting, albeit at an enhanced tax rate of 18%.
Bally’s online relaunch
Bally’s remains focused on iCasino as land-based motors along.
Under new management: Bally’s news Kambi/White Hat-powered backend solution is set to be live in three states before the end of the summer with at least seven states operational by year-end.
CEO Robeson Reeves said Bally was “keenly focused” on growing its US iCasino market share, while CFO Marcus Glover admitted OSB would remain more of a funnel rather than a profit driver.
Reeves said iCasino share in New Jersey continues to “creep higher” after reaching and surpassing 4% in Q1, with the operation “on track” to achieve its long-term 6-8% share goal.
The company launched iCasino in Pennsylvania in June and Reeves said it looked forward to the “potential game-changer” of being the sole iCasino operator in Rhode Island.
Asked about whether online would cannibalize land-based revenues in Rhode Island, Glover said it was “additive”.
“People engage both at home and they socialize more in the retail establishment,” he added. “So we see this as totally incremental.”
UK online was the driver behind the growth in international interactive revenues, up 12% YoY and helping push segment revenues up 5.6% to $248m. He suggested the UK business was taking market share.
“The formula of ARPU up, FTDs up while CPA is down significantly, continues to play out and drive performance,” Reeves added.
“We are still taking share from smaller players and actually some bigger players too.”
Reeves noted the Bally Bet brand would soon be rolled out internationally.
A’s to Z: Bally’s casinos and resorts business grew revenue by 11% to $333m, helping to push overall revenues up nearly 10% to $606, while adj. EBITDA rose 9% to $961m.
Future plans include the “one-of-a-kind” scheme to fit a 30k MLB arena into the space currently occupied by the Tropicana.
In Chicago, meanwhile, Bally’s received preliminary suitability from the authorities for a temporary casino at Medinah Temple.
Earnings in brief
Red Rock Resorts: Consecutive record-breaking Q2s left Red Rock Resorts with a tough act to follow as it reported a drop in quarterly revenue year-on-year, with hopes for the remainder of 2023 now pinned on the Thanksgiving opening of the Durango. Revenues fell 1.5% to $416m in Q223 YoY, while adj. EBITDA was also down 7.2% to $175.3m.
CEO Frank Fertitta said tough comparisons will last through Q3 and Q4, but he sees cause for optimism everywhere, every weekend in Vegas.
“We’ll open the doors [on November 20] and let ’em rip for customers. It will be full-on that day. No soft opening,” Fertitta said.
In contrast to the cartwheels being performed elsewhere, Fertitta said the arrival of F1 in Vegas and the Super Bowl in Q124 are “just two more data points”.
“It’s exciting but there’s something major going on every weekend right now. It’s two weekends out of a lot of great ones coming up.”
AGS: CEO David Lopez said it was his company’s R&D expertise, product strategy and operational excellence that is “hands down better than anything I’ve ever seen” that lay behind the company’s 17% leap in revenues to $89.8m. Adj. EBITDA rose 15% to $39.6m.
The key to the revenue growth has been the performance of the Spectra cabinet where customer numbers increased 65%.
CFO Kimo Akiona said new casino expansions and the “relative stability” of the core unit footprint should allow AGS to grow the domestic installed base for the sixth consecutive quarter in Q3.
Recall, in the recent slot survey from EKG AGS was shown to be gaining market share, up 200 bps to 6%.
Accel: The “continued growth in the face of economic uncertainty demonstrates the strength” of the hyper-local distributed gaming model, according to CEO Andrew Rubenstein. Revenues rose 28% to $293m while adj. EBITDA was up 9% to $46.6m
He added the company was “evaluating” potential M&A opportunities having completed the integrations for the recent Century deal.
In terms of new markets for distributed games, he said the company was keeping a close eye on North Carolina.
FL Entertainment: Betclic’s listed parent said new cross-selling features and strategic partnerships helped it gain share in all key markets. Revenues from its digital wagering activities were up 23.5% at €489m, with adj. EBITDA rising 26% to €130m. OSB was up 21% at €389m and online casino revenues rose 40% to €65m.
Konami: The ongoing revival in Macau and across Asia helped gaming and systems revenue for FY24 rise 30% YoY to JPY73bn ($512m), while profit rose 17% to JPY13.4bn. The company said markets across North America and Australia have “regained” their pre-pandemic energy.
** SPONSOR’S MESSAGE ** BettingJobs is the global leading recruitment solutions provider to the iGaming, Sports Betting and Lotteries sectors. Boasting a 20-year track record supporting the iGaming industry, and with a team of experts and world class knowledge, it’s no surprise BettingJobs is experiencing rapid growth with outstanding results. Does your company have plans to expand teams to cope with strong growth and demand?
Contact BettingJobs.com today where their dedicated team members will help you find exactly what you are looking for.
MGM analyst takes
Analysts suggest the bull case for MGM remains in place.
Big mo: Take a slightly misfiring regionals out of the mix and MGM retains its momentum, suggested the team at Jefferies. The share price reaction – down over 5% in after-hours trading – suggests “expectations were elevated”, said Truist, but they also believed the commentary from the company was positive.
One of the reasons remains what the company said was its “fortified balance sheet”.
The team at Macquarie said it has “one of the strongest balance sheets in the sector” and, as such, positions the company to “execute capital returns” while also looking at bolstering its growth opportunities in digital, New York and Japan.
The shares week
If only all responses to profit warnings were like XLMedia’s.
Oversized returns: Raising eyebrows in the last week has been the performance of the London-listed affiliate. Since effectively issuing a profit warning on July 27, when it said adj. EBITDA for H1 was down 39% to £6.5m, the shares have soared nearly 25%.
👀 XLMedia get a boost
M&A notebook
Catena Media has sold its UK and Australian online sports-betting affiliate brands Squawka and GG.co.uk as well as its Australian-based subsidiary for €6m to UK-based sports betting affiliate Moneta Communications.
The assets generated LTM revenues of €4.5m and EBITDA of €0.9m. Catena said the cash received will go towards paying down debt.
It will reduce its cost base by ~€2.8m annually.
CEO Michael Daly said the move was “another milestone” as the business moved to concentrate wholly on the North American affiliate market.
** SPONSOR’S MESSAGE ** Venture capital firm Yolo Investments manages in excess of €600m in capital across 80 exciting fintech, gaming and blockchain companies. The Yolo Investments' Gaming fund, regulated by the Guernsey Financial Services Commission, has taken positions in fast-growth suppliers and operators, including Dabble and Enteractive.
Yolo Investments (yolo.io) wants to hear from readers of this newsletter. Get in touch with your pitch, or for a chat about innovative products which can plug into our investment ecosystem.
Newslines
Paysafe will provide its eCash solution to The Mill Adventure’s partner casinos and online players in Germany.
Calendar
Aug 4: DraftKings (call)
Aug 7: Genius Sports
Aug 8: Full House, Light & Wonder, Endeavor, Century
Aug 9: Flutter, Everi, Sportradar, Penn, NeoGames (e)
Chief Technology Officer – Eastern Europe / Remote / UK
Japan Country Manager – Remote
Head of VIP – Cyprus / Remote / Malta
An +More Media publication.
For sponsorship inquiries email scott@andmore.media.
