Gambling’s big earnings week

MGM, Caesars, Flutter and DraftKings to report, GLP call recap, Churchill Downs share reaction, startup focus – BettorTakes +More

Earnings+More

May 01, 2023

Good morning. On the agenda:

Gambling’s consequential earnings week ahead.
GLP says there is funding life beyond banking failures.
Churchill Downs’ shares hit their stride.
Startup focus is consumer-facing betting tools provider BettorTakes.

He's a man with a plan.

A big week for…

The biggest names in betting and gaming get set to report earnings.

The quad: The big two in Las Vegas, MGM Resorts and Caesars Entertainment, kick off proceedings later today and tomorrow, both AMC. Then fresh from its dual listing shareholder vote, Flutter will issue a statement on Wednesday before DraftKings issues earnings on Thursday with the call following on Friday morning, eastern.

Also cluttering up the week are Penn Entertainment, Rush Street Interactive and Red Rock Resorts.

Konnichiwa: The big news for MGM came in mid-April when its plans for a resort casino in Osaka got the nod from the Japanese authorities. Analysts at JMP said at the time it was a “dream come true” for MGM which with its partner Orix will be investing up to $10bn in the project.

As for online, also in mid-month JV partner Entain said BetMGM’s revenues rose 76% YoY to $470m in Q1, in line with guidance for this year of revenues at $1.8bn-$2bn and 76% up YoY.

Priced in: As with MGM, rival Caesars is likely to be ahead of forecasts on Las Vegas after state numbers showed the Strip running 12% ahead of 2022 in Q1. Recall, CEO Tom Reeg said during the Q4 call it was “hard to express how strong Vegas is right now”.

Most will be listening in to hear what Reeg has to say about the online business.
Recall, in late February analysts at Regulus questioned Caesars’ headway outside of the Nevada market.
Caesars said at the time of its Q4s that the online business would likely post a “modest loss” for the quarter.

High times: Flutter had a busy end of last week with shareholders giving their 100% backing to the US dual listing plans and the company responding to the release of the UK government’s ‘High Stakes’ White Paper on gambling.

On the latter, analysts at Numis noted Flutter was the least exposed of the UK-listed operators with 19% of its revenue coming from the UK.
The main focus of the call, though, will be the performance of the US operations which is now the largest contributor by geography.
Ex-launch costs in Maryland and Ohio, FanDuel produced positive EBITDA in Q4; depending on continued launch investments in Q1 – mainly Massachusetts – EBITDA profitability might feature for Q1.

Paying the price: The debate around profitability will intensify at the end of the week as DraftKings produces its earnings AMC on Thursday before its earnings call BMO on Friday.

The most recent news comes from the aforementioned opening in Massachusetts where DraftKings narrowly failed to unseat FanDuel as market leader by GGR.
This came after what is presumed to be a hefty outlay in promotional activity. EKG noted DraftKings was offering $1,200 in free bets during the launch period vs. $150 for FanDuel.
Analysts at Roth suggested DraftKings Q1 adj. EBITDA losses will be better than the management’s last implied guidance of -$270m vs. the Street’s -$235m.

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FanDuel, BetDEX and Vault co-founder Nigel Eccles heads a stellar cast of financiers, lawyers, operators, marketers, compliance professionals and, ahem, emerging media moguls (see full cast here)
E+M’s own Scott Longley will be on hand to talk media matters and learn a thing or two from all of the above
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Also next week

Penn Entertainment: Having completed its acquisition of Barstool in mid-February, Penn missed its earnings target but enjoyed an online quarterly EBITDA profit of $5m in Q4 despite a $10m hit from Mattress Mack during the World Series.

On track: The Barstool transition to a proprietary betting platform was still on track for the summer.
The same tech stack enabled theScore Bet to exceed expectations in Ontario.

Rush Street Interactive: In early March CEO Richard Schwartz said the group had made “great strides” and with $180m of cash in hand and no debt was “fully funded” to reach EBITDA positive territory by H223.

Calendar

May 1: MGM Resorts
May 2: Caesars Entertainment, E+M Startup Month
May 3: Flutter, Rush Street Interactive
May 4: Penn Entertainment, Red Rock Resorts, DraftKings (earnings)
May 5: DraftKings (call) – E+M Earnings Extra

Forthcoming event

Gaming in Spain takes place in Madrid on May 18. The full program and details of tickets can be viewed at https://www.gaminginspain.com/agenda-2023.

Traction in Macau

Revenue climbed to a three-year high of $1.8bn in April.

The monthly tally reached its highest level since January 2020, according to the figures from the Macau Gaming Inspection and Coordination Bureau, up 450% YoY. This comes ahead of the five-day Labor Day holiday that runs through to this Wednesday, May 3.

The authorities are expecting at least 70,000 visitors a day on average in the period, according to GGRAsia reported
That would be about 64% of the average daily visitation in May 2019.

Call review – GLP

Call an ambulance: Gaming’s resilience in the face of a choppy economic backdrop was praised by CIO Matthew Demchyk which helps explain GLP’s focus on a “purposefully conservative” balance sheet.

With $1.7bn of liquidity available, he said the gaming REIT was “positioned to pounce” on opportunities.
He noted that recent “headwinds in banking” (ie. banking failures) has “set the stage for a more robust and wide-reaching” dialogue with counterparties.
“Lending costs and bank relationships that used to be more predictable could be less so over the coming months and years and that reality is not lost on the folks that we talk to,” he added.
Steve Ladany, CDO, added there was plenty of M&A deal flow but “just in different buckets” than previously.

Earnings in brief

BetMakers: The process of “normalizing its cost base” as cash receipts rose 9% to A$24m. Cash outflows declined by 13% over the period to A$28.6m. A full operational review is ongoing.

Northstar Gaming saw GGR rise 61% to C$4m while turnover nearly doubled Q4 revenue to C$112m QoQ. Full-year GGR came in at C$7.3m.

Share watch

Churchill Downs was off the races this week.

At the post: Ahead of the latest running of the Kentucky Derby next Saturday, May 6, Churchill Downs shares were propelled by a 13%+ surge in the past week off the back of a strong earnings statement. But it was the booming historical horseracing unit that lay behind the 53% revenue rise.

🐴 Churchill Downs leaps on its earnings news

Analyst takes

Rejuvenation: Interest in digital gambling has been “globally rejuvenated” with European operators’ Q1 margins on the rise thanks to continued engagement post-World Cup and retail outlets performing strongly, says Jefferies analysts.

In Macau the early stages of the recovery resembles the situation in Las Vegas 18 months ago, the team suggested.
“Macau remains the near-term destination of choice for Mainland Chinese given the travel convenience and expensive alternatives.”

Startup focus – BettorTakes

MC7: The Detroit-based consumer-facing betting tools company was founded in 2021 by CEO Steve Rubenfaer along with six others including Gil Varon, a startup veteran. The tools help consumers better understand their own gambling habits.

Funding backgrounder: The company is bootstrapped.

Losing my edge: Rubenfaer notes that currently every bettor is effectively using the same data and following the same trends. “Because of this, it is very difficult to have an edge,” he says, noting that “97% of bettors lose money”.

“We're the only company on the market that helps bettors improve performance by understanding their own betting habits,” Rubenfaer says.
“When bettors see firsthand where their areas of weaknesses are, they become more mindful of placing bets, and can win more often,” he adds.
“The idea resonates immediately with anyone who bets on sports, and it is fascinating to see your results in the app.”

Ahead of the game: The initial goal, says Rubenfaer, is revenues “in the next couple of years” of between $500k-$1m. We don't have a preferred exit strategy,” he adds.

“We would like to actually make money by creating a ton of value for our customers and turning a profit!. If this leads to a buyout, great, but we are really focused on maintaining our lead in the industry.”

Growth company news

Sports betting and iGaming developer the Unit will become the front-end development partner for sports betting risk-management supplier 10star. The Unit will feature as a startup focus in next Monday’s Cheat Sheet.

Kwiff has extended its partnership with Betmakers to include the provider’s Price Manager system to power Kwiff’s proprietary trading technology and risk systems.

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Career paths

Superbet has appointed Jimmy Maymann as its new deputy chairman following the group’s recent appointment of Hans-Holger Albrecht as chairman.

The UK Tote has appointed Jon Knapman as CCO for its international B2B and Dave Hammond as CCO for the UK market.

Sportradar has appointed Gerard Griffin as its news CFO, He was previously CFO of Zynga. The group has also opened an office in Mumbai and appointed Prasun Bhadani as GM of its India operations.

Tim de Borle has joined Casumo as its new COO from Belgian sportsbook and casino Napoleon, where he was CEO.

Newslines

Lottomatica is set to float on Wednesday with a market cap of €2.3bn.

NeoGames’ aggregation platform Pariplay and potential MGM M&A target Push Gaming have been granted B2B licenses by Swedish gambling regulator Spelinspektionen.