Jul 29: Weekend Edition #57

PointsBet Q4, Churchill Downs Q2, VICI Q2, Nevada June, $1bn lottery, sector watch - streaming +More

Jul 29, 2022

Thought bubble

As is the way, on Wednesday the markets welcomed the Fed’s 0.75 point hike in US interest rates and the gaming sector didn’t miss out. A rising tide lifts all boats but whether those gains can be held on to will depend on what is said next week by the likes of Caesars, MGM, Penn National, Bally and DraftKings. Much of the analyst questioning this week focused on any signs of consumer weakness, and yesterday’s news that the US economy suffered its second successive quarter of GDP contraction likely means there will be more along those lines.

Our predicted phrase of the week: ‘We’re not seeing it. Yet.”

There I was digging this hole.

PointsBet Q4

Group gross win rose 24% YoY to A$122m while net win was up 32% to A$78.5m.
US gross win up 30% to A$41.9m; net win up 47% to A$23.8m.
Australia gross win up 20% to A$79.5m while net win up 28% to A$55.2m.

First contact: An accident of earnings announcement timings means PointsBet is the first operator to give investors a sighting of any numbers from Ontario - and for PointsBet, at least, they appear somewhat underwhelming.

Turnover for the company was A$16m while gross win was A$0.7m and net win was A$0.2m. Actives were a mere 7,239 whole marketing expense was C$7m.
All at sea: Canadian CEO Scott Vanderwel said PointsBet’s strategy in Ontario was to “stand out from the sea of sameness”.

Ill behavior: Illinois is the highlight for PointsBet’s US operations and at 8.9% market share the only state where the company comes close to its previously stated aim of hitting 10% market share.

US CEO Johnny Aitken said the combination of local “high-impact media” via the NBC partnership along with the continued focus on in-play “creates our foundation to compete in Illinois regardless of the competitive landscape”.
Elsewhere, PointsBet’s market shares in the remaining nine US states where it is operational stand at an average of 2.6%.

Chasing rainbows: Sam Swanell, CEO, said the overarching message from the US and Canadian businesses was that PointsBet was “focusing on genuine clients over volume clients”. “That has changed from 12 months ago,” he added.

“Our aim is not about increasing turnover, it is about increasing net win,” he added.

Susquehanna: Swanell made mention of the recent A$92.4m investment from SIG, an offshoot of the Susquehanna International investment firm. Alongside that deal came an exploratory agreement with the SIG offshoot Nellie Analytics, a sports trading firm.

“That will accelerate out our focus on sharper in-play pricing,” Swanell said.

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Churchill Downs Q2

Revenues up 13.1% to $582.5m while adj. EBITDA rose 24.8% to $291.2m.

Historic: The record performance across the board was helped along by the live and Historical Racing Machine segment of Churchill Downs where revenues came in at $260.9m. This included record handle and EBITDA from the Kentucky Derby week

Derby daze: Asked whether the current inflationary environment might mean Churchill Downs raised prices for next year’s edition of the race, CEO Bill Carstanjen said it was a sensitive subject.
“We generally have a philosophy with our customer base that we just don’t raise prices and leave it at that,” he said.
“We always try to enhance their experience and make them feel good about it.”

Feeling the heat: On the question of how CDI’s gaming operations were faring - where the $184.3m of revenue included what Jefferies terms as “notable weakness in Mississippi and Louisiana” - Carstanjen said the macro backdrop at present was “manageable”.

Recalling the 2009 period, he added that current circumstances were “not overly remarkable at this point and it is not universal across jurisdictions”.

Better off out of it: The Twin Spires business saw adj. EBITDA rise by 38% YoY as the unit benefited from the unwinding of Churchill Downs’ sports-betting and igaming ambitions.

Carstanjen said he hoped the B2B offering would be making some partner announcements before the end of the year with operators integrating horserace betting into their sports PAM.

VICI Q2

Revenues rose 76% YoY to $662.6m while adj. EBITDA climbed 42% to $564.5m.

All conquering: Following the completion of the deal to buy MGM Growth Properties, VICI CEO Ed Pitoniak celebrated VICI being the first US REIT in history to go from IPO to S&P 500 inclusion in less than five years.

Taking advantage: Pitoniak also suggested that with VICI’s credit status and with its access to and cost of capital having strengthened, it meant the company was well-placed if opportunities opened up due to any levels of distress elsewhere.

“We have the ability to move quickly and decisively in market conditions that may cause others to pause,” he added.
He added that versus the likely cost of refinancing in the wider market right now, VICI’s cost of capital “beat the hell out of that”.
Last resorts: Analysts at CBRE noted that REITs might also be the only game in town.
“In some cases, traditional financing may still be difficult to obtain for some borrowers, making REIT financing not just a more compelling proposition from a cost perspective, but a more viable option.”

I can see clearly now: Talking up the future for the operators Pitoniak made a solid defense of their combined focus on sports betting, suggesting they had made an investment in the future and a “much bigger consumer market in America”.

Ed Pitoniak: “Sports-betting has managed to activate the next generation of customers. I think the cloud over sports-betting investment has gone too far and people are losing sight of the fact that it's going to be a key means with which gaming competes in the consumer marketplace.”

Earnings in brief

Gaming & Leisure Properties: Revenue was up 2.7% YoY to $326.5m while adj. EBITDA was up 11.4% to $307.6m. The company reinstated guidance for that FY22 AFFO of between $908m-$920m. GLP’s call with analysts takes place later today.

BetMakers: Q4 revenue was up 194% to A$26.2m while FY22 revenues more than tripled to A$93.4m. The company said it was cash flow positive in the quarter.

The company noted the news from April that it will be providing the backend to a new wagering entity being created by NTD, a joint venture involving Tekkorp, New Corp in Australia and Australian bookmaking veteran Mathew Tripp. During the period, BetMakers launched a fixed-odds horse race betting product in New Jersey.
Separately, GTG Network has announced it has signed a deal mto provide its iSport Genius data insights product to the new NTD venture.

FDJ: H1 revenue was up 12.1% to €1.2bn with net profit up 9.4% to €160m. The company said the growth came from both points of sale and digital.

CEO Stéphane Pallez said that given the deterioration in the global economic environment, FDJ “remains cautious but confident in its outlook, based on its extensive and responsible gaming model”.

$1bn lottery

For only the fourth time ever the Mega Millions jackpot this weekend is over $1bn.

Bonus balls: Looking ahead to this coming weekend’s draw, the analysts at Macquarie suggest the hype surrounding it is bringing a focus back onto the lottery and with it, a likely influx of infrequent players which is ultimately likely to benefit providers such as IGT.

The Macquarie team note that IGT will get a boost of ~1%-2% of any jackpot total; in this instance, it means it will receive between $25m-$30m in Q3.
Offset: The benefit will likely be offset, however, by FX issues around the translation of Italian lottery revenues and a potential downgrade to EBITDA. Macquarie point out that Italy is worth ~25% of total revenues.

Nevada datalines

GGR for June was up 8% YoY to $1.28bn, 22.7% ahead of Jun19.
The Strip led the way once again with GGR up 22.7% YoY to $735m.
Sports-betting GGR down 18.3% YoY to $23.8 on handle that fell 10.1% to $490.4m.

When do we stop counting? Analysts at JMP pointed out that June was the ninth time in the past year when Strip revenues set an all-time record. They pointed out that mass play was up 30% in Q2.

Key debate: JMP say their own checks and earnings commentary suggests “headwinds in the economy have not spilled over into the gaming/consumer segment to this point”.

Dear prudence: Over at CBRE, the team pointed out that while it would be “prudent” to expect some curtailment of domestic leisure spend, that might be offset by the further return of group and international business.
Better off: Macquarie, meanwhile, said casinos are “better prepared to handle a downturn than prior cycles” due to leaner business models and little by way of new supply.

Sector watch - streaming

Kicking off: The beginning of the English Football League (EFL) season is looming this weekend and streaming has come very much to the fore. Blame/thank the early kick-off on the World Cup taking place halfway through the season but the tournament has also caused something of a rethink from the football authorities about the broadcast of weekend games.

Under orders from the EFL, all League One and League Two games (i.e. third and fourth tier games, just to confuse the unwary) will be officially streamed live via the Football League’s iFollow app.
All midweek fixtures will also all be streamed live.

Must-have: The Athletic quoted Neil Hart, CEO at Bolton, who is clearly in favor of the streaming move: “We live in a digital world and football fans, especially the younger ones, now expect streaming. We’ve got to deliver and move with the times,” he was quoted as saying.

Pigskin in the game: Also sailing further into streaming waters, the NFL this week announced the launch of NFL+, a new subscription app

NFL+ offers live out-of-market preseason games across all devices, live local and primetime regular season and postseason games on mobile devices, live local and national audio for every game, NFL Network shows on-demand, NFL Films archives and more.

Premier buy: There has also been a move in the further reaches of the content jungle as ViaPlay (formerly known as Nordic Entertainment Group) has snapped up UK sports broadcaster Premier Sports for £30m.

The Dublin-based Premier Sports currently has 222,000 subscribers on its books and comes with a bit of a ragbag of rights including La Liga, Scottish Cup and Coppa Italia football, Rugby Football League, NASCAR and the Elite Ice Hockey League.
ViaPlay hopes to launch its offering in the UK later this year.

Newslines

Blackstone said the $5.65bn sale of the operations of the Cosmopolitan to MGM Resorts was the most profitable single asset sale ever undertaken on the part of its real estate division. Blackstone remains involved via a long-term lease arrangement between MGM and the Blackstone Real Estate Income Trust alongside Stonepeak and the Cherng Family Trust.

IGT has extended the final maturity date of its revolving credit facility by three years to 2027 and increased its borrowing capacity to $1.83bn. It has also agreed to amended term-loan facilities.

New York Mets owner Steve Cohen hopes to bring a casino to the team’s Citi Field stadium in Queens, according to the New York Post which said Cohen favors teaming up with Hard Rock.

Playtech and 888 have signed an agreement to extend their partnership to include the rollout of live casino and further RNG games for the North American market. Rollout begins with the 88Casino operation in New Jersey.

Sports IQ, a provider of pre-match and in-play player props across the NBA, NFL, NHL and MLB, has signed a multi-year agreement with new partner, Tipico.

You wear it well: Kindred is being sued for SEK10m by Swedish fashion designer Per Holknekt who accuses the company of fueling his gambling addiction, according to Expressen.

What we’re reading

Keeping schtum: Gov. Newsome avoids commenting on California’s sports-betting proposals. “Politically speaking, it is in Newsom’s best interest to remain noncommittal because the battle landscape is fraught with dangers.”

The weirdest recession ever. “Things are crappy in some areas and awesome in others.”