Mar 3: Bet365 sees in-play fall in 2021

bet365 annual results, Entain FY, Yahoo Sports rumor, Rush Street Interactive FY, SciPlay earnings call, MGM share buyback +More

Earnings+More

Mar 03, 2022

Good morning. On today’s agenda:

Bet365’s figures for the year to March 2021 are out.
Entain offers no surprises with its full-year results
Analysts show skepticism over Rush Street profitability aims.
MGM announces a $2bn share buyback program.

A rush and a push. Click here:

Bet365 FY21

Sports and gaming turnover up 1% at £2.79bn.
Pre-tax profits of £525m include £177m of investment gains.
Active customers up 13%, amounts wagered on sports down 13%.
In-play at 68% of sports revenue from 75% in the prior year.

Lockdown migration: In its results posted with Companies House for the 12 months to March 2021, bet365 said the decline in sports betting was made up by an 8% increase in gaming, particularly during the lockdowns that took place over the period. It was partly offset by an unspecified increase in margins.

Denise Coates, CEO: “The global suspension of sport across all levels resulted in dramatically reduced revenues. However, sports resumed in the second half of the period and revenues increased to above pre-pandemic levels.”

Datapoint: The lack of sport at the beginning of the period might be a factor, but the fall in in-play betting is significant.

Charity case: Donations to the Denise Coates foundation increased to £100m. Dividends for the year were £97.5m. Contributions towards research and treatment of gambling-related harm increased in line with the commitment to increase contributions to 1% of GGR by 2024.

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Entain FY

Revenue up 8% to £3.83bn and underlying EBITDA up 5% to £881.7m.
Online revenue up 12% to £3.01bn and underlying EBITDA up 12% to £899m.
Retail revenue down 8% to £791.1m and underlying EBITDA off by 29% to £81.5m.

Climbing frame: As was previously announced by partner MGM, BetMGM saw revenue climb five times to $850m while the share of losses rose 170% to £162.5m. This accounted for the 9% fall in operating profits. The company reiterated the BetMGM message from January that EBITDA profitability would be reached in 2023.

Jette Nygaard-Andersen, CEO: “While others aggressively try and spend their way into the market, they lose sight of what’s important to the customers.”

Same old: Referencing the news last night on Apollo seeking a merger with a sports-betting operator for Yahoo (see below), Nygaard-Andersen said it was “old news” and noted that BetMGM’s current relationship with Yahoo was simply an affiliate partnership.

New York, New York: As regards other recent developments in the US, Nygaard Anderson noted the news on legislative moves around igaming in New York.“It is not something that we see happening in this cycle, but of course, it is directionally positive,” she said.

‘Careful what you wish for’ corner: “On New York tax, I think what will happen is over time states will look at neighboring states and they will look at what is the best model going forward.”

Pause button: Online NGR up 13% in constant currency terms and the company said the emergence of a “new normal” was apparent in Q4. As analysts at Jefferies noted, this new normal would appear to mean an “ongoing pause” in the double-digital online growth story.

CFO Rob Wood said growth was “global” with the exception of Germany and the Netherlands.

Casual trade: Talking about the growth in the recreational player base in the UK, Wood suggested that partly this was a deliberate move but it was also “a reflection of the ongoing RG measures” the company has introduced.

Tale of two halves: Wood suggested that after Q1 - where the comparables are particularly tough - the business will improve as the year progresses with a “return to double-digit growth” in H2.

What they said

Rob Wood on investment in Ontario: “There will inevitably be some investment but I don't expect the J-curve to be as deep as it is in a new US state.”

Nygaard-Andersen on the upcoming UK Gambling Act white paper: “We are supportive of that, but before it lands we don’t want to speculate on how it plays out.”

Flywheel count: Two.

Yahoo Sports rumors

To the Moon: According to CNBC, Apollo Global is considering merging Yahoo Sports with a sports-betting operator and is said to have begun preliminary discussions with a number of firms, including PointsBet. The sources in the story cautioned that no deal is imminent and that talks are in the early stages and Yahoo/Apollo is “yet to settle on a target”.

Pointing the way: Nevertheless, the news lit a fire under the Australian-listed PointsBet which has seen its shares climb nearly 20% in the past week.

Rush Street interactive Q4

Revenue was up 31% to $131m, Adj. EBITDA losses reached $31.2m vs. -$1.3m in Q420.
FY revenues were up 75% to $488m, FY adj. EBITDA losses $65.1m vs. -$4.4m in 2020.
Full-year 2022 revenue guidance of between $580m-$630m.

Investor shift: Addressing the “recent shifts” in investor sentiment regarding the path to profitability, CEO Richard Shwartz said visibility was improving for RSI.

Schwartz: “As an increasing number of competitors, reduced marketing and promotional spend, the cost for RSI attract players has diminished, and visibility for our marketing efforts has increased.”

Pathfinder: He added that RSI has a “path to profitability in all markets where we are live.”

Kyle Sauers, CFO: “I don't want to give a forecast for profitability, (but) if we didn't launch anything more after Mexico I think we've got a good opportunity for showing profitability in 2023.”

Casino key: Sauers noted that Ontario and Mexico had a combined population of ~145m, “more than four times the number of people that have access to our casino product today in North America.”

Sauers on being able to offer icasino: “The pace at which we get there and the magnitude of profitability in each market is going to depend on whether it includes both casino and sports, our market share, the competitive intensity and tax rate.”

Datapoint: RSI advertising spend in Q4 at $64m vs. $23.1m in Q420.

Yahoo talk: Talking about M&A speculation, Schwartz said “anytime you have a media partner asset that could help you drive traffic and have some brand awareness in the marketplace is something that it's important for us to consider”. “Yahoo has been in the business for a long time and has some great assets.”

Bad timing: Wells Fargo said RSI was “effectively in the right place” with a solid igaming tech stack, strong product and a focus on higher-margin igaming players, but was “at the wrong time” with the market being one of heightened competition and with new state launches. They don’t expect RSI to be profitable until 2024. Analysts at Jefferies noted the quarter was slightly below expectations, “which will likely be met with a negative reaction”.

MGM share buyback

Give it back: The new $2bn share buyback program had been foreshadowed on the company’s Q4 earnings call by CFO Jonathan Hlakyard who had said giving excess cash back to shareholders was a "good use of capital". As of the end of December, MGM had free cash of ~$4.8bn.

SciPlay earnings call

All-star game: CEO Josh Wilson said SciPlay was “firing on all cylinders” on the Q4 call yesterday afternoon after announcing record revenues of $606m AMC on Tuesday. He said the company’s Project All-Star had been the “catalyst” for its success with its largest games, leading to record monetization for games such as Jackpot Party.

Wilson: “Across the different subgenres as casual, whether it's Solitaire games, match three games, puzzle games or social casino, the common thread is the player. We learn more about each player's preferences with each game they play.”

Smart casual: Wilson noted the acquisition of the Turkish ‘ultra-casual’ games developer adding significant player numbers with DAUs at 1.8m and MAUs at 28m and provided an entry point into a $13bn market for mobile game advertising.

“The hypercasual space is one of the fastest-growing of the subgenres of casual, and so we're expecting great things from them,” said Wilson.

Light & Wonder analyst updates

Aussie takeover: Jefferies reported back from a meeting with chairman Jamie Odell and vice-chair Toni Korsanos who pointed out that there had been a “plethora” of personnel joining the company from Aristocrat.

Still in Play? Jefferies noted that the duo spoke about the need for capital discipline when it came to the recent failed bid for SciPlay. But noting that LNW owns 98% of voting rights, it said the matter might be “revisited in a different context” later.

Flow chart: Meanwhile, Credit Suisse said the free-cash-flow story at LNW was “compelling” with the company looking to generate $500m+ per year. But they cautioned that more igaming legislative moves in the US were needed to take the share higher.

Earnings in brief

Paysafe Q4 revenues were flat at $371.7m, adj. EBITDA was up 11% to $105.5m. FY revenues up 4% to $1.4bn, adj. EBITDA up 4% to $443.9m. The group said activities had been adversely impacted by "unfavorable market headwinds related to gambling regulations” in Germany and Netherlands, which had led to a $15m YoY impact in the (fourth) quarter alone. The US and Canada were more promising. Following deals with Hard Rock and Bally Corporation, it will soon be launching with Barstool as well as with crypto exchange Binance.

Newslines

Vox pop: Voice technology provider VoxBet has signed a deal which will see the UK Tote introduce its Viber messaging platform to its consumer-facing offering. Voxbet’s platform allows sports bettors to send their stake and selections in a text message, making it fast and easy to place even complex bets.

Elys deals: Elys Game Technology has signed a deal with Lottomatica to integrate with and provide technical services to the lottery giant’s US sports betting infrastructure and product offering. Elys also extended its technology partnership with Isleta Sportsbook in Albuquerque, New Mexico, via its subsidiary USBookmaking.

Man who wasn’t there: Illinois’ in-person registration requirement for mobile betting is set to end this weekend. With players no longer required to be in a physical casino in order to open an online betting account, industry observers have suggested the state could reach $1bn in handle in March as a result. The previous record of $840m was set in October.