May 11: Wynn eyes Mass. movement

Wynn Resorts Q1, Light & Wonder Q1, Inspired Entertainment Q1, SciPlay Q1, Raketech Q1

Earnings+More

May 11, 2022

Good morning. On today’s agenda:

Toting booming Las Vegas earnings, Wynn also sees Massachusetts opportunity.
Light & Wonder buys games developer and platform provider Playzido.
SciPlay revenues hit by Alictus expenses
IGT and Everi analyst reactions

Ready or not, here I come. Click below:

Wynn Resorts Q1

Revenues of $953.3m were up 29.4% while adj. EBITDA more than tripled to $177.6m.
Wynn Las Vegas up 147% to $441.2m while Encore Boston up 46.7% to $190.8m
Wynn Macau ($135.1m) and Wynn Palace ($163.3m) down 24.8% and 31.2% respectively.
Interactive losses pared back to $31.5m from $43.5m YoY.

No vacancies: CEO Craig Billings noted that the Wynn in Las Vegas achieved 91% occupancy in March compared with the forecast mid-80s at the time of the Q4 call.

Details man: Billings said record EBITDA was due to the way the company looks at “every inch” of the property and “ask ourselves, how can we make it better? How can we make it return more?”

Homegrown: Billings said the Las Vegas success had been driven by domestic traffic rather than any international trade, adding that the company was seeing the benefit from its efforts to “reconstitute” its loyalty program and customer database.

“Then the last thing I would say is that the cash, leisure and transient customer is also very, very strong relative to 2019.”
He added that the company had “one of the strongest bases we’ve ever seen”.

Wynning online: In online, Wynn said its interactive division generated 23% better NGR despite the “materially lower” marketing spend.

Craig Billings: “The strategy we implemented late last year to manage the business with a long-term shareholder friendly view is working.”

Datapoints: CFO Julia Cameron-Doe said total turnover for interactive hit $727m and noted that sequentially the EBITDA loss was less than half the $79.4m in Q4. Revenue remains unstated but as an example, if hold were 6% then GGR would be ~$44m.

Craig Billings: “Sports is where the majority of the addressable market is today, and it’s also where a lot of the irrational behavior is taking place.”

Three steps to heaven: Billings noted that the next step was to “get to breakeven”, then cross their fingers on Massachusetts and look to further states coming online.

“It’s too early to talk about market share,” Billings added.
Wynn’s focus remains on recognizing its place in the market and reaching that target in a “prudent way”. “So stay tuned,” he added.

Mass market: Noting the recent legislative moves regarding sports-betting in Massachusetts, Billings said Wynn’s would benefit from a “significant catalyst” should the measure pass.

Our lips are sealed: Billings said Wynn was “interested” in the potential for a New York casino and was “active there” but couldn’t say anything further.

If you don’t know me by now: Addressing Macau, Billings tried to sound convinced in the long-term picture even as continued pandemic restrictions choke the life out of the market.

“Macau is really the most fascinating aspect of our portfolio right now. And the equity markets obviously aren't appreciating that, but that's fine.”
Analyst take: Deutsche Bank said the Macau shortfall had been well anticipated but still “largely offset” by the domestic outperformance.

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Light & Wonder

Revenue from continuing operation was up 26% to $572m.
Adj. EBITDA rose 42% to $202m.
Online gaming revenue came in up 2% to $59m.
The company announced the acquisition of Playzido for an undisclosed sum.

The wonder of you: Barrie Cottle said Light & Wonder’s debut results under its new name demonstrated how the business was “transformed” following the sale of the lottery business to Brookfield and the pending offloading of the OpenBet sports-betting backend business to Endeavor.

The $5.6bn from the lottery sale has gone to pay off debt, LNW’s “number one priority”. CFO Connie James added: “I can't emphasize enough what a significant and fundamental change this is for our business and credit profile.”
Cottle noted that leverage had fallen from 10.5x a year ago to 3.7x.
The company also authorized a $750m shareholder buyback program in March; to date it has bought $140m worth of its own shares.

Momentum play: Cottle said there was progress with game, system and table sales with year-on-year momentum.

Top performer: Willy Wonka Dreamer of Dreams.

Online hot stepper: US online gaming was strong, seeing 63% growth YoY and 21% sequentially with proprietary games making up 50% of GGR on its platform. Cottle said that 16 out of the top 20 games in the US on the OGS platform were LNW content.

Ontario was LNW’s largest-ever single market launch with eight operators going live on day one and a further 20-plus in the pipeline.
Live and direct: Cottle said the company would be launching live dealer in the US in Q422 and live dealer was “projected to be 30%” of US igaming TAM. Ex-US the product launched in Q421.

Games without frontiers: Cottle said the company is yet to see any impact from wider economic issues, though he acknowledged “the market is very volatile at the moment”. He noted the “elevated levels” of GGR were “testament” to players “across the spectrum” loving playing games.

Barry Cottle: “Whether we're looking at gaming, iGaming or social, we're actually seeing strong and growing GGR across those three markets.”

Bushed: The company has acquired the London-based games development and content provider Playzido for an undisclosed sum.

Led by founder Stuart Banks (ex-Paddy Power and Betfair), Playzido was launched in 2017. Banks said on LinkedIn: “it goes without saying that this acquisition is a huge milestone achievement for Playzido”.
Cottle said on the call it was “a small acquisition that we expect to have an outsized impact”.
Cottle: “What our partners are looking for is exclusive and customized content that they can offer to their players.”

SciPlay Q1

Offset: SciPlay Q1 revenue was up 5% YoY to $158m, adj. EBITDA was down slightly to $44.2m, in part due to expenses linked to the $100m acquisition of casual games studio Alictus.

Player conversion rates were at record 8.9%, Average MPUs and MAUs both increased 7% QoQ, ARPDAU was up 10.4% to $0.74, with 90% of SciPlay products played on mobile.

Needle point: Macquarie said they continue to be impressed by SciPlay’s ability to “thread the needle between reinvesting and growth,” while also transforming itself into a more diversified casual games provider.

Earnings in brief

Inspired Entertainment Q1 revenues increased 166% YoY to $60.6m as business returned to pre-COVID-19 levels. Adjusted EBITDA was up 418% to $20.1m, net income $1.5m vs. net loss of $16.7m in 2021. Virtual Sports revenue up 84%. The board of directors approved a $25m share repurchase program. Interactive was up 72% during 2021, with North America growing strongly and ilottery presenting strong opportunities.

iLottery hopes: COO Brooks Pierce said: “We're seeing this unfold very rapidly. And much like the iGaming business in North America, it's really in its infancy. There are only a handful of states that are doing iLottery now, but I think it's going to accelerate exponentially across the country just the way iGaming is doing.”

Raketech Q1 revenue was up 53% to €12.7m, EBITDA was up 58.6% to €5m, operating profit was up 105% to €32.m. US revenues increased 380% to €2.4m, sports revenues made up 34% of group revenues vs. 17% in 2021. The group said Q2 revenues would slow down due to a quieter sporting calendar affecting its ATS subscription service.

Raketech has also soft-launched its Affiliation Cloud service, a portal where external affiliates can leverage Raketech technology to increase revenues. CEO Oskar Mühlbac added that the Netherlands market was a longer term option which the group would enter through M&A.

EBET (formerly Esports Technologies) said Q1 revenues came in at $19m, up 166% QoQ while gross profit hit $7m. The company ended the quarter with cash in the bank of $7.1m.

IGT analyst reaction

Check’s in the poste: Analysts at Credit Suisse noted that the sale of IGT’s Italian-facing payment business to PostePay for €700m should complete in Q322, enabling IGT to further pay down its debt.

CS added that the weakness in the stock is likely tied to fears over the Italian lottery market. The results statement will have been reassuring in this respect with lottery revenues of €680m coming in ahead of Street estimates.

Choppy waters: Deutsche Bank noted IGT maintained its 2022 guidance despite various headwinds. They noted that the guidance now includes the iSoftBet acquisition, expected to close this year but they suggest both the revenue and EBITDA contribution will be minimal given the likelihood that IGT will “(eliminate) certain markets” under its ownership.

Everi analyst reaction

Everione’s a winner: The gaming-to-fintech provider produced a record set of results once again earlier this week, reflecting momentum across both verticals suggests the team at Jefferies, something which that expect to continue given “increased traction” and further tuck-in acquisitions.

They noted Everi has approved its first-ever stock buyback programme which they assume will be ongoing.

Machine sales: The team at Macquarie suggested Everi is not getting enough recognition for its successes in gaming machine sales, pointing out it sold 1.5k in Q1 compared to IGT’s 5.3k, LNW’s 3.4k and the 1k at AGS. “In our view, this implies ~10% market share, which is at or slightly higher than we previewed,” they added.

Regulatory roundup

California’s San Manuel Band of Mission Indians, Rincon Band of Luiseno Indians and Wilton Rancheria tribes will not try to qualify their sports betting initiative for the November ballot and will likely try to run it in 2024. Online sports betting could launch this fall in Ohio. State Senator Kirk Schuring told a local radio station that online operators, retail sportsbooks and Ohio sports teams all want a coordinated sports betting launch. Three Wisconsin tribes have negotiated new gaming compacts that allow them to open retail sportsbooks at their casinos that could open the door to mobile wagering in the future. Vermont Senator Dick Sears has said the chances of a sports betting bill passing this year were "slim to none".

Newslines

No sh*t Sherlock: A study by Rutgers University has shown that there is a strong correlation between online sports-betting and the growth of online casinos in New Jersey. NJ online-casino revenue grew significantly in 2018 when online sports-betting launched in the state following the repeal of PASPA.

Northern Exposure: North Star Gaming has launched its OSB site northstarbets.ca in Ontario on the Kambi platform. The group is part of the Torstar Corporation, the holding group that runs the province’s largest newspaper the Toronto Star.

What we’re writing

Exit OSB euphoria, pursued by a bear: Coming up on Wagers.com later today, Scott Longley looks at how the sector is faring with the onset of a bear market.