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MGM and RSI promise abundant online profits

Oct 31, 2024

Digital profits are just around the corner, say MGM and Rush Street.
In +More: Tekkorp’s African venture.
Relief rally: UK-listed sector bounces on ‘nothing to see here’ Budget.
Caesars gets thumbs down from investors despite profit promise.

I counted out his money, it made a pretty penny.

Floodgates

Keeping up with the Joneses: MGM Resorts and Rush Street have followed the lead of Caesars the day before and pointed to supersized digital profits that are now just within reach.

Soon come: In reporting its Q3 earnings, MGM’s CEO Bill Hornbuckle insisted the company’s digital interests – including BetMGM and its in-house LeoVegas business – would be generating up to half-a-billion in free cash flow from 2026 onwards.

He said that in the medium term the digital businesses would be producing $400m-$500m in cash flow “and then some.”
“We could turn the lever on some of it today and push half that out the front door,” he added.

Growing in confidence: Across town, Rush Street Interactive upped its 2024 adj. EBITDA forecast to $82m-$86m and while the company is not forecasting any further ahead, its confidence was expressed via the announcement of a buyback program.

MGM’s hit and miss

Basta! Hornbuckle said MGM was not expecting to have to put any further capital into BetMGM and he also appeared to suggest the in-house interactive arm was done with acquisitions for the time being.

“We have three markets under launch right now,” he added of the in-house interactive arm’s launches in the UK, the Netherlands and soon Brazil via a partnership with the Globo media group.
“All of that will manifest itself unless there's something else that breaks of scale.”

Digital digits: MGM’s share of BetMGM operating profits came in at $3.2m vs. $12.6m last year while losses in the nine-month period came in at $67.8m. The company said BetMGM revenue rose 20% YoY.

LeoVegas figures were not split out in the full earnings report but remained buried within the corporate and other revenue segment where adj. EBITDA losses climbed 50% to $132m.

Miss you nights: Despite revenue coming in up 5% to $4.18bn, adj. EBITDA was down 1% at $1.13bn and the analysts were left bemoaning the consensus miss.

Core: The team at Deutsche Bank noted the “apples to apples” adj. EBITDA comparison was down 7%, adding to concerns over the health of the Las Vegas Strip.
The team said this was compounded by a “meaningful” miss in Macau off the back of declining market share.

Heavy weather: Asked about growth in Las Vegas and in the regionals business in 2025, Hornbuckle expressed confidence in some progress being made, but not a lot. “It won’t be massive,” he said.

“We think the markets continue to grow at a couple of percentage points,” he added. “We do have some headwinds.”

The pits: Those include the upcoming F1 race, which the company reiterated would not be as profitable across its properties as last year.

Hornbuckle insisted the race was still valuable, saying it brought “significant economics” during one of the slowest weekends of the year.
“But no more,” he added, somewhat deflatingly.

Profit rush

Do right woman: On the announcement of a buyback, Rush Street CEO Richard Schwartz said now was the “right time and the right thing to do.”

“We really haven’t had a point in our history where we’ve had better visibility into the cash flow prospects,” he added. “Obviously, we’re very bullish on the position we’re in.”
The analysts at Macquarie said the buyback was “something few would have foreseen just a couple years ago.”

The right to choose: Schwartz added that the buyback gives the pan-Americas online operator the opportunity to return cash to shareholders while also giving it flexibility to fund new market launches or even “tuck in” to M&A opportunities.

By the numbers: Revenue was up 37% YoY to $232m while adj. EBITDA more than quadrupled to $23.4m.

North American revenues were up 30% YoY with revenue from outside its ‘home states’ of Pennsylvania and Illinois now representing 62% of the total.
LatAm revenue near-enough doubled YoY.

Side: Schwartz highlighted RSI’s success in Delaware where GGR was now running at an annual run rate of ~$100m, which he said in iCasino was ~5x that of predecessor operator 888. He added that $200m was achievable.

Venture capital firm Yolo Investments manages in excess of €500m in capital across 100 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.

+More

Shovel ready: Boyd Gaming and the Pamunkey Tribe have officially broken ground on their $750m Norfolk, Virginia casino.

Earnings in brief: Illinois-based convenient store to bars and restaurants gaming machine operator Accel Entertainment said revenues rose 5% to $302m with adj. EBITDA up 4% to $45.9m.

The company said it has received approvals for the buyout of Fairmont Park, which will include the potential for a sports-betting license via FanDuel.

BlueBet: The Australian bookmaker said net win rose 92% to A$27.9m ($18.3m) in FY25 Q1 on handle that rose over 100% to A$287m.

Read across

Moment in the sun: Prediction market fever stepped up a gear this week after betting momentum all but placed Donald Trump back in the White House and as the meme stock world’s favorite app, Robinhood, jumped on the bandwagon. In The Token Word.

Licensed to pill: Meanwhile, Tuesday’s Compliance+More reported on the news that the Philadelphia district attorney is suing Elon Musk and his controversial America PAC over its $1m registered voter sweepstakes, calling it an “illegal lottery scheme.”

+More careers

The big move: Investment and advisory boutique Tekkorp has announced that Conor O’Donovan is joining the firm to head up a division focused on exploiting opportunities in Africa.

O’Donovan was previously CEO of African-facing brand Betyetu and has decades of experience as a serial investor in other multi-territory operators.
Matt Davey, Tekkorp CEO, said the firm expected the African market to see “strong growth at a significant pace” and noted Tekkorp was hoping to “get ahead of coalescing trends.”

Underdog Fantasy has appointed Greg Roseberry as its senior VP of finance. Roseberry previously held executive roles at Google, Pinterest and Coinbase.

He will oversee capital strategy and resource allocation as the company expands and points towards a possible stock exchange listing.
Underdog founder and CEO Jeremy Levine said Roseberry “knows the formula for how to take a growing business to the next level.”

Golden Entertainment’s Strat resort-casino has appointed Skylar Dice as senior VP and general manager.

Marc Thomas has been promoted to the post of MD at Algosport.

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UK Budget dodge

Phew! The UK sector enjoyed a rare across-the-board increase in share prices yesterday after the new Labour government failed to announce any increase in remote gaming duty in its first Budget announcement.

Instead, it merely said within the document it would consult next year on changes to the remote gaming duty regime, which currently incorporates three different rates.

Relief rally; The news saw all the major consumer-facing UK-listed entities enjoy a day in the sun. Evoke led the way with a 10%+ increase, followed by Entain (+9%) and Rank (+6%).

Flutter also enjoyed a good day with its share price in New York rising 4%.
Recall, it was the company worst hit by newspaper rumors that, swayed by anti-gambling lobbyists, the government was set to double rates in OSB and Casino.
Further reading: See Compliance+More today on why the operators’ sigh of relief might only be temporary.

Analyst takes – Caesars

Swings and roundabouts: The analysts might have been reasonably happy with Caesars Q3 statement, but investors were less impressed, sending the shares down over 8% yesterday.

The company was punished after it missed consensus with revenue down 2.6% at $2.87bn and adj. EBITDA off by 4% to $1bn.

Instead, the analysts were left dazzled by the prospects for Caesars’ digital business, which the credit team at CBRE said has now turned from being a drag on debt levels to a growth driver.

Indeed, CBRE is forecasting $300m of adj. EBITDA in 2025, contributing to the free cash flow “inflection point” for Caesars, which will also occur next year.
The analysts forecast FCF to be ~$850m-$1bn annually beginning next year.

The equity analysts at CBRE were also impressed by some of the detail of Caesars’ iCasino success, noting how the new standalone casino app is attracting more slot players than it could cross-selling from OSB where demographics skew towards lower-margin table games.

Over at B Riley, the analysts said they were convinced Caesars “holds multiple, still unlocked competitive advantages in iCasino.”

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Sector watch – esports

Full Moon? Moonrail has entered a partnership with Betby, which will provide sportsbook and trading/risk management services to the operator’s CSGOEmpire site.

CSGOEmpire is the largest skin betting site by bet volume, but also accepts fiat and crypto deposits.
The partnership with Betby seems to be a continued expansion of the company beyond the realm of skins.

CSGOEmpire has previously been embroiled in very public controversies. This has included disrupting a CS2 Major by invading the stage to protest a team’s sponsorship with a skin-betting competitor, claiming they were unlicensed and operating illegally.

Moonrail is known to be working on an online casino brand completely independent of CS2.

The Stakes are high: Stake.com has entered the realm of esports sponsorship. The crypto gaming platform will be the exclusive English language betting partner of the Champion of Champions Tour, working with GRID and Eden Esports.

This marks Stake’s first move in the esports world, but given the company’s aggressive sports sponsorship policy it may not be the last.

Virtually esports? A continued growth area is properties such as eFootball and eBasketball, which almost merge the world of virtuals and esports.

Beter has entered a partnership with 10Bet to provide its ESportsBattle tournaments to the operator.
Abios has recently penned a deal with Svenska Spel to provide its suite of eFootball services.

FIFA (or EA Sports FC) and NBA 2K games being played 24/7 purely to provide a betting product is becoming a core part of most B2B offerings.

It’s a service that esports purists would scoff at, but provides a product that is understood by all bettors and operators alike.

Algosport are regarded as one of the ‘best-kept secrets’ in the gambling industry, currently supporting hundreds of Tier 1 and challenger operators with our proprietary Algosport Blackbox – a powerful engine capable of supercharging your sportsbook.

We are best known for our next generation Bet Builder/Same Game Multiples product that offers the widest range of sports with unrivalled coverage, markets and features, both pre-match and in-play.

To understand how we could help create more revenue get in touch at www.algosport.co.uk

Earnings calendar

Nov 1: VICI Properties
Nov 4; Wynn Resorts, Century Casinos
Nov 6: Kambi, Full House, Red Rock, Bally’s
Nov 7: Penn, Sportradar, Catena Media, Red Rock, Golden, Cirsa
Nov 8: DraftKings, Inspired Entertainment

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