Discover more from Earnings+More
Weekend Edition #71
Penn online losses widen, Bally’s quest for profit, analyst takes, sector watch – esports +More
Good morning, welcome to this week’s Weekend Edition, which features:
Penn Entertainment sees land-based advances offset by digital losses.
Questions over interactive dominate Bally’s earnings call.
Analysts believe the YoY EBITDA decline at MGM spooked investors.
Sector watch takes a look at the latest esports news.
Penn’s online battle
Land-based upside helped push revenues up 7.5% YoY to $1.63bn, while worse-than-expected online losses saw adj. EBITDAR fall 1.7% to $471.9m.
Uncomfortable mattress: Despite online losses widening by 54% to $49m in Q3, Penn noted the business was profitable in October and – barring Mattress Mack winning his Astros World Series bet – Penn “anticipates” online should turn a profit in Q4.
CEO Jay Snowden was keen to suggest the extent to which owning the tech in Ontario – where theScore went live on its inhouse platform in July – is benefiting the business.
Penn said Ontario is now its top market in North America for both OSB and iCasino; online revenue in Q3 rose 70% to $158.7m.
Long-term bears on Penn, Deutsche Bank noted the absence of commentary on Barstool in the US.
With limited iCasino legislation opportunities, it questioned “where the revenue growth to scale the business is likely to come from”.
Q3 online profits were hurt by its share of the lobbying in California, which cost the company $12.5m over the period.
The young ones: In land-based, revenues hit $1.57bn and land-based EBITDAR beat estimates at $547.7m. Snowden spoke about Penn’s success in attracting a greater number of the younger demographic since the pandemic, saying two factors were behind it.
First, post-pandemic Penn’s properties were one of the few entertainment options and, second, the moves in online sports-betting. The team at Jefferies suggested Penn was “swapping seniors for stoolies”.
With online, Snowden noted that 80% of igaming custom comes from 21-44 year olds and 90% in sports betting.
“The big opportunity is what does that loyalty look like 10 years down the road,” he added.
Share and share alike: With omni-channel, Snowden reiterated comments from earlier in the year about, at some point, having a shred wallet for its mychoice loyalty program customers. “From my perspective, [the shared wallet] is table stakes that you need to offer one wallet, allowing [customers] to move seamlessly through your ecosystem,” he added.
More to come: Penn recently announced $850m worth of growth projects at various properties in tandem with GLP, and the team at CBRE suggested the company has a “considerable amount of dry powder” for more moves.
**Sponsor's message: Spotlight Sports Group is a leading technology, content and media business specialising in sports betting. Working with the largest media companies in the world, including AS.com and Advance Local, Spotlight Sports Group offers fully managed solutions that allow publishers to maximize revenue across their highly valuable sports betting audiences.
For more information visit: spotlightsportsgroup.com
Bally’s profit drive
Revenues rose 83.6% to $578.2m and adj. EBITDA increased 93.5% to $151m, with group focus set on core products and profitability.
The perils of execution: The “significant strength” in land-based – segment EBITDA hit $119m – was offset by adverse FX movements and launch costs affecting the international and North American online businesses. US interactive losses will hit $75m this year and CEO Lee Fenton said an evaluation of “disparate units pulled together in a short space of time” was underway.
“We’re identifying what’s non-core,” he said.
The Bally Bet 2.0 product was “taking longer than expected” and Bally won’t support marketing in sports-only states until it is fully ready. The focus will be on states where iCasino is regulated, Fenton added.
Asked about the softness in Japan (-3.3% YoY), Fenton said this was down to macro factors but that was the “nature of the beast and we’re confident the region will soon be in growth”.
The UK, meanwhile, was up in October and “slightly” up in Q3 thanks to reduced marketing.
😢Penn and Bally on the day of their respective earnings
Meanwhile, on social
MGM Resorts: The team at CBRE noted that, although MGM had previously indicated margins would eventually normalize and settle at levels of between 400-600 bps better than 2019, the YoY decline in EBITDA relative to EBITDA trends noted by others in the industry “spooked the sector”. Post-close, the shares fell over 7% at one point.
They added that they see “continued earnings upside” in Las Vegas from the “growing consumer preference for experiential entertainment”.
Earnings this week
MGM tops the bill: Las Vegas helps MGM boost revenues by 26% to $3.42bn.
River of life: Rush Street experiences iCasino margin dip.
Point of departure: Caesars sees digital inflection.
Coming up later today, an Earnings Extra with DraftKings. Then next week, (deep breath), Full House Resorts, IGT, Everi, AGS, Flutter Entertainment, GiG, Light & Wonder, NeoGames, Acroud, Genius Sports and Endeavor.
Coming up next Tuesday, our latest Deal Talk has spoken to a range of insiders on the ongoing will-they-won’t-they debate surrounding MGM Resorts and its BetMGM JV partner Entain. Plus, all the usual off-the-record commentary and industry gossip.
Also, catch-up with all the latest news and views on the betting and gaming sector’s growth companies in the Startup Month #4 from this week.
Earnings in brief
Golden Entertainment: Up against tough comps, the largely Nevada locals operator saw revenues decline 1.2% in Q3 to $279m, while adj. EBITDA fell by 16.9% to $61.1m. The company hopes its Strat property will benefit from the busy Vegas events calendar as much as its more august competitors further north on the Strip.
Skillz: The mobile casual games operator saw Q3 revenue fall 61% YoY to $60.2m, with adj. EBITDA losses rising 63% to $15.4m. The company said there was “no quick fix to the challenging year” and that it was taking the necessary steps to return to profitability.
Sector watch – esports
Hard to be vie-able: The troubles at Esports Entertainment Group, which has shut down its vie.gg operations, brings to an end the group’s esports-betting strategy in New Jersey, Spain and the UK.
Despite its name, the vast majority of EEG’s revenues have come from the online sportsbooks SportNation and Bethard it acquired in 2020 and 2021 respectively.
Just $5.2m of its $58.4m FY22 revenues came from vie.gg and live esports events.
The group recorded losses of $102.3m during the period.
Tough pivot: EBET has also found esports-betting a tough space in which to work. During the summer the group confirmed it was pivoting towards iCasino and will focus on the B2C brands it acquired from Aspire Global just over a year ago for $75m.
Regulus Partners previously told E+M that esports has been used successfully as a “millennial-attracting vertical” to attract funds and investment.
But it is tiny when compared to the global iCasino or OSB markets and needs to be properly understood to make it work.
OK go: Canadian esports-focused bookmaker Rivalry has had a better time of it, with Q2 GGR rising 60% to $5.3m and gross profits up 206% to $2.1m. CEO Steven Salz said the group’s launch in Ontario had been “OK relative to spend”, but “more challenging than expected” due to the marketing restrictions.
No approval needed: Nevada, meanwhile, has approved regulations that would allow sportsbooks to accept bets on esports events without the need for special approval from the Nevada Gaming Control Board.
Virginia: Sports-betting GGR increased 74% to a $53.8m on handle that was up 40% YoY to $411m. It was the first time the state has gone over the $50m mark for betting GGR. Taxable GGR was $48.4m. Historical horse racing GGR was up 71% to $44.2m.
Oregon: Sports-betting GGR was up 266% to $4.6m on handle that rose 54% to $38.6m. VLT GGR was down 5.6% to $98k.
Ohio: The first licenses from the Casino Control Commission have been issued ahead of market launch on January 1, including DraftKings, BetMGM and BetRivers.
Betr: The micro-betting startup has reached a market access agreement for Indiana via a deal with Caesars Southern Indiana and the Eastern Band of Cherokee Indians' gaming entity, EBCI Holdings.
Where we’re mentioned
A hat tip from the Nevada Independent for our news on Davis Catlin’s Divergent Capital.
Nov 4: DraftKings
Nov 7: Full House Resorts
Nov 8: IGT, Everi, AGS, Playtika
Nov 9: Flutter Entertainment, GiG, Light & Wonder, NeoGames
Nov 10: Genius Sports, Acroud, Endeavor
Scott Longley email@example.com
Jake Pollard firstname.lastname@example.org