11 May: Wynn fires cannon on online Austerlitz deal +More
Wynn Resorts, Scientific Games, Bally Corporation, Inspired Entertainment, Full House Resorts, Accel Entertainment Q1s, Illinois (sports-betting) march, Missouri April GGR
Good morning. The phrase “a major player” was used twice yesterday with regard to competing claims for involvement in the US sports-betting and iGaming space. First, George Papanier, CEO at Bally Corporation, spoke about his company’s online sports-betting launch later this month; then later his counterpart at Wynn, Matt Maddox, used the same words in relation to the just announced SPAC merger with Bill Foley’s Austerlitz acquisition vehicle. That news kicks off the action and reaction to an incredibly busy day for earnings yesterday with Scientific Games, Inspired Entertainment, Full House and Accel Entertainment also reporting. Plus we have data to digest from Illinois for sports-betting and Missouri. But we start with an investors call that was heavy on the hyperbole at Wynn.
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Wynn Resorts
The top line
Operating revenues fell 23.9% to $725.8m ($953.7m Q120) and net loss was $281m or $2.53 per diluted share, compared with a loss of $402m or $3.77 per diluted share, in Q120.
Adjusted EBITDA at the group’s resort properties increased $17.2m, $50.2m and $43m at Wynn Palace, Las Vegas, and at the Encore Boston Harbor respectively.
Wynn’s Las Vegas and Boston properties incurred $56.4m and $19.3m of expense respectively due to the group’s commitment to pay salary, tips, and benefits from April 1 to May 15 2020.
Wynn has cash reserves of $2.89bn, $1.8bn of which is held by Wynn Macau. At March end total borrowing capacity for Wynn Resorts was $833.9m and for $293m for Wynn Macau. Total debt was $11.95bn as of March 31.
The full Napoleon: First, the significant detail on the move to spin Wynn Interactive into a full listing via the $3.2bn merger with the Austerlitz SPAC run by Bill Foley. The current shareholders of Wynn Interactive will retain 79% of the new entity. Within that, Wynn Resorts will hold 58% of the shares. Foley’s Austerlitz, fresh from completing the de-SPAC of Paysafe, will inject $640m into the new entity. Cannae Holdings will backstop any share redemptions. Matt Maddox, Wynn Resorts CEO, on the company’s Q121 earnings call said that “as we looked at the future and realised this was going to be as large as the commercial casino opportunity, we knew this was an opportunity we had to capitalize on.”
“As we explored various options, it became clear that creating a pure-play publicly-listed gaming company was the right thing to do to create value. It felt like the exact right thing to do.”
However, the call was light on detail. Giving the call over to “online pioneer” Sadok Kohen, president at WynnBet and CEO and founder at Betbull, much was said about bringing the social and casual gaming expertise of the UK road-tested BetBull app to the WynnBet offering in order to reach a hoped-for 15% market share long-term. Echoing DraftKings last week, Kohen said the company had a “relentless focus on product and user experience” and encouraged margin-heavy parlay bets and social interactivity. However, the projected $75m of UK revenues in 2023 doesn’t scream huge mass-market appeal as yet.
As of April, Wynn Interactive was live in five states including the most recent launch in Indiana. No detail on current revenues was included, although it said it hoped to hit $708m in combined interactive revenues from WynnBet, BetBull and the social casino business by 2023.
Retail therapy: During Wynn Resorts’ Q1 analyst call, Maddox said he was confident in the outlook for Las Vegas and Boston going into the summer, saying volumes picked up around March Madness. He said revpar in April increased 50% on Q1. He also pointed to record slot numbers of $25m last month in Vegas, a property record and “more than any month in history of Wynn Las Vegas”. Maddox added that Q2 EBITDA was already above Q1 with occupancy rates at 90%.
Junket evolution: Momentum continued to accelerate in Macau with Golden Week generating $3m normalised EBITDA per day, which Maddox said was was the biggest total since the start of the pandemic. The group is focusing on attracting mass and premium mass players. Visitor numbers were at 80% of Golden Week numbers from 2019 and in May there had already been acceleration over April results. When asked if the group could expect to ever return to the VIP highs of 2014 , Maddox said it was currently at around 50% of pre-Covid levels, “but we’re repositioning the business toward premium and mass premium customers.”
“Junkets have evolved and so have we. Lots of customers are playing direct with the operators and we have made changes to address that.”
Muted reaction: While applauding the move on interactive, the analysts at Jefferies were less impressed with the the Macau and Las Vegas numbers which they said “disapppointed.” Taking more heart from the results were the team at Deutsche Bank who suggested the management commentary on Macau was encouraging while the “domestic colour” on Las Vegas and the Encore Boston was “very positive from an outlook perspective.”
Scientific Games
The top line
Overall revenues rose 0.6% to $729m, gaming revenue was down 23.3% YoY to $244m. Adjusted EBITDA for gaming rose 30.2% to $108m with margins up 1,400bps to 44.3% thanks to cost controls.
Lottery net revenues hit $248m and EBITDA $119m, social gaming and bingo division SciPlay recorded net revenues of $151m and EBITDA of $46m. SG’s iGaming verticals recorded net revenues of $86m and EBITDA of $29m. Group EBITDA totalled $302m, consolidated adjusted EBITDA was £270m, a 35% rise on the prior year period.
Future perfect: CEO Barry Cottle said he was very confident for the future of the business. Lottery sales grew 17% in Q1 compared with 3% in Q420 with instant game sales and large Powerball/Mega Millions jackpots in the US drove much of the activity. “iLottery is an incredible opportunity and an $11bn total addressable market (TAM),” Cottle added.
“The US market is still in the very early stages and there is tremendous momentum. We launched a very successful iLottery product in Pennsylvania and supply 21 international lotteries. We’re on the cusp of an incredible market opportunity.”
Go with the flow: The group paid off $360m of its $8.3bn debt during Q1 and generated $80m in free cash flow, “well above consensus expectations of $35m,” analysts at Macquarie said. SG has $1.3bn in liquidity and no debt maturity until 2025.
Converging channels: The convergence of online and land-based gaming content was a recurring theme during the call. The group said it would be introducing iLottery and online sports betting (OSB) to its existing operators to develop more revenue streams. Corporate strategy will revolve around portfolio optimization, high growth opportunities in content and digital businesses to enhance revenue margins and continuing to reduce debt levels. Cottle added that SG expects the content and digital businesses to be comparable in size to the land-based business within three years.
Content is king: In terms of OSB, Cottle said SG had migrated US market leader FanDuel to its latest platform version in four states and expected “revenues to start coming in over the next few months.” “Thanks to our huge library of games that can be deployed online and land-based, 32% of our global GGR comes from that resource and is developed in land-based settings and then launched and played online,” Cottle said. The group will continue leveraging the high brand recognition levels of its games and roll them out across all channels. Cottle added that it was too early to be considering merging online and offline content teams. “There is huge upside in iGaming and $15bn TAM, player adoption rates are really high and there is great momentum, but we’re still in the very early stages.”
Wait in vain: Credit Suisse said Q1 EBITDA of $270m was ahead of street estimates but added that the run rate could slow down as “there seems to be a correlation between Lottery results and Covid (i.e., strength in lottery as the world shut down).” Comps are likely to get tougher and “as other gaming alternatives open, we see potential downside to street numbers.” At Jefferies, the team said the better-than-expected results “are constructive, although the greater certainty is around the conclusion to the strategic review, which is forthcoming within 2Q21.” The Macquarie team expressed some frustration with the progress on this front saying they had anticipated a conclusion before now to a process which has already been in train for eight months.
Bally Corporation
The top line
Revenues leapt 76.2% to $192.3m during the quarter while EBITDA more than doubled to $52.5m. EBITDA margins improved by 708bps to 27.3%. The company said that the same-store beat was “significant.”
Revenue from gaming more than doubled to $152.9m, racing revenues fell 19.8% to $2.3m. Hotel revenue rose 70.8% while F&B was near enough static at $15.5m.
Net debt at the end of the period stood at $1.17bn. Financing for the Gamesys deal is yet to be confirmed after the company received an approach from a potential strategic investor comparable to a now discontinued $250m equity issue.
Say it loud, and often: Bally’s stated aim is to become the “premier, truly integrated, omni-channel gaming company with a B2B2C business.”
The interactive triple play: When asked whether Bally was effectively playing for the scraps left behind by the market leaders (which have taken 90% of the market in certain states), the Bally team on the earnings call (politely) bristled. “We’re positioning ourselves to be a leader in this space,” said CEO George Papanier. Pointing to recent acquisitions - Bet.Works, Monkey Knife Fight, Sportcaller and the upcoming deal with Gamesys - as well as the media partnership with Sinclair for the Bally Sports-branded TV channels, Adi Dhanhhania, senior vice president for strategy and interactive, was also bullish.
“We have market access in most states and we have a proprietary tech stack plus the media and devoted content on the RSNs.”
Test and deploy: The debut for the Bally sportsbook online app will come in Colorado at the end of this month followed by three more state launches in time for the football season. The company says it will then “layer in” additional states in 2022, at which point it will presumably have the Gamesys offering to add to the mix. As it stands, Gamesys has a license in New Jersey and Dhanhhania said they would be looking to partner with them in that state. Bally itself now has access in Virginia and Iowa and Dhanhhania suggested that it was “noticing… that new states aren’t tethering their skins.” “Our goal is to get into as many states as possible and we are aggressively working on that.”
AC control: Admitting that the company rushed the purchase in Atlantic City in November, Papanier said that issues including a problematic de-coupling from the systems of previous owners Caesars meant Bally had run into ‘traditionally loss-making quarter for the property. “We see a path to profitability in the second and third quarters,” he said on the call. “We also opened a new permanent sportsbook in conjunction with FanDuel - just in time for March Madness. We are encouraged by the early visitation trends.”
Inspired Entertainment
The top line
Q1 revenues of $22.8m translated to a net loss of $16.7m as Covid closures applied throughout Q1. Online revenues increased 90% YoY as the group went live in Michigan. Inspired has $41.2m in cash reserves and $27.6m revolving credit line at March 31, 2021.
Interactive and virtual sports-betting channels enjoyed strong YoY growth (90%) with revenues of $10.7m and operating margins increasing from 2.7% to 50% YoY. Adjusted EBITDA for online increased from $0.7m to $3.4m and adjusted EBITDA margins rose to 65.1% from 34.6% on the prior year period.
New loan spell: Inspired is raising £235m of new debt to pay off its existing loans of £145.8m and €93.1m and will set up a new £20m revolving credit facility as part of the refinancing. The terms of the new facility are yet to be agreed and because of the “sensitivities” around the transaction CEO Lorne Weil said he would not be taking questions during the group’s call with analysts on Monday afternoon.
Guiding forecasts: Weil said the group doesn’t usually provide forward guidance, but would make an exception this time. He expects Q3 EBITDA of $28-$30m and added that the group’s strategy was paying off. Although the past 12 months had “tried our patience, it is becoming clear and the next couple of quarterly results will validate it,” he said.
Friends of Dorothy: In his prepared remarks, Weil compared the lockdowns of the past 12 months to Groundhog Day. As the expected reopening date of 17 May approaches for the all-important UK market and most European countries were expected to reopen by mid-June, he said that moment would be like “Dorothy stepping out of the monochromatic world of Kansas into multi-colour world” in the 1939 classic The Wizard of Oz.
Hopeful signs: UK betting shops partially reopened on 12 April with two of four machines allowed, sessions limited to 15 minutes and two visits per day. “Even with these restrictions, GGR is up 8% in the intervening period and leisure hubs such as holiday park bookings were at their highest ever levels in 12 months,” said Weil. The group expects to make synergies of £20m per year from its acquisition of Novomatic’s UK business.
Online positives: Commenting on the group’s interactive growth, COO Brooks Pierce said the company had continued to invest in its online products through the year and was benefiting from its iGaming launch in Michigan.
Full House Resorts
The top line
Revenues rose 36.8% to $42.2m while net losses improved to $3.4m from $4,4m in the prior year period. Adjusted EBITDA rose to $10.8m compared to a loss in the previous year.
Balance sheet was improved via $310m of new senior secured notes and a $46m equity issuance and entered a $15m revolver.
Segmentally, revenue at the Silver Slipper in Mississippi rose 48.1% to $22.4m; the Rising Star in Indiana rose 18.5% to $8.6m; Bronco Billy’s in Colorado saw revenue rise 18.5% to $5.9m; the smallest segment in Nevada revenues hit $3.1m.
Stimulus forever: In Colorado, where the recent changes to the state’s gaming law means more table games are now available, Full House hopes to take advantage with the expanded (and now fully funded) Chamonix Casino Hotel project. The company also has an application pending in Waukegan, Illinois.
“We ended the quarter with a flourish and that continued into April,” said Daniel Lee, CEO, of the record quarterly results. “We hope the government will send out stimulus checks for ever.”
That’s your slot: Five out of the six Full House sports wagering skins are now up-and-running in Colorado. When all six are up and running, FH expects to earn a contractual minimum of $7m a year. Q1 included $1m of revenues from three functional skins; two more (including Churchill Downs in Colorado) opened in April. The last skin, Smarkets in Indiana, will launch “in the next few months.” “It’s come along,” Lee said of the sports wagering arm. He added that Full House had opted for the skins model in sports because it was not its area of expertise. But with gaming it would be a different matter. “That's slots; that’s what we do,” he said.
Accel Entertainment
The top line
Revenue rose 38% to $147.1 million for Q1 2021, an increase of 38% compared to Q1 2020, Adjusted EBITDA rose 74% to $25.8 million.
Earnings call tomorrow: E+M will also report on Accel Entertainment’s Q121 results tomorrow after the earnings call with analysts.
Illinois sports GGR, March and Missouri April GGR
So that’s why DraftKings were happy about Illinois: According to Deutsche Bank, the March data from Illinois shows why DraftKings is happy to sit on its mobile registration laurels in Illinois. They sit top of the tree with 33.5% of monthly handle or $203.9m, followed by FanDuel on 32% ($194.9m), BetRivers on 15.7% ($95.7m), PointsBet on 8.8% ($53.6m), Barstool on 7.8% ($47.8m) and William Hill on 2.2% ($13.3m).
Missouri: GGR was up 23.1% on the same month two years ago at $171.6m. Sequentially, this was down 2% on the previous month. Penn’s properties generated $52m, up 4.5% on the same month 2019, Boyd’s two properties came in at $46.4m, up 20.7% on April 2019 and Caesars properties generated GGR of $42.4m, up 26.3% on April 2019.
Newslines
Sale done: IGT announced this morning the completion of the sale of the Lottomatica business to Gamenet Group.
Meanwhile in New Jersey: Coming in the summer…
What we’re reading
Why is the Tokyo Olympics going ahead when the language of onerous pandemic restrictions “feels redacted of any explanation of how all this is going to be enjoyable”?
Earnings calendar
11 May: IGT, Accel Entertainment earnings call, FuboTV
12 May: Better Collective, Raketech, Angler Games
13 May: Neogames, Rush Street Interactive
Contact us
Scott Longley scott@clearconcisemedia.com
Jake Pollard jake@openmediaservices.com