Good morning. On today’’s agenda:

• Booming Vegas profits offsets poor Macau numbers for Wynn Resorts.

• Light & Wonder says operators are ‘crying out’ for live dealer competition.

• Inspired Entertainment admits to poor hedging policies during FX confusion.

• We also have earnings in brief from SciPlay, Zeal Network and NeoGames as well as affiliates Raketech and Acroud. 

I’d pay any price just to get you.

Billings: Tilmann’s bargain buy

Recent buying activity from Tilmann Fetitta highlights the value at Wynn Resorts, as revenues drop 10.5% YoY to $889.7m but adj. EBITDA rises 12% to $173.5m. 

Bargain hunt: CEO Craig Billings said Tilmann Fertitta should be praised for spotting the value in Wynn Resorts and snapping up shares “when the stock was excessively cheap”. The owner of the Golden Nugget emerged as the second largest holder of 6% of Wynn stock earlier this month.

• “I think it's just a great recognition of the value in our equity, but there's not much more to say beyond that,” said Billings. 

Puts and takes: In Q3, Las Vegas produced a record EBITDA haul of $196m on revenues of $544.3m in the quarter, but losses in Macau dented prospects. Wynn Boston was up 10% to $212m and Wynn’s Macau operations produced revenues of $115.6m and an adj. EBITDA loss of $65.6m. Wynn Interactive EBITDA losses were pared back 82% to $18m. 

• Following the Macau government’s decision to make e-Visas available from Nov 1, Wynn Macau president Ian Coughlan said the group was “starting to see a buildup in occupancy” and ”the e-Visas trickle-in (should) pick up pace in the coming months”. 

• Billings said the market remained challenging but, “in light of the market having no junkets”, the group saw an uptick in direct demand from VIPs. 

• In Boston, the group said it was looking forward to “a significant catalyst for Wynn in Massachusetts” as the state prepares to go live with regulated sports betting in early 2023.

Analyst takes: Jefferies noted the faster turnaround time in Macau’s response to the latest COVID cases. For the team at Wells Fargo, Macau's recovery remains the “key driver of the stock, and timing remains highly uncertain”.   

😥Wynn was down over 3% ahead of the post-close earnings

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Stripped down LNW

Following the disposal of OpenBet, revenue from continuing operations rose 20% to $648m, while adj. EBITDA was up 15.8% to $235m.

Milestones for millstones: CFO Connie James pointed to the transformation of the debt profile at Light & Wonder, with the multiple of debt to EBITDA now down to 3.1x vs the 10.5x at the end of 2020. 

• James said the “final milestone” was the $800m received from Endeavor for the OpenBet business, bringing combined divestiture proceeds to $6.6bn.

• Debt at the end of the period stood at $3.98bn. “Our balance sheet is a competitive advantage,” said James, pointing to the potential for investing in R&D.

All smiles: Asked about the current economic backdrop, newly installed CEO Matt Wilson said the mood at the recent G2E was “unbelievably optimistic”. “Kudos to them,” he added. 

• Noting what he said was the “chronic under-investment” in the last few years due to the pandemic, he said land-based operators were now seeing that the “economic engine of these casinos is the slot floor”.

• Online, management said LNW will be launching live dealer in its first state – Michigan – within the coming weeks.

• “This is a segment of the market that is crying out for competition,” said Wilson. “We’re pushing at an open door with operators.”

Analyst takes: Credit Suisse said the free cash flow story at LNW was “compelling but doesn’t incrementally stand out in a space of depressed valuations”. Jefferies said, with the transformation of the balance sheet and make-up of the company largely complete, everything now hinged on execution.

SciPlay

Quick hits: Revenue hit an all-time quarterly revenue record of $170.8m, up 17% YoY. The company said Jackpot Party Casino and Quick Hit Slots both enjoyed strong double-digit year-over-year growth. 

Inspired’s FX impact 

Group talks of operational ‘underlying strength’, but currency fluctuations see revenues drop 3% YoY to $75m while adj. EBITDA falls 7% to $27.8m.

Blame Kwarsi: CFO Stewart Baker said the group did not fit its “capital structure to match currency exposure” and did not have a hedge in place against FX movements. In constant currency terms, revenues rose 13% while adj. EBITDA was up 7%.

• Five-year plan: Inspired announced a five-year agreement to supply more than 5,000 gaming terminals to UK bookmaker Betfred.   

• Meanwhile, virtual sports revenue was up 39% to $14.6m and, with the group‘s interactive division, generated over 50% of Q3 adj. EBITDA. 

• Lottery steer: Asked if the low volatility of virtuals would mean more focus on lotteries, chairman Lorne Weil said: “If we steered in that direction, it wasn’t intentional. Lottery is big for us because it has many retail locations.” 

• With virtual launches in Pennsylvania and Ontario during Q3, the group is hoping to get clarity from FanDuel on a near-term launch date. “FanDuel represents 15-20% of any market, so it’s a big gap not to have in our (live) customers,” said Weil.

• Quantum leap: Inspired recently made a failed $370m bid for AGS and, asked about M&A, Weil said the company’s focus was “quantum-step” acquisition in terms of tech or platforms rather than buying earnings.  

🚀Inspired’s earnings get a warm reception from investors

Earnings in brief

NeoGames: In its first full quarter following the acquisition of Aspire Global, NeoGames said revenues rose 262% to $73.3m while adj, EBITDA more than doubled to $17.6m. The existing lottery business saw revenues climb 22%, while sports-betting and iGaming was up 8%. 

• E+M will report on NeoGames earnings call, which takes place later today, in the Weekend Edition.

Acroud: Revenue rose 4% YoY to €6.7m, while EBITDA was up 19% to €1.5m. After quarter end, Acroud completed the acquisition of paid media assets from Caltena Media for £5.1m. In October, the company said EBITDA came in at €1.1m.

Raketech: Revenue bounced back in Q3, up 38.6% to €13m, while adj. EBITDA was up 25.7% to €4.8m. US revenues amounted to €1.5m over the quarter with a tick up at the end of the quarter as the NFL season kicked off. Momentum continued into October with revenues of €5.8m. 

Zeal Network: Revenue for the first nine months of the year rose 14% YoY to €74.5m, while adj. EBITDA over the same period was up 25% to €22m. The company said a significant growth driver over the summer was the record Eurojackpot in July, which prompted a record number of customer ticket sales.

Analyst takes

Flutter: Noting the offset of a decent US performance versus lower UK & Ireland and Australia performances, the analysts at Wells Fargo said they didn't see anything to change their mind about the trajectory for the group being increasingly defined by its US operations.

• JMP said similar, pointing out the US was worth 32% of total revenues in Q3, up from 19% in the prior-year period,

• They added it was “significant” FanDuel saw average monthly players in the US rise 42% vs. 19% at DraftKings, given the latter has “vastly improved” in recent months and yet didn’t apparently dent FanDuel’s market share.

Datalines

AGA Q3 survey: Record Q3 revenues for commercial gaming of $16.2bn leaves the sector on track to surpass 2021’s total. Slots GGR was up 1.7% to $8.84bn, table games rose 2.4% to $2.55bn, sports betting came in up 80.6% at $1.68bn and igaming was 28.5% ahead at $1.21bn.

• The AGA noted that gaming revenue growth of 8.8% YoY outstripped US GDP of 2.6%.

• Out of 33 commercial gaming states operational one year ago, 16 reported quarterly highs in GGR in Q3 2022. 

Newslines

Kindred’s Unibet is now the main sponsor of Dutch cycling team Tour de Tietema.

Lottomatica has announced it will be joining Playtech’s iPoker network in Italy.

Portnoy’s complaint: The Barstool founder’s lawsuit against Business Insider was dismissed on Monday by a Massachusetts federal judge. Needless to say, Dave was not happy.

What we’re reading

Own goal: Why did Caesars pull the plug on its long-term plan to sell a Strip asset?

On social

Victor Rocha @VictorRocha1

Who’s having a worse day? SBF or the California sports betting consortium?

5:39 PM ∙ Nov 9, 2022

Calendar

• Nov 9: NeoGames

• Nov 10: Genius Sports, Acroud, Endeavor

• Nov 14: GAN

• Nov 16: Sportrader, Flutter Investor Day

• Nov 17: Catena Media, Gambling.com

Contact

• Scott Longley scott@clearconcisemedia.com

• Jake Pollard jake@openmediaservices.com