Good morning. In this issue:

• BetMGM hopes for $2bn in revenue and profitability in H2. 

• LVS’s upbeat tone is welcomed by the analysts.

• Corporate advisory firm Houlihan Lokey examines digital’s boom and bust.

• Sector watch looks at the Chicago-based startup hoping to turn music streaming data into a tradable financial future.

Traction in the rain.

BetMGM 'coming of age’

BetMGM said it hopes revenues will hit up to $2bn this year as it targets EBITDA profits in the second half.

Guiding lines: BetMGM is “coming of age”, according to CEO Adam Greenblatt after it said revenues for 2022 would come in at $1.44bn, 11% ahead of expectations, while EBITDA losses came in at ~$440m. 

• FY23 revenue was forecast at $1.8bn-$2bn and losses for the year would be ~$150m. Q4 revenue stood at $432m with implied EBITDA losses of $66m, which was in line with guidance. 

• Parents MGM and Entain will between them provide a further $150m of investment in the business, bringing their combined total investment to $1.25bn.

• BetMGM is now live in 25 North American markets; its 2023 forecast includes the recently launched Ohio and upcoming Massachusetts.

That's why I fell for the leader of the pack: In iCasino, BetMGM is in a clear leadership position with 30% market share. On the subject of iCasino competition, Greenblatt said the group could only focus on its own strategy. 

• He noted that the same question was put to him this time last year and since then BetMGM’s iCasino market share was 1% higher. 

• “We’re feeling pretty confident and continue to be the leader in live casino and have the largest games portfolio,” he added.

• Omni concerns: The revamped MGM loyalty program had driven $400m in revenues from players who had a pre-existing relationship to MGM properties and FTDs from omni-channel players rose 120%.

Greenblatt said the focus on parlays, bonus optimization and finding profitable players versus less productive ones was “paying off” and resulting in a greater NGR percentage, reduced tax rates and increased flow through to EBITDA. 

• “All of that is happening,” he said. 

Sowing the seeds of love: As to further iCasino legislation, Greenblatt said a “tremendous amount of education work was going on behind the scenes”. The industry is “sowing the seeds for future legislation”.

• “Market distortions don’t last over time,” Greenblatt added, suggesting it was the retail casinos that needed to be convinced.  

• Further reading: Compliance+More yesterday wrote about the hopes for iCasino in Indiana, where the VLT issue is seen as the biggest block. 

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BetMGM analyst takes

Jam tomorrow: BetMGM’s exposure to the “higher-spending, stickier” iCasino market impresses the team at JMP, who suggested it will lead to a “sharp inflection: to profitability in 2024”. 

• While they expect that section of the market to become more competitive, BetMGM’s database, tech and expertise “should support current market share levels”.

Anger management: Deutsche Bank suggested it was “refreshing” that no TAM guidance was issued, as it “leads the industry away from benchmarking against largely misleading forecasts… and over aggressive forecasting”.

Let’s get it on: There continues to be much chatter about the potential for MGM to buy Entain and resolve the JV issue once and for all, an outcome that Truist said would be a “positive, but not at any price”. The team at Peel Hunt said yesterday that “surely MGM is on the prowl”. 

• “Entain’s market cap is roughly the same relative to MGM’s as in early 2021 when talks were disclosed,” they added.

LVS analyst reaction

The prospects of Macau finally following the recovery path set out by other markets has the analysts purring.

We’re all waving flags now: The upbeat tone from Las Vegas Sands AMC on Wednesday was noted by the analysts, with the team at CBRE suggesting “there is no one better to wave the green flag” than LVS in Macau. 

• They added that management’s commentary on the resumption of restriction-free travel would be enough to “increase the appetite” of investors.

• “We are beginning to see key similarities between Macau and the recovery in other markets that would suggest an eventual rally beyond 2019 levels,” the team added.

Calling it: While still early, Wells Fargo noted LVS’s “real-time commentary on Macau’s rapidly recovering GGR” and noted the company has seen high-quality patronage across all segments and evidence of pent-up demand. 

• The team said that, as it stands, gaming volumes are outpacing the visitation recovery.

• Deutsche Bank noted the same, adding it was similar to the US recovery with spend per visit metrics up “healthily”.

Of MICE and men: The team at Macquarie noted that Marina Bay Sands was back on track for a run-rate $1.6bn of EBITDA. In New York, they suggested LVS is a “serious contender” for a license given its track record in “MICE and non-gaming at scale”.

🎯 Las Vegas Sands enjoys a result bump

Analyst takes

Caesars: The team at CBRE suggested the “real story” this week for Caesars is its new capital structure. Following this week’s bond raise and new credit facility, the team noted the company’s variable rate debt exposure falls to 23% from 43%, thus removing a “significant overhang”. 

• At the same time, the debt maturities have been significantly extended, pushing near-term maturities out to 2028-30.

OSB hold: Deutsche Bank analysts suggested the recreational sportsbook model is “largely, if not entirely, predicated on the mix of single event vs. parlay/multi-outcome wagers”. An operator’s hold level would “essentially mirror” its ability to push players towards parlays.

• Comparing promotional spend levels, DB said bookmakers in Pennsylvania had spent $548m LTM or 36% of mobile GGR. 

• But in Colorado, with its far less punitive tax rate, promo spend represented ~50% of OSB GGR. In Michigan it was 45% of OSB and in Connecticut, with its three licensed operators promotions, it was just 26%. 

Digital outlook

The gaming team at corporate advisory firm Houlihan Lokey suggest the sector names are on a comedown from a once-in-a-generation boom.

Froth and nonsense: The corporate advisor involved in many of the biggest sector M&A suggested key names in the sector have been oversold since the middle of 2022 – leaving their valuations looking attractive once again.

• Looking across US and globally listed entities, they suggested both EV/revenue and EV/EBITDA multiples have fallen by over 50% compared to their 2021 highs.

• Pachydermatitus: “There is no way to avoid the elephant in the room that the industry likely saw a once-in-a-generation boom in valuations that we liken to the dot-com 1.0 environment,” they added.

But they suggested that, with valuations now more attractive, it should give way to new rounds of investment for venture-backed companies in 2023/24. In particular, they thought venture capital and growth capital investors still have a “healthy interest” in digital transformation of the gaming space.

• “This isn’t wishful thinking on our part, and discussions with large capital sources remain very constructive on the sector,” the team added.

Where the money will go: Companies that target underserved markets; tech that helps lower CAC values; tech that disrupts incumbents; businesses with a shorter ramp to profitability; and essential services that benefit from broader industry growth.

Where it won’t go: They noted, though, that with gambling still seen as a sin industry, it will limit the investor universe. Therefore, businesses working in the areas of sports integrity and responsible gambling “may be able to avoid being tagged by ESG concerns”.

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Sector watch – financial trading

The UK’s largest spread-betting and CFD providers have all announced trading figures in the last few weeks.

Retaining wall: Market leader IG Group said on Thursday it had seen strong trading in its financial H1 with revenue increased 10% to £519.1m, while pre-tax profit decreased by 2% to £240.5m. The company said it had seen growth in revenue per client and “consistency” in client retention rates.       

• Active clients reduced slightly to 312,000, while new clients acquired of 37,500 represented a 30% drop off from the “very high levels” in the comparative period last year.

• “Despite a softening in trading demand due to the global economic environment, our high-quality clients have continued to find opportunities to trade, demonstrating the resilience of the business model,” said June Felix, CEO.

Alphabet soup: Similarly upbeat noises came from rival CMC Markets, which said in an update that, while net operating income was weaker towards the end of the last calendar year, it “recovered strongly” this month meaning the company was trading in line with expectations for its year-end in March.  

• The firm added that its development upgrades were on track across its trading and investing platforms, with ETFs, ISAs and ESG screening functions having been added to the CMC UK Invest platform. 

• CEO Lord Cruddas spoke of the company’s product expansion, new trading analytics, new pricing functions and enhanced onboarding initiatives. 

Plus points: Lastly, Plus500 reported earlier this month an “excellent operational and financial performance” in FY22, despite lower levels of activity across financial markets towards the end of the year caused by the 2022 FIFA World Cup.

• FY 2022 revenue grew to approximately $832m, while EBITDA rose to approximately $454m during the year. 

• The firm added that against a challenging macro-economic environment, its balance sheet “remains extremely robust” at $900m.

This week on E+M

• Discussion around Fanatics’ bid last Friday for BetPARX was covered on Monday, with sources suggesting the Michigan license might be key.

• Later on Monday, Caesars’ bond raise occasioned the release of a Q4 pre-announcement, which said digital losses would be less than feared.

• On Wednesday, Las Vegas Sands reported its Q4 earnings, suggesting Macau has finally turned a corner.

In Compliance+More this week, events in Massachusetts, Kentucky and Indiana were covered. Also, Skywind’s In Touch Games made it a hattrick of UK Gambling Commission regulatory settlements, the Park Lane Club’s travails were examined and Swedish gambling harm data offered insight into tackling problem gamblers.

Earnings in brief 

Bluebet: Handle was up 6.6% to AU$147.7m and actives increased 32.3% to 59.6k in Q2. The FIFA World Cup and US promotions drove a 58% increase in OSB handle. The group’s ClutchBet consumer brand soft-launched in Iowa and is set to go live in March in Colorado. 

• It will also launch its first F2P games via Low6 in time for the Super Bowl. BlueBet invested $500k in Low6 in October and will also continue to develop its sportsbook-as-a-solution B2B platform.

M&A lines

• Novomotic’s Greentube has acquired an 80% stake in Slovenia-based software developer Ineor for an undisclosed amount.

Datalines

Denmark: Gambling GGR rose 7.5% YoY to DK6.7bn in 2022, with iCasino up 2% YoY to DK2.9bn and reaching a record high of DK272.3m in December. Land-based casino GGR increased 59.3% to DK349.2m. Sports-betting GGR was down 3.6% to DK2.3bn and, despite the FIFA World Cup, December GGR was down 35% at DK135.5m, likely due to the national team’s failure to make it out of the group stages. 

Newslines 

GiG has signed a five-year agreement to supply its player account management platform to the Latin American group JOY Enterprise, which will operate the Playr.bet brand in the region.

Red Knot Communications has appointed Andy McNamara to head up its new Toronto office.

Parimatch has rebranded its backend supply B2B business as GR8 Tech.

1XBET has denied a report that its license to operate in Curaçao has been suspended and that it has been declared bankrupt by a Dutch court.

What we’re reading

“For anyone who found solace or haven in Crosby’s singing, his death feels like the dimming of some golden light.” The New Yorker.

Calendar

• Feb 1: Entain

• Feb 2: Evolution, Penn Entertainment, Boyd Gaming

• Feb 7-9 ICE London

An +More Media publication. 

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