Good afternoon. On today’s agenda:

• Portnoy looms over Penn earnings.

• Rush Street defends Connecticut exit.

• Lottomatica suffers a first-day decline in Milan.

• Ohio Q1 data points to bet365’s efforts.

• Analyst takes: Flutter and Caesars.

I see trouble on the way.

Slip of the Penn

Penn’s mildly disappointing earnings are overshadowed by another Portnoy social media storm.

Mintz edition: An overnight social media storm surrounding the sacking of a Barstool Sports personality Ben Mintz over the broadcasting of a racial slur was the unplanned prelude to Penn’s Q1 earnings statement.

• While refusing to comment on the furore, CEO Jay Snowden did say ”there are going to be some dramas sometimes and we’ll manage through those”.

• He added that Barstool was one of the strongest sports media brands and has a “very exciting future ahead”.

Under the influence: Snowden was joined on the call by Erika Ayers, CEO at Barstool Sports, who defended the company’s record. “In some ways we’re a media company and in other ways we are a collection of influencers.”

• “This is a company which is authentic and unapologetic,” she added. “We are not particularly corporate.”

• “There is no other platform which will give the talent a laptop, a microphone and a camera and allow them to broadcast all sorts of content.”

The knitting: With the earnings, CFO Felicia Hendrix said that interactive losses in Q2 and Q3 would be worse than the Q1 loss but that adj. EBITDA profits in Q4 would “more than offset” cumulative losses through the year.

• Interactive losses came in at $6m for Q1 on revenues of $234m. Group revenues were up 7% to $1.67bn but adj. EBITDA was down 3% to $478m.

• Snowden suggested any forecasts for the economy in three or six months would be guesswork but the company would be sticking with its adj. EBITDAR forecast for 2023 of $1.88bn-$2bn.

Props: Snowden spoke about the launch of the proprietary platform with theScore Bet in Ontario, noting that the product was improving month on month. He noted the Barstool sportsbook platform, by way of contrast, has been “frozen” for the last six months ahead of its proprietary launch later this year.

• Penn said that, comparing Ontario to the US, retention rates were over 100% better and cross-sell into iCasino was 26% better.

• On the media side, Snowden said Penn was pleased with the performance of the Barstool business since being fully integrated earlier this year.

Gray returners: The enhanced Penn Play loyalty scheme was boosted by interactive, with total numbers up 13% with 350k new customers in Q1. In land-based, the company saw a return to pre-pandemic levels of the 65+ demographic. 

• Revenues for the segment were up 7% to $1.67bn, with the northwest doing comparatively well compared with the south and west region, which were each down 8%.

🍕 Penn Entertainment shares off by nearly 5% pre-open

Portnoy’s ‘press conference’

Poison Penn: Taking to Twitter, Portnoy said the decision “sucks”. “Not in my wildest dreams did I think I'd be sitting here being like we had to fire Ben Mintz. Penn felt differently.”

• “Penn operates in a world that we don't operate in,” he added. “They are highly regulated. They’re issued licenses for gambling that just as easily as they’re issued they can be pulled.”

• He added that Penn had made it clear it had a “zero tolerance” policy for issues such as occurred.

• “They believe there’s a legitimate chance lots of the states would pull their licenses because of this. Penn’s a multibillion dollar company. Without their licenses, they are a $0 company.”

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Rush to profits

Profitability the concern as Rush Street explains Connecticut exit.

End of the affair: CEO Richard Schwartz said the partnership with the Connecticut lottery was “not the right fit” for the company, adding that resources could be spent more efficiently elsewhere. RSI announced it would be calling a halt to the deal in late March.

• “I think Connecticut had some specific things about it that we’re very particular about and made it the right move for us to exit that market,” said CFO Kyle Sauers.

• Schwartz added there was no specific timeframe on when the partnership would end as the lottery is currently going through another RFA process.

Share of voice: Asked whether Rush Street is considering other state exits, Schwartz said the company was “constantly evaluating” both existing and new markets. But he acknowledged Rush Street doesn’t have the most nationally recognized brand vs. its competitors.

• “When you have a very loud high-intensity competitive environment, sometimes it takes a little longer to build that brand because it's hard to get attention,” he added.

RSI insisted once more its strength lay in iCasino, which helped drive a 20% rise in Q1 revenues to $162m, and Schwartz and Sauers expressed confidence that the vertical would enable the group to reach EBITDA profitability in H2. 

• Adj. EBITDA losses for the quarter improved by 80% to $9m, thanks in part to a 26% drop in advertising and promo spend to $49m.

• Schwartz also expressed confidence that iCasino regulatory initiatives in jurisdictions such as Ohio and New York would progress in the near term.

Latin love: In Colombia revenues grew 40% in local currency, and 20% when factoring FX headwinds, and the group was building to a “deliberate and measured ramp” in Mexico, a market that was “not much different than Colombia a few years back”. “We love that region,” Sauers said.

Shares watch

Lottomatica took a tumble on its first day of trading in Milan, down 8% from its float price. CEO Guglielmo Angelozzi told the FT he was not concerned about the opening day fall. “This is a marathon, not a sprint,” he said. “We are listing at a discounted valuation, but we are betting on longer-term growth. We have no regrets.”

Datalines – Ohio

All day and all of the night: Looking at the Q1 numbers, the team at EKG once again noted how bet365 appears to have dug deep to achieve a respectable ~5% GGR market share from a ~7% share of turnover. 

• The team pointed out the firm paid out $43m in bonuses (compared to $200m from market leader FanDuel), demonstrating a “willingness to aggressively contest”.

• Alongside the news of the company seeking to staff up a new US headquarters, the Ohio push “won’t have gone unnoticed” at third-placed BetMGM (8% of GGR), Barstool (5%) or Caesars (4%).

Earnings in brief 

Accel Entertainment: Defying the macro uncertainty, route gaming operator Accel said revenue rose 49% YoY to $293m, while the number of gaming locations rose 41% to 3.6k and the number of terminals was up 72% to over 23k. Adj. EBITDA was up 31% to $46m.

• “Even when other forms of entertainment suffer, our establishment partners recognize and have come to rely on the value of our high-quality offerings to help support their businesses,” said CEO Andrew Rubenstein.

• He added the company was “evaluating multiple” M&A opportunities.

Gaming Innovation Group’s media division helped the group grow revenues 49% to a record €28m in Q1, while adj. EBITDA grew 75% to €12m. CEO Richard Brown said the AskGamblers acquisition from last year had been turned around in quick time, with the asset seeing month-on-month growth. 

• GiG Media revenues were up 31% YoY to €18m with adj. EBITDA up 49% to €8m. Growth was 13% ex-AskGamblers, while Americas’ growth stood at 34%.

• 100 percenters: Platform and sportsbook revenues rose 100% to €10m with adj. EBITDA recovering to €3.6m vs. €200k loss YoY. 

• Brown said on the call that work on the potential splitting up of the group was still ongoing.

EveryMatrix: The gaming-to-sports provider said it had signed deals with Bet-at-home and the Hungarian lottery during Q1 as revenues rose 69% to €23.5m, while EBITDA was up 119% YoY to €10.5m. GGR across its operator partners was up 77% to €374m.

Analyst takes

Caesars Entertainment: In digital, Caesars will reach “sustainable profitability” even with less revenues than its peers due to its recent cost discipline and the strength of the brands, suggested the team at CBRE. Moreover, they have faith in the company’s chance of grabbing market share in iCasino via standalone apps and the promised new PAM and single wallet.

• Flywheel watch: Over at B Riley, analysts said Caesars’ valuation is too cheap, the “Las Vegas flywheel continues to turn” and the digital inflection “too enticing to ignore” even when factoring in a potential mild recession.

• “Right now is not as good as it gets,” they added. “We believe the quality of customers will continue to increase as LV fits squarely into today’s experiential economy.”

• The team also suggested the iCasino moves were a “significant operational and strategic upgrade to its existing offering”.

Flutter: The team at JMP indicated the 8% growth seen ex-North America was “testament to management’s ability” in international markets despite occasional bouts of “regulatory noise”. Meanwhile, in the US, FanDuel keeps “adding gold medals to the trophy case” following the grabbing of pole positions in Ohio and Massachusetts.

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Newslines

Light & Wonder will make its debut with its Authentic Gaming Live Dealer product in Michigan and Ontario with Rush Street Interactive.

Mobile live-dealer provider Playgon Games has completed its previously announced brokered private placement of 10% unsecured convertible debentures, raising CA$2.5m.

FansUnite has sold its Scotland-focused bookmaking brand McBookie to an unnamed third party for CA$5m.

Calendar

• May 4: Red Rock Resorts, DraftKings (earnings)

• May 5: DraftKings (call) – E+M Earnings Extra

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