• DraftKings’ Robins: “We’ve seen off waves of competition.”

• FanDuel’s Howe: competing in OSB “not for the faint-hearted”.

• MGM Resorts and Flutter head the earnings week ahead.

• Startup focus – talking GuardDog with Jeremy Levine at Underdog Fantasy. 

Waves don't die, let me crash here for the moment.

DraftKings call

“We are winning,” CEO Jason Robins tells analysts on DraftKings’ Q3 earnings call. 

You ain’t seen nothing yet: Robins never sounds like the over-excitable type but, still, he was clearly in a confident mood last Friday as he spoke about DraftKings’ prospects. “We have created what we believe is the strongest product in the industry,” he said. “But the best is yet to come.”

• He was speaking after the company guided to positive 2024 adj. EBITDA of $350m-$450m. Shares rose over 16% on Friday.

• This after it also said adj. EBITDA losses for 2023 would be slashed to $95m-$105m, a near $300m improvement on its forecasts at the start of 2023.

• “We are poised for a rapid increase in adj. EBITDA due to continued strong revenue growth, coupled with a scaled fixed-cost structure,” said CFO Jason Park.

Day in, day out: Without any big state openings forecasted for 2024, and given DraftKings’ history of consistent quarterly beats and raises, the likelihood is the company will beat the upper range of forecasts, even with new competition entering the space.

• A major factor is the reduction in marketing spend, with Robins saying the company expected further declines. 

• “As our existing states mature, we see less and less external marketing spend there,” he said. “If we see some very significant new states come online next year, that could change.”

• “But right now based on the kind of launch that we expect to launch, we're forecasting an external marketing decline next year,” he added.

Hold fire: On the threat of competition, he said DraftKings had already witnessed “multiple waves” and he still expected a decline in promos. “We'll stay disciplined,” he said. “The last time we saw a huge wave of competition, we didn't increase our promotion rate and I don’t think we expect to do that this time.” 

• “It’s not like we haven’t had fierce competition pretty much from the start,” he noted.

• “In the end, we believe that most customers will gravitate to the best product, the best experience.”

• The Q3 numbers showed DraftKings benefiting from recent market share gains, which Robins suggested was part of the reason behind the outperformance. 

• “Our team is going to be dissatisfied if we don’t continue to gain share.”

Cash piles: Turning to a question that, as one analyst put it, has “just has never come up until now” – of what to do with its growing cash – Robins (not for the first time on the call) called it a “great question”.

• “It’s something we’ve actually been spending increasing time going through looking at all different options,” he said.

• This included organic investments, opportunities for capital structure optimization, buybacks and “just basically how do we deliver the maximum value over the long term to shareholders”.

• “We’ve been focused on getting to this point,” he said.

Diary dates: Attention now turns to DraftKings’ capital market event on November 14. Meanwhile, more info on ESPN Bet will likely be forthcoming on Thursday with ESPN’s EDGE conference. 

🔥 DraftKings up over 200% this year

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Analyst takes – DraftKings

Impervious: Jefferies noted that unlike with other areas of the leisure sector the team covers – including B&M gaming – a “call on the macro” was not a factor with DraftKings or the online space generally. “Overall, the guidance suggests that the positive momentum should continue,” the team added.

• Wells Fargo said they viewed DraftKings as the “best way to play the burgeoning US online market, given its first-mover advantage, strong brand recognition with the younger demographic and superior tech”.

Scale model: The team at CBRE said critical scale was being reached. “Revenue continues to grow as absolute marketing dollars contract and the company scales its fixed-cost base far more efficiently,” they added.

• “The operational excellence and structural improvements had a direct positive impact on results,” added JMP.

• They also noted that the bar for 2024 in terms of adj. EBITDA “has been set low”.

FanDuel’s Howe on CNBC

Faint heart never won fair lady: Speaking late last week to Contessa Brewer as part of CNBC’s Evolve Global Summit, FanDuel CEO Amy Howe said the competitive nature of the US OSB and iCasino landscape meant it was “not for the faint of heart”.

• She noted there had “already been a lot of very well capitalized, very strong competitors on the field” and said there were more to come.

• But she added that any competitor has to have a “superior product experience” to actually take market share.

• “If your product doesn’t work, it doesn’t matter how great your brand is, you’ve got to have a really phenomenal experience.” 

Scaling the walls: The other factor, she added, is the potential for the biggest operators to enjoy scale advantages, with the US online market showing signs of being “not dissimilar to many ecommerce industries” with high barriers to entry. 

• “You can’t just pick up and decide you want to be an online sports bettor,” she said. 

• There are “significant” regulatory and development costs and “by the way, you’re spending a lot to responsibly bring consumers to your platform”.

• “So it’s certainly not for the faint of heart,” she added. 

• “And if you’re sitting there with a low single-digit share, and you don’t have that scale advantage over time, it just becomes harder to reinvest back into giving what consumers want.”

The week ahead

Trouble and strife: The full impact of September’s cyber attack will be front and center for MGM AMC on Wednesday, along with questions around the potential impact from the threat of the Culinary Union’s strike action. Deutsche Bank noted they expected “plenty of room for interpretation”.

• Recall, MGM said in early October that what CEO Bill Hornbuckle called “corporate terrorism” would cost ~$100m in Q3 EBITDA.

• On the union troubles, DB suggested the problems were unlikely to “linger” beyond the upcoming F1 race.

• The team has adjusted their revenue forecast to $2.89bn from $3.05bn, while adj. EBITDA falls to $1.1bn from $1.2bn.

Ask a stupid question: There was some intrigue last week during Entain’s strategy update meeting when CEO Jette Nygaard-Andersen appeared to suggest the company was contemplating the injection of more funds into BetMGM, which was contrary to previous commentary from both JV partners.

• DB noted that, after what Entain has said, they expected a potentially breakeven Q3.

• “We project sequential performance to be relatively flat, despite what appears to be some sequential share loss in the iCasino segment,” they added.

Flutter: Jefferies suggested they were executing an upbeat trading update based on strong US market data and “rational competitor activity”. “We anticipate that FanDuel could take advantage to drive greater US market share gains in Q423,” they said.

• Flutter has forecasted a US EBITDA profit for 2023 of £90m-£190m. Group EBITDA for the year is expected at £1.53-$1.79bn.

Reporting this week

• Nov 7: Melco Resorts, Red Rock Resorts, AGS

• Nov 8: GiG, Everi, Full House, MGM Resorts, Accel

• Nov 9: Flutter, Light & Wonder, Bragg, Super Group, Wynn

Shares watch – Sportradar

On the radar: Penn Entertainment grabbed the market headlines late last week when its shares were boosted by confirmation of a launch date for ESPN Bet, but quietly heading the field on the same day was Sportradar, which finished Thursday up over 14% on the day.

• The boost helped the company recover the ground from its fall on the day of its earnings announcement and left it up over 5% for the week.

• Jefferies analysts said the company’s intention to focus on margins and cash flow generation as much as growth was “unique in our view”.

• JMP said the announced 10% workforce reduction demonstrated the focus of the company on operational excellence.

🏀 Sportradar receives an end-of-week bounce

Earnings in brief

Konami: The gaming and systems division saw an 11.6% rise in H1 to ¥19.1bn ($127m), with all major markets “moving toward recovery”. Unit profit came in at ¥3.12bn, up 56%. The company said its Synkros casino management system, as deployed by Resorts World in Las Vegas, has been well received.

Analyst takes

Entain: Noting the announcement of Lottomatica’s €639m deal for SKS365, the team at Deutsche Bank said it was a party that Entain would previously and arguably should have crashed. But with the balance sheet cupboard “bare”, the team suggested Entain was “hamstrung”.

Golden Entertainment: The team at CBRE pointed out that Golden’s return to beating consensus expectations after five consecutive quarters of misses is down entirely to having the Strat at the north end of the Las Vegas Strip back in full, newly renovated action.

Startup focus – GuardDog

Angels with dirty faces: To those looking at the controversies surrounding the state-by-state developments around pick’em fantasy games, the irony isn’t lost that one of the leading protagonists Underdog Fantasy have launched a fund specifically aimed at the responsible gambling space.

• The GuardDog initiative has seen Underdog Fantasy backstop an effort to accelerate early-stage startups with $1m in initial funding.

• The aim is to identify and provide support to companies “building new and creative solutions to address problem gaming and further responsible gaming”. 

Speaking to E+M, the only nod CEO and founder Jeremy Levine offers to the current legal battles is his comment that Underdog Fantasy is “definitely talking to a lot of regulators”. But he adds that the guiding principle behind Underdog Fantasy – that the product could be done better – is the same for GuardDog.

• “As we looked at responsible gaming, what everyone was doing was table stakes,” says Levine. “So we want to do more and to do it better.”

Connective tissue: The initiative will involve identifying companies where Underdog Fantasy can not only invest but also mentor. “It takes me back to where I started when I launched a company that got picked up by Techstars,” he adds.

• “It’s about connections,” he says. “We have a huge array of connections that we can open up to our entire network, our investors and their connections.”

• “We expect to be surprised,” he says. “Ultimately, we want to find the founders who are going to build the future.”

• “When we started Underdog Fantasy, everybody said we were crazy trying to take on DraftKings and FanDuel.

• “But I knew there was the opportunity to build a better fantasy business – and now the same thing applies.”

Companies and entrepreneurs interested in being considered by GuardDog can learn more and contact the GuardDog team at https://underdogfantasy.com/guarddog. 

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What we’re reading

Waiting for my man: Two decades in the making, the Fontainebleau in Las Vegas is but one step away from a potential December opening.

Career paths

GiG has appointed Andrew Cochrane as chief business officer for its platform and sportsbook division. He previously served as senior VP of commercial for SBTech/DraftKings.

NorthStar Gaming has announced CFO Jennifer Barber will resign, effective Dec 1. VP of Finance and Compliance Chin Dhushenthen will assume the role of interim CFO.

Entain has appointed Amanda Brown as an independent non-executive director, starting Nov 8. She was most recently chief human resources officer at Hiscox.

Playbook has named Jonathan Chilton as COO. He joins from GM Gaming.

Newslines

Full House said its new Chamonix property in Black Hawk, Colorado, is now taking reservations ahead of its official opening on Dec 26.

Kambi’s iCasino studio Shape Games will provide its sportsbook and casino front-ends to Sun International’s SunBet in South Africa.

An +More Media publication. 

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