• BetMGM predicts $500m+ of adj. EBITDA profits in 2026.

• DraftKings’ Robins: we have established a ‘competitive moat’.

• Aspire Global legal dispute threatens NeoGames/Aristocrat deal.

Now I'm feelin' how I should, Never knew single could feel this good.

BetMGM business update

BetMGM management insists the company doesn’t need more cash from its parents, as they plot a path to $500m profit in 2026.

Brass in pocket: BetMGM CFO Gary Deutsch said the company was “done taking cash” from joint venture partners MGM Resorts and Entain, as it said in a business update it would be generating adj. EBITDA of ~$500m by 2026 after another “year of investment” next year.

Riddle me this: The comments appear to contradict those from Entain CEO Jette Nygaard-Andersen, who said during her company’s Q3 trading update that it was prepared to inject more cash into the JV.

• She said back at the start of November “we really want to win and if that means investing into the business, then we’re pretty open to that”.

• Deutsch noted yesterday that “of course, things can change”, suggesting further investment might be needed for further state launches or “attractive new investment opportunities”.

Adam Greenblatt: “BetMGM represents a strategic limb of both MGM Resorts’ and Entain’s story, and the support and engagement from each of those organizations reflects that.” 

Efficiency drive: Asked directly whether that might relate to potential M&A activity, CEO Adam Greenblatt said BetMGM was “not actively evaluating” any deals right now. But he added it was “incumbent upon us to maximize the opportunity for our shareholders at all times”. 

• “It’s worth reiterating that we’ve been able to achieve these results with unparalleled capital efficiency,” he boasted.

The military two-step: But the analysts weren’t wholly convinced. In the words of the team at Deutsche Bank, when looking at the current market share level of ~17% vs. BetMGM’s own target of 20-25%, “it would appear investment is necessary”.

• JMP noted that while the top two of DraftKings and FanDuel “become stronger”, BetMGM is “taking one step back to develop its online app, to take two steps forward to grow the business for the long term”. 

By the numbers: Revenue for 2023 will come in at $1.9bn, in the middle of the previously forecasted $1.8bn-$2bn and representing a YoY uplift of 39%. The company said it would achieve adj. EBITDA profitability in H223. Same-state growth hit 18%.

• The target adj. EBITDA for 2026 is ~$500m. Analysts predicted 2024 losses of $100m-$200m.

• Deutsche Bank pointed out BetMGM’s success in seeing net margins in Q3 doubling as hold rates increased and promotions abated.

What happens in Vegas: Next year is the “year that Nevada comes to life for BetMGM”, said Greenblatt. He added that, subject to approval, the company hoped to launch in the state and that Las Vegas was now “more relevant” than ever for sports betting.

• “We can see a path to every major US professional sport being represented in Vegas,” he added.

• “BetMGM is positioned better than any other operator to take maximum advantage of Vegas becoming the sports destination in America.”

• Greenblatt pointed to the recent F1 event in Las Vegas as one of the “tent pole events”, including the Super Bowl, which will “showcase the power” behind the BetMGM brand and what it can offer to its players.

He noted that adding Nevada to the equation was one of the reasons the company was confident in its 2026 forecasts. “We haven’t made any heroic assumptions for 2024,” he said. “We think we have tremendous headroom in acquiring more players at or around the CAC that we currently achieve.”

• “We think the activation of Vegas will have a very positive downward impact on our customer acquisition.”

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Shares watch: 888 received a share price boost yesterday, up nearly 16% after reports at the weekend that it had been the subject of a bid from Playtech in the summer.

Earnings in brief

Allwyn said this morning that revenue for Q3 rose 98% to €2bn driven by recent acquisitions. Ex-these, revenue was down 1% to €1bn. Adj. EBITDA was up 16% to €368m.

Career paths

Sportradar has appointed former SciPlay CFO Jim Bombassei as its new senior vice-president, investor relations and corporate finance.

On social

Chris Grove from Acies Investment and EKG suggested that, based on channel checks, “the early days of ESPN Bet feel closer to the home run Jay Snowden is hoping for than the flop some were predicting”. Via LinkedIn.

What we’re reading

Bitcoin surges past $42,000 driven by three letters – ETF.

More BetMGM

By the power of Angstrom! Much has already been said by both Entain and MGM Resorts about the difference that will be wrought by adding the capability of Entain’s Angstrom acquisition, bought in July for £203m including the earnout. 

• Greenblatt said the benefits right now were “currently nascent” but the real impact “will manifest in 2024”.

• “We will leverage the power of Angstrom’s sophisticated modeling and differentiated markets, starting with pre-live SGPs, then expanding into live betting,” Greenblatt said.

• He promised that the full Angstrom-enabled offering would be available by the start of the NFL season.

Monte Carlo simulation: Greenblatt noted that in iCasino the business was “going from strength to strength”, suggesting scale in iCasino is “one of” BetMGM’s advantages. He added that two of the company’s four themes for ensuring it hit its 2026 adj. EBITDA target include exclusive games and in-house content such as the iCasino/B&M product Dual Play Roulette.

• Meanwhile, Greenblatt noted the top-grossing slots were omni-channel offerings.

• But JMP suggested that, while the benefits of omni-channel were evident, it “gets the sense” that the omni-channel effort is “progressing slower than expected, but remains untapped potential for long-term growth”.

Let’s get it Ontario: One surprise was Ontario where BetMGM broke cover on its market share, saying that based on its own internal estimates it controls ~22% of the total market. “We weren’t surprised by our performance,” said Greenblatt.

• “The MGM brand counts for a lot,” he added. “Going to Vegas is a thing but we also have first-class marketing around the brand.”

• “We got out of the gate quickly and invested in a concerted way,” he added.

• The team at Deutsche Bank suggested BetMGM in Ontario was “nicely ahead of what we believe most anticipated”.

DraftKings fireside chat

Itch: Speaking at the Craig-Hallum Online Gaming Conference yesterday, CEO Jason Robins repeated the message from the company’s investor day that DraftKings had seen waves of competition and that Penn and ESPN Bet had been “pretty rational” up to now.

• “I think they’re playing for the long term, not to come in and make a splash and disappear,” he said. 

• “The hope is they’re bringing some new people into the market, which would be great. I think that’s good for everybody if the overall TAM is growing.”

• He added that he believed operators with single-digit market share “will be able to exist, especially if you’re part of a larger entity”.

Mousetrap in development: Robins indicated DraftKings had already established a competitive moat. “If you have products or a product that is clearly viewed as best in class, you get all sorts of organic benefits to LTV and CAC, which then reinforces the advantage,” he said.

• He noted, though, that the pace of consolidation among the market leaders had been surprising.

• “Frankly, I thought it would be a longer grind than that,” he added. “Not to say we still don’t have a way to go, we do and we’ll never stop grinding.”

Always look on the bright side of life: He added results in the NFL had gone against the sportsbooks: “The only problem's been the sport outcomes, which I'm sure also is probably helpful to actives and handles.”

Sleeping beauty: Robins said DraftKings hasn’t “even started to scratch the surface” with iCasino. “I think a lot of people are sort of sleeping on it a little bit and maybe are just focused on how big the sports side can be and not realizing the iGaming side can make the business even larger,” he said 

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Aspire legal dispute

Court in the act: The co-founders of BtoBet have filed a legal challenge in the High Court against Aspire Global that alleges Aspire breached the terms of the agreement that governed its €20m purchase of the business in June 2022.

• Aspire was itself subsequently bought by NeoGames, which is now the subject of a $1.2bn bid from Aristocrat.

You just haven’t earned it yet baby: Alessandro Fried and Igor Lestar claim Aspire neglected its obligations related to how it valued the earnout incentives that were part of the agreement. Those terms committed Aspire to paying €15m in cash with a further €5m earnout based on BtoBet’s performance in the 12 months following completion.

• The two suggested the calculator method for the earnout as applied by Aspire was used to lower BtoBet’s 2022 EBITDA figure.

• The filing states that BtoBet incurred costs in 2022 for developing services that would generate revenue after 2022.

Projections and expectations: It adds that this arrangement would disproportionately benefit the buyer by reducing the earnout consideration for any amount above €20m. The claimants assert these services should have been factored into the earnout since “the buyer would stand to benefit from 100% of the revenue generated from this investment in the years following 2022”.

• In its response, Aspire denied breaching any SPA obligations related to earnout, claiming it had allowed BtoBet significant “latitude and autonomy” to achieve its incentives.

• Aspire suggested the owners of BtoBet had “bullish projections about the company’s future performance and might not meet those projections”.

Analyst takes

Light & Wonder: After meeting with management, the team at Macquarie said there was confidence in the estimated $1.4bn in 2025 EBITDA target after a strong Q3 “showed momentum across all of LNW's businesses”. 

• “LNW is focused on executing on its roadmap, including driving growth in gaming by taking share in class III and leveraging R&D to enter adjacencies,” the team added.

• The company remains in the early innings of its cross-platform strategy, which combined with its increased R&D spend, “should result in higher-quality ‘shots on goal’, in our view”.

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Calendar

• Dec 5: Allwyn

• Dec 6: NorthStar investor call

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