• ESPN Bet losses account for Penn slump.

• In +More: Viva NBA Vegas, Peltz pelts Disney.

• CEO Lindwall confirms Betsson’s global M&A ambitions.

• MGM’s upbeat earnings message fails to impress the markets.

• GiG boss ‘surprised’ by AskGamblers’ impressive performance.

Maybe we'll turn back the hands of time.

Penn posts supersized online losses

A slip of the Penn: Penn Entertainment CEO Jay Snowden put a brave face on the company’s online arm clocking up an adj. EBITDA loss of $334m in Q4, which was almost double what the analysts had been expecting. Online revenue came in at just $32m, a mere 15% of the consensus estimate of $210m.

• The shares fell by over 10% in early trading in New York as the market digested the heavier-than-expected losses.

• Investors will have recoiled at being reminded of huge online losses from years past, including the $500m adj. EBITDA loss posted by Caesars in Q122.

😱 Penn not mightier: Share down over 10% in early trading

You’re welcome: Snowden said Q423 online EBITDA losses were worse than expected and blamed a higher-than-predicted volume of customers for ESPN Bet, which resulted in elevated promo expenses. “We acquired as many first-time depositors and betters in the first two months as we had anticipated we would generate in the first full year post-launch,” said Snowden.

• He noted the launch of ESPN Bet helped increase monthly active users on the Hollywood-branded iCasino offering by nearly 280%.

• The company hopes for breakeven in 2025, but online losses this year will total $380m-$420m from revenues of $1.28bn-$1.42bn.

7 is the new 11: Analysts mostly focused on ESPN Bet with concerns expressed on the call around the company’s OSB market share dropping from 10-11% post-launch to just 7% two months later.

• Snowden claimed the company could turn a profit in two years time even if its market share stays at 7%.

• But he added the company didn’t anticipate 7% was going to be “as good as it gets by any means.”

• “We think that the market share is going to be growing steadily as we continue to make product improvements and add more deeper integrations with ESPN,” he added.

• He said the integration of the ESPN fantasy app would provide a “huge shot in the arm.”

• “We should be able to catch the others over time,” he said. “But it may not be done in 2024, but I don’t think it's going to go beyond 2025.”

By the numbers: Q4 revenue was down 12% to $1.40bn, while adj. EBITDA slumped by 76% to $112.5m due to the ESPN Bet launch expense. The regional picture was mixed with declines at both the revenue and adj. EBITDA levels in the south and northeast offset by increases in the west and midwest. 

• Revenue for 2023 was down marginally to $6.36bn, while adj. EBITDA slumped 22% from $1.94bn to $1.5bn.

• The company expects regional revenues to range between $5.6bn-$5.75bn and adj. EBITDA to come in at $1.9bn-$2.03bn in 2024.

Let’s go round again: Snowden described it as “another transformational year” and placed faith in the company’s omnichannel paying off in the long-term. He pointed to a third of its new ESPN Bet customers living within 50 miles of one of the company’s 43 retail properties.

• Helluva job: Snowden said the company is nearing the end of its search for a new head of interactive to replace the founders of theScore. 

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https://www.soft2bet.com/news/soft2bets-official-mega-launch-during-ice-london-2024 

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Silver lining: Las Vegas is “definitely” being considered as a potential NBA expansion city, according to commissioner Adam Silver. Speaking to ESPN, Silver said once the league had “figured out what our media relationships are going to look like,” it would look to expansion with a Vegas team high on the list.

GAN interim CEO Seamus McGill has been confirmed in the post on a full-time basis.

What we’re reading

Pasta joke: The activist investor Nelson Peltz has issued another broadside at Disney, saying its sports streaming plans and the investment in Epic Games was “throwing spaghetti against a wall.” 

• “Frenetic activity, in the face of a proxy contest, is not a substitute for a well-considered corporate strategy,” Bloomberg reported Peltz’s Trian Fund Management as saying in a letter to the Disney board.

Betsson earnings

They’ll never take our freedom: Pontus Lindwall, CEO, insisted Betsson has global ambitions when it comes to M&A, pointing out that with a strong balance sheet the company had the “freedom” to choose between potential takeovers and share buybacks. 

• In terms of targets, he said B2C bolt-ons were still very much the prime targets with new territories being particularly appealing.

Just the way things are: Asked about the company’s B2B ambitions in North America – where it offers a sportsbook solution – Lindwall suggested the company focus was now on LatAm. “That's how things have developed,” he said. 

• “We have not left North America at all with our B2B offering,” he added. 

• “But we have put more effort into our B2C offering in LatAm and in some European markets. That's how it has turned out.”

Slot to like: iCasino is increasingly the driver for Betsson, contributing 72% of revenues of €252m. The company said the 5% decline in sportsbook revenues was driven by lower margins. Sports accounted for 27% of total revenues or ~€68m. EBITDA rose 40% to €79.1m.

• For FY23, revenue was up 22% to €948m while EBITDA came in at €263m, up 52%.

MGM earnings reaction

Slip sliding away: The upbeat message from the earnings call got lost in translation as far as the markets were concerned, with MGM falling 6% yesterday with the news on EBITDA margins in Las Vegas, which gave investors a fright.

• The team at CBRE estimated that on a more normalized hold, MGM would have seen negative same-store adj. EBITDA in Vegas for the quarter.

• “This likely took some enthusiasm out of the quarter,” the team added.

Still, the outlook for Las Vegas in the year ahead remains promising, with Truist noting the Marriott Bonvoy partnership likely to bring in more transient trade while the Mandalay Bay refresh is nearing completion, adding 100k+ group nights on the Strip.

• Deutsche Bank noted that MGM China, meanwhile, notched up “considerable GGR market share gains” in Q4.

• But they added that reinvestment levels in Las Vegas and Macau via rebates on losses to high-end customers, mass programs or the value of complementaries are “becoming a much more pronounced dynamic.”

• They suggested this warranted “greater attention.”

Test of strength: The team at Macquarie noted MGM has “one of the strongest balance sheets in the space”, as is evident from recent share-buyback activity, which reduced the share count by 14% in 2023. 

• CFO Jonathan Halkyard made the case for more buybacks on the call and Macquarie suggested more was indeed expected.

But buybacks won’t be the only use case for excess cash. In the digital arena, the team at JMP noted the comments from CEO Bill Hornbuckle regarding potential M&A, with the balance sheet providing a “path forward to compete” with global online players.

• “At the same time, developing the business outside the US will position the company to have an end-to-end technology stack should Entain and MGM separate from the BetMGM JV structure,” they added.

• Trusit noted the comments from Hornbuckle, suggesting MGM was in negotiation about entry into the soon-to-open Brazilian OSB and iCasino market via a JV.

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Earnings in brief

FDJ confirmed its earnings pre-announcement from January, showing 2023 revenue up 6.5% YoY to €2.62bn, a 2.8% like-for-like uplift. The figures were boosted by the Premier Lotteries Ireland and ZEturf acquisitions. EBITDA was up 11% to €657m.

• Lottery ex-Euromillions was up 5%, while sports betting and gaming saw an 11% YoY revenue increase.

• The company repeated the claim that by buying Kindred – as announced in late January – it was creating a “European champion.”

Monarch: The Black Hawk, Colorado-based casino operator produced forecast-beating results with revenues at $128m, up 6% YoY, while adj. EBITDA came in at $43m, representing a 3% uplift. Operations in Black Hawk benefited from being, according to Truist, the “best-in-class asset” in the market, but times were tougher in a more competitive Reno environment.

GiG earnings reaction

Telling: Jonas Warrer, interim CEO and the man in charge of GiG’s media arm, said he had personally been “surprised” by how well the AskGamblers business had performed since being bought from Catena Media. He noted revenue was up 93% vs. the run-rate at the point of the takeover, while FTDs were up 62% and EBITDA had more than doubled.

• Apple cart: “The team has done a fantastic job,” he said. So much so that GiG was delaying the switch to its own platform because “we are afraid to change it.”

• But the migration will happen eventually, he added, because GiG wants to add sports to AskGamblers to “double the size of the addressable market.”

• Across the media business, Warrer said GiG had a “core strategy” of diversification.

• “We have transitioned from a domestic champion being very focused on the Nordics to a global leader,” he added.

Calendar

• Feb 15: DraftKings (earnings)

• Feb 16: DraftKings (call)

• Feb 20: Caesars Entertainment

• Feb 21: Raketech, Kambi, Churchill Downs (e)

• Feb 22: Acroud, Better Collective, Churchill Downs (call), VICI (e)

• Feb 23: VICI (call)

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