• FanDuel flies into 2024, but PokerStars’ writedown hits Flutter bottom line.

• In +More: new debt for Allwyn and MGM Resorts.

• New name, new strategy for 888.

Stars are never sleeping, dead ones and the livin’.

Flutter flying high

Catch us if you can: Having seen Flutter US revenue rise nearly 41% in 2023, the form continued into the first quarter 2024. The company said current trading was up nearly 56% in the 10 weeks to mid-March, with sportsbook up 64% and iCasino up 50%. Excluding new launches, revenues rose 34%.

• In introducing its estimates for FY24, it said US revenue was expected to come in at $5.8bn-$6.2bn while US 'further’ adj. EBITDA – i.e. excluding share-based payments – would come in at $635m-$785m.

• Revenues ex-US were forecast to come in at $7.65bn-$8.05bn while further adj. EBITDA would be at $1.63bn-$1.83bn.

Lean on me: “We are trying to create as big a business as we can do,” said CEO Peter Jackson. “We’ve always leaned-in hard. We are operating in an environment where people are working hard to try and take their share of customers.”

Stars are out tonight: The company said the $725m writedown against the value of PokerStars reflected the unit’s presence in “predominantly lower growth” markets. Alongside a $165m charge against the value of the Fox Option liability and a further $791m amortization of acquired intangibles, it meant the company registered a $1.21bn net loss for the year.

• Recall, the previous incarnation of Flutter, Paddy Power Betfair, bought the PokerStars business – which included Sky Bet – in a $6bn all-share deal in 2019.

• “The impairment is a one-off,” said CFO Paul Edgecliffe-Johnson.

• “There are real benefits from being able to bring the PokerStars product into our local hero markets,” said Jackson. “This is about reinforcing the moat in those markets.”

Inflect me with your love: The news came with Flutter’s debut earnings as a New York joint-listed entity showing FY23 earnings up 25% to $11.8bn. Further adjusted EBITDA came in at $1.87bn, up 45%. Jackson hammered home the message about FanDuel having reached an “inflection point.”

• The US business generated $4.48bn, up 41%, while further adj. EBITDA came in at a profit of $167m vs. a loss of $263m in the prior year. 

• The UK and Ireland saw revenue climb nearly 14% to $3.05bn, Australia was down 2.8% at $1.45bn, while international rose 34% to $2.81bn.

• Further adj. EBITDA for UK&I was up 16% to $911m, Australia dropped by 23% to $356m and international rose 42% to $627m.

Raising the roof: Flutter also announced that after consulting with shareholders it has a new medium-term leverage target of 2x-2.5x debt to EBITDA versus the previous range of 1x-2x. The company said the flexibility on its debt headroom meant it would more readily be able to take advantage of “value-creating acquisition opportunities.” 

• The increased target “reflects the confidence we have in future cash flows,” said Edgecliffe-Johnson.

• “If we see attractive acquisitions, absolutely we will go after those,” he added.

• Jackson said the MaxBet acquisition was a “good example” of how Flutter might go about future M&A. 

• Net debt stood at $5.78bn at the end of 2023, an increase on last year, but the leverage ratio fell to 3.1x from 4.4x.

Listing note: Flutter plans to make New York its primary listing after an upcoming shareholder vote in May.

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+More

The former owners of BetCity have filed a counterclaim against Entain that suggests the latter was aware of the regulatory investigations in 2022 and 2023, according to Dutch website CasinoNieuws.nl. Entain claims it overpaid for BetCity by as much as €156m. The former owners are seeking €143m from Entain.

MGM Resorts has announced $750m of new notes dated 2032, with the proceeds from the issuance being used to repay existing debt including some bonds dated 2025.

Global lottery operator Allwyn has announced a six-year term loan €500m accordion debt facility with a syndicate of international banks. The company will use the proceeds in part to finance the buyout of Instant Win Gaming, announced in February. 

BetMakers Technology and Gaming Innovation Group have announced an agreement to deliver racebook services on GiG’s sportsbook platform SportX via integration with BetMakers’ Embedded Racebook Solution.

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888’s new name, new era

Evoke warriors: CEO Per Widerström said the new name for 888, Evoke, would end some confusion following the acquisition of William Hill. “Sometimes we are called 888, sometimes we are called 888 William Hill, sometimes we are just called William Hill,” he said. 

• “We needed a new name. Evoke marks the start of a new era,” said Widerström. “We have a lot of work to do. It is a reset of the business. We know what to do and how to get there.”

Declaring an interest: The central vision behind the new strategy, called the value creation plan or VCP is to “make life more interesting for our customers”, with a mission “to deliver players world-class betting and gaming experiences.” 

• “It is not rocket science. It is a good solid model I have used for many years,” continued Widerström, citing his previous success at leading CEE operator Fortuna.

A break from the past: The new era for Evoke will be delivered by an all-new 13-strong – but notably all-male – executive team that is “obsessed with value creation.” CCO Mark Kemp joins after a spell as CEO at DAZN Bet, and former Standard Chartered Bank regional COO Stephen Sheridan joins as chief customer and operations officer. 

By the numbers: Pro forma revenue was down 8% to £1.7bn, while pro forma adjusted EBITDA was down 1% to £308m. The strategic move away from dotcom markets made the biggest impact, with international revenue down nearly 16% to £517m. 

• UK retail was just about the only spot of sunshine with pro forma revenue rising 3% to £535m, but UK & Ireland online was down 8% pro forma to £658.5m. 

• The company said it was “very satisfied” with 888 Africa, which grew 4x year on year in Q124.

• Q124 suggests an EBITDA prediction of £420m-£430m for FY2024.

What’s the plan, Stan: Behind a lot of management speak about creating value and driving profit using strategic initiatives lies Widerström’s fundamental belief that “this business was not performing anywhere near the way it could and it should.” 

• Operations 2.0 will harness the power of AI and talent operation to improve customer services and trading, particularly.

Evoke will focus on gaining podium positions in four key markets: the UK, Spain, Italy and Denmark, which account for 85% of revenue. Everything else has been deemed an “optimized market” and hopefully one day some of these will be promoted to become core markets.

• “All of the brands have somewhat lost their way,” said Widerström, which won’t need a radical rebranding exercise but a clearer, more distinctive focusing on specific customer groups. 

• Capex expenditure and improvement in retail point to a “massive opportunity,” particularly in gaming.

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Analyst takes

DraftKings: After having met with management, the team at JMP suggested the “capital allocation story” is one for the second half of 2024 with decisions around what to do with excess cash likely to be delayed. 

• CEO Jason Robins made it clear to the team he would “like to see the balance sheet start to build cash” before pressing the button on share buybacks, for instance.

• The team also noted DraftKings would “keep its options open” with regard to refinancing its $1.3bn of convertible notes due in 2028.

Product+More: Product-wise, JMP reported Robins as suggesting the company would “put attention and resources” into in-play betting in the coming years. “The scale of the company and its ability to give the end-customer the most product offerings are in a way hedging itself in more volatile games/events, protecting margins to the downside,” the team added.

• They noted the depth of the product offering during the Super Bowl allowed it to meet its gaming margin target for the day.

Earnings in brief

Bragg Gaming: Revenue for 2023 was up 10% to €93.5m while adj. EBITDA rose 26% to €15.2m. CEO Matevž Mazij attributed the positive performance to a reconfiguration of its revenue mix, favoring higher-margin products such as internally developed proprietary content and its PAM platform. 

Galaxy Gaming: Net revenue for the table games and iCasino provider rose 13% to $6.7m with adj. EBITDA up 10% to $2.8m. CEO Matt Reback said the “opportunistic sales of perpetual licenses” peaked in 2023, and that the company would “return to a sustainable growth model” in 2024.

Calendar

• Mar 27: Playtech, Allwyn

• Apr 2: FansUnite

• May 6: E+M Capital Markets Forum

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