• Keith Smith sees potential in M&A but is mindful of debt.

• Bally’s accepts Standard General offer at $18.25 a share.

• Analysts assess the damage done to DraftKings by Illinois tax. 

• Earrings commentary from Kambi, Kindred, LVS and Churchill Downs.

We all been playing those mind games forever.

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 M&A mind games

Definitely maybe: CEO Keith Smith didn’t specifically comment on the potential for Boyd Gaming to be involved in a bid for Penn Entertainment. But neither did he dismiss the idea of growing via M&A. “We’ve always been willing, it’s not news,” he told the analysts on Boyd’s Q2 earnings call.  

• “If you look back over the history of our company, the majority of our growth has come through M&A,” he added.

• “And I think we've developed a great expertise at it. We know how to buy properties. We know how to extract value out of these companies once they're part of our portfolio.” 

Just the facts, ma’am: But adding a note of caution, he went on to say it was “hard to speculate” on the financing of any deal. “It's wholly dependent on the specific facts and circumstances around the transaction,” he added. 

• He noted Boyd has a long-term leverage target to be below 3x which was “in the neighborhood of where we are today.” 

• “And so we would have the objective of getting back to that level very quickly.”

Just rumors: Recall, in late June Boyd was reported to have approached Penn about a potential bid while more recent speculation has suggested it might partner with Flutter in a deal that would see the B&M and online segments split up.

Smorgasbord: Analysts at Deutsche Bank suggested Smith had offered “something for everyone” with his comments, with enough said to “keep the discussion ongoing” but with the issue of price being all important.

• “We believe there were comments made that would/could be interpreted as supportive of Boyd engaging in larger scale M&A, as well as comments that would seemingly dampen the speculation around BYD and large scale M&A,” they added. 

Boyd by the numbers: Boyd’s Q2 earnings showed revenues up 5% to $968m but adj. EBITDA fell by 2% to $344m. The damage was done by the Las Vegas Locals segment where revenue was down 2.5% and adj. EBITDA fell by 8% largely due to competition from Red Rock’s Durango and others.

• Online, where Boyd has an ongoing market access relationship with FanDuel and a 5% stake in the business, was up 53% in revenue terms to $130m with adj. EBITDA up 27% to $17m.

• Of Boyd’s own online operations, currently live in New Jersey and Pennsylvania, CFO Josh Hirsberg said the approach was “a regional strategy, not national.”

👀 “We’re not in the business of making big investments and losing a lot of money to get market share,” he added. 

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By the numbers

Ontario: Q1 data shows GGR climbed 34% YoY to C$726m, a 5% sequential rise, on handle that was up 3.5% to C$18.4bn. iCasino accounted for 73% of GGR and sports 25% with P2P poker chipping in 2%. 

• Active player accounts during the quarter were 1.9m while the monthly average spend per active was C$284.

• There were 50 operators in the market using 80 brands. One was particularly happy with the figures according to this posting on X.

Read across

The release of the UK’s Gambling Survey for Great Britain was preceded by guidance from the UK Gambling Commission that its new “gold standard” statistics should not be used to calculate the rate of gambling harm. In Compliance+More.

In The Token Word this week, ETF providers were celebrating after the SEC gave the go-ahead for products tracking the price of Ether.

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Bally’s sells up

Kim’s deal: Bally’s has reached an agreement with major shareholder Standard General, which will see the investment vehicle run by Bally’s current chair Soo Kim buy the shares it doesn’t already own for $18.25 a share.

• This represents a 71% premium to the prevailing share price before the original $15 offer in March.

• The transaction values Bally’s at an enterprise value including debt of $4.6bn.

Cash out: Shareholders are being offered the option of rolling over all or some of their holdings or taking the cash. Standard General has secured $500m of committed financing to support the merger.

Vote yes: Previous to the March approach, Standard General, then a 21% shareholder, offered $38 a share for the shares it didn’t own. However, that deal was rebuffed by a special committee at the time. This time the committee unanimously said yes to the offer.

• Chair of the committee, Jaymin Patel, said the offer represented “meaningful and immediate value” to shareholders.

• Shareholders Sinclair Broadcast and Noel Hayden, ex-founder at Gamesys, have committed to support the deal and will see their holdings rollover.

Don’t stop me now: Standard General will merge Bally’s with its wholly-owned Queen Casino & Entertainment. It owns four properties including DraftKings at Casino Queen in East St. Louis, Illinois, the Queen Marquette in Marquette, Iowa, and the Queen Baton Rouge and the Belle of Baton Rouge in Baton Rouge, Louisiana.

• Post transaction, Ballys will have 19 properties in 11 states.

DraftKings’ IL fortune

Zone of impact: DraftKings has indicated to the analyst community that it has suffered a “substantial impact” from the new tax rates applied in Illinois in the last few weeks. Such is the disruption, the team at Jefferies trimmed its adj. EBITDA number for 2024 by $40m to $449m.

• More positively, the Jefferies team believes adj. EBITDA will double this year and next, paving the way for share buybacks.

• With a 90% flow through to free cash generation this year and next, the analysts suggested repurchases “could prove a productive allocation to offset stock comp and management sales”.

Kambi bump

Leaving present: Departing CEO Kristian Nylén signed off with an earnings day share price bump of over 14% on Wednesday after the company produced what he said was a “very strong” performance for the quarter with revenues up 6% to €42.9m and EBITDA up 25% to €16.1m.

• Recall, Kambi also recently announced Nylén successor as CEO Werner Becher who started yesterday, Thursday.

Border crossings: Over the period, Kambi launched its platform with Svenska Spel and in multiple countries with LiveScoreBet as well as signing a new partnership deal with the Choctaw Nation of Oklahoma. Noting the Choctaw’s official partnership with the Texas Rangers, he said it gave Kambi a potential entry into Texas should it regulate OSB. 

• On the potential of losing LeoVegas, where parent company MGM Resorts recently bought the Tipico US platform, Nylén said there would be “plenty of discussions” in the fall. He refused to disclose when the contract runs until.

Kindred’s Euros boost

Golden boots: The boost to business provided by the recent Euros was highlighted by Kindred, which said it saw a 16% increase in revenue in comparison with the World Cup in 2022, the last major soccer tournament. The company noted that the sports-betting margin before free bets was “very high” at almost 20%, which it attributed to the success of its Bet Builder products.

• “It's been a real step change in this tournament compared to previous iterations,” said CEO Nils Andén.

Voulez-vous? Revenue for the quarter rose 7% YoY to €328m while underlying EBITDA was up 32% to €73.6m. Excluding North America – which it exited during the period – revenue was up 9%. Andén noted the increased footprint in French sports betting also contributed to the margin improvement due to the country’s high inherent margin.

• France drove Western European revenues up 16% YoY, Nordics was flat and Central European operations declined by 9% with Andén saying Romania was the only focus in the region.

• That might help explain this posting on LinkedIn this week complaining about Kindred’s treatment of affiliates in Bulgaria.

• B2B revenue – i.e. Relax Gaming – rose 16% to €10.1m. Notably, however, revenue from iCasino was down 2% for the quarter to €168m.

Still talking: On the acquisition by FDJ, Andén noted the discussions between FDJ and the French competition authorities are continuing. “That is something that FDJ drives, and they seem very comfortable with the timelines that have been communicated,” he said.

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LVS earnings reaction

Somewhere over the rainbow: CEO Robert Goldstein noted that “sometime in the near future” LVS will be generating its highest-ever adj. EBITDA in the company’s history “without Las Vegas.” The Q2 numbers were below consensus, albeit with revenue up nearly 9% at $2.76bn while overall adj. property EBITDA rose 10% to $1.07bn.

• Patrick Dumont, COO, insisted LVS’s competitive position in Macau once the Londoner renovation is completed “will be stronger than ever.” 

• Having taken capacity out of the market for the work, he added that achieving the $561m of adj. property EBITDA in Macau was a “great result.”

• In Singapore, Goldstein said LVS was still “playing the game with one hand behind our back” given the ongoing work on Tower 3 there.

Not buying it: Still, there is no disguising the unwillingness of investors to buy into this story with the shares down over 21% YTD and off by nearly 30% on a 12-month view. The analysts at Deutsche Bank said neither the numbers nor the call commentary would be “well-received” by investors.

• “The share price doesn’t make sense to us,” said Dumont, adding that LVS’ share buyback program would continue.

• “I think the idea of shrinking the share count, I think we're in a good position to do it,” he said. 

Branching out: Dumont said LVS was “very ready” for new developments whether that was in New York, Texas or Thailand, but Goldstein was keen to point out that these investments wouldn’t be in the “near future.”

Race for the prize

One morning in May: The 150th Kentucky Derby enjoyed an all-time all-sources record revenue for Churchill Downs helped by the debut of the newly redeveloped paddock project which “provides a foundation for further innovation and monetization opportunities into the future,” said CEO Bill Carstanjen.

• For the 151st edition, Churchill Downs will be embarking on an $80m-$90m pavilion refurb.

Home straight: Total revenue came in up 16% YOY to $891m while adj. EBITDA rose 23% to $445m helped by thriving HRM operations, which Cartsanjen noted would soon include new venues in Kentucky, Virginia and New Hampshire.

• Noting the recent deal with IGT to provide Exacta’s HRM tech to the Maltese Lottery, Cartsanjen said international expansion of the product was now a potential growth opportunity.

• “Whether you talk in the United States or beyond, there are lots of potential markets that will look at this product,” Cartsanjen added.

Feeling Haute, Haute, Haute: In gaming, meanwhile, the company recently unveiled its new Terre Haute Casino property in Indiana in April “on time and on budget,” noted Carstanjen. He added that part of the strategy for the property was to attract custom from Indianapolis which is 70 miles away

Earnings in brief

Killing it: Revenues at Red Rock Resorts came in up 17% to $486m while adj. EBITDA rose 15% to $202m as the company saw its investment in building the Durango property pay off in some style. 

• The company also spoke on the call with analysts about its plans to expand the property with a phase 2 development to bring extra casino floor space and more machines.

• Asked whether that would potentially cannibalize the existing property, CEO Frank Fertitta was blunt. “We expect it to be additive. Otherwise, we wouldn't be doing it.”

Gaming & Leisure Properties: Revenue rose 7% to $381m while AFFO was up 2¢ to $0.94 helped by both a growing portfolio of assets and rent escalations. Recall, GLP recently completed a $1.59bn deal with Bally’s which included $900m of funding for Bally’s permanent facility in Chicago.

Monarch Casino & Resort: revenue rose 4% to $128m while adj. EBITDA was up 5% to $44m with the company saying its Black Hawk property continued to attract mid- to upper-tier players from the Denver region.

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Calendar

• Jul 26: GLP (call)

• Jul 29: BetMGM

• Jul 30: IGT, Accel, Caesars Entertainment

• Jul 31: MGM Resorts, Rush Street, Codere Online

• Aug 1: DraftKings (earnings)

• Aug 2: DraftKings (call)

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