• ESPN Bet has a shot at being a major US OSB player, says Penn.

• In +More: Endeavor puts OpenBet and IMG Arena up for sale. 

• Gaming recession risk under the spotlight.

• Light & Wonder in a position to exploit supplier M&A, say analysts.

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American dream

Star-spangled: Penn Entertainment sees closing the gap with the market leaders on parlays as a percentage of handle as central to its hopes of leveraging the ESPN name and cementing ESPN Bet as a major player in the US OSB landscape.

Be the best: CEO Jay Snowden noted FanDuel has been “in a class of its own” when it comes to parlay hold percentages, but said ESPN Bet would be “significantly better” at the start of the football season than previously.

• “I’m not saying we’re going to get to FanDuel’s numbers – we’re not going to give you a timeframe – but clearly there’s a big opportunity for us to continue to close that gap over time,” he told the analysts.

Lean on me: That effort starts in earnest with the new football season and the upcoming launch in New York, where both Snowden and CFO Felicia Hendrix were keen to stress the extent to which ESPN Bet would be leaning on the connection to the existing ESPN consumer base.

• Blanket coverage: On the “deep integrations,” both in sports and with fantasy, Snowden said that “anywhere where you see a score of an event, you’re going to have that pack of odds and deep links with ESPN Bet.”

I like to watch: Responding to a question regarding DraftKings’ customer surcharge plans, Snowden said the move was “unexpected” but “definitely interesting.”

• Keep your enemies closer: “You should expect us to be observers,” he added, suggesting a surcharge being levied in early 2025 was “not even on our radar.” 

• “I hesitate to ever say never,” he noted. “We would not be a first mover on something like that.”

• “We’re going to stay very close to it. We’ll observe. We’ll see what the reaction is, assuming that it does launch in early 2025.”

• A watching brief: Note, on Entain’s earnings call yesterday interim CEO Stella David similarly said the joint-custody owner of BetGM would “see what the customer response is.”

By the numbers: In Q2, Penn saw revenue fall less than 1% to $1.66bn while adj. EBITDA fell  by 23% to $367m. B&M gaming was a mixed bag, with growth in the Northeast, West and Midwest segments managing to more than offset the 3%+ fall in the South.

• Interactive fell 10% to $233m while adj. EBITDA losses climbed to $103m.

• Hendrix said the interactive segment would be generating “meaningful” adj. EBITDA by 2026, although it is still predicted to lose $460m-$510m this year.

• In B&M, executive VP of operations Todd George noted the “noise” in the quarter was due mainly to weather impact but he felt “comfortable” with the rest of the year.

Schtum: On the subject of potential M&A, Snowden batted away an analyst query over financial media reports – “and even some of the gaming trade rags” – surrounding rumored approaches, remaining tight-lipped silent except to say the company doesn’t comment on speculation.

✒️ Penn is mightier, up over 8% on Thursday

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Venture capital firm Yolo Investments manages in excess of €500m in capital across 100 exciting fintech, gaming and blockchain companies. The Yolo Investments' Gaming fund, regulated by the Guernsey Financial Services Commission, has taken positions in fast-growth suppliers and operators, including Dabble and Enteractive. Yolo Investments (yolo.io) wants to hear from readers of this newsletter. Get in touch with your pitch, or for a chat about innovative products which can plug into our investment ecosystem.

+More

Endeavor has put OpenBet and IMG Arena up for sale as the company moves towards it being swallowed up by major shareholder and private equity house Silver Lake. Endeavor bought OpenBet from Light & Wonder for a knock-down $800m in Oct22, adding it to its existing IMG Arena business.

• However, Endeavor’s grand plans for what became its sports data and technology unit failed to come to fruition.

• No details were given regarding the segment’s financial performance in Q2.

• Shop window: To advertise its worth, OpenBet said yesterday in a separate release that customer numbers grew 40% in H1 with Tabcorp and Veikkaus added to the roster.

Genius Sports has announced the launch of GeniusIQ, a next-generation data and artificial intelligence platform for sports.

Read across

Simply predictable: In The Token Word, Nigel Eccles, ex-founder at FanDuel and now founder and CEO at BetHog and blockchain-based betting exchange BetDEX, had a word of warning for in-the-news prediction market provider Polymarket.

• Its “real challenge,” he argued, will begin after the US presidential election when coming up with bettable markets from “messy” news cycles is far more difficult.

Thais that bind: Meanwhile, the news of Thailand announcing the skeleton details of its regulatory regime for casinos was the top story this week in Compliance+More.

+More careers

The big move: IGT has announced the appointment of Nick Khin as president of global gaming having previously served as IGT COO and VP of gaming since 2015. Khin is based in Las Vegas and will report directly to CEO Vince Sandusky.

• Mohegan has appointed Joseph Hasson as COO on a permanent basis. He has fulfilled the role on an interim basis since April. 

• Everi has announced that Dean Ehrlich, executive VP and games business leader, will step down effective September 1 to pursue other business endeavors. 

• Online gaming affiliate and compliance solutions provider Rightlander has given the top job of CEO to Sarafina Wolde Gabriel, who replaces company founder Ian Sims in the role. Wolde Gabriel was previously chief strategy officer.

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Hard times

Threat level: Investors are generally quick to factor in a hard landing recession for gaming stocks and, according to the analysts at Bank of America, recent price movements suggest there is a 60% chance of such a downturn.

• Gaming stocks suffered with the rest of the market on Monday on US recession fears.

• But a soft landing would be a different prospect with interest rate cuts and falling bond yields benefitting the most rate-sensitive sub-sectors, including gaming REITs and regional gaming,

I think I’m cracking up: BoA made the point that there are some evident “fundamental cracks” among low-end travel and leisure providers. Within the gaming sector, stocks at risk should these cracks widen include Penn, Caesars and MGM Resorts.

• Using similar language yesterday, Penn Entertainment CEO Snowden noted that airlines and lodging operators have seen “some cracks in that lower end consumer.” 

• But he was quick to suggest this wasn’t evident for regional gaming operators.

• “If people are traveling less, whether it's air travel or they’re staying in hotels less, that tends to be beneficial for regional gaming,” he argued. “People are staying closer to home.”

Light & Wonder earnings reaction

Nothing’s gonna change my love for you: The team at Deutsche Bank suggested there was enough contained within LNW’s Q2 earnings for both bulls and bears to chew on, with the numbers unlikely to change views on either side.

• On the plus side, DB noted continued operating momentum, with “numerous shots on goal” across its business lines, and reaffirmed guidance on the $1.4bn 2025 EBITDA target.

• Conversely, though, the negatives included limited FCF conversion and “meaningful” EBITDA add backs, including restructuring expenses.

On the call, CEO Matt Wilson made note of the recent private equity buying activity in the gaming supply space and the DB team suggested LNW might yet be “active” on the M&A front.

• This could take advantage of what DB believes to be a “healthy valuation and well-capitalized balance sheet.” 

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Seeking inspiration

Half and half: Interactive was the star of the show for Inspired, showing 40% YoY revenue growth to $9.4m, while gaming was up 1% to $27.1m and leisure rose 3% to $27.4m, all helping to offset a 23% decline in virtual sports to $11.7m. Group adj. EBITDA fell 6% to $25.5m.

• On the call, CEO Brooks Pierce talked up the potential for the company’s hybrid live dealer product, now live with BetMGM in New Jersey and most recently in Michigan. “It’s starting to hit its stride,” he promised.

• Tzatziki: He remained optimistic with virtuals for the rest of 2024 despite the “small dip” in H1.

• In gaming, Inspired recently signed a new long-term deal for retail machines in the UK with Evoke.

That joke isn’t funny anymore: Executive chair Lorne Weil noted the Inspired share price is “laughably undervalued” but said management was “not really worrying” about any take-private moves. 

• He said buybacks were now back on the agenda after the recent financial restatement “mess.”

Earnings in brief

Golden Entertainment: Valuation concerns were expressed on the call as CEO Blake Sartini made the point that as it stands, on “conservative math”, the value of Golden’s real estate in Las Vegas exceeds the value of the company.

• It brings up the potential of selling the land to a gaming REIT. “I think the question for us is, long term, how do we generate the most value being this public company? Is it owning our real estate or not?” he asked.

• Operationally, revenues came in at $167m, down substantially YoY after the Rocky Gap sale. Adj. EBITDA stood at $41.2m, both in line with forecasts.

• Wheels within wheels: Sartini also noted the efforts being made by the Las Vegas Convention and Visitors Authority and other Downtown operators to avoid F1 being the “headwind” it was last year. 

• He said there was a “concerted effort” to make F1 weekend “entertainment heavy.” “We are in offensive mode this year for that weekend,” he added.

Century Casinos: Net revenue rose 7% YoY to $146m but adj. EBITDA fell by 6% to $27.4m, with the decline largely attributable to construction disruption across several properties and Polish casino closures.

Mohegan: Q3 revenue rose 21% to $504m, helped by a significant 67% YoY rise in international revenues to $135m following the opening of the Inspire resort in South Korea. Digital revenues also more than doubled to $41.8m.

Bragg Gaming: Revenue was near enough static at $24.9m while adj. EBITDA dropped by 24% YoY to $3.6m, a decline Bragg blamed on changing product mix. CEO Matevž Mazij said the company’s strategic review was “still ongoing against a backdrop of increased M&A activity.”

Full House earnings reaction

Glass half full: The somewhat slower start for Full House’s Chamonix property and the continuing overhang of a legal issue for the Waukegan, Illinois casino meant the share price hit the skids this week, down nearly 13% as of early trading yesterday.

• Dan Lee, CEO, noted it was difficult to ensure consumers knew that a new property had opened.

• “It takes time for people to realize that this is really a sliver of Las Vegas, plunked down in a historic gold mining town in Colorado,” he added.

Purse strings: Lee said Full House is pushing out the start of construction of the permanent $325m American Place, Waukegan casino until this time next year.

• It means the company has perhaps 18 months to put together the financing. “We’re confident we’ll be able to do that,” he added.

• The credit analysts at CBRE said this was likely to be a comprehensive capital restructuring that would see the current $450m bonds retired with an “incremental” amount added.

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Calendar

• Aug 12: DoubleDown Interactive

• Aug 13: Flutter, Sportradar

• Aug 14: Raketech, Catena Media

• Aug 15: Evoke, Rank, Gambling.com

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