• Shares drop after hours as operator chops 2024 adj. EBITDA target.

• Penn also bemoans the bad luck factor in OSB.

• Sportradar CEO expresses optimism over extended MLB rights deal. 

• Durango shines for Red Rock but masks locals ‘softening.’

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Guidance cut

Sobering October: DraftKings cut its 2024 adj. EBITDA guidance for the second quarter in a row, lowering its estimate for the year to $240m-$280m from its previous $340m-$420m, or a 30% cut at midpoint. It previously nudged its target down from $500m at midpoint.

• The company blamed the impact of customer-friendly sports results in October, somewhat offset by lower promotional spend and expense efficiency.

• The post-close earnings caused the share price to fall nearly 6% in after-hours trading.

Steady the ship: Doubtless in an effort to preempt concerns over the longer-term picture, DraftKings restated its previous guidance for adj. EBITDA profits for 2025 of $900m-$1bn.

• It also introduced revenue guidance for 2025 of $6.2bn-$6.6bn, a 31% YoY increase at midpoint.

• It said those numbers don’t include any potential revenue from Missouri where the ballot measure regulating OSB gained voter approval this week.

No shit, Sherlock: While sympathizing with the hold issues – “sports hold can be volatile” – the team at Deutsche Bank said they “don't expect investors to simply underwrite the 2025 results anymore.”

Buzz: The warning came with the company’s Q3 numbers showing revenue up 39% to $1.1bn. Adj. EBITDA losses narrowed to $58.5m, down from $153m in the prior-year period. 

• The company said the improvement was driven by higher structural hold, improved promo metrics and the addition of revenue from this year’s Jackpocket acquisition.

• In the accompanying shareholder letter, DraftKings said it expected structural hold in 2025 to be at ~11% with “further upside” in 2026 “and beyond.” 

Look hard enough: The company said it recently launched new same-game parlay products for the NBA and continues to see opportunities in microbetting and in-play.

• 👀 It also noted it would start breaking out OSB from iCasino as of early 2025.

Bad company: DraftKings found a more sympathetic ear at JMP. “Bad outcomes happen in this business,” the team wrote. “A string of unlucky events does not take away the fact that 2025 revenue growth of 31% is above consensus.”

On call: DraftKings will host what is sure to be an interesting call with analysts later today.

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Right place, wrong time

How’s your luck? On a similar theme to DraftKings, earlier in the day Penn Entertainment said that no sooner had ESPN Bet managed to get its house in order with an improved parlay product than it ran into October.

• “Having a higher parlay mix is great other than when the favorites are hitting and parlays are also hitting,” CEO Jay Snowden told analysts on the earnings call.

• Talking about the October hold issue, he added that Penn was “in a hole right now” but it wasn’t alone in this. “It’s not a ESPN Bet thing,” he said.

Dear prudence: Snowden said, given the hold situation in October, the company was being prudent with its Q4 online adj. EBITDA guidance, keeping it at the levels it spoke about earlier in the year.  

• In Q3, interactive produced an adj. EBITDA loss in line with its pre-released numbers in October of $90m, an 81% increase YoY from revenues that rose 24% to $245m.

• Total revenue rose 1% to $1.64bn while adj. EBITDA fell 22% to $348m.

Late to the party: ESPN Bet also finally launched in New York during the quarter, but despite the app failing to truly register in terms of market share as yet, Snowden remained positive of what the offering there brought to the business.

• Brushing off concerns over limited player take up, he said Penn was “not as worried about handle market share in New York” as it was in other states.

• “What we’re seeing in New York is a higher-quality customer,” he added.

Lagging: According to figures from the New York State Gaming Commission for October (see below), ESPN generated handle of $40.8m or 1.75% of the total of $2.32bn, while its GGR came in at $3.2m or 2.3% of total GGR of $176m.

I ♥️ ESPN… Bet: The latest improvement to have Penn’s hopes pinned upon it is the account linking with the ESPN app, which was launched late last week. CTO Aaron LaBerge said the move was “foundational.”

• He said the “tens of thousands” that have linked accounts over the past weekend were “super fans” who were “going to love this.” 

Do Hollywood: The interactive business will also soon benefit from a renewed iCasino effort, with the Hollywood app relaunching in Pennsylvania in January. 

• Snowden said the cross-sell opportunities would be “substantial” given that iCasino customers are currently directed via the ESPN Bet app.

• “What we’re doing right now is messy,” he said of the process of telling the B&M casino database to “download the ESPN Bet app to play their favorite slot machine.”

House of brick: The B&M business – still the main driver of revenues despite the focus on interactive on the call – suffered a mildly disappointing quarter due largely to weather disruption across the south. Initial numbers for Q4 are positive.

+More

By the numbers – New York: The first indications of the damage done in October came from New York, which said GGR came in at $176.3m for the month from handle that totalled $2.32bn, suggesting a hold percentage of 7.6%, down 70 bps YoY.

The Trump trade: Prediction market operator Kalshi said via X it saw over $1bn of two-way trade during the presidential election. See yesterday’s E+M.

Read across

Big win: In The Token Word this week the story was the extent to which the crypto world celebrated the Trump victory. Having been courted by the President-elect throughout the campaign, the Bitcoin bros are now luxuriating in the glow of victory. 

Little victory: Meanwhile, the US OSB sector can enjoy some small celebrations of its own after voters in Missouri narrowly passed the ballot measure allowing for sports betting in the state. From Compliance+More.

+More careers

The big move: Entain has appointed Dafne Guisard to the new role of chief operations officer, effective from 13 January. She joins from The Kraft Heinz Company, where she fulfilled the role of chief strategy, transformation and digital officer.

• Entain said Guisard will “drive operational excellence” and lead global strategic planning, the customer service organization and M&A integration.

• Prior to her time at Kraft Heinz, Guisard spent nine years at Anheuser-Busch InBev.

Steven Matsell has returned to the executive fray as the CEO at iCasino game provider Jelly Entertainment. Matsell was last in situ at Leander Games. Current CEO David Newstead will transition to the role of chief business development officer. 

Inspired Entertainment has appointed James Richardson as CFO, starting January 1.

• Chief Marketing Officer – Remote 

• Head of Trading Operations – Sofia

• Chief Executive Officer – Remote

Home run

At bat: With the Dodgers having recently won a hotly anticipated World Series, Sportradar management was asked about the likelihood of the current agreement with MLB being extended. 

• CEO Carsten Koerl said the company was in talks and was “very optimistic” about prolonging the deal.

• Without divulging any details, Koerl said Sportradar believed it has “found a model” that is beneficial for both sides. “You don’t need to calculate a big hit,” he added.

By the numbers: Revenue rose 27% to $255m while adj. EBITDA was up 30% to $66m. The company further raised its 2024 targets, with revenue now expected to come in 24% up at $1.09bn and adj. EBITDA of at least $216m, which will represent a 29% YoY increase.

• CFO Craig Felenstein noted EBITDA margins increased despite a 77% rise in rights costs to $63m, driven largely by the new deal with the ATP.

• Investors warmed to the message of strong margins, sending the share price up over 13% on the day.

Marginal gains: Speaking of the ATP, Sportradar launched micro markets for tennis in October and has recently agreed supply agreements with Huddle and nVenue to provide microbetting options to its MTS platform.

• On the call, Koerl said the company was hoping to expand its micro markets offering into additional sports, including basketball, baseball, football and hockey by early 2025.

The affiliate game: Sportradar recently announced it was entering the gaming affiliate space via the acquisition of a number of North America-facing assets from XLMedia for $30m.

• XLMedia announced yesterday that its shareholders had approved the purchase.

• Koerl said the acquisition was the “missing piece” in attempting to build a 360 marketing services offering.

• “As a standalone property it is profitable but integrating it makes it even more profitable,” he added.

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Red Rock

Tough mudder: This was the “most challenging quarter” Red Rock has faced for some time, according to the team at Deutsche Bank after the company produced positive Q3 numbers.

• Revenue was up 14% to $468m while adj. EBITDA rose 4% to $183m but still it didn’t please the DB team, who suggested there were signs of a “softening” in the Las Vegas locals market.

• The team at Jefferies said the growth at Durango “overshadowed” the mixed performance for the rest of the portfolio.

Eat at home: DB also played upon the cannibalization coming from the success of Red Rock’s Durango property, which CFO Stephen Cootey said was continuing to ramp.

• He argued the cannibalization “remains in line” with expectations and that its impact is primarily felt at the Red Rock property. 

More positive were the analysts at Macquarie, who noted the comment from the company about moving on to phase 2 of the Durango project.

• Cootey said the expansion would add over 25k square feet of additional casino space and 230 more slots.

+More earnings

Galaxy Entertainment: The Macau operator said revenue rose 11% to HK$10.7bn ($1.37bn) while adj. EBITDA was up 6% to HK$2.9bn. Noting the record visitor figures during the recent Golden Week celebration, Galaxy said the average visitor total was 102% of the corresponding figure from 2019.

Genting Singapore: Revenue fell 19% during Q3 to S$562m ($425m) driven by a 28% decline in income at the Singapore IR. Adj. EBITDA fell by 56% to S$152m. The company blamed the shortfalls on lower hold in its VIP business.

Golden Entertainment: What analysts termed as “trough” earnings saw revenue tumble by 38% to $161m, while adj. EBITDA fell 36% in sympathy to $34m. The company said the decline was due largely to the exclusion of the results from the now sold Rocky Gap Casino and the distributed gaming operations.

Bet-at-home: The German-facing operator said revenue in the first nine months of the year rose 9% to €37.6m while EBITDA was up 19% to €2.8m. It now expects FY24 revenue to be €45m-€53m with EBITDA at €1.5m-€4.5m.

Cirsa: Revenue rose 8% to €531m while adj. EBITDA was up 9.5% to €173m, helped by the integration of the Peruvian-facing Apuesta Total in July. FY24 revenues are in line with expectations at €2.11bn-€2.16bn.

Analyst takes – Bally’s

That’s all folks: If leaving the audience wanting more is the aim of any earnings call, then Bally’s can celebrate a success after Wednesday’s Q3 announcement. 

• But with no room for any analyst Q&A, the credit team at CBRE noted the lack of transparency that comes with the company soon being taken private by major shareholder Standard General posed a “growing risk.”

• The team had also wanted to hear more about the sale of the Asian-facing interactive business. “We were hoping for more color,” they said.

Over at Truist, there was also concern that Bally’s “did not address” its prior 2024 guidance. Recall, Bally previously said it expected revenue and adj. EBITDA at the low end of its guided ranges of, respectively, $2.5bn-$2.7bn and $655m-$695m. 

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.

Earnings calendar

• Nov 8: DraftKings (call)

• Nov 12: Flutter Entertainment, Genius, IGT, Light & Wonder

• Nov 13: Better Collective

• Nov 14: Gambling.com

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