Good morning and welcome to the Earnings +More newsletter. First up we have the latest third-quarter numbers from Entain, which showed the BetMGM JV moving ahead strongly even as the continued negative effects of the German market were a drag on revenue growth. Of course the looming October 19 deadline for DraftKings’ bid is the centre of attention with Entain - but the company said nothing. Elsewhere, Sportradar gets a brace of initiation notes looking at the newly-floated company’s prospects and there are more analyst updates on Bally, Churchill Downs and IGT.

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Entain

The top line

• NGR up 4% (+6% constant currency), with online up 10% (18% ex-Germany) and retail up 1%. Online driven by strong sports-betting margins of 12.8%.

• BetMGM delivered 26% sports-betting and igaming market share across states in which it operates and 32% igaming share.

• FY21 EBITDA expected to be in line with previous guidance of £850-900m despite Netherlands withdrawal (-£5m a month). 

I ain’t sayin’ nuttin’: CEO Jette Nygaard-Andersen said neither her or CFO and deputy CEO Rob Wood would comment on the DraftKings bid and they were true to their word. DraftKings has until October 19 to make a further bid for the group, asked whether a change of deadline was possible, Nygaard-Andersen said she had nothing further to add on the topic other than the board was carefully “considering the proposal, its structure and value.” 

If there was no deal, we see limited downside: Entain is a highly appealing standalone, with double-digit online growth, online scale, proprietary tech and US upside from BetMGM,” said the analysts at Jefferies. “We believe the DraftKings approach underscores the attractiveness of the Entain tech platform and highlights the value of Entain's international footprint.”

Bonus slowdown: State openings in Arizona and Wyoming were “very exciting,” Nygaard-Andersen said, and the flurry of sign up bonuses and promotions was abating following the frenetic start of the NFL season. Wood added: “At the start of the NFL season there were massive amounts of acquisition bonusing, that ratio is now changing to retention bonusing” as the real money players start to emerge from the initial wave of sign ups. 

Fourth quarter down: With the loss of revenues from the Netherlands (c.£5m of EBITDA per month), Wood noted the guidance for online was a double-digit decline of c.13% for the fourth quarter. The German operation continues to struggle. “In Germany, gaming revenues are stable but materially down year-on-year and we look forward to more robust policing of the market in due course,” said Wood. “We are at least approaching the anniversary of the tolerance regime.” 

Regulus Partners said Germany was “an expected drag, although comparable revenue figures are complicated by the addition of a gaming turnover tax (5.3%; 80%+ revenue). The Netherlands will be a drag in Q4 and going forward into the medium-term (previously c. 3% online revenue), but the scale is not comparable to Germany exposure.

Sportradar analyst initiation

Global scene setter: In an initiation note on the recently-floated Sportradar, the Jefferies team suggest the data, streaming and betting services provider is a “profitable play on global sports-betting growth” with “critical positioning and significant tenure”. Importantly, the analysts see room for Sportradar to broaden out its B2B offering meaning it has more claims than most to reaching one-stop-shop status.

US reach: Noting the U.S. will continue to represent a minority of Sportradar’s revenues in the short- to medium-term (c.9% for FY20), Jefferies nonetheless point out that Sportradar provides data to over 85% of U.S. licensed sportsbooks. Looking into the details of the switch on the part of the NFL to rival Genius Sports, Jefferies reported that Sportradar management had cited costs as a “main consideration”. 

“The official NFL data cost Sportradar $20.5m in the last year of the deal, while the company generated $9M in revenue from NFL-products,” said Jefferies. “The new deal between the NFL and Genius Sport was reportedly valued at $120m a year.”

Profit of distinction: Deutsche Bank has also initiated and its analysts make the point that unlike many others involved in the U.S. market, Sportradar is profitable, estimating the company will produce positive EBITDA of €101.6m, €132.9m, and €174.5m between 2021-23. “Sportradar’s profitability is in stark contrast to B2C sports betting operators, many of which plan to invest heavily and post considerable losses over the coming years,” they add. Moreover, Sportradar will have access to 100% of the U.S. TAM, contrary to the B2C operators which face access hurdles, state lotteries, and tribal agreements in some states.

“Even if a state’s sports betting is run by tribes or the lottery, the operator still needs data, technology, ad services, and more to run its operation, thereby making the Sportradar services valuable to all,” the Deutsche Bank team said.

Bally Corporation analyst update

Transformers: The remodelled and hugely augmented Bally Corporation gets a vote of confidence post-Gamesys merger from the analysts at Wells Fargo. The new management (CEO Lee Fenton comes from Gamesys) “has deep roots running online gaming platforms globally, and we are increasingly confident they have the tools in place to compete in the highly competitive US online market.”

“Bally has spent the last year piecing together, in our view, one of the most comprehensive sports-betting and igaming strategies in the space,” said the Wells Fargo analysts.

Er, Japan: Seemingly oblivious to the contested nature of the Japanese online market - is it grey or simply black? - The Wells Fargo team suggest that while it doesn't have “quite the growth profile” of the U.S. right now (E+M comment: maybe due to that contested regulatory picture), “management has been bullish around the growth trajectory,” implying 2x growth from here “leaving a multi-year growth runway for the international portfolio.” 

IGT analyst update

Committed: Having spent some time with management at G2E, Deutsche Bank suggest the product pipeline for the gaming side of the business “speaks to a continued commitment to innovation, the importance of multi channel cross-sell, an enhanced focus on participation and linked products and a further deepening of the content library”. Further benefits will come from continued lottery outperformance and the separation of the sports-betting business from the igaming side. Recall, IGT recently appointed ex-William Hill US CEO Joe Asher to run the sports-betting business. IGT will be holding an investor day in November.

Churchill Downs analyst note

Turf at the top: Following on from the Arlington racecourse sale to the Chicago Bears, Wells Fargo suggest the group is in the “early stages” of a reinvestment program at the Churchill Downs racetrack (investing ~$150m) and in its historical racing machine (HRM) facilities. In the case of the latter, CHDN has three expansion projects underway at Turfway Park, Derby City Gaming and downtown Louisville. The analysts also see room for an additional buildout in Louisville.

Las Vegas Southwest worries

Labor Daze: Staffing worries have been one of the themes of the summer in Las Vegas. The analysts at Deutsche Bank yesterday raised the spectre of a lack of flight crew with Southwest Airlines as being one more issue to worry about, albeit at a marginal level. The issue was the swathe of cancellation suffered by one of Las Vegas’ most important carriers (up to 30% of flights were cancelled by the airline over the weekend). The DB team remained phlegmatic, suggesting the impact would be negligible even if the current circumstance linger.

G2E review - part 2

This ain’t over ‘til I say it is: A belated G2E review note from Macquarie pointed out that after meeting with 30-plus public and private companies last week, the “resounding” opinion is that the upcoming Q3 results will be just as bullish as the previous quarter. “For Q3, we expect revenues to broadly be in-line or even grow vs Q2 compared to our previous estimate of -5%,” the team suggested. Corroborating the conclusions from others last week the team said the two main themes from the show were omni-channel and cashless.

Macau update

Less than Golden: Golden Week turned out to be a damp squib this year in Macau due to the stricter travel restrictions caused by domestic Covid infections. The Jefferies team suggested the recovery in gaming activity was now characterized by a series of false starts, while the lack of formal Chinese holidays during the rest of this year would provide a further hindrance on any recovery. The analysts’ channel checks suggested VIP was some 30% down on normalized levels while mass was down between 35-38%.

Wagers.com feature

Online gambling’s forever wars: Scott Longley looks into the wider ramifications of the latest Dutch debacle. ‘The end, when it came, was brutal…’

Datalines 

Iowa: September handle was up 190.6% to $210.4m, online sports betting accounted for $186.5m of the total figure. GGR was up 9.6% YoY to $5.7m, but down 13.6% MoM. 

Oregon: The Oregon Lottery’s Scoreboard app recorded sports-betting handle of $25m, up 41.7% MoM but down 4.2% YoY. GGR rose 18.4% MoM to $1.2m, but this was also a drop of 17.5% YoY.

Illinois OSB:  August handle was $400m, up 8.5% MoM with the top four operators (Casino Queen/DraftKings, FanDuel, BetRivers, and PointsBet) garnering 92% of the total mobile handle in the month. Revenue, including land-based retail, was $26.8m, down 29%. Mobile revenue accounted for 95% of total GGR in August, akin to the July mix.

Newslines

Seven-day trial run: Regulated sports-betting will soft launch in Connecticut later today ET after the state’s Department of Consumer Protection notified the three licensed operators licensed - Connecticut Lottery Corporation with Rush Street Interactive, Mohegan Tribe with FanDuel and Mashantucket Pequot Tribe with DraftKings - they could start a seven-day soft launch. 

SG wins 10-year lottery deal: Scientific Games will supply its gaming technology to the Vermont Lottery after it won the tender for the contract. The contract is for a duration of 10 years, with options to extend for another 10.

Brazil fantasy: DFS betting B2B specialist Scout Gaming has added Betano Brazil to its list of clients. It will provide Brazil-focused games and products to the sportsbook, which is part of Kaizen Gaming. Brazil is the second South American country Betano is expanding into following its launch in Chile.  

Down by the Rivers: Dave Rivers has joined PointsBet Canada as vice president of marketing in preparation for Ontario’s regulated sports betting market going live in the next couple of months. 

Knowing me, knowing Nu: Toronto-listed Nuvei completed its U.S. joint listing closing with a $424m IPO late last week. Nuvei said it will use the net proceeds from the offering primarily to strengthen the company's financial position and allow it to pursue its growth strategies.

What we’re reading

Take it to the bridge: “It gives me agita. That’s our money that’s going over that bridge,” says Joseph Addabbo, chairman of the New York State Senate committee on racing, wagering and gaming of the New Yorkers who cycle, jog or e-scoot over the George Washington Bridge to place their mobile sports bets.  

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Calendar

• 19 Oct: 888 Q3 trading statement

• 20-21 Oct: iGamingNEXT conference

• 25 Oct: Gaming in Germany conference

• 27-28 Oct: Churchill Downs Q2, VICI Properties Q3

Contact us

• Scott Longley scott@clearconcisemedia.com

• Jake Pollard jake@openmediaservices.com