Good morning. First, we have the reaction to the news yesterday that DraftKings had decided against pursuing its bid for Entain. Kindred Group warns on fourth-quarter revenues due to Dutch withdrawal and “exceptionally’ weak margins. Kambi is boosted by 48% revenue growth. Boyd Gaming has released its Q321 numbers showing it continues to benefit from elevated margins. 

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DraftKings nixes Entain bid

No deal: After having requested an extension just last week from the London Stock Exchange to pursue terms with Entain, DraftKings officially pulled out just one week on. But anyone expecting this to draw a line under the future of Entain is likely mistaken. As the analysts at Jefferies pointed out, “there’s no tapping out of a tag team match” and the unresolved questions around the future of BetMGM likely mean this is an M&A saga that is yet to run its course.

Poison arrow: Jefferies repeated its assertion that MGM is the “most natural” buyer for Entain. Indeed, the failed process might well have “highlighted the attractiveness of both Entain's tech platform and its international footprint,” but MGM’s stake in the US JV effectively acts as a poison pill for any other buyers.

All of my heart: Spurned, DraftKings will also be contemplating its next moves. Rumors have abounded about other targets for the company, from Las Vegas casinos to fellow online operators. As Macquarie pointed out, Entain might have just been “too difficult” given the MGM cuckoo in the nest, but DraftKings will simply “likely have to look elsewhere to fulfill its strategy of expanding into new markets and verticals”.

On the Wagers.com LinkedIn feed, Scott Longley rumbles through the wreckage of DraftKings bid and suggests this isn’t over by any means. 

Uneasy listening:

Walk Away ReneeThe Left Banke

Kindred Q3

The top line

• Gross win rose 6% (11% cc) to £298.4m and underlying EBITDA rose by 13% (21% cc) to £84.2m. Sequentially, Q3 revenues fell 18%.

• The company warned that Q4 revenues would be between £220-260m. This compares with £365.7m in Q420. 

• Average daily gross win in first 24 days of October down 61% while average number of customers down was 13% and daily average sports turnover down 21%. Average daily gross win from casino down 24%.

• In September, Kindred’s Unibet brand launched in its fifth (Iowa) and sixth (Arizona) states but US Q321 gross win of £13.4m was down 16% YoY on increased marketing spend. 

Hard times: Kindred blamed the Q4 projection on the Oct 1 Dutch withdrawal and “exceptionally” weak sports-betting margins of “under 2%” (compared to a long-term average of 9.1%). “Clearly the closure of our services to Dutch citizens has an impact,” CEO Henrik Tjärnström said.

“It’s worth highlighting that the margin on sports can be quite volatile from time to time,” Tjärnström deadpanned. On the tumbling current trading figures,Tjärnström said “this is only 24 days”. “We don’t see any structural reasons for this,” he added.

Gritted teeth: Despite waiting until almost the last minute to exit the Dutch market on the eve of the regulated market launch, Tjärnström said the company was “100%” behind the Dutch authorities’ policy objective. 

“We have a very strong commitment to Dutch society as a sustainable operator,” Tjärnström claimed. “We're looking forward to being supportive of the Dutch process.”

Cooler kings: He added Kindred had been “honoring” the cooling-off period and was hopeful of gaining a license in Q222. “We’re working on making our submission as solid as possible,” Tjärnström added. He also hinted at one benefit of not being involved from the start of the new regulated regime: “The initial margin pressure is the highest at the very start.”  Still, the exit will hurt the company severely: recall, it said at the time of the withdrawal that it would cost the company £12m a month in EBITDA.

Prop bet: In the US, Tjärnström said the company is still on the Kambi platform but that it was working on submitting its own proprietary technology for certification in New Jersey ahead of a prospective launch in H222. On current trading, Tjärnström said the marketing environment “doesn’t really make sense”. He spoke about a 13% YoY growth of active customers but that looks low given the expansion seen in the US in the intervening 12 months.

Just a thought: Kindred might want to rethink the slogan for its responsible gambling efforts. ‘Journey towards zero’ can be read in more than one way.

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Boyd Gaming Q3

The top line

• Revenues of $843m were up 22.9% YoY and a 2.9% improvement on Q219 while adj. property EBITDAR rose 38.8% YoY and was 55.3% up on the two-year comparison.

• Las Vegas Locals was up 35.2% to $231.3m (up 8.4% on Q319), Downtown rose 140% YoY but was down 30.5% on Q319 and Midwest and South was up 22.9% YoY and 4.4% on Q319.

• Operating margins YoY improved by nearly 400 bps.

Buoyed up: The record performance - including approaching $700m of free cashflow in the last 12 months - has persuaded the company to embark on a $300m share buyback. CEO Keith Smith said on the earnings call the prospects for next year are promising. “As we think about ‘22, net/net we see upside,” he added. Deutsche Bank suggested there was now market confidence in Boyd’s ability to “maintain the majority” of the recent considerable margin expansion.

“We believe, in general, operators who were underperforming on a gaming tax-adjusted margin basis, as Boyd was in the years prior to the pandemic, will ultimately prove to be the biggest beneficiaries of the COVID cost overhaul and business rationalization,” the DB team said. 

Friends with benefits: One analyst on the call noted that Boyd tended to give “a little bit more” insight into their thinking on digital every quarter. Smith noted the igaming operations in Pennsylvania and New Jersey alongside the benefits it gets from the minority ownership (5%) of FanDuel. “We have a great relationship with FanDuel and are able to leverage their technical expertise,” Smith said. “FanDuel is a clear leader and we are participating in its success as an equity holder and as a partner.”

Dear Prudence: Analysts at Jefferies said that “longer-term digital initiatives remain in a formative stage and will take time to play out.” DB said the company has taken a “prudent approach” to online.

Kambi Q3

The top line

• Revenue of €41.6m was up 48% YoY while EBIT of €14.7m was more than double Q320. Nine-month revenues of €127.5m have eclipsed the FY20 figure of €117.7m.

• Excluding the exiting DraftKings, operator turnover was up 10% YoY.

• Acquired esports provider Abios during the quarter

What’s the Score? Kambi continued to suggest in relation to client Penn National’s acquisition of Score Media & Gaming that it had made the wrong move.

“I think what we are doing is highly complex and not very easy to replicate. Many have tried in Europe before and failed. It’s a tough task,” CEO Kristian Nylén said.

CFO David Kenyon said Penn was worth “between 5-10%” of Kambi’s revenue during the quarter.

Used to be a King: DraftKings accounted for c. 30% of total revenue in Q3 (including penalty fees for early termination). On the call Kenyon noted that turnover via its operators was down 14% in Q3 reflecting the gradual transition of DraftKings to its own proprietary platform during the quarter.

Thick red line: Kenyon said he noted the comment from Kindred this morning and corroborated that Kambi had seen “many favourites winning” in the month to date. But the company still raised its long-term margin expectations to between 8-10% on the basis of the launch on newer higher-margin bet builder products.

“It is very hard to create a (bet builder) product that is competitive,” said Nylén.

Pipeline! Talking about ongoing partnership negotiations, Nylén said the mix was driven by operators looking to enter the US and while in Europe it was more companies looking to switch to third-party provision from their own proprietary platforms. In New York, Kambi has partnered in its bid with Fanatics and Nylén said “obviously” hoped that it could extend that relationship into other states.

Earnings in brief

Betmakers Technology: Q122 revenues rose to A$21m, up 135% sequentially and up 437% YoY, helped by the launch of fixed-odds horse racing wagering in New Jersey. The company said the integration of Global Tote during the period had provided a step change.

Newslines

PlayUp on the up: Challenger brand PlayUp has signed up to Paysafe’s unified payments technology as well as launching an affiliate program with Income Access. PlayUp recently launched in New Jersey. Separately, PlayUp has also announced it has gained market access to Iowa via a deal with Wild Rose Entertainment, operator of three eponymous casinos in the state.

Line call: Sportradar and the International Tennis Federation (ITF) have announced a three-year extension to their exclusive data agreement. The pair have been working together since 2012.

Hub spot: OpenBet has opened a new trading hub in Tampa, Florida which will allow the firm - currently still under Scientific Games’ control but soon to be under the Endeavor banner, to provide around-the-clock US sports trading services. The business already has an existing trading operation in Nevada.

What we’re reading

Corn laws: The push for online gambling in Iowa.

Macau: Analysts expect the concession term to be extended for six12 months.

On social

Smarkets @smarkets

Not long left to get your 'Budget Buzzword' suggestions in to @SmarketsNews - Rishi Sunak delivers his speech at 12.30pm. Will he say any of these? Great British Pub - 10% chance Union Jack - 20% What People Say To Me - 19% Full market 👉 smrkts.co/3nayBfn #Budget2021

October 27th 2021

Calendar

• 28 Oct: Churchill Downs Q2, VICI Properties Q3, PointsBet Q1

• 29 Oct: Global Leisure Partners Q3

• 2 Nov: Reputation Matters, London, Caesars Entertainment, Red Rock Q3s

• 3 Nov: Everi, Golden Entertainment, MGM Resorts International Q3s

• 4 Nov: Aspire Global, Penn National Gaming, Gaming & Leisure Partners Q3s

Contact us

• Scott Longley scott@clearconcisemedia.com

• Jake Pollard jake@openmediaservices.com