Feb 23: Caesars: Digital Q1 ‘will be ugly’
Feb 23: Caesars: Digital Q1 ‘will be ugly’Caesars Entertainment Q4, Catena Media Q4, Churchill Downs P2E acquisition, DraftKings analyst downgrade, earnings in brief, Playtech takeover news +MoreGood morning. On today’s agenda:
Right here, right now. Caesars Entertainment Q4
Vanishing point: CEO Tom Reeg kicked off by saying “nothing has changed” about Caesars’ expectations that it would cumulatively lose $1bn in establishing itself in sports betting and generate 50% EBITDA ROI at maturity except the velocity.
Beautiful on the inside: The New York launch had been “eventful” with volumes being 2x pre-launch expectations and with Caesars achieving a market share that was also 2x larger than planned. “We were extremely pleased with how we came out of the box,” Reeg added. But he admitted the promotional spend would mean the first quarter for digital “will look ugly”.
The $3,000 question: On the New York promotional spend, Reeg noted that the average amounts deposited - and matched by a welcome bonus - was $450. “So our results in New York were not driven by a lot of $3,000 deposits… it was hundreds of thousands of smaller customers that came to our site”.
There but for omicron: Caesars properties on the Las Vegas Strip would have enjoyed a record fourth quarter if it weren’t for the last couple of weeks of the quarter being “clipped” by omicron issues. This weakness continued into January and February, but Reeg said the medium-term picture was very positive. “Everyone is going to have a good 2022 and 2023 because of the return of group business,” he said. What Reeg said: On recent market pessimism on sports betting: “Can this be a profitable business? We've gone from kind of ever increasing bullishness to unlimited bearishness at this point.” On the shape of the market: “We always thought market share would consolidate into a handful of players and that's all happened quicker than we thought.” On the New York casino opportunity: “How do I answer this politely? New York is a difficult regulatory state. I think it's going to be extremely expensive to build there. I think it's going to be an extremely expensive license fee.” On the prospects of a Las Vegas Strip asset sale: “We're excited about where we can get here. If you recall, we only paid $17bn for Caesars… We bought Caesars for less than 6x EBITDA. And the Vegas asset sale is going to bring back 15% plus of those proceeds most likely back onto our balance sheet.” Analyst quick takesDeutsche Bank suggested the digital losses were greater than expected and said Q1 losses would be the “largest losses of the year, by a wide margin”. The Macquarie team reiterated their bullishness on Caesars:
The Truist team noted the management’s track record of squeezing more EBITDA from its acquisitions and said it gave them “confidence” in the long-term digital ROI. ** SPONSOR’S MESSAGE ** ** Sponsor’s message: Venture capital firm Yolo Investments is home to €350m of equity in more than 50 of the most exciting companies across fintech, gaming and blockchain. It continues to build one of gaming’s most dynamic portfolios as it eyes up seed and A-stage opportunities across the sector. Its dedicated 28-company, €135m AUM gaming fund already houses holdings in fast-growing suppliers and operators, including Kalamba Games, SimWin and ThriveFantasy. Yolo Investments is also on the lookout for LPs as it looks to scale new concepts, including its high-roller live casino brand, Bombay Club. As a proud sponsor of Earnings+More from Wagers.com, Yolo Investments wants to hear from readers of this newsletter. Get in touch with your pitch, or for a chat. Catena Media Q4
Efficiency drive: Catena’s North America pivot is well and truly underway. The New York and Louisiana OSB launches had driven January revenues up 29% YoY and Catena expected strong growth from Ontario. The group highlighted the fact that in 2019 ~19% of Catena’s revenues came from the US, this had reached 30% in 2020 and 50% in 2021.
Organic focus: The US icasino opportunities were “significant”, Daly said, despite only ~13% of the US population being able to access the products currently.
Germany slo-mo: The ongoing travails of the industry in Germany, “the largest OSB market in Europe” until the new gambling regulations came into force in Jul21, CFO Peter Messner said, would continue for some time, but there were also signs for long-term optimism.
Daly added that Germany would not be like the New York launch, where the impact has been felt “from day 1”.
Big in Japan: The group said revenue from Japan rose strongly YoY but didn’t disclose amounts. That had happened despite “volatility in search engine rankings” and the easing of Covid restrictions which had led to fewer online sessions. Earnings in briefEsports Entertainment: Q4 revenue was up $12.2m to $14.5m YoY, but down 11.4% QoQ and adj. EBITDA losses were $6.8m vs. -$4.3m QoQ due the group shutting down its Bethard sportsbook in the Netherlands and low margins caused by unfavorable sporting results. The group has reduced its 2022 revenue guidance from $100m to $70-$75m. Further COVID restrictions also prevented it from launching its LANDuel and Helix esports events and venues. The group said the launch of its esports betting site vie.gg in New Jersey and of its new B2B-esports focused solution OMEGA had been very well received. Webis FY21: The UK-listed operator said Dec21 and Jan22 have been steady with handle and revenue above pre-COVID levels. Initial results at the Cal Expo were hampered by poor weather and an outbreak of equine flu, resulting in lower handle. Churchill Downs acquisition
Historic expansion: The deal sees CDI expand both its live and historical racing machine footprint via the addition of the Colonial Downs Racetrack to its portfolio. Colonial Downs comes with half-a-dozen ‘Rosie’s Gaming Emporium’ sites featuring some 2,700 HRMs with more planned. Waterloo sunset: CDI also gains the del Lago Casino in Waterloo, New York and the operational assets of the Hard Rock Sioux City, Iowa which will also see its real estate bought by an unnamed third-party.
DraftKings analyst updates
Knockdown: While the market worries about stratospheric levels of marketing hindering the chances of DraftKings being EBITDA positive by the predicted date of Q423, Wells Fargo say the “accelerating” opex spend is also a worry.
Make that 2025: Hence, the team suggests that it is “difficult modeling a scenario” where DraftKings achieves EBITDA profitability before 2025. Recall, the team at CBRE warned about a similar timeline in a note on Friday. Brighter later: More promisingly, both for DraftKings and the rest of the sector, Wells Fargo noted that a compressed promo spend dynamic is emerging with higher levels of spend for a shorter period of time but with customers flooding in quicker.
Heavy sits the crown: In a note suggesting it was a “tough day to be King”, Bank of America said the guidance “spooked investors”. “We expected losses to exceed consensus given the timing of new state ramps, but the magnitude was worse than expected,” the BoA team added. They were also worried about the tech spend in comparison with its peers.
On Wagers.com: More analyst round ups on DraftKings. Playtech takeoverMor, Mor, Mor: In a somewhat surprising development, it emerged first in the press and subsequently confirmed by the company that CEO Mor Weizer had teamed up with ex-CEO Tom Hall to ask if they could explore the possibility of joining the bid being put together by TTB Bond. Peel Hunt said the news was “on balance” a positive, though competing bid now seem unlikely.
NewslinesBoard level: The special board committee at Bally Corporation formed to examine the offer from major shareholder Standard General has appointed Macquarie as its financial adviser and Potter Anderson & Corroon LLP as its legal counsel. Make it pay: Bally Corporation has signed with Paysafe to integrate the group’s online payment methods for its Bally Bet sportsbook in Arizona and Bally’s Casino in New Jersey. The rollout of payment methods will include Skrill, Neteller and paysafecard among others and will be expanded to more sports betting states in the coming months. Novi surrender: Novibet has surrendered its UK gambling license, according to a message on its UK-facing website and was no longer taking UK bets as of Monday, 21 Feb. Novibet has been operational in the UK since 2014 and parent Novigroup remains registered in the Isle of Man. On socialBad beats and humbug Arguably the worst bad beat you’ll see this year… brutal just brutal https://t.co/SXifpeJKbR Stanford Steve @StanfordSteve82 Bad Beats Part 2 A team total that was close to impossible https://t.co/J7H93sLOU2Calendar
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Feb 17: New Jersey defies the odds
Thursday, February 17, 2022
New Jersey, Michigan Jan22, Tabcorp H1, Aspire G4, Wynn analyst update, Sportico fan engagement seminar, earnings in brief +More
Feb 16: Wynn’s 'absolute stunner'
Wednesday, February 16, 2022
Wynn Resorts Q4, Super Bowl betting, New York wk.5, AGA State of the Industry, GiG, earnings in brief +More
Feb 14: The billion-dollar ball game
Monday, February 14, 2022
Super Bowl betting, Gambling.com analyst update, 2021 OSB market shares, Startup focus - DoTrust, the shares week +More
Feb 11: Weekend Edition no.33
Friday, February 11, 2022
Kambi Q4, LeoVegas Q4, MGM analyst update, earnings in brief, sector watch - affiliates +More
MGM: ‘We're just getting rolling’
Thursday, February 10, 2022
MGM Resorts International Q4, Betsson Q4, bet-at-home 2022 forecast, earnings in brief, Jefferies' sports-betting customer survey +More
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