Feb 24: Bally waits to make its play

Bally Corporation Q4, Better Collective Q4, Churchill Downs Q4, earnings in brief +More

Feb 24

Good afternoon. In another busy day, the agenda is as follows:

Bally Corporation’s lower than expected results lead to more questions.
It is boom time for super affiliate Better Collective.
Churchill Downs shows gaming operation on a tear.

BREAKING: Churchill Downs has announced on its Q421 earnings call that it is exiting the “online wagering” business. CEO Bill Carstanjen said: “This isn't the result we wanted, but it is the prudent next step. We remain excited about Twin Spires horse racing.”

More reaction to the earnings call and Churchill Downs’ results in tomorrow’s Weekend Edition.

Bally Corporation Q4

Q4 revenues up 360% to $547.7m and adj. EBITDA up 468% to $98.4m.
Full year revenues of $1.3bn full year adj.EBITDA $333m.
Full-year 2022 revenue guidance instated at between $2.4-$2.5bn and adj.EBITDA $560-$580m.

Special committee: Having formed an independent board committee to consider the bid from major shareholder Standard General, chairman Soo Kim said nothing further on the call.

Better get it right: With the Bally Bet 2.0 sportsbook set to launch (and debut in New York) in H1, the group said it was not worried about going live later than its main rivals. Earlier in the week, Bally chairman Soo Kim told PoliticsNY that the group’s focus was always on getting the product right.

Bally chairman Soo Kim: “We knew we were going to miss the (New York) opening and when we saw how it was, we were nearly happy about it? The plan is to launch when our product is ready, but also offer differentiated products that (players) can only find at Bally Bet.”

No splash: The group won’t be making a big marketing or advertising splash. Having forecast ~$125m in revenues and ~60m EBITDA loss (vs. -$80m initially) from its North America interactive activities for 2022, CEO Lee Fenton said the $20m improvement was partly due to the timing of the launch and the group staying cautious “on build-out”.

Lee Fenton on advertising: “Making a big splash was never part of the plan. We won’t think about it differently, other than in margins due to the tax rate (in New York).”

DB checks: Despite not having physical properties in New York, Fenton pointed out that Bally’s Atlantic City casino database had as many New York addresses as New Jersey ones, with the same trend applied to its Pennsylvania resort.

Fenton on conversion: “We’ve also had strong cross-sell from Bally’s icasino in New Jersey, but you won’t see significant above-the-line spend. We will leverage our phenomenal assets and make the right choices in terms of creating differentiated long term funnels for conversion.”

Different kind of chip: Asked how Bally’s would “chip away” at the market shares of its main competitors, Fenton mentioned the group’s partnership with Sinclair Broadcasting, “significant capacity” to recruit players through its free-to-play games. “But I’m not sure if I like the expression to “chip away”, “gain significantly” over time is how I would describe it.”

Analyst quick takes

Jefferies said there was “so much to unpack” and the quarter reflected “limited near term visibility into the business, based on the lower than expected results and guidance”. However, factors such as Soo Kim’s ~$2bn bid for the group and the company's share buyback scheme also played a part. Wells Fargo said “revenues were 7% below our $586m and 6% below consensus' $586m. International interactive EBITDA was $70m vs. our $79m (margins 27.8% in line with our 28%), while North America interactive EBITDA was -$9m vs. our -$8m.”

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Better Collective Q4

Q4 up 44% to €52.8m, organic growth up 25%, FY up 94% to €177.1m.
Q4 adj. EBITDA up 16% to 16.3m, FY up 46% to €55.8m.
NDCs were up 74% to 267k.

Supercalifragilistic: There can be no doubting the transformation being wrought by the sports-betting boom in the US which, Better Collective said today, is now its single biggest market. In Q4, the US contributed €20m of revenue or ~38% of the total. For the full year 2022 the company expects the US to be worth $100m.

The New York opening in January, meanwhile, led to an “unprecedented” inflow of business with €13m being generated from the US for the month, more than the company generated in the whole of 2020 from the region.

Share crop: Søgaard suggested the company was seeing the first signs of a shift in the US from CPAs to revenue shares.

Søgaard: “It’s still early days but what has been interesting with the launch of New York, for the first time US-based operators seem interested in the revenue share model. The market is finding its feet.”

Lost in translation: Still, the “quantum leaps” that CEO Jesper Søgaard said the business was making came with some downsides. Despite the large rise in NDCs, the proportion of those coming through on revenue share - while boosting long-term revenues - also had a short-term impending effect on revenues and EBITDA. Combined with a low sports-betting margin for the period, the company estimated a ~€6m effect on earnings.

Paid in full: There were specific issues around paid media where margins fell to 5% from 13% in the prior-year period, comparing poorly with the 40% margins in the publishing segment. Paid revenues were flat.

Søgaard: “We did experience some headwinds for that segment last year and we weren't fully satisfied with the development.”

What Søgaard said

On future US M&A: “We are very comfortable with the position we have in the US brands. We believe we can build from that position. We have no need to buy but there could be opportunities that would be a nice supplement to our business there. But it's more nice to have than must-have.”

On Better Collective being an attractive acquirer: “I think BC has a very strong name in terms of being a potential buyer when a seller considers selling the business.”

Churchill Downs Q4

Q4 revenue rose 23.7% to $364.8m and adj. EBITDA up 60.4% to $127m.
Full-year revenue was up 52% to record $1.6bn and adj. EBITDA was up 119% to $627m.

Historic quarter: The record results for 2021 were driven by the gaming segment which delivered the majority of adj. EBITDA at $411.9m. The Twin Spires horse-racing segment saw adj. EBITDA fell 6% YoY to $119m. The company announced the expansion of its gaming segment (particularly the historical racing machines segment) with the acquisition of the Peninsula Pacific Entertainment business earlier this week.

Churchill Downs will conduct an earnings call on Friday, Feb25.

Earnings in brief

Super Group: Pre-announcing its FY21 results, the operator behind the Betway and Spin brands said net revenue would be up ~36% to $1.52bn while estimated full-year 2021 EBITDA will be in the region of $350m. Super Group’s full results will be published in the first half of April.

Galaxy Entertainment: The Macau operators said revenues were up 53% to HK$19.7bn but that adj. EBITDA recorded a loss of HK$1bn. Chairman Liu Che Woo said he remained confident in the future of Macau and said trading through the Chinese New Year had been encouraging.

FuboTV: Q122 revenues will reach $232-$237m and FY22 revenue will hit between $1.08-$1.09bn. The company didn’t update on its sports-betting numbers other than to say its “expansion into real-money wagering is underway” in two states (Arizona and Iowa), “with additional states expected to follow this year”.

Ainsworth: The Australian-listed gaming machine provider saw revenue rise 39.7% for H1 to A$100.7m with the company once again reporting an EBITDA profit of A$24.6m, from a loss in the prior year period of A$36.8m. In part, the results were driven by an increase in the revenue derived from historical racing machines.

Cirsa: The slots hall operator saw revenue rise 79% to €378.4m while adj. EBITDA was up 137% to €121.2m. The company is on track to return to pre-Covid elevsl with the hours of operation in Q4 at 95% across its European and LatAm operations, up 6pp on Q3.

Everymatrix: Revenue rose 33% to €23.9m in Q4 and was up 23% in 2021 as a whole at €86.7m. Q4 EBITDA rose 23% to €4.4m and 65% to €19.7m for the year. The increases came despite the “challenges” in Germany. Everymatrix has applied for licenses in New Jersey, West Virginia and Michigan and is in the process of applying in more states.

Startup newsline

Access: Previous Startup Focus company Sporttrade has gained market access to two more states, Indiana and Louisiana, via market access agreements with Penn National and Caesars Entertainment respectively. It hopes to go live in each state in 2023.

Jefferies Macau update

Macau’s daily revenue for the week ending Feb20 dropped to MOP185m/day from the Chinese New Year highs MOP333m/day and MOP429m/day in the first two weeks of February due to the “traditional post-holiday visitation slowdown and weaker travel sentiment after recent Zhuhai Covid cases”, the team at Jefferies said. The VIP win-rate was slightly below the 2.7% average and that also contributed to lower GGR.

Brazil regulatory update

Brazil has legalized online and land-based casino gambling. The vote by the country’s Chamber of Deputies will allow integrated resorts to be established across Brazil’s 26 states. The bill will be voted on today (Feb24) in the Senate and is expected to pass. The licensing fees for offline and online casinos have been set BRL$600K/$120K per establishment and domain name. Sports betting is being regulated separately, licenses will be granted at both federal and state government levels. Taxes on winnings are set at 15%.

Newslines

Triple deal + Lone Star option: Rush Street Interactive has secured market access in Ohio, Maryland and Missouri by signing a 20-year strategic partnership with Penn National Gaming. The agreement will enable RSI to operate its BetRivers brand in those jurisdictions once OSB and gaming regulations have passed. RSI has also been granted first refusal rights over a potential skin agreement with Penn National in Texas should the state pass OSB or icasino legislation.

California dreaming: A UC Berkeley Institute of Governmental Studies survey released Wednesday and co-sponsored by the Los Angeles Times reports that 45% of California voters are in favor of legalizing sports betting in the state. One-third of voters opposed the idea and 22% of respondents were undecided. Three ballot measures proposing different business models are set to appear on the midterm ballot in November, voters were not asked which model they would prefer.

Done deal: Las Vegas Sands has completed the $6.25bn sale of the Venetian to Apollo Global and VICI Properties. In a statement, LVS said its strong balance sheet and operational focus on Macau and Singapore meant it was Poised for a new era of growth,”, according to CEO Rob Goldstein. LVS will maintain its corporate headquarters in Las Vegas.

Nugget deal: Century Casinos said it is acquiring the Nugget Casino in Sparks, Nevada, from Marnell Gaming for $195m including the sale of 50% of the real estate for $95m with a five-year option to buy the rest for $105m. The $100m value of the operational business is priced at 5.6 times 2021 EBITDA.

Keno down under: Lottoland and Tabcorp shared the spoils of Australia's first multi-channel Keno licenses in the state of Victoria. The 20-year licenses allow the companies to provide online and retail Keno, replacing the current 10-year retail-only license held by Tabcorp since 2012.

See you in court: Gaming machine-to-fintech provider Everi has filed a legal action challenging the validity of a patent owned by cashless payment provider Sightline Payments. Sightline has previously sued Everi for patent infringement. Everi believes the Sightline suit is without merit.