Good morning. Social media has been full of messages in the last few days from companies and individuals in the gaming sector expressing solidarity with colleagues and friends in Ukraine. It reminds us that global gaming is a hugely interconnected global sector, a factor often overlooked in recent years with the rise of sports betting in the US. Needless to say, we hope everyone stays safe.

Made it to the free west, on a chartered flight.

Churchill Downs Q4 earnings call

End of the affair: Having said the company had “high hopes” when PASPA was overturned, CEO Bill Carstanjen suggested the effectively irrational actions of competitors had forced a rethink.

Churchill Downs CEO Bill Carstanjen: “Many are pursuing maximum market share in every state with limited regard for short-term or potentially even long-term profitability.” 

Exit stage left: Unable to see a path to “acceptable margins for several years,” the company has opted to exit the sports-betting and igaming business within the next six months. 

Carstanjen: “This isn't the result we wanted when we started this business back in late 2018, but it is the prudent next step forward for our company.”

An online timeline:

• May 2018: Churchill Downs signs with SBTech to provide sports-betting and igaming platform services.

• Aug 2018: BetAmerica launches two retail sportsbooks in Mississippi.

• Feb 2019: BetAmerica launches online in New Jersey.

• Aug 2020: Churchill Downs switches backend providers to Kambi and GAN.

• Jan 2021: BetAmerica relaunches as TwinSpires.com.

• Feb 2022: Churchill Downs closes online sports-betting and igaming.

Baby/bathwater interface: Carstanjen said Churchill Downs will continue with its retail sports-betting business “where we are profitable” and will otherwise seek to monetize its market access, saying the company “constantly receives” expressions of interest. CDI also remains committed to the horse-racing betting business.

Carstanjen: “We needed to step away from Sports and iCasino, but there's a piece of this segment that we think we're really good at and we want to make sure that we can continue to compete in.”

• Could Churchill Downs be tempted back into the digital market? “Right now, it doesn't look good. In the future, we'll have to see how it develops.”

What happens next: Asked whether Churchill Downs might do something more, in terms of partnerships, that might “unlock value in some other way”, Carstanjen said it was a “logical and obvious one”.

Carstanjen: “I want to acknowledge it’s an interesting topic and interesting thing to talk about but it’s not one that we can comfortably do so at this time.”

History-maker: Carstanjen said the company would be focusing on “what we see as working” and, as per this week’s $2.5bn Peninsula Pacific Entertainment deal, that is clearly in the direction of land-based gaming and historical racing machines in particular. Carstanjen said the deal added geographic diversification and scale.

Nice timing: Analysts at Jefferies applauded the coincidence of the timing of the move out of OSB and igaming and the furtherance of HRM activity. “Trading the risks and timing of P2E for OSB/iGaming should be taken positively, particularly given the evident immediate accretion of P2E,” they suggested.

• Diary date: Carstanjen said the 148th Kentucky Derby on May 7 would see the return to full capacity.

Popbitch noted this week that last year’s winner Medina Spirit was officially stripped of the title after the results of the post-race drug tests were confirmed. After pointing out that trainer Bob Baffert’s excuses were, well, horseshit, they point out that if American racing is finding it difficult to win headlines and attention, then a full-on Tour de France-style doping scandal “would certainly change that”.

** 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.

Bally’s analyst reaction

The hard yards: Wells Fargo said yesterday that Bally was facing a “tough road ahead” for its North American interactive ambitions after its lower-than-expected fourth-quarter results. They noted, though, that the Bally Bet 2.0 approach was “prudent/thoughtful”. Addressing the takeover bid from Standard General, analysts at Truist say they remain keen on further gains.

Analyst at Truist: “While the $38 takeout price is only +5% higher than current levels, we maintain our Buy rating seeing the potential for upside and significant long-term value.”

PointsBet investor call

Time is on our side: The key message from CEO Sam Swanell was that PointsBet would “be on the start line” when new states launch in North America and not playing catch up as it has done in many of the states where it is currently live. 

CEO Sam Swanell: “Product ultimately wins. History tells you consumers gravitate towards the best product and if you listen to DraftKings or FanDuel they use the same line. But that doesn’t change the fact that we have to overcome the (lack of) brand recognition that others have.”

At the gate: Swanell noted PointsBet would be “on the start line” in Ontario, Ohio and Maryland and this was important in terms of share of wallet. “Before we’ve always been a share-of-wallet bookie. Every client we’ve obtained we had to win it off MGM or FanDuel, here’s an opportunity to win clients first onto our platform.”

Fade to grey: Swannell said Bet365 and bwin were the two biggest brands in the province and Canada generally but there was a lack of clarity as to which operators will get licensed in the province. 

Swannell: “If they get licensed in Ontario they may have to turn off operations in the rest of Canada, so it’s a trade off. If (Bet365 and bwin) are there legally it will be a different dynamic but it’s hard to tell at the moment.” 

For more on Entain and its newly-acquired Sports Interaction brand’s position there, you can read Jake Pollard’s recent report here. 

Playtech analyst take

Definitely maybe: Peel Hunt neatly summarizes the uncertainties around the future of the company. “A bid for Playtech may emerge from the TTB investor group, which may include CEO Mor Weizer. Playtech’s interest in Caliente may crystallize into shares in US-listed SPAC. Offers may emerge for parts of the group from different parties. The number of ‘what-ifs’ is daunting.”

Related news: Spurned on its Playtech bid, Aristocrat has said it plans to enter real-money online gaming by establishing a third operating business alongside its slots and social-gaming arms.

REIT Q4 review

• VICI revenues up 2.7% to $383.2m, AFFO up 10.8% to $278.9m.

• Record transactions of $21bn in 2021.

• Gaming and Leisure Properties revenues were down slightly at $298.3m with AFFO at $205.3m.

Rock of ages: The company said it had made “great strides” towards having an investment-grade balance sheet. As noted yesterday, VICI completed the acquisition of the Venetian real estate. Analysts at CBRE called VICI a “rock of comfort in uncertain times” and suggested VICI was a “great” inflation hedge. Though VICI missed out on the recent Wynn Resorts/Encore Boston Harbor real estate deal, CBRE said the news validated VICI’s strategy.

Analysts at CBRE: “The deal highlights the growing enthusiasm for gaming real estate among the dedicated real estate community and provides a solid valuation argument for VICI, which owns a number of comparable assets.”

MGM Growth Properties: VICI is set to complete the $17.2bn acquisition of MGP in H1. Truist noted that MGP (which reported on Feb 10) achieved revenues of $199m. The company said it would continue looking at further M&A in the gaming space. Jefferies noted the investment-grade rating would also lower the cost of capital.

Analysts at Jefferies: “VICI is in an improving position to pursue future accretive opportunities, both within and outside of gaming and within and outside the US.”

Primary benefit: Jefferies also likes the prospects for GLP. “Ultimately, our thesis is proving out on long-term stable rent generation, coupled with growth through transaction activity. As the overall valuation level for Gaming REITs continues to rise, we expect GLPI to be a primary beneficiary.”

Playtika Q4

• Revenues up 13% to $649m and adj. EBITDA was up slightly at $212.5m.

• Full-year 2021 revenue up 8.9% to $2.58bn.

Winter sales: The surprise results announcement came with the news that the board was evaluating the company’s “potential strategic alternatives to maximize value for stockholders” including a possible sale. As Macquarie analysts noted, this comes against the backdrop of large-scale M&A in the gaming space.

Recent deals:

• Take-Two Interactive acquired Zynga for ~$12.7bn.

• Microsoft announced the acquisition of Activision Blizzard for $69bn.

• Glu Mobile was acquired by Electronic Arts (EA) for $2.1bn. 

Analysts at Macquarie: “The transactions mentioned highlight the strategic value of mobile gaming as part of a complete entertainment ecosystem, and thus underscores the embedded value within Playtika shares.”

Playstudios: Also reporting yesterday, the free-to-play games provider said Q421 revenues rose 12.4% to $71.9m while adj. EBITDA rose to $12m. CEO Andrew Pascal said that with the focus on the “increasing complexity and costs of acquiring consumers,” it meant the focus on holding on to existing audiences “played to our strengths”. 

Andrew Pascal, CEO: “The unique challenges of today’s market are intensifying the problem that our loyalty platform model solves. And it’s for this reason that we remain so optimistic about our opportunity, and so committed to our strategy.”

Sector watch - payments

Deal spree: Paysafe has signed a slew of partnerships with US operators in recent weeks: Hard Rock online casino in New Jersey is the latest, it joins Bally Casino in NJ and Bally Bet in Arizona. It will likely go live with Bally in New York and other states when Bally Bet 2.0 goes live in H1. Paysafe also signed with BetWildwood, the sportsbook offering from the Wildwood Casino in Colorado. 

Cryptic partnership: On the crypto front, the UK’s FCA told Paysafe of its concerns over its recent partnership with crypto exchange Binance. In June the FCA prevented Binance from being able to access the UK retail payment networks via Faster Payment Services and Barclays and Santander barred their customers from sending money to the exchange. Binance’s partnership with Paysafe reopened Sterling deposits and Euro transfers in January. 

• The FCA said it had limited powers to stop such partnerships but Paysafe said it took its “regulatory obligations extremely seriously and comply with the highest industry standards. We always adopt a fully transparent approach when dealing with regulators.”

Every patent has its day: As reported by WE+M earlier this week, gaming machine-to-fintech provider Everi has filed a legal action challenging the validity of a patent owned by cashless payment provider Sightline Payments. This follows Sightline previously suing Everi for patent infringement. The dispute revolves around the patent linked to the technology used to move money electronically in and out of casinos. 

Regulatory roundup

Kentucky Sen. David Yates has introduced an online sports-betting and real-money poker bill. However, as with previous legislative efforts it faces long odds to pass into law. A Missouri House committee is scheduled to discuss and potentially vote on a statewide OSB proposal on Feb. 28, possibly clearing the first legislative hurdle in the multi-year effort to legalize online wagering. The Ohio Casino Control Commission announced a fourth batch of sports-betting regulations on Wednesday including rules on supplier and employee licensing. South Dakota lawmakers will discuss a ballot measure to allow online sports-betting today, Friday.

Partnerships

The Buffalo Sabres have named FanDuel as an official sports-betting partner in a Wednesday press release. Caesars and the Cleveland Cavaliers announced a deal that will bring a retail sportsbook to the team's home arena, a high-profile in-person compliment to the anticipated 2022 statewide mobile-betting launch.

Newslines

Hail Mary: BetRivers has been granted “potential approval” by the Maryland Lottery and Gaming Control Commission (MLGCA) for a retail sports-betting license. Both BetRivers and partner Bingo World would need final approval from the MLGCA for a BetRivers-powered retail sportsbook to open in Maryland.

Admirable: Novomatic’s Greentube acquired Italian sports-betting and online casino operator Admiral Sport for an undisclosed amount. Admiral Sport operates more than 100 sports betting venues in Italy.  

What we’re reading

John Authers: Markets are saying Putin will get what he wants.

The 10 most annoying sportsbook tweets.

On social

Don’t look at social media today.

Calendar

• Mar 1: Flutter FY, IGT, Playtika Q4, Scientific Games Q1

• Mar 2: Rush Street Interactive Q4

• Mar 3: DraftKings investor day

Contact us

• Scott Longley scott@clearconcisemedia.com

• Jake Pollard jake@openmediaservices.com