Apr 22: Weekend Edition #43

Q1 US regional preview, Simplebet analyst meeting, Texas gaming, sector watch - esports, earnings in brief +More

Apr 22

Good morning. We enter the first-quarter earnings season that kicks up a gear next week with a degree of trepidation. In US land-based gaming, as discussed below, comps are much more demanding while in online, long-held fears over OSB and igaming profitability in the US, and stagnation fears in Europe, hold sway. The earnings call in the next few weeks will be followed closely for a sense of which way the wind is blowing. Our advice? Buckle up.

The man comes around. Click below:

Q1 regional preview

Four horsemen: Investors’ hopes for the rest of 2022 will be “tethered” to operator commentary around four key areas, according to Deutsche Bank.

The outlook for the 2Q22 as comps are considerably more difficult; the impact of inflation on revenue prospects and expenses; asset sales and capital-return agendas; the sustainability of margins in the near term.

Cut price Caesars: While the DB team retain their target on Red Rock resorts, Penn National, Boyd and Golden Entertainment, they have trimmed their target for Ceasars.

The DB price target goes to $100 from $105 largely due to higher than previously anticipated net debt stemming from higher cash interest, the reduced asset sale price, and higher digital segment losses, rather than core EBITDAR reductions.

Eat your own lunch: DB makes the claim that evidence for some key states suggest there is evidence of cannibalization in states where there is igaming.

Deutsche Bank: “When looking at the performance of casino GGR in PA, MI, and NJ, three states with icasino that either launched in 2021, or doubled relative to 2019, brick and mortar casino comparisons have materially lagged comparisons in other markets across the Northeast, Midwest, and Southeast.”

The data: Across the seven-state regional subset where icasino is not present, GGR grew 13% in Jan22, 12% in Feb22 and 5% in Mar22.
Aggregate casino GGR in NJ, MI and PA for the three months fell by -9%, -6% and -10%.

** Sponsor’s message: Venture capital firm Yolo Investments is home to €551m of equity in more than 70 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 29-company, €183m 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.

Simplebet analyst meeting

Perfectly formed: Taking the opportunity of a chat with the analysts at Morgan Stanley, the micro-betting provider said its work with DraftKings had resulted in a ~30% share of total NCAA handle for the past season and ~25% of total Super Bowl handle.

Simplebet claimed micr-betitng gives DraftKings a “leg-up” in the market; MS quantified that leg-up to be worth 23% of market share by handle over the last football season compared to 20% in the previous seven months.

Take me down to the ball game: Micro-betting product is "best suited" to baseball, according to the management team.

It takes 1.5 seconds to generate a live-betting market after receiving data from either Sportradar or Genius Sports. With pitches thrown every 22 seconds, it means there is a window of ~20 seconds when a market is live.

Margin…: Simplebet told MS that hold rates have ranged from mid-single digits for the NFL regular season (when operators were prioritizing volume over gross win) to double digits during the NFL playoffs.

… erosion: The MS note didn’t discuss the margin erosion from having a third-party supplier involved in a large portion of DraftKings’ in-play handle.

Earnings in brief

MGM Growth Partners presented its final results ahead of the completion of the buyout from VICI. Q1 rental revenue came in at $195.1m while net income stood at $116.5m. Adj. EBITDA was $253.6m.
Française des jeux Q1 revenue was up 14% YoY to €613m. Lottery revenue rose 14% to €467m, stakes for draw games up 9.5% to €1.5bn, instant game stakes up 19% to €2.5bn. Sports-betting was up 13.4% YoY to €129m. FDJ said the numbers compared strongly with Q121 but pointed out that up to 10% of its 30,000 strong retail network was closed at the time due to COVID restrictions. FDJ has a B2B division headed up by the UK data and betting solutions provider Sporting Solutions it acquired in 2019, but the group did not break out those revenues.

Better Collective analyst update

On the rise: Looking ahead to the Q1 earnings (released May 18), the Redeye team has updated their forecasts for 2022 based on the recent acquisitions of Canada Sports Betting and Futbin (see below). Their EBITDA estimates rose by 11-13% for 2022-24.

Solid as a rock: The team expects a solid Q1 with the quarter helped by the launch in New York.
BC will also benefit in current trading from the Ontario launch where its recent acquisition will also come into play.

Sector watch - Esports

Channel surfing: Better Collective’s acquisition of Futbin for €105m/$113m further diversifies the Danish affiliate group into broad consumer channels.

The sale came at a hefty multiple (nearly 10x) but enables BC to tap into advertising and recently-launched subscription revenues and a largely non-gambling specific audience of 50 million MAUs and 3 million DAUs.

Below the radar: Better Collective Esports SVP Henrik Lykkesteen told the Sharpr newsletter that its esports content, including HLTV that it acquired in 20202 for $37.5m, now reached around 100m monthly users.

Lykkesteen added: “We believe eSports is the path we can take where we can both acquire and grow as a media company. I think a lot of these assets are below the radar for some of the bigger media houses - they’re not focusing on this segment.”

The odd one in: Live-odds and data provider Oddin.gg has entered into a strategic partnership with betting-solutions provider SB22 that will see Oddin provide it with its esports-focused feeds and odds. The new partnership follows up Oddin’s recent agreements to supply its oFrame solution to Polish bookmaker Betx, as well as to Esports Entertainment Group, Betway, SIS and South East Asia esports-focused group the Centre of Betting Vietnam.

In luck: Esports-betting operator Luckbox recently announced partnerships with Microgaming for icasino content, Raketech for affiliate services and recently appointed ex-PokerStars and MrGreen senior executive Bo Wänghammar to its board of directors.

CEO Thomas Rosander also took part in conference panels during ICE and said operators could produce best-in-class content through a mixture of external feeds and in-house development and content teams.
“With esports everybody has the same offer. But the key to creating your own content is to create betting markets that players want and that no other operators are offering.”

At the margins: Rosander added that offering proprietary games meant being able to act independently of suppliers, but there was also easy money to be made with roulette or blackjack and “if you create it yourself you don’t have to pay the extra margin on top of it”.

But Rosander also cautioned: “Don’t become too dependent on one product, dependencies are always bad.”

Texas gaming

Support group: While out campaigning candidate for the Texas governorship Beto O'Rourke said he would be “inclined to support” regulatory expansion of sports betting and casino if elected in November.

Beto O'Rourke on expanding gambling regulations in Texas: “From listening to Texans across the state, it’s one, a very popular proposal, and two, it would also help us address some of the challenges we have in reducing inflation and property taxes in the state. So I think that warrants a very close look and it’s something I’m inclined to support.”

Crossing state lines: Tribal gaming is the only legal gambling option currently in Texas and many residents are already traveling to neighboring New Mexico, Oklahoma and Louisiana to bet in commercial casinos, with the state losing out on millions in tax and business revenues.

Public enemy: This is the first public comment the Democrat candidate has made on the issue, but even if elected, any regulatory expansion of gambling in Texas would be difficult.

The Republican-led state has repeatedly made clear its opposition to the idea, while the Texas Constitution would also need amending, a provision the current Governor Greg Abbott has supported and defended in the past. Lt. Governor Dan Patrick has also been clear in his ongoing opposition to the idea.

Present and future partners: The US casino industry has funded lobbying efforts in Texas while sports clubs already support the idea of regulating sports wagering in the second most populated state in the US. The Dallas Cowboys and Texas Rangers have already signaled their intent to partner with sportsbooks and MLS clubs Austin FC and Houston Dynamo recently announced partnerships with PointsBet and Fubo Gaming.

Further reading: WE+M’s Scott Longey gauged the temperature for sports betting while attending the SXSW festival last month.

Sports franchises are fully aware of the commercial revenues that would open up to them should sports betting become regulated in Texas.

Eben Novy-Williams @novy_williams

In small leagues, that can be transformational for teams. We valued the @HoustonDynamo at $425 million. The team's partnership with Fubo Gaming could be worth $175 million (!) The @WNBA's Mercury signed a deal worth $66 million. Not sure the team would sell for $66 million

Newslines

Kind of blue: LeoVegas’ Blue Guru Games has launched its first game, The Nemean Lion, which the company says will be “an important first step” in the games studio’s rollout of new content. The company said Blue Guru was “looking to penetrate the US market with planned games releases in H2.

Cali poll blow: A new poll suggests that 53% of voters do not support an online sports-betting ballot initiative being pushed by DraftKings, FanDuel and other online operators. The poll, conducted by FM3 Research, was commissioned by the Coalition for Safe, Responsible Gaming, which is made up of the California tribes pushing the November referendum for retail-only sports betting at tribal casinos and racetracks.

No props: Ohio State University has asked the state’s casino control commission to limit betting on college sports to football and basketball and not allow prop bets. The latter request comes after the University expressed concerns over social media threats to athletes.

On tour: Irish bookmaker BoyleSports will be the new sponsor of Spotlight Sports Group’s weekly golf show The Sweet Spot. The new agreement covers Spotlight’s weekly shows discussing betting options across all golfing events from the majors to the PGA Tour and DP World Tour.

Play up Hoosiers: Online betting start-up PlayUp has expanded its market access agreement with Caesars Entertainment and will add to its sports betting offering with the launch of icasino products once legislators in the state have the regulatory framework in place. PlayUp’s existing partnership with Caesars is currently active in New Jersey, Pennsylvania and Iowa.

Play and raise: Canadian sports media group Playmaker plans to raise CA$75m by issuing shares, debt securities and warrants. The funds will be used to invest in the company and carry out potential acquisitions.

Dock of the bay: Las Vegas Sands’ license for the Marina Bay Sands resort was renewed until April 2025 by the Singapore Casino Regulatory Authority.

Earnings+More pod #5

This week Jake and Scott discuss the return of ICE London and how pleasant the event was, the sportsbook deal between DAZN and Pragmatic Play, why 888 Q1 revenue is down and whether DraftKings can be effective in Ontario after missing the launch.

The pod is also available on Spotify, Apple or can be viewed on Youtube.

Chart of the week

The Score has done well with regard to app downloads in Ontario since regulation on April 4, but a closer look at the chart below from Sensor Tower and Morgan Stanley shows that Betway and bet365 by some distance have led the province in downloads since Jan21. In March, i.e. just before the province went live with regulation, bet365 cranked things up to reach 77% of downloads. Therefore it will be interesting to see how The Score’s app downloads translate into wagering volumes and market share.