Florida and Texas chip away at legal sports betting, Las Vegas COVID impacts linger, and other notable stories in the sports betting and iGaming space.
Welcome to the latest edition of "Bet On It," where The Fly looks at news and activity in the sports betting and iGaming space.
SECTOR NEWS: On Friday morning, DraftKings (DKNG) reported Q4 earnings results. The company's Q4 revenue came in at $322M, almost $100M higher than analysts' consensus. Monthly unique payers, or MUPs, for the B2C segment increased 44% compared to Q4 of 2019. On average, 1.5M monthly unique paying customers engaged with DraftKings each month during the fourth quarter. Average revenue per MUP, or ARPMUP, was $65 in Q4, representing a 55% increase versus the same period in 2019. The company noted its ARPMUP was positively impacted by increased engagement with iGaming and mobile sports betting product offerings as well as cross-selling. For 2020, ARPMUP increased 29%. "With a favorable fourth quarter sports calendar and strong marketing execution, DraftKings was able to generate tremendous customer acquisition and engagement that propelled us to $322M in fourth quarter revenue, a 98% year over year increase," said Jason Robins, DraftKings' co-founder, CEO and Chairman of the Board. "In the fourth quarter of 2020, we saw MUPs increase 44% to 1.5 million and ARPMUP increase 55% to $65. We are raising our revenue outlook for 2021 due to our expectation for continued growth, the outperformance of our core business and newly launched states that were not included in our previous guidance."
Caesars (CZR), on the other hand, reported a Q4 earnings miss. The company noted Q4 same-store net revenues were $1.6B, a decrease of 37.5% versus the comparable prior-year period. William Hill and Caesars sports betting joint venture is currently operational in fifteen states and Washington D.C. As of right now, the company is operating mobile online sports betting in twelve jurisdictions. However, the sports betting joint venture is expected to be operational in twenty jurisdictions by year end. Tom Reeg, CEO of Caesars, commented, "Our fourth quarter was negatively impacted by additional COVID-19 restrictions implemented in several states starting in November. Early results in the new year indicate a strengthening of consumer demand as restrictions have been lifted and demand levels normalize, especially at our regional, non-destination properties. With vaccinations underway, we are optimistic about the year ahead and look forward to the recovery of travel and tourism in the U.S. and especially Las Vegas."
Rush Street Interactive (RSI) announced that it has secured market access opportunities in Ohio, Maryland and Missouri. RSI has entered into a strategic partnership agreement with Penn National (PENN). Under the terms of the agreement, RSI will have the ability to offer its BetRivers.com real-money online casino and sports betting platform for up to 20 years in Ohio, Maryland and Missouri through potential second skins in each of those states, subject to license availability, state law and regulatory approvals. Upon and following the launch of the skins, RSI will compensate Penn National with payments for market access. Craig-Hallum analyst Ryan Sigdahl told investors in a research note that he market access deal is presumably related to Penn announcing it secured second skin access to New York mobile sports betting and internet gaming via Rush Street Gaming's casino in upstate New York. The analyst noted that the deal highlights Penn's structural advantage of having the largest regional casino base. He continues to think the company has an "unrivaled omni-channel offering with significant cost advantages relative to online-only competitors." Sigdahl sees upside to $250 per share or higher longer term for Penn, he noted.
FLORIDA AND TEXAS SEEK SPORTS BETTING LEGISLATION: A bill has been introduced in Florida's House of Representatives that is intended to authorize wagers on sports events, provide duties of Division of Pari-mutuel Wagering, authorize application to division for license to operate sports pool, require annual renewal of license, and prohibit sports pools from being offered by anyone other than division or licensee, according to a post to the state's Senate website. The effective date would be "October 1, 2021, if HB 1319 and HB 1321 or similar legislation are adopted in the same legislative session or an extension thereof and become law," according to the post. The Sunshine State is expected to begin a new legislative session at the beginning of March. Marcus WIlliams of SportsBetting.Legal noted that betting on the NFL and other pro sports will be allowed, as well as wagering on college athletics, but HB 1317 specifically bans any action on high school games. The bill names the Florida Division of Pari-mutuel Wagering as the governing authority, allowing them to issue and renew licenses, and provide general enforcement for regulations. BH 1317 states the following four places as venues for sports betting:
A racino or pari-mutuel facility licensed to operate in the state by the Department of Business and Professional Regulation
One of the state’s Tribal casinos that are already in-place
Stadiums and arenas that host professional sports teams
The Texas legislature is proposing a constitutional amendment authorizing the legislature to legalize sports wagering, according to a post on Texas Legislature Online. Texas Republican Representative Dan Huberty filed HB 2070 & HJR 97 that would put Texas sports betting to a November 2021 vote. Gaming Today reported that Texas sports betting had seemed unlikely in the past and called the news rather surprising. The Dallas Cowboys, Dallas Mavericks and the Texas Rangers have all backed “the Sports Betting Alliance,” joining the efforts began by major sportsbook operators to soften statewide regulations that ban legal sports wagering.
TALE OF TWO STATES: Nevada reported that January Las Vegas Strip gaming win was down 43.8% to $321.53M. Macquarie analyst Chad Beynon noted that the tone around near-term Las Vegas trends remains cautious for a recovery but booking trends are improving in the second half of 2021. MGM Resorts (MGM) sees hotel revenues returning to 90% of 2019 levels late in 2022, implying no meaningful recovery until the group and convention business returns, the analyst told investors. Improved cost structures and better operating models should support margins during the recovery, Beynon said. However, revenue from the four public operators is expected to fall 30%-50% compared to 2019.
The New Jersey Division of Gaming Enforcement reported that total gaming revenue for January was $346.4M compared to $300.7M in January 2020, reflecting a 15.2% increase. Internet gaming win was $103.8M in January compared to $55.1M in the prior period, reflecting an increase of 88.4%. Sports wagering gross revenue was $82.6M for the month. Casino win for January was $160M, decreasing 16.7% from the same month last year. The top three states in terms of amount wagered on sports in January is as follows:
New Jersey $958.7M
PUBLICLY TRADED COMPANIES IN THE SPACE INCLUDE: Bally's (BALY), Boyd Gaming (BYD), Caesars (CZR), Churchill Downs (CHDN), DraftKings (DKNG), Flutter Entertainment (PDYPY), Gan Limited (GAN), Las Vegas Sands (LVS), MGM Resorts (MGM), Penn National (PENN), Rush Street Interactive (RSI), Scientific Games (SGMS), William Hill (WIMHY) and Wynn Resorts (WYNN).