Details of Ohio bill are released, analysts react to earnings in the space, 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: DraftKings (DKNG) and FanDuel (PDYPY) were suitors of Action Network before Better Collective agreed to purchase the platform for $240M, Benjamin Mullin of The Wall Street Journal reported. Private equity firms were also involved in the auction for Action Network that ended with the Better Collective deal. Action Network and Better Collective are reportedly planning to increase the total volume of bettors they refer to gambling operators. Representatives for DraftKings and FanDuel declined to comment.
Macau's gaming bureau reported April gross revenue from games of fortune in the region increased 1014.4% year-over-year to 8.401B patacas. April's jump compares with April 2020, when Beijing ramped up travel restrictions to slow the spread of Covid-19. Last April, gaming revenue sank a record 97%. At this time last year, Macau's borders were closed to nearly everyone, with only limited exceptions made for those assisting in the pandemic response. On February 23 of this year, Macau authorities announced that no city in mainland China was any longer considered by the Macau authorities to be "medium risk" for transmission of COVID-19 infection. Daily visitor arrivals in Macau continued to show an upward trend in April, rising to the highest level since the start of the pandemic, according to the Macau Government Tourism Office. The resumption of domestic travel in mainland China could help further boost the numbers of visitors to Macau. The upcoming Labor Day Golden Week holiday is expected to increase revenue for gaming operators in May, with Melco Resorts & Entertainment (MLCO) and MGM China Holdings (MGM). both predicting on earnings conference calls that they would have strong holiday performances. According to Chinese travel portal Qunar.com, hotel room bookings for Macau from May 1 through May 5 are up 17% from pre-pandemic levels experienced during the 2019 Labor Day.
Genius Sports (GENI) announced that it has entered into a definitive agreement to acquire Second Spectrum, a provider of data tracking and visualization solutions. The aggregate purchase price for the acquisition is $200 million, subject to customary adjustments. The purchase price will be paid at closing in cash and shares of Genius Sports common stock. Consummation of the transaction is subject to customary closing conditions and expected to take place in the second quarter of 2021. The business is expected to be profitable post-integration and additional details and quantification on synergies will provided in Genius Sports upcoming Q1 earnings call.
Penn National (PENN) announced that it has established Penn Game Studios, or PGS, an in-house content development team focused on creating iCasino content for its customers. To fuel this effort, the company is acquiring HitPoint Studios and its spun-off real money gaming company, LuckyPoint. The acquisition is expected to close in the near term, subject to the satisfaction of customary closing conditions. HitPoint is an independent game design and development studio founded in Massachusetts in 2008. HitPoint currently runs the day-to-day live operations for multiple games using their proprietary technology stack. In 2019, HitPoint spun out LuckyPoint to focus on real-money game development and the creation and operation of a remote gaming server, or RGS. In addition to traditional online casino table games and slot machines, the LuckyPoint RGS brings a variety of gaming styles to desktop and mobile devices, including retro-style arcade games and puzzle games. Upon completion of the acquisition, the team of 30 employees from HitPoint and LuckyPoint will be integrated into Penn National's wholly-owned interactive division, Penn Interactive. The team is comprised of designers, artists and engineers.
EARNINGS RECAP: Earlier on Friday, DraftKings reported Q1 earnings, posting Q1 revenue of $312M compared to analyst consensus of $236.19M. Monthly unique payers, or MUP, for B2C segment increased 114% compared to the first quarter of 2020. On average, 1.5M monthly unique paying customers engaged with DraftKings each month during the first quarter. The increase reflects strong unique payer retention and acquisition across Daily Fantasy Sports, Online Sports Betting and iGaming. Average Revenue per MUP was $61 in the first quarter representing a 48% increase versus the same period in 2020. ARPMUP was positively impacted by increased engagement with our iGaming and mobile sports betting product offerings as well as successful cross-selling. In the Q1 earnings release, the company also raised its FY21 revenue expectations to $1.05B-$1.15B. The company said, "The increase reflects solid performance in the first quarter of 2021, continued strong user activation due to the effectiveness of our marketing spend, well-executed launches of mobile sports betting and iGaming in Michigan and mobile sports betting in Virginia, and a modest contribution from our recently completed acquisitions. This guidance also assumes that all professional and college sports calendars that have been announced come to fruition and that we continue to operate in states in which we are live today." After DraftKings reported Q1 revenue that beat consensus and the high-end of its own guidance, Morgan Stanley analyst Thomas Allen noted that management raised 2021 revenue guidance by $150M, which was more than the $70M beat, without adding in any new states. He sees the revenue results as "very impressive given the company beat and raised by similarly more than expected last quarter and has now done it again," said Allen. He has an Overweight rating and $66 price target on DraftKings shares.
On Thursday, Penn National reported a Q1 earnings beat in what CEO Jay Snowden called a "record" quarter. Snowden commented: "Penn National kicked off the year with record results in Q1 2021 from our land-based business and the launch of our online Barstool Sportsbook in Michigan and Illinois. In addition, we fully integrated our mychoice player loyalty program across all our retail and digital offerings, which bolsters Penn National's ecosystem and further expands our competitive advantage. Equally exciting was our inclusion in the S&P 500 in March, which underscores the investment community's confidence in our digital transformation and our position as the nation's largest regional gaming operator. This milestone is a testament to the hard work, determination and commitment of all our team members at the property and corporate levels as well as our valued partners at Barstool Sports. "Last month we filed our proxy statement which included an in-depth ESG report on our ongoing efforts to care for our people, our communities and our planet." Allen raised his near-term estimates to account for Penn National's "remarkably strong regional trends" and said he sees the selloff in the shares as "overdone" following what he feels was a "strong" Q1 report. However, Allen leaves his price target unchanged at $99 to reflect online de-rating and keeps an Equal Weight rating on Penn National shares.
Caesars (CZR), on the other hand, missed analyst consensus for EPS when it reported Q1 earnings on Tuesday. Although, same store adjusted EBITDA came in At $548M in Q1 compared to $410M a year ago. Tom Reeg, CEO of Caesars, commented, "Our first quarter results improved significantly versus the fourth quarter of 2020 as the pace of vaccinations across the country accelerated and consumers started to resume more normal behavior. We are excited to see the dramatic improvement in operating efficiencies throughout our enterprise which we believe are sustainable going forward." The company noted a boon from march Madness, saying March EBITDA was almost half of Q1. On its Q1 earnings conference call, Caesars said that weekends in las Vegas are sold out for the foreseeable future and that 2022 revenue on the books is trending up about 50%. Shares were up 5% following the report. Deutsche Bank analyst Carlo Santarelli raised the firm's price target on Caesars to $126 from $120 and keeps a Buy rating on the shares following the "resounding beat" in Q1.
OHIO GAMING BILL GETS LAID OUT: Senator Kirk Schuring and joint sponsors, Senator Niraj Antani and Senator Nathan Manning introduced the first comprehensive gaming bill for Ohio. The state will offer 20 licenses for mobile app on-line gaming and 20 licenses for brick and mortar sports gaming. Licenses will cost $1M and will be good for three years being distributed on a first come first serve basis. The Ohio Casino Control Commission has oversight authority. The bill also allows for a sports wager system through Ohio Lottery retailers. The tax structure for the proposed bill is as follows:
Ohio will receive 10% from net revenue
Revenue is directed toward public and private education
2% is directed toward gambling addiction and problem gaming
“Sports gambling is already here, Ohio just isn’t benefiting from it,” said joint sponsor Senator Manning. “This bill is fair, no one gets a special benefit and the state has expert level diverse oversight. It’s a win for taxpayers and the economy.” The Ohio State General Assembly noted that SB 176 is the result of 8 hearings with an array of testimony from 50 individuals. Committee hearings for the bill will begin next week. While Schuring believes the bill could get done by June, sports betting in Ohio could not start until January 2021.
PUBLICLY TRADED COMPANIES IN THE SPACE INCLUDE: Accel Entertainment (ACEL), Bally's (BALY), Boyd Gaming (BYD), Caesars (CZR), Churchill Downs (CHDN), DraftKings (DKNG), Flutter Entertainment (PDYPY), Gan Limited (GAN), Genius Sports (GENI), Las Vegas Sands (LVS), MGM Resorts (MGM), Penn National (PENN), Rush Street Interactive (RSI), Scientific Games (SGMS), Score Media (SCR), William Hill (WIMHY), and Wynn Resorts (WYNN).