Scientific Games discloses SG Lottery info, Florida arguments coming to a head, 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: Autograph has announced a deal with basketball brand SLAM to create and distribute digital-collectible content on DraftKings Marketplace (DKNG). "As a launch partner for their basketball vertical, Autograph users will have access to SLAM's 300-plus cover archive dating back to 1994, featuring some of the greatest basketball players over the last three decades... The Autograph NFTs previously dropped on DraftKings Marketplace included such star athletes as Tiger Woods, Wayne Gretzky, Derek Jeter, Naomi Osaka, Simone Biles and Tony Hawk. Autograph recently announced a similar deal with Lionsgate in which the companies will collaborate to create digital collectible content based on the flagship movie franchises later this year," the companies stated.
Scientific Games (SGMS) disclosed in a regulatory filing certain information with respect to its lottery business, "SG Lottery," to certain interested parties in connection with Scientific Games' previously announced evaluation of strategic alternatives for the intended divestiture of SG Lottery. In the filing, Scientific Games said SG Lottery "predominately conducts business in North America and Europe, which contributed approximately 73% and 24% of fiscal year 2020 revenue, respectively." Revenue for the business is forecast to grow at a two-year CAGR of 13.6% to fiscal year 2022, as instant lottery participation-based revenue growth for fiscal year 2021 is estimated to be 14% in the U.S. and 23% internationally and instant lottery price per thousand tickets revenue growth for fiscal year 2021 is estimated to be 28% internationally, with Italy responsible for 36% of the European revenue growth. Following the disclosure, Truist analyst Barry Jonas reiterated a Buy rating on Scientific Games citing the 2021/2022 Lottery revenue/AEBITDA forecasts ahead of estimates. Jonas told investors in a research note that this supports the $5B valuation he ascribes to Lottery, and believes a double-digit multiple for Scientific's Lottery division could see sizable upside to Lottery competitor International Game Technology's (IGT) valuation. Separately, Scientific Games announced the appointment of Connie James as executive VP, CFO, treasurer and corporate secretary, effective October 15. James has served as CFO of Scientific Games' Gaming business since January 6, 2020. Current CFO Mike Eklund will be stepping down to pursue other opportunities and will remain with the company until October 15, 2021.
NFL SEASON STARTS WITH A BANG: The legal sports betting market in the U.S. had its busiest four-day stretch ever as the NFL season kicked off last week, David Purdum of ESPN reported. According to GeoComply, a company that provides geolocation services to sportsbooks, 58.2 million online transactions took place Thursday through Sunday with sportsbooks in 18 states and the District of Columbia. It marked a 126% increase from the same period at the start of the 2020 NFL season. As per the data, the top five states in terms of sportsbook transactions were:
There are now sportsbooks in 26 states and D.C., with more jurisdictions expected to come online in the very near future. "It's probably going to be one of our biggest weekends ever," DraftKings sportsbook director Johnny Avello told ESPN on Sunday night. "All the numbers look very positive." "I couldn't have asked for a better day to start the season," Tom Gable, sportsbook director for The Borgata in Atlantic City, New Jersey, said. Sigdahl told investors in a research note that he expects strong online sports betting this NFL season, heavy marketing/promotions, and investors focused on market share winners/losers. In the next several months, Connecticut, Louisiana, Maryland and Ontario are all expected to launch online sports betting.
A TALE OF TWO STATES: New Jersey's Division of Gaming Enforcement reported total gaming revenue for August was $427.7M, compared to $326.3M in August 2020, reflecting a 31% increase. Casino win for August was $262.4M compared to $199.1M in August 2020. Internet gaming win was $113.2M in August compared to $87.8M in the prior period, reflecting an increase of 29.0%. Sports wagering gross revenue was $52M for the month. Craig Hallum analyst Ryan Sigdahl noted that New Jersey continues to be the strongest state for online sports betting on a per capita basis, besides Nevada, and demonstrated that with nearly twice the bets per capita as Michigan, partly benefitting from its proximity to New York.
Iowa bettors boosted their wagering in August more than 20% from July, the first month-over-month gain in betting volume since March's record-setting month. August's uptick to more than $108M was nearly enough for the state to reach $1B in wagering since Jan. 1, a noteworthy milestone ahead of what will likely be the busiest four months of the year, according to PlayIA, a source for news and analysis of the Iowa gaming market. Iowa's online and retail sportsbooks accepted $108.4M in bets in August, up 21.1% from $88.9M in July, according to official data released Monday. Bettors placed $3.5M per day over the 31 days of August, up from $2.9M per day over the 31 days of July. Despite the volume increase, operator revenue fell 14.3% to $6.6M from $7.7M in July, resulting in $486,608 in tax revenue for the state. Year-over-year, August's wagering was up 115% compared with $50.3M in August 2020. Meanwhile, revenue grew 120% in August from $3M in August 2020. Iowa sportsbooks have now generated $997M in bets since Jan. 1, falling just short of reaching $1 billion in wagering for the year. Baseball led the way in August. But the return of college football, even if for just a handful of games, was a significant reason why volume increased in August. In August, $96.1M in bets were made online, representing 88.6% of the state's handle. Retail betting accounted for the remaining $12.4M. September will show even greater gains, though. A full college football schedule and the return of the NFL will always bring a boom in sports betting. But Saturday's showdown between No. 9 Iowa State and No. 10 Iowa — the first time a Cy-Hawk game featured both teams in the AP Top 10 — was something altogether different for Iowa sportsbooks. "A game that creates that kind of excitement is rare, sending fans on both sides pouring into the state's online and retail sportsbooks," Ramsey said. "That made it a unique opportunity for the industry to reach college football fans all across Iowa, including those who have never placed a bet before." Caesars' (CZR) William Hill topped the online market with $34.8M in online wagers, which yielded $229,427 in net receipts. DraftKings was second with $29.9M in online wagering, generating a market-best $2.3M in revenue.
MACAU CASINO STOCKS UNDER MICROSCOPE: Macau's Gaming Inspection and Coordination Bureau aims to complete a revision the city's gaming law by the fourth quarter this year, GGR Asia reported earlier this week. A public consultation process regarding the revision will begin on September 15 and run through October 29, according to the report. Lei Wai Nong, Macau's Secretary for Economy and Finance, commented that the law includes the "healthy and sustainable development" of the gambling industry through improvements to the regulatory system of casinos, as well as an aim to increase the "competitiveness" of the city's casino industry.
Subsequently, JPMorgan analyst DS Kim downgraded Sands China (SCHYY), Wynn Macau (WYNMF), Melco International (MDEVF) to Underweight from Overweight and MGM China (MCHVF), Galaxy Entertainment (GXYEF) and SJM Holdings (SJMHY) to Neutral from Overweight citing Hong Kong's plans to increase direct supervision. The government's policy signal indicates "heightened scrutiny on capital management and daily operation with upcoming license renewal," Kim told investors in a research note. The announcement "already planted a seed of doubt in investors' minds, which is probably enough to de-rate these names until clarity emerges on key points, an event that's unlikely to happen this year," said the analyst. On Tuesday, Credit Suisse analyst Kenneth Fong told investors in a research note of his own that the consultation has a negative read for the gaming sector as regulation remains a risk. Increased capital requirements, pre-approvals being needed for dividend payouts, introducing government representatives into companies and regulation against accepting deposits of cash or funds could all potential "impact the structural drivers" for the group, added Fong, who thinks uncertainties about the regulation could also be a drag on valuations. While Macau's tighter countermeasures to prevent the spread of Covid-19 were gradually eased between the second half of June and early July, travel restrictions between Macau and mainland China were again increased in late July due to new Covid-19 infections on the mainland. As of midnight on July 31, people intending to enter Macau on a direct flight from mainland China must hold a nucleic acid test certificate issued within 48 hours proving they are negative for Covid-19, and as of August 2, Macau authorities have also added new locations to the list of places where departing travelers must do a 14-day quarantine upon arrival in Macau. Macau gaming revenue for August was up 234% year-over year, but was down 82% from the same period in 2019.
OPPOSITION TO FLORIDA SPORTS BETTING REMAINS STEADY: New filings have been unearthed in the effort to to thwart the fall launch of Florida sports on Tuesday. John Holden of Legal Sports Report reported, The West Flagler Associates’ lawyers filed their response to Governor Ron DeSantis’ motion to dismiss and the Seminole Tribe’s motion to intervene in the court case. These actions will ultimately lead to a showdown over a motion that, if granted, would stall the South Florida gaming operator’s efforts to stop the Seminole Tribe from launching sports betting. These filings in the Northern District Florida Federal Court were in concert with a joint briefing schedule filed in the District of Columbia this same week. The Florida-based filings are likely one of the final steps at the District Court level before a hearing. The case will reportedly be appealed to the Eleventh Circuit Court of Appeals. The plaintiffs, West Flagler Associates and the Bonita-Fort Myers Corporation, argue that DeSantis’s compact with the Seminole Tribe of Florida is something beyond what his powers enable him to do. The South-Florida gaming magnates argue that the off-reservation sports betting provisions in the Compact violate the Indian Gaming Regulatory Act as well as various other federal laws and constitutional provisions. Holden said the Florida-based litigation should likely come to a head before a potential launch before the end of the year. On the other hand, an appeal to the Eleventh Circuit Court of Appeals is seemingly inevitable.
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) and Wynn Resorts (WYNN).