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: Caesars Entertainment (CZR) announced its sports wagering mobile app, Caesars Sportsbook, is available for download throughout Wyoming. Eligible sports fans in the state can now enjoy a new Caesars Sportsbook experience on iOS ahead of its rollout in other states, as well as on Android and desktop.
Bally's (BALY) announced a marketing partnership designating Bally Bet as an official sports betting partner of The New York Yankees. This marks Bally's first sports team partnership in New York after becoming the ninth online sports betting operator in the state in July. Under the agreement, Bally's receives use of New York Yankees trademarks and marketing designations as an official sports betting partner, an official daily fantasy sports partner, an official iGaming partner and an official free-to-play gaming partner. Bally's Casino Atlantic City also becomes a partner of the New York Yankees.
Macau's gaming bureau reported July gross revenue from games of fortune in the region was down 95.3% year-over-year to 398M patacas. The country will reopen public services and entertainment facilities after finding no COVID-19 cases for nine straight days, Farah Master and Twinnie Siu of Reuters reported. Casinos were closed for 12 days in July, reopening on July 23 as authorities began walking back strict measures which required most businesses to shut. Despite reopening, there is likely to be no business for at least a few weeks due to strict restrictions still in place, according to analysts. Sands China (LVS), Wynn Macau (WYNN), MGM China (MGM), Galaxy Entertainment (GXYEY), SJM Holdings (SJMHY) and Melco Resorts (MLCO) are the current six casino license holders in Macau. Their licenses will expire by the end of 2022.
EARNINGS RECAP: DraftKings' (DKNG) Q2 revenue results beat expectations as the company also upped if FY22 revenue outlook. Monthly unique payers increased to 1.5M average monthly unique paying B2C customers, representing an increase of 30% compared to the second quarter of 2021. Average revenue per MUP was $103 in the second quarter of 2022, representing a 30% increase compared to the same period in 2021. DraftKings also improved its fiscal year 2022 adjusted EBITDA guidance to a loss of between $765M-$835M from its prior FY22 guidance of a loss of between $810M-$910M. “DraftKings had an excellent second quarter, exceeding expectations for revenue and Adjusted EBITDA,” said Jason Robins, DraftKings’ co-founder, CEO and chairman of the board. “Customer engagement remains strong, and we continue to see no perceivable impact from broader macroeconomic pressures. Due to our ongoing investments in core online gaming technologies, we are in a strong position from a competitive perspective as we approach the beginning of the NFL season. We remain well capitalized, ready to enter new markets as they become live, and confident in our ability to compete and win with customers." “We executed very well in the second quarter and outperformed the midpoints of the Q2 guidance ranges for revenue and Adjusted EBITDA that we provided on our first quarter earnings call,” added Jason Park, DraftKings’ CFO “Our B2C segment drove revenue growth due to stronger than anticipated customer activity, while we continued to make progress on identifying and capturing operating efficiencies. As a result, looking forward, we are increasing the midpoint of our fiscal year 2022 revenue guidance by $15 million and improving the midpoint of our fiscal year 2022 Adjusted EBITDA guidance by $60 million.” DraftKings is live with mobile sports betting in 17 states, live with iGaming in 5 states and recently launched its sportsbook and iGaming products in Ontario, Canada.
After DraftKings' beat-and-raise Q2, Jefferies analyst David Katz said ahead of the company hosting its associated conference call that he views the quarter "positively" and thinks the "quarter should draw a positive reaction." The analyst expects the increase in guidance to be taken positively, given the heightened focus on the path to profitability, as the EBITDA increase in the guide exceeds the revenue increase.
Penn Entertainment (PENN) shares, on the other hand, fell 2% following second quarter results. The company finished the quarter with revenues of $1.6B, an increase of 5.2% year-over-year; Adjusted EBITDAR margins of 31% were a decline of 694bps year-over-year CEO Jay Snowden commented: “We are pleased with our second quarter results. PENN generated revenues of $1.6 billion and Adjusted EBITDAR of $504.5 million. Despite economic headwinds, we delivered consistent performance across our retail portfolio in the quarter and into July. In addition, last month, we successfully transitioned theScore Bet in Ontario to our own fully-integrated, proprietary tech stack – reflecting a key achievement in our strategic roadmap. Our strong operating performance and balance sheet enabled us to opportunistically repurchase $167.0 million of stock in the quarter under our $750.0 million share repurchase authorization. Based on our second quarter performance and our outlook for the remainder of the year, we are reiterating our 2022 revenue and Adjusted EBITDAR guidance range of $6.15 billion to $6.55 billion and $1.875 billion to $2.00 billion, respectively. Our mychoice database has increased by over 1.2 million registrations over the last four quarters, driven by both our retail properties and new interactive offerings, providing significant opportunities for future growth. We continue to enhance the guest experience at our properties with new hospitality offerings including hotel remodels, new restaurant concepts, and Barstool branded sportsbooks which have especially benefited our destination properties. We are encouraged by the ongoing visitation and engagement of our high worth segment as well as continued growth from all but our oldest demographic. Our unrated segment trends reflect strong conversion of non-rated players into our mychoice loyalty program. Our industry leading cashless, cardless and contactless technology (“3C’s”) enables omni-channel engagement and remains a growth driver. 3C’s is now live at nine properties in three states. We expect to roll the technology out to twelve additional properties by the end of 2022, pending regulatory approvals." The company noted its focus remains on migration of Barstool Sportsbook to in-house managed risk and trading platform and tech stack
Stifel analyst Steven Wieczynski lowered the firm's price target on Penn Entertainment to $45 from $50 and reiterated a Buy rating on the shares, telling investors that if he "had to summarize the print and earnings call in one word, it would be stability." His estimates are now about 7% lower in 2023 and 2024 as he has now embedded a moderate recession into his out-year estimates and his lower target also reflects more conservative multiple assumptions, but Wieczynski added that "most of the negative headwinds seem to be priced in."
Bally's reported mixed results in the second quarter while cutting both revenue and adjusted EBITDA guidance for FY22. The global casino-entertainment company cited six months of results, adverse foreign exchange movements and lower expectations for its Atlantic City property for the slashed outlook. Lee Fenton, Chief Executive Officer said, "Our second quarter results reflect continued strength in our Casinos & Resorts segment, record margins in our International Interactive segment and continued growth in our North America Interactive segment particularly in BallyCasino.com in New Jersey, despite headwinds from significant FX volatility and challenges in Atlantic City. We are pleased with the Company's record cash flow from operations in the quarter and are focused on continued incremental cash flow generation initiatives."
MGM Resorts (MGM) also experiences mixed results for the quarter, but shares did climb over 2% following the earnings release. MGM reported record Las Vegas Strip adjusted property EBITDAR and record regional operations adjusted Property EBITDAR in Q2. Adjusted property EBITDAR of $825M was an increase of 108% compared to last year. However, in China revenues of $143M in the current quarter compared to $311M in the prior year quarter, a decrease of 54%. The current and prior year quarter were significantly impacted by travel and entry restrictions in Macau; "We see exceptional value in our Company's shares and have returned capital to our shareholders by repurchasing over $1.1 billion of our stock in the second quarter," said Jonathan Halkyard, CFO and treasurer of MGM Resorts International. "Since early 2021, the execution of our asset light strategy has allowed us to repurchase 31% of our market cap while accumulating domestic cash in excess of debt on our balance sheet."
Truist analyst Barry Jonas raised the firm's price target on MGM Resorts to $40 from $35 but maintained a Hold rating on the shares. The analyst cites the company's "strong" Q2 earnings beat with record Vegas and Regionals performance as well as with strength continuing into Q3. Jonas adds however that while MGM is "perfectly" executing its strategy, his Hold rating reflects investor concerns of inflation/recession and visible weakness in Macau markets.
Lastly, shares of Caesars fell slightly, around 1%, following Q2 earnings. While revenue narrowly surpassed analyst consensus, EPS fell just short. The company reported same-store adjusted EBITDA of $978M versus $1B for the comparable prior-year period. Tom Reeg, CEO of Caesars stated, "Our second quarter results reflect a consolidated EBITDA record for our brick and mortar properties led by an all-time quarterly EBITDA record in Las Vegas and continued strength in our regional markets when compared to 2019. Operating results in our digital segment improved dramatically versus the first quarter and we are optimistic regarding trends in this segment for the balance of the year." On its earnings conference call the company said it expects occupancy in the high 90s from September and beyond, falling in line with the conclusion of construction on the front entrance of Caesars Palace. Additionally, Caesars noted it has seen international come back to Vegas in last four weeks and that July of 2022 is neck-in-neck with July 2021.
B. Riley analyst David Bain lowered the firm's price target on Caesars to $102 from $128 and kept a Buy rating on the shares. The analyst believes the "most confusing thing" out of Caesars' Q2 will be variability in sell-side estimates. Some will assume a full-blown recession, while others are likely to acknowledge a forward slowdown, Bain told investors in a research note. The analyst tempered his valuation multiple but says the stock is "woefully undervalued."
On the other hand, Barclays analyst Brandt Montour raised the firm's price target on Caesars to $65 from $56. The analyst views the company's Q2 results and outlook as a net positive." Surprise upside within Digital and no signs of a slowdown yet in Las Vegas were offset to some extent by softness in Regionals, Montour told investors.
MASSACHUSETTS MIRACLE: Less than two weeks after the House Speaker in Massachusetts said lawmakers were "far apart" on the topic of legalizing sports betting in the state, the Sports Betting Conference Committee reached a last minute agreement on legislation in the state, reported NBC Boston's Matt Fortin and Kirsten Glavin. The legislation would allow for wagering on both professional and collegiate sports in the state, according to a tweet from House Speaker Ron Mariano. The contents of the bill include:
According to of Legal Sports Report, Legislators understood how time sensitive the passing of a bill was while they had some momentum. “I think if we don’t get a bill done, we have failed the citizens of the commonwealth,” Rep. David Muradian, a member of the six-person conference committee, told LSR Thursday afternoon. “I mean, it’s been abundantly clear — for sessions now — that they want it.”
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) and Wynn Resorts (WYNN).
Caesars
-0.445 (-0.92%)
Bally's
+1.56 (+7.32%)
Las Vegas Sands
-0.965 (-2.45%)
Wynn Resorts
-0.83 (-1.24%)
MGM Resorts
-0.8 (-2.26%)
Galaxy Entertainment
+ (+0.00%)
SJM Holdings
-0.16 (-10.26%)
Melco Resorts
+0.305 (+6.05%)
DraftKings
+1.475 (+9.02%)
Penn Entertainment
-1.06 (-3.02%)