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: The Ohio Casino Control Commission approved its next batch of sports betting license and Ohio online sports betting operators ahead of the rapidly approaching Jan. 1 universal launch, Saturday Tradition's Robert Linnehan reported. The casino control commission approved Type A - online sports betting - and Type B - retail sports betting- licenses for the Hall of Fame Village Newco, the Hard Rock Casino Cincinnati, and Miami Valley Gaming and Racing, the author noted. Additionally, the commission approved online sports betting service provider licenses for BetMGM (MGM), DraftKings (DKNG), Hard Rock Digital, Tipico Sportsbook, and BetRivers (RSI) and retail service provider licenses for BetMGM (MGM), Hard Rock Digital, Tipico Sportsbook, and BetRivers. “We are very excited to launch sportsbook on Jan. 1. It will be great for Ohio and great for Hard Rock,” George Goldhoff, president of Hard Rock Casino Cincinnati, said at the meeting.
Macau's gaming bureau reported October gross revenue from games of fortune in the region was down 10.7% year-over-year to 3.899B patacas. The report came after Chinese authorities said Monday mainland residents can apply for electronic travel permits for Macau starting from November 1, Reuters' Farah Master and Twinnie Siu wrote. At the same time, authorities in Macau have reinstated strict Covid-19 measures, including locking down a major casino over the weekend after a handful of cases were detected. Authorities locked down the MGM Cotai casino resort owned by MGM China on Sunday, with staff and guests ordered to stay inside until November 1. All of Macau's 700,000 residents have been mandated to take rapid antigen tests daily from Sunday to November 1 at least and will have to take an official PCR test on Tuesday, according to the report. Operators have already been trying to manage China's zero-COVID restrictions for more than 2-1/2 years, losing millions of dollars monthly in the process.
Shares of Wynn Resorts (WYNN) were up 6.5% on Monday to $62.10 in pre-market trading after a regulatory filing showed that billionaire Tilman Fertitta has acquired 6,917,551 shares of the casino operating company's stock, giving him a 6.1% stake. The filing with the SEC indicates a passive stake holding and does not allow for activism. Tilman Fertitta is the sole owner and CEO of Fertitta Entertainment, which owns the restaurant company Landry's, the Houston Rockets, and the Golden Nugget Hotel and Casinos. Gordon Haskett's head of event-driven research, Don Bilson, noted after Tilman Fertitta disclosed his take that "Elon Musk's adventure at Twitter began with a 13G" that "was eventually flipped into a D and then a successful offer to acquire the company." Fertitta, who owns Golden Nugget Casinos and just two weeks ago won Clark County approval to build a "spot on the strip," previously offered to "exchange stock in a private company owned by Fertitta for shares in Caesars, at the same multiple that Caesars currently trades," but was rejected, recounted Bilson. Fertitta "has resources and aspirations," also has "a strategic asset that could be used in various types of deals" and he now owns more than 6% of Wynn, all of which "begs a question of whether there is more going on here than meets the eye. A lot more," stated Bilson in a pre-open note to investors.
HUNGRY DOGS: Week 8 was probably the worst week of the NFL season for sportsbooks, as only one underdog larger than three points won outright, Canaccord analyst Michael Graham told investors in a research note. Outright favorites winning cashed many parlays for customers and will likely contribute to a weekly hold rate below the historical average. The analyst noted unders have normalized after starting the season hitting at a historically high clip. New York posted $34M of gross gaming revenue generated from $366M of wagers placed during NFL Week 7. Industry-wide hold rate of 9.2% was the second lowest thus far this season but comfortably above the historical average of 7%, highlighting the good fortune of sportsbook operators during the first seven weeks of the season. FanDuel (PDYPY) finished on top with 40% of handle, although its share of gross gaming revenue, or GGR, fell to 45% as the company's 10.5% hold rate was much closer to its competition. DraftKings' share of handle held relatively steady at 35%, and its share of GGR ticked up to 32%.
BETTING ABROAD: Ontario Lottery and Gaming Corp. announced last week that casinos in the province will begin to introduce retail sportsbooks, Pat Evans of Legal Sports Report reported. The OLG launched retail sports betting at lottery retailers in August 2021, as well as ProLine+ for online ON sports betting. “We are proud to have worked closely with the gaming industry and our partners in the Ontario government on this next phase of growth in Ontario’s gaming market,” OLG President and CEO Duncan Hannay said in a release. “Sportsbooks in casinos will offer a diverse and integrated entertainment experience for players, give our service providers a stake in the sports gaming market, and bring more jobs and economic benefits to host communities.”
EARNINGS RECAP: DraftKings reported Q3 revenue of $502M citing successful launches of its sportsbook and iGaming products in additional jurisdictions, atypically high hold rates largely from NFL wagering and reduced promotional intensity. Revenue results also beat analyst expectations. The company also reported monthly unique payers increased to 1.6M average monthly unique paying B2C customers, representing an increase of 22% compared to the third quarter of 2021. Additionally, the company raised it s revenue outlook for FY22 and initiated guidance for FY23. "DraftKings had a very strong third quarter. Our team continued to drive top-line growth through highly effective customer engagement and compelling product and technology enhancements while remaining focused on our path to profitability," said Jason Robins, DraftKings' co-founder, Chief Executive Officer and Chairman of the Board. "For the NFL season, we made investments in our mobile Sportsbook product, creating a differentiated and fun customer experience, and also realized unique marketing optimization benefits as an operator with truly national scale. Throughout 2022, we've struck the right balance between delivering differentiated top-line growth and driving operating efficiencies. We continue to be confident that we will achieve positive Adjusted EBITDA in the fourth quarter of 2023 based on the visibility we have into expected state launches." Jefferies analyst David Katz said DraftKings reported "strong" revenue and a narrower-than-expected EBITDA loss in Q3. However, "the bar may have been high given competitors' solid results this past week" and the new FY22 and FY23 guidance implied another $600M-$700M of EBITDA burn before turning a profit in Q4 of 2023, so he expects "a neutral to modestly negative reaction pending further commentaries," Katz told investors. Shares were down nearly 20% this morning.
Penn Entertainment's (PENN) Q3 results also beat analyst consensus. The company had adjusted EBITDA of $440.4M, an increase of 20.9% year-over-year and adjusted EBITDAR of $471.9M, a decrease of 1.7% year-over-year. Jay Snowden, CEO and president, announced: “We are pleased to report another solid quarter despite operating in an uncertain economic environment. PENN generated revenues of $1.6 billion and Adjusted EBITDAR of $471.9 million. Our strong retail results were highlighted by ongoing database growth and stable margin performance, which continued through October. Meanwhile, our successful sports betting launch in Kansas, from both a retail and online perspective, underscores the advantage of our leading omnichannel strategy. In Ontario, we are enjoying early success during our first football season while benefitting from theScore Bet’s seamless transition to our own fully-integrated, proprietary tech stack. Based on our third quarter results and our continued consistent performance, 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." CBRE analyst John DeCree lowered the firm's price target on Penn to $54 from $57 but maintained a Buy rating on the shares. The company's Q3 results were "solid" with better casino trends offsetting a slightly wider than expected Interactive loss due to some one-time items, the analyst tells investors in a research note. DeCree added that the regional casino margins remained comfortably in the 37% range, which should be "sustainable absent a broad recession".
Bally's (BALY) noted third quarter revenue of $578.2M and adjusted EBITDA of $151M. CEO Lee Fenton said, "In Q3, Casinos & Resorts benefited significantly from the first full quarter of integration of our regional casino properties. We also welcomed Tropicana Las Vegas into the mix and will continue driving our omni-channel portfolio in the U.S. International Interactive returned to growth in the U.K., with record margins across the platform, offset by foreign exchange headwinds, while North America Interactive experienced continued growth with New Jersey iGaming and the launch of our new combined app housing both Sports and iGaming in Ontario. We are evaluating our money losing businesses in North America Interactive and refocusing efforts where we have faster paths to profitability."
Melco Resorts & Entertainment (MLCO) came up short of analyst expectations in its Q3 earnings report. Lawrence Ho, chairman and CEO, commented, "Our results for the third quarter of 2022 were impacted by the casino closures in July and the travel restrictions imposed across mainland China and Macau. In July, the Macau government implemented preventative measures against the pandemic and our casinos were closed for 12 days. Following the re-opening, the operating environment remained challenging given the continuing tight travel restrictions, but we are encouraged by the recent re-opening of Macau to international tourists from designated countries as well as the increase in visitation over the October Golden Week. We are also cautiously optimistic that the granting of e-visas and group visas, which commenced on November 1, 2022, will lead to a gradual increase in visitation. We submitted our proposal to the public tender for the award of new gaming concessions on September 14, 2022 and it has been a smooth and transparent process. We fully support the Macau government's initiatives to further develop Macau as Asia's premier destination for international tourism. Our integrated resorts offer a wide range of unique non-gaming amenities, and we plan to leverage our experience to provide additional tourist attractions in Macau. Our proposal reinforces our commitment to Macau, and we look forward to playing a leadership role in partnering with the Macau government to execute on its vision."
Caesars (CZR), on the other hand, beat expectations in its third quarter report on Tuesday. The company noted record consolidated adjusted EBITDA in the quarter. Tom Reeg, CEO of Caesars Entertainment, Inc., commented, "Our third quarter results reflect a new quarterly record for consolidated adjusted EBITDA. Results in the quarter also reflect a new quarterly record for our brick and mortar properties led by a new all-time high third quarter EBITDA performance in our regional segment and continued strength in Las Vegas. Caesars Digital reported strong revenue growth in the quarter and a smaller than expected EBITDA loss driven by improved operating efficiencies." The company mentioned on its earning conference call that it no longer is looking to sell a Las Vegas strip property, noting October was strongest month in history of Las Vegas for the company.
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 Entertainment (PENN), Rush Street Interactive (RSI) and Wynn Resorts (WYNN).
DraftKings
-4.28 (-27.30%)
Rush Street Interactive
-0.325 (-8.14%)
MGM Resorts
+2.015 (+6.42%)
Wynn Resorts
+3.65 (+5.49%)
Use FLUT
-3.67 (-5.54%)
Penn Entertainment
+1.28 (+4.11%)
Bally's
+0.58 (+2.88%)
Melco Resorts
+0.505 (+8.57%)
Caesars
-0.65 (-1.51%)
Accel Entertainment
+0.2 (+2.10%)
Boyd Gaming
+1.35 (+2.47%)
Churchill Downs
+2.78 (+1.40%)
Gan Limited
-0.08 (-4.76%)
Genius Sports
-0.42 (-7.76%)
Las Vegas Sands
+2.18 (+5.76%)