Bet On It: Betting companies outshine expectations in earnings season

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: WynnBET (WYNN), the online casino and sports betting app from Wynn Resorts, announced that six of its states are now available on the new WynnBET app. The new multi-state platform replaces existing state specific apps, bringing players several improved features including faster deposits and withdrawals, one app and login across all states, a travelling wallet, more sports markets, and more casino games. Players with existing accounts in Arizona, Colorado, Indiana, Louisiana, Tennessee, and Virginia will be prompted to download the new app and login using their existing login information. All existing bets, funds, and Wynn Rewards points will be safely transferred automatically.

Macau’s gaming bureau reported July gross revenue from games of fortune in the region was up 4082.9% year-over-year to 16.662B patacas.

Churchill Downs announced that Churchill Downs Racetrack will resume live racing for the regularly scheduled meet beginning September 14, 2023. The meet will take place following a temporary suspension of racing operations to conduct an internal safety review. Following a comprehensive evaluation of existing safety protocols and a thorough assessment of industry best practices, Churchill Downs has implemented several key enhancements to further ensure the safety and well-being of equine and human athletes. Key elements include: Infrastructure Upgrades: Analysis by multiple leading industry experts found no issues with the racing surfaces, however, to further maximize surface oversight and consistency, the Racetrack has invested in additional new surface maintenance equipment and committed to doubling the frequency of surface testing. Increased Veterinary Oversight: Additional resources will be added to CDI’s highly qualified veterinary team to provide additional monitoring and specialized care for horses and assist in pre-race inspections and entry screening. Collaboration with Industry Experts: Work will continue with HISA and other industry experts to predict at-risk horses using up-to-date data and advanced analytic techniques. Establish Safety Management Committee: A new safety committee will be established consisting of horsemen designees, racetrack employees and veterinarians to candidly discuss concerns and observations to constantly provide real time feedback on areas of improvement.

Flutter Entertainment (PDYPY) and Fox Corp. (FOX) announced the decision to close sports betting platform Fox Bet. A phased closure of Fox Bet’s operations will take place between July 31 and August 31. Flutter operated Fox Bet as part of The Stars Group US along with the U.S. facing operations of PokerStars. Flutter will retain ownership of PokerStars, in addition to US sports betting market leader FanDuel. Fox will retain future use of the Fox and Fox Bet brands, including FOX Bet Super 6, and intends to launch an all-new FOX Super 6 game later this summer. Fox will continue to hold its option to acquire 18.6% of FanDuel and in addition holds a 2.5% stake in Flutter.

Bragg Gaming (BRAG) announced that it has launched its new proprietary content and Remote Games Server, or RGS, technology with FanDuel (PDYPY) in Michigan and Connecticut. FanDuel’s players in Michigan and Connecticut now have access to an initial selection of games from Bragg Studios brands including Atomic Slot Lab, Indigo Magic and Spin Games – as well as selected exclusive Powered by Bragg titles from third-party developers. The launch of Bragg’s new exclusive content with FanDuel in Michigan and Connecticut represents an extension of an existing collaboration between the two online gaming companies in North America, with Bragg’s Spin Games content already live with the operator in New Jersey and Ontario. In addition, the company began rolling out its newest Bragg Studios content with FanDuel in Ontario in June.

EARNINGS RECAP: Among the number companies that reported strong second quarter earnings this week, DraftKings (DKNG) shares were up double digits.. In the company’s report yesterday, DraftKings surpassed analyst consensus in both EPS and revenue. “DraftKings produced outstanding results for the second quarter of 2023. We grew revenue at an impressive year-over-year rate, captured additional GGR share in a cost-effective manner, and maintained our focus on operational efficiency,” said Jason Robins, DraftKings’ CEO and co-founder. “The positive Adjusted EBITDA that we generated in the second quarter exceeded our guidance, and we are well on our way to achieving positive Adjusted EBITDA again in the fourth quarter of 2023 and for fiscal year 2024 and beyond. We are excited by the additional product features and functionality that we are introducing leading into football season and also look forward to another successful online sportsbook launch in Kentucky this fall pending licensure and regulatory approvals.” Additionally, the operator raised both its full-year revenue and adjusted EBITDA outlooks following the Q2 results. The company also provided fourth quarter revenue guidance that nearly doubled analyst expectations. “We are acquiring new customers efficiently while simultaneously retaining and monetizing our existing players through rapid product innovation, less promotions, and higher hold from better bet mix. Our unit economics are outstanding with older states generating more than enough cash to fund investment in new states. This performance, combined with fixed costs that grew at only a mid-single digit year-over-year percentage rate in the second quarter, resulted in an inflection to positive Adjusted EBITDA that we expect will occur again in the fourth quarter and for full year 2024.” Benchmark raised its price target on DraftKings to $37 from $32 and reiterated a Buy rating on the shares. DraftKings’ Q2 performance, which “markedly” exceeded consensus forecasts on both revenues and AEBITDA, along with revised 2023 guidance that raised revenue predictions by $315M and AEBITDA by $110M, was “a grand slam” that firmly cements the company’s place as “a front-runner in the digital sports entertainment and gaming industry,” the firm told investors.

Accel Entertainment (ACEL) also found itself above consensus in its earnings release. The companies chief executive called the quarter “record breaking”. Accel CEO Andy Rubenstein commented, “We are pleased to deliver another record-breaking quarter and I am excited by our future growth opportunities. Despite uncertain economic times, our revenues continue to grow organically outside of acquisitions. As we look beyond Illinois, we have greater visibility on new ways to further extend our position as a national leader in distributed gaming. We expect our strong balance sheet and locally focused business model will offer what we believe is one of the best returns in gaming.”

MGM Resorts (MGM) was firmly in the group of operators who overdelivered in the second quarter. The company touted its new agreement with Marriott (MAR) as a highlight of the quarter. “Beyond MGM’s outstanding second quarter performance, we also cemented a long-term agreement with Marriott which will provide us with an expansive customer booking channel to further bolster our profitability. Also, BetMGM reported that it achieved its first positive EBITDA quarter and remains on track to achieve its next milestone of second half profitability,” said Bill Hornbuckle, CEO and president of MGM Resorts. “Looking forward to the rest of 2023 and beyond, we are encouraged by the pacing of both Formula 1 and the Super Bowl and the announced relocation of the A’s, which will further solidify Las Vegas as the sports and entertainment capital of the world.” Stifel raised the firm’s price target on MGM Resorts to $59 from $56 and maintained a Buy rating on the shares. Based on the number of inbound questions the firm has got about MGM’s “slight margin miss” in Vegas and at the regional level, the firm believes that investors “haven’t fully grasped the fact that post-COVID margins were probably not fully sustainable over the long term” and contends it is “fair to say that margin expectations remain elevated and unrealistic.” However, instead of focusing on a slight margin drop, the firm would instead be focusing on how strong MGM’s core business continues to perform and it continues to believe the MGM story remains undervalued when comparing them to certain peers, the firm told investors. On the other end of the spectrum, Susquehanna lowered the its price target on the operator to $48 from $51 and kept a Neutral rating on the shares. The firm noted MGM Resorts’ results showed weaker margins and with several overhangs does not see anything material that could notably lead to upward estimate revisions or valuation levels.

In its Q2 conference call following its quarterly results, Caesars Entertainment (CZR) noted the company had “solid momentum” heading into the second half of the year. The company, along with a few others, highlighted strength in Vegas as a catalyst for the earnings beat. Tom Reeg, CEO, commented, “The second quarter of 2023 reflected continued strength in our business. Demand remains strong in both Las Vegas and our regional markets. Caesars Digital posted its first quarter of positive adjusted EBITDA since our rebranding to Caesars Sportsbook in the third quarter of 2021. Our capital investments are generating stronger than expected returns based on recent new property openings.” Stifel increased the firm’s price target on Caesars to $74 from $68 and backed a Buy rating on the shares. Vegas and regional casino fundamentals “remain solid with no signs of the consumer slowing,” the firm said in a post-earnings note. Stifel expects free cash flow generation will continue to surprise to the upside from here, which it argues “should in turn lead to accelerated debt reduction and bring more long-only investors back to this story.”

Melco Resorts & Entertainment (MLCO) got in on the Q2 Macau recovery posting revenue of $947.9M vs. $296.1M last year. Lawrence Ho, chairman and CEO, commented, “The strength of our Macau recovery is evident in the 43% increase in gross gaming revenue in the second quarter of 2023 compared to the first quarter of 2023. We’ve seen mass drop increase month-to-month and turnover in our premium direct VIP segment continued to exceed 2019 during the second quarter. Labor supply issues in Macau have been largely resolved. We have been able to provide our customers with Melco’s full suite of services and amenities. We expect to add another 560 hotel rooms to our portfolio with the opening of W Macau at Studio City in September and are well positioned to support the continuing increase of customers in Macau. The mass segment is also leading the recovery in the Philippines, continuing to outperform 2019 in the second quarter of 2023. And in Cyprus, we opened City of Dreams Mediterranean to the public in July after a successful soft opening in June, and we’re excited for its prospects as we ramp up our operations. Environmental sustainability is built into the core of our business and embedded in our operations. Examples of this include the sophisticated water filtration system installed in our waterpark at Studio City to reduce water consumption and improve water reuse and meticulously-designed sustainable packaging and amenities that are free of single-use plastics. We are also continuing our work towards achieving BREEAM certifications for Studio City Phase 2 and City of Dreams Mediterranean following the construction completion of these properties.”

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), Gambling.com (GAMB), Gan Limited (GAN), Genius Sports (GENI), Las Vegas Sands (LVS), MGM Resorts (MGM), Penn Entertainment (PENN), Rush Street Interactive (RSI), Super Group (SGHC) and Wynn Resorts (WYNN).