Month: May 2022

This is a new Q1 record, nearly matching the all-time quarterly record, which was set in Q4 2021 ($14.35bn).

Total commercial gaming revenue for Q1 2022 increased nearly 29% year-over-year, as 32 of the 34 jurisdictions that offer commercial gaming surpassed Q1 revenue from last year. Three of the 34 set quarterly records, including Arkansas recording $147.4m, Florida, $182.0m and New York at $996.6m.

The strong start to the year was punctuated by March’s revenue performance of $5.31 billion. The month marked the highest-grossing revenue month in industry history.

“Consumers continue to seek out gamin entertainment options in record numbers,” said AGA president and CEO Bill Miller.

“Q1’s strong results build on the industry’s record year in 2021 despite continued headwinds from supply chain constraints, labour shortages, and the impact of soaring inflation.”

Land-based gaming also showed growth despite the traditional ‘seasonal slowdown’.

Breaking revenue down by vertical, slot games recorded the highest Q1 at $8.2bn, up 19.4% since Q1 2021. Table games also experienced a 4.72% increase to $2.38bn, sports betting increased 64.6% to $1.58bn, and igaming was up 53.9% to $1.21bn.

“Four years post-PASPA, legal sports betting’s success is proving what we’ve known all along: American consumers are eager to wager within the protections of the regulated market,” Miller added. “It also reinforces the need to stamp out offshore, illegal operators who prey on vulnerable customers.”

This comes after AGA announced the newly released ‘State of the States 2022’ report. The report explores the industry’s development since the 2021 pandemic, highlighting the economic and regulatory growth in US commercial gaming.

Miller said the report showed that the “industry’s success goes beyond the bottom line and into communities across the country. The record state and local tax contributions fund vital services from infrastructure and education to healthcare and emergency services.”

The report highlighted 2021’s new annual record for commercial gaming, reaching $53bn – a 21.5% increase from the previous high in 2019. Operations generated a record $11.7bn in direct gaming tax revenue paid to state and local governments, which is up 75% from 2020.

The Las Vegas Strip maintained its top spot for commercial gaming markets, generating over $7bn in revenue year-on-year. It was closely followed by Atlantic City, Chicagoland and Baltimore-Washington D.C.

Betting technology, content and services brought in $49.7m, which was up by 27.4% from Q1 of 2021. The majority of the increase, $7.3m, was due to new customers.

Media technology, content and services experienced the fastest growth, up by 157.3% to $24.1m. This, Genius said, was “primarily driven by the acquisition of new customers in the Americas and Europe primarily for programmatic advertising services, and the inclusion of revenues from recent acquisitions”.

Sports technology and services brought in $12.1m, up 124.0%. Most of this growth was also acquisition-related, with Genius highlighting the acquisition of Second Spectrum.

Looking at a geographical breakdown of revenue, just over half – $44.2m – came from Europe, up 11.3%. The Americas brought in $36.0m, up 246.1%, while revenue from the rest of the world grew by 56.8% to $5.7m.

However, costs of revenue grew much more quickly, by 152.7% to $101.4m. A major reason for this growth was stock-based costs of revenue, which came to $22.5m in Q1 of 2022 after no such costs the year before. These stock-based costs of revenue refer to warrants that were issued to the National Football League (NFL) when Genius became the league’s data partner, allowing the NFL to purchase Genius shares for $0.01 each.

As a result, the business reported a gross loss of $15.5m, compared to a gross profit of $13.6m in 2021.

Like costs of revenue, operating expenses also grew more quickly than revenue did, by 196.7% to $49.6m.

This included sales and marketing expenses, which were up 138.3% to $9.2m, and research and development costs, up 126.7% to $7.4m, as well as general and administrative costs of $32.8m, a 270.2% increase. These general and administrative costs included $13.9m in stock-based compensation, which again was a new outgoing.

As a result, Genius made an operating loss of $65.0m, after a $3.1m operating loss a year earlier.

The business then paid $391,000 in interest expenses, but made a $4.4m gain from the fair value remeasurement of contingent payments related to the Second Spectrum deal, plus an $8.7m gain from the change in value of warrants issued when the business went public and a $12.6m gain from currency exchange changes.

As a result, the business made a $39.6m pre-tax loss in the quarter, after a $5.8m loss in Q1 of 2021.

After $576,000 in taxes, Genius made a net loss of $40.1m, compared to a $5.3m loss the year before.

The business also reported an adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) loss of $2.9m, which was 42% lower than the projected EBITDA loss.

“Our strong first quarter is a result of successful execution,” said Mark Locke, Genius Sports co-founder and chief executive. “We began 2022 with a comprehensive investor day, outlining our strategic plan and underlying assumptions supporting our financial outlook. 

“Our financial and operational achievements in the quarter demonstrate our ability to deliver on that plan and increase our competitive advantages through unique and proven technology.”

During its latest investor day, BetMGM reiterated its net revenue guidance for 2022 of $1.3bn (£1.06bn/€1.25bn), up from $850m in 2021. Executives also said BetMGM’s earnings before interest, tax, depreciation and amortisation (EBITDA) for the year should be similar to 2021, when the business reported an EBITDA loss of $430m.

However, chief financial officer Gary Deutsch noted that there was a change in the portions of this $1.3bn produced by different states.

“Within this guidance, the revenue mix is different than previously expected,” he said. “We expected lower New York revenue and higher revenue in our other online sports and igaming states.”

Deutsch then went on to outline why BetMGM had taken few steps to establish a foothold in New York. During April, the operator reported $5.0m in revenue from $142.2m in total wagers, placing it fourth in the market with a 4.8% share.

“The specific problem in NY is that it has a high 51% [tax on] gaming revenue and that it applies that rate to ‘phantom’ revenue from promotional credits,” he explained. “That means that the real tax rate on net gaming revenue is well over 100%.

“We simply can’t apply our capital against an irrational investment thesis. Players cannot continue to play if the house always wins, and the house cannot continue to play if it will always lose.”

However, Deutsch added that the business expects a more favourable tax environment to be implemented over time.

“We expect, however, for this tax environment to change and given the positions of Entain and MGM it makes strategic sense to take our time here,” he said.

Chief executive Adam Greenblatt, meanwhile, noted that it appeared unlikely that other states would adopt tax policies similar to those in New York.

“Fears of New York tax contagion are being eased by frameworks introduced in Ohio and Kansas,” he said. “It will be clear over time that these more sustainable tax systems lead to greater levels of play in the regulated market, which is beneficial to all interests.”

As a result of this, Deutsch said, the business has opted for a “conservative” marketing strategy in New York. Instead of spending heavily in the state, marketing investment has been diverted to other states.

This movement of marketing spend was something that chief marketing officer Matt Prevost identified as a key part of BetMGM’s overall strategy. By using results to prioritise where it spends, he said, the operator was able to compete with rivals pumping more into marketing.

“BetMGM spends hundreds of millions of dollars less than our primary competitors, by around $300m to $400m,” Prevost said.

“Central to our approach is flexibility. We limit the number of fixed marketing deals and move money from state-to-state based on performances.”

Greenblatt also added that there could be some concern about the industry over-marketing itself, and urged for caution in acquisition in order to prevent a backlash.

“We have a number of examples of what happens if these issues are not addressed over time: Italy, Spain, the UK,” he said. “The best way to sustain the health of the industry is to take a strategy of more responsible marketing. 

“BetMGM is taking steps to work with our industry peers to address this.”

Looking at the first quarter of 2022, Deutsch said revenue was in line with expectations at $271m, 58% ahead of Q1 of 2021. 

Deutsch added that the business expects to report positive earnings before interest, tax, depreciation and amortisation (EBITDA) by the end of 2023, though BetMGM does not expect to be EBITDA-positive for the year as a whole.

“In early 2023, the mix of player cohort vintages in the business will tip towards more mature positive-contribution cohorts,” he said.

Greenblatt also addressed questions of whether BetMGM could expand to further jurisdictions such as Latin America, something that he said is not on the horizon.

“Currently BetMGM’s exclusive jurisdiction for all things igaming and sports betting is the US,” he said. “Our shareholders have agreed specifically that BetMGM can compete in Canada but that’s about as far as we’ve got so far. It doesn’t make sense to look south yet.”

The investor day comes soon after MGM Resorts, which owns 50% of BetMGM alongside Entain, bid to acquire European online casino operator LeoVegas for $607m.

Bill Hornbuckle, chief executive and president of MGM Resorts, said at the time that the deal would allow MGM to offer online gambling across Europe and elsewhere outside the US. Greenblatt noted that as the focus was on other markets, the deal would not impact BetMGM in a significant way.

“BetMGM is exclusive in the US, so it doesn’t really affect us,” Greenblatt said. It doesn’t really have an impact on BetMGM at all. MGM and Entain remain committed to us and to our future.

“Where is there an impact? Well north of the border in Canada, LeoVegas has a strong existing position, but that doesn’t really change anything under MGM’s ownership.

“We’re going to continue with our plan and it doesn’t really change anything at the moment.”

Total revenue for the three months to 31 March 2022 was $358.5m (£293.4m/€344.8m), up from $278.6m in the corresponding period last year, with revenue up in all areas of the business.

Gaming revenue climbed 25.0% year-on-year to $261.5m, while food and beverage revenue rocketed by 117.3% to $28.9m, hotel revenue increased 44.8% to $24.9m, and retail, entertainment and other revenue was up 11.1% to $43.2m.

Breaking down revenue by each business segment, the Mohegan Sun Casino and Resort in Connecticut generated $215.5m in revenue, an increase of 14.0% on last year. Revenue at the Mohegan Sun Pocono in Pennsylvania also jumped 18.7% to $62.2m.

Revenue from the MGE Niagara Resorts Canadian segment hiked by 278.3% to $52.3m, despite land-based casinos in Ontario having been forced to close for 21 days in January in line with local novel coronavirus (Covid-19) measures. Casinos reopened at 50% capacity on 31 January, with these lifted on 17 February and all other measures removed on 1 March.

Elsewhere, management development and other revenue declined 23.1% to $15.6m, while all corporate revenue was down 90.6% to $241,000. Other revenue, reflecting the Mohegan Sun Las Vegas property in Nevada and MGE Digital online casino and sports betting operations, reached $13.3m in Q2.

Turning to costs and operating expenses were 28.7% higher at $301.0m. However, due to the increase in revenue this left an increased operating profit of $57.5m, up 28.1% year-on-year.

MGE also noted $60.2m in other expenses, primarily due to $52.3m in interest costs, which left a pre-tax loss of $2.7m, an improvement on the $19.2m loss posted at the same point in 2021.

The operator recovered $276,000 in income tax benefits, meaning net loss for the quarter was $2.8m, an 82.6% reduction from the $16.0m loss recorded in Q2 of last year. 

However, MGE also recorded $342,000 in losses attributable to non-controlling interests, as well as $8.4m worth of negative foreign currency translation, which meant comprehensive loss for the quarter was $11.2m, though this was still a significant improvement from a $26.5m loss in the previous year.

In addition, MGE said adjusted earnings before interest, tax, depreciation and amortisation (EBTIDA) increased 7.4% year-on-year to $86.7m for the quarter.

“Our consolidated adjusted EBITDA of $86.7m reflects our strong performance and ongoing focus on profitability,” MGE chief executive Raymond Pineault said. 

“Although visitation was somewhat impacted by the Omicron variant and poor weekend weather at our Northeast properties early in the quarter, the consolidated adjusted EBITDA margin of 24.2% was 234 basis points higher than the pre-Covid comparable fiscal 2019 quarter.”

Chief financial officer Carol Anderson added: “These results demonstrate MGE’’ ability to adapt to the ongoing Covid-19 pandemic and reflect the current stabilizing operating environment. 

“We have reintroduced some lower margin non-gaming amenities since the prior-year period, and last year also included temporary reductions in labour, marketing and entertainment expenses as well as deferred operating expenses that were necessary to operate within the early phases of the Covid-impacted environment.”

Publication of the results comes after it was announced last week that Kambi will provide MGE’s PlayFallsview brand with its online sportsbook technology when it launches in Ontario.

Mohegan will launch a betting and gaming brand in Ontario, named after its Fallsview casino resort. The sportsbook for this brand will be provided by Kambi, featuring its ice hockey and bet builder products.

Under the deal, Stats Perform will provide Atmosphere Sports viewers with real-time scores, stats, standings, betting lines and a range of other related content for its Atmosphere Sports channel.

The channel can play alongside a broadcast, allowing viewers to view news, insights and data without changing to another channel.

The agreement covers data related to US sports and football’s English Premier League.

“With Atmosphere’s unique market and Stats Perform providing advanced data and insights across a variety of sports, we are looking to bring a whole new level of sports storytelling to a vast new group of fans for years to come,” Stats Perform’s senior vice president of America sales and global partners and channels, Wayne Ford, said.

Atmosphere’s vice president of news and sports, Micah Grimes, added: “We are revolutionising the presentation of sports for businesses. Sports data and the real-time visualisation of that data are critical pieces of that puzzle.

“Stats Perform, with their global coverage, stood out in a competitive data market as the best partner to power our vision to success as we scale.”

Overall revenue for the three months through to 31 March 2022 amounted to S$314.5m (£184.7m/€216.7m/US$225.6m), up 20.5% from $261.0m last year.

Revenue from gaming operations at the Singapore integrated resort was up by 8.1% to $234.5m, while non-gaming revenue at the venue increased 25.7% to $76.3m. 

In addition, other revenue from the operator’s investment business, hospitality and support services rocketed by 931.8% year-on-year to $3.8m.

Genting Singapore did not disclose its full financial figures for the period, but it did note that adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) slipped 2.5% to $124.8m, mainly due to a rise in utilities expenses and the expiry of Covid-19 government support measures.

EBITDA from the Singapore integrated resort fell 3.3% to $130.6m, while the investment business, other hospitality and support services posted a loss of $5.7m for the quarter, though this was a shorter loss then $7.0m last year.

When also accounting for $3.2m in net exchange loss relating to investments, share-based payment and other expenses, this left $121.7m in EBITDA, up by 3.1% year-on-year, while net profit after tax was 17.1% higher at $40.4m.

“With Singapore reopening its international borders to fully vaccinated travellers from 1 April 2022 and further relaxation of Covid-19 related regulations, we are cautiously optimistic of the recovery trajectory,” company secretary Ong Jinq Her said.

“While we are encouraged by the gradual increase in footfall to our integrated resort, Resorts World Sentosa, we anticipate that the pace of recovery in leisure travel will be moderated by the limited flight schedules, high airfares and ongoing travel restrictions on visitors from certain countries.

“We continue to harness opportunities to refresh and build new visitor offerings to emerge stronger from the pandemic and capture any upswing in demand.”

There was a great penny- (dime? quarter?) dropping moment on a call last week with a major US player who shall remain nameless, for reasons forthcoming. 

“We’re happy to be last to market,” they said, of the US sportsbook market. “Let them kill each other over unrealistic CPAs for the next couple of years. We’ve got tons of cash reserves, and we’ll come in when the market’s corrected.”

Which of course seems to be playing out quite prophetically at the moment, or at least has been the case for the last six months. To understand why this is the case, and why the direction of travel will be reversed in the short term, we need to unpick why tech has recently fallen out of love with the market. 

Most gambling stocks trade at a higher private equity ratio (typically 60:100) than their FAANG (Tech’s ‘big five’ of Facebook, Apple, Amazon, Netflix and Google) counterparts (20:50). As such, a good portion of them were (justifiably) oversold in the latter part of 2021 and so far in 2022.

However, there will be a short-term correction, and it’s important to understand that it will happen soon. Look at the majority of gambling stocks’ growth curves for the last six months, and observe that most are currently exhibiting a typical inverse head-and-shoulders pattern. 

Legislative fomo

This means that there could be a healthy rebound in prices for the forthcoming quarter, as investors look to capitalise on state legislative fomo.

Sadly, this revival will be short-lived. Despite good expected growth in the upcoming quarters, at some point later this year there will likely be a not-too-unexpected profitability warning from the warring players. This will signal that the expected return on (American, sportsbook) investment will take longer than expected, and pushed to 2024 at this rate.

At this point, most funds would have quickly taken profits, leading to another dark chapter for US-focused gambling stocks. However, the interesting dynamic to be observed here will be the first wave of consolidation in gambling operators. 

Expect a few bold moves from some of the larger media players here, keen to take ownership of a cheapish full-stack operator with connections to many prospective states, possibly with a few European assets in tow. Fast-forward a few more quarters, and the media companies have moved in on the sportsbooks, now offering a fully integrated solution adjacent to their programming.

So far, so Barron’s. However, what’s recently becoming clear is that this is not the endgame for the US.

The spirit of yolo

To understand what’s now changed, it’s important to look at where capital was typically concentrated in the previous decade. Pre-2020s, and especially pre-regulation, most liquidity in the US came from old-school private equity players such as CVC and Apollo. 

These firms essentially unlocked the abilities for the likes of land-based casinos to buy up online operators and vertically integrate them into a full-stack, full-fat kitchen sink provider. Which works very well in boom season, but when markets contract it becomes very clear which operators are, well, operationally efficient, and which aren’t.

Which leads us to the unnamed US player. Remember them?

For the last few years, there has been a slow but steady growth of the so-called retail investor persona in the US. Brought to popular mainstream culture via WallStreetBets, but essentially raised to icon status through the likes of Robinhood and Lawnmower, the spirit of “Yolo!” has been kept well and truly alive over a large part of a decade thanks to that well-understood and well-managed sentiment in American markets: the day trader. 

And these markets know full well the ease of transition between recreational investor to moneyball punter. 

Now, while an investment platform might still see a bit of a stretch in converting and upselling a potential gambler, there is another sub-vertical in this category that has a totally different perspective. 

Web3 awaits

Make way for the web3 operator, the fully licensed crypto-exchange, home of shitcoins, NFTs and the all-important tokens, one of which may be tomorrow’s Bitcoin, Ethereum or Solana, but especially launching tomorrow’s sportsbook exchanges, and especially the next generation of crypto-casinos.

Think it’s unlikely? Then you haven’t really been paying attention. Why have crypto-exchanges dominated the Super Bowl, Formula 1 and now even FIFA? 

Hint: it’s not for sports fans to exchange tokens during the ad break. These new marketplaces understand that the next generation of gamblers won’t be riding odds off a sportsbook like the previous wave. 

They’re busy planning web3-powered exchanges: discord-driven marketplaces where user-harvested tokens provide the real battleground in gambling, creating a new way to generate odds among peers and even speculators. What these actual crypto-books will look like is mostly opaque for now, but we can get occasional hints from the likes of Topspin, Axie and Nitro. 

But even before then, their first move will likely be to acquire an existing (online-only) operator, ideally one with a web3 slant, and start to prepare them for the revolution.

Fund managers, relax; this is still a few years out. So, you can keep buying ‘oversold’ gambling stocks well into next year. 

But wait until the true cost of acquisition (and state taxes) starts to bite and then watch the great crunch unfold. And when the consolidation phase has begun, there will emerge the next generation of US sportsbooks. 

This revolution won’t be televised, it will just be tokenised.  

Senate Bill 84 was approved on 12 May after the Senate presented it to governor Laura Kelly earlier this week.

The bill allows sports betting to be included under Kansas’ expanded lottery act, and historical horse racing machines to be included under the Kansas Parimutuel Racing Act.

Read the full story on iGB North America.

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