Bet On It: Legal sports betting goes live in Maine

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: Sports wagering is live in Maine, and Caesars Entertainment announced that its flagship sports wagering platform, Caesars Sportsbook (CZR), is accepting sports wagers on mobile and desktop in the Pine Tree State. Caesars Sportsbook launches through Caesars’ historic partnership with three of the Wabanaki Nations: the Houlton Band of Maliseet Indians, the Mi’kmaq Nation and the Penobscot Nation, furthering Caesars Entertainment’s longtime commitment to supporting Indian gaming.

Jay Snowden, Penn Entertainment (PENN) CEO and president, said: “We are extremely excited to announce the planned launch of ESPN BET prior to the active Thanksgiving week sports calendar that includes the NCAA college football rivalry week and the Super Bowl rematch of the Kansas City Chiefs and the Philadelphia Eagles televised on ESPN’s Monday Night Football. ESPN BET will be powered by our proprietary and proven technology platform, which continues to drive impressive performance in Ontario under theScore Bet brand for both online sports betting and iCasino. Our ESPN BET product will include a wide array of popular betting options, including featured bets, quick bets (micro-markets), player props, same game parlays and more. In connection with the launch, ESPN will be implementing an initial wave of exclusive integrations targeting their 200 million loyal fans across their linear and digital platforms, including an advertising campaign headlined by SportsCenter anchors Scott Van Pelt and Elle Duncan. Looking ahead, we will be introducing even deeper platform and media integrations with ESPN over the upcoming months, providing an unmatched and seamless media/betting experience that will appeal to sports fans across the country.

Bragg Gaming (BRAG) announced that it has launched its new content and Remote Game Server, or RGS, technology with BetMGM (MGM) in New Jersey. Egyptian Magic from Bragg’s Atomic Slot Lab studio is now available to BetMGM’s New Jersey customers, with further titles from the Company’s proprietary games studios and partner studios under its ‘Powered by Bragg’ program expected to roll out in the coming weeks. The content rollout is powered by the launch of Bragg’s new RGS technology with BetMGM.

BetMGM announced the opening of a new retail sportsbook at Isleta Resort & Casino in Albuquerque. This partnership marks BetMGM’s sports betting launch in New Mexico. The BetMGM Sportsbook at Isleta is 4,900 square feet and features 35 television screens, along with two VIP sections. The sportsbook also includes five betting windows and four betting kiosks.

Macau’s gaming bureau reported October gross revenue from games of fortune in the region was up 400.2% year-over-year to 19.501B patacas.

DraftKings (DKNG) announced it has reached an agreement in principle, subject to licensing and regulatory approvals, with the Passamaquoddy Tribe paving the way for the launch of its online sportsbook in Maine. The agreement between DraftKings and the Passamaquoddy Tribe will allow sports fans 21 years of age and older to access DraftKings’ innovative, immersive and entertaining sportsbook app experience that includes a variety of wagering options including pre-match and in-game options as well as signature, built in-house same-game-parlay features. In response to the tragic events in Lewiston, ME on October 25, DraftKings will be donating $100,000 to Lewiston-Auburn Area Response Fund to support those affected. With Maine Community Foundation as a conduit, 100% of every dollar donated will be allocated to people impacted and the organizations that will help guide Lewiston-Auburn through the process of healing.

Nevada reports September statewide gaming win up 1.69% to $1.27B. Nevada reports September Las Vegas Strip gaming win up 2.79% versus last year to $741.23M.

Casino stocks have been big losers over the past two months, falling 12%. Now it may be time to bet on a gaming comeback-in Las Vegas and beyond, Teresa Rivas (BYD), Penn and Wynn Resorts (WYNN) look cheap, even relative to where they were trading before the pandemic, the author notes.

EARNINGS RECAP: A number of companies in the space reported quarterly results this week. DraftKings results came in ahead of analyst expectations on Thursday, Monthly unique payers, or MUPs, increased to 2.3M. Average revenue per MUP was $114M in Q3. “Our fantastic third quarter results demonstrate the positive impact of our product and technology investments as well as excellent preparation and execution by our entire organization,” said Jason Robins, DraftKings’ CEO and co-founder. “Our new and differentiated features and functionality have created an exceptional user experience that sustains engagement for our mobile sports betting and iGaming customers. We also delivered another successful online sportsbook launch in Kentucky and look forward to additional launches in Maine and in North Carolina, pending licensure and regulatory approvals. We expect to generate approximately $200 million of positive Adjusted EBITDA in the fourth quarter of 2023 based on the midpoint of our updated fiscal year 2023 guidance and look forward to sharing our multi-year outlook at our Investor Day on November 14th.” The company followed up their third quarter results with elevated full-year 2023 guidance. Additionally, DraftKings initiated full year 2024 guidance that beat consensus. Shares gained 8% consequently. Canaccord raised the firm’s price target on the stock to $46 from $42 and reiterated a Buy rating on the shares. The firm said they reported another set of very impressive results, with both revenue and profitability coming in well ahead of consensus in Q3 as investments the company has made over recent years to strengthen its organization and enhance its product offering continue to drive market share gains.

Penn Entertainment followed suit and also topped estimates in its third quarter report. The company highlighted its transition to ESPN Bet and its expected launch next month. CEO and president, said: “Our property level performance was stable in the third quarter reflecting solid results from our rated traditional core customer. We continued to see relative strength in several locations, including our casinos in Ohio, Kansas, Massachusetts, and Missouri, which highlights the benefits of our geographically diversified portfolio of premier regional gaming assets and the addition of retail sports betting offerings at many of our properties. Third quarter Interactive segment results reflect curtailed marketing in the U.S. as we prepared to transition our online sportsbook to the ESPN BET brand. Finally, we are excited to announce that we plan to simultaneously launch ESPN BET on November 14 across the 17 states in which we operate online sports betting, subject to final approvals. This strategic alliance is expected to further expand our digital ecosystem and drive re-engagement with the millions of customers in our digital and retail databases, leading to compelling cross-sell opportunities.”

On the other side of the coin, Bally’s (BALY) results fell short of analyst expectations. The company was also forced to cut guidance, citing its delayed launch of its temporary Chicago casino. The company said, “This change reflects the later-than-expected opening of our Chicago Temporary Casino and our decision to pause reinvestment and operational changes at the Tropicana while awaiting MLB’s decision on the Oakland A’s relocation. The MLB’s vote on the Oakland A’s relocation plans is scheduled to take place in November. We are also updating recent foreign exchange headwinds at Bally’s International Interactive due to the strengthening of the U.S. dollar. Guidance for rent expense remains at $125M, for straight-line GAAP rent while actual cash rent is $119M, for the FY23. Bally’s is maintaining its 2023 capital expenditure guidance of $160M in aggregate as we complete our capex expansion cycle. This amount excludes the investment in the Chicago Temporary Casino development project, which is now complete.” Barclays lowered the firm’s price target on Bally’s to $10 from $12 and kept an Equal Weight rating on the shares post the Q3 report. The firm’s 2024 estimates moved lower on slower Chicago ramp and Tropicana performance, offset by international interactive strength. The analyst sees better risk/reward elsewhere in U.S. gaming.

While Sportradar’s (SRAD) EPS fell short of last year’s results, its revenue came in ahead of 3Q22. The company noted that it reduced its workforce earlier in the week. Carsten Koerl, CEO of Sportradar said: “As the leader in our industry, we aim to consistently deliver value to our clients, partners and shareholders. For 2023 we remain on track to deliver a strong growth year and are well positioned to maintain that momentum into 2024. This week we announced a reduction in our global workforce as part of a broader set of strategic initiatives that will enable us to further strengthen our client-centric organization and focus on the market opportunities ahead of us.” Citi lowered the firm’s price target on Sportradar to $15 from $18 and maintained a Buy rating on the shares post the Q3 report. The company lowered its revenue guidance for the full year, while raising the low end of its adjusted EBITDA outlook, the analyst tells investors in a research note. The firm cites a lower revenue multiple, to reflect higher sports rights costs, for the target drop.

On the other hand, Caesars (CZR) experience an earnings beat in the third quarter, boasting an all-time consolidated adjusted EBITDA record. Tom Reeg, CEO of Caesars, commented, “During the third quarter of 2023, the Company achieved an all-time consolidated Adjusted EBITDA record. We experienced Adjusted EBITDA growth year over year in all three of our primary operating segments including Las Vegas, Regional and Caesars Digital. Our Regional segment achieved an all-time quarterly Adjusted EBITDA record as we harvest the recent portfolio investments within this segment.” Caesars noted on its quarterly conference call that Las Vegas continues to benefit from one of the strongest event calendars in the U.S and that it expects 2024 to be a busy year. Barclays lowered the firm’s price target on Caesars to $67 from $75 and backed an Overweight rating on the shares. The company delivered on Q3 estimates, mostly driven by a surprisingly strong result in Regionals, the analyst tells investors in a research note. However, the firm’s forward estimates edge lower on Las Vegas wage pressure and general macro concern. Caesars remains its top pick in gaming.

RETAIL: The Seminole Tribe of Florida has revealed that they will introduce in-person sports betting at three of their casinos located in Hollywood and Coconut Creek on December 7, David Purdum of ESPN reported. Furthermore, additional venues will follow suit on December 8 and December 11. This announcement coincides with a recent United States Supreme Court ruling that upheld the Seminole Compact with Florida, allowing the tribe to provide sports betting services. This development is the latest chapter in a protracted legal dispute that began in 2021 between the Seminole Tribe and other gaming operators in Florida. This legal battle commenced after Governor Ron DeSantis agreed to a new gaming compact, and although Hard Rock Casinos initially started accepting bets in November 2021, they had to abruptly cease operations due to legal challenges.

NFL WEEK 8: The NFL plays a crucial role in the performance of U.S. sports betting companies due to the substantial amount of betting activity centered around football, especially during weeks 4-17 of the 2023 NFL season, which coincide with the fourth quarter, Canaccord told investors in a research note Week eight of the 2023 NFL season showed more mixed but still positive outcomes for the sports betting industry, according to the firm. Only four of the sixteen underdogs managed to secure outright victories, one of which involved a significant point spread. However, the Broncos’ surprise win over the Chiefs was particularly significant for operators as it likely nullified many teaser and parlay bets. In total, underdogs had a 7-7-2 record against the spread for the week, and half of the sixteen games ended with scores below the projected totals, including all three prime-time matchups. Strong engagement in established markets, the introduction of sports betting in several new states, and generally advantageous outcomes for operators all contributed to a roughly 34% year-on-year growth in gross gaming revenue, or GGR, for US sports betting during the third quarter, Canaccord noted. This growth was observed in states that reported operator-level data. Additionally, DraftKings nearly doubled its sports betting GGR year-on-year during the same period, signaling the potential for better-than-expected Q3 results compared to consensus expectations, thanks to ongoing market share gains and improvements in the structural hold rate. In week seven of the 2023 NFL season, handle in New York increased by 27% year-on-year, reaching $464M, while gross gaming revenue saw a 20% year-on-year rise, totaling $40M. DraftKings experienced a slight dip in its handle share compared to the previous week, dropping to 31%. However, its weekly hold rate of 10.4% was slightly higher than FanDuel’s, which helped DraftKings expand its GGR share by 540 basis points year-on-year, reaching 38% for the week. In states where operator-level iGaming data is reported, industry-wide GGR increased by 22% year-on-year. DraftKings’ GGR grew by 46% year-on-year, while FanDuel’s increased by 43% year-on-year in these states. During the early part of Q4, the total sports betting handle in New York increased by 30% year-on-year, and GGR saw a 22% year-on-year growth. DraftKings’ handle in New York went up by 36% year-on-year in the first four weeks of October, and its GGR increased by 55% year-on-year during the same period.

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).