Bet On It: Online sports betting returns to Florida

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: Hospitality workers in Las Vegas have reached a tentative labor deal with Wynn Resorts (WYNN), reported Reuters, citing the union. The new five-year agreement covers 5,000 employees at Wynn. 

The Culinary and Bartenders unions representing Las Vegas Strip workers struck a tentative deal with Caesars Entertainment (CZR) as the casino company tentatively agreed to a new five-year contract covering about 10,000 workers at nine Las Vegas properties, wrote The Wall Street Journal’s Dean Seal. 

MGM Resorts (MGM) announced that its board of directors had authorized a new $2B share repurchase plan, which is in addition to the Company’s existing February 2023 repurchase plan.

Gan Limited (GAN) announced that the company has entered into a definitive agreement and plan of merger with Sega Sammy Creation, or SSC, a wholly-owned subsidiary of Sega Sammy Holdings, an international conglomerate operating in the entertainment, gaming and resorts businesses. Under the merger agreement, at the effective time of the merger, each of Gan’s issued ordinary shares will be converted into the right to receive in cash $1.97 per share, which reflects a premium of 121% over the closing price of Gan’s ordinary shares on November 7, the last trading day prior to the date of this announcement. The proposed merger is subject to the approval of Gan shareholders. The company will ask its shareholders to consider and vote to approve the merger agreement at a special meeting of shareholders, which is expected to be held no later than March 31, 2024. Completion of the merger is not subject to a financing condition but is subject to the accuracy of the representations and warranties, performance of the covenants and other agreements included in the merger agreement, and customary closing conditions for a transaction of this type, including notification or approval with various gaming regulatory authorities. Assuming satisfaction of those conditions, the company expects the merger to close during the fourth quarter of 2024. If the merger is approved by Gan’s shareholders and is completed, all outstanding Gan ordinary shares will be acquired for $1.97 per share in cash; Gan’s ordinary shares will no longer be subject to public reporting requirements under the Securities Exchange Act of 1934; and its ordinary shares will no longer trade on any market. Upon completion of the merger, GAN will become a wholly owned subsidiary of SSC. The Gan board of directors formed a special committee, comprised solely of independent directors, to consider the transaction and to negotiate the price per shares and the terms of the merger agreement, with the assistance of financial and legal advisors. Based on the unanimous recommendation of the special committee, the Gan board of directors determined that the $1.97 price per share constitutes fair value for each company ordinary share, and determined that the terms of the agreement, the merger and the other agreements and transactions contemplated by the merger agreement are in the best interests of the company and its shareholders. Macquarie downgraded Gan Limited to Neutral from Outperform with a $1.97 price target after the company agreed to be acquired for $1.97 per share in cash by a wholly-owned subsidiary of Sega Sammy Holdings.

Bragg Gaming (BRAG) announced it has extended its agreement with Entain (GMVHF) to supply Entain’s Dutch iGaming operator, BetCity.nl, with the company’s player account management, or PAM, platform until 2025. BetCity.nl will also continue to utilize Bragg’s content and product delivery services on an exclusive basis for the duration of the extended PAM agreement, allowing Bragg to provide its proprietary, exclusive and aggregated casino content as well as the delivery of sports betting products to customers of the leading Dutch market operator. In addition, Bragg will integrate with several new iGaming suppliers to further enhance the localized content portfolio the company provides to the Netherlands market.

Elys Game Technology (ELYS) announced a market access agreement with Caesars Entertainment (CZR) that unlocks immediate access to the lucrative Colorado sports betting market. This strategic agreement signals Elys’ first entry into the North American mobile sports betting landscape. With the introduction of the Company’s “5D by Elys” mobile app under the recently unveiled SportBet.com brand, the Company presents a comprehensive sports betting platform enriched with advanced features and seamless cross-platform compatibility. This agreement potentially positions Elys for a strategic launch of its North American online sports betting aspirations. While the commencement of online operations is contingent upon pending regulatory approvals, the agreement with Caesars Entertainment allows Elys to launch its online sportsbook operations in Colorado. Elys intends to expand its market position by offering its new “5D by Elys” mobile app to sports bettors across multiple states through future market access partnerships. This initial agreement empowers Elys to deliver a personalized and captivating gaming experience, firmly establishing its leadership in the industry.

FLORIDA FIGHT IS WON: Online sports betting has returned to the state of Florida after “an arduous two year journey,” reported Action Network, which noted that the only online book available in the state – Hard Rock, owned by the Seminole Tribe – has begun taking online bets as of Tuesday morning for select users. Craig-Hallum said that to the firm’s surprise, online sports betting has returned to Florida. While there is a slim possibility of the app shutting down again, the firm thinks the precedent is clear and that “sports betting is back in Florida.” While traditional sports books will not benefit from its launch, Craig-Hallum thinks data providers Sportradar (SRAD) and Genius Sports (GENI) will be the biggest beneficiaries. The firm has Buy ratings on both stocks with price targets of $18 and $15, respectively.

EARNINGS RECAP: A number of remaining companies in the space reported third quarter earnings this week. Starting with Wynn, which beat analyst estimated in Q3. “Our third quarter results reflect continued strength across our property portfolio,” said Craig Billings, CEO of Wynn Resorts, Limited. “Our teams at Wynn Las Vegas and Encore Boston Harbor delivered a new third-quarter record for Adjusted Property EBITDAR at our combined North American properties as we continue to elevate our properties above those of our peers. In Macau, the recovery continued to progress during the quarter, with particular strength in our mass gaming, luxury retail and hotel businesses. On the development front, construction on Wynn Al Marjan Island is well underway, and we are confident the resort will be a ‘must see’ tourism destination in the UAE.” Deutsche Bank lowered the firm’s price target on Wynn Resorts to $124 from $140 and keeps a Buy rating on the shares post the Q3 report. Macau came in lighter than expected on a headline EBITDA basis, and operating expenses “crept a bit,” in conjunction with programming and non-gaming elements, the analyst told investors in a research note. However, the firm would be buyers of the stock on weakness.

Super Group (SGHC) highlighted record revenue in the quarter, surpassing last year’s figure. Neal Menashe, CEO of Super Group, commented: “Super Group has delivered yet another quarter of solid results, having achieved our highest ever revenue for a third quarter, as well as new all-time highs for both our customer numbers and deposits. I remain encouraged by our very strong customer engagement and continued expansion of our global iGaming offering.”

Bragg Gaming (BRAG) came up short compared to revenue consensus in Q3. “Bragg’s initiatives to position the business as a leading content-driven iGaming B2B provider as well as our disciplined expense management combined to drive growth in third quarter revenue, gross profit and Adjusted EBITDA, as well as a quarterly Adjusted EBITDA margin of 16.9%,” said Matev Mazij, CEO for Bragg. “Third quarter year over year revenue rose 8% to EUR 22.6 million (USD $24.0 million), gross profit increased 13.5% to EUR 11.9 million (USD $12.6 million) and Adjusted EBITDA increased more than 70% to EUR 3.8 million (USD $4.0 million). These results reflect, in part, a revenue mix shift to higher-margin products including in-house created proprietary content, exclusive third-party content, and turn-key Player Account Management (“PAM”) and managed services partnerships, alongside our ongoing cost control actions.” JMP Securities upgraded the stock to Outperform from Market Perform with an $8 price target. Trading multiples across online gaming do not reflect Brag’s strong fundamentals, the analyst told investors in a research note. The firm believes the sale of Gan Limited for five-times 2025 consensus EBITDA should set a floor for the value of a business-to-business business. It sees Bragg, trading at 4.2-times consensus EBITDA, as a “superior business model given the growth pipeline and cash flow.” JMP thinks content creation is an attractive, high-growth business, and views management and the company’s operations in a favorable light.

MGM Resorts cruised past analyst consensus in the third quarter as the company looked to get past its cybersecurity incident in September. “We started the quarter with great momentum across our businesses. While we were faced with a difficult cybersecurity issue in September, our employees rose to the occasion with incredible resilience and determination. With the incident now behind us, we are a stronger company having been through the challenge,” said Bill Hornbuckle, Chief Executive Officer and President of MGM Resorts. “Going forward we have much to be optimistic about with Formula 1’s inaugural Las Vegas race next week and early next year the debut of the MGM Collection with Marriott Bonvoy followed by the Super Bowl. Beyond these catalysts, MGM China is performing exceptionally well, and we have a pipeline of development opportunities including New York and Japan alongside the growth and development of our international digital business and BetMGM.” Stifel lowered the firm’s price target on MGM Resorts to $55 from $59 and kept a Buy rating on the shares. The company’s Q3 capital return program far exceeded the firm’s expectations and its LV Strip results were solid, the analyst told investors. The firm is now modeling a moderate recession starting in the second half of 2024. While Stifel believes it is currently being “overly conservative” with its estimates of MGM Resorts, the firm noted it is “prudent” to do so given how low investor expectations are.

Lastly, Melco Resorts & Entertainment (MLCO) rounded out the companies reporting earnings this week, surpassing last year’s EPS and revenue numbers. Lawrence Ho, chairman and CEO, commented, “Macau’s recovery continued to grow from strength to strength into the third quarter of 2023, especially during the summer months, with our property visitation and casino player hours benefiting from this growth. We had solid performance over the October Golden Week and we saw a robust recovery during the remainder of October. Both gaming and non-gaming segment revenues improved, reinforced by our commitment to invest in world class entertainment and enhance our non-gaming amenities. Our market leading design standards were recognized by Prix Versailles with Morpheus being the only hotel in Macau to have the honor of being included as one of the World’s Most Beautiful Hotels. City of Dreams Manila continues to generate solid earnings with a strong margin profile. On the other hand, after a successful opening, City of Dreams Mediterranean has been impacted by the conflict in Israel. Our teams are working on re-aligning our marketing strategy. Food waste reduction continues to be a key focus of our sustainability strategy with plate waste being the most challenging area to address. With clean plate awareness campaigns taking place almost daily in our staff dining areas at City of Dreams Manila and the implementation of AI technology, plate waste per cover has reduced by more than 60%.”

After all the companies in the sector reported, BofA said the main points to note are:

1. The gaming customer base remains steady, despite occasional competition, the introduction of new offerings, or promotional activities.
2. Profit margins in regional areas are resilient, with recent challenges faced by BYD (refer to the report) seeming mostly specific to their circumstances
3. There is robust demand in Vegas, but margins will be impacted by inflation and expenses related to unions
4. DraftKings (DKNG) is performing exceptionally well in all aspects of its operations.

NFL WEEK 9: In the ninth week of the NFL season, there were results that favored sports enthusiasts, as only two underdogs secured outright victories and just four managed to cover the spread, Canaccord told investors in aresearch note. The Atlanta Falcons, who were favored by more than a field goal, were the sole team to lose outright, succumbing to the Minnesota Vikings after surrendering a late lead. The Chicago Bears, as the only substantial underdog, covered the spread. Notably, favorites emerged victorious and covered the spread in all four standalone games for the week. However, 11 out of the 14 total games, including those four, went under the projected total, bringing the season’s underperformance rate to 61%. In New York during the eighth week of the 2023 NFL season, the industry-wide handle experienced a remarkable 53% year-over-year growth, reaching a record $527 million. This surge was attributed to a vibrant sports calendar that featured the commencement of the NBA and NHL seasons, along with the World Series. Despite this, gross gaming revenue, or GGR, saw a decline of approximately 15% year-over-year, settling at $29M. DraftKings observed a sequential decline in its handle share, dropping to 28% last week. However, its weekly hold of 6.1% surpassed FanDuel for the third time in the past four weeks, contributing to a 520 basis points year-over-year expansion in its GGR share, which reached 31% for the week. FanDuel achieved a season-high 52% GGR share during week eight, driven by strong engagement. The company’s handle nearly doubled year-over-year, reaching $275M. In the fourth quarter so far, total New York sports betting handle has seen a 35% year-over-year increase, and gross gaming revenue has grown by 14% year-over-year. In October, DraftKings’ handle in the Empire State rose by 34% year-over-year, while its GGR increased by 45% year-over-year. FanDuel’s handle for the quarter increased by 46% year-over-year, and its GGR rose by 10% year-over-year in the fourth quarter.

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).