U.S. Gaming Companies In The Black On Online Gambling

August 3, 2023
The latest quarterly earnings from MGM Resorts International, Caesars Entertainment and Bally’s Corp. have underlined the sharp focus of casino operators on reaching profitability in digital operations, as well as the importance of professional sports in Las Vegas.


The latest quarterly earnings from MGM Resorts International, Caesars Entertainment and Bally’s Corp. have underlined the sharp focus of casino operators on reaching profitability in digital operations, as well as the importance of professional sports in Las Vegas.

Presenting the company's second-quarter results, Bill Hornbuckle, CEO of MGM, reiterated that BetMGM was on track for second-half 2023 profitability. However, he steered clear when asked by J.P. Morgan analyst Joe Greff if there was an update on any further merger and acquisition aspirations in digital, beyond the two recent deals.

“We’re focused on working alongside our partners with a collective goal to maximize the growth and profitability of MGM and LeoVegas,” Hornbuckle told analysts during a conference call Wednesday (August 2) to discuss second-quarter earnings.

“I think we’re making good progress on both these fronts,” he said. “And that’s really all we’re going to say.”

BetMGM revenues

In early 2021, MGM made an $11bn bid to buy BetMGM’s co-owner Entain, but it pulled the offer within a month after Entain said the bid “significantly” undervalued the company. Analysts have since speculated that MGM could still return with an offer to buy Entain’s 50 percent stake in the joint venture.

As for LeoVegas, MGM acquired the European online gaming operator last year for $607m in cash, giving the company a global presence in the online casino market. In announcing the deal in May, Hornbuckle said LeoVegas and its “technology platform and pipeline for growth presents a compelling opportunity for our business to grow online.”

Per BetMGM’s release last week, the company generated $468m of net revenues in the second quarter and remains on track to hit management’s target of $1.8bn to $2bn of revenues in 2023. MGM also expects last quarter’s acquisition announcement by subsidiary LeoVegas of privately held Push Gaming to close later this year.

Hornbuckle discussed MGM’s latest financial results a day after Caesars CFO Eric Hession confirmed that the digital business of MGM's chief rival similarly produced a profit in the most recent quarter.

Positive adjusted EBITDA of $11m from $216m of net revenue compared to an EBITDA loss of $69m from digital operations last year, Hession said. “Results this quarter represent our first full quarter of EBITDA profitability since rebranding to Caesars Sportsbook in the third quarter of 2021.”

At a broader level, Caesars CEO Tom Reeg told analysts on Tuesday (August 1) that the casino company continues to pay down debt and was now in a position to contemplate acquisitions to accelerate revenue growth.

“Given where we are in the capital cycle, where we are with the performance of the business, we’re starting to look at what do you do with the free cash flow that will be generated in 2024 and 2025,” Reeg told analysts.

Eldorado Resorts closed on its $17.3bn acquisition of Caesars in July 2020, and initially insisted it would need to dispose of a Las Vegas Strip asset to pay down debt, before last year confirming that was no longer the case.

“I tell you, as you're sitting here today, three years after the Caesars transaction close, it was 30-60 days beyond the first time where I'm feeling where we can be offensive from an external opportunity standpoint,” Reeg said. “So, it has been a long road to get through. Everything that happened with COVID, the merger, we really, really feel like we're on strong footing as we head forward.”

Carlo Santarelli, an analyst with Deutsche Bank, reminded Reeg that his comments were a “little bit of a change” from his previous commentary around the ability to be aggressive with external opportunities.

“We don't have any of the chunky projects that we've had going, really, since the merger,” Reeg responded. “There's some meaningful projects in particular markets, but you're not looking at the $300m, $400m or $500m capital outlays. So, from a balance sheet and cash flow perspective, you get to a point where you're going to be generating a lot of free cash flow and look at what do I do with it.”

Take Me Out To The Tropicana

In a further set of results released by a major U.S. casino company, George Papanier, president of Bally’s Corp., said Thursday (August 3) that the company has run into a “headwind” since it was announced that the Tropicana Hotel and Casino on the Las Vegas Strip would become the future home of Major League Baseball’s (MLB) Oakland Athletics (Oakland A's).

Papanier said the planned $1.5bn, 30,000-seat stadium on nine acres of the Tropicana site was on hold until MLB owners approve the team’s relocation to Las Vegas from California.

“We’re waiting on them to see what their actual timing is, and we’ll just react to that and manage the property accordingly,” Papanier said.

MLB owners have until the end of the years to decide on the Oakland A’s relocation request. Bally’s operates the Tropicana and Gaming & Leisure Properties owns the 35 acres of real estate.

“The planning process is only in the beginning phase,” Bally's CEO Robeson Reeves said. “We will share additional details as they emerge over the next 18 to 24 months.”

Whether the Oakland A's relocation is approved or not, MGM's Hornbuckle told analysts that his company wants to address pedestrian access between the proposed stadium and the three nearby MGM casino-resorts on the Las Vegas Strip. MGM casinos are already closely connected to the T-Mobile Arena where the Vegas Golden Knights play hockey, as well as the Allegiant Stadium that hosts Las Vegas Raiders NFL games.

“We’re not pleased about the way it all connects right now, so we’d like to work on the connectivity on that corner,” he said.

Hornbuckle said a 30,000-seat stadium represents an additional 2.4m seats during the regular 162-game baseball regular season. That should drive more than 400,000 new tourists to midweek business in Las Vegas, he said.

“The Raiders and the Stanley Cup Champion Golden Knights have shown that Las Vegas is the go-to destination for away fans seeking a fun entertaining getaway to see their favorite teams play and we think the A’s will be no different,” Hornbuckle said.

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