Nearly a week after BetMGM BetMGM co-owner Entain or a plan to acquire Entain’s 50% stake in BetMGM.
“We’re focused on working alongside our partners with a collective goal to maximize the growth and profitability of MGM and LeoVegas,” Hornbuckle said during MGM Resorts’ 2023 second-quarter earnings call on Wednesday after the bell. (LeoVegas is a European-focused online gaming subsidiary.)
“I think we’re making good progress on both those fronts, and that’s really all we’re going to say,” Hornbuckle said.
BetMGM is a 50-50 t venture between MGM Resorts and Entain, one of the largest gambling conglomerates in Europe. MGM Resorts made an $11 billion bid to acquire Entain in 2021, which Entain dismissed out of hand, claiming that MGM “significantly undervalued the company and its prospects.”
While Hornbuckle declined to comment on the future of BetMGM’s ownership, MGM Resorts pegged its 50% equity value in the online gambling operator at approximately $2.78 billion. When Entain’s stake is factored, BetMGM received an implied valuation of $5.56 billion based on models from nine equity analysts.
“It’s unlikely Entain will retain its ownership stake in BetMGM much longer,” said Lloyd Danzig, founder and CEO of Sharp Alpha Advisors, in a February interview with Sports Handle. “Whether MGM makes a bid for the entirety of Entain or just its share in the t venture, full ownership will allow for product development capabilities and agility that are currently constrained by the existing relationship.”
Earnings breakdown 6m292j
Wednesday’s call held a positive tone for MGM, as the company reported consolidated net revenues of $3.94 billion, representing a record quarter and an increase of 21% year over year. MGM topped analyst consensus estimates of $3.82 billion, according to data from Benzinga Pro. The company also reported adjusted diluted earnings per share of $0.59, up from $0.04 in the prior year quarter.
For the three-month period ended June 30, MGM also reported an adjusted EBITDAR (earnings before interest, taxes, depreciation, amortization, and restructuring or rental costs) of $1.1 billion. On the digital side, BetMGM’s first quarter of EBITDAR profitability sets a “positive tone” for the second half of 2023, JMP Securities analyst Jordan Bender wrote in a research note.
While BetMGM reported positive adjusted EBITDA for the first time in a single quarter, MGM Resorts did not provide a detailed guidance for the venture’s profitability over the second half of the year.
Customer acquisition costs, which were once over $400 per new customer, declined to below the low $300s at BetMGM. Hornbuckle cited an “active maturity” in how the venture markets to customers and which customers it targets with marketing materials.
On the casino side, MGM Resorts hopes to receive a New York license in the first half of 2024. MGM’s recently announced partnership with Marriott was also discussed on the call, as Hornbuckle outlined possible future integrations between the two brands. The integrations, according to MGM Resorts’ management, could potentially be a key driver for customer acquisition at BetMGM, Truist Securities analyst Barry Jonas noted.
BetMGM’s pivot to profitability helped fuel a mostly positive quarter for MGM Resorts, according to Jonas. The analyst maintained MGM Resorts’ price target at $60 a share, while reiterating a buy rating.
BetMGM product enhancements 5jk5p
As for BetMGM’s short-term future, Hornbuckle sounded bullish on product enhancements. The improvements include the integration of Angstrom Sports, a specialist provider of sports modeling, forecasting, and data analytics that was recently acquired by Entain and is expected to improve BetMGM’s parlay and in-game offerings.
“Our partner’s announced acquisition of Angstrom is also a positive step toward improving BetMGM’s product and refining our pricing tools, both of which we expect to drive customer satisfaction and ultimately margins,” Hornbuckle said.
Entain makes latest US play with Angstrom Sports takeover https://t.co/r5QRmChYhM
— iGaming Advocate (@iGamingAdvocate) July 17, 2023
MGM Resorts anticipates an increase in parlay and live bets that may benefit BetMGM’s bottom line.
“We’re simply going to have more high-margin bets available for customers as we deploy Angstrom,” Hornbuckle said.
Across the industry, a number of operators are stockpiling technology to prepare themselves for the shift to in-game betting. Fanatics‘ acquisition of the Australian company’s U.S. assets. As the shift away from pre-game wagering accelerates, BetMGM’s plans to leverage Angstrom’s in-game technology has received high marks from analysts.
"The US sports betting and igaming market is maturing and at BetMGM Adam Greenblatt believes product is the battleground where the leaders will be decided for the market’s next phase."
Adam Greenblatt outlines BetMGM’s path to profitabilityhttps://t.co/jqOeSUSBlV
— Alfonso Straffon 🇨🇷🇺🇸🇲🇽 (@astraffon) June 10, 2023
BetMGM will also have its single-wallet feature available in 14 jurisdictions by the end of this week, Hornbuckle said. He expects the single wallet and Angstrom’s onboarding to significantly enhance BetMGM’s product.
BetMGM currently ranks third among operators in national market share, withonline sports betting market share to the two leaders, Hornbuckle hopes to claw some back by focusing on the cross-sell between sports betting and iCasino.
“Our product is not where we want it to be,” Hornbuckle said. “I think the moves that we’re now making with Entain, [and] the moves we’re gonna make with Angstrom as an onboarded partner for BetMGM, will get us to a place where we’ll be back in that game in a meaningful way. And ultimately begin to gain some share back.”
On a long-term basis, Bender models MGM Resorts’ EBITDA share in BetMGM at $184 million for full-year 2025. By 2027, Bender forecasts a step up to $950 million for both partners of the venture, which he believes may further strengthen liquidity for MGM.
MGM released quarterly results one day after rival Caesars Entertainment disclosed that its digital arm generated a profit over its most recent quarter. Leading sportsbook operators are feeling immense pressure to deliver profitability after high spending on marketing and sports betting promotions in recent years. On Thursday, DraftKings may become the latest to announce it ended the quarter in the black.
MGM Resorts traded as low as $46.30 a share in Wednesday’s after-hours session, sliding more than 5%. MGM remained around $46 in pre-market trading on Thursday morning. The company is still up by more than 40% since the start of the year.
Matt Rybaltowski contributed to this report.
