The gambling industry continues to navigate the complexities of a rapidly changing market environment. Building on the momentum and challenges of Q1, our analysis of Q2 earnings calls reveals emerging trends and shifts in sentiment among publicly listed gambling companies. The insights gathered offer a balanced view, showcasing how companies are adjusting their strategies in response to new opportunities and threats. Additionally, we have meticulously compiled quotes specifically mentioning or focused around "technology,"
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Earnings Call, Aug 13, 2024 - Flutter Entertainment plc
Positives -
Strong Financial Performance: Flutter reported revenue growth of 20% and adjusted EBITDA growth of 17% to $738 million. The U.S. market, led by FanDuel, had a particularly strong quarter with a 39% increase in revenue and a 51% increase in adjusted EBITDA. Diluted earnings per share increased by 290%, and free cash flow was $171 million, showing significant improvement from the previous year.
Market Leadership and Growth: FanDuel maintained a nearly 40% market share in the U.S. sports betting and iGaming market. Significant market share gains in key markets like North Carolina (59% share) and Italy, where Sisal's market share hit a record high. Continuous momentum in the UK&I market, with iGaming growth driven by successful product launches like Paddy's Mansion Heist.
Operational Efficiency and Technology Integration: The migration of FanDuel Casino to proprietary technology in the U.S. promises enhanced platform stability, access to in-house content, and better promotional capabilities. Positive impact from integrating acquired businesses, such as Sisal, which has seen AMP growth of 60% and revenue growth of 37% since acquisition.
Positive Outlook and Guidance: Upgraded 2024 guidance for both revenue and EBITDA, with U.S. revenue now expected at $6.2 billion and adjusted EBITDA at $740 million. Confidence in sustaining growth through strong customer acquisition strategies and product improvements, particularly in live betting and same game parlay features.
Negatives -
Challenges in the Australian Market: Revenue in Australia declined by 10% due to a softer racing market, which was anticipated but still impacts the overall performance.
Regulatory and Tax Challenges:The new tax changes in Illinois are expected to result in a $40 million net impact for the year, with the possibility of similar challenges in other states if tax policies become more stringent. Higher payment costs and other operational expenses, partly due to changes in player behaviour, are increasing operating costs.
Increased Operating Costs: The company is facing higher operating costs, including a $20 million increase due to customer acquisition investments and additional expenses related to the Beyond Play acquisition and compliance with U.S. listing regulations.
Competition and Market Dynamics: Increasing competitive intensity in the U.S. market, with competitors investing heavily in iGaming and sports betting products, which may require Flutter to increase its own investments to maintain its leadership position.
Direct Quotes on Technology:
Peter Jackson on FanDuel Casino Migration:
"In iGaming, we completed an important milestone for the migration of FanDuel Casino onto our proprietary technology. In time, this will unlock important benefits through access to in-house content, promotional capabilities, and also greater platform stability."
Rob Coldrake on Operating Costs and Technology:
"We've got some very good momentum coming into the second half of the year from a revenue perspective. One of the other things that we'll be very focused on for the second half of the year moving forward is actually driving more operating leverage. All the costs are coming into focus. We're really looking to be as efficient and optimal as we can from a cost base perspective."
Peter Jackson on Bringing iGaming In-house:
"I'm delighted to tell you that we've actually brought our iGaming product in-house in the U.S. And it's not a cost play, but it's certainly going to improve our ability to deploy our own in-house content into the U.S. market, which is not something we've been able to do in the past. It is also going to help improve things like the stability of the platform as well."
Peter Jackson on Product Development:
"It's not just around the investment in marketing. We have also been investing a lot in building out our product capabilities. I'm really pleased when I look at the performance of parlays and MLB at the moment. Historically, it wasn't an area of strategy for us. And we've almost got to the same level of penetration as we would do in things like the NFL. So clearly, the product advantages within having -- we've been doing a lot around live betting and there's a stack load of things that we're going to deploy to take our product forward into the new football season."
Peter Jackson on Leveraging Global Technology for U.S. Market:
"We’ve been able to bring technology from other markets as well. So I think what we've done here in casino is a great example of the Flutter Edge coming to life."
Earnings Call, Aug 08, 2024 - Entain Plc
Positives -
Strong Interim Results: The company delivered good interim results, with Q2 outperforming expectations. The performance in key markets such as Brazil showed strong double-digit growth, and the UK market showed signs of recovery.
Improved Financial Outlook: Entain upgraded its guidance for 2024, with online NGR pro forma growth now expected to be positive in low single digits, compared to previous expectations of a negative growth.
Project Romer Success: The efficiency program, Project Romer, is on track to deliver significant cost savings, with a target of at least £100 million in net savings by 2026, up from the original target of £70 million.
BetMGM's Growth: BetMGM's iGaming business was highlighted as strong, with a healthy 22% market share and $400 million in contribution, showing significant profitability.
Operational Improvements: The company has made several operational improvements, such as launching new products like Bet Builder for EPL, simplifying customer journeys, and enhancing app experiences, which are starting to show tangible results.
Liquidity and Leverage: The company maintains strong liquidity with over £1.3 billion available and stable leverage, reflecting a strong financial position.
Negatives -
UK Market Challenges: Despite showing some signs of recovery, the UK market remains challenging, with NGR still down 8% year-on-year, and the full impact of regulatory changes is yet to be seen.
Impact of Regulatory Changes: Regulatory changes in markets like the UK and the Netherlands continue to pose challenges, with potential impacts on future earnings.
Dependence on One-off Factors: Some of the performance improvements, particularly in Q2, were driven by one-off events like the Euros and Copa America, which may not be sustainable.
Ongoing Transformation Needs: The company acknowledges that there is still a significant amount of work to be done to fully capitalise on its opportunities and achieve structural growth.
Direct Quotes on Technology:
Satty Bhens on Technology Enhancements:
"We are working on both scaling our localization capabilities and accelerating our product velocity. We are now able to release every 2 weeks. We are well on track to release 4x more improvements in 2024 than we did in 2023."
"We integrated our MLB and NBA offerings powered by Angstrom, and our in-play micro bets have also landed really well. Angstrom's play-by-play models saw BetMGM increase the depth and breadth of its baseball offerings."
"Our teams have been working flat out to fix the basics, including over 200 UX fixes in the first half of the year. We’ve been simplifying the core customer journeys, especially around the Bet Builder experiences and responsible gaming flows."
Stella Julie David on BetMGM's Technological Integration:
"As we implement initiatives like Single Account Single Wallet in Nevada; having the Angstrom capabilities for the first time for NFL; and creating more integrated customer journeys, we are going to be able to build a much deeper understanding of how BetMGM will optimise its sports offering."
Earnings Call, Aug 2, 2024 - DraftKings Inc.,
Positives -
Strong Customer Acquisition: DraftKings saw an 80% year-over-year increase in new Online Sports Betting (OSB) and iGaming customers. Customer acquisition costs (CAC) also declined by more than 40% year-over-year, indicating more efficient spending.
Revenue Growth: The company reported $1.104 billion in revenue for Q2 2024, representing 26% year-over-year growth. The fiscal year 2024 revenue guidance was increased to $5.05 billion to $5.25 billion.
Jackpocket Integration: The integration of Jackpocket is progressing well, with expectations that it will generate positive adjusted EBITDA in fiscal 2025.
Share Repurchase Authorization: The Board authorized a share repurchase of up to $1 billion of Class A common stock, reflecting confidence in the company’s future cash flow generation.
Expansion of Betting Features: DraftKings launched in-house player prop wagers for multiple sports, expanded progressive parlays, and plans to integrate a bet and watch experience with NFL streaming. These enhancements are expected to drive customer engagement.
Strong Product Position: The DraftKings and Golden Nugget Online Gaming apps were ranked #1 and #2 overall in a recent survey. The company is on track to double the number of new games released this year compared to last year.
Negatives -
Increased Taxation in High-Tax States: The Illinois sportsbook tax rate increase will negatively impact EBITDA in fiscal 2024. Although the company plans to introduce a gaming tax surcharge in high-tax states, this indicates a challenging operating environment in some regions.
Adjusted EBITDA Guidance Revision: The fiscal year 2024 adjusted EBITDA guidance was revised downward to $340 million to $420 million from $460 million to $540 million. This revision takes into account the Illinois tax rate increase and other factors.
Potential Risks in Implementing Surcharge: There is uncertainty regarding how competitors and customers will react to the planned gaming tax surcharge. The success of this initiative is not guaranteed, and it could lead to customer dissatisfaction or competitive disadvantages.
No Signs of Consumer Weakness Yet, But Vigilance Required: While no consumer weakness has been observed, the company remains cautious and is prepared to adjust spending if the customer acquisition environment changes.
Direct Quotes on Technology:
Jason D. Robins, Co-Founder, Chairman & CEO:
"Our product is in a great position as we are continuing to differentiate ourselves by investing in new features and functionality for Sportsbook and iGaming."
"In Sportsbook, we recently launched in-house player prop wagers for NFL, NBA, MLB, NHL, college football, college basketball and tennis."
"In iGaming, we are on track to double the number of new games we will release this year compared to last year and recently improved our interface to promote game discoverability."
"A lot of the work we've been doing over the last several months has been more back-end performance stuff. So things like making sure that pages load faster, making sure that the app crash is less, making sure markets are up for longer and we have less time where markets are locked or unavailable."
"We expanded progressive parlays to include new types of bets as well. And more to come. Obviously, bet and watch hasn't launched yet, and we have a number of other features that we haven't announced that we have planned for the coming months."
Earnings Call, Jul 19, 2024 - Betsson AB,
Positives -
Strong Financial Performance: Revenue increased by 15% year-over-year to EUR 271 million, with an 18% increase in operating income to EUR 64 million. This quarter marked the 10th consecutive quarter of increasing operating income.
High Customer Activity: Active customers increased by 25%, and deposits grew by 15% year-over-year, indicating strong customer engagement and market expansion.
Successful Geographic Expansion: The company obtained its first local licenses in Peru and has continued to expand in Latin America, particularly in Argentina and Colombia, leading to a 22% revenue increase in the Latin American region.
Sustainability Recognition: Betsson was awarded an AAA rating by MSCI ESG Ratings, up from the previous AA level, indicating strong performance in environmental, social, and governance aspects.
Record Highs in Revenue: Sportsbook revenue hit an all-time high of EUR 78 million, and casino revenue also reached the highest level for an individual quarter, contributing significantly to overall revenue growth.
Stable Operating Margin: Despite an increase in locally regulated revenue (subject to higher taxes), the operating margin improved to 23.6%, showcasing the efficiency of Betsson’s scalable business model.
Positive Start to Q3: Early indications for Q3 2024 are positive, with average daily revenue up 20% compared to the same period in Q3 2023.
Negatives -
Increased Costs: Higher costs were noted in several areas, including personnel expenses due to geographic expansion and investments in product and technology development, as well as increased gaming taxes due to higher revenue from locally regulated markets.
Decline in Nordic Region Revenue: Revenue from the Nordic region declined compared to the previous year, driven by lower activity in casino products.
Regulatory Challenges: There are concerns about the changing regulatory environment in different markets, which may impact Betsson’s operations. The CEO mentioned that overly strict regulations could undermine the purpose of regulation, indicating potential risks.
Uncertainty in Certain Markets: The future in markets like Brazil remains uncertain, as the company could not provide detailed comments on preparations or expectations, reflecting potential challenges in these regions.
Direct Quotes on Technology:
Pontus Lindwall, CEO:
"Like the rest of the organization, the product and tech team put a lot of efforts into the preparations for the major football tournaments Euro and Copa America in the second quarter, and I'm pleased to say that the platform was up and running and able to handle even the most critical moments during the tournaments with high volumes and [ betting ] taking place."
"As always, strengthening of the product offering continues to be a top priority. For the Sportsbook product, a new bet builder function was launched on all brands for pre-match and live betting. New native apps were developed and launched during the quarter, for example, in Italy. Also, new payments and authentication solutions were launched in a few markets."
Martin Ohman, CFO:
"The scalable business model that is now the foundation of the Bettson operation is based on a dedicated strategic approach, focusing on sustainable and long-term profitable growth through the geographic diversification and supported by our in-house technology."
"Cash flow from investing activities [ sums ] up to EUR 40 million, where the majority relates to investments in [ own ] technology and product development."
Earnings Call, Aug 8, 2024 - PENN Entertainment, Inc.,
Positives -
Strong Retail Business Performance: PENN Entertainment's retail segment delivered solid results, with notable market share growth in key markets like Ohio, Maryland, and Iowa. Flagship properties such as Hollywood Casino at Greektown and M Resort in Las Vegas showed continued momentum.
ESPN BET Integration Success: The integration of ESPN BET into PENN’s operations has been effective, contributing to increased revenue and market share growth at properties like Greektown, which saw revenues up by more than 6.5% year-over-year.
Growth in Interactive Segment: The Interactive segment showed significant improvement, with record quarterly NGR and a $93 million adjusted EBITDA improvement compared to the first quarter. The top-of-funnel growth and better promotional strategies were key drivers.
Expansion and Project Developments: PENN's ongoing investments in properties and upcoming projects are on track and on budget, with positive impacts expected by 2026. These include rebranding sportsbooks to ESPN BET and various property expansions.
Significant Database Growth: PENN Play database grew to approximately 31 million members, with a 138% year-over-year increase in monthly active users. This expansion provides a strong foundation for future growth.
Technological Advancements and Product Enhancements: The company is rolling out significant product improvements in ESPN BET, which are expected to enhance user engagement and monetization, especially with the upcoming NFL season.
Improved Financial Metrics: The Interactive segment saw improved financial performance, with adjusted revenues up by more than 65% compared to the first quarter, despite a seasonally slower sports calendar.
Positive Outlook: The company expects to start generating positive cash flow from its Interactive unit by 2026, with continued deleveraging of the balance sheet starting in 2025.
Negatives -
Challenges in Interactive Segment: Despite improvements, the Interactive segment still posted a significant loss of $103 million in adjusted EBITDA for the quarter.
Operational Disruptions: Some disruptions in the South due to weather and hotel construction impacted the company's operations, particularly at the Lake Charles property.
Lag in Product Features: The company acknowledged that it has ground to make up in certain product categories, such as parlays and player props, which are crucial for sports betting.
High Costs and Losses in Digital Segment: PENN's digital operations continue to face high costs, with projected losses for the Interactive segment still expected to be substantial for the year, even though slightly improved.
Uncertainty in Regulatory Approval: The launch of ESPN BET in New York is subject to regulatory approval, which creates some uncertainty around the timeline and impact of this expansion.
Macro Concerns: While the company did not see major issues in regional gaming trends, there are broader concerns in the market regarding the stability of the lower-end consumer, which could impact future performance.
Direct Quotes on Technology:
Aaron LaBerge, Chief Technology Officer:
"During my first couple of weeks, I've had the opportunity to do a deep dive with our Interactive teams in Toronto and Philadelphia, focusing on our product roadmap and growth strategies. I continue to be so impressed with this team, their world-class capabilities and the robust and scalable technology stack they've built."
"Our goal here is simple. We want to create the best product for sports fans by elevating how they find, place and track their bets, both within ESPN BET and across the entire ESPN ecosystem."
"Collectively, we have a truly unique opportunity to create a frictionless ecosystem for fans to enjoy the sports they love and engage in sports betting. We are both deeply committed to making ESPN BET a top name in sports betting over the coming years."
Jay A. Snowden, President, CEO & Director:
"With Aaron's addition to our team, we're confident that we can build a market-leading product that will allow us to realize the power of our portfolio of leading digital brands."
"The great thing about our relationship with ESPN is it's a driver of both top of funnel as well as ongoing retention."
Earnings Call, July 25, 2024 - La Française des Jeux
Positives -
Revenue Growth: FDJ reported strong revenue growth of 11% in H1 2024, reaching EUR 1.43 billion. Digital revenue grew by 40%, and the lottery and sports betting segments saw substantial increases, especially in the digital space.
Digital Expansion: The digital revenue now accounts for 15% of total revenue, up from 12% in H1 2023. This growth is largely due to an increase in the number of players and successful launches like Euro Dreams.
Recurring EBITDA Margin: The recurring EBITDA margin stood at 25.9%, an increase driven by strong business momentum, especially in the digital sector, and favorable sports betting results.
Adjusted Net Profit: The adjusted net profit rose by 28% to EUR 235 million, showing strong financial performance.
Responsible Gaming and CSR: FDJ continues to excel in CSR, especially in responsible gaming, reducing the percentage of high-risk players to 1.6%, already surpassing the 2025 target. The company's environmental commitments are also noteworthy, with an A carbon rating for the third consecutive year.
Kindred Acquisition Progress: The acquisition process for Kindred is on track, with completion expected by November 19, 2024. This acquisition is anticipated to further strengthen FDJ's market position, particularly in the digital and online betting sectors.
Negatives -
Sports Betting: Although sports betting revenue increased by 15%, the growth in H1 was partly due to exceptional circumstances (e.g., low player payout), which may not be sustainable in H2. The margin boost from sports betting is expected to normalize, leading to a lower EBITDA margin in H2.
Operating Expenses: Marketing and communication costs rose by 16%, and there are concerns about the higher operating expenses in H2, traditionally due to heavier advertising towards the end of the year.
Kindred Acquisition Concerns: The acquisition of Kindred is still subject to regulatory approval, and there were third-party concerns during the review process. While FDJ is optimistic about the deal, there are still uncertainties.
Political and Regulatory Risks: The ongoing European Commission investigation and the situation in the Dutch market, where regulatory changes and potential tax increases are expected, could pose risks to FDJ’s operations and future profitability.
Direct Quotes on Technology
Pascal Chaffard on Digital Growth:
"Our digital dynamic is also very nice with reported revenue up 40%, and up 25% at constant perimeter. Performance still largely attributable to the increase in the number of players, which takes the digital share of revenue to 15%."
"Digital revenue has risen sharply by 40%... The digital revenue now accounts for 15% of total revenue. To recall, it was only 12% in H1 2024 -- 2023, sorry."
Pascal Chaffard on Online Betting and Poker:
"We have successfully launched a poker offer and if you look at the different figures, we have a 25% growth on the sports betting [indiscernible] and even more important growth, maybe nearly 50% on the poker offer."
"The strategy to complement our offer with the poker in surplus of sport betting has really well worked and in surplus, we have had now the [indiscernible] betting offer."
Pascal Chaffard on Instant Games and Digital Lottery:
"We have worked a lot on something on which we were not that good. I mean, Instant games online. It was -- we have said that in the past. It was, for us, a bit difficult to have a really attractive offer in Instant games online. And now we have a growth in the Instant games offer that is very good."
"Euro Dreams is the game that has the more important digital penetration between 35% and 40% digital penetration for this game... It means that we have boosted our digital offer with this game."
Earnings Call, July 25, 2024 - Churchill Downs Inc,
Positives -
Record Financial Performance: Churchill Downs delivered all-time record net revenue of $891 million and all-time record adjusted EBITDA of $445 million in Q2 2024.
Strong performance across all segments, including a record Kentucky Derby week that contributed to significant financial results.
Successful Projects and Strategic Investments: The Paddock Project at Churchill Downs Racetrack was completed on time and on budget, enhancing the customer experience and setting a foundation for future monetisation opportunities.
The Grandstand Club and Pavilion project is expected to significantly improve amenities and contribute to revenue growth with a projected capital investment payback of less than 8 years.
HRM Expansion: Continued focus on Historical Racing Machines (HRMs) with new venues in Kentucky and Virginia, with projects progressing on time and on budget.
The acquisition of Exacta has improved both top-line performance and overall margins through better optimisation and reduced technology fees.
Growth in Virginia: Virginia HRM properties delivered nearly 37% adjusted EBITDA growth, with a 7.3-point margin improvement, demonstrating the success of their business model and the Exacta transaction.
Strong Pipeline and Future Opportunities: The company has a strong pipeline of growth opportunities in both brick-and-mortar and technology-related businesses.
Terre Haute Casino opened strong, contributing positively to the company’s financial results.
Solid Capital Management: Generated a record $437 million in free cash flow during the first half of the year, with significant future capital investments planned to sustain growth.
Negatives -
Slower Ramp-Up in Certain Properties:
Derby City Downtown in Louisville and properties like Newport and Turfway in Kentucky had slower than expected ramp-ups, indicating some challenges in achieving immediate growth.
The downtown Louisville market has not rebounded as quickly from COVID-19 as other comparable markets.
Potential Cannibalization Concerns:
Questions about cannibalization within the Kentucky HRM market, although the company did not report significant issues, the slower ramp-up could suggest potential concerns.
Labor and Cost Pressures:
Although not a top concern, the company acknowledged some level of wage inflation, reflecting broader economic pressures that could impact margins if not managed carefully.
Uncertainty in New Markets:
The international and U.S. expansion of Exacta technology is promising, but the company acknowledged that they cannot commit to specific expectations about when new markets will open, adding some uncertainty to future growth.
Direct Quotes on Technology:
William C. Carstanjen (CEO & Director) on HRM Technology:
“HRMs and HRM technology are a key strategic focus over the next 5 to 10 years for our company. These high-growth, high-margin investments provide an excellent return on capital.”
William C. Carstanjen on Exacta Acquisition:
“The acquisition of the Exacta central determinant system technology has provided many benefits for our company, some of which we have already begun to realize and some of which we are still developing.”
“Exacta has improved the performance of our Virginia HRM venues by enabling us to better optimize the gaming floors and reduce the technology fees charged to our properties.”
William C. Carstanjen on B2B Opportunities:
“Exacta has also enabled us to provide technology to third-party HRM operations in Kentucky, Wyoming, New Hampshire and most recently, internationally.”
William C. Carstanjen on Electronic Table Games:
“We continue to make progress on the development of HRM-based electronic table games. These products would further enhance the performance of our HRM venues over the long term, and we believe is an important part of Exacta's future.”
William C. Carstanjen on TwinSpires:
“The distribution of horseracing content is a growth opportunity that we believe is important for the industry and for us over the longer term.”
“While we continue to invest in our B2B capabilities and relationships, our core B2C TwinSpires business continues to perform quite well as it focuses on committed horseplayers seeking a more immersive horseracing wagering experience.”
Earnings Call, July 25, 2024 - Boyd Gaming Corporation
Positives -
Overall Performance: Boyd Gaming delivered a solid performance in Q2 2024, with revenues consistent with the previous year and strong performance across multiple segments, particularly in Las Vegas and the Midwest and South.
Market Share Growth: The company grew its market share in the Las Vegas Locals segment and saw a sequential improvement in year-over-year results.
New Developments: The new land-based casino at Treasure Chest opened with strong performance, showing revenues nearly double the prior year since its opening. The company is also beginning work on new projects like Cadence Crossing Casino in Las Vegas and an expansion at Ameristar St. Charles.
Online Segment: The Online segment, particularly the partnership with FanDuel, continues to exceed expectations, leading to increased EBITDA guidance for the full year.
Sky River Casino: Continued strong performance at Sky River Casino, with plans for significant expansions, indicates confidence in long-term growth.
Strong Balance Sheet: Boyd Gaming maintains a strong balance sheet with a leverage ratio of 2.4x, providing financial flexibility for future investments.
Capital Allocation: The company remains committed to returning capital to shareholders, with significant share repurchases and dividends, alongside ongoing investments in growth.
Negatives -
Competitive Pressures: The Orleans and Gold Coast properties in Las Vegas continue to face significant competitive pressures, impacting performance.
Promotional Environment: The promotional environment around some properties remains aggressive, particularly from private operators, which could continue to pressure margins.
Seasonality and Softness: April saw unexpected softness in the Midwest and South segment, which the company could not fully explain, indicating potential unpredictability in customer behavior.
Expense Pressures: The company continues to manage rising expenses, such as wages, property taxes, and utilities, which impacted margins in the previous quarters.
M&A Speculation: While Boyd Gaming remains open to M&A opportunities, there is some uncertainty around how such activities would be financed and the impact on leverage, which might concern investors.
Direct Quotes on Technology
Keith E. Smith, President, CEO & Director:
On the Online segment: "Our industry-leading partnership with FanDuel continues to produce strong results for our company. And as a result, we are increasing our expectations for the Online segment to $65 million to $70 million in EBITDA for the full year."
On Boyd Interactive: "Look, I would say that we're very pleased with where Boyd Interactive is in terms of its growth and where it is in kind of our expectations, operating well in Pennsylvania and New Jersey growing the business."
"Once again, when we started that business a couple of years ago, we talked about having a regional strategy, not a national strategy, but a regional strategy that allowed us to speak to the customers in the states where we do business, importantly, and in some of the surrounding states where we draw large portions of our customers."
Josh Hirsberg, CFO & Treasurer:
On Boyd Interactive: "Our approach is not to kind of estimate the TAM and expect we're going to get a percentage of that and apply our margin. It's really, as Keith mentioned, kind of building a bottom-up from our existing customers and markets where we bring or draw customers from."
"We're not in the business of making big investments and losing a lot of money to get market share. That's just not our philosophy. Others may have a different strategy. That's just not our strategy."
Earnings Call, July 31, 2024 - MGM Resorts International
Positives -
Las Vegas Growth: MGM Resorts achieved top and bottom-line growth year-over-year in Las Vegas, driven by higher rates and occupancy. The strategic relationship with Marriott has positively impacted performance, contributing significantly to room bookings.
Luxury Resort Investment: MGM's luxury resorts are the main drivers of top-line growth in Las Vegas. The company has committed 75% of its 2024 domestic property capital budget to luxury property enhancements, including room remodels and suite updates.
Technology Integration: The integration of the Cosmopolitan of Las Vegas into the MGM Rewards program is complete, which allows MGM Rewards members to enjoy benefits across the properties, enhancing customer loyalty and experience.
Macau Performance: MGM China saw a 37% year-over-year growth in net revenues and a 40% increase in adjusted property EBITDA, with strong market share and margins, indicating robust performance in a recovering market.
Digital Strategy: MGM has invested in proprietary technology for its iGaming and sports betting platforms, including the acquisition of LeoVegas and Push Gaming. This move aims to capture market share in both established and emerging markets.
Share Repurchase Strategy: MGM has significantly reduced its share count by 40% over the past three years, using excess cash for share repurchases, which is expected to result in a mid-teens free cash flow per share compound annual growth rate by 2028.
Strategic Developments: MGM is making strides in new markets, including Japan and the UAE, which are expected to contribute to long-term growth.
Negatives -
Softness in Formula 1 Event: There was some concern about the softness in room rates and bookings for the upcoming Formula 1 event in Las Vegas, which could be a potential headwind in the fourth quarter.
Challenges in Regional Markets: While MGM’s regional properties remained stable, there was some softness in the low-end segment and unrated play, indicating challenges in these customer demographics.
Labor Cost Increases: MGM has faced challenges related to wage inflation and labor costs, although the management has been able to mitigate some of these through efficiency measures.
BetMGM Investment Concerns: The need for continued heavy investment in BetMGM’s sports product to regain market share has raised some concerns, especially given the competition and the potential impact on profitability.
Uncertainty in Development Timelines: There is some uncertainty regarding the timelines for MGM’s new developments, particularly in the UAE and Japan, which could affect long-term growth projections.
Direct Quotes on Technology:
Jonathan S. Halkyard, CFO & Treasurer:
"On the technology side, we've now completed the integration of the Cosmopolitan of Las Vegas into our MGM Rewards program, which will now allow our MGM Rewards members to enjoy full benefits at the Cosmopolitan and vice versa."
Gary M. Fritz, President of MGM Resorts International Interactive:
"The first pillar was for MGM to own its tech ecosystem so that we were not reliant on third parties. A tech ecosystem that is scalable and cloud-based. We achieved this in 2022 through our acquisition of LeoVegas."
"We took a large step forward to achieving technical independence with the purchase of Tipico's U.S. Sports betting platform, which will close soon and drive important synergies."
"The third pillar of our strategy is to target organic growth in attractive regulated markets with the BetMGM brand... We have already launched the brand in the United Kingdom and the Netherlands, with great early results, and we plan soon to enter Latin America."
"The final component of our strategy is our live dealer product, enabled by our recently announced strategic relationship with Playtech, making us the only U.S. operator to offer live casino content for International markets directly from the Las Vegas Strip."
Earnings Call, July 30, 2024 - Caesars Entertainment, Inc.,
Positives -
Las Vegas Performance: Las Vegas delivered record net revenue of $1.1 billion, with an adjusted EBITDA of $514 million, up 1.2% year-over-year. The recent renovations in the Versailles and Colosseum Towers significantly boosted average daily rates (ADRs).
Caesars Digital Growth: Caesars Digital posted a 28% year-over-year increase in net revenues, setting a quarterly adjusted EBITDA record of $40 million. iGaming revenues grew by 50% for the second consecutive quarter.
Future Outlook: The company expects to see strong performance in the second half of 2024, particularly in Las Vegas. There's also optimism about the momentum in the digital segment and expected improvements from the completion of various capital investments.
Cost Management: Despite increased labor costs, Caesars managed to hold margins well, particularly in Las Vegas. The company also expects to see a reduction in CapEx by $200 million in 2025, which will lead to increased free cash flow.
Expansion and Acquisitions: The opening of new properties in Nebraska and Danville, along with the acquisition of WynnBET in Michigan, demonstrates strategic growth and market expansion.
Negatives -
Regional Segment Weakness: The regional segment saw a year-over-year decline in adjusted EBITDAR by 8%, primarily due to competitive pressures, construction disruptions in New Orleans, and difficult comparisons in Reno.
New Orleans Construction Impact: Peak construction disruption in New Orleans significantly impacted earnings, with ongoing effects expected into Q3 2024.
Labor Cost Increases: Rising labor costs, particularly due to union contracts in Las Vegas, posed challenges, although they were somewhat offset by other gains.
Dependency on Hold: Future growth in the digital segment's EBITDA seems partially dependent on maintaining higher hold percentages, which could be a concern if those metrics decline.
Direct Quotes on Technology
Eric Hession, President of Caesars Digital:
"In July, we closed on the acquisition of ZeroFlucs, a leading sports betting technology company based in Australia. The ZeroFlucs team has already started contributing to the product innovation and driving hold improvements and customer engagement."
"Our product on the sports side continues to improve, and our customers are reacting positively to our increasing mix of parlay and in-game offerings."
Thomas Robert Reeg, CEO & Director:
"We were off, what, 30-something for the quarter and [ 25 ] plus of that was New Orleans and Reno, as I described. So the regional business as a whole continues to bump along. Obviously, as we've seen, you've got months that are not as strong and others that are stronger."
"Eric talked about digital, another quarter of nearly 30% net revenue growth, 50% flow-through, which is what we've told you that we expect to deliver. July is off to a fantastic start. Growth is in excess of that target."
"Expect that the Horseshoe brand, the second brand in iCasino can help us build on the gains that we've had since we rolled out Caesars Palace online."
Earnings Call, July 19, 2024 - Evolution AB,
Positives -
High Activity and Expansion: Evolution experienced a period of high activity, maintaining momentum from previous quarters and expanding its product offerings into new markets such as the Czech Republic, Brazil, and the Philippines. This expansion is expected to drive long-term growth.
US Market Expansion: Evolution further strengthened its presence in the US by launching live casino games in Delaware and adding successful games in several states. Additionally, the acquisition of Galaxy Gaming is expected to solidify their position in the US market.
Record Payouts: The company achieved the biggest payout ever in an online casino, amounting to EUR 35 million to over 5,000 players, which could increase demand for their games.
Strong Financial Performance: Despite some slower growth in certain areas, the company reported a 15% year-on-year revenue growth, with a revenue of EUR 508 million for Q2 2024 and maintained a strong EBITDA margin of 68%.
Significant Game Releases: Evolution launched its largest game show ever, Lightning Storm, and other popular games, indicating a robust pipeline of new products that are expected to drive future growth.
Capital Allocation Framework: The announcement of a capital allocation framework, including a EUR 400 million share buyback, demonstrates the company's strong financial position and commitment to returning capital to shareholders.
Strong Cash Flow: The company reported strong operating cash flow, with a high cash conversion rate, and maintained a debt-free financial position with a cash balance of EUR 689 million.
Expansion in Asia and LATAM: Asia remains the fastest-growing market with 22% year-on-year growth, and LATAM also reported healthy growth at 17% year-on-year.
Negatives -
Slower Top-Line Growth: There was a slower quarter in terms of top-line growth, which affected the EBITDA margin. The company acknowledged that the quarter did not fully reflect their operational performance.
Impact of Large Payouts: The record payout of EUR 35 million negatively impacted revenue share for the quarter, highlighting the potential volatility in earnings due to large, single-event payouts.
Lower Growth in RNG Segment: The RNG (Random Number Generator) segment showed only 1.5% year-on-year growth, indicating that this area is underperforming compared to the rest of the business.
Slower Growth in North America: Despite being a key market, North America showed only 8% year-on-year growth, which was below expectations and market growth rates. The company admitted to losing market share in the RNG segment in the region.
High Personnel Expenses: Personnel expenses increased by 27% year-on-year due to significant recruitment efforts, adding to overall operating expenses and affecting profit margins.
Operational Challenges: The company faced challenges in some regions, with slower-than-expected development and regional performance not meeting expectations.
Direct Quotes on Technology
Martin Carlesund, Group Chief Executive Officer:
"Online casino games exist to generate excitement and entertainment for players... Events like this bring excitement to the games and resonate with players."
"The game round index shows the development of the whole Evolution network and includes all games. It can be seen as a general indicator of activity in our network."
Jacob Kaplan, Chief Financial Officer:
"We continue to have a good release tempo for games and will gradually during the year, add more functionality to OSS, like live spins, spin gifts, and also our AI software commander."
Martin Carlesund, Group Chief Executive Officer:
"Our ambition is just as high as always, striving towards bringing unique player experiences and list excitement to new levels."
"We are game changers and game creators through our innovation, not only do we offer unique player experience and state of the art game, but we're also transforming the industry."
Earnings Call, Aug 15, 2024 - Galaxy Entertainment Group Limited,
Positives -
Strong Financial Performance: Galaxy Entertainment Group (GEG) reported a revenue of $10.9 billion for Q2 2024, which is up 26% year-on-year and 3% quarter-on-quarter. The adjusted EBITDA was $3.2 billion, up 28% year-on-year and 12% quarter-on-quarter. This indicates strong financial health and growth.
Robust Balance Sheet: GEG maintained a strong and liquid balance sheet with a net cash position of $25.2 billion as of Q2 2024, demonstrating its financial stability.
Dividend Increase: The company announced an interim dividend of $0.50 per share, reflecting its confidence in Macau's market and future performance. This is the first significant dividend increase in a decade, which should please investors.
Market Share Gains: GEG's Mass revenue reached 114% of 2019 levels in Q2 2024, with Galaxy Macau's Mass business performing exceptionally well at 134-137% of 2019 levels. The company also saw improvements in market share in July and August.
Operational Improvements: The reconfiguration of the casino floor at Galaxy Macau before Chinese New Year led to increased efficiency and traffic flow. Additionally, the introduction of smart tables is expected to further enhance performance.
Cost Control: GEG managed to reduce its total operational expenses by 2% compared to Q1, showing effective cost management. Staff costs, which make up 75% of OpEx, were kept stable.
Expansion and Development: The company is progressing smoothly with Phase 4 of its development, focusing on non-gaming entertainment and family facilities. The upcoming Capella at Galaxy Macau, set to open in mid-2025, will elevate luxury hospitality standards in Macau.
Increased Visitation: Q3 visitation to Galaxy Macau grew by 30% compared to Q2, and August's visitation was 50% higher than Q2's average, indicating strong customer interest and engagement.
Negatives -
Slightly Unlucky Gaming Results: The company noted that they played "slightly unlucky" in Q2, which decreased their adjusted EBITDA by $20 million. Although this is a relatively small impact, it highlights the inherent volatility in gaming operations.
Market Competition: Despite the strong results, the company acknowledged that the market competition remains intense, which could pressure margins and market share in the future.
Uncertainty Around Legal Changes: The potential criminalization of illegal money exchange in Macau could impact the business, though the company mentioned that it is too early to assess the full impact.
High Staff Costs: While staff costs have been managed well, they still represent a significant portion (75%) of the company's OpEx, which could be a concern if revenue growth slows.
Capital Expenditure: The company continues to invest heavily in its developments, with a total CapEx of HKD 1.1 billion for Q2 and an expected HKD 6 billion for the year. This could be seen as a significant cash outflow, depending on future returns.
Direct Quotes on Technology
Smart Tables Implementation:
"We are glad to share the preparation to implement smart tables into our casino are well advanced. We successfully completed live back-of-house pilot testing of smart tables. And in early July, we commenced the installation of smart tables in Galaxy Macau's gaming floor." — Ying Tat Chan, Chief Financial Officer
Efficiency Gains from Smart Tables:
"And lastly, on the smart table implementation, we continued to roll out in July and we are quite confident we can complete the rollout by year-end at Galaxy Macau. And from the -- a few weeks of available data points, we have already seen some improvement in dealer hand speed. So we're quite a firm believer in these technologies." — Ying Tat Chan, Chief Financial Officer
Operational Enhancements:
"The reconfiguration of the casino floor at Galaxy Macau before Chinese New Year led to increased efficiency and traffic flow." — Ying Tat Chan, Chief Financial Officer
Earnings Call, Aug 7, 2024 - ZEAL Network SE,
Positives -
Strong Revenue Growth: ZEAL Network SE reported a 40% year-on-year increase in revenue, with the second quarter alone showing a 45% increase. This growth was driven by strong billings and margin expansion.
Increased EBITDA: The company’s EBITDA grew by 46% in the first half of 2024, outpacing revenue growth. This highlights the scalability of ZEAL’s business model.
Customer Acquisition: ZEAL acquired a record number of new customers in the first half of 2024, driven by a favorable jackpot environment and improved marketing strategies.
Improved Efficiency: The cost per lead (CPL) decreased by 26% year-on-year, indicating more efficient customer acquisition efforts.
New Product Launches: The launch of the new charity lottery, a dream house raffle, is expected to attract new customer segments and expand the company’s product portfolio.
Strategic Progress: ZEAL reported significant progress towards its strategic goals for 2024, including an increase in billings margin to 13.6% in the first half and the successful rollout of higher-margin products.
Positive Market Response: The dream house raffle and other new products are receiving strong support and are expected to contribute to future growth.
Stable Financial Outlook: The company reiterated its full-year 2024 guidance, expecting revenue growth between 21% and 29%, and EBITDA growth between 16% and 28%.
Negatives -
Increased Costs: ZEAL experienced a 38% increase in personnel costs, partly due to hiring in new business areas and increased provisions for short-term and long-term incentives (STI and LTI).
Higher Operating Costs: Direct operating costs grew by 59%, driven by higher billings volume and increased use of more expensive payment methods like PayPal.
Legal and Consulting Expenses: Indirect operating expenses rose by 40%, largely due to external legal and consulting costs related to new business launches and license applications.
Conservative Guidance: Despite strong growth in the first half, ZEAL’s guidance for the second half of 2024 remained conservative, citing uncertainties in the jackpot environment.
Regulatory Restrictions: The company faces regulatory challenges, particularly with cross-selling games, which may limit the speed of growth in their games category.
Direct Quotes on Technology:
Helmut Becker, CEO & Chairman of Management Board:
"We have more than 100 games live now, 10 of those are softer, lower return to player and therefore, higher-margin instant-win-games."
"Our Games portfolio is slowly but steadily growing. We have more than 100 games live now, while we are waiting for the approval of roughly 300 more games."
Sebastian Bielski, CFO & Member of Management Board:
"We had very efficient customer acquisition in social media, driven by insourcing and a change of the bidding algo."
"We also took some changes in our app store marketing and we saw some really good increase in volume and efficiency there."
Earnings Call, Aug 07, 2024 - Light & Wonder, Inc.,
Positives -
Strong Financial Performance: The company reported double-digit consolidated revenue growth for the eighth consecutive quarter, with revenue up 12% year-over-year to $818 million. Consolidated EBITDA also grew by 17% to $330 million, demonstrating consistent financial health.
Successful Gaming Operations: Light & Wonder showed significant momentum in its gaming business, with North American premium installed base growing for 16 consecutive quarters. They reported over 1,000 units added sequentially, with revenue per day surpassing $50.
Strong Game Sales: The company saw a 32% increase in global gaming machine sales, including substantial contributions from Australia, Macau, and other markets. This indicates robust demand for their products.
SciPlay Success: SciPlay delivered over $200 million in quarterly revenue for the third consecutive period, outpacing the social casino market for 10 consecutive quarters. Direct-to-consumer revenue also increased significantly, making up 12% of total SciPlay revenue.
iGaming Growth: The iGaming segment maintained record revenue of $74 million, with strong growth in North America and a significant year-over-year increase in gaming revenue volumes in the U.S. and Canada.
Global Presence and Diversification: The company’s diversified product portfolio and strong international presence in markets such as Australia, Asia, and Europe were highlighted as key drivers of growth.
Strategic Investments: Investments in R&D, infrastructure, and new game development, such as the upcoming Horizon Cabinet and new game franchises, are expected to fuel future growth.
Share Repurchase Program: Completion of the first-ever share repurchase program and the authorization of a new $1 billion buyback program show the company’s confidence in its value and financial position.
Negatives -
Legal and Restructuring Costs: The company reported a $32 million charge related to certain legal matters, which impacted their financial results. Ongoing legal expenses are expected to continue into the second half of the year.
Modest Margin Impact Expected: There is an anticipated modest impact on margins in the third quarter due to the announced Entain deal, which involves a lower average selling price but recurring revenue components.
iGaming Market Slower Than Expected: The growth in the iGaming market has been slower than initially anticipated due to slower legalization processes. This has affected the mix of contributions to the $1.4 billion EBITDA target set for 2025.
Uncertainty in Consumer Behavior: Although current indicators are positive, the company acknowledged the volatile news cycle and the potential for macroeconomic shocks, which could impact future performance.
Seasonality and Cash Flow Variability: There was some variability in cash flow from operations over the past six quarters, influenced by timing issues related to CapEx, interest payments, and tax payments.
Direct Quotes on Technology:
Matt Wilson on Gaming Systems Innovation:
"As a leading global systems provider, we will continue to innovate and integrate our software and hardware to provide operators with best-in-class solutions to run their operations efficiently."
Matt Wilson on Cross-Platform Strategy:
"Our cross-platform strategy fully accentuates the power of our portfolio as we continue to see our brands and franchise expand across land-based, social, and iGaming channels."
Matt Wilson on R&D Investment:
"We will continue to focus on R&D investment and innovation to elevate the overall gaming experience, which will ultimately translate into growing market share."
Matt Wilson on iGaming Growth and Technology:
"Our experience and first-mover advantage in the industry continues to differentiate our products as we build and expand our offerings such as enhanced marketing capabilities to improve player engagement and experience for operators."
Matt Wilson on SciPlay Direct-to-Consumer Technology:
"We went from 1% of revenues in 2023 being driven through our direct-to-consumer platform to 12% in the quarter. So there's been a huge step up sequentially Q1 to Q2... We'll continue to scale over time."
Matt Wilson on Global Content Strategy:
"We're building world-class games, and it just rises all boats across our organization. So really comfortable with the momentum we're seeing, you're seeing it on the ILS chart, you're also seeing it show up in the financials."
Earnings Call, Aug 07, 2024 - Super Group (SGHC) Limited,
Positives -
Strong Financial Performance: Super Group reported its strongest quarter ever, with record revenue of EUR 408 million (excluding the U.S.), reflecting 9% year-on-year growth. Adjusted EBITDA also set a record at EUR 98 million, showing an 11% increase year-on-year.
Operational Efficiency: The company emphasized its successful integration of the Apricot sportsbook and other operational efficiencies. Despite incurring EUR 3.3 million in redundancy costs, they maintained a strong EBITDA margin of 24%, which could have been 26% without those costs.
Strategic Market Focus: Super Group is focusing on high-margin markets, particularly by expanding its iGaming presence. They have decided to exit the U.S. sports betting market, which was not profitable, and will instead concentrate on maintaining their iGaming operations in New Jersey and Pennsylvania.
Strong Balance Sheet: The company has a strong financial position, ending the quarter with EUR 307 million in unrestricted cash and no debt. They also announced and paid their first cash dividend, with plans to maintain or possibly increase it.
Increased Guidance: Due to their strong performance in the first half of the year, Super Group has raised its 2024 ex-U.S. adjusted EBITDA guidance to over EUR 300 million, representing a margin of over 19%.
New Marketing Deals: The company highlighted new marketing deals, such as Betway becoming the official title sponsor of South Africa's premier soccer league and a global betting partner for Manchester City in the English Premier League.
Negatives -
Costs Related to U.S. Exit: The exit from the U.S. sports betting market is expected to incur cash costs up to EUR 45 million, mainly due to contract obligations and redundancy costs.
Ongoing U.S. Losses: The U.S. business has already incurred an adjusted EBITDA loss of EUR 39 million, with an additional expected loss of EUR 20 million for iGaming operations in the second half of 2024.
Regulatory Challenges: The company faces significant regulatory challenges in markets like Germany, where strict regulations are pushing customers to the black market, negatively impacting revenue. Similarly, unfavourable regulations in markets like Buenos Aires have led them to withdraw, and there is uncertainty in Brazil.
Market Competition: The competitive environment remains challenging, especially in mature and highly regulated markets like the U.K., Canada, and the Netherlands. The company mentioned difficulties in maintaining profitability in certain markets due to these challenges.
Direct Quotes on Technology
Neal Menashe (CEO & Director):
"This year, we have been prioritizing operational efficiencies, including the successful integration of the Apricot sportsbook."
"We obsessively tailor our offerings to each local market, which includes a continued rollout of our leading casino brand, Jackpot City into new and existing markets."
"And across the board in all these markets, we are optimizing everywhere."
Richard Hasson (President, Chief Commercial Officer & Director):
"A lot of our internal forecast have assumed improvements in a number of KPIs from where we were at the beginning of this year. And we also are -- we're seeing those come through at the moment."
"As part of the geographic -- the footprint optimization that we're going through at the moment, we're considering these a lot more carefully and making sure that wherever we do go live, there is a path there and sustainable path to profitability."
Earnings Call, July 31, 2024 - Bally's Corporation,
Positives -
Revenue Growth: Bally's reported a 3% increase in revenue year-over-year for Q2 2024, reaching $622 million. The Casino and Resort segment saw a 3% revenue increase, and the North America Interactive segment grew substantially by 95%.
UK Performance: The UK operations performed strongly with a 9% revenue growth, and despite challenges outside the UK, adjusted EBITDA margins improved by 130 basis points.
Chicago Development: Bally's secured a $940 million financing arrangement with Gaming and Leisure Properties for their Chicago permanent casino resort, which is on track to open in the second half of 2026.
Database Growth: In Chicago, Bally's grew its customer database to over 100,000 players, which is a 100% increase since Q4 2023, and they surpassed 1 million total visitors.
iGaming Success: The North America Interactive segment generated $6.7 million in net gaming revenue in Rhode Island, and the iGaming operation is expanding successfully in New Jersey, Pennsylvania, and Rhode Island.
Improved Customer Experience: Bally's has enhanced its real-time monitoring and player management systems in the UK, which has improved customer engagement and satisfaction.
Strategic Construction Plans: The demolition of the Tropicana in Las Vegas is on schedule, with the implosion of the hotel tower planned for October 2024, making way for the new MLB stadium.
Negatives -
Revenue Decline in International Interactive Segment: The International Interactive segment saw a 7% revenue decline year-over-year, primarily due to softness in non-UK operations.
Challenges in Rhode Island and Atlantic City: The Rhode Island properties were impacted by traffic disruptions due to the Providence Bridge construction, leading to a decline in visitation. Atlantic City experienced difficulties due to turnover in the relationship marketing team, which impacted customer visitation.
Losses in North America Interactive: Despite revenue growth, the North America Interactive segment reported an adjusted EBITDA loss of approximately $7 million for the quarter.
Challenges in Asia: Business volumes in Asia are being impacted by regional issues, with no immediate signs of recovery. The sentiment in Japan, driven by government actions and currency devaluation, has led to decreased demand.
CapEx Reduction: Bally's reduced its CapEx spend from an initial estimate of $165 million to $115 million, excluding major projects in Chicago and Tropicana. This could indicate a slowdown in some expansion or maintenance projects.
Direct Quotes on Technology:
Robeson Mandela Reeves (CEO & Director):
"With the ongoing successful rollout of Bally Bet across our markets, we're generating improved volumes and profitability, particularly as the transition onto Kambi and White Hat platforms has garnered good customer feedback and helped us differentiate our offering."
"We've definitely improved that code base of our native applications in [the UK] market, which has made it easier to drive a better customer experience. And we've massively advanced our real-time monitoring and player management. That both helps us from communicating to our players in a near real-time fashion, and I mean, sort of split seconds."
George T. Papanier (President & Director):
"We're focused on going through the process and obtaining the appropriate approvals with the PGT... and timing of construction probably won't be until the first half of 2025 at this point. As part of the transaction, obviously, this is a stage relative to arranging the financing for that."
Earnings Call, Aug 15, 2024 - Gambling.com Group Limited,
Positives -
Strong Financial Performance: Gambling.com Group reported record Q2 revenue of $30.5 million, an 18% year-over-year increase, and adjusted EBITDA growth of 19% to $11.2 million.
Gross profit increased by 16% to $29.1 million, and the company achieved a gross margin of 95%.
The company raised its full-year revenue guidance to $123 million to $127 million, with expected adjusted EBITDA growth of 24%.
Effective Response to Market Changes:The team was able to quickly adapt to changes in Google's content prioritization, recalibrating their portfolio of owned and operated sites faster than expected.
The impact of Google’s policy shift was less pronounced than initially expected, demonstrating the company's agility.
International Growth:Strong iGaming growth was reported across Europe, with the UK and Ireland revenue rising 18%, other Europe up 111%, and the rest of the world up 70%.
The company successfully launched new licenses in Greece and Romania, which are expected to be growth drivers in the medium term.
Strategic M&A and Share Repurchases: The acquisition of Freebets.com is trending ahead of expectations.
The company repurchased over 6% of its outstanding shares and received board approval for an additional $10 million in share repurchase authorisation.
Optimism for Future Growth:The company remains confident in reaching $100 million in adjusted EBITDA in the coming years, supported by organic growth, strategic M&A, and new state launches in the U.S.
Negatives -
Challenges in North America:Revenue in North America was down 8% year-over-year due to exceptional performance in the comparable period and the impact of changes in media partnerships.
The company does not expect overall growth in North America in 2024, largely due to a substantial reduction in media partnership business.
Increased Costs:Cost of sales grew 60% year-over-year to $1.4 million, driven by sustained media partnership revenues.
The company raised its full-year cost of sales guidance from $4.7 million to $6.5 million due to higher-than-anticipated media partnership contributions.
Dependence on Market Conditions: The company's future growth and ability to reach its $100 million EBITDA target are partially dependent on new state launches in the U.S. and the pace of regulatory changes, which remain uncertain.
Direct Quotes on Technology:
Charles Hanson Gillespie, Co-Founder, CEO & Chairman of the Board:
On the impact of AI on search patterns: "Frankly, to date, we haven't seen any change as a result of generative AI and various kind of AI-enabled search engines, the volume of search that still comes off of Google is -- I mean, it's higher than ever. And the traffic is still there. Nothing has changed."
On technology integration post-acquisition: "We've already successfully migrated certain aspects of the acquired portfolio to our technology stack, including our ad tech and we will continue our integration work across the entirety of the portfolio for another few quarters."
On the potential impact of antitrust rulings on Google: "If they actually spun off Android or actually managed to break it up, I think it'd be a long time from now. And I don't frankly see the search business being terribly impacted, but ask me again in 5 years."
Earnings Call, July 30, 2024 - International Game Technology PLC,
Positives -
Strong Financial Performance: IGT reported strong first-half results with over $2 billion in revenue and an operating margin of 23%.
Achieved record operating income and adjusted EBITDA, particularly in the global lottery, gaming, and digital segments.
Generated $463 million in cash from operations, resulting in $264 million in free cash flow.
Net debt leverage was confirmed at 2.9x, the lowest in company history.
Successful Strategic Transactions: The sale of the gaming and digital business to Apollo for $4.05 billion in cash was highlighted as a positive evolution of the originally planned spin and merger transaction with Everi.
This transaction is expected to provide a quicker realisation of value for shareholders, reduce tax impacts, and eliminate integration risk.
Lottery Business Strength: The lottery segment continues to show resilience and growth, with a 2% increase in revenue for the first half and a strong performance in Italy.
IGT secured several important multiyear contract wins and extensions, including a new 7-year contract with the Colorado Lottery and a 3-year extension with the Mississippi Lottery Corporation.
Growth in Gaming and Digital: The global installed base of gaming machines increased for the eighth consecutive quarter, with IGT's premium games performing particularly well.
Notable titles like "Tiger and Dragon" and "Mystery of the Lamp" are driving demand, along with the successful launch of the Whitney Houston Web game.
iLottery Growth: iLottery sales showed strong momentum, rising 27% in the first half, particularly in the U.S. and Italy.
Strategic Focus on Core Business: Post-transaction, IGT will focus on its lottery business, which has a compelling model characterised by long-term contracts, strong customer relationships, and significant free cash flow generation.
Negatives -
Lottery Revenue Decline: The global lottery segment saw a 2% revenue decline in Q2, primarily due to elevated product sales in the prior year.
Lower Terminal Unit Shipments: Global terminal unit shipments declined by 640 units year-over-year, reflecting a return to more normal levels after a period of pent-up demand due to supply chain challenges.
Challenges in the Australian Market: IGT has struggled to gain market share in Australia, although there are signs of improvement.
Potential Tax Leakage: The sale of the gaming and digital businesses is expected to result in modest tax leakage, estimated at up to $100 million or less than $0.50 per share.
Uncertain Regulatory Approvals: Although Apollo has experience with regulators, there is still an estimated timeline of up to 15 months for the completion of the transaction, which introduces some uncertainty.
Direct Quotes on Technology:
Vincent L. Sadusky, President, CEO & Executive Director:
"Consistent investments in our technology, our game content, and innovative solutions provide us a really good foundation to build from."
"We're currently working on things like what the technology plan would be, et cetera."
Massimiliano Chiara, Executive VP, CFO & Director:
No direct quotes specifically about technology, but his discussions involved the financial implications of technology investments, particularly in the context of the Italian Lotto renewal process.
Earnings Call, July 31, 2024 - Rush Street Interactive, Inc.,
Positives -
Record Revenue and EBITDA: Rush Street Interactive (RSI) reported a record revenue of $220 million, up 34% year-over-year, and a record EBITDA of $21.4 million, reflecting a $20 million improvement year-over-year.
Strong Player Growth: The company has been adding new players to its platform at an accelerated pace, particularly in North America, where MAU growth was 24% year-over-year. Latin America showed even stronger growth, with MAUs up 79% year-over-year.
Geographical Diversification: RSI has diversified its revenue streams, with 59% of revenue now coming from markets outside Illinois and Pennsylvania. This includes significant growth in markets like Delaware, where iCasino revenue was 4x higher than the previous operator’s performance.
Improved Marketing Efficiency: RSI achieved record numbers of first-time depositors in both the U.S. and Latin America while reducing marketing spend by 10% compared to the prior year quarter. The company is acquiring more customers with less spend, demonstrating significant improvements in marketing efficiency.
Expansion into New Markets: RSI has recently launched operations in Peru and is exploring further opportunities in Canada and other Latin American markets, indicating a focus on long-term growth and market expansion.
High Gross Margins: The company reported that its gross profit margin increased to 34.6%, with markets outside Pennsylvania and Illinois achieving a gross profit margin of 47%, the highest in the company’s history.
Positive Cash Flow: RSI ended the quarter with $194 million in unrestricted cash and no debt, with a $28 million increase in net cash position in the first half of the year.
Raised Full-Year Guidance: The company raised its full-year revenue guidance to $860-$900 million and EBITDA guidance to $64-$72 million, reflecting confidence in continued growth.
Negatives -
Challenges in Illinois: The increase in the Illinois tax rate, although mitigated by the company’s structure, poses a potential challenge. The higher tax rate could reduce competitiveness in the state and may impact profitability.
Lower ARPMAU in Latin America: While MAU growth in Latin America was strong, ARPMAU (Average Revenue Per Monthly Active User) in the region was down 2% compared to the prior year period, which could indicate a potential issue with monetization despite user growth.
Uncertainty in Brazil: RSI’s entry into the Brazilian market is cautious, with concerns about the regulatory framework and the presence of unregulated operators. This hesitation may delay potential growth in a large market.
Potential Future Lobbying Efforts in Delaware: While the current model in Delaware has been successful, the company anticipates that future lobbying efforts could challenge its position, creating uncertainty in a key market.
Direct Quotes on Technology:
Richard Todd Schwartz, Co-Founder, CEO & Director:
“We’ve been improving quite a bit with our investments in technology and marketing tools as well as investing in capabilities to make sure that we find the right players in the right places that are valuable for us.”
“The only thing we haven’t brought in-house is sportsbook platform, which we integrate through Kambi for many years. And as I’ve shared previously, it’s probably been a while, and our philosophy on that relationship is that we like to sort of get the bread and butter from Kambi, but we have a development team internally that adds our own flavour, our own twist, our own innovation on the top of the sportsbook.”
“We built [our jackpot system] in-house. So, we have a very robust, very thorough, very broad-based technology system in-house really. I would say, 95% of everything is in-house.”
Kyle L. Sauers, Chief Financial Officer:
“We’ve gotten a ton better at making sure that the right bonuses are going to the right players and that we’re giving value to the players that deserve it most.”
Disclaimer: The information provided in this article is for informational purposes only and should not be interpreted as financial advice. The opinions and analyses expressed herein are the author's own and do not represent the views of any financial institutions. We strongly advise conducting your own research or consulting with a qualified professional before making any financial decisions. The author and the publication assume no responsibility for any losses or damages arising from the use of this information.