During Wednesday’s investor’s call, BetMGM CEO Adam Greenblatt said that he expected to reach profitability in 2023, “based on what I can see today.”
But Greenblatt hedged a bit on whether the sports and online betting joint venture between MGM Resorts and Entain will truly be in the black next year.
“Let’s not lose sight of our reality,” Greenblatt said. “We are not selling toothpaste in a very mature market in a price stable environment. That’s not this business, right? The market is still in relatively exciting, exciting stages, with lots of new states becoming addressable at different and uncertain ties.”
Greenblatt added that the company is subject to short-term results based on volatility in sports.
“So, while we cannot commit as we stand here today to profitability for the full year 2023, at this state, we expect to enjoy many months of positive EBITDA as the year progresses.”
BetMGM net revenue for 2021 was $850 million, ahead of management expectations and almost five times 2020 revenue. Greenblatt also said the company is on track to achieve its long-term goal of a 20-25% market share of the U.S. sports betting and igaming and that BetMGM’s 30% market share in igaming leads the U.S.
“It is impressive that BetMGM has established itself as a reliable No.2 in the competitive US sports betting market without taking aggressive financial hits,” said Lawrence S Shen, CFA, Partner at C3 Gaming in an email “The 140% growth in same-state net revenue from operationyear over year and the fact that some states are generating positive EBITDA in the first year of operation offer great confidence that BetMGM will pose positive EBITDA in 2023, which is faster than many competitors.”
Greenblatt stated the yearly results are “outstanding” in the context of the aggressively competitive environment among operators vying for shares of online betting markets and merit more investment by BetMGM.
“Ultimately, capital is rational and the capital investment market is getting smarter,” he said. “So, what I think we at BetMGM are able to do with our board is demonstrate the cohort economics and the value of that cohort ROI which fuels the fire, which almost justifies further investment.”
“But I do think capital going to become more demanding,” Greenblatt added, “which will drive more selective investment, shall we say? More selective and more prudent approaches to investment and player promotion. I think what we’ll see is there is a path to the rationalization of the commercial environment, and it may happen through the course of this year.”
Credit Suisse analyst Benjamin Chaiken wrote in a statement that sports betting operators have been “negatively impacted” by views that profitability is out of sight or unrealistic.
“Today’s update not only suggests MGM has an actionable plan but also clearly defines a path to profitability (MGM expects positive EBITDA in’ 23),” Chaiken wrote. “We think this clarity around profitability timing is both unexpected and ahead of expectations and directly eats away at the bear case. We think MGM is an outperformer even without contribution from sports betting, so today’s update strengthens our bull case even more.”
In response to a question about fewer new states onboarding, Greenblatt emphasized that the depth of markets where sports betting and igaming are now legal have strong KPIs (key performance indicators).
“We haven’t seen a plateauing of organic demand in our live states,” Greenblatt said, noting Michigan as an example.
Other items from the investor’s call:
- Net revenue from operations is expected to be over $1.3 billion in 2022
- BetMGM expects to launch online sportsbooks in Illinois and Louisiana in the first quarter. Retail sportsbooks in Puerto Rico and online sportsbooks and igaming in Ontario, Canada, are expected to launch later in 2022.
- The company expects to expand in 2022 its first-to-market bingo product and the BetMGM Racing app into additional states.
BetMGM’s year-end results come after DraftKings in early October made a $22 billion offer to acquire Entain, only to withdraw its offer a few weeks later.
During the Global Gaming Expo in Las Vegas last October, MGM Resorts Bill Hornbuckle bowed out of a scheduled press conference after DraftKings bid was announced. Hornbuckle later that day told Bloomberg that he saw a path where MGM Resorts would acquire Entain’s stake in BetMGM.
Shen said there’s little doubt that MGM played a big role in DraftKings’ failed acquisition of Entain last year.
“Entain could have agreed to sell if MGM had not intervened,” Shen said. “This was supported by the rise in DraftKings’ stock price and the deep slide in Entain’s stock price on the news the deal fell apart, which meant the acquisition price was over the fair value. It would put MGM in some tough situation because if that acquisition happened, MGM would naturally like to buy out Entain’s stakes in the BetMGM JV, but the high acquisition price meant MGM need to pay more for that. With more jurisdictions opening up and its investments in personnel and technology, MGM would prefer to stay on the planned schedule of deploying capital.”
