BetMGM notes increased growth and market share during Investors Day conference call

May 12, 2022 7:06 PM
  • Rege Behe, CDC Gaming Reports
May 12, 2022 7:06 PM
  • Rege Behe, CDC Gaming Reports

During Thursday’s BetMGM Investors Day broadcast, company executives expressed optimism about the sports betting operator’s prospects. CEO Adam Greenblatt and his colleagues touted the company’s progress over the last year, notably “the spectacular growth” BetMGM has experienced.

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“Around this time last year we expected to be in 20 markets,” Greenblatt said. “Today, we’re alive in 23.”

Greenblatt also noted that in February of this year, BetMGM reached a 25% overall market share in the states in which it operates, “which, by our estimate, is the market-leading position.”

He continued, “As we look to the future, our plan is working better than we expected. We’re on track to achieve our near- and long-term objectives, which include over $1.6 billion in net revenue in 2022, expected long-term U.S. market share of 20 to 25 percent, and expected long-term EBIDTA of 30 percent.”

But while there are reasons for optimism, continued growth is at least partially contingent on two of the nation’s largest markets, California and New York.

Currently, four initiatives for the legalization of are competing to make November’s ballot in California. Greenblatt said that current polling indicates 58% of Californians want sports betting legalized. He also added that based on California’s adult population and an estimated spend per head of $90, the total addressable market could be between $2.5 billion and $3 billion.

“But our path to profitability doesn’t include a launch in California,” Greenblatt said. “If California does get approved, that’s great news for our business. We’ve demonstrated the state-level economics, the unit economics of new states, and obviously in California we have a good deal of certainty about what the regulatory framework will be. … Should it launch, it will require investment, but it’s very, very positive for BetMGM.”

The launch of legal sports betting in New York has been tempered by the tax rate of 51% levied on gaming operators. Because of that “unfavorable” rate, BetMGM is taking a conservative approach to acquiring new players in the Empire State.

BetMGM Chief Finance Officer Gary Deutsch says one of the issues with that tax rate is that New York applies it to both real revenue and “phantom revenue associated with non-cash promotional wagers.”

“We hope that the New York tax environment will be updated and we can then again aggressively pursue New York players,” Deutsch said. “However, as rational allocators of capital with sophisticated investors in Entain and BetMGM, we simply can’t apply our capital against an irrational investment thesis.”

The outlook for BetMGM is much rosier in Ontario, Canada, where sports betting was legalized five weeks ago. Greenblatt noted that BetMGM’s experience in the Canadian province can’t be compared to other states, because the Ontario market “was already fully formed before we got there.”

To emphasize his satisfaction with the Ontario market, Greenblatt revealed one bit of “data candy”: On the day before the investor’s call, BetMGM handled almost 2 million transactions. “I think that’s a good number from a standing start,” Greenblatt said, “We’re seeing thousands of players every day, thousands of actives every day.

“What’s equally encouraging to me is that our registration-to-first-time-deposit conversion rate has been at or ahead of our U.S. states’. So the recipe is working again.”

“BetMGM now expects the total addressable market in the U.S. for online sports betting/igaming and Canada for online sports betting to be approximately $37 billion, up from its estimated $32 billion from its April 21, 2021, investor day (long-term, timeline not specified, but our guess it’s 2030 +/-),” wrote Joseph Greff, a Wall Street analyst at J.P. Morgan, “and targets long-term market share of ~20-25% in the U.S. (unchanged from last April).”