Igaming Focus: Entain’s BetMGM woes continue with $123m H1 loss

Hello and welcome to this week’s Igaming Focus newsletter.

On the slate this week:

• MGM reported strong Q2 revenues overnight, but BetMGM, its U.S. sports betting JV with Entain, struggled in H1 as it recorded losses of $123m.
• Apollo’s $6.3bn IGT/Everi purchase will “offer certainty to investors” as IGT Q2 numbers in line with expectations.
• FanDuel and ESPN Bet on the rise as U.S. parlay hold drops.
• France round-up: FDJ, Kindred results, Euros and France H1 numbers
• Exit stage left: Nylén leaves Kambi on a slight high.
• News shorts: The Unit-XCLSV, White Hat-Bet365, Bally’s accepts SG offer.

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Entain’s BetMGM woes continue with $123m H1 loss

U.S. joint venture has work to do to recapture market share as new Entain CEO Gavin Isaacs readies September start.

Revised targets: Shares in Entain were down 8% at the close of trading on Monday after the operator announced its BetMGM joint venture in the U.S. had made an EBITDA loss of $123m for the first half of 2024. As a result, the 50/50 JV between Entain and MGM Resorts International pushed back its $500m EBITDA target from 2026 to “in the coming years”.

• The same applied to its aim of reaching 25% market share, while its current share of GGR in the U.S. and Ontario across sports betting and igaming is 13%. Net revenues were up 6% YoY to $1bn and the group said it expected BetMGM’s H2 EBITDA to be similar to H1.
• The struggle is real: BetMGM continues to struggle to compete with DraftKings and Flutter Entertainment’s FanDuel. Flutter has forecast US revenue of $6bn this year, with DraftKings recently raising 2024 guidance to $4.9bn.
• New leader’s tasks: Ex-Scientific Games CEO Gavin Isaacs was announced as Entain’s new CEO earlier this month. Isaacs will be under pressure to revive the JV when he takes up his role on September 2, while speculation about whether to pursue the joint project is also likely to resurface. Recall, ex-CEO Jette Nygaard-Andersen mentioned at G2E last October that “joint ventures don’t last forever”.
• Reasons to be cheerful: The team at Jefferies noted that Q2 was “the first quarter in over two years where BetMGM avoided market share losses across both OSB and igaming” and that that online casino actives were up 18% YoY.

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Apollo’s $6.3bn IGT/Everi purchase will “offer certainty to investors”

Takeover by Apollo is well received by markets as IGT issues inline Q2s. 

Apollo Global Management’s planned $6.3bn acquisition of IGT Gaming and Everi Holdings has been met with optimism by analysts, clearing up some of the concern around the previously planned merger of the two suppliers. IGT’s Q2 revenues of $1bn and EBITDA of $420m also matched forecasts, with lottery coming in 4% below estimates and gaming and digital 11% above expectations.

• As part of the Apollo deal, IGT Lottery will split from its gaming and digital divisions and IGT shareholders will receive $4.05bn from the transaction, with Everi receiving $14.25/share or $2.25bn from Apollo. The deal is expected to close in Q3 2025.
• The new announcement comes just five months after IGT’s Global Gaming and PlayDigital businesses and Everi announced that they would merge, valuing the combined business at $6.2bn.
• Cautious optimism: Truist Securities said it was “optimistic around the longer-term potential of the combined entity (and heard positive feedback from operators)” but had been “cautious about the near-term setup until the deal closed and possibly into early integration”.

Dear prudence: “This drove our downgrades of both IGT and EVRI from Buy to Hold (on 3/1) upon the deal announcement on 2/29/2024. The new cash terms offer certainty to investors; and despite potential longer-term upside – we see limited risks to the deal not closing.”

• The team at Craig Hallum echoed the sentiments of other analysts when it told Reuters: “We felt that the prior transaction meaningfully undervalued the Everi assets.”
• Exec appointments: Vince Sandusky, will continue as CEO of IGT Lottery and IGT EVP of strategy and corporate development Fabio Celadon will head up the combined IGT/Everi entity.
• Shares in IGT have jumped since the announcement of the deal last Friday, with the share price reaching $23.45 at Monday’s close, up from $20.75 at last Thursday’s close. In the same timeframe, Everi’s shares jumped from $9.20 to $12.81.

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FanDuel and ESPN Bet as parlay hold drops

Sharing is caring: FanDuel, ESPN Bet and Fanatics all gained market share in Q2 while DraftKings lost share QoQ and, with Rush Street Interactive, were the only two companies to experience lower gaming margins QoQ, according to data from the Jefferies team.

Key numbers: 

• FanDuel gained 200bps of GGR share to 47% despite its share of handle declining in July, but its “superior risk and trading resulted in gaming margins only down ~70 bps, compared to the industry down ~124 bps”.
• Despite DraftKings losing OSB share QoQ, its share of handle is up ~400 bps since January.
• Finally, ESPN Bet share of handle “continues to decline in its operational markets”, but its “gaming margins of >8% (from 5% in Q1), highlight sustained improvement in the business model (risk, trading, product), resulting in GGR market share slightly up QoQ”.

In the mix

Commenting on the influence of parlay bets on U.S. online sports betting, Deutsche Bank said “parlay mix grew steadily over the course of 2023 relative to 2022” but aggregate hold was down 30 bps YoY to 17.8% in 2023.

• The decline happened during “the back half of the year”, said DB, “despite marketing efforts around operator-created parlays and larger lottery tickets (more legs) to boost structural hold”.
• In 2023, parlays accounted for 25% of handle, +330 bps YoY and so far in 2024, they “make up roughly 25.7% of total handle, while hold is up (+130 bps) to 19.1%”.

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France round up: FDJ and Kindred results, Euros and France H1 numbers 

The country has been busy hosting the Olympic Games and heightened activity has also been evident among its gambling stakeholders. 

No surprises: French lottery giant Française des Jeux (FDJ) said its €2.6bn ($2.8bn) acquisition of Kindred Group remained on course and discussions with France’s competition authorities were progressing as planned, with the timing of a decision on the buyout still set for November. Prior to its results announcement, there had been rumours that the deal might be waved through as early as this month.

• FDJ’s H2 revenues climbed 11% YoY to €1.4bn thanks to contributions from Zeturf and Premier Lotteries Ireland (PLI) and a 15% rise in its online betting and gaming activities to €294m that were boosted by “exceptionally favorable” sports results. Group EBITDA was up 23% to €370m.
• Kindred’s results came out the day before FDJ’s and the group reported strong growth of +41% in France, +17% in the Netherlands and +12% in Belgium thanks to app updates and an improved UX. Kindred revenues were up 6% (+12% ex-US) to £208.4m in Q2, with EBITDA up 32% to £73.6m.
• Opening salvo: Meanwhile, French online gaming trade body AFJEL commented that dot fr sportsbooks had experienced a poor Euro 2024 because of illegal operators targeting the market, while Anden said its Unibet brand had “definitely taken market share” from rivals.
• The country’s gambling regulator Autorité Nationale des Jeux said bookmakers recorded €650m in stakes from French punters during the Euros.
• The total was less than that recorded during the previous Euros in 2021, but it was also some way above the numbers stated by AFJEL, which said its members had taken less than €500m in wagers on the event.
• Tit for tat: ANJ said that while some illegal online casino sites offered sports betting products, “this service is not widely used by the public” and the bad political atmosphere in the country and the absence of goals scored by the French team in the group phase were factors behind the low stakes during the Euros.
• ANJ added that the Tokyo Games in 2021 generated €120m for French sportsbooks and “these stakes could double with the Paris Games”.
• During the first half of 2024, France’s online sports betting market was “very dynamic”, ANJ said, with stakes rising 24% to €5.2bn and GGR up 16% to €871m.

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Kambi sees off Nylén era with Q2 rise

Euros and Copa America boost Q2, LATAM to be key region for new CEO

Final call: Kristian Nylén’s final quarter as Kambi CEO saw the group’s Q2 revenues rise 6.5% YoY to €45.7m with the boost attributed to the Euro 2024 and Copa America tournaments, which contributed 9% of turnover.

• New man in the hot seat: The football events helped push up revenues, but also showed the difficulty new CEO Werner Becher faces as he took up his functions this week. During Q2, Kambi withdrew its 2027 financial targets due to slower than expected regulatory progress in key markets.
• Key region: Becher’s experience includes roles as CEO of Interwetten and CEO EMEA and LATAM at Sportradar. His background in LATAM is likely to have played a key role in his recruitment as the region will be key to make up for Kambi’s loss of deals with DraftKings and Penn Entertainment in the US over the past two years.
• Contract talk: Asked about what will happen to Kambi’s contract with LeoVegas following the operator’s acquisition of Tipico Group’s US sportsbook. Nylén said the platform LeoVegas will acquire is “not yet customisable for all the different geographies” and that discussions will take place in the autumn.

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News shorts

The online-gambling focused marketing agency The Unit has announced a strategic partnership with New York-based XCLSV that will see them collaborate on a number of services including pay-per-click, SEO, social media, influencer marketing, and allow The Unit to continue its growth in the North American market.

White Hat Studios will supply online casino titles such as Peaky Blinders, Wolf Legend and Megaways to bet365 following a partnership between the two firms in Pennsylvania.

Bally’s Corporation has agreed to a buyout offer from the hedge fund Standard General headed up by its chairman Soo Kim valuing the company at $4.6bn.

See you in two weeks!