Nearly a week after BetMGM reported a profitable quarter — the first in the mobile operatorβs history — MGM Resorts CEO Bill Hornbuckle was tight-lipped about the possibility of a renewed bid to buy BetMGM co-owner Entain or a plan to acquire Entainβs 50% stake in BetMGM.Β
“Weβre focused on working alongside our partners with a collective goal to maximize the growth and profitability of MGM and LeoVegas,” Hornbuckle said during MGM Resortsβ 2023 second-quarter earnings call on Wednesday after the bell. (LeoVegas is a European-focused online gaming subsidiary.)
“I think weβre making good progress on both those fronts, and thatβs really all weβre going to say,” Hornbuckle said.
BetMGM is a 50-50 joint 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 BetMGMβs 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.Β
“Itβs 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. βWhether MGM makes a bid for the entirety of Entain or just its share in the joint venture, full ownership will allow for product development capabilities and agility that are currently constrained by the existing relationship.”
Earnings breakdown
Wednesdayβs 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.Β
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.Β
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.Β
Customer acquisition costs, which were once over $400 per new customer, declined to below the low $300sΒ at BetMGM. Hornbuckle cited an βactive maturityβ in how the venture markets to customers and which customers it targets with marketing materials.Β
On the casino side, MGM Resorts hopes to receive a New York license in the first half of 2024. MGMβs 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.Β
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 enhancementsΒ
As for BetMGMβs short-term future, Hornbuckle sounded bullish on upcoming 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 BetMGMβs parlay and in-game offerings.Β
βOur partnerβs announced acquisition of Angstrom is also a positive step toward improving BetMGMβs product and refining our pricing tools, both of which we expect to drive customer satisfaction and ultimately margins,β Hornbuckle said.Β
Entain makes latest US play with Angstrom Sports takeover https://t.co/r5QRmChYhM
— iGaming Alliance (@iGamingAlliance) July 17, 2023
MGM Resorts anticipates an increase in parlay and live bets that may benefit BetMGMβs bottom line.
“Weβre simply going to have more high-margin bets available for customers as we deploy Angstrom,” Hornbuckle said.Β
Across the industry, a number of operators are stockpiling technology to prepare themselves for the shift to in-game betting. PointsBet’s ownership of Banach Technology, a sportsbook solutions provider, is viewed by some experts as one of the main drivers of 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 marketβs next phase."
Adam Greenblatt outlines BetMGMβs path to profitabilityhttps://t.co/jqOeSUSBlV
— Alfonso Straffon π¨π·πΊπΈπ²π½ (@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 Angstromβs onboarding to significantly enhance BetMGMβs product.
BetMGM currently ranks third among operators in national market share, with FanDuel and DraftKings considerably outpacing all mobile sportsbooks. While BetMGM has recently lost online 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.Β
βOur product is not where we want it to be,β Hornbuckle said. βI think the moves that weβre now making with Entain, [and] the moves weβre gonna make with Angstrom as an onboarded partner for BetMGM, will get us to a place where weβll be back in that game in a meaningful way. And ultimately begin to gain some share back.β
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.