Bet On It: Circa Sports throws hat in Kentucky sports betting ring ahead of NFL

Welcome to the latest edition of “Bet On It,” where The Fly looks at news and activity in the sports betting and iGaming space. 

SECTOR NEWS: Circa Sports Kentucky is set to launch a temporary retail sportsbook at The Mint Gaming Hall Kentucky Downs in Franklin, Kentucky., on August 12, subject to regulatory gaming approvals. This retail sportsbook is following the introduction of Circa Sports Kentucky’s mobile betting app in Corbin, Kentucky., earlier this year. Circa Sports will provide an in-person betting experience at its new location until the debut of the permanent retail sportsbook, slated for summer 2025. “Launching a sportsbook in a new state is a significant milestone for any operator, and we couldn’t think of a better venue than The Mint Gaming Hall,” said Derek Stevens, CEO of Circa Sports. “Kentucky’s passion for sports makes it an ideal location, and we’re excited to offer customers a unique betting experience, combining some of the best odds in the industry with top-tier service.” Open seven days a week from 9 a.m. – 11 p.m. CT, the Circa Sports book at The Mint Gaming Hall will feature three betting windows, one ADA window, five kiosks, 10 TVs and four odds boards. A Circa Sports betting kiosk also will be housed at Oasis Side Bar inside The Mint Gaming Hall.

Light & Wonder (LNW) announced a new $1B share repurchase program. Oliver Chow, CFO, added, “Our 13th consecutive quarter of consolidated revenue growth once again reflects the strength of our combined business and solid financial profile. We continue to see improved earnings quality with consistent growth and healthy margins, all while investing back into the business to scale for the future. The new $1.0 billion share repurchase program is a testament to the value we see in the business and confidence in our ability to execute to plan over the long-term. We believe we will continue to create significant value for our shareholders through enhanced cash flow generation initiatives while delivering on our financial targets.”

Genius Sports (GENI) announced the extension of its exclusive official data partnership with Football DataCo through 2029. Since 2019, Genius Sports has been DataCo’s exclusive supplier of official low latency data from in-stadia to the sports betting industry, capturing, and distributing live data for over 4,000 games per season to hundreds of licensed sportsbooks across the globe in under a second. As part of the agreement, from season 2025/26 Genius Sports will also exclusively provide sportsbooks worldwide with Official Player Market Data, powering a wide range of pre-game and in-play betting opportunities such as number of shots on target, assists, pass completions and more.

EARNINGS RECAP: In its second quarter earnings report, Golden Entertainment (GDEN) fell short of EPS and revenue expectations. Blake Sartini, chairman and CEO of Golden, commented, “In the second quarter, we continued to strengthen our balance sheet by fully repaying our outstanding bonds in April and reducing our interest rate on our term loan in May. We also aggressively returned capital to shareholders through our recurring dividend and repurchasing nearly one million shares. Our healthy operating cash flow and strong balance sheet will continue to provide us with strategic and financial flexibility while we return capital to shareholders throughout the year.” JMP Securities lowered the firm’s price target on Golden to $36 from $39 and maintained an Outperform rating on the shares. Golden saw persistent weakness at the lower end of its database, contributing to EBITDA missing consensus expectations in the quarter as well as contributing to same-store EBITDA decline in 1H24, the analyst told investors in a research note. The company has downsized the portfolio and lost some of its scale benefits along the way, leading to margin erosion in recent quarters, and JMP expects these trends to bottom in the back half of the year as it reaps the benefits of the growth initiatives it has taken over the prior years.

Compared to last year, Bragg Gaming (BRAG) fell shy in the earnings per share category and came in just ahead of Q2 revenue target. In addition, the company reaffirmed its full-year 2024 guidance. Matev Mazij, CEO for Bragg, commented: “In the second quarter, we delivered revenues of EUR 24.9 million (USD 26.6 million), a new quarterly record and increase of 0.5% year over year, reflecting a robust business performance diversified over several growing iGaming markets and in-demand product verticals. As expected, gross profit and adjusted EBITDA were down 10.3% and 23.8% year over year respectively, as our product mix has changed. However, I am encouraged by recent momentum for our higher margin products including for our proprietary iGaming content in North America, and from launches of new customers powered by Bragg’s Player Account Management (“PAM”) and turnkey solutions. I am also pleased with sequential growth in revenue (+4.4%), gross profit (+4.4%) and Adjusted EBITDA (+6.0%) compared to the first quarter of the year, a timeframe during which our product mix has remained consistent, and I am confident that we have the products, the strategy and the expertise in place to be able to continue to grow our revenues and profit margins in the second half of the year and into 2025.”

Surpassing analyst consensus for both EPS and revenue in Q2 was Penn Entertainment (PENN). Penn noted its adjusted EBITDAR in the second quarter was $367M. Shares were up 2% following the quarterly report. Jay Snowden, CEO and President, said: “Our retail business remained stable as consistent consumer trends, our diverse portfolio, and recent capital investments offset known, new supply in certain markets,” said Mr. Snowden. “We remain focused on database growth and driving engagement through new technology, continued investment in our gaming and non-gaming offerings, and local and national partnerships related to our food and beverage offerings. Cross-sell opportunities from our ESPN BET customers remain a key growth driver for us, as our PENN Play database has grown to approximately 31 million members, including 3.8 million in our digital database, which is an increase of more than 80% since the launch of ESPN BET. We are also making solid progress on our four development projects, all of which remain on budget and on schedule.” Barclays analyst Brandt Montour raised the firm’s price target on Penn Entertainment to $23 from $22 and keeps an Overweight rating on the shares post the Q2 report. The company’s core gaming outlook and sequential digital improvement are both reassuring, the analyst tells investors in a research note.

Light & Wonder posted mixed results in Q2 but highlighted its gaming business momentum in the quarter. Gaming revenue increased 14%, primarily led by continued growth in Gaming machine sales, which grew 32% year-over-year, 14% growth in Gaming systems and 5% growth in Gaming operations revenue. SciPlay and iGaming revenue grew by 8% and 6%, respectively. Matt Wilson, president and CEO of Light & Wonder, said, “Light & Wonder continues to capitalize on opportunities underpinned by our scale and diversified product offerings as demonstrated through the growth momentum across the business. We saw strong progress in the Gaming business as the expansion of units in the North American installed base reached an inflection point. Our global presence enables further product refinement and market penetration with our suite of games and casino solutions. We continue to develop our catalog of proven, evergreen franchises to bring the most engaging experiences to our players, leveraging the power of our portfolio across land-based, social and iGaming platforms. The uplift that we have continued to see across the business is a testament to the quality of the talent and culture in our organization. I am pleased with the continued momentum that we are seeing and know that the best is yet to come.” Macquarie increased its price target on Light & Wonder to $122 from $120 and affirmed an Outperform rating on the shares. The company delivered another record quarter as it continues to execute towards its $1.4B 2025 EBITDA target, the analyst noted. The firm said the shares should trade with growth stock valuations, rather than lower growth value names.

Despite the company’s Q2 earnings miss, Wynn Resorts (WYNN) reported record adjusted property EBITDA. “Our second quarter results, including a new second quarter record for Adjusted Property EBITDAR, reflect continued strength throughout our business. I am incredibly proud of our teams in Las Vegas, Macau and Boston,” said Craig Billings, CEO of Wynn . “Importantly, we continue to invest in growing the business, with construction on Wynn Al Marjan Island in the UAE progressing at a rapid pace. During the quarter, we also finalized a transaction to acquire our pro-rata share of the land on Al Marjan Island Three, including a sizable land bank for potential future development opportunities for Wynn Resorts or for selected third parties complementary to Wynn Al Marjan.” Barclays cut the firm’s price target on Wynn to $108 from $128 and kept an Overweight rating on the shares. The company reported an in-line quarter and Macau remains the driver of share sentiment despite another strong quarter in Las Vegas, the analyst contended. The firm believes the recent selloff in the shares looks overdone.

Genius Sports upped its full-year guidance following its second quarter release and noted expectations of posit6ive free cash flow in FY24. “This quarter validates our strategic execution as we continue to deepen our league relationships, having extended one of our key data rights agreements, expanded our technology footprint, and bolstered our product offering across the sports ecosystem,” said Mark Locke, Genius Sports co-founder and CEO. “We are excited for the remainder of the year and expect to reaccelerate Group Revenue growth, continue our Adj. EBITDA margin expansion and generate positive cash flow.” Macquarie raised the firm’s price target on Genius Sports to $10 from $9 and keeps an Outperform rating on the shares following the Q2 report. The firm says that with sports betting still in its infancy in North America, it sees more momentum for the sector during NFL season. Genius Sports is a direct benefactor of this momentum, positioning the company to outperform in the second half of 2024, the analyst told investors in a research note.

SURCHARGE SENTIMENT: In conjunction with its second quarter report last week, DraftKings (DKNG) announced a new upcoming gaming tax surcharge on high-tax states. Investors responded to the unprecedented tax with varied opinions according to Jefferies. The bullish perspective on the surcharge is generally seen as beneficial for the industry and supportive of EBITDA generation rather than market share. Some responses also describe the surcharge as a form of price increase. However, the overall outcome largely hinges on FanDuel’s (FLUT) reaction and whether other companies follow suit, Jefferies told investors. Some believe FanDuel might not take a definitive stance but could remain flexible. Additionally, there is a sentiment that both companies should be more concerned about other states increasing taxes rather than each other’s strategies. The firm noted that this situation sends a message to regulators about the negative impact of over-taxing, which can lead to lower revenues for both the state and operators. On the bearish side, it is noted that management had previously communicated that they could offset the taxes over time through various means, but the announcement shifts control to FanDuel, their largest competitor. FanDuel could leverage this to attract more new customers, potentially harming DraftKings shares, regardless of whether it boosts EBITDA, the firm also argued. Rush Street interactive (RSI) has already stated it will not implement a surcharge, although it generally has a lower market share and tax rates in Illinois. Critics argue that the industry is too nascent to adopt adversarial positions against states, especially where DraftKings is lobbying for iGaming legislation, suggesting it is too early to establish a fair margin. Others believe the risk is high unless the company’s intelligence indicates that more states are likely to raise taxes. The best-case scenario is partially offsetting the tax increase, while the worst-case scenario involves losing more market share than anticipated and having to reverse the strategy, according to Jefferies.

ADDITIONAL ANALYST COMMENTARY: B. Riley downgraded PlayAGS (AGS) to Neutral from Buy with a price target of $12.50, down from $16, after the company agreed to be acquired by private equity firm Brightstar Capital for $1.1B.

Barclays lowered the firm’s price target on DraftKings to $43 from $53 and keeps an Overweight rating on the shares post the Q2 report. The analyst says more investment in 2024 “equals more at stake for 2025,” with increased competition a key source of risk. Surcharge is a bold move by DraftKings, one that Barclays is positive on, even if it means share losses, the analyst told investors.

B. Riley analyst David Bain raised the firm’s price target on Everi Holdings (EVRI) to $14.25 from $11 and keeps a Neutral rating on the shares to reflect the pending takeover by Apollo.

Deutsche Bank lowered the firm’s price target on Entain (GMVHF) to 958 GBp from 1,089 GBp and backed a Buy rating on the shares.

Macquarie lowered the firm’s price target on Golden Entertainment to $41 from $44 and held an Outperform rating on the shares post the Q2 report. Easier cost comps start in Q3. and longer term the southern Nevada gaming market is one of the best in the U.S, according to the analyst.

Barclays elevated its price target on Penn to $23 from $22 and reassessed an Overweight rating on the shares post the Q2 report. The company’s core gaming outlook and sequential digital improvement are both reassuring, the analyst said.

Deutsche Bank analyst Carlo Santarelli boosted the firm’s price target on Light & Wonder to $81 from $76 and keeps a Hold rating on the shares. The company’s story continues with the Q2 beat likely to maintain momentum, the analyst tells investors in a research note.

B. Riley upped its price target on Genius Sports to $10 from $9 and keeps a Buy rating on the shares following the Q2 report. The firm says 2025 consensus estimates are likely to go higher in the near term.

Wells Fargo pulled back the firm’s price target on Wynn to $115 from $126 and maintained an Overweight rating on the shares following quarterly results. F1 commentary should calm Q4 Las Vegas fears, the firm noted. At $76/share, Wynn trades sub 8-times EV/EBITDAR despite its compelling growth prospects and trophy asset ownership, Wells added.

PUBLICLY TRADED COMPANIES IN THE SPACE INCLUDE: Accel Entertainment (ACEL), Bally’s (BALY), Boyd Gaming (BYD), Caesars (CZR), Churchill Downs (CHDN), DraftKings (DKNG), Flutter Entertainment (FLUT), Gambling.com (GAMB), Gan Limited (GAN), Genius Sports (GENI), Las Vegas Sands (LVS), MGM Resorts (MGM), Penn Entertainment (PENN), Rush Street Interactive (RSI), Super Group (SGHC) and Wynn Resorts (WYNN).