888 has cautioned investors about its “mixed performance” in Q3 2023, with revenue expected to dip by 10% year-over-year to £400m. 

The company’s shares tumbled 14% during the early hours of trading.

Several factors were identified as the main drivers behind the year-over-year revenue decrease. 

These factors include an ongoing significant impact from compliance changes in dotcom markets, resulting in a slower recovery in customer activity and revenue. 

Additionally, customer-friendly sports results have affected win margins in both UK and international markets in September. 

The continued effects of safer gambling changes within the UK are also contributing to the revenue decline. 

Lastly, a short-term impact stems from a shift in 888’s marketing approach to prioritise higher returns in line with the group’s market focus strategy and new brand-led marketing approach.

Earlier this week, 888’s UK online and retail rival Entain posted a similar earnings warning.

Retail remained robust

Despite these challenges, the retail sector continued to perform strongly, with revenue remaining broadly stable compared to the previous year. 

The company maintained its expectation of mid-single digit revenue growth for the full year, citing robust customer engagement and the positive impact of the ongoing rollout of additional proprietary self-service betting terminals (SSBTs) and expansion of content on the retail gaming platform.

888 also reported a cash balance of approximately £162m, with undrawn committed facilities of £150m, providing a total liquidity buffer in excess of £300m.

Current trading and outlook

The Q4 outlook, however, shows promise, with sequential revenue improvement expected. 

Despite projecting a mid-single-digit year-over-year decline in Q4, 888 is targeting a robust return to growth in 2024.

The company said it has made significant and ongoing improvements to the sustainability and quality of the mix of the business, and while this is weighing on short-term performance, it continues to drive strong double-digit active customer growth.

888 executive chair Lord Mendelsohn commented: “We are making significant strides to improve the quality and long-term sustainability of our revenues, but performance in Q3 has been below our expectations, and this means we now expect to end the year with EBITDA below our prior expectation.”

However, he added: “The hard work the team has undertaken so far this year has set very strong foundations for the future of the business and our synergy delivery is well on track. 

“We are strongly focused on investing to deliver good levels of expected revenue growth in 2024 as we progress towards our clear target of more than £2bn of revenue in 2025 and I look forward to the coming years with confidence.”

Full-year guidance

888 noted that synergy delivery remains on track, and significant cost savings have been achieved, helping to offset the year-to-date revenue performance shortfall compared to initial expectations. 

Additional synergy opportunities have been identified, but any extra savings will be reinvested in growth initiatives. 

The group highlighted its significant growth potential supported by its new operating model and brand-led marketing strategy.

888’s primary focus remains on driving sustainable growth in 2024 and beyond, leading to an expected adjusted EBITDA margin of approximately 18% to 19% for the full-year 2023.

888 had initially provided guidance for an adjusted EBITDA margin of 20% for the year.

Mendelsohn also expressed his confidence in the company’s newly appointed CEO Per Widerström and CFO Sean Wilkins, who are expected to lead the company through its next phases of growth, with Widerström set to assume his role in mid-October.

For H1 2023, 888 reported a loss after tax of £33m, a notable shift from the comparable period in 2022, when it generated a £12m profit after tax.

Group revenue surged by 165.5% year-on-year to £881.6m in H1, primarily driven by the acquisition of William Hill, which completed in July last year.

However, on a pro-forma basis (assuming 888 owned William Hill throughout the comparative period), group revenue declined by 6.5%.

Nevertheless, Peel Hunt analyst Ivor Jones anticipates improved prospects on the horizon, prompting the firm to raise its target price from 150p to 175p.

At the 175p target price, 888 would have a FY24E Price-to-Earnings (PE) ratio of 8.8x and a Free Cash Flow (FCF) yield of 11%.

Jones commented: “It has been a challenging year for 888, but we believe better times are ahead and reiterate our Buy recommendation.”

BetMGM generated positive EBITDA throughout all of Q2 2023, according to a trading update released by its joint owners MGM Resorts International and Entain.

After generating $470m in revenue during Q1 (up 76%) as previously announced, BetMGM revealed today that its total net revenue from operations for the first half of 2023 was $944m.

That suggests the business generated around $474m in revenue during Q2. 

On a same-state basis, BetMGM said net revenue from digital operations was up by 25% year-on-year.

“I am pleased with the significant progress we have made during the first half of 2023 as we continue our strong growth and remain on our path to profitability,” said BetMGM CEO Adam Greenblatt.

“Our focus remains on building a sustainable, scalable and returns focused business with leading products that our players enjoy responsibly.

“We look forward to the remainder of the year, buoyed by ongoing product improvements, tremendous support from our shareholders providing access to new assets and partnerships, and – above all – our extraordinary team at BetMGM.”

H1 achievements

In addition to reaching the milestone of turning EBITDA positive for a full quarter, the trading update also celebrated several of BetMGM’s wins during the first half of this year.

In marketing, the cost per acquisition (CPAs) for new customers was improved by 8% on a same-state basis during H1, while bonus optimisation and player management also continued to have a positive impact, BetMGM said.

Those factors combined to deliver enhanced GGR to NGR conversion, as the brand’s sports betting NGR margin increased by three percentage points year-on-year in H1, and digital sports revenue per player grew by 65% for players acquired in 2021 or before.

BetMGM also continued to expand its footprint across North America this year, with new online sports betting launches in Ohio, Massachusetts and Puerto Rico.

The brand is now live in 26 jurisdictions, and boasts a combined market share across iGaming and sports betting of around 18%.

For iGaming alone, BetMGM holds a market share of some 27%, while its share of online sports betting is markedly lower at around 11%.

Expectations for 2023

The results put BetMGM on track to deliver results at the upper end of a previously stated revenue guidance range for the full-year 2023, between $1.8bn and $2bn, it said.

The brand also remains on track to stay EBITDA positive throughout the whole second half of 2023, it added, despite additional investment in state launches in Kentucky and North Carolina, which were not originally planned for this year.

MGM and Entain also expect the brand to become self-sustaining during H2, they said, with no additional equity investment required from either company beyond the $150m previously committed for this year.

The joint venture owners continue to contribute “new technology, resources, and relationships to accelerate both BetMGM’s product evolution and its access to players,” they added.

One recent example is the use of Angstrom Sports’ technology, which was acquired by Entain earlier this month and is expected to significantly enhance BetMGM’s sports betting offering.

Shares in XLMedia have taken a dip after the affiliate business revealed it anticipates a year-on-year revenue decline for H1 2023.

At the company’s AGM today (26 May), CEO David King partly attributed the decline in revenue to the tough comparative period, in which revenue was boosted by the launch of New York’s online sports betting market in January 2022.

“We also note that the level of acquisition spend by operators in H1 2023 is not comparable to 2022, with less generous promotions available to attract new customers,” King added.

He noted that the group had a robust start to Q1 in the US, driven by the successful launch of online sports betting in Ohio.

However, he stressed that the launch of online sports betting in Massachusetts in mid-March, following the conclusion of the NFL season, did not generate the typical revenue surge observed during state launches.

“This reflects our previous acknowledgement that growth in the US market will not be linear, with significant spikes generated by periodic state launches,” he added.

Strong comparisons

Back in H1 2022, the affiliate business recorded revenue of $44.5m, showing a strong year-on-year increase of 38.2%.

That growth was primarily fuelled by the rapid expansion of the company’s operations in the US market.

Specifically, XLMedia’s sports betting revenue in the US during that period surged to $30.2m, a massive fivefold increase compared to the previous year.

The CEO predicted that the current softness in the market would continue through the early summer.

The group said it anticipates a return to significant investment in customer acquisition as well as the launch of new products leading up to the new NFL season, which is expected to bolster the company’s performance in the second half of the year.

Despite the slow start to 2023, XLMedia said it predicts revenue to be in line with its expectations for the full year.

Last year, total revenue reached $73.7m.

Potential for growth

XLMedia said it sees potential opportunities in Massachusetts as the NFL season kicks off, and is also awaiting the launch of online sports betting in Kentucky.

Looking beyond the immediate future, King emphasised the potential for online sports betting and online casino legalisation in several US states.

A total of 23 states, including California, Georgia, and Texas, are yet to legalise online sports betting, while three states have legalised but are not yet operational, including Florida. Additionally, 43 states are yet to legalise online casino operations.

“Across European sport and European gaming, performance is tracking in line with management expectations benefiting from a strong Cheltenham and Aintree festival, and we expect this encouraging performance to continue,” he said.

In 2022, the group went through a restructuring exercise, which has seen it turn its core focus away from European iGaming and towards US sports betting.

Investors did not share King’s optimism, and XLMedia shares were trading more than 16% lower in the morning.

In a trading update published today (24 May), Playtech said it now expects adjusted EBITDA for full-year 2023 to come in ahead of current consensus expectations.

According to the company, the improved performance is forecast following a successful start to the year, as a result of certain tailwinds throughout Q1.

Playtech’s B2B division performed “very well” throughout the first four months of 2023, the business said, as it expanded its presence in Latin American markets.

Its Caliente brand continued to demonstrate strong growth, it added, while building on its “leadership position in Mexico.”

In addition, the London-listed supplier continues to make progress in the US, following March’s pledge to invest $85m in Hard Rock Digital in exchange for a low single-digit percentage minority stake in the firm.

Playtech added that its live casino division had been able to capitalise on the market’s rapid expansion, and delivered “good growth” in the first four months of the year, while its higher margin SaaS business also delivered strong revenue growth, new launches and customer signings during the period.

In the B2C segment, Italian operator Snaitech continued to drive Playtech’s performance.

“Our strategy of focusing on regulated or soon-to-be regulated markets, combined with Snaitech’s impressive performance in Italy, means we remain well-positioned to make further progress and capitalise on the significant growth opportunities ahead.” 

– Playtech CEO Mor Weizer

The resumption of domestic football following the end of the FIFA World Cup, combined with pent-up demand for betting, provided a tailwind for the brand at the start of the year, Playtech said, “with the retail segment in particular seeing very strong growth.”

Snaitech’s online business also witnessed good growth, it added.

Strategic and operational measures put in place are beginning to take effect at German and Austrian-facing B2C brand Happybet, which led to a reduced EBITDA loss in the first four months of this year compared to last year. Happybet was integrated into Snaitech in 2021.

Despite the fact current growth rates are expected to come down later in the year following the Q1 tailwinds, the Playtech board expects an increase in 2023 EBITDA ahead of current expectations.

“I am delighted to report that our strong start to the year has continued, with growth across both the B2B and B2C divisions,” said Playtech CEO Mor Weizer. 

“Our strategy of focusing on regulated or soon-to-be regulated markets, combined with Snaitech’s impressive performance in Italy, means we remain well-positioned to make further progress and capitalise on the significant growth opportunities ahead.” 

In its full-year 2022 financial report, Playtech said it had a medium-term adjusted EBITDA target of between €200m and €250m for its B2B segment, and between €300m and €350m for Snaitech.

In the report, CFO Chris McGinnis also commented that: “The company has been investing for growth in recent years, and as a result, the focus has been on EBITDA within the company. Going forward, I believe we need to balance this and also focus on cash generation.”

The Rank Group has reported a 13% year-on-year increase in NGR due to improved performance across all business segments.

Group NGR climbed to £174.4m in the firm’s financial Q3 (three months ending 31 March), with digital NGR up 16% to £52.5m and land-based venue NGR up 12% to £121.9m.

The group’s chain of Grosvenor land-based casinos saw the biggest revenue increase, generating NGR of £77.9m, up 15% on the same period last year following improved performance across London and the rest of the UK.

Grosvenor’s average weekly NGR in the quarter was £6.1m, up 15% on Q3 2021/22 and up 2% on the previous quarter, which benefitted from strong Christmas trading.

Meanwhile, revenue from Rank’s Mecca bingo venues grew by 9% to £34.8m, driven by a 4% increase in customer visits and a 5% increase in spend per visit.

Average weekly NGR for Mecca venues reached £2.7m, up 9% on the comparable period last year and up 10% sequentially.

In Spain, Rank’s Enracha venues generated £9.2m in revenue during the quarter, an increase of 8% on the previous year.

In the online sector, Rank posted digital revenue of £52.5m.

Rank noted a 15% rise in digital revenue from the UK, with revenue from the Grosvenor online brand up 23% and Mecca online up 15%. Rank’s other digital brands in the UK were up by 7%, while Spanish digital revenue also jumped 19%.

Better than expected

Rank Group said the start of financial Q4 (beginning 1 April) is traditionally a quieter period for its Grosvenor venues.

However, due to the improved performance seen in Q3, the board now expects the group’s underlying like-for-like operating profit for the full year to 30 June 2023 to be at the upper end or slightly ahead of the previously guided range of between £10m and £20m.

Rank Group reported a £101.2m loss for the first half of its financial year 2022/23 as a result of rising costs of energy, wages and other expenses.

Chief executive John O’Reilly attributed the improved performance to investments made to better the customer experience in venues and the build-out of enhancements to the customer experience online on Rank’s proprietary technology.

“We are pleased that the momentum we saw at the start of the second half of our financial year has continued with positive NGR growth across all our businesses,” he said, and added that the company has “a strong pipeline of developments to continue to grow market share into the future”.

Analyst Ivor Jones of investment bank Peel Hunt described the group’s performance as “internally-generated success”.

“Inbound tourism is picking up, and this is probably helping the Grosvenor venues business in London,” he added.

“However, we believe that the investments made by Rank in customer experience in its venues are a material driver of outperformance as the customer base grows.”

Year-to-date results

In the nine months leading up to 31 March, the Rank Group saw a 6% increase in revenue, which reached £511.8m.

Within this period, Grosvenor venue NGR only slightly increased by 1%, totalling £231.2m, while Mecca venues’ NGR grew by 6% to £100.3m.

Enracha venues in Spain experienced a significant increase of 19%, generating £26.9m in NGR. Meanwhile, digital NGR rose by 11%, totalling £153.3m.

Ahead of its planned IPO, Lottomatica has reported a 21% year-on-year revenue rise to €281m for the first two months of 2023. 

Lottomatica unveiled earlier this year its intention to debut on the Euronext Milan in April, and just recently, the plan was approved by the company’s shareholders.

In a trading update, the Italian company said it recorded a 39% revenue increase in its online segment and a 19% revenue rise in its sports franchise segment in January and February 2023 compared to the same period in 2022.

In addition, the company posted a 12% revenue rise in the gaming franchise segment.

EBITDA for the same period increased by 27% to €104m.

Moreover, Lottomatica reported that it processed €4.8m in total wagers across the business in January and February of this year, a 33% increase compared to the same period in 2022.

Full-year guidance

Lottomatica said revenue guidance for the full year is between €1.57bn and €1.67bn.

The company also aims to achieve EBITDA of €550m to €570m, including an online EBITDA of at least €275m.

To support these targets, the gaming group has planned for recurring capital expenditure of approximately €65m and concession capital expenditure of approximately €45m, along with one-off growth capital expenditure of approximately €30m.

Based on market projections provided by H2G and Prisma-MAG, Lottomatica anticipates an increase of 15% in online GGR between 2022 and 2023 and a CAGR of 13% for the period 2023 to 2027.

While sports retail GGR is expected to increase by 7% between 2022 and 2023 and at a CAGR of 3% in the period 2023 to 2027, gaming retail GGR is projected to increase by 6% between 2022 and 2023 and at a CAGR of 3% in the period 2023 to 2027.

At the time of its potential listing, Lottomatica aims to achieve a net leverage ratio of about 2.5 times its net financial debt to its anticipated future EBITDA.

If the listing is successful, the company intends to repay an intercompany loan of €250m to its sister entity, Gamma Bondco S.à.r.l.

Looking ahead, on a steady state basis, Lottomatica has set its sights on achieving a net financial debt to EBITDA ratio of 2.0 to 2.5x.

Catena Media’s revenue from the North American market has risen 31% year-on-year to reach €21.5m during Q4 2022.

However, according to preliminary figures released today (19 January), the affiliate giant’s total revenue was down. The company generated €31.5m in Q4 of last year, a slight decrease from the €31.9m recorded in Q4 2021.

The company expects a total adjusted EBITDA of €12.7m, corresponding to a margin of 40%, as compared to €13.2m and 41% respectively in the previous year.

Catena Media is currently going through a period of change and reorganisation after revealing in mid-2022 that it wants to divest its European assets to focus on growth in the US, Asia-Pacific and Latam markets.

In December 2022, Catena Media sold its flagship website AskGamblers and several smaller domains to Gaming Innovation Group (GiG)for €45m.

This was followed by the news earlier in January that that third parties have shown interest in acquiring the entire company.

Revenue from continuing operations

During the quarter, the group generated total revenue from ‘continued operations’ of €27.4m, a 15% increase year-on-year.

This figure does not include revenue generated by the discontinued operations of AskGamblers, and related brands, as well as the Financial Trading segment, which is currently up for sale.

Adjusted EBITDA from continuing operations, excluding items affecting comparability, is expected to reach €10.8m, up 14% year-on-year and representing a margin of 39%.

Catena Media CEO Michael Daly: “We successfully delivered on our strategy of further expansion in North America while completing our strategic review with the sale of AskGamblers and related assets.”

The North American market accounted for 78% of group revenue from continuing operations during the quarter.

Commenting on the results, Catena Media CEO Michael Daly said: “It is pleasing to see such strong performance from our core North American business in Q4.

“We gained uplift from the launch of licensed online sports betting in Maryland in November and a strong run-in to the go-live for online sports betting in Ohio on January 1, 2023, which delivered our strongest ever launch period for a US state sportsbook launch.

“We successfully delivered on our strategy of further expansion in North America while completing our strategic review with the sale of AskGamblers and related assets. These preliminary results reaffirm our strategy and provide a solid platform as we enter 2023,” he added.

Moreover, Catena Media reported a reduction in operating profit due to non-cash impairment charges on goodwill of €7.3m and on other intangible assets of €9.9m.

The company said these write-downs relate to the current restructuring measures.

Playtech shares are trading 4% higher after a Q1 2022 trading update showed the business generated adjusted EBITDA of more than €100m during the quarter.

The positive Q1 run rate has continued into April, the supplier said in a note to investors, with “very strong performance” driven by both its B2B and B2C businesses.

In Italy, Snaitech has seen the same trends continue from H2 2021, Playtech said, with a strong start to 2022 buoyed by its online business, recovery in the retail sector and favourable sports results.

Performance in Playtech’s B2B business, meanwhile, has been driven by strong momentum from the Americas, the supplier said, particularly by Caliplay in Mexico, in addition to strong performance generally across the wider B2B operations.

Playtech’s live casino business also signed several new licensees and launched new games during the quarter. Playtech has signed several new customers in the US and launched several new partnerships in Canada since the launch of the Ontario market.

Regarding any potential acquisition offers from Hong Kong-based investment fund TTB Partners, Playtech said there had been “positive progress” in discussions with the group, but there can still be no certainty as to whether a concrete offer will be made.

If a bid does not emerge by 20 May, a new deadline of 17 June will be announced for TTB to make a firm offer for the business.

Further, Caliplay and Playtech continue to explore a possible SPAC transaction which “would allow Caliplay to enter the US market on an accelerated basis,” while the disposal of Playtech’s Finalto financial division remains on track to complete in Q2.

London-based investment bank Peel Hunt reiterated its Buy recommendation and 800p target price for Playtech in response to the update, as well as upgrading its full-year 2022 EBITDA forecast from €355m to €375m. 

Peel Hunt analyst Ivor Jones said: “Playtech’s business is bouncing back more quickly than expected. Long-planned strategies including: Snaitech; live casino; US market entry; and Latin American partnerships, are all paying off. 

“Shareholders should be demanding in relation to any offer price they are prepared to accept. We reiterate our 800p target price and Buy recommendation and sit back awaiting further developments.”