BetMGM Earnings Call Preview: On Pace For A Profit?

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BetMGM investors will gain more insight into the company’s progress towards its end-of-year goals Wednesday at 8:30 a.m. Eastern when it releases financials for the first half 2023.

Like many of their online sports betting competitors, BetMGM parent companies MGM Resorts and Entain are targeting profitability for their joint venture by the end of the year.

First-half results likely will neither make or break that goal, but may put additional pressure on what’s already the busiest time of year for sportsbooks.

On track for revenue goal so far

Entain signaled it was on track with its year-end net revenue goal of $1.8 billion to $2 billion when it reported $470 million for the venture in Q1.

A smaller number during Q2 would not be out of the norm because of the dropoff in the sports calendar from April to June. How much smaller will determine how important Q3, NFL and NCAA football, are in meeting the goal. A higher number could prompt the company to up its year-end revenue guidance.

BetMGM reported $440 million in EBITDA losses last year. In its Q1 update, Entain said it was “on track” to deliver positive earnings before interest taxes and amortization by the end of the year, but did not specify a quarterly figure. EBITDA figures for the first half of the year should be the biggest clue as to whether it hits a profit in the next six months.

How does BetMGM reach its goals?

Last year, BetMGM saw a 150% gross win margin during NFL regular season betting, after losses from promotions. Much of that was fueled by a rise in parlays. Those increased 90% from the previous year, while parlays as a percentage of total bets rose by 15%.

It achieved that progress while cutting customer acquisition costs by 21% for the entire year, which BetMGM CEO Adam Greenblatt attributed to targeted marketing and less-generous bonusing.

Executives could play to the same strategies when addressing the upcoming season during Wednesday’s call. With Kentucky the only state to launch online sports betting in Q3, they should have additional leeway to focus on products without the pressure of competing for advertising slots.

Converting users to iGaming

BetMGM held a 28% market share in US iGaming through the last quarter, slightly down from the previous quarter but still the market leader. It also held a 17% market share in states where iGaming and sports betting are legal, good for third-best among operators. A higher number for the first half of 2023 would be significant going into the push for a profitable quarter.

Both companies planned to invest an extra $150 million into BetMGM this year. Part of that was building a single wallet feature for sports betting and iGaming, which they may provide a timeline for Wednesday.

One of the largest casino operators in the US, MGM Resorts shares are up over 46% on the year. Entain, which owns internationally successful gambling websites like Ladbrokes and Coral, is down more than 5% on the year on the London Stock Exchange.