Q1 2024 Earnings Summary
- Robust UK Growth: The management emphasized strong and sustainable UK performance, highlighted by 12% revenue growth and excellent customer retention metrics, while also planning to launch online sports betting to further drive market share.
- Ramping of Chicago Physical Operations: The temporary facility in Chicago is showing promising progress with monthly GGR increasing from approximately $9 million to $13 million, accompanied by rapid customer base expansion (up to over 80,000 customers) and a favorable shift in demographic profile.
- Positive North American Interactive Momentum: The North America interactive segment is demonstrating encouraging early signs, including the successful Rhode Island launch that generated around $1 million GGR, and strategic initiatives such as consolidating technology stacks to reduce costs and drive margins toward breakeven and eventually positive performance.
- Adverse weather and labor cost pressures are impacting margins: Executives noted that due to adverse weather (e.g., January weather causing margins to drop from 30% to 24%) and resultant elevated labor costs from union contract renewals, margins have suffered and may continue to be pressured if such conditions persist.
- North America Interactive segment faces significant losses and operational inefficiencies: While revenue grew by 70% YoY, the segment is expected to post a full-year $30 million loss. Additionally, operating with duplicate technology stacks increases costs until consolidation is complete, raising concerns regarding its pathway to profitability.
- Ongoing infrastructure disruptions could dampen customer traffic: Issues such as the Providence bridge construction causing lane closures in Rhode Island were cited as negatively impacting visitation during peak periods. If infrastructure challenges continue, they may further hinder revenue generation for the bricks-and-mortar segment.
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Margin Impact
Q: How did weather affect margins?
A: Management explained that adverse weather and union cost increases compressed margins—from 30% last January to 24% this year, with February and March showing about a 100 bps decline compared to last year. -
NA Cost Adjustments
Q: What drove cost improvements in NA interactive?
A: Executives detailed efforts to streamline costs by consolidating technology and optimizing labor, while expanding into new states; however, the segment remains on track for a $30 million full‐year loss. -
Temporary Ramp-Up
Q: How is the temporary facility performing?
A: The Chicago temporary facility has boosted monthly GGR from roughly $9 million to $13 million, driven by aggressive marketing and operational enhancements that accelerate customer sign-ups. -
UK & Spain Outlook
Q: Are UK growth gains and Spain prospects sustainable?
A: Management highlighted strong UK performance with 12% revenue growth and noted that reversing ad restrictions in Spain will enable continued disciplined spending and further market gains. -
Tropicana Timing
Q: When will Tropicana plans materialize?
A: Executives emphasized that there is no rush to finalize the Tropicana strategy; the timing aligns with their 2028 stadium-related plans, maximizing the option value over time. -
UK OSB Marketing
Q: Will launching OSB add marketing costs?
A: They plan to leverage an existing player base to cross-sell without significantly increasing marketing expenses, expecting improved average revenue per user over time. -
NA Interactive Vision
Q: What’s the long-term outlook for NA interactive?
A: Management envisions transitioning from a $30 million loss to eventual profitability by focusing on high-quality iGaming operations, though no explicit timeline was provided. -
Providence Bridge Impact
Q: Does the Providence bridge issue affect revenues?
A: Executives noted that while bridge disruptions affect peak periods, they are effectively mitigated through variable expense adjustments and by leveraging complementary iGaming channels. -
Customer Demographics
Q: Who frequents the temporary facility?
A: The customer base is described as younger and predominantly local, with most guests coming from within a 5-mile radius, primarily attracted by table games.