This past week, several major sportsbook operators shared their Q3 2022 quarter results. The big takeaways won’t come as a surprise to anyone who has been following the sports betting market.
For most operators, they’re capturing more customers and spending less in advertising. Both of these are pushing them closer and closer to profitabability. BetMGM, Caesars, DraftKings, and Penn Entertainment, owner of Barstool Sports, are all aiming to become profitable in the next year.
The other big talking point for many operators was parlays. Big players, like BetMGM and Caesars, have been aggesssive in adding parlay markets for players. Parlays, tempting bet-small-to-win-big options for gamblers, are big moneymakers for sportsbooks.
Here are breakdowns of Q3 results for major sportsbooks:
BetMGM Q3 2022 Results
| Q3 2022 | Q3 2021 | % Change | |
|---|---|---|---|
| Net Revenue | $400 million | $210.5 million | 90% |
| Net Income (loss) | Not reported for BetMGM separately | ||
| Adjusted EBITDA | Not reported for BetMGM separately | ||
| Diluted Earnings per Share | -$1.45 | $2.77 | -152.30% |
The company “remains bullish on BetMGM, which continues to build on its success every quarter,” Bill Hornbuckle, MGM CEO, explained.
BetMGM is still leading in the iGaming marketing, with 29% of market share in the United States. Similarly, it’s competing with other large operators for sports betting, holding 22% of the market in active states. In Canada, the company is doing “exceptionally well,” said Hornbuckle. “If we’re not leading [in iGaming], I’d be surprised. We did a great job getting Wayne Gretzky onboard early.”
In the Q2, the company leadership explained that for football season, they intentionally focus advertising on high return on investment states, as well as bonusing. So far, the company said that this strategy is working to help them limit advertising spend.
When asked if there was a chance of BetMGM becoming profitable prior to Q3 2023, Hornbuckle said, “BetMGM is firing on all cylinders and is still expected to reach profitability in 2023. We’re not trying to get ahead of ourselves.”
Caesars Q3 2022 Results
Q3 2022 Q3 2021 % Change
Net Revenue $212 million $96 million 120.80%
Net Income (loss) -$63 million -$190 million 66.80%
Adjusted EBITDA -$38 million -$164 million 76.80%
Diluted Earnings per Share $0.24 ($1.10) 121.8
*note: data reflects Caesars’ digital line in reporting, which is the sports betting segment, except Diluted Earnings per Share.
With the Houston Astros winning the World Series, Caesars Sportsbook is on the hook for a $30 million payout to Houston furniture-store magnate, Jim McIngvale.
For the first time next quarter, Caesars has a chance to be contribution-positive, which means that it adds to the company’s bottom line instead of taking away from it. But the impending payout means the operator might miss that opportunity.
CEO Tom Reeg explained, “We’ve got a fairly high-profile liability out there. That will be a swing factor on whether the fourth quarter is positive.”
It’s an extra point of pressure for the sportsbook that’s trying to push for profitability. In Q3, the company saw its smallest loss since 2021 – and a loss that was smaller than expected.
Eric Hession, CFO and co-President of Caesars Sports and Online Gaming, said that the sportsbook will continue on the path to profitability. He pointed out that the company “recently started to realize the benefits of [changes] we made over the summer to improve the overall experience for our customers, [like] cash-out speed, customer service response time, and parlays.”
With the improvements, the sportsbook was able to expand its markets, be more responsive during in-play trading, and increase overall hold.
Churchill Downs (TwinSpires) Q3 2022 Results
| Q3 2022 | Q3 2021 | % Change | |
|---|---|---|---|
| Net Revenue | $383.1 million | 393.0 million | -2.50% |
| Net Income | $57.0 million | $61.4 million | -7.16% |
| Adjusted EBITDA | $163.2 million | $156.1 million | 4.54% |
| Diluted Earnings per Share | $1.49 | $1.57 | -5.09% |
Churchill Downs made a big bet on horse racing when it announced its exit from online sportsbetting in early 2022. In September, Churchill Downs shared that it would have a multi-year partnership with FanDuel that will allow bettors to wager on horse races seamlessly from their existing FanDuel accounts.
Now the partnership is coming to fruition: access to wagering on horse racing will launch in January 2023 on FanDuel. The company is planning to create more partnerships going forward.
CEO Bill Carstanjen said on the earnings call that, “We believe that horse race wagering should be available across the United States. We are in the process of negotiation different partnerships [with other operators] to enable them to distribute horse racing content to their customers.”
Customers can still bet on horse racing on TwinSpires online. This past quarter, handle was up 8% compared to the previous year. Adjusted EBITDA for the platform was positive, and up around 50% since 2019. This shows the strength Churchill Downs has as the owner of many major racetrack venues and the primary horse race betting platform.
The company also has put a major focus on retail locations. On November 1, the company finalized its acquisition of the majority of Peninsula Pacific Entertainment (P2E) assets.
This includes the Colonial Downs Racetrack and Rosie’s in Virginia, Del Lago Resort & Casino in New York, and the Hard Rock Hotel & Casino in Sioux City, Iowa. It also provides the company with seven development opportunities across the state of Virginia.
DraftKings Q3 2022 Results
| Q3 2022 | Q3 2021 | % Change | |
|---|---|---|---|
| Net Revenue | $501.9 million | $212.8 million | 135.80% |
| Net Income (loss) | -$450.4 million | -$545.0 million | 17.30% |
| Adjusted EBITDA | -$264.2 million | -$313.6 million | 15.70% |
| Diluted Earnings per Share | Not reported (Adjusted Earnings per Share is -$0.60) |
“Our results in the third quarter significantly exceeded the expectations that we provided on our second-quarter earnings conference call,” said CFO Jason Park during the earnings call. The company attributes this to three things: increases in players, strategic marketing choices, and improvements to the DraftKings app.
DraftKings has seen an increase in monthly unique players, which now sit around 1.6 million. This is a 22% increase from the same time last year. In addition to expansion into new markets, the company touts player retention as a reason for this.
The company has been able to focus on nationally-scaled marketing efforts, which saves money in the long run. One special project DraftKings has launched is its multi-year partnership with Amazon Prime. Amazon has special offers and content, as well as DraftKings odds integrations on its NFL football pregame show. This year, DraftKings is featured on all 15 NFL games shown on Prime.
The app continues to evolve as DraftKings expands its content offerings and functionality. The company has been focused on parlays, particularly same-game parlays. It has also added head-to-head matchups, multi-player props, play flash markets, and full-time and anytime squares for every game of the season.
DraftKings still expects to be profitable in the 4th quarter of 2023.
Flutter (FanDuel) Q3 2022 Results
Flutter, parent company of FanDuel, didn’t report on FanDuel’s full performance for Q3. However, the U.S. division, which encompasses FanDuel, is now the company’s largest division and generated $700 million in revenue, up 82% from the same time last year.
FanDuel is preparing for launches in Maryland, Ohio, and Massachusetts in the next two quarters. It has been able to use the 8% increase in hold to prepare for the financial investment in advertising during launches.
“There’s pent-up demand for our product,” said CEO Peter Jackson during the earnings call, “so there’s different strategies we’re deploying.”
Had Californians voted to approve legal sports betting, expanding and operating in the state would have limited the company’s ability to be EBITDA positive in the next year, but long term the market would have been an incredible boon to the customer base. FanDuel is still the number one online sportsbook, holding 42% of market share in the states where it is live.
Flutter is also considering an IPO for FanDuel in the next year. Jackson indicated that it’s not certain yet, due to the volatile economic situation and a pending deal to sell 18.6% of FanDuel to FOX.
Penn Entertainment (Barstool Sports) Q3 2022 Results
| Q3 2022 | Q3 2021 | % Change | |
|---|---|---|---|
| Net Revenue | $158.7 million | $93.0 million | 69.67% |
| Net Income | Not reported for the “Interactive” line | ||
| Adjusted EBITDA | -$49.3 million | -32.0 million | -53.75% |
| Diluted Earnings per Share | $0.72 | $0.52 | 38.46% |
*Note: data reflects Penn Entertainment’s Interactive line in reporting, which is the sports betting segment, except Diluted Earnings per Share.
For Penn, it’s all about two things: younger players and using in-house strengths. In Q3, the company saw steady increase of players who are between 21 and 44 years old at its retail locations.
Todd George, Executive VP of Operations, said during the earnings call, “We are seeing increased visits in the 21- to 44-year-old group, but where we’re really seeing improvement is spend per trip.”
Penn is in a unique position to use its retail customer databases to push players to use its online ecosystem. In Ontario, the system is working well.
Jay Snowden, CEO, said, “In Ontario, we are currently live on our own platform, and we’re seeing the benefits of that. We’re seeing high retention levels. Customer acquisition has been better in Ontario than what we saw in the U.S.”
As the Barstool Sports acquisition finalizes in February of next year, Penn is focused on bringing all its casinos and online sportsbooks onto an in-house, one-wallet platform. This will allow bettors to play seamlessly between online and retail locations.
Long term, the company plans to use the growth in the younger retail segments to feed into its robust online sports betting ecosystem. Likewise, it hopes to bring the younger players who are familiar with the brand through Barstool to retail locations.
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