Entain CFO: “Parents do not expect to inject further capital” into BetMGM

Entain CFO and deputy-CEO Rob Wood has insisted future investment into BetMGM will be secured through debt facilities as he said there would be no impact on the UK-listed operator’s cash flow anytime soon.

Alongside Entain interim CEO Stella David, who outlined aspirations for the North America JV with MGM Resorts International, Wood stated that BetMGM’s expected additional funding will come from bank debt during Entain’s H1 earnings call yesterday, August 8.

Last week, BetMGM published its H1 and Q2 2024 results, which was a mixed bag that included an EBITDA loss of $123m for the first six months of the year alongside $1bn in revenue.

Both Entain and MGM Resorts International have consistently billed 2024 as a year of investment for BetMGM, with gains in igaming seeing capital pushed into the vertical to ensure further gains.

BetMGM’s trading updated noted that “additional investment [is] expected to be funded by bank debt” as the JV looks to secure its pathway to $500m in EBITDA in the “coming years.”

The operator has seen its market share decline to 13% across online sports betting and igaming, although within igaming alone, its market share sits at 22%, although it was north at 30% at one time.

The solid igaming position, which is contributing $400m per year, is set to be doubled down on, with BetMGM having confirmed “greater-than-planned” marketing investment for H2.

Wood provided further context to the BetMGM update last week as he insisted neither Entain nor MGM Resorts was looking to plough further capital into the JV.

Wood explained: “To be clear, the parents do not expect to inject further capital. You remember 10 days ago with the update, there was reference to debt financing, so the expectation is that as and when capital is required, it will be secured by debt facility at the subsidiary level.

“Therefore, there is no impact on Entain cash flows for the foreseeable future.”

Pressed for comment on just how much additional debt can be expected, Wood added: “Gary Deutsch [BetMGM CFO] is leading the charge in the US, it’s very much in discussions at the moment. I would anticipate a facility of no more than $200m.”

David and Wood discussed also how the operator is faring from the perspective of its UK-based parent and what the plans are for the joint venture in both the short- and long-term.

David explained: “We are strongly aligned with MGM in our aspirations for BetMGM, and that is to build a strong, profitable business for the long term.

“I think we’re in the best place we could possibly be in understanding what the drivers are and what our potential could be over time in online sports betting. We’re learning as we’re going with the better product. On igaming, we’re very, very confident to our position.”

The interim Entain CEO continued by talking up BetMGM’s most recent igaming results. The brand is live in four US states: Michigan, New Jersey, Pennsylvania, and West Virginia, as well as the Canadian province of Ontario.

For all of BetMGM’s igaming success, David did not shy away from the fact that both Entain and MGM Resorts acknowledge that things are moving significantly slower on the online sports betting front.

“We know the market share has weakened, but the reality is much of the great progress that we’ve been making in our sports offering is still to fully hit the market and connect with the customer,” she explained.

“Inputs do lead to outputs, but there is just that slightly frustrating lag factor.”

On the sports betting front, David highlighted the imminent integrations of ‘single account, single wallet’ in Nevada as well as Angstrom Sports-powered markets across the NBA, NFL, and MLB as reasons to be hopeful.

“We are going to be able to build a much deeper understanding of how BetMGM will optimize its sports offering. Critically, this will guide the choices for strategic investments to deliver a future overall EBITDA of at least $500m.”

The EBITDA target of $500m for BetMGM was a subject addressed by both David and Wood, with the former reluctant to provide a timeline on when both parents hope to reach it but reaffirmed the expectation of hitting this target in “a reasonable period of time.”

David said: “I think it’s exactly the right time for ourselves and our partners in MGM to be working with the BetMGM team to say what is the optimal long-term journey to maximize the long-term profitability of this business.

“We know far more now than we did historically. We have loads of data points and we can take that forward. I know that’s always a bit of a frustrating answer because people want absolutely definitive knowledge, but it is a work in progress, and we want to choose the best solution for the best long-term profitability.”

However, Wood did note the caveat that when discounting “investment that we make in new player acquisition,” BetMGM is already at a run rate of about $500m in EBITDA.

Wood added that there are certain obstacles out of Entain’s control when it comes to BetMGM’s road to $500m in EBITDA, such as if and when new states opt to legalize igaming and/or sports betting.

Wood said: “So for example, are we going to get New York igaming next year? Or Ohio igaming? Or Illinois igaming? They would all be positives for 2026. If Texas, which is looking increasingly positive, comes in with OSB in 2025, that would be a negative on 2026.

“There’s other moving parts that are outside of our control and hence, relinquishing that target, gives us more flexibility to do the right things.”

Meanwhile, Entain reported a 6% year-on-year (YoY) in group NGR to £2.6bn for H1 2024, up from £2.4bn in H1 2023.

Bosses explained that the aforementioned increase was a reflection of “underlying Q2 outperformance and stronger than expected win margins for the Euros.”

Underlying EBITDA also increased by 5%, from £499m to £524m.