BetMGM said it expects its total addressable market (TAM) for online sports betting and iGaming in the US and Canada will reach $37 billion at maturity, a figure that includes a future launch of sports betting in California.
But the company — a 50/50 joint venture between MGM Resorts International and Entain — also revealed during an investor day presentation on Thursday that, despite a successful launch, it is not pursuing players in New York, at least for now.
“During Q1, BetMGM made a concerted decision to pull back in our pursuit of players in New York due to its unfavorable tax environment,” said CFO Gary Deutsch. “This reduced revenue slightly, however, the marketing budget was diverted from New York to states with better economic returns. This helped drive acquisition overperformance in those states.”
Bonus Bets Expire in 7 Days. One New Customer Offer Only. Additional Terms Apply.
- Quality welcome offer
- Some of the best promos
- Variety of betting markets
Estimate on California’s Future Share of TAM
Breaking down the $37 billion TAM figure, BetMGM said it expects online sports betting to account for $17.6 billion of the total, while US iGaming would be $14.8 billion. Canada figures to make up $4.4 billion of TAM.
During a Q&A session with analysts, CEO Adam Greenblatt said the company expects sports betting in California will account for between $2.5 billion and $3 billion of TAM.
BetMGM is currently live in 23 jurisdictions, up from 12 at the time of its last investor day presentation in 2021. It projects that it will be live in an additional 10 to 15 markets by the end of 2023. Those markets are likely to include states where the operator has already secured market access — specifically, California, Kansas, Maine, Massachusetts, Missouri, Ohio, and Texas.
By the company’s calculations, in February it held a 25% market share in US markets where BetMGM was active. In terms of iGaming, its market share was 29% that month.
Net Revenue Forecast of $1.3 Billion in FY 2022
BetMGM estimates that its net revenue for FY 2021 was $850 million. It projects that net revenue will hit $1.3 billion in FY 2022 — including $271 million in Q1 2022 — and that it will be profitable by the end of 2023. Quarterly revenue is up 58% compared to Q1 2021.
“We’re going to cross the bridge into EBITDA [earnings before interest, taxes, depreciation, and amortization] positive toward the second half of next year,” Deutsch said.
New Jersey has been EBITDA-positive for five consecutive quarters. Likewise for Michigan at six months. BetMGM said four states with sports betting only — Arizona, Colorado, Tennessee, and Virginia — are on track to make a positive contribution within 2022.
Different Takes on New York and Ontario
Deutsch said New York’s 51% tax rate is prohibitively high, and that the state applies it to both real revenue and phantom revenue associated with non-cash promotional wagering. “Even at lower-than-typical promotion levels for a new market, operators in New York stand to experience effective tax rates — taxes divided by real revenue, coupled with GGR — of well over 100%,” he said.
“We have hope that the New York tax environment will be updated, and we can then again more aggressively pursue New York players. However, as rational allocators of capital — with sophisticated investors in Entain and MGM — we simply can’t apply our capital against an irrational investment thesis.
“Players would never continue to play if the house always won, and the house cannot continue to play if it’s always going to lose.”
It’s a different story in Ontario. Greenblatt said BetMGM was “delighted” with how well it’s doing in the province.
“Ontario was a fully-formed market before we got there,” Greenblatt said. “BetMGM came from nowhere in five weeks. Yesterday, between our sports betting, casino, and poker businesses, we did almost 2 million transactions. I think that’s a good number from a standing start. We’re seeing thousands of players every day.
“Notwithstanding the inability to offer promotions, our daily registrations and first-time deposits are very strong. What’s equally encouraging is that our registration-to-first time deposit conversion rate has been at or ahead of our US states. This shows our recipe is working again.”
REVIEWBONUS- Generous welcome bonus
- $25 in no deposit funds
- Good selection of slots
CEO: MGM Acquiring LeoVegas “Doesn’t Affect Us”
MGM’s surprise acquisition of Sweden’s LeoVegas AB, which was announced last week, “doesn’t really affect us,” Greenblatt said.
“BetMGM is exclusive in the US for our product set,” he said. “I don’t anticipate it will have any effect on BetMGM at all. MGM and Entain remain fully committed to seeing the success of BetMGM here in our markets.
“Where will there be an impact? Well, north of the border in Canada, LeoVegas has an active and strong market position. But that’s not really changed with MGM’s ownership — that’s really the existing competitive set and the change of ownership doesn’t change their market position. We’re continuing to execute on our plan, and I don’t anticipate any change as a result.”
