BetMGM battles past macro headwinds for strong Q1, reiterates FY2025 guidance
BetMGM withstood challenging macroeconomic headwinds with a strong first quarter, providing one of the largest operators in the US with optimism that it will swing to full-year profitability in 2025.
For the three-month period ended 31 March, BetMGM generated net revenue of $443 million (£330.9 million/€389.1 million), up 34% from the previous year’s quarter. It translated to adjusted EBITDA of $22 million, an improvement of more than $150 million from a loss in the first quarter of 2024.
The operator reported gains in the online sports betting and igaming segments, with increases of 68% and 27%, respectively. As BetMGM continues to refine its product and pricing models, the operator saw underlying trends that improved over the quarter and prompted it to reiterate guidance for fiscal year 2025.
“The momentum we built in the second half of 2024 continued into the first quarter as we implement our igaming strategy, enabling us to grow faster than the market and at scale,” said BetMGM CEO Adam Greenblatt in a statement.
No impact from macro headwinds on player behaviour
As Q1 earnings season kicks off this month, the global trade environment will serve as one of the pivotal issues for Wall Street analysts on quarterly earnings calls. The unveiling of US president Donald Trump’s tariff plan on 2 April roiled global markets, sending domestic major indices to their worst week in five years. Leading stocks in the gaming industry were not immune, as top names plunged more than 10% on inflationary and tourism concerns.
Since then, the major indices have rebounded somewhat on indications that the Trump administration will delay the imposition of tariff hikes on most trading partners. As it relates to the gaming industry, there are overarching concerns on how the sweeping policy changes will impact the customer’s wallet.
One view is that customers with less disposable income may rein in parlay activity, as well as time spent on top sports betting sites.
From the outset, the first questions on Monday’s call centred around the topic. Addressing the concerns head-on, Greenblatt responded that BetMGM has not seen any negative impact on player behaviour from the macro environment .
As players tighten their belts on spending, some operators may be required to increase promotional spending to acquire and retain customers. But Greenblatt noted that the costs for customer acquisition and the promotional environment overall have remained stable.
Refined approach to player retention
Another main takeaway from the call surrounds BetMGM’s strategy of targeting and retaining so-called “high-value” players. Put simply, the operator is laser focused on investing capital on its most valuable customers. The refined approach to player retention is seen in some of the metrics on the quarter.
While active player days are up 20% year-over-year, according to BetMGM, handle per active customer is up 37% over the same time frame. The refined approach takes into account areas such as promotion strategy and improved segmentation.
BetMGM is also placing an emphasis on the cost to acquire a customer relative to the player’s value to the venture. As Grenblatt puts it, BetMGM has become “more surgical” in reinvesting in the players that are most valuable to the company.
For the period, bets per active user increased 28% year-over-year. Asked about the percentage of promotional spending relative to overall handle, Greenblatt responded that US levels are still higher than established markets around the world.
For instance, he indicated that promotional levels in Australia are about 1%-2% of handle. The levels are dramatically higher in North American markets, but Greenblatt can envision the levels moderating once the market matures.
Reiterating FY2025 guidance
BetMGM experienced net revenue growth despite a series of unfavourable sports outcomes during March Madness. Florida, one of the tournament favourites, won the men’s national championship in basketball, while UConn prevailed on the women’s side.
All four No 1 seeds in the men’s tournament advanced to the Final Four for only the second time ever. The unfavourable outcomes provided a $30 million hit to net revenue during the quarter, BetMGM reported.
BetMGM reaffirmed its expectation that FY2025 will be EBITDA positive. In a period described as a reinvestment year, BetMGM ended 2024 with negative EBITDA of $244 million. BetMGM also reiterated FY2025 net revenue guidance in the range of $2.4 billion to $2.5 billion.
On a long-term basis, BetMGM is targeting EBITDA of $500 million-plus per year. The outlook is comparable to the long-term guidance of Caesars Digital, one of BetMGM’s main rivals.