BetMGM battles past macro headwinds for strong Q1

BetMGM is poised for significant advancement toward full-year profitability, following an impressive 30% increase in net revenues during the first quarter.

Despite navigating a complex macroeconomic landscape, BetMGM has reported strong performance that encourages prospects for achieving full-year profitability by 2025. As a leading operator in the United States, this optimism reinforces the brand’s core strategies in a competitive market environment.

For the quarter ending March 31, BetMGM generated net revenues of $443 million (£330.9 million/€389.1 million), marking a remarkable 34% rise compared to the same quarter last year. This surge translated into adjusted EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) of $22 million, showcasing an impressive turnaround of over $150 million from a loss reported in Q1 2024.

The company achieved substantial growth in both online sports betting and iGaming segments, with increases of 68% and 27%, respectively. As BetMGM continues to refine its product offerings and pricing models, favorable underlying trends have emerged, solidifying its guidance for fiscal year 2025.

“The momentum we cultivated in the latter half of 2024 has persisted into this first quarter, driven by our comprehensive iGaming strategy that allows us to scale faster than the market,” stated BetMGM CEO Adam Greenblatt.

Resilience Amid Economic Challenges

As the first quarter earnings season kicks off, analysts focus on the macroeconomic environment and its implications for consumer behavior. The announcement of U.S. President Trump’s tariff plan on April 2 sent shockwaves through the markets, leading to a notable decline in major stock indices, including key players in the gaming industry which experienced drops exceeding 10% amid concerns about inflation and tourism.

However, recent indications that tariff hikes might be postponed have led to a modest recovery in these indices. Despite these shifts, there are prevailing concerns regarding how these economic policies may influence consumer spending in the gaming sector.

There is a prevalent perspective suggesting that reduced disposable income could lead to decreased engagement in parlay betting and overall time spent on top sports betting platforms. Nonetheless, addressing these concerns, Greenblatt reported that BetMGM has not observed any adverse effects on player behavior due to the current macroeconomic climate.

As consumer spending tightens, some operators may find it necessary to increase promotional efforts to attract and retain players. However, Greenblatt highlighted that customer acquisition costs and the overall promotional environment have remained largely stable at BetMGM.

Strategic Focus on Player Retention

Another key takeaway from the recent earnings call is BetMGM’s enhanced strategy targeting “high-value” players. This refined approach is evident in several performance metrics from the quarter.

Active player days have surged by 20% year-over-year, while handle per active customer has increased by 37% over the same period. This deliberate focus on player retention encompasses tailored promotion strategies and improved segmentation, ensuring that the most valuable customers receive best-in-class engagement.

BetMGM is also meticulously evaluating the cost-to-acquire customers against their potential value. As Greenblatt emphasizes, the company has become “more surgical” in reinvesting resources into its most profitable segments.

During this period, bets per active user rose by 28% year-over-year. When questioned about promotional spending relative to overall handle, Greenblatt noted that U.S. levels exceed those found in established markets worldwide.

For example, promotional expenditure in Australia often hovers around 1%-2% of handle, in stark contrast to North American markets where the figures are significantly higher. However, Greenblatt envisions moderation in these levels as the market matures.

Reaffirming Projections for FY2025

Despite facing unfavorable sports outcomes during March Madness—a significant period in the sports betting calendar—BetMGM achieved notable net revenue growth. The tournament saw surprise victories, such as Florida winning the men’s national championship and UConn taking the title for women’s basketball, resulting in an estimated $30 million hit to net revenues in the quarter.

Nonetheless, BetMGM remained steadfast in its projection for FY2025, anticipating a positive EBITDA. While ending 2024 with a negative EBITDA of $244 million, BetMGM reiterated its guidance for FY2025 net revenues to fall within the range of $2.4 billion to $2.5 billion.

Looking toward the long term, BetMGM targets an EBITDA exceeding $500 million annually, positioning itself competitively alongside major rivals such as Caesars Digital.