Seasonal Effects Push BetMGM Into Loss Territory After Two Quarters of Profitability

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MGM Resorts International’s financial report for Q1 2024 makes less mention of BetMGM than usual, perhaps because it marks the first time the joint venture has slipped back into the red after two profitable quarters to finish 2023. Although it’s unsurprising that the company would want to direct investors’ attention elsewhere, the loss isn’t particularly alarming. Historically, Q1 has always been expensive for BetMGM, but it might be on track for its first profitable year regardless.

BetMGM’s operating loss for the quarter was $32.6 million, erasing a $12.6 million profit in Q3 2023 and a sub-$1 million Q4. Even so, it was a $49.3 million net improvement over the $81.9 million loss one year earlier. That’s in keeping with the gross annual increase for each of the preceding three quarters.

While temporarily sweeping its digital platform under the rug, MGM opted to focus instead on a couple of records it set in the quarter. MGM China saw its adjusted EBITDAR increase by 78%, while MGM’s Las Vegas properties also set an all-time best for their aggregate net revenue.

MGM’s retail casino revenue dropped slightly year-over-year in the US. In Las Vegas, at least, a 10% increase in revenue from hotel rooms more than made up for that. Occupancy rose by one percentage point, while the average daily rate per room was up by 7%.

BetMGM’s Seasonal Cycles

Online gambling revenue is heavily seasonal. US sportsbooks start to make more money as NFL season begins, then hit their annual peak in the spring thanks to the one-two punch of Super Bowl and March Madness. Online casinos follow a weaker version of the same cycle. Some of that is due to cross-marketing with sports betting, but players also spend more time outdoors in the summer and less time gambling on their phones.

That makes it counter-intuitive that BetMGM’s net profit/loss would bottom out in Q1 each year. After all, that’s revenue is at its highest. In Michigan this March, for instance, BetMGM Casino won $40.4 million, beating its previous monthly record by 10%.

The explanation, naturally, is that expenses must also be at their highest at that time. For one thing, Super Bowl ads are enormously expensive. Thirty seconds of air time cost about $7 million this year. Meanwhile, BetMGM’s drop in net income from Q4 2023 to Q1 2024 was $33.4 million, or less than five Super Bowl spots.

State launches are also expensive for operators, as customer acquisition in those first few months is key. Q1 has also traditionally been the time for the bigger and more important states to open their markets. In 2022, it was New York. In 2023, Ohio and Massachusetts. This year, it was North Carolina.

Annual Change Suggests a Profitable 2024

Assuming a bad-looking Q1 for BetMGM was inevitable, the more important metric is how bad it was compared to last year. In pure dollar terms, BetMGM reducing its Q1 losses by $49.3 million was as much of an improvement as going from a $23.6 million loss in Q2 2022 to a $12.6 million profit in Q2 2023.

Over the last four quarters, BetMGM’s operating loss has improved by $182.7 million over the preceding four. That’s an average of $45.7 million per quarter, so Q1 was above average from that perspective.

Moreover, BetMGM’s net loss for the full year of 2023 was only $90.1 million. If the trend of the last four quarters continues for the next three, it might end up in the black this year by a similar margin.

Note: Commentary on BetMGM’s potential performance in future quarters is for informational purposes only, based on a cursory examination of trends in the data. Nothing in this article should be taken as financial advice.