My thoughts on the quarter1. Not a good quarter. Clearly, certain jurisdictions are tightening the screws on gray market gambling, and it is hurting, despite everything Rafi said in the past. I'm certain that Russia was a big headwind, and Rafi's cockiness about having "Plan A, Plan B, and Plan C" to deal with it looks foolish in retrospect.
2. The numbers in poker were dismal and it is back to negative growth instead of remaining flat. The question is, how low will it go? Will the ship steady at some point?
3. Flat casino was very surprising to me. This is the first quarter where there has been on growth. I hope they can provide more clarity on this. In the past, they said that casino was cannibalizing poker, but since both shrunk, I want to hear their explanation.
4. A significant contributor to the miss was the Net Win Margin over at SkyBet. This is the second quarter in a row where operator-unfavorable results have come in. This is temporary and it will swing the other way at some point, bringing in a big influx of cash. I'm not worried in the least about this.
5. What I found positive is that expenses from synergies will be reduced by $100 million instead of $70 million. I also like the growth in QAU over at SkyBet, which bodes will for the medium term.
6. As expected, Fox Bet will not bring in any material revenue this year.
7. The share dilution is ugly and really reduces EPS.
8. Although debt is decreasing, it will take a loooong time to make the balance sheet solid based on current projections. Debt paydown through dilution is not the answer as it hurts existing shareholders.
Not a good quarter and I expect the stock to be down 5-6% today. I should not have bought back yesterday.