888 makes “clear” US plans with older customers in sight via Sports Illustrated rollout

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888 Chair Lord Jonathan Mendelsohn has outlined that the global betting and gaming group has a ‘pretty clear’ strategy when it comes to the future of its US operations, as it targets older bettors with “longer lifetime value”. 

Addressing investors last week as part of 888’s 2022 and Q1’23 trading update, which was largely dominated by regulatory headwinds in both the UK and the Middle East, Mendelsohn noted that the group has a strong niche position in the US market after several key market entries last year. 

888 targets older US customers

888 launched the SI Sportsbook brand in Virginia and Michigan in the US and launched 888 Sportsbook and Casino in Ontario last year as it identified ‘regulated, less mature markets’ as one of its key priorities for the years ahead. 

Moving further into 2023 and beyond, Lord Mendelsohn, who is leading the search for a new CEO after the sudden departure of Itai Pazner in January, noted that 888 is targeting older customers who will likely take up igaming when regulation reaches those jurisdictions. 

Mendelsohn explained: “We’ve been pretty clear about what our US strategy has been and what we were planning to do, we’ve really emphasized that we’ve found a brand in order to be able to market to a very distinct customer to have a very good, strong niche position in a very large market that we’re focusing on using that brand of Sports Illustrated to go to this slightly older customer and one who has a longer lifetime value and that we’re really going to try and focus on markets where we have an igaming advantage as well.

“The initial signs from our launch in Michigan are encouraging, and we really hope to be able to update at a later time on how well this is fully progressing, but we’re comfortable and confident with the plans that we now have.”

US and Canada viewed as key growth markets

Within its results, 888 noted that the US and Canada were part of its growth markets, alongside the less mature European market in Germany

The chair explained that the growth markets accounted for around 10% of its total online revenues and that it aims to build long-term growth and sustainability in these markets. 

He also explained that the US strategy had honed in on igaming states, largely following trends observed in the US recently, as operators identify online casino as having greater margins than sports betting. 

However, 888’s igaming fortunes took a blow earlier this year after the Delaware Lottery issued an RfP for its exclusive contract which was held by 888 for 10 years.

Previous reporting cited that 888 would be interested in applying for the contract, but the RfP does at least put its Delaware fortunes in a more precarious position. 

888 leadership explained: “These growth markets represent about 10% of our online revenues today, but we see really strong growth potential and are building long-term sustainable market-leading positions in these jurisdictions. 

“We launched SI Casino in February this year. And while it is early days, we have been delighted with the customer reaction here and this has further reinforced our confidence in our US strategy to focus on gaming states where the combination of our world-class products and content platform and the strength of the SI brand gives us huge competitive advantages.” 

2022 figures 

Alongside these remarks, 888 disclosed its financial results for 2022, declaring £1.23bn in revenue, reflecting a 74% increase on FY2021 comparatives of £712m.

In a year dominated by its acquisition of William Hill’s non-US assets, the group recorded EBITDA growth of 82% to £218m (FY2021: £120m).

Despite this growth, adjusted profit before tax declined by 10% to £80.5m due to increased interest costs following the acquisition.

The international unit, which the US and Canada encompassed, took a hit of 9% as turnover reached £613.7m, largely driven by a 22% decline in betting revenue. 

Its adjusted EBITDA amongst international markets, including the Netherlands, declined by 8% to £136.0m. 

As noted by analyst James Wheatcroft at Jeffries, there was an EBITDA drag in the US, with CFO Yariv Dafna noting that EBITDA in the US was negative £12m, which was both similar to 2021 figures and is anticipated to remain similar into 2023. 

In the market trading since the 888 financial results and update was released, the group’s share price has shown signs of recovery, improving 18% on Friday to 74.7.

However, the price remains some way short of the 103.2 price that 888’s stock was on the London Stock Exchange until revelations of the AML and KYC failings were disclosed in the Middle East.