Entain plc

Good morning and welcome to Entain's Q3 trading update call. Today's call is for analysts and investors. For those who have dialed in directly rather than via webcast link, please note that the supporting slides are also available in the results center of Entain's website. And I'll pass to Entain's CEO, Gavin Isaacs, to open today's call.

Thank you. Good morning, everyone, and thank you for joining us today. It's great to be speaking to you as Entain's CEO. I'm joined by Rob Wood, our CFO and Deputy CEO, and Davina Hobbs, who heads up our investor relations. I've met a number of you already and look forward to meeting more over the coming months as I settle in and get further stuck in. So let's kick it off. Entain has this clear strategy, which since the start of this year, the entire business has been focused on delivering. That is execution focused on driving growth in both core and US, as well as delivering margin improvement. Importantly, we've been making progress and it is bearing fruit. Our business's improving momentum demonstrated at H1 has continued. We delivered a strong Q3 with performance ahead of our expectations. A UK online business returned to positive year-on-year growth sooner than we had expected. Brazil continues to perform strongly and we are excited about the launch of the licensed market early next year. And BetMGM, where we are seeing encouraging data and trends following our much improved sports product and greater investment in player acquisition. Underpinning all of this is our product roadmap delivery. We continue to strive to provide our customers with great products and smooth, simple journeys. So we have made great strides, but it is really only the start of our tech improvement journey. So before I pass to Rob to go into detail of Q3, as it's my first to obtain results, I wanted to start with my initial thoughts and reflections on the business and its many opportunities ahead. I spent a lot of time in my first seven weeks getting out and about in the business, meeting my colleagues and their teams, walking into lots of our stores, getting onto our training floors, as well as introducing myself to some of our key shareholders. I've been busy observing, listening and learning. So what have I learned? Entain is a very good business operating in a highly attractive global industry and is on the path to becoming a great business. We have strong brands, an enviably diverse global portfolio with the highest quality of earnings in our industry. Our tech and product are good and improving, but we know we need to put a lot of hard work to take them to where they should be. And we will. Entain is bursting with talent, ambition and opportunities. The business has already undergone a strategic reset and that strategy is bearing fruit. Part of that included a review of our assets and the strategic alternatives for our portfolio. Crystal Bet has been singled out. It is an attractive asset, and after assessing the market, we have concluded that the business is more valuable to the group remaining as part of our portfolio. We will continue to assess all our portfolio. We will only sell assets at a proper valuation and if it makes strategic sense. Entain is just at the beginning of its journey. There is a long way for us to go. Our number one priority is operational excellence. Focusing on the product roadmap and delivering improvements to our player offerings. That's absolutely critical. Reinvigorating growth in our core business and getting the execution right with BetMGM. So what does that mean for me? I'll be throwing my full energy into helping drive the business. I'll be relentlessly pursuing those product improvements, breaking down internal silos and barriers, and making sure we have the processes and systems to work together better. In short, ensuring our business has what it needs to be a success. What is abundantly clear is the number of opportunities Entain has ahead, and those opportunities and our real ability to capture them means this is an incredibly exciting time for me to be joining the business. I look forward to talking to you more at our full year results in March, when I'll outline these opportunities more fully. On that note, over to Rob to run through our Q3 performance.

Thanks, Gavin. Good morning, everyone. As always, all revenue growth numbers that I quote will be in constant currency. So to Q3 trading, and I'm pleased to report that Entane's recovery continues. We beat our expectations in Q2, and now we've beaten them again in Q3. Online growth is back to being broadly in line with market growth, which of course is where we should be, and I'm pleased that we've got there sooner than expected. Importantly, we're now delivering growth in each of our must-win markets, Brazil, UK, US. In Q3, all of the online markets delivered growth. In aggregate, Group NGR was up 6% on a pro forma basis, or up 7% pro forma, including our half of best MGM. Within that, most significantly, expectations with pro forma NGR growth of plus 9%. As context, let's remember the path to getting here for a moment. Following regulatory changes last summer, pro forma online revenue growth fell into decline, And Q3 and Q4 last year were both minus 6%. Our recovery started in Q1, with NGR improving from minus 6% to minus 2%. Then Q2 saw further improvement to flat, excluding the euros, or plus 5, including the euros. And now Q3 has stepped up to plus 9% growth. So we're back to where we should be, in pro forma growth and earlier than expected. Pleasingly, the 9% online growth was primarily volume driven, although there was a year on year benefit from sports margin too. The principal region driving the step up to plus 9% is the UK, which has swung from being down 9% in H1, excluding the Euros, to up 6% in Q3. So let's start the regional review there. with UK online NGR at plus 6%, marking a return to growth sooner than we had anticipated. The principal driver of the return to online growth is lapping regulatory measures in the prior year. Now that we've lapped those measures and have now fully implemented the new voluntary code, it means we expect that the year-on-year regulatory drag has now passed. Let me just pause on that for a moment. We expect that the year-on-year drag from regulatory intervention is behind us. To find the last time we posted proper growth in UK online, you have to go back to Q2 2021, over three years ago. So growth is long overdue. With no regulatory drag, it now means all the new UK teams' hard work this year on improving the product, improving navigation, improving bet builder, site speeds, and so on, is playing through to NGR. So in addition to actives growth, which has continued throughout, we now see NGR growth too. As well as product enhancements, I'll also call out the success of our new coin economy across Lab Brooks and Coral in the UK, which is helping to drive strong numbers in gaming. A quick comment on retail now, which was down 2% in the UK in Q3. Down 2% reflects an improving trend in line with expectations. The benefit of our new best-in-class Cascada cabinets will be fully felt in Q4 following rollout during Q3. Moving to international now, where online NGR was up 10% year-on-year and retail NGR was flat. Brazil continues to be the headline grabber, where excellent performance carried on into Q3. Following 48% growth in Q2, we saw 48% growth again in Q3. The comps are, however, starting to get harder for Brazil, as we now annualize improving metrics this time last year, and we have new regulation to grapple with from 1st of January. So growth from Brazil in 2025 is likely to be much more moderate. As well as Brazil, Australia also performed well in Q3, delivering a second successive quarter of revenue growth, this time at plus 8%. We expect that means that the market is improving and we're taking a little bit of share, but sports margins also provided a tailwind in the quarter. Italy was a little behind expectation in Q3 with 4% NGR growth, as high single digit volume growth was pulled back by adverse football results. Those adverse football results in Italy also restricted international retail to be only flat NGR despite volume growth. In addition to those three largest markets in international, all our main markets delivered online growth, which is fantastic to see. Particularly pleasing with double-digit growth were the Baltics and Nordics, Georgia, Canada and Spain. N10CE had another strong quarter, up 13% year-on-year in online and up 2% in retail. Supersport in Croatia delivered impressive double-digit NGR growth again. while STS in Poland saw double digit volume growth, but partially offset by a tough quarter of sports margins. Turning to the US now, where BEDMGM's Q3 NGR was up 18% year on year. This acceleration to 18% revenue growth following 3% in Q1 and 9% in Q2 is encouraging as we continue to invest in marketing behind our improving product and player experience. Pleasingly, we're seeing further stabilization in BetMGM's sports and gaming market shares. Most recent data for blended market share actually shows an increase to 15% from 13% previously However, that uplift just reflects seasonality during the quieter sports months. The key message is that we see share stabilisation from which to build in future quarters. Gaming continues to be strong with 22% market share and Q3 was another record for gaming NGR. FDDs were up 70% year on year, supported by our additional but disciplined marketing investment into customer acquisition. and gaming further benefited from improved cross-sell from sports. In sports, although it's early days, we're seeing encouraging momentum as players enjoy our Angstrom enhanced sports betting offering, which now covers MLB, NBA, NFL, and college football. Metrics are improving week by week across important KPIs like retention, engagement measures, parlay mix, and expected win margin. Similarly, it's very early days, but the unlock of Nevada is now complete with full single account, single wallet functionality for players visiting Vegas. The early signs are encouraging with a doubling of FTDs year on year from Nevada and a significant portion of those continuing to bet after returning to their home state. We have been clear that 2024 is a year of investment for BetMGM and we're cautiously optimistic that early indicators show we're gaining momentum. Lastly, from me, our updated outlook for 2024. As a result of stronger than expected Q3 performance and our increased confidence for the balance of the year, we now expect online NGR XUS to grow mid-single digits in pro forma constant currency. That's an upgrade from our previous low single digit positive from August, which itself was an upgrade from the low single digit negative guidance we gave back in March of this year. What does that mean for Group EBITDA? It means we expect EBITDA to land towards the top end of our previously guided range of 1040 to 1090 million pounds, which is a little ahead of where consensus currently sits today. And pleasingly, for the first time this year, it means we now expect Group Organic EBITDA to return to year-on-year growth this year in constant currency, which is, of course, the aim of future years as well. In summary from me, we're pleased with Q3, in particular with both OnlineXUS and with the US as well. Momentum is returning, and that gives us confidence to increase expectations for the full year. With that, I'll hand back to Gavin. Thanks, Rob.