Greek Organistn Football

Ladies and gentlemen, thank you for standing by. I am Yelly, your chorus call operator. Welcome and thank you for joining the OPAP SA conference call and live webcast question and answer session to discuss the full year 2022 financial results. Please note a video presentation has been distributed and is also available on the OPAP investor relations website. All participants will be in listen only mode and the conference is being recorded. At this time, I would like to turn the conference over to Mr. Jan Karas, CEO of APAP-SA. Mr. Karas, you may now proceed.

Thank you very much. Good evening or good morning to everyone and welcome to our regular full year 2022 results conference call. I couldn't be more pleased with the set of results announced delivering record high Q4 GGR and concluding to full year EBITDA that certainly exceeded our latest outlook. 2022 has been challenging for all of us, however for OPAP it's been a year of delivering tangible progress in further upgrading our customer experience and rejuvenating our recreational mix. We are also happy to announce a generous shareholders remuneration of €1.15 that comes on top of the €0.30 already distributed as interim in November 2022. We expect 2023 to be another year of success supported by stable macro environment and are well in place strategy. Hopefully you have reviewed and enjoyed the results recorded video we shared with you earlier today. So we will jump directly to our Q&A session. Operator, over to you.

Ladies and gentlemen, at this time we will begin the question and answer session. Anyone who wishes to ask a question may press star followed by one on their telephone. If you wish to remove yourself from the question queue, then you may press star and two. Please use your handset when asking your question for better quality. Anyone who has a question may press star and one at this time. One moment for the first question, please. The first question is from the line of with your bank equities. Please go ahead.

Yeah. Hello there, and thank you for taking my questions. Hope you can hear me well. Let me first start with a question on your online offering. You recently launched a new online sports book. In your presentation, you actually sounded a bit about this. I'm just wondering what is different this time because you made you have made a foray into online sports well a few times in the past but you did not get the traction you had been hoping for and on the online lottery front it seems that we that finally the time has come for online kino Have you done any work, any research on this to see what sort of opportunity we are potentially talking about? So that was my first question. Secondly, on shareholder remuneration, I think you surprised on the upside for yet another year. My question is straightforward. I think you paid one and a half euros last year. with a one-off element, 1.45 this year, maybe including a small one-off. Given the growth in profitability in 2023, the significant netted reduction in 2022, and the propping up of your equity position, is there any reason why shareholders should expect anything less than 1.5 euros barring any unforeseen event, of course. So that's my second question. And lastly, if you could update us on the situation with the Hellenic lotteries and the arbitration related to the minimum gaming duty, please. Thank you.

Thank you very much for your questions. I'll take two of them and I'll leave for Pavel to comment on the dividends. So regarding online offering, the new online sportsbook, yes, you're right. We already have a couple of not so successful attempts to shine with our sportsbook going as far back as 2016, 17 times. But this time we are absolutely sure that we do it right because the setup is very different, much stronger team, much better experts on board and much stronger and provenly successful partner to deliver the solution. I'm referring to OpenBet who is delivering the backend platforms for the new sportsbook. So a lot of things are new. From a customer perspective, though, the key thing they see is a very innovative and fresh UX and UI. So for the sportsbook fans among yourself, you can see for yourself and when comparing with competition, there is a lot of elements that are quite innovative and new. So that's, let's say, the latest state of the art in UX and UI. Second, I would say maybe even the most important thing, way much faster navigation so it's really super fast and that's what customers look for and appreciate because every second counts in sports betting and last but not least there is a lot of new features both content wise as well as social features preferred by the young audiences so overall we believe it's a really significantly better proposition and certainly very competitive to anything else you can find on the market. Your second question was about iLottery. It's coming really soon, and in terms of the opportunity we see, that is depicted in our expectations for this year, where the whole online we expect to achieve another double-digit our, I would say, single team's percentage growth year over year again, and there certainly iLottery should contribute. It's quite a new thing for this whole market, bringing all the different games to our customers, so we are ourselves looking forward to how successful we will be anywhere from to extremely successful that is yet to be seen in terms of popularity and engagement of the players that possibly do not play today. It's something that we are looking forward to see. It's a mass market proposition and accordingly we have pretty high expectations from that. Regarding Hellenic Locaries arbitration, I don't have any updates for you on this front. As promised, once again, as soon as there are any updates, you will certainly be among the first ones to hear. Thank you, and I'm handing over to Pavel to comment on the third question.

Okay, good afternoon from me. The question on shareholder remuneration, we are committed to our previously announced dividend policy That means to distribute more than our net profits with a minimum floor of one euro per share and to add additional special dividend distributions on ad hoc basis. As you rightly mentioned, both the remuneration for 21 and 22 included the extra element of capital return. And as you prompted, this dividend policy remains in place. but obviously we have recorded Betano gain in our 2022 results and we have already communicated previously that we will be intending to distribute this gain to the shareholders. So I hope this answers your question that the expectation can be again a bit more than one euro distribution for 2023.

Okay, that's clear, I think. Yeah, thank you so much.

The next question is from the line of Djukalia Fanny with Wooden Co. Please go ahead.

Hello from our side. Congratulations on the strong results. I have two questions, if I may. The one has to do with the VLT's performance in the fourth quarter. It appeared to be quite strong. I think there was a record... net drop per VLD per day. I was wondering if this is something that we should consider as sustainable going forward. I understand there might be some seasonality due to higher customer traffic, but I'm trying to figure out if this is a number that we should be looking due to the optimization of the machines as well. And the second question is, if you could provide us with some color on the in the first quarter of 2023 in terms of performance. Thank you.

Thank you very much for the question. In terms of VLT performance, it certainly continues to be strong in Q1, and I'm partially answering your second question. And as you correctly pointed, primarily driven by activity of players. That's something generally connected with this after COVID recovery, things getting back to normal, people very much willing to have fun every day and not just wait for it to come in the future. So all that connected is creating an environment where we see more and more people coming. This is a trend that we expect to continue and this is something obviously we are very much focusing on nurturing and further developing. Upgrade of the VLTs is one of the things, but there is also a lot of CRM activities, loyalty scheme, That should be helping us in developing the players and increasing the active base overall, leading to further growth of the VLT business. VLT business is undoubtedly one of the growth categories that is powering our year-over-year evolution. In terms of Q1, I'm happy to share that following the very strong Q4, the results in Q1 so far continue to be pretty solid, so we have good reasons to be slightly optimistic about the future. But you all know how the political situation currently looks like. There is still a lot of question marks around inflation, energy prices, etc. So we want to be reasonably cautious at the same time, especially in terms of the macro environment. Thank you for the question.

Thank you. The next question is from the line of Nakrasov Maxim with Citi. Please go ahead.

Yes, hello. Thank you very much for the presentation earlier. I have a few questions. So the first question is on the fourth quarter and betting revenue for a bit lower year-on-year, particularly in online, despite the world cup. So I'm wondering to what extent this was in line with your expectations and how this performance can be attributed to higher online betting competition. And generally, what's your view of how speed can keep competition in online? That's the first question.

Please continue. I had a slight problem hearing you, but we will agree here what the question was. Can you continue with your second question?

Yeah, I hope you can hear that now.

Hello?

Hi, can you hear me now?

Yes. I was asking if you want to say all your questions, or do you want us to provide answer first on the first one?

Please proceed with the answer.

Okay. Give me just one second because I was a little bit struggling to hear you, so I need to understand from the colleagues what was exactly the question to make sure I'm answering the right answer.

I'm sorry to interrupt. Maybe Mr. Nakrasov would like to repeat his question so you can understand clearly, please.

Yeah, yeah. Let me repeat it. So the question was regarding your betting revenues in the fourth quarter that were down year on year, and especially the online. So I was wondering whether it was driven by online competition and generally how significant is competition in online competition?

Thank you for repeating it. The Q4 performance was about the World Cup. We had pretty big expectations from the World Cup. Our expectations were largely around the usual experience with the World Cup, which happens in a very different period normally. So what we found out that at the end of the day the World Cup was certainly below our expectations in terms of GGR generated. There was however a lot of positive upsides coming from the increased traffic that was in stores anyway and people playing also other games. But because during World Cup there was a very weak other calendar, other sports betting calendar, so there was a lot of single bets involved because the results of the matches were largely in favour of the players, I mean customers. That certainly didn't help as well. Overall, the World Cup performance in terms of sports betting only was slightly below our expectations. Something, a trend and observation we have seen across many, many betting companies across the EU market that we speak to. So that was rather a common slight disappointment with the results of the World Cup across the industry. Your second question was how did we perform versus competition during World Cup or generally?

Yeah, I mean during the World Cup and generally.

Yeah, so during World Cup, I commented earlier, generally we are certainly, we continue to be happy with our strong position. Opap together with Sticheman being a dominant player and seeing continuously increasing business in absolute terms. So that's a good one.

Okay, thank you. And can I ask you on your 2023 guidance? So you expect revenue to grow between 6% to 10%. And how much growth do you expect we consider separately online and offline? Do you expect offline to grow? And what are expectations regarding iLottery in absolute terms?

Thank you for the good question. We expect some minor growth in retail as well, but retail is primarily about keeping our strong position and innovating to keep customers interested and excited, especially in the area of entertainment and socializing and digitalization, as our strategy indicated. So, retail is about maintaining our strong position and exploring opportunities for growth. But if you want to put a number there, we are talking about some low single digit number of growth. The key growth area, obviously, is online, where, as I indicated earlier, we expect some low teens growth year over year. And that is driven by both farther evolution of Sportsbook and Casino, the non-competitive part, as well as the completely new one, exclusive part of iLottery World that we plan to introduce.

Thank you very much.

You're welcome. Thank you for the question.

The next question is from the line of Boynton Russell with Edison Group. Please go ahead.

Good afternoon. I have a couple of questions, if that's okay. My first one is kind of a bit more top-down in terms of looking back at this time last year, I mean, effectively, you delivered EBITDA for the year that was the top end of your guidance from the start of last year. But I think revenue is probably a bit more than 10% lower than you initially estimated. So, from a revenue perspective, could you just give an idea of what was better, what was worse than you expected? I mean, you talked positively about what you're achieving with your new online initiative and products being rolled out, and there was an obvious macro impact as the year went on, but could you just kind of give some feel for what was better, what was worse? And in terms of cost inflation, could you just talk about what you're expecting this year, particularly from staff costs, because Your staff costs went up this year. You're obviously doing the right thing and helping staff to cope with the cost of living crisis better. So is there kind of more inflation coming in this year from that because you were late on for that? And does that account for the main reason why the margin guidance for the year is lower or are there mixed effects as well? Thank you.

Yeah, I will comment first on the revenue side. Obviously, the year had been a bit of a roller coaster in terms of the macro environment. The whole impact, both psychological as well as economical, of the war in Ukraine, then the energy prices, cost of living difficulties for many countries, many people, our agents suffering and our retail network throughout the year where we had to provide a lot of subsidies. It was quite a bumpy road that certainly took its toll on revenue. So if you ask me, that was certainly the negative impact on revenues. On the positive side, we were pleased with the resilience of VLT business that was recovering uh i would say finally exceeding our expectations so that was nice uh our casino in online uh was a very strong growth year over year where we have proven then when we have everything under control in terms of the customer proposition and the right front ends in place we can deliver Really good results, so that has helped. Sticheman has been strong throughout the year, further building the business. So those were some of the positive upsides. Scratch towards the end of the year was getting stronger with a 20% growth year over year. So, yeah, there were good sides, there were bad sides, but overall the result, I believe, is very good.

So can I just come back? So really the main reason why revenue was weaker was macro because the other stuff was pretty strong.

Yes, well, macro was the reason. For us, it's obviously not macro per se, but it's its impact on our customers and their willingness to play and the different moods there were in the society. Because we are in the entertainment industry and there were certainly points of time last year where it was not very entertaining for people. And a similar situation we can see now around an absolutely tragical situation accident with the train that had an impact on our business immediately we have seen people spending less time in the evenings in the shops and generally not being exactly ready to have fun and party so these things always do any kind of negative tensions and moments in the society have always an impact on us so if that covers your question yes thank you

Okay, I will take the second question regarding cost and inflation. We are always carefully looking at our cost base and managing really our total costs. It was not easier in 2022 with the macro turbulence and with the high inflation, which got eventually to double digits now lately in recent months. it eased to high single-digit inflation, and this is our expectation also for the 2023. Of course, it somehow impacts our forecasts. We are able to extend our negotiation power with the vendors, and we are always trying to split any inflationary increase between us and the particular vendor. and definitely it has impact on our projection going forward, together with the fact that, remember, in the first five months last year, we had still significant green pass limitations, COVID-related, which also helped us in the initial months of last year to have slightly lower costs. But basically, when you asked about how it influenced the margin in our outlook, There is a bigger impact, not so much from cost inflation, but really from the mix which we assumed between the channels. And obviously we are growing significantly in online, which has a lower margin. And our implied margin of 35.7, which is the mid-range margin of the outlook which we gave, It is not far away when you look at 21, 22, where we were at the 36, 38 level. So it's still within this range.

Thank you very much.

Thanks. As a reminder, if you would like to ask a question, please press Char and 1 on your telephone. Once again, to register for a question, please press star and 1 on your telephone. The next question is from the line of Zuzula Skosadimnos with Axial Ventures. Please go ahead.

Hello. One question from my side. Do you have any updated data regarding the profile of your customers, both online and offline? especially if we talk about offline, in respect of your keynote customers.

This is an interesting question. I think I would need a little bit more clear data as to what you're interested in because we obviously do have an updated data. We have a lot of customer tracking mechanisms in place, both monthly customer trackers as well as many various researches on the customer segmentation. There is a lot of data available, last but not least from our loyalty scheme where we have currently more than 600,000 customers registered and we know how they play and what they play. If your question is what differences we see in an evolution of a structure of customers,

Actually, just to be a little bit more specific, I'm trying to understand if we... Talking about offline now, if you have new customers in the stores, and I'm trying to connect this with the growth of the economy, and secondly, if the profile of keynote players is different versus the other... the profile of the players of the other games, and how we can interpret this as Kino moves online.

All right, so let me try to answer. The first thing... We have with across all verticals or most of the verticals and certainly including Kino, we have seen the highest penetration of the game ever in Q4 and it's a trend that continues. Point number one, yes, there is increasing number of keno players and so is it for other games as well. By the way, the very high penetration or the record high penetration for many of the verticals was connected with the side benefit of World Cup that I was mentioning before, increased traffic and people playing other games. Point number one. Point number two, we see a continuously increasing trend of average number of games that people play when they come to the store. So it's important to know there is no such thing as a keno player or keno-only player. The regular players play on average more than 2.8 games. so that they typically have a large overlap of sports betting and keno players. So there is a lot of overlap and that is the essence of our business. We want people to have fun with multiple games when they come to the store and to retail. Next, when it comes to online versus retail and keno, it's also important to recognize or realize, and we will bring you more updates on that next time, that the online lottery proposition is really not about kino online because that's what we are doing today with Joker and that's not enough. People expect and want much more. So we are bringing them a portfolio of games and the user interface will be very much about engaging them just to play anytime, anywhere, for a few minutes, and attract large volumes of audiences to play. So it's not about someone sitting at his computer and playing for two hours a kino. It's an entertainment hub. It's only second its kino in online, kino gaming online. Think of it as more something that is in the background, but the front end is entertainment. and Mix of Games. Does it cover you?

Yes, yes, very interesting. Thank you very much.

Yeah, thank you. Sorry we cannot tell you more now, but rest assured that next time we will share with you more than that.

The next question is from the line of Sherzir Rubin with Times Square Capital Management. Please go ahead.

Hi, good afternoon and thank you for taking my call and congratulations on a very strong year of performance. My question is just building on an earlier question. Am I accurate in understanding 2023 revenue guidance is 6% to 10% year over year? Is there a range provided for absolute EBITDA or for EBITDA margin? for 2023, and I'm curious about the EBITDA level, given how strong the margin came in for 2022.

Yes, we have provided not only guidance for the GGR, but we have provided also guidance for the EBITDA, and that is 740 to 760 million euros.

So that's 740 to 760 million. Yeah.

Correct. Yes.

Okay. Okay. And the GGR is that six to 10%. Correct.

Yes. Okay.

Okay. Okay. What is it? What's, what's the, I don't have a, the math at my fingertips here. The, the absolute EBITDA range. What does that translate to in, in, in the margin rate for margin range?

It's around, let's say, 36%. It's around 35.9%, 36%.

So that would be a decline year over year. Is that accurate, then, if you came in at the range, in the range?

That would be what, sorry? No, we certainly expect to grow EBITDA. You know, this is maybe a conservative assumption, in terms of our margin mix between retail and online and certainly we need to properly support the growth of the online and introduction of the new online lottery and we will update you as the year progresses how we are doing against this outlook and if there is any change.

The EBITDA margin last year came in roughly at around, what, 38%? Is that accurate?

Yes. Our actual 2022 margin was 38%. That's correct. And I think what we are doing is to continue and maintain very healthy margins. Okay. Okay.

All right. Thank you.

You're welcome.

Once again, to register for a question, please press Char and 1 on your telephone. As a final reminder, to register for a question, please press Char and 1 on your telephone. We have a follow-up question from the line of Negrasov Maxim with Citi. Please go ahead.

Yes. Hi. I have a couple of follow-up questions regarding Bitano business. So the first one is, when do you expect to receive the remaining sum, like 130 million for Bitano sale? And the second question is basically, do I understand correctly that last year you reported 15 million euro income from associates? This was coming from your share in Bitano that you sold in December. So there will be no such income in 2023. Am I correct?

Yes, so I answered the second question. This is correct. That was the share of profit associated. That was the income from Betano, which will not be coming in 2023, correct? And when to expect that? The future payments will depend on the performance of Betano. So basically, there is a structure of the earn out depending on the future performance of Betano.

So it will be prolonged in several years, right? So it won't be like in 2023?

Yeah, this is to be seen depending really on performance, I would say. I don't want to speculate at this stage.

Okay, thank you very much.

Ladies and gentlemen, there are no further questions at this time. I will now turn the conference over to Mr. Caras for any closing comments. Thank you. Ladies and gentlemen, there are no further questions at this time. I will now turn the conference over to Mr. Caras for any closing comments. Thank you.

Thank you very much. Thank you very much for being with us today, to all of you. We will be looking forward to talk to you again in a couple of months upon the Q123 results announcement, but hopefully we will have fresh news also from our iLottery launch, as I have promised. Thank you very much for your questions. Thank you for the patience and being with us, and have a great day, everyone. Goodbye.

Ladies and gentlemen, the conference is now concluded, and you may disconnect your telephone. Thank you for calling, and have a pleasant evening.