Greek Organistn Football

Ladies and gentlemen, thank you for standing by. I'm Poppy, your course call operator. Welcome and thank you for joining the OPAP SA conference call and live webcast question and answer session to discuss the first quarter 2023 financial results. Please note that a video presentation has been distributed and is also available on the OPAP investor relation website. All participants will be in a listen-only mode and the conference is being recorded. At this time, I would like to turn the conference over to Mr. Jan Karas, CFO of OPAP SA. Mr. Karas, you may now proceed.

Thank you very much. Good evening or good morning, everyone, and welcome in our regular Q1 2023 results conference call. I'm pleased to share with you another set of solid results for OPAP, positively affected by our sound commercial plan and leading to increased retail activity and strong online contribution. We continue to build on the fast-forward strategy pillars, and we just launched opaponline.gr, our new umbrella brand for our iLottery proposition. These make us confident, and we are well on track to deliver our 2023 outlook. Hopefully, you had a chance to review the results recorded video that we shared with you earlier today, so we will jump directly to our Q&A session. Poppy, 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 comes from the line of Graziotti Samatis with Eurobank Equities. Please go ahead.

Yes, hello there and thank you for taking my questions. I have a couple, if I may please. Firstly, on VLTs, we seem to have returned to levels of daily net win near 40 euros, which is a level seen prior to 2019, i.e. before full deployment of the machines. I'm just wondering, has this been driven by footfall or spending? And what, in your view, would the driver of higher machine performance in the future be? Would it be more players or higher player activity, or maybe machine optimization? That was the first question. And secondly, online, I'm just wondering, I mean, I know this is a transition period for you, but your own digital platform seems to remain rather subdued in terms of performance. If I'm doing the math correctly, revenues were a little changed versus the same quarter last year. Which is the segment struggling the most? I presume it must be sports. And could you tell us what the experience has been with the migration to the new hub and combating all the full product offering and of course the experience from the launch of online keynote these past seven or eight weeks. Thank you.

Thank you very much for your questions. I will take them one by one. So starting with the VODs, you're Expectation is correct. Going forward we certainly have ambitions to further grow the activity of players, meaning increasing the active players base as well as increasing their activity. And that is again driven by commercial plans and actions. The VLT replacement excuse me, the VLT replacement is an important part of it. So we have at this moment something around 7,000 machines replaced, and that's what our customers can enjoy. But as you know, our total estate is 25,000, so there is still many to go. So that's going to be helping, but we are also planning further evolution of things like loyalty schemes, the customer journeys, the simplicity of topping up the accounts and machines, digital communication, etc. So there is quite a lot on our plan and I don't think I can highlight any specific element of that being the predominant driver of the success. It's a combination of multiple elements and those that you have mentioned are certainly part of it. I don't think that Q1 results in any way indicate any mid to long term trends. Our ambitions are certainly continuous growth and it stays that way. Regarding the online, which was your second question, I would like to remind ourselves that we have launched the new sports betting platform in the first week in March and the new iLottery platform that you could see the screenshots in the presentation in the first week in April, one month later. Certainly Q1 performance had nothing to do with the introduction of new proposition and it was only very partially affected by the relaunch of the sports betting or replacement of the platform or migration to the new platform. So those moves are something that we now settle and onboard customers and make sure that everything works perfectly. But obviously, we need to wait a couple of months and with sports betting, certainly wait for the new sports betting season to kick in in end of August, beginning of September to start making judgments and year-over-year comparison as to how the new environments for the customers and new experiences have impacted our which we certainly expect to have a significant impact going forward. As to migration of customers that you have asked about, that is certainly something we can consider a success. Both migration from the old sports betting platform to the new sports betting platform, when absolutely smooth, we kept all the players on board. And the same went for iLottery platform, but just to remind ourselves that it was not a change of platform, the technical solution changed. It's still the same. It was expansion of the game portfolio and introduction of new interfaces. But also this change went really smooth. Thank you for your questions.

Thank you very much. And just a follow-up regarding your experience since the launch of online Kino. Has the game been performing in sync with your expectations or is it too early to say anything?

So far it's performing in sync with our expectations, but it's certainly too soon to make conclusions, because don't forget, We didn't go yet for massive communication and certainly not ATL. So at this moment, this was more onboarding of the existing base. And the early numbers are quite encouraging in terms of how much the customers enjoy playing multiple games and not just Joker as in the past. So that's certainly a good one. However, it's too early to make conclusions because the opportunity is not only in upselling the ex-Joker.gr customers, the opportunity is to go, of course, much bigger than that and bring more people to online and bring also completely new customers to our active base. And that remains to be seen once the communication kicks in. Thank you very much.

You're welcome. Thank you.

the next question comes from the line of quantum russell with edison please go ahead hello all i have three questions my first one is just going back to that previous uh question on your on opap's own online business um you've had good growth in active users but the spend is pretty flat so which implies uh lower spend per active so Is that a matter of reducing frequency or is it a matter of reducing spend per visit? My second question, I mean, broadly, you speak about better engagement with players as you've invested. But a key part of the investment was also to. shift the demographics of the businesses a bit, you know, have more younger players, more females. So could you just give an update on what you've seen so far on the most recent launches? And my final question is on cash flow. I appreciate that quarterly cash flow can be a bit volatile, but could you just give some detail on the working capital outflow and the cash tax, please? Thank you.

Okay, good afternoon from Pavel Mucha. I'll start with the last question on the cash flow. There is nothing unusual really in cash flow. There is a movement compared to the same quarter last year in the payables. And basically it's just different phasing of payments to our vendors. There is nothing unusual. And in terms of the income taxes paid, it's again only just facing how we pay the advance payments during the year and final settlement. Obviously, you have to bear in mind that because of the performance during the 2021, the final corporate tax liability for 21, which was much lower, than what we had for 2022 following the lockdown. And that then impacts the advance payments for corporate tax and final settlement. So it's, I would say, phasing of the payment of the income taxes.

If that's all from you, Pavel, I will cover the other questions regarding the activity of players and their spend. For sports betting, but for our players, Not bad. And for our iLottery platform, it was quite similar. Obviously, the early weeks were totally focused on assuring we are not losing any customers that we had before, and we are focusing on absolutely smooth customer experience on the new platform. So that was the focus there. And for the iLottery and sports betting platform, it continues to be focused also throughout April, just to make sure we offer the best customer experience possible before we go out with ATL communication and mass market-focused acquisitions. With that also, I really would like to abstain from any early judgments of the performance and impacts of any of the new platforms and or propositions on overall performance. Don't forget that when we grow and we keep growing, you are getting into different segments of customers with different behaviors, with different spends. Our ambition is always the same. Maximize the active players base and we have no smaller target than continuously grow across all of our online verticals the number of active players. And second, maximize the spend within the vertical and or across the verticals. Obviously always respecting the competitive law limitations and the wall that we have between the lottery world and the sports betting world.

Okay. Could you provide any demographic detail in terms of whether you're managing to take your customer base younger and more female?

This is a younger audience. Well, slightly different answers per vertical. So if I will be speaking about sports betting, it's sports betting fans is our target group. There is more than 1.6 million players in Greece. We want to be relevant to all of them. And the age groups, when you look at the publicly available statistics, it's really going across all categories. all age groups. So there our focus is for all of them and I think we are successfully, I would say with increasing success, because we are certainly far from where our ambitions lie, we address those segments. When it comes to casino, that's a bit traditional segment that we were trying to make more relevant to the younger audiences with the introduction of casino games vertical. It has helped us, we have increased our presence in the younger segment, so I'm referring to 21 to 35, but again here it's not the end of the journey, that's a continuous case and we are always working on further enhancements of the propositions. But I think really the casino games vertical is a nice example of innovation and attracting new audiences, especially among the youth. When it comes to iLottery, it's quite a different story because while casino and sports betting have their specific audiences, the iLottery should be really the mass market proposition. And with that, it absolutely must be relevant also to women and younger audiences. And that's why what you will see coming in the future are further enhancements towards the entertainment element, social element. So to give you an example, chats among the people. different rewards, loyalty, connecting, collecting points, free games, etc. So just think of really an entertainment hub where there should be something for everyone to have a couple of minutes a day, fun, just to break out of the day and play for some time and enjoy. That is our ambition and with that we will follow our commercial plans to deliver that. Hope that helped.

Yeah, that's great. Thank you. You're welcome.

As a reminder, if you would like to ask a question, please press star and 1 on your telephone. Once again, to register for a question, please press star and 1 on your telephone. The next question comes from the line of Treasurer Ruben with Times Square Capital Management. Please go ahead.

Thank you. Can you hear me? Yes, yes. Okay, great. Hi, this is Ruben Scherzer, Times Square Capital Management in New York. Thank you for taking my question. Congratulations on a strong Q1 results. And on the back of that point, I'm curious, based on the initial guidance for the year, what kind of circumstances would have to occur for OPAP to raise guidance for the year 2023, given the strong start of the year?

Thank you very much for your question. Yes, well, thank you for your kind words. We are indeed satisfied with our solid performance in the first quarter, it was a good start of the year and certainly we are optimistic for the remaining of 2023 likewise. Now, since we have provided the outlook for the year just two months ago, currently we are sticking with this outlook, and I don't have any new updates for you on that front. That outlook stands, and we remain certainly confident that we are well on track to deliver on this target. So just to repeat for the whole audience, the EBITDA is expected to be within the range of $700 million. 740 to 760. In any case, we will come back to you on that with an update, and you should expect that post-summer, along with our Q2 results, I think that would be a good time to be more specific on the expectations on any results.

Okay. Thank you for that detail.

You're welcome.

As a reminder, if you would like to ask a question, please press star and 1 on your telephone. The next question comes from the line of Memisoglu Osman with Ambrosia Capital. Please go ahead.

Thank you very much for your time and presentation. Just following up on the previous questions, you've given us quite a bit of detail on the product side. More on the demand side, customer spending, I guess a bit of macro sentiment from your perspective. How was Q1 and how are you seeing Q2 so far and any color and outlook given the recent developments? Thank you.

Okay. Well, macro is moving in the right direction in Greece. Across all metrics, things are improving compared to the last year. Namely, inflation is easing. I would say the recent elections provide also some optimism. And I would say there is a good mood, which we see across the whole retail industry in Greece. And so people do spend more and we see basically the entertainment wallet of the players, of the customers generally increasing from our tracking results we've seen constant increase really since the autumn last year and it continues also beyond Q1 into April and May. So I would say in this respect and also expecting another record tourist season given the bookings and progress so far. I think on macro front and the whole retail and us being affordable entertainment venues, we see the summer and Q2 also quite optimistic.

Thank you. Thank you very much.

Once again, to register for a question, please press star and one on your telephone. The next question comes from the line of Puri Karan with JP Morgan. Please go ahead.

Hi, congratulations on the strong set of results, everyone. Just had a question on the growth profile of your core products, numerical lotteries and retail betting. I mean, the 10% and 11% growth was very, very strong, obviously underpinned by, you know, some help from COVID comps as well and strong retail momentum. Going forward, Q2 onwards, how would you, is it fair to assume a deceleration in growth going forward? And when do you sort of see it getting back to the low single-digit growth that you've historically sort of guided on for that segment?

I assume you are referring to year-over-year growth of the given quarters, right? Yes, exactly. Well, I don't like to forecast too much on the deceleration of our success. That remains to be seen. We always aim high and I think we are lately quite successful with engaging players because we have been during Q1, as you have seen in the deck, reaching some very high numbers in terms of activity of players and that across all the different verticals and we have some cards in our sleeves going forward to further trigger activity of players. So I certainly don't aim for anything less than continuation, but at the same time, putting aside ambitious CEO trends, we should see single digit growth sorry single digit growth comparison quarter on quarter going forward as well how much we will succeed to go to double digit range remains to be seen because don't forget that there are still some macroeconomic question marks ahead of us like the final results of the political elections that seem to be hopefully on a good track but it's still not closed we have a touristic season ahead of us which again seems to be on a good track but far from conclusive as to where it's gonna and how it's gonna end up. We have some interesting forecasts on weather that possible tropical high weathers might have an influence and impact on people going out and spending time outside of our stores. So there is quite a lot of things that can influence how the rest of the year will go, not just default GDP or are encouraging Q1 performance. So I really would like to abstain from speculation and come back to my statement that I said before, that we will hopefully give you a much better insight as to how the year will end with the Q2 results.

Thank you so much.

To register for a question, please press star and one on your telephone. The next question comes from the line of Zouzoulas Koustantinos with Axia Ventures. Please go ahead.

Thank you. A couple of years ago, if I'm not mistaken, we have discussed about the prospects of the online market in Greece. Fast forward two years. How do you see the market evolving? Do you believe that the trends that you were discussing or thinking were conservative or aggressive.

Thank you. I'm sorry because I cannot refer to optimistic or conservative statement as to, since I'm not sure to exactly what data point couple of years back you are referring to. But when it comes to the future, our expectation continues to be some healthy growth of online. at around 10% year-over-year rate, while certainly protecting our business on the retail side. That is also what we are seeing in the European benchmarks of other jurisdictions that are more advanced than OPAB on the lottery online side. Having said that, similar to my statement before, there is quite a few possible interesting opportunities that we may be able to explore, like how much we will manage to attract new players to our iLottery proposition, new generation players that are possibly not with us. And likewise, as always, there might be some unpleasant surprises along the way in themselves, constantly evolving customer preferences as to what they want and what they don't want and what they consider entertainment that they want to pay for. While generally a very diverse array of opportunities and challenges ahead of us, coming back to my original statement, we don't expect to be anywhere else than of around at least 10% growth year over year for online business.

Thank you.

You're welcome. Thank you.

once again to register for a question please press star and one on your telephone the next question comes from the line of shohan virendra with alpha value please go ahead uh good afternoon ian and uh

Well, quick question on the online business, specifically iLottery. So I'm sorry if you have addressed this during the Q&A. I had some trouble getting on the call. But the iLottery business was down about 2% in Q1 and coming on the back of a very strong performance towards the end of last year, if I remember correctly. So my question is, is this a reflection of the transitional period that you had and you were awaiting the launch of the new platform and hence less marketing intensity, if I could term it that way? Or is there anything else at play? Because it's moved from, I think, 20% plus growth in Q4 to about a decline in Q1. So can you just clarify that for me? Thank you.

Thank you very much for your question. The answer is very simple. The explanation is very simple, and that is... Now I can say think of the past and that is very high dependency on the jackpot. So since it was a joker.gr only, it was all about do we have a high jackpot or not. And that is some, so it had nothing to do with the new platform because that has been launched at the beginning of April. But that kind of dependency is exactly one of the things we are trying to change with the introduction of the whole iLottery portfolio and everything that is coming going forward, we should be much more about creating a habit of people coming on a regular basis and spending a few minutes a day having some fun rather than praying and waiting for jackpots. So it remains to be seen how successful we will be on our ambition, but I'm optimistic on that front.

Okay, so if I understood correctly, you're saying that Comparable had a higher jackpot-driven business last year, and now that's the reason for this drop in business, right?

I'm not sure I understood the question, but in terms of what we always do, if that is your question, what we always do, we are looking at performance in comparison to the similar jackpot in the past, and on that front, we are not seeing any decline. On the contrary, so that's what you were asking.

Okay, yeah, perfect. So I was looking for some kind of underlying growth in the business, and I think that's clear. Thank you. Thank you very much.

As a reminder, if you would like to ask a question, please press star and one on your telephone. As a final reminder, if you would like to ask a question, please press star and one on your telephone. Ladies and gentlemen, there are no further questions at this time. I will now turn the conference over to Mr. Karas for any closing comments. Thank you.

Thank you very much, Poppy. And thank you very much all for being with us today. And thank you very much for your question. And it's beautiful that at this moment I can wish you to enjoy a great summer. And we will be looking forward to talking to you again in September for our Q2 2023 results, where I'm sure we will have another set of exciting news for you. Thank you very much and have a great day and great summer. Bye-bye.

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