Greek Organistn Football

Ladies and gentlemen, thank you for standing by. I am Gaeli, 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 fourth quarter 2024 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, Chairman and CEO of Obapase. Mr. Karas, you may now proceed.

Thank you very much. Good evening or good morning to everyone and welcome to our Q4 2024 results conference call. In the last quarter, we have recorded exceptional performance driven mainly by the Giga jackpot in Joker, the strong performance in sports betting and the growing popularity of our iGaming proposition. Actually, overall, our online segment performed strongly and grew further, contributing about 32% to the group's revenues, setting a new record which underscores the digital focus of our strategy. Hopefully, you have reviewed and enjoyed the results of the recorded video we shared with you earlier today, so we will jump directly to our Q&A session. Geli, over to you.

Thank you, Mr. Karas. Ladies and gentlemen, at this time, we'll 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 headset 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 Draziotis Tamatis with Eurobank Equities. Please go ahead.

Yes, hello there. Thank you so much for taking my questions. Three questions, actually, if I may please, and perhaps we could address them one at a time to ensure clarity on each point. So firstly, I would just like to start with your 24 top-line performance, which obviously eclipsed the upper end of the of the guidance by nearly 100 million. So the question I guess here is what worked so much better than your expectations at the start of the year and to what extent there were non-recurring pockets of growth, if I may say so, so be it the Euro or enthusiasm about the Euro jackpot, for example, or jackpot rollovers for Joker, which you referred to. So to what extent these, you feel, create a tough comp base for 2025 and thus explain the guidance for low single-digit growth in this year? So that's the first question. Thank you.

Thank you very much for your question. Even though you almost answered yourself, I will still elaborate a little bit. So first of all, when it comes to the guidance itself, as always, the management and the IR team follow a realistic approach to forming our outlook, as we have hopefully well evidenced by the track record of our guidance falling within quite a narrow range provided in the previous years. So the provided outlook that we are discussing now, the 2024 versus the actuals, luckily had a happy ending, but certainly throughout the year was also a challenge at times. And for example, when we were communicating the Q1 result in the second quarter, we certainly were feeling bold sticking to that forecast and hoping that with all the efforts that we had in our mind to put into it, we will be able to deliver. But what I'm trying to say throughout each and every quarter of the year, the feelings about the forecast are certainly evolving. And we always do our best to forecast as accurate as possible. Now, I think the merit of your question is what exactly has influenced it the most. You have mentioned some of the reasons. What is certainly important to note is the exceptional sports betting performance, certainly boosted by the Euro 24 tournament, but also notably with favourable results for us as OPAP when it comes to payouts. We certainly note a very high Joker performance aided by very high jackpot rollovers. Just to put it into perspective for you, last time we have seen such a giga jackpot was back in 2009. So as you can imagine, this is certainly not something you can very accurately predict. Last but not least, as I mentioned in my intro, online casino certainly has a very strong performance and and that has exceeded our expectations that the dynamics of this vertical as well overall it resulted in our performance of our 2024 guidance but let's also remember that in q4 we have indicated that we will be looking to cross the upper range of our of our guidance as well. And finally, we scored even better than expected at that time. So I think that's just a completely honest and transparent background of the forecasting versus actuals.

Great. And if I could follow up on your response. So I guess the outlook for, and I'm moving to channels now, so the outlook for online is probably very strong and probably you feel comfortable projecting double-digit growth, I imagine, for this channel, which means that this will be offset by maybe weaker retail due to what we talked about, basically, Joker and the Euro, I guess, affecting sports betting. thus leading to the low single-digit growth at group level. Is this sort of your rationale, and I guess also leading to a lower margin year-on-year, partly due to the channel mix? Is this a fair point to make?

Listen, when it comes to 2025 outlook and online specifically, we have certainly seen a very strong performance of online in 2024 that has exceeded our expectations in terms of year-over-year growth, because when you compare it to the year-over-year growth we had in we have observed back in 2023, you will understand what I'm talking about. Now, while that certainly makes us excited about the momentum we have in online, we also need to be a little bit cautious because sports betting margin sustainability, sports betting growth sustainability is a question mark. How far this can go in terms of engaging customers, in terms of especially how much the customers are ready to spend. There will at some point be a saturation. So while we have a good momentum in both sports betting and the iCasino verticals that I will elaborate on, on lottery later, we cannot just draw straight lines when it comes to trends. So what exactly we will be observing remains to be seen. But if you wish to hear a number, that certainly, I believe, the opportunity represented is still more, I would say, rather low double-digit than single-digit. So that online will certainly perform better. stronger than retail as such.

Got it. Thank you so much. And second question is with regard to your shareholder remuneration policy. So let me just make an assumption, you know, for the sake of the discussion. So if low single-digit revenue growth were to translate into low single-digit growth in terms of bottom line, would it be fair to assume that this would filter through to a similar increase in the dividend? And how do potential future buybacks fit in within this logic? Thank you.

Okay, I will take that question. Good afternoon from me. Our dividend policy remains as it was in the past. So we are committed for dividend distributions that exceed net profits with a minimum of one euro dividend per share. We may consider some additional special dividends on other basis. In terms of the buyback, we just completed the medium size buyback program of €150 million, which we always mentioned was complementary to paying the maximum possible dividend. So we believe for 2025, The outlook for the dividends, and given what you said, and the guidance which we provided for the GGR and EBITDA, it should be at similar levels as the one which we paid out in 2024.

Okay, got it. Thank you. And last question is actually on online. I'm not sure of the extent to which you can answer this question, but I will try. So I'm basically a bit perplexed by the strategic move of your parent company, which recently got a majority stake in one of your online competitors. What was the rationale behind this move, to the best of your knowledge? And I mean, the way you view this, what strategic implication does this carry for OPAP, given the common ownership, yet continued competitive positioning of the two companies. Thank you.

Thank you very much. As you correctly said, this is a strategical move of our parent company, and as such, we will certainly abstain from commenting on the purpose. The Novibeth company operates with its own license. We are in a competitive environment and there is no plan on changing anything on that setup to our awareness. So I can tell you right now.

Okay. Okay. Thank you so much. Thank you.

Thank you.

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

Good afternoon, everyone. A couple of questions. First of all, on the sports betting growth, are you able to disentangle how much of a benefit the favorable revenue for you was as a result of the results? Because coming into the year, you would have known about Euro 24 and obviously the Champions League structure has led to more games. So I'm just interested in what is the, you know, if you take out the favorable odds for you, how much better revenue was. The second one, a couple of questions on costs. In your statements, you refer to salary adjustments to retain and attract talent, which put a bit of a cost pressure. Are there certain parts of the the employee base where there's greater pressure than others. I don't know if it's tech or marketing, that kind of thing. And going back to the margin guidance, which is a bit lower, and I appreciate there may be some games in there, where are the specific cost pressures, please? Because if you look at in 2024, excluding the increase in sponsorships, your advertising actually grew at a slightly lower rate than the overall TGR. It's only marginal, but it was slightly below. So are you getting more efficient at advertising? Thanks.

Thank you very much for the questions. We'll try to answer them, hopefully understanding all of them correctly. Maybe for the future, if the audience would be so kind and ask the questions separately, that will be easier to follow and answer. We will cover all of them, don't worry. So starting with the first one, which was about the specific quantification of the beneficial results, that's obviously not something we are able to quantify in exact numbers because everything is connected that's more an overall observation that it helps us but there are much more influencing factors than only the payout itself and there is activity of players how attractive is the calendar how much the favorable teams of the local customers are playing or not playing within etc etc So that, I'm sorry, but I cannot tell you a specific number on that, but certainly the positive payout, positive for us, was one of the contributing factors to the GGR performance that we have observed in the sports betting. But maybe to give you a color about some of the other influencing factors, in sports betting overall as OPAP, we have attracted significant new incremental amount of players to both online and retail. And that number, obviously because of the size of our retail being predominantly driven by the retail part, accounts for hundreds of thousands of new players in playing sports betting with OPAP. And that has been one of the important contributors to the overall annual success of sports betting. So I hope that... Handing over to Pavel for the second question.

Yeah, the second and third question, I think the first one was related to the salaries. Now, as far as payroll expenses is concerned, the current levels, they reflect increased headcount. We also have variable-based compensation, so in a year of a good performance, that plays some role. And also, we do adjust the salaries because the market is very competitive. As you know, Greece is doing well, not only OPAB, but many are companies across all sectors are doing well. So really to retain and attract talent, we need to be relevant in the job market. And as you asked about which particular parts of organization, well, it's no surprise. It's mainly technology. But not only that, all the parts of company like digital marketing, CRM, customer proposition, All of that are important part of our business where we need to remain relevant in the job market. Now your question about the guidance and cost pressure. Obviously, we had the high inflation in previous years, which now somewhat stabilized. We are doing our best to keep the cost control well under the control, well sort of contained. But in terms of the marketing costs where you asked, definitely the asset prices are going up in terms of the sponsorship. There is a lot of competition in the market, so definitely there is an increase in costs, not only in the sponsorship, but generally media costs go up very significantly because of high demand. So we are trying our best basically to keep it under control.

Thank you.

The next question is from the line of Negrasov Maxim with Citi. Please go ahead.

Yes, good afternoon. Thank you for the presentation. I have a couple of questions. First, I'll start with probably a traditional question at this point. So last year you obtained several licenses, including the Euro Jackpot and the Cyprus license. Is there any update on the upcoming instant lotteries and more importantly the core offline betting and numerical lotteries licenses? Any updates?

Thank you very much for the usual question and we have the almost usual answer that when it comes to Hellenic Lottery's license we are in the discussion with the state representatives. These discussions have been now influenced by the recent reshuffling government, and as you, if you follow Greece, have noticed, we have a new Minister of Finance appointed. We expect continuity of the conversations in the next weeks that the discussions will continue. It remains to be seen how it will influence the whole process, but we don't have any at this moment an indication that there should be any negative influence as such. We expect that we will continue to work, and hopefully successfully, towards our clearly declared ambition to extend these licenses. The same commitment we have to the expansion of the big licenses. I'm sorry, just to be correct with the terminology. When it comes to Hellenic Lotteries licenses, this is not a license that can be extended. We are working towards being awarded with the license starting May next year, following the relevant process with the government bodies. When it comes to big licenses, that's something where indeed extension is for a discussion, and that discussion we hope we will be able to initiate soon, but at the same time it's 2025, so it's a bit early, but even here we have indicated our interest to talk. When it comes to our confidence, this is maybe also something I would like to mention. When it comes to our confidence on securing the licenses going forward with the experiences of last year, and that was, as you noticed, the Cypriot license as well as the award of the Eurojackpot license, we are very confident that our chances for success here are equally high.

Thank you. That's very clear. Another question is on Joker. And correct me if I'm wrong, but as I understand, there was a record, one of the highest records in the third quarter, then also a strong basically jackpot in the fourth quarter. And from the presentation, I understand there's another record in January. So is it fair to say that there are somewhat structural improvements in this product, or we should not extrapolate such success going forward?

Structural improvements are certainly there. However, the statistics is merciless, so I think it continues to be obviously a matter of luck as to when and what size of jackpots we will continue to see. And indeed, now in First quarter, we have seen the biggest jackpot in Joker ever, but do we expect this to be repeated five times a year? Unfortunately, that would be difficult to work financially. So kind of yes and no. Structural changes of the game are favouring the faster growth of jackpots, yet occurrence of mega jackpots of this kind is certainly not something that we can expect to happen on a regular basis.

Okay, that's very clear. And final question, just to continue on buyback, right? So do you plan to cancel the existing Treasurer shares? I believe it's about 3%.

Yes, as we indicated going forward, the reason to do the buyback was eventually to cancel the shares.

That's very clear. Thank you.

The next question is from the line of with Zurich Securities. Please go ahead.

Hi. Hello from our side as well. One question again. I'm sorry about the back and forth on the dividend. Could you please reiterate what is the target for dividend distributions for 2025? And when you refer to the target as 2024, do you basically approach this on an absolute amount of distributions, including the share buyback or in the dividend gain? But I guess that's... That's not the case. And if you are referring to the absolute amount, would it be possible to have a breakdown on the dividend distribution and how much will you be committed to the shared buyback program? Thank you.

Thank you. Basically, we are committed to distribute maximum possible dividend, which is pretty much all our net profits generated in a year. which should be as a minimum one euro per share. Now because the buyback really was not impacting this commitment, and in case we continue with the buyback also in 2025, we will make sure that it doesn't impact the maximum dividend distribution, that it's complimentary and on top after the maximum dividend is paid. So because we have very good cash flow conversion and free cash flow generation, that's what enables us to do the buyback on top of the maximum dividend being paid.

Okay. Okay. Thank you. Thanks a lot. That's all from my side.

Thank you.

The next question is from the line of with Pirao Securities. Please go ahead.

Just to clarify one thing, thank you. As far as I understand, you plan to reinitiate the share-buy-back program for next year. This is the first thing. The second thing is that do you plan to enrich your current gaming portfolio with new features if there is such a thing for 2025 to enhance gaming experience, if you have any such plans? Thank you very much.

At the moment, on the buyback, at the moment there are no plans. We just completed the previous plan and we are always cautiously taking into consideration our capital requirements. So as I said, we did have surplus cash on top of maximum cash that was paid, but we have to see what is the situation with capital requirements and with the licenses. And we may consider it going forward. Definitely we want to keep the flexibility so current program ends in June 2025. We intend to bring this point to the upcoming annual general meeting to have the approval of shareholders to do the buyback. But at the moment there are no firm plans that we would continue with the buyback.

Okay, and what about your gaming portfolio? Any new features for 2025 in any of the games?

We focus on evolving the experiences in the first place. So games are a core part of it, but it's more about everything that happens around it and what experience the customers will enjoy. If your question is, specifically what new games we will see. I believe the one worth noting is that we intend in the summertime to bring Eurojackpot also to online. But other than that, it's more on the side of experience, like expanding the power spin with some new features and enhanced gameplay and visual side of things, etc. Thank you very much.

Once again, to register for a question, please press star and 1 on your telephone. As a final reminder, to register for a question, please press star and 1 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, Gali. Thank you to all of you very much for being with us today. Our IR team will be looking forward to answer any other questions you may have and dive deeper into your inquiries as always. We will be looking forward to talk to you again in a couple of months upon the Q125 results announcement. Thank you very much and have a great rest of the day. Thank you, Gali.

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