Lottomatica Group Spa

Good afternoon. This is the Coruscant Conference Operator. Welcome and thank you for joining Lottomatica Group's first quarter 2026 results conference call. As a reminder, all participants are in listen-only mode. After the presentation, there will be an opportunity to ask questions. Should anyone need assistance during the conference call, they may signal an operator by pressing star and zero on their telephone. At this time, I would like to turn the conference over to Mr. Mirko Senesi, head of IR at Lottomatica. Please go ahead, sir.

Thanks, operator, and good morning to everyone. Welcome to Lottomatica Q1 2026 result presentation. I'm here today with our CEO, Guglielmo Angelozzi, and our CFO, Lorenzo Mallancher. Now, the floor directly to Guglielmo for the presentation. Guglielmo, please.

Thanks, Mirko, and good morning, everybody. uh we can start with page two of the presentation very happy to share with you another very good quarter um ebita continues to grow double digit on a normalized level and also revenues and uh we have a positive seven percent uh EBITDA also on a reported basis notwithstanding the negative sports payout in the quarter. This is on the back of a very strong market. As you can appreciate from the two graphs on the below part of the slide, online has continued to grow mid-double digit in terms of bets and so total sports, meaning online and retail. And at the same time, we've performed well in competitive terms, as you will appreciate in a few minutes. So let's get to page number three. Well, this is the list of the main items that we think is relevant to comment for the quarter. As I said, the market has been strong. Tail operators have continued to lose market share, particularly in iGaming. No issue from prediction market, notwithstanding a recent sponsorship. They continue to be illegal. The product-consumer mismatch continues to be strong. We don't believe there is any market space. And at the same time, sponsorship has basically no impact in enhancing local brands. Very good news on PwO market shares. iGaming, we've recovered half of the share that we lost through the migration. And we're a bit behind in terms of iSport, but this is explained by the market trend on overall sports, meaning online plus franchise, which you know franchise has been particularly strong in the last few quarters. And so it is the case also for us. And so if you look at total sports, we have recovered to pre-migration levels of 9%. And we'll see more detail in a few minutes. There's been refinancing done with the important raising more capital, more debt, 765 million euros. 400 was a refi and additional capital for general corporate purposes including buyback and bolt-on acquisition. The overall consequence of this is that we lower our cost of debt from 5.3% to 4.9%. Page number 4. All that I have said leads to strong confidence on us being at the top end of the guidance for 2016. And also in being able to confirm our strong commitment on capital returns with up to one billion euros to be returned to shareholders in 26 and 27 including dividends. So the keywords are continued growth and continued returns to shareholders. Now let's go quickly page by page to see the items, the relevant items that I mentioned a couple of minutes ago. Market, strong market momentum. You see the details here. Again, gross mid-double digit. iSports gross mid-double digit. And sports retail shy of that, of course, in terms of that, because that's the only thing you can look at given the payout dynamic in the quarter. Page number six, you can appreciate the details of the tail operators progression and our progression in terms of market share. This is an eye gaming on the tail operators. You continue to see the sharp decreased trend starting from Well, it was progressing throughout the year and it was an overall trend, but it has accelerated starting from the new concession. From the 2024, 4.4 points, which is roughly 25% of the total market share that this cluster had has been lost. We continue to grow market share, the 32.2% that you see there is including An additional bolt-on that we've made after Sportbet, we've done another deal with Begain, so this is Performa for that. So very good performance both organically and with our deals that allow us to quicker consolidate take advantage of the erosion of the tails. Page number seven, super fast, was basically just commented a few minutes ago on... Prediction markets, there's a bunch of data points here that you can look at and that show why this continues. This is not at all an issue for us. I think we can go directly to page number eight, which is the progression on PWO. We've separated from iGaming and sports. You know, iGaming, half of the... market share which had been lost due to the migration has been recovered and there's a consistent path, so it's not really, there's not really volatility in the progression. And page number nine is the same trend for sports. You can see in the graph, sports as a total, completely recovered. And then the detail, the breakdown between iSports and sports franchise. There is still room to go in iSports, but this has been... you know, compensated by a more than favorable trend on sports franchise. This is the consequence of the trend that we've observed at an overall level in the market and also, as it was mentioned before, by the fact that the... Actually, the... The retail recovery, the retail transition, the retail recovery was structurally faster. But as you know, our GGR to profitability to EBITDA contribution from the two segments is pretty much about the same. So actually, this is very good news. Page number 10, especially a summary, we wanted to recap and make sure we were on the same page and we fully appreciate the model, the business model of Lottomatica, the overall framework and setup. So on one side you have a very strong and resilient business model because of a bunch of reasons including omnichannel, product tech, AI leverage which results into top line growth, cost control and scalability and M&A, demonstrated M&A and integration capabilities. And that's the core business part. Then we believe we have a very robust and steady capital structure and as you've seen we continue to optimize our financing costs, our balance sheet and through that the financing costs. And we believe we have a smart capital allocation, meaning a good balance between organic growth compared to M&A and compared to the right shareholder remuneration. This results into growth and returns, which is the first page and the last page of this section of the presentation. And we wanted to do an interesting exercise, I believe, We took all European listed companies with market cap above 5 billion euros. We went to filter those which have grown at least 10% with EBITDA. then those who have at least 30% EBITDA margin, then those who have at least 75% of cash flow conversion, so really cutting the parameters at the top end of the range, and then you are left, and then those which have total short-order returns of at least 100% in two years. And then you left with three companies, which is, you know, of course, less than 1% over the almost 400 companies that we started with. And that's basically the result of the model that you see on the left, growth and returns. So I leave the floor to Lawrence.

Thank you, Guglielmo. On page 12, you can see that on a normalized basis, our revenues are up plus 10% and EBITDA plus 22%. On a reported basis, despite the payout headwinds, revenues were up plus 3% and EBITDA plus 7%. Just as a reminder, we are comparing a Q1-26 with a very unfavorable payout to a Q1-25 with a very favorable payout. Lastly, I'd say our EBITDA margin has hit 39% due to the higher weight of 1.1 in this quarter. Moving on to page 13, here again we see on a normalized basis how we have continued to see good growth for both online and sports. Still in double-digit territory, we are plus 17% for revenues online, plus 11% for sports franchise, and on the EBITDA level, plus 29% and plus 21%, respectively, for online and sports. And when you look at it on a reported basis, you can see the impact of the payout affecting mainly the sports franchise segment. Whilst, despite the unfavorable payout online, EBITDA has still grown by 18%. Gaming franchise is flat at a revenue level and slightly up, so plus 4% in Q1, partly due to bolt-ons and distribution insourcing and also some timing of costs, which we will reverse throughout the course of the year. page 14 on the left hand side you can see the total capex including recurring and concession amounted to 39 million of which 25 million recurring slightly higher than the previous year and the 14 million concession capex in line with previous year on the right hand side you can see that operating cash flow reached 196 million euros or up plus six percent from last year And this growth number, if we had normalized both 26 and 25, Q1 for payout would have been plus 25%. Page 15. We closed the quarter here with a net financial leverage of 2.3 times and the cash of 119 million euros. So looking at the bridge from the net debt as at the 31st of December, 25, you have EBITDA, then a negative working capital absorption in Q1, reflecting the typical seasonality of the business, CapEx, financial expenses and leases, and then we acquired 56 million euros worth of stock in Q1. Then other, which also include extraordinary items in relation to the closure of our Serbian branch, which leads us to a net debt of 2.052 billion on the 31st of March, 2026, equivalent to a net leverage, as I said earlier, of 2.3 tons. And that's it on our side.

Thank you, Pareto. I think we can open up for the question.

Thank you. This is the Coruscant Conference operator. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and 1 on their touch-tone telephone. To remove yourself from the question queue, please press star and 2. We kindly ask to use handsets when asking questions. Anyone who has a question may press star and 1 at this time. That's star and 1. and one. We will pause momentarily as callers join the queue. The first question is from Ben Shelley with UBS. Please go ahead.

Hi, good morning guys and thanks for taking my questions. I've got two please. First, I hear you on the opening remarks, but could you expand a bit more on EBITDA margins in the quarter? specifically online EBITDA margins, any colour on the drivers there would be much appreciated. And then my second question on online bet growth of 15%. Could you talk about exactly what's behind that, particularly in eSports, where I don't think we've seen double-digit volume growth for some time? Thank you.

Hi, surely on the EBITDA margin in online, it's 57.5% this quarter. Q1 has been a good quarter in terms of volumes, so that is one factor that contributes to the favorable margins. And also we are seeing the full impact now of the synergies, Q1 26 versus Q1 25. of the synergies that we've realized for PwO. So these are the main drivers. So in terms of back growth in sports, we have seen, first of all, we're also comparing two periods with different payouts, Q1 was very, favorable very favorable to us and this Q126 was very unfavorable to us so there is some payout dynamic also that impacts the bed growth but I would say that you know we we have seen this continued growth since the beginning of the year and there's no no real other reason than some of the payout dynamics but we continue to see to continue to believe that this segment in aggregate will continue to grow in the mid-term at around 8%.

Thanks, guys.

The next question comes from Estelle Weingraud with JP Morgan. Please go ahead.

Hi, good morning, and thanks for taking my question. Just again on the online margins, you mentioned in the past the level in the mid-50s would make sense longer term. Is it still the case, or should we be looking at something a bit higher, high 50s or something? And I have another question on the PWO market share evolution. May I ask, why is iSports lagging the sports franchise in terms of the recovery versus pre-migration level? Please, thank you.

Awesome. I can take both. So on the online margin, we had one quarter of good margins. I would still say that we're in the mid-50s. Maybe in the mid-term we're a bit at the high end of the mid-50s. So we have a scope definitely to potentially do a little bit better than that. But anyway, let's see how things progress also over the course of the year. On the market share, Planet is one of our most omni-channel brands of the whole portfolio. And as you know, the shift between online and retail is much more between channels is much more permeable. And therefore the demand has moved in the past few quarters more on the retail side and on the online side. But it happens in particularly omni-channel, especially for highly omni-channel brands. We've continued to see this as well at the beginning of this year where retail was very, very strong and online was doing well but not as well as retail. We might see a reversal of this going forward. We'll see. But just as a reminder, As you already know, Estelle, it doesn't really matter to us from a profitability standpoint because when GGR moves from retail to online and vice versa, the contribution margin is very, very similar. So we're quite indifferent to this shift.

Thank you.

The next question comes from Fabio Pavan with Mediobanca. Please go ahead.

Yes, hi, good morning. Thank you for taking my question. I have one on your decision to update full year guidance. Given your prudent approach, I think this is probably the best news we have today. I was wondering if this is mainly driven by stronger than expected market dynamics. or higher increasing market share better margins or mix of these three elements thank you

Thanks Fabio. It's really a combination of all these factors. I'd say that volumes have been extremely strong in this first quarter and we're seeing continued growth after that. That gave us, it's definitely one of the elements that gave us confidence to put us at the high end of the guidance. The other element more on the cost side is We see some impact also from the closure of the Serbian branch, which has contributed from a cost standpoint to... the range of the, increase the position itself at the end of the guidance. I think these are the main, I think these are the main drivers, but I would say that probably one of the determining factors has been the very strong market growth.

Thank you. The next question is from Clark Lampen with BTIG. Please go ahead.

Thanks very much. I have two quick ones, if I may. On the online margin trajectory over the balance of the year, just curious if you could share any perspective around the phasing and, I guess, sort of timeline for margin improvement over the balance of the year. Just curious if there are either comparison headwinds that we should be aware of in the 25 timeframe or any lumpiness. on the network side or with fixed costs this year, maybe beyond, I guess, what you just mentioned with Serbia. And then another, I guess, sort of clarification with volume growth over the balance of the year. I think if I heard you right before, Lawrence, in the first answer, you mentioned that we should think about 8% over the balance of the year. Is that the right way of thinking about the embedded growth assumptions for the online business? And if so, is there anything meaningful factored in in either 2Q or 3Q for World Cup tailwinds? Thanks a lot.

Hey, Clark. So on the online margin, if you look at the evolution over the quarters, obviously assuming that all else being equal, Q1 and Q4 are the strongest quarters of the year and Q2 and Q3 tend to be the weakest quarters of the year. So you have a seasonality dimension to take into account. The second thing I'd say is that because in Q1 you were comparing Q126 where you have the full run rate effect of the synergies with Q125 where we were still in the process of implementing synergies, there's an element there that compares favorably when you compare the two quarters. in terms of volume growth 8% is our sort of mid-term view of the overall sports segment including retail and online and this year obviously we have our projections which is what is ultimately reflected in the guidance but we do have some tailwind from the World Cup that helps as well

Thank you.

The next question is from Domenico Gilotti of Equita. Please go ahead.

Good morning. Two questions. One is on the synergies. I would try to understand if... We have to assume that the Q1 is at full run rate because you are mentioning the Serbian branch closure, so I'm trying to understand if it was already driving results in Q1 or something that will be left in case how much we can expect from this action. And second, on the current trading, you made reference to a very supportive trend also beyond Q1. I haven't seen data so far, so if you can share a little bit what's going on.

Yeah, on the Serbian part, I'd say that it already reflects, it's all run-rated. I should just assume that it's already run-rated in Q1. And for the second question, the... We have to wait for AGI-MEC data that comes out, but there's nothing surprising in the information. I think we'll continue to see very solid volume growth throughout April and very encouraging results already in May.

Okay, thank you.

The next question comes from Praveen Gondail with Barclays. Please go ahead.

Hello. Good morning. Thanks for taking my questions. Firstly, can you chat about the gaming franchisee EBITDA margins drivers this year? I mean, EBITDA margins were really strong in Q1 this year. What are your outlook for the rest of the year from here? And then secondly, any update on retail transition tender you have to share? Thank you.

Take the first one. So the gaming franchise, it's two impacts. One is the impact of the distribution sourcing that improves our margins. As you know, we've continued to carry out that activity throughout 25 and then early 26. So you see the benefit of that. But there's also an element of timing of costs. You know, when you budget for the year, some costs may move between quarters, and this quarter has been a bit lighter on costs. So you should assume that on the margin level, we'll continue to see margin levels between 23% and 24%.

Yeah, I'll take the one on the retail concession. No updates compared to last time. As you know, there is a very solid framework which has been prepared by the regulator. But it's very hard to say what's going to be the... if it's going to be approved and when it's going to be approved as, you know, you need the agreement with the regions in the end. But, you know, I think there's – everybody's highly committed to that. But, you know, they have to make forecasts. What we can say is basically two things. It's very robust, balanced – and constructive framework, as you all know. And second point, you'll need in any case time to implement that and to execute upon that because really it's a complicated process, so it takes time. But the framework is there and it's very good. Thank you.

The next question comes from Chiara Pampurini with Intermonte. Please go ahead.

Thank you. Good morning. I got a question about bolt-on acquisition. You said the proceeds of new bonds issued are also for bolt-on M&A. So my question is if you have selected some targets, are you seeing some targets other than big game? And about big game, if you can share with us the market share gain you expect from this acquisition and if the operation was similar to that of SportsVet or had another structure. Thank you.

Yeah. I mean, when we talk about bolt-ons, we have an active pipeline that we continue to work on across different segments. So we look at gaming franchise, sports franchise, as well as online. So that has not changed in the sense that, as you can imagine, we won't have capacity to buy games. 350 million of bolt-ons. We're talking about tens of millions that we can actually implement in maintaining price discipline. So this is in continuity with the bolt-on activity that we've been carrying out for the last two to three, the last few years, sorry. With regards to BGAME, so it's around 0.7% of market share.

Thanks.

Thank you. The next question is from Andrea Bonfa of Banca Acros. Please go ahead.

Hello, good afternoon to everybody. I got just one clarification on your EBITDA guidance. Does it implicitly assume that in order to reach the top part of the EBITDA that you count on a payout which will be lower than you've been budgeting for in order to compensate that you want a negative payout or you're counting more on the condominium side on some lower cost side. Thank you very much.

Hi, this is a combination of both really. I would say we have faster top-line growth that puts us at the high end of the guidance, as we said earlier, and also some better cost efficiencies as well as we're reaping some of the benefits of some operating leverage as well.

Okay, thank you very much.

The next question is from Richard Stuber of Deutsche Bank. Please go ahead.

Thank you. Good morning. Just two for me. First, just a clarification again on your guidance. I think you've guided to the top of the EBITDA range of 940 to 980. Is it fair to assume that you're also guiding to the top end of your revenue range as well, the 2390 to 2460 range? And the second question is on the share buyback. I think you did 56 million in the first quarter, so you're guiding towards about 700 over the next two years. Could you give us some guidance in terms of how quickly that will ramp up, any guidance in terms of what sort of buyback you expect to do in the next few quarters? Thank you.

Sure. We're comfortable on the EBITDA guidance at the high end. On the revenue side, we'll see. It depends on ultimately where we'll end up because at the EBITDA, you have the confluence of both revenue growth as well as operating leverage and cost efficiencies. So for now, we just maintain the high end of EBITDA guidance and not of revenue guidance. And for the buyback, we will do less than half this year and more than half next year.

Great. Thank you.

The next question is from Andrew Tom with Rothschild & Co. Redburn. Please go ahead.

Hi, good morning. Thanks for taking my question. You included sport bet and B game in your market share statistics. Can I just clarify whether those are fully consolidated into your revenue and EBITDA? And if not, if you did fully consolidate that, what that would add to your revenue and EBITDA growth? Thanks.

Sure. So we consolidated them in the market share. We will start consolidating them at some point, but for now they're not in. I'd say that if you look at the impact that it has on our EBITDA growth, at this point I would say it's not material.

Okay, thank you.

Okay, operator, I think we are done with the questions, so we can close the call.

Ladies and gentlemen, thank you for joining. The conference is now over. You may disconnect your telephones. Thank you.