Lottomatica Group Spa

Good morning, this is the course call conference operator. Welcome, and thank you for joining the Lottomatica Group's H1-2026 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 Senezi, Head of IR of Lottomatica. Please go ahead, sir.

Thanks, operator, and good morning to everyone. Welcome to Lottomatica Q2 2026 results presentation. I'm here today with our CEO, Guglielmo Angelozzi, and our CFO, Lorenzo Vallanca. Now the floor directly to Guglielmo for the presentation. Guglielmo, please.

Thanks Mirko and good morning to everybody. Let's go up page two of the deck, another very good quarter and another very good semester. We increased EBITDA 14% reported, 17% on a normalized basis in the quarter, which means 10% for the semester on a reported basis recovering chunk of the payout issue that the market had in Q1, and 20% increase on a normalized basis for the entire semester. Even better for the online, of course, which is growing 21% in the semester at a reported level, and 24% for the quarter and 25% at a normalized level. So very strong results in terms of EBITDA. even more so in terms of margins, which increase two points in the semester at group level from 37% to 39%, and mainly driven by the consistent increase in the online profitability from 54% to 58%. Page number three of the presentation. What are the drivers of this growth? The same which we've had in the last 10 years, basically. Strong market growth, 12% in overall online. June peaks at 19%. Of course, very strong iGaming performance, but also sports has been very strong on the bets because the market has suffered in Q1 for the payout. We continue to increase market share when you look at the trend line, both on a year-to-year comparison and on a quarter-to-quarter comparison in iSports, iGaming, and overall online. So let's try to draw a conclusion out of these strong results. A conclusion on the results. There is a consistency of growth in adjusted EBITDA. We have a page four of the presentation. We've been growing every quarter over the same quarter of the previous year, every single quarter in the last 10 years, of course, except during the COVID restrictions. so consistently looks like an appropriate word for this page number five consistency again in results we've consistently grown in margins this company started a little more than 10 years ago with 12 percent margin we have transformed this company in a 39% margin. Mix, efficiencies, you know, all sorts of levers that you can use in this type of cases. And, of course, the online also has been a key driver, not only in terms of mix, but also in terms of internal efficiencies, because the very first profitability of online was 21% back in 2017, and today is 58%. Also, when you look at the latest quarters that you can see on the graph on the right, you can see that notwithstanding the fact that we have consolidated assets with a much lower structure, lower profitability like PWO, And we've offset that. So we've been able to fully integrate these assets. This is the example of PwO, but there are others also within the business model of the group and consistently recover the profitability and bring that to the level of the group. So this was about consistency of results, which has been driven by the consistency of the drivers underlying these results. Page number six, the first driver and the most important of all, of course, is the market. The market, the online market, has been growing consistently in the last 10 years, and after COVID is a pretty stable in the mid double-digit range. At the same time, on a competitive basis, we've been increasing our market share. There have been periods where the market share has been growing faster, others where it has been growing slightly slower, but the trend line is very clear. In a mix of organic growth and M&A, we've gone from a marginal operator to the dominant to the largest operator in the market. This is also true as you see in page number seven in the latest quarters when you reduce the granularity and look at it on a month or quarterly basis, so on a smaller, on a shorter period. You can see, of course, ups and downs, glitches, especially in sports, where you also have the payout, which is impacting the market share depending on the brand and on the business model, but the trend line is also very clear. Page number 8, an update on PwO. It continues to go the direction we've mentioned in the previous quarter. Sport is not only recovered, but is above the previous levels before migration. And we're doing, we also continue to work on the iGaming. The important point is that we've been focusing on a proper balance between market share and growth and profitability. Market share has to be sustainable. We've cleaned up part of our customer base, limiting abuses, optimizing the bonuses, shutting down unprofitable bonuses campaigns. And that's why we basically doubled the companies. The brand is very healthy. has done a good journey from the migration and it's doing double the EBITDA. That's pretty much the story. When we go to the other important trend of these last couple of years, page number nine, the consolidation of the tails, this continues. It continues on an organic basis and it continues because we consolidate some of the smaller operators, but this happens also because we offer a very compelling environment for them to continue to grow as entrepreneurs more than they would do on a stand-alone basis. Last but not least, page number 10, the recap of how this all works. Now, this is all about compounding returns. We have yield of our free cash flow, which if you measure that basically from IPO to today, has been on average 8%. on top of these the company has been growing so the growth rate of these levered free cash flow has been in same period 26% CAG talking about CAG so basically you get an excess of well in excess of 30% of total returns on average CAG in that 30% sorry in that period of time How did we also use that 8%? We gave it back to our shareholders through distributions. Even more than that 8%, you can see the example of the last year. On average, we have generated 8%, but we've given back in the last year more than 10% between dividends and buybacks because we could do more buyback because of the 26% growth, which gave us incremental leverage capacity. Strong compounding returns and use of the returns to provide enhanced distributions to our shareholders. Now I'll leave the floor to Laurence for the second part of the presentation. Thank you.

Thank you, Guglielmo. Moving on to page 12, the Group Financial Highlights. You can see on the left-hand side how revenues have grown plus 5% in the first half. and in Q2, on a reported basis, plus 6% and plus 8% on a normalized basis. On the right-hand side, you see how overall EBITDA has grown plus 10% in the first half, also taking into account, on a reported basis, taking into account the impact of the sports payout. And in Q2, we've grown at plus 14% on a reported basis and plus 17% on a normalized basis with normalized payout. Also, looking at EBITDA margin, it has increased over the group level by almost 2%, by 2 percentage points. And this has been driven by the online, by mixed effect, given online has at higher margin has grown faster than the other two segments. It's the effect of the run rate synergies that we completed last year. And finally, also the effect of the cost efficiencies realized in the first half of this year. On page 13, on the left-hand side, you'll see how online continues to remain our engine of growth, with growth in revenues on a normalized basis of 17%. Sports franchise continues to grow very nicely on a normalized basis of plus 9%. And when you look at it on an adjusted EBITDA basis, you'll see that on a normalized basis, online has grown at plus 27%. and sports franchise at plus 18%, while gaming has been broadly flat. In terms of margins, online is now hovering at 58% in the first half, with sports franchise at around 25.5% and gaming franchise at 24%. We're going on to page 14. On the left-hand side, we can see the total amount of CAPEX spent, both recurring and concession, amounting to €80 million, broadly in line with what we spent last year, at circa 7% of total revenues. And on the right-hand side, operating cash flow, which achieved a growth of plus 12%, slightly higher than the EBITDA growth, given the leverage effect on CAPEX. Look at page 15. You can see the net leverage that has stayed broadly constant at 2.3 turns. And this is, so when you go through the bridge, you start from 2.051 billion of net financial debt as at 31st of March. And you have the, other than adjusted EBITDA, you have a positive effect of the net working capital, then taxes paid of 75 million, CapEx, which include also the one of CAPEX and growth CAPEX including also bolt-ons of 16 million that amount in total to 57. Financial expenses and leases that include also the cost of refinancing that we've done in the second quarter in total of 65 million. We've bought back 58 million euros in shares and paid a dividend of 101 million euros. And then other costs that primarily include the extraordinary items in relation to the closure of the Serbian branch as well as the Bolton minority acquisitions and puts that were exercised in the second quarter. This is in total to achieve a net financial debt of 2.11 billion, taking into account the cash amount of $366 million gets on net financial leverage of 2.3 turns, so in line with Q1. And with that, we've completed the presentation.

Thank you, sir. Would you like to begin the Q&A session?

Yes. Thank you. Okay.

This is the course call conference operator. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. To remove yourself from the question queue, please press star and two. We kindly ask you to use handsets when asking questions. The first question comes from Ed Young of Morgan Stanley.

Good morning. I've got three, if that's okay. The first is on the World Cup. You've not really isolated it during the presentation, but I wonder if you could talk about the impact on the business and where it came versus your expectations for acquisition, player engagement and mix on the business. Second of all, in online, your GGR revenue conversion was noticeably strong in the quarter and perhaps a little bit counterintuitive given the World Cup I just mentioned. can you talk perhaps a little bit about your promotional strategy and more broadly about the competitive intensity in the market that you're seeing and then finally online EBITDA margins obviously stepped up and you mentioned Serbia you've presented it today as this continuous long-term improvement in margins so should we be thinking about this as a new normal level with scope to improve or is this something that could end up being lower in other quarters as you retain flexibility to invest in the business? Just trying to think about the operational gearing and how you think about the target for the in online. Thanks.

Sure. I'll take these. On the World Cup, it's been ultimately in line with expectations. This was also included in the guidance that we've given for the full year. So we The numbers that we've done in the second quarter are pretty bang in line with what we expected. As we said also in other forums, it doesn't really move too much the needle at an EBITDA level, and it was factored in the guidance range. Online GGR I mean in here we've I think we also mentioned it on the slide with Planet we've been we've continued to maintain good discipline in our promotional activity and so we are focused on obviously on growth but also but especially on profitable growth and so this the results that you see reflect also this this approach. Thirdly I think on online margin, I'd say we've probably gone a little bit faster in terms of margin growth than we originally anticipated. This is because a number of things happened in the meantime. I know we've made our structure, let's say, more efficient. I think in terms of guidance, I'd say that probably mid-50s probably won't hold. As we mentioned earlier, we'll be a notch above that. There may be quarters. As you know, there is always some volatility due to payout, so there may be quarters we may be lower on EBITDA margins. But I think we are trending in a direction which is in line with what we're seeing now. So it reflects the... a rebase cost structure that is sustainable in the medium term.

Thank you. Just to come back on the promotional intensity point, it was quite a big step up sequentially. So I understand that the commentary there is around profitable growth, but is that sort of ongoing mindset for here or is there other noise in the quarter that we should be aware of, whether it's tax mix or anything else that could have affected that number?

So when you talk about the numbers, which number are you referring to exactly?

Online GGR to revenue conversion.

Yeah. No, no, no. We have had, if you look at it, remember, we have done also some additional cleanups, as we mentioned, so we are a bit more not more, but we always maintain discipline. We have had a number of cleanups as well during the quarter. So I don't necessarily think that we'll stay at these levels, but it is sort of an indication that we want to remain disciplined on all the promotional activity. Thank you.

Maybe a quick comment, a quick addition, integration to these. These big events are good acquisition tools, as we always said, but you have to distinguish between acquiring clients, which are then there to stay, and acquiring clients that disappear immediately after. You don't necessarily want to deploy a lot of money on the second group, which is about discipline. So that's another... point I'd like to stress.

Okay, thank you both.

The next question comes from Estelle Weinrod of JP Morgan. Hi, good morning.

I've got a couple of questions as well. The first one on the online margin, just to come back to Ed's question. I mean, what are the key drivers of further improvement from here, and how much of that is, like, structural cost efficiency versus operating gearing? and another one on the retail compensation framework. Is it still the case that an agreement could happen in August? And if so, when do you see the earliest cash outflow, please? Thank you.

So I can take the first. I mean, I think, Estelle, we've always been, as you know, a bit cautious always in guiding to further improvements. I think the levels at which we are now is a level we're comfortable comfortable with going forward. But I would not bake in further margin improvements for the time being. Do we have operating leverage? Yes. Are there any further cost efficiencies potentially materializing in the future? Possibly. But if those were to materialize, we'll talk about them when we do them. But I think that we are, I would say, relatively comfortable with the levels we've achieved now.

Okay. Yes, on the retail concessions. Look, you know, it's very hard to say. The reality is that whether you have an agreement or not, basically nothing changes. The outcome is exactly the same in the next two to three years, which I think answers to the second part of your questions, because the reality is that whether you don't have the framework, the agreement, or you have it tomorrow morning, you will need, in any case, to have an extension of the current concessions for a couple of years, maybe three now, depending on how you want to phase it. But that's a bare minimum that you need to go from, that you need to bridge from, from an agreement tomorrow morning and the awarding and so the payment of the of the next concessions so long story short whether you have that tomorrow or you don't have it you know what happens in the next couple of years three years probably is going to be exactly the same just think about the reform of the online you had the law in or was that March 24, and you got the concession in November 25. So for one product, pretty easy, straightforward, like the online, it took 18 months. And these are two, not to say three, because you also have bingos there, complex tenders. and with the involvement of local regulation for the distribution, it's going to take much more than that. So one way or the other, what happens tomorrow and for the next two to three years before you get to the new concession is going to look exactly the same in the two scenarios. Very clear. Thanks. Welcome.

The next question comes from Praveen Gondal of Barclays.

Hello, good morning. Thanks for taking my questions.

Firstly, can you comment on current trading trends into July and whether the momentum has remained broadly consistent with Q2? And then secondly, on the sort of proportion of market share there, which is in online, which is up for grab. Are there any sort of change in your views that what could ultimately come, become available following the sort of concessions here, given the intensity that you have seen in the World Cup and then the progress of BW market share wins here? Thank you.

So I think this current trading July, obviously the numbers haven't come out, but the trends continue to remain solid. So there's nothing to note there. So far, so good. On the market share, your question is, I think from our perspective, the views in terms of what is up for grabs has not changed. So it then remains consistent with what we said in the past. In addition to that, as Guilherme pointed out earlier, we're focused on growth and especially profitable growth. So we will remain disciplined in how we continue to grow.

Thank you.

The next question is from Charlie Moore-Sands of BNP Paribas.

Good morning, Jasmine. Thank you for taking my questions. I have two, please. Firstly, just with respect to the buyback, I saw in the bridge that the spend in the course was only about 58 million down on the acceleration that we saw at the beginning of the year. I just wondered, given where the share price is and the leverage, what your considerations were with respect to the pace of execution of the capital return program. And secondly, just with respect to some of your recent small bolt-ons, B-game and sport bets, can you just remind us now where they sit within your statutory and adjusted revenues EBITDA net income? Thank you.

So I can take them both. On the buyback, the 58 million reflects the fact that we had to stop the buyback for, I think, around three weeks. because we had to wait for the new approval for the approval from the EGM so technically in order to be able to extend the buyback beyond the original limit and to the new limit that we've approved in the latest EGM you have to stop so it's not a sort of conscious slowdown because we want to spend less and this is a The buyback is executed based on an amount that we give to the bank and the bank does it autonomously. But we reiterate that the same message we said in the previous results presentations, which is we are planning to buy back up to 700 million euros this year and next year. from in terms of bolt-ons right now so in the statutory accounts you will not see anything other than an investment so it's an equity investment and but in the adjusted EBITDA we've shown we've added the contribution of SportBet today and it's still I mean it is immaterial to our numbers many thanks

The next question is from Clark Lampin of BTIG.

Thanks for taking the question. Maybe first I wanted to follow up on the question that was asked, I think, sort of two previously around share. If we were to look at the iGaming business, I think you've been running steady in the sort of low 30s, maybe 32% this quarter and last. Was there any impact from the World Cup and players wagering more on competitor platforms or with your sports business more than iGaming this quarter that might have impacted those numbers? Or did you see market-wide that the same trends were fairly uniform for your competitors? And then second question is a little bigger picture. When we think about AI integration and impact to your business, I'm curious, as we look at the back half of the year, Specifically, do you see, you know, just sort of very high level, more opportunity on the revenue side of the business for optimization, or is there more near-term optimization opportunity on the cost side? Thanks very much.

Yeah, hi, Clark. I'll take this. So, well, the pocket of the player is a certain amount, right? and there's a lot of overlap between sports and iGaming, especially in moments where there is occasional gaming, like in these big events. So clearly, you know, if sport flies, iGaming is impacted, and it depends on why sport flies. If sport flies on occasional events and you focus a lot on occasional players, then, you know, clearly that has... that has an impact, but as you could see, which has always happened also in the past, you may have some glitches, but the fundamentals of iGaming growth remain pretty much the same, and so the fundamentals of sports growth in some of retail and online. So short answer in the very short term, yes, because there is a correlation. You will find that mathematically. But it's like basically short-term dynamics which do not alter the trend, which we continue to see exactly the way we have represented it so far. On the second point, which is AI integration, We think that by far the largest impact of this will be on the revenue side. We have a huge number of projects and already active agents that are working on the top line side and get improved release after release. We mentioned several times talking about risk management and bet acceptance, talking about the casino presentation offer and pricing, talking about the communication automation of communication to promotions to players the intensity of the bonuses so much stuff which is related to the top line but clearly across and this is to the business across the entire company there's a lot also around productivity which is also very important and can be very material on the cost side. But I wouldn't say one is long-term, the other is short-term. Also, the agents and the applications on the top line are already up and running. It's not that one revenue is long-term, the other... We're working on both and there are other opportunities will come on the content side from AI, which clearly work both on the cost side, how much you pay the content, how much the content costs to us, and what's the quality of the content, so the top line driven by that content. So there's a long list, but clearly the revenue side is more sexy and potentially larger. That is in a nutshell. We haven't provided a number yet on this topic, because we want to accumulate experience and data points, but this is clearly something relevant, very relevant.

Thank you very much.

I apologize. The next question is from Ben Shelley of UBS.

Hi, I'd like to go back to the online GGR to revenue conversion topic and potentially link it with this theme around AI. Are the tools and infrastructure you have around bonusing, are they improving? Is that sort of a big part of the driver here? Just love to hear more thoughts on that. And then on PwO, can you talk more about the market share developments on the iGaming side? Where is that versus pre-migration levels and how is that progressing? Thank you.

Yeah, on the first point, as I said, we have tools which are up and running, but I would like to get on to the actual impact on that, on that type of on the GGR2 to revenues conversion, because as I said, we want to have a large and consistent set of data points before giving numbers and KPIs. It's already up and running, but I don't think we are at the point yet that we can disclose an impact or give a guidance on that. So I would prefer to confirm that it's there and it's relevant, but not to get into the, early to get into the numbers. So P.W., maybe you want to comment, Lawrence.

Yeah, I mean, PWM has performed extremely well, particularly on the sports side. They're continuing to grow market share, so we're very happy with that. That went definitely beyond expectations. So we've gained 0.2% market share compared to pre-migration levels. In iGaming, this is a journey. We had recovered half of what we had lost. We probably have another half percentage points to recover, so we're still hovering around those levels. Again, when... And we tried sort of to stress this also on the slide, which shows the performance of PwO. We want to continue to grow market share profitably. So we're still on that journey, and we think the potential is there. But again, we'll see how long it takes. But whilst we do it, we care about the bottom line. All right, thanks very much.

The next question is from Domenico Ghilotti of Equica.

Good morning. A few questions. The first is on the Serbian branch restructuring. If you can provide some additional color on, first of all, if you have already booked all the costs in Q2, or you have some additional costs to be booked, and if the contribution, the positive contribution was already, say, fully on stream in the second quarter, if you have additional upside in the next quarters. Second question, well, just a clarification so that the normalized tax rate was a bit higher in the semester. If you can reconfirm the expectation for the full year and next year.

Okay, I can take those two quickly. So, certainly, yes, the restructuring costs have been fully loaded in Q2. And then the numbers are, most of the benefits are already baked in, already baked in EBITDA. With regards to taxation, it's just a matter also of timing for the year. The full year taxation costs are broadly in line with consensus. Okay, thank you. Sure.

The next question is from Chiara Pamporini of Intermonte.

Thank you. Good morning. I had a question. The first one is on the second half of the year. The guidance for the full year, again, implies a bit of growth above 10%. What are the main factors you expect to support growth in the second half of the year? and if you still expect further synergies and efficiencies to come through in the second half of the year from Preview. And the second question is on the one of CAPEX, if you can give us some color on what are the main items that are included in the number of the second quarter. Thank you.

Sure. On the second half of the year, there is, I mean, we There's not really much to say other than our estimates support the fact that we have achieved sort of the upper part of the guidance. So we don't have any other sort of further efficiencies baked in other than what we've already done. If there'll be something, we'll include it. But otherwise, there's There's nothing else in that. It's clear that H2 also is a stronger half than H1, given the seasonality of the business and how strong Q4 is. You have to factor that in as well when you look at the seasonality of the business. In terms of one-off capex, there are predominantly bolt-ons and other investments we have to do in relation to the concession. These are the main items.

Thank you. The next question is from Richard Stuber of Deutsche Bank.

Hi, good morning. Thanks for taking my questions. Two, please, both on cash. The first is, I think you did 385 million of operating free cash flow in the first half. It appears during the presentation now that your priority is largely about shareholder returns. I know you did, what, 110 million share buybacks, 100 million of dividends. But what I'd like to know is a bit more about your appetite for using cash for M&A, particularly outside of Italy, and if you've got any sort of thoughts there and the second question on cash. I think the Q2 did 114 million working capital inflow, which seems quite a lot. Can you just remind us what that relates to and whether that's sustainable and what your guidance for working capital is for the full year? Thank you.

Sure. Listen, so in terms of cash frame and aiming, as I mentioned earlier to Chiara, we have a pipeline of bolt-ons, but they are domestic, where we have Finishing the value accretion deriving from the multiples of which we acquire businesses, which are below where we are trading today. Internationally, we've said a number of times, whilst we look at international opportunities, we're always focused on returns. So far, the best returns have been achieved via buybacks. and so there's no change in view on that. With regards to second question on the working capital, the 114 million, it reflects the seasonality of the business. Q2 tends to be a quarter which has very positive inflow due to change in working capital. that's because of how, because we receive back the 0.5% from the ADM and then we accumulate the gain in taxes of Imposta Unica. This then reverses in Q3, which tends to be negative, and then in Q4 it's broadly flat, slightly negative. If you look at the history of our working capital movements, this is the Q3, Q2, sorry, is the quarter with the strongest cash inflow. And then you see reversals in the other quarters. So it is a seasonality effect.

That'll be clear. Thank you.

Gentlemen, the last question is from Andrea Bonfa of Acros.

Hello, good afternoon. I hope you can hear me. Very quickly, I would like to have, let's say, your general view on the residual market share of Tailwinds operator. Do you expect that to gain market share from those operators is going to be more difficult or it's going to be standard or less difficult than what you already achieved so far? I mean, are these stronger operators, the ones left today, or they are even weaker than the one. You already gained market share. Just if you can share your view with us. Thank you very much.

I think, Andrea, there's a couple of points here. The point is not only acquiring market share, but acquiring quality market share at a sustainable cost. So that's the key point, which is true both if you do that organically and if you do that through deals. When you do that through deals, the main driver is the quality of the counterpart. You want to do a deal with a counterpart which has good quality, so you can do a journey for the long term. When you do that organically, it's mainly about what type of customer base are you acquiring. is that good bets or bad bets and you know what you have to spend for that so it's not I wouldn't say the difference is on the strength of the operator you know I would say that is not the topic the topic is more on the quality of the operator when you want to partner and the quality of the customer base when you want to acquire and the discipline at which you do that. So that's the real driver of the decisions more than the strength of the competitor. This is not about the strength of the competition. This is about what you want to get. I hope this clarifies. Thank you. That's the balance. It's more like an art than a rule, but that's a very important point. I agree with you, but it depends on that. Thank you. Welcome.

Thank you, operator. I think we are done with the question.

Perfect. Thank you, gentlemen. Ladies and gentlemen, the conference is now over, and you may disconnect your telephones.