Entain plc (ENT.L) reported strong third-quarter results, exceeding expectations and prompting an upward revision of its 2024 outlook. The company saw significant growth in both U.K. and international markets, with Group Net Gaming Revenue (NGR) rising 6% on a pro forma basis.
Key Takeaways:
• U.K. online business returned to positive year-on-year growth, achieving 6% NGR growth
• Brazil maintained robust momentum with 48% growth in both Q2 and Q3
• BetMGM showed an 18% NGR increase
• Group NGR rose 6% on a pro forma basis, with online NGR growth at 9%
• 2024 outlook revised upward, expecting mid-single-digit online NGR growth ex-U.S.
Company Outlook
• Anticipates mid-single-digit growth in online NGR excluding the U.S. for 2024
• EBITDA expected to reach the upper end of the £1,040 million to £1,090 million range
• Forecasts return to year-on-year growth in organic EBITDA in constant currency
• Online EBITDA margins for 2024 expected at the top end of the previously guided range
Bullish Highlights
• Strong performance in U.K. and international markets
• Brazil's continued robust growth
• BetMGM's promising signs with 18% NGR increase
• Australia's growth from 5% in Q2 to 8% in Q3
• Double-digit growth in U.S. iGaming and online sports betting
Bearish Highlights
• Potential tax increases in the U.K. budget
• Anticipated regulatory challenges in Brazil
• Expected decline in Netherlands due to new deposit regulations
• Slowing year-on-year growth starting this quarter
Q&A Highlights
• Caesars (NASDAQ:CZR) reportedly developing single account, single wallet solution for Nevada, launching 2025
• $750 million marketing budget planned for BetMGM player acquisition
• Evaluating consolidation opportunities in the Italian market
• Confidence in Brazil's regulatory progress
• Goal to achieve U.K. market growth across all segments next year
Entain plc reported a strong third-quarter performance, with significant growth in both U.K. and international markets. The company's U.K. online business returned to positive year-on-year growth, achieving 6% NGR growth, driven by improved product offerings and the easing of regulatory impacts from the previous year.
Brazil maintained its robust momentum with 48% growth in both Q2 and Q3, although future growth may moderate due to regulatory changes. BetMGM showed promising signs with an 18% NGR increase, supported by marketing investments and improved player experiences.
Overall, Group NGR rose 6% on a pro forma basis, with online NGR growth at 9%. Based on this strong performance, Entain has revised its 2024 outlook upward. The company now expects mid-single-digit online NGR growth excluding the U.S. and anticipates EBITDA to reach the higher end of the previously guided range of £1,040 million to £1,090 million.
CEO Gavin Isaacs expressed confidence in the company's strategic direction and operational excellence, emphasizing a focus on product improvements and growth in core markets. However, he also addressed concerns regarding potential tax increases in the U.K., warning that punitive measures could harm the industry and job market.
In the U.S. market, both iGaming and online sports betting experienced double-digit growth. The company is focused on maintaining market share in the competitive landscape, particularly during the NFL season. BetMGM's strategy emphasizes achieving both top and bottom-line growth, with a significant marketing budget of $750 million planned for player acquisition.
Looking ahead, Entain expects continued improvement in performance, though year-on-year growth is anticipated to slow starting this quarter. The company remains committed to enhancing core products and player experiences, expressing optimism about future opportunities and stakeholder value.
Full transcript - None (GMVHF) Q3 2024:
Operator: Good morning and welcome to Entain's Q3 Trading Update Call. Today's call is for analysts and investors. For those who have dialled in directly rather than via webcast link, please note that the supporting slides are also available in the results center of Entain's website. I'll now pass to Entain's CEO, Gavin Isaacs to open today's call.
Gavin Isaacs: Thank you. Good morning, everyone and thank you for joining us today. It's great to be speaking to you as Entain's CEO. I'm joined by Rob Wood, our CFO and Deputy CEO and Devina Hobbs, who heads up our Investor Relations. I've met a number of you already and look forward to beating more over the coming months as I settle in and get further stuck in. So let's kick it off. Entain has this clear strategy which since the start of this year, the entire business has been focused on delivering. That is execution focused on driving growth in both, core and U.S. as well as delivering margin improvement. Importantly, we've been making progress and it is bearing fruit. Our business' improving momentum that we've demonstrated in H1 has continued. We delivered a strong Q3 with performance ahead of our expectations. Our U.K. online business returned to positive year-on-year growth sooner than we had expected. Brazil continues to perform strongly and we are excited about the launch of the licensed market early next year. And BetMGM where we are seeing encouraging data and trends following our much improved sports product and greater investment in player acquisition. Underpinning all of this is our product road map delivery, we continue to strive to provide our customers with great products and smooth, simple journeys. So we have made great strides but it is really only the start of our tech improvement journey. So before I pass to Rob to go into detail of Q3, as it's my first interim results, I wanted to start with my initial thoughts and reflections on the business and its many opportunities ahead. I spent a lot of time in my first 7 weeks getting out and about in the business, meeting my colleagues and their teams, walking in a lot of our stores, getting on to our trading flows as well as introducing myself to some of our key shareholders. I've been busy observing, listening and learning. So what have I learned? Entain is a very good business, operating in a highly attractive global industry and is on the path to becoming a great business. We have strong brands and enviably diverse global portfolio with the highest quality of earnings in our industry. Our tech and product are good and improving but we know we need to put a lot of hard work to take them to where they should be and we will. Entain is bursting with talent, ambition and opportunities. The business has already undergone a strategic reset and that strategy is bearing fruit. Part of that included a review of our assets and the strategic alternatives of our -- for our portfolio. Crystalbet has been singled out. It is an attractive asset. And after assessing the market, we have concluded that the business is more valuable to the group remaining as part of our portfolio. We will continue to assess all our portfolio. We will only sell assets at a proper valuation and if it makes strategic sense. Entain is just at the beginning of its journey. There is a long way for us to go. Our number 1 priority is operational excellence, focusing on the product road map and delivering improvements to our player offerings, that's absolutely critical, reinvigorating growth in our core business and getting the execution right with BetMGM. So what does that mean for me? I'll be throwing my full energy into helping drive the business. I'll be relentlessly pursuing those product improvements, breaking down internal silos and barriers and making sure we have the processes and systems to work together better. In short, ensuring our business has what it needs to be a success. What is abundantly clear is the number of opportunities Entain has ahead and those opportunities and our real ability to capture them means this is an incredibly exciting time for me to be joining the business. I look forward to talking to you more on our full year results in March when I'll outline these opportunities more fully. On that note, I'll now hand over to Rob to run through our Q3 performance.
Rob Wood: Thanks, Gavin. Good morning, everyone. As always, all revenue growth numbers that I quote will be in constant currency. So to Q3 trading and I'm pleased to report that Entain's recovery continues. We beat our expectations in Q2 and now we've beaten them again in Q3. Online growth is back to being broadly in line with market growth which, of course, is where we should be but I'm pleased that we've got there sooner than expected. Importantly, we're now delivering growth in each of our must-win markets; Brazil, U.K., U.S. [Technical Difficulty] markets delivered growth. In aggregate, Group NGR was up 6% on a pro forma basis or up 7% pro forma, including our half of BetMGM. Within that, most significantly [Technical Difficulty] estimated expectations with pro forma NGR growth of plus 9%. As context, let's remember the path to getting here for a moment. Following regulatory changes last summer, pro forma online revenue growth fell into decline and Q3 and Q4 last year were both minus 6%. Our recovery started in Q1 with NGR improving from minus 6% to minus 2% and Q2 saw further improvement to flat, excluding the euros or plus 5% including the euros and now Q3 has stepped up to plus 9% growth. So we're back to where we should be in pro forma growth and earlier than expected. Pleasingly, the 9% online growth was primarily volume driven, although there was a year-on-year benefit from sports margin too. The principal region driving the step up to plus 9% is the U.K. which has won from being down 9% in H1 excluding the euros to up 6% in Q3. So let's start the regional review there. With U.K. online NGR at plus 6%, marking a return to growth sooner than we had anticipated. The principal driver of the return to online growth is lapping regulatory measures in the prior year. Now that we've lapped those measures and have now fully implemented the new voluntary code; it means we expect that the year-on-year regulatory drag has now passed. Let me just pause on that for a moment. We expect that the year-on-year drag from regulatory intervention is behind us. To find the last time we posted proper growth in U.K. online, you have to go back to Q2 2021, over 3 years ago. So growth is long overdue. With no regulatory drag, it now means all the new U.K. team's hard work this year on improving the product, improving navigation, improving Bet Builders, site speeds and so on is playing through to NGR. So in addition to active [ph] growth which has continued throughout, we now see NGR growth too as well as product enhancements, I'll also call out the success of our new coin economy across Ladbrokes (LON:LCL) and Coral in the U.K. which is helping to drive strong numbers in gaming. A quick comment on retail now which was down 2% in the U.K. in Q3, down 2% reflects an improving trend through the year and was broadly in line with expectations. The benefit of our new best-in-class Kascada cabinet will be fully felt in Q4 following rollout during Q3. Moving to International now, where online NGR was up 10% year-on-year and retail NGR was flat. Brazil continues to be the headline grabber, where excellent performance carried on into Q3. Following 48% growth in Q2, we saw 48% growth again in Q3. The comps are, however, starting to get harder for Brazil as we now annualize improving metrics this time last year and we have new regulation to grapple with from first of January. So growth from Brazil in 2025 is likely to be much more moderate. As well as Brazil, Australia also performed well in Q3, delivering a second successive quarter of revenue growth this time at plus 8%. We expect that means that the market is improving and we're taking a little bit of share but sports margins also provided a tailwind in the quarter. Italy was a little behind expectation in Q3 with 4% NGR growth as high single-digit volume growth was pulled back by adverse football results. Those adverse football results in Italy also restricted international retail to be only flat NGR despite volume growth. In addition to those 3 largest markets in international, all our main markets delivered online growth which is fantastic to see, particularly pleasing with double-digit growth with the Baltics and Nordics, Georgia, Canada and Spain. Entain CEE had another strong quarter, up 13% year-on-year in online and up 2% and in retail. SuperSport in Croatia delivered impressive double-digit NGR growth again, while STS in Poland saw double-digit volume growth but partially offset by a tough quarter of sports margins. Turning to the U.S. now, where BetMGM's Q3 NGR was up 18% year-on-year. This acceleration of 18% revenue growth following 3% in Q1 and 9% in Q2 is encouraging as we continue to invest in marketing behind our improving product and player experience. Pleasingly, we're seeing further stabilization in BetMGM's sports and gaming market shares. Most recent data for blended market share actually shows an increase to 15% from 13% previously. However, that uplift just reflects seasonality during the quieter sports months. The key message is that we see share stabilization from which to build in future quarters. Gaming continues to be strong with 22% market share and Q3 was another record for gaming NGR. FTDs were up 70% year-on-year, supported by our additional but disciplined marketing investment into customer acquisition and gaming further benefited from improved cross-sell from sports. In sports, although it's early days, we're seeing encouraging momentum as players enjoy our Angstrom enhanced sports betting offering which now covers MLB, NBA, NFL and college foot. Metrics are improving week by week across important KPIs like retention, engagement measures, parlay mix and expected win margin. Similarly, it's very early days but the unlock of Nevada is now complete with full single account single wallet functionality for players visiting Vegas. The early signs are encouraging with the doubling of FTDs year-on-year from Nevada and a significant portion of those continuing to bet after returning to their home state. We have been clear that 2024 is a year of investment for BetMGM and we're cautiously optimistic that early indicators show we're gaining momentum. Lastly, from me, our updated outlook for 2024. As a result of stronger-than-expected Q3 performance and our increased confidence for the balance of the year, we now expect online NGR ex-U.S. to grow mid-single digits in pro forma constant currency. That's an upgrade from our previous low single-digit positive from August which itself was an upgrade from the low single-digit negative guidance we gave back in March of this year. What does that mean for group EBITDA? It means we expect EBITDA to land towards the top end of our previously guided range of £1,040 million to £1,090 million which is a little ahead of where consensus currently sits today. And pleasingly, for the first time this year, it means we now expect group organic EBITDA to return to year-on-year growth this year in constant currency which is, of course, gain for future years as well. In summary from me, we're pleased with Q3, in particular, with both online ex-U.S. and with the U.S. as well. Momentum is returning and that gives us confidence to increase expectations for the full year. With that, I'll hand back to Gavin.
Gavin Isaacs: Thanks, Rob. Before we open the Q&A, given the recent headlines, I wanted to comment on the speculation that our sector will be signaled out for excessive tax increases in the forthcoming U.K. budget. Until the budget is announced, it's all conjecture. We continue to highlight to the treasury that a punitive tax increases would have a materially detrimental impact on the economic contribution of the wider industry, putting at risk thousands of jobs, funding for sports and racing as well as benefiting the black market. With that, I'll hand the call over to our operator and who will open lines up for Q&A. Thank you.
Operator: [Operator Instructions] Our first question comes from Ed Young with Morgan Stanley (NYSE:MS).
Ed Young: I've got 3 questions, if that's okay. The first is for Gavin, congratulations. This feels like this is a business where the course has been set by your predecessor who is now Chair and is showing organic growth and extraordinary performing in the U.K. and Brazil which are the first 2 sort of big areas of focus. And it sounds from your commentary there that you think the strategy is right. So how much of your focus is internally on the online and retail businesses ex-U.S.? And how much of it is towards the U.S.? And if you could perhaps comment at this stage, what's the biggest single thing do you think, if anything, that needs to change? The second question is on Crystalbet. Georgia which I -- sorry, It should be one at a time or...
Gavin Isaacs: No, hit them all. I'll cover them.
Ed Young: Sure, okay. Second one, Crystalbet Georgia, I guess it's back to being core again. Was there any change in your attitude towards price or the impetus to sell that business? Or was there any change in demand given the political context there or any other factors? And are you open-minded about the sale of other assets providing the valuation was correct? And then finally, do you have any view on U.K. market growth in the quarter and where you sit versus the competition? I'd just note that Rank had very strong U.K. numbers this morning. So I was wondering if your bingo and soft gaming brands were outperformers within your mix.
Gavin Isaacs: Okay. Thanks, Ed. I'll take the first 2. I'll ask Rob to answer the last. Okay. So the course was set by Stella which came in -- which was to focus on organic growth, particularly the U.K. and Brazil. And for this year, I think that's exactly the right thing to do. From what I've seen so far, continuous improvement and working with businesses and getting them better performing is the key to our success in the short term. And you asked me how much I'm focused U.S. versus ex-U.S. The core central platform covers both or many of our markets -- most of our markets in fact. So my focus has really been looking at that core platform and supporting Satty [ph] and his teams to take us into the next -- into the future with a much more efficient, quicker platform which enables our teams in the field, ultimately to have more control over their front ends and also over their local trading which is the goal and some progress has been made on that and it continues to be made on that but that's been my focus. So it really does cover both U.S. and ex-U.S. Our biggest change or biggest -- what was your actual part of -- what was the biggest concern or change or focus? It's definitely on the product. I've been working through that and trying to understand the exact product plan, just like other companies that I've been involved with in the past, getting the product right is the key to ultimate success. We must improve the player interface, the player journey. As we do that, we'll improve -- with the strength of our brands, our people and our offerings, we will continue to improve our performance and that's the way I see it. There will be some fine-tuning for next year's strategy and I hope to release that to our team internally towards the end of this year. And I can assure you the continuous focus -- we will focus on our product and continuous improvement will be part of that. In relation to Crystalbet, frankly, for what we were seeing as the offers, we just decided that it was not worth selling at those prices and we decided to keep it. It's a good performing business and it's very low maintenance. It is on its own platform. If in the future, people come along with offers for parts of our portfolio, we will assess those, we will not give them away. If there are proper valuations and they strategically make sense for us, we will contemplate dispositions. But right now, our main focus is getting the organic growth firing up. With that, Rob, the U.K. market growth.
Rob Wood: Yes. Let me take that. And let me just reiterate as well on Crystalbet. We're up double digits year-to-date. So it's performing well. To the U.K., so to answer your question directly, it is no, I don't have a feel for what market growth has been in Q3 yet. We'll wait to see all the operators report their numbers. It's also true to say there are so many different drivers impacting the U.K. business right now. It's hard to unpick them all. So if market growth is one, lapping prior year measures, as I spoke about, is a big one. We now have the voluntary code which is benefiting customer journeys in our own business but it's also leading to a leveling the fan filled [ph] across the marketplace. Plus, our teams have been working incredibly hard on app enhancements, app speed, things like the coin economy that I mentioned, product improvements, Bet Builder and so on. To unpick all of that is really tough. My expectation at least is that the market in the U.K. continues to show at least mid-single digits of growth and we'd expect that to continue into next year as well.
Operator: We'll now turn to Monique Pollard with Citigroup.
Monique Pollard: 3 questions from me as well, if I can. The first question is just about the sports margins in the quarter. Obviously, the online sports margins were a benefit, up 40 basis points but the retail were down 50 basis points, particularly and weaker in International CEE. Just trying to understand the difference in the dynamics the sports margins online and retail. Why that is? Is it mix effect and the sort of weighting of, I don't know, for instance, in the U.K. racing versus footfall, retail, online or something else going on there in terms of the margins? The second question is obviously Nevada, the single app single wallet. As you say, it's very early days. So not expecting anything concrete. But I just wondered if you could give us a sense of the potential upside from this. So whether it's number of customers that you have going and you talked about there and then going back to any sort of sense of scale of the opportunity from that Nevada single app single wallet would be super useful for some context. And then Brazil, obviously, another quarter now of 48% constant currency growth. I understand the point that the comps get harder as we go and you've got the regulatory overhang. But just if you could call out some wins that you've had in that market this quarter and last quarter in particular, would be great.
Gavin Isaacs: I'll let Rob take the first question about sports margin.
Rob Wood: Okay. Let me do that now. So the answer is geographic mix. So the most markets for online were up year-on-year in the quarter but there were some that were down. The ones that were down included Italy, Belgium and Poland, all of which have retail estates; so that's the geographic mix that's driving retail down. Also worth noting same point but on the positive side, Australia was the strongest margin year-on-year and that's online of course. So the answer to the question is geographic mix.
Gavin Isaacs: Yes. In relation to Nevada signal account single wallet, I don't think we can give you specific numbers and information you're looking for. But you can think a little bit more generally that the strong point for MGM's alone is Nevada. And you know, so when players come in and they [indiscernible], open an account and take that account with them back to the markets [Technical Difficulty] benefit for us. One of the things that we were -- the key tenets of the whole original proposal; so we're excited by the opportunity to put it that way. For Brazil...
Rob Wood: Let me do that. So we've heard a lot from Sameer over the last couple of results presentations on all the changes being made. And really, it's the combination of all these things that's driving the turnaround. Nothing new, particularly in Q3. But just as a reminder for everyone new to the story, firstly and perhaps most importantly, we have a brand-new team in place on the ground in Brazil which we couldn't say 12 months ago and that's having no doubt a huge impact. But also, you've heard Sameer talk about things like sourcing payments out as in withdrawals, improving content and making sure we have popular local games available at the aviator game [ph]. The front end has improved significantly, benefiting from BetMGM's developments. We've refreshed the brand. We have 365 scores which is driving about 1/3 of the FTDs and is, therefore, obviously a significant contributor to the growth as well. So you add all those things together, that's what's driving the turnaround. And we expect the numbers to continue to improve but on a year-on-year basis, of course, the growth starts to slow from this quarter on.
Monique Pollard: Great. And just coming back to Nevada then, one follow-up. Obviously, the main other operator that could look to do this sort of single app single wallet would be Caesars, do you see them coming with something like this relatively soon? Or do you think you've got a decent period of time where it would just be you with that ability to offer that single app single wallet in Nevada.
Rob Wood: I'll take that, Monique. Last I heard Caesars are working on single account single wallet and it was due in 2025 but I haven't seen an update for a little while.
Operator: We now turn to Estelle Weingrod with JPMorgan (NYSE:JPM).
Estelle Weingrod: I just have 3 questions as well, please. I mean I've got the first one on Australia which contributed nicely to your good performance this quarter. Could you provide more color on this one as I want to understand a bit better the key underlying drivers. Also one on Brazil again, does it make sense for us to assume further investment there as it legalizes in January and as some of -- some more competitors might decide to accelerate investment in player acquisition? And just a last one on the U.K. I mean, I know, Rob, you mentioned it's difficult to strip out all the comps there. Any way you can help us understanding the impact from the lapping of prior year regulatory implementations? Just want to understand a bit better what the underlying performance is. Also how long are these -- is it related to that lapping going forward? I guess up until Q2 -- yes, Q2 next year.
Gavin Isaacs: Well, Australia, Rob, do you want to? I think it's...
Rob Wood: Yes. I'll take that. So we need to wait, of course, to see our competitor numbers. But we know for us that we've gone from plus 5% in Q2 to plus 8% in Q3. My sense is the market is improving and we've annualized through things like BetStop which had an impact from last summer. And our expectation is we've probably taken a little bit of share over the last couple of quarters. But we'll see from our [indiscernible] there's been a huge amount of work on things like improving pricing, generosity to drive improved net win margin, refocusing on the customer profile and that's having an impact on margin, albeit sacrificing some handle as a consequence of that. But as I said in my opening remarks, we did obviously see favorable results, we think, in Q3 as well. So there's likely to be a little bit of margin benefit playing through from that. Brazil, so to talk about Brazil now, further investments. So we are hitting the budget season right now. So we're looking at what the right level of marketing budget should be and no doubt, it will be up on 2024. You mentioned new entrants. We do expect 1 or 2 material new entrants or increased marketing budgets from existing larger players. That said, there will be a long tail of exits from the market as well. Just really hard to quantify what the net impact of that is because there's no existing regulation, there's no record of how much of the market the long tail has. So we'll wait to see. But clearly, Brazil is a really important market for us. The paybacks are strong in Brazil and that's led to us increasing marketing investment this year as well. So it's a market we want to play in and be successful in. On to the U.K. now. To quantify lapping the retail [ph], my estimation over the last 2 or 3 years is it costs us around 10 percentage points. That's now washing through. So we're back in line with market growth. Your point is correct, around H1 of next year, we'll have slightly softer comparatives. But the real H1 versus H2 noise came in 2023. So just be slightly careful about that. But yes, it's the first half of next year. And before the voluntary code was implemented then it should be slightly better in second half of next year. But overall, the drag is gone and therefore, we've got an opportunity to at least be back in line with market growth and perhaps even outperform a little bit.
Operator: We'll now turn to David Brohan with Goodbody.
David Brohan: 3 questions from me. Firstly, would you be able to provide the STS NGR growth number? I think, Rob, you said it was negative. But just if you could provide that number, it would be really helpful. And then 2 questions on BetMGM. Firstly, could you give any color on the drivers of growth between OSB and iGaming; and you've adjusted kind of at very high-level terms. And then secondly, any color on how promotional intensity has developed over the 3 quarters year-to-date given the trajectory of NGR growth over the year?
Davina Hobbs: Gavin, do you want to start?
Gavin Isaacs: Yes, I want to start with the STS.
Rob Wood: Yes, let me do that. So we were up 4% in Poland in Q3. Hanedo [ph] was much stronger, Hanedo [ph] was up 15%, I think -- remember, there's no gaming at this stage anyway. No gaming in Poland; so it's all about sports, handled at 15%, but adverse margins which is almost entirely football driven, brought it back to plus 4%. I can talk a little bit about the U.S. between iGaming and OSB were both up good double digits in Q3, particularly OSB that had a significantly stronger, some favorable margin tailwinds in September, albeit August was soft with the baseball results going against us. So not much of a margin story across the full quarter. As we look forward, yes, we do expect double-digit growth on both sides and that's the aim. In terms of promotional intensity, nothing is really standing out so far with the new season. I would say it's much more of the same. As people are observing the market, we know, we're down to really just a handful of operators who are really fighting heart for OSB player acquisition; so that's helpful. And obviously, now that we have Angstrom enhanced markets across all of our main and the main for U.S. sports, really pleasing to see things like parlay mix tick up, theoretical GGR margin tick up week by week. Our engagement is improving. So things like active player days are up in both gaming and sports, bets per active is up double digits in sports which is -- we're really pleased with them and potentially actual [ph] effect playing through there. Parlay mix is up 1 or 2 points and I mentioned cross-sell earlier. So pleased with the metrics that we're seeing and we want to see a carry on.
Operator: We now turn to Joe Thomas from HSBC.
Joe Thomas: Yes, my questions, please. First thing, just on retail, down 2% despite the new covenants being rolled out. I think you said, Rob, that it's getting -- I think you said it's getting better. Can you just sort of give us an idea about what the exit rate is and what you'd be expecting on the retail outlook? Secondly, U.S. market share. You were sort of quite keen to downplay that as being -- the improvement as being a result of seasonality. Just wondering if you can give us any anecdotes on the early part of the NFL season and what's your expectations are generally on market share, I know that you're spending more on marketing and improved the product mix. On Australia -- back on Australia, are there any different trends in sports versus racing? I think you've called margin in past and it would just be quite helpful to that. Thank you very much.
Rob Wood: So we've seen sort of sequential quarterly improvements in the year-on-year in U.K. retail. First, it was a little bit soggy but we had that reported back across the market; October is better, so nothing to complaint. And [Technical Difficulty] we're seeing the gap [ph] growth, i.e., the growth that those shops are seeing relative to the control group is playing through just as expected. So we're pleased with that but we don't get full benefit of that until we to Q4. So optimistic that Q4 see a little bit of an improvement relative to Q3. U.S., do you want to do that Gavin or should I do that?
Gavin Isaacs: Well, I think the market shares, I mean, from what we're seeing in the NFL season, they're about the same. We're not losing which is the key and the whole idea for this season was to get better performance, get our Angstrom, Ala engines been out there working. They seem to be -- they're holding up. And over time now as we can build upon that success, we can improve upon the player interface. We can improve on the player experience, begin to use some of the strength of our brands over there. So I think we're quietly encouraged by the current performance.
Rob Wood: I think that's right. And just to repeat, I know I made a point around the seasonality but it is material; it does move the dot [ph]. So I don't want people to take our 15% and think that we're on the upward trajectory; that's not the case, not yet but we do have stability. And that's the most -- that's step one; just holding market share after clearly a long period of seeing it slip away. So we can hold market share; and if we stay at 13%, 14%, 15% in the world's largest market with the most growth [indiscernible], that's market is quite right. That's a good starting point; and the step one is all about stabilization, and that's the key message.
Joe Thomas: And the Australian difference between the sports and racing?
Rob Wood: Yes, nothing really to pull back. I think we're not the operator who's consistently pointing out the difference between the two. We are mostly racing.
Operator: We now turn to Jack Cummings with Berenberg.
Jack Cummings: Two questions, please. Rob, I think you mentioned parlay mix was up by 1 or 2 points. But could you maybe just add a little bit of color as to how Angstrom is driving the hold rates since the product have been rolled out? And then secondly, just on the Netherlands. I think it was down 13% in half 1. Was that back in growth in Q3? And how do you think about the Netherlands going forward? Is it still a core market for you?
Gavin Isaacs: I'll let Rob take both those.
Rob Wood: Yes. Let's start with the Netherlands, core market, probably a bit of a stretch. It's about 3% of partly mix [ph]. So it was actually in growth in Q3, probably surprised us as well. The key story there is annualizing early introduction of lower player deposits from the prior summer. So therefore, a drag that we saw in the second half of last year, first half of this year, washing out. But let's be clear, though, the new changes which saw a further lowering of deposit limits kicked in on the first of October. So therefore, we fully expect Q4 and indeed, the next 12 months to see NGR decline in the Netherlands. Onto parlay mix and the benefit of Angstrom, so the upward trend it's being delivered by across many levels and things like the increased availability of bets, the increased combined ability of bets, the ability to build parlays from anywhere in the product which you couldn't do before. These are all reasons why your parlay mix, especially same game parlay and same game parlay plus are going up and more bets per active, more legs per bet that all leads to higher theoretical GGR margin as well. But I would stress is we're seeing sequential improvement but there's a way to go. And I'm sure when Adam and Gary next present in Q1, they'll share more trends and more data for you on that.
Operator: We now turn to Ben Shelley with UBS.
Benjamin Shelley: Congratulations on the new gig, Gavin [ph]. Three questions from me, if I may. One, how do you view BetMGM profitability into next year? And what will you prioritize between top line and bottom line? Two, in your Q3 deck last year, you spoke to medium-term 7% growth rate in online, is this what your medium-term online margin guidance is anchored to? And three, could you talk a bit about consolidation in the Italian market? Would you view yourselves more of a seller or a natural buyer of assets in this country?
Gavin Isaacs: All right. Well, thanks, Ben. BetMGM profitability going forward. I think the strategy for BetMGM is a bit like the strategy that I've sort of started telling people internally which is this year, we want to make our numbers. Next year, we will make market growth and make those numbers which will be a bit -- a much bigger stretch that we are doing at the moment. And then we want to start really growing. So from a profitability perspective, both top and bottom line, I would like to see them grow in the BetMGM side. Rob, is there any other aspect of that? I mean...
Rob Wood: Yes, a reminder of how we thought about it at the interims. So it's worth recognizing that this year, we give or take plan to spend around $750 million in new player acquisition. And therefore, on an underlying basis, around $500 million EBITDA positive this year. The point of saying that is the key question as to what EBITDA will be next year, it depends entirely on what we do with that $750 million. Does it go up? Does it go down? And whether it goes up or down, and how much -- what that number is depends on the returns that we're seeing on marketing. And all the while that those metrics are improving that I mentioned earlier, leading to improved player values, that means that the payback periods are improving and that might encourage us to invest more. So, I think the sure answer is too early to say. But just to give you the comment, it's really that $750 million that will dictate what BetMGM profitability will be next year.
Gavin Isaacs: And obviously, we're working on [Technical Difficulty] more effectively and efficiently; that's a huge focus for the business.
Rob Wood: And in terms of medium-term outlook for ex-U.S. markets. So you're right, 7% was the expected [Technical Difficulty] just the one watch out as you're thinking about 2025 is to remember that we'll be lapping a year that has Brazil regulation is likely to lead to more moderate growth there. So perhaps slightly down from 7% in 2025 but nonetheless, the medium-term trajectory that still remains our expectation.
Gavin Isaacs: And so when it comes to Italy, obviously, it's a very strong market. And we have a strong presence there. The consolidation has been that the first and second players certainly pulled away in size from us. I think we're currently in line with our peers in relation to growth. It's something that we're definitely looking at. I can't tell you right now whether we're a buyer or a seller but as I said, it's an important market and we have to assess that right now which is what we're doing.
Rob Wood: And perhaps the near-term focus is the new licensing regime which is still scheduled to come in Q4 which should see an opportunity for a little bit of consolidation of the longer tail. We expect the number of concessionaires to reduce probably by half and the number of websites will be down very significantly. So that might lead to a little bit of share consolidation and share gain opportunity for all of the larger players.
Operator: [Operator Instructions] Our next question comes from Simon Davies with Deutsche Bank (ETR:DBKGn).
Simon Davies: Just one last for me. On Brazil, there seems to be a lot more negative rhetoric coming out of -- from politicians and I guess there's a commission investigating potential financial impacts from the proposed setting regime. Do you have any concerns? Are there going to be any delays in terms of the introduction of regulation or indeed that it could get politically [ph]?
Gavin Isaacs: We don't think that it's going to get to it politically and we don't expect there to be a delay but we do -- we encourage regulation. We are fully regulated that we want to be and that's what we operate best in. And so I think that would be something that they're looking at and may end up being an advantage to us.
Rob Wood: And some of the measures that are being looked at, we will see sensible from our perspective, panning of credit cards, ease of social benefits, advertising or ensuring that advertising has a sufficient allocation towards responsible gambling, messaging and all those things seem relatively straightforward.
Operator: Our final question comes from James Rowland Clark with Barclays (LON:BARC).
James Rowland Clark: Two questions, please, just online. You mentioned that you think you're probably growing in line with the market at mid-single digits. But with iGaming, you're obviously outperforming the market and wagering flat growth looks like it's probably underperforming. So I just wondered if you could just outline your confidence about whether the wagering business that could return to in line with the market and by when you think that can happen? And then secondly, just on sort of looking to next year, your U.K. and Brazil businesses have returned to faster -- an earlier growth than you expected in the second half. So you're carrying a bigger business into next year. Any comments you have about online profitability into 2025?
Gavin Isaacs: Just to be clear, James, you're talking about the U.K. in the first comments?
James Rowland Clark: Yes, absolutely. U.K.
Gavin Isaacs: I am not sure what else we can say about the retail and the iGaming.
Rob Wood: Perhaps just on profitability. So for online EBITDA margin, probably the key measure here, we do now expect 2024 to be a bit towards the top end of the guided range from back in March and that's partly because the business is larger, of course, with the NGR outperformance. When I think ahead to online EBITDA margins next year, we'll guide properly in March. But just to give you a flavor, I would expect something broadly similar year-on-year on the basis that whilst we do have the introduction of Brazil regulation and therefore, the new taxes, we do have roadmap benefits playing through as well as an expectation of operating leverage benefiting margin as well. So if that helps with your question, we'd expect profitability to set similar levels of online EBITDA margin to continue into next year despite the introduction of Brazil taxes.
James Rowland Clark: And I get to my first question, it was really on the online store setting business in the U.K. about when you think it can grow back in line with the market?
Gavin Isaacs: Well, I think my goal for the company is to get back to growth in market -- market growth across the board next year. Whether or not that's achievable; I mean, we're doing the budgeting like -- coming up in 2 weeks but that's sort of a guideline we would like to walk towards.
Rob Wood: Yes. And let's remember, the U.K. product sports product, in particular, is improving all the time but there's a way to go. There was a significant low. As you all know, this is a new news of product development for us, U.K. sports business whilst the U.S. was the priority across '21, '22, '23; that's starting to be rebalanced now. And you heard from Satty [ph] in March, again in August around the improvements we're making to the U.K. but there's a lot more to do. So, can we get back into market level of growth on sports as well as do well in gaming? Of course, that's the aim but perhaps we need a little longer to get brought up to parity.
Operator: This concludes our Q&A. I'll now hand back to Gavin Isaacs, CEO, for any final remarks.
Gavin Isaacs: Well, thank you and thank you all for listening and for your questions. I hope the next time around, I'm a lot more knowledgeable about the business and then help Rob out some of the final details. We really appreciate your time and your interest. I think that the key message is across the business, we are starting to make good progress in improving our performance, our operational performance but this is just the beginning. We have a long way to go but we are focused. We have plans in place to improve our core products, we're executing towards those plans. Alongside of them, we have plans in place to improve our player interfaces and our player journeys and that's going to be very exciting. So, I'm certainly excited about the opportunities ahead. I'm also very confident in the continued delivery of our plan and that will drive value for all our stakeholders. So, I appreciate you making time for us today. If you have any other questions, please get in touch with the IR team. Thank you. And for those I haven't met, I look forward to meeting you, and stay well, and goodbye. Thank you.
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