Banijay Group N.V. (BNJ.AS) Earnings Call Transcript & Summary

Good day, and thank you for standing by. Welcome to the Banijay Group 9 Month 2025 Results Conference Call. [Operator Instructions]. Please be advised that today's conference is being recorded. I would now like to hand the conference over to Marion Heudes, Investor Relations. Madam, please go ahead.

Good evening, and welcome to Banijay Group 2025 First 9 Months Result Webcast. This is Marion Heudes, Investor Relations, On this side, let me draw your assumption to the disclaimer on Slide 2. I also want to remind you that this presentation is now available on the company's website, and the recording of this call will be accessible in the coming days. Your speakers today are Francois Riahi, our CEO; and Sophie Kurinckx-Leclerc, our CFO. First, Francois will present our key financial and business highlights for the first 9 months. Sophie will then cover the results in more detail. These are Francois provides some concluding remarks. We will then open the call for questions. Over to you, Francois.

Thank you, Marion. Good evening, everyone, and thank you for joining us. During the first 9 months of 2025, Manager Group revenue reached EUR 3.2 billion, up 4% year-on-year. In content production and distribution, we delivered a strong slate of scripted shows to global streaming platforms and linear broadcasters and are seeing the usual seasonality of show deliveries weighted towards Q4. In light event production, we delivered a strong growth as we scaled up key immersive experience IP across our global network. While in sports betting and gaming, we delivered once again strong performance across all activities, even when considering the very high comparison base from 2024 and a number of adverse sports results in September. Adjusted EBITDA growth is up 9.8% for the first 9 months with both sides of the business delivering a margin improvement. On the Banijay Entertainment and Life side, this was thanks to the positive timing of major scripted deliveries at higher margin rates. While at Banijay Gaming, this improvement was driven by good cost discipline, partially offset by French tax increases in Q3 and the adverse results already mentioned. As a result, adjusted net income was up 9.3% to EUR 271 million. We maintained a high level of cash conversion at 78% and our leverage is stable versus the end of 2024 at 2.9x. Let's move to business highlights now, starting with Banijay Entertainment and content production and distribution. As the #1 European studio for scripted shows, we have once again delivered global heat this year for both streamers and like linear broadcasters. During our Capital Markets Day, we highlighted how we are effectively leveraging our English-speaking footprint with streaming platforms to capture market share as they expand. This is clearly demonstrated during this period. We delivered major global shows that connect global audiences such as historical drama, House of Guinness, which was the #3 English language service globally and the #1 show in the U.K. and Ireland with over 5 million views. We also delivered local hits that crop travel globally, capitalizing on global streaming platform audiences. Swedish dramedy Diary of a digital was also a huge success of Netflix becoming a top 10 non-English language title globally with 1.3 million views in the week of its release. And we continue to deliver more high-quality local content that resonates with local agencies for linear broadcasters like [ TF1 ] in France. This includes historical drama, Mulmac, reaching over 4 million viewers with its first episode and [ Rita ] we secured an average of 4.3 million viewers across the week of its release. Let's move to Life experiences, digital and scores the strategic growth pillars highlighted at our Capital Markets Day, where we are now delivering concrete progress and scaling fast. First, on the life side. The first 9 months, so the fast rollout of ruminations, the immersive show from Logi acquired in January. Since then, we have rapidly scaled this IP, leveraging our global footprint to move into 4 new markets Spain, Germany, the Netherlands and the U.S., and there will be 3 more in 2026. The company is now producing more than 3 shows per day on average, and the number of tickets sold has tripled year-on-year to almost EUR 0.5 million. This marks our first live IP acquisition and a rapid fully organic rollout. Looking ahead, we will continue to identify and scale high potential IP across our global footprint, including our own IPs like [ Bret New ], which will be in 2026. Second, on the digital and AI side, we continue to strengthen our innovation, talent and technology infrastructure, forming partnerships with innovative tech platforms to accelerate catalog monetization and expanding our presence on YouTube, which is, of course, a key priority through collaborations with content creators. A few examples, we partnered with French company MomentsLab to drive AI-driven solutions for smarter video indexing discovery and content accessibility enabling us to repurpose and monetize our leading content catalog at scale across channels. Working with YouTube. We also launched Banijay Studio, both in France and in the U.K. to tap into the fast-growing creator economy. This initiative will reach the gap between creators and creatives by inviting YouTubers to reinvent iconic television shows for digital audiences. And third, at the junction of sports and digital, we are actively developing multiple initiatives in this growing segment. A recent example is the launch of SCF Benelux the first -- and registered football club powered by leading digital creators. All these digital initiatives open new revenue streams from sponsorships to digital advertising and content monetization, and we will continue to develop this firing initiatives across our markets. Moving now to Banijay Gaming which saw a strong 23% increase in unique active data. As I say every quarter, this is the most important KPI to look at when you want to assess the commercial performance of the platform. The QIP increase is especially impressive given the high comparison basis with last year's busy sports calendar with euro to 2024 and the Olympics and is thanks to approval the proactive acquisition and retention strategy. adverse sports results in September resulted in lower sports group revenues. As you've seen in previous years, these temporary activity is part of operating in this space with sometimes unfavorable months followed by natural catch-up in subsequent periods. In casino and poker, there was very strong performance, 16% revenue growth in Casino and 33% in poker. So it's more in line with the increase in ERP, driven by the new Poker platform introduced at the end of last year, which is, of course, very satisfactory as moving from an external platform to an internal platform has boosted the revenues. Last week, we announced a transformational deal to combine Bestic and typical to create a European champion in sports betting and online gaming. And I'll come back to that later. In this context, strong technological foundations like our high-performing poker platform becomes even more strategic with the opportunity to unlock easy synergy opportunities that have already been identified. That's all for me for now. I give the floor to Sophie.

Thank you, Francois. So let's start with group revenue for the first 9 months where we delivered 4% growth at constant exchange rates to reach EUR 3.2 billion. Q3 revenue was down very slightly at constant exchange rates. Thanks to this growth in revenues and our effective cost control, adjusted EBITDA grew 9.8% at constant exchange rates. We also saw our adjusted EBITDA margin increasing to 18.5%. This was mainly driven by the greater contribution from Bang gaming, which has a higher margin. At Banijay Entertainment, EBITDA margin also increased due to a different timing of scripted deliveries at higher margin rates like cane or House of Guinness. At the grouping rule, total external and personnel expense rose by just 2.2%, driven by effective cost management across all activities. Looking next at our P&L. LTP expense were done as anticipated, reflecting the expected trajectory of vesting plants. The increase in depreciation and amortization is driven by greater recruitment of third-party distribution advents in our content production and distribution business as well as higher depreciation linked to IT capitalization at Banijay Game. The other finance costs mainly include the change in the fair value of financial instruments, including hedging or mainly put in earn-out debt and currency loss season gains. Income tax expense increased in line with activity growth. But looking at the effective tax rate, it has improved slightly year-on-year. Adjusted net income was up 9.3% to EUR 271 million. Let's go now to results by business, starting with content production, distribution and live events. Revenues were up 1.7% to EUR 2.1 billion at constant exchange rate, which is a solid performance. As usual, there is an expected seasonality effect with an amplified volume of short deliveries and production of events weighted towards the end of the year. Looking at revenue by activity. Content production and distribution revenues were stable and reflects the phasing of deliveries at year-end while underlying activity remains dynamic with a strong slate of scripted shows delivered to both streamers and in broadcasters. For Life Experience & Other, the first 9 months was a particularly strong period as highlighted by Francois earlier, growth of 15% reflects, firstly, the consolidation of loci since early 2025, delivering notable success through its rollout across France and internationally. And there was also a solid performance from Banijay Studios with a seasonality effect resulting in increased show deliveries during Q4 2025. Let's look at content production and distribution earnings and cash flow next. Adjusted EBITDA was up 6.7% at constant exchange rates, a very good result supported by revenue growth favorable timing effect on scripted deliveries at higher margins and cost savings. Higher CapEx mainly reflects higher third party distribution advances and Banijay rights and higher investment in digitalization. The change in working capital and income tax paid mainly reflects the timing effect on scripted deliveries with major scripted shows delivered before the end of September in 2025 compared to a high weighting of scripted show deliveries in Q4 last year. This reflects a return to a more normal seasonality compared to 2024, consistent with trends seen in 2022 and 2023. Adjusted free cash flow conversion was 63%. Next, let's look at online sports betting and gaming, where we saw solid growth of 8.5% at constant exchange rates, even when taking into consideration the high comparison basis with last year, as previously mentioned by. Sportsbook revenues were up 5% despite the high comparison basis with last year and the temporary impact of unfavorable football sports results in September 2025. As already mentioned earlier, this business is naturally exposed to short-term volatility in sports results. We will see the catch-up of this one-off effect in the coming months but conservatively expect this to happen beyond the end of this financial year given the sports results seen in October. In online casino poker enter performance was strong across all geographies, with revenue up 21%, driven by the strong adoption of the new Poker platform supported by high player engagement and continued positive momentum in online casino. Looking at are -- now. Banijay Gaming continues to deliver solid profitability and free cash flow. Adjusted EBITDA was up 12.9% at constant exchange rates, with the margin up 110 basis points thanks to continued cost discipline, including lower marketing costs as a percentage of revenues. This was partially offset by higher betting tax in France which came into effect in July 2025. Adjusted free cash flow conversion remains high at 93%. Over the first 9 months of 2025, adjusted operating free cash flow was temporarily impacted by one-off items and sports calendar set. First, one-offs related to the exceptional 2024 performance with cash outflows occurring in 2025. This affected both the change in working capital notably due to 2024 performance-related payouts cashed out this year and income tax paid, which includes an exceptional EUR 27 million payment linked to the strong results achieved in 2024. Second, the spot calendar and sport outcomes created timing effects on working capital particularly on betting in taxes, marketing spend and other taxes, and this is pure copasetic. Excluding the first element I mentioned relating to one-off adjusted operating free cash flow would be up 1% compared to adjusted EBITDA growth of 13% with the delta explained by the soft calendar and sports results outcomes in September. These calendar effects are expected to gradually normalize towards the year end. Looking ahead, 2026 will benefit from the return of a major tournament cycle, including the [ FIFA ] work. Looking at cash flow generation now. Adjusted free cash flow reached EUR 465 million, this resulted in a cash conversion rate after CapEx and lease payments of 78%, in line with our guidance for the year. Adjusted operating free cash flow was EUR 264 million. Given the normal seasonality effect, we expect strong cash collections in Q4. The group's net debt stands at just EUR 2.8 billion. The increase in net debt mainly reflects the seasonality of the activity and cash payments as well as the payment of the dividend during the period. Overall, we continue to have a strong cash position and a significant undrawn secured credit line. That's all for me. I will now hand back to Francois for some concluding remarks.

Thank you, Sophie. As you can see, our performance in the first 9 months of the year demonstrated that we are clearly delivering on our strategy. Overall, it was a strong first 9 months performance for the group with 10% earnings growth and a solid contribution from all activities. Banijay Entertainment saw stable growth, while Banijay Life demonstrated that it is an increasingly significant strategic growth driver, as explained during our CMD. This positive momentum is also expected to increase in the final quarter of the year, thanks to major shows in the pipeline at Banijay Studio. Banijay Gaming once again showed its profitability, delivering continued strong performance across all activities, despite a high comparison basis with last year tax increases in France and unfavorable sports results in September, which should not mask the strong performance of our business once again. And we demonstrated our credentials as a natural consolidator in the entertainment industry with the acquisition of Tipico to create a European champion in sports betting and online gaming. I will come back on it in a minute. In terms of our outlook for 2025, we expect to deliver low single-digit organic revenue growth from Banijay Entertainment and Banijay Live which reflects the postponement of some deliveries to Q1 at Banijay Entertainment level. On the Banijay Gaming side, because of negative post results in September, not reversed in October, as explained by Sophie, we expand we expect to land around 10% organic revenue growth for this business, which is a strong result for 2025 compared to a very, very strong 2024. Despite the primarily timing effects, we confirm our guidance of mid- to high single-digit adjusted EBITDA growth and about 80% of adjusted free cash flow conversion. Overall, we foresee a strong year for the group. Before we take your questions, a quick update on the largest acquisition made by the group so far. Typical is the undisputed leader in sports betting and gaming in Germany and Austria. In 2024, it had revenues of EUR 1.6 billion and adjusted EBITDA around EUR 418 million, meaning a similar scale to betting. With Tipico and Amira Austria, it has 2 major brands with strong customer loyalty, ratings and brand awareness, 9 out of 10 sports betters in Germany, no Tipico and on iOS and Android Tipico is the best rated app. This recognition as a sports betting leader has been built through a 360-degree offering, combining 2 million digital active players with 250 betting shops across Germany and Austria. This means that Banijay Gaming will have a physical retail presence in these 2 countries. And leveraging a market-leading proprietary tech platform, Tipico has a strong track record of market share growth and has significant room to grow further with a large untapped market in Germany and some potential new offerings in Australia. As a result, Banijay Gaming will be a leading European champion in sports betting and online gaming. It will have a combined presence in 6 countries with top 2 positions in all including 3 out of the 5 largest countries in the European Union and will be the fourth biggest European operator and the largest sports betting operator in Continental Europe. There is a clear strategic fit between the 2 companies. Together, we will have an even more diversified geographical footprint, a multichannel offering a strong cultural alignment and a state-of-the-art technology platform. The deal is fully backed at Banijay Gaming managers relative to a majority of their stake in Tipico. It is also worth mentioning that we expect fast deleveraging driven by strong cash generation. Recent confirmation of Moody's rating on Banijay existing Terminal B is a clear signal of confidence in the Tipico acquisition. In terms of next steps, the proposed transaction is subject to customary conditions precedent in particular, merger control and gambling regulatory approvals, we also plan to divest our stake in Beta 2 given the fact that there's no overlapping between the 2 companies, the closing of the transaction is expected by mid-2026. This financially accretive deal perfectly illustrates our position as a natural consolidator of the entertainment industry. We are acquiring a highly profitable and cash-generative company, allowing us to achieve our strategic ambitions and create value for Banijay Group shareholders. Post transaction, the new managing group with -- on the basis of 2024 pro forma delivered around EUR 6.4 billion, which is an increase of EUR 1.6 billion. Adjusted EBITDA in 2024 of the combined entity is EUR 1.4 billion pro forma, representing a 22% margin compared to 19% before transaction. Adjusted free cash flow is EUR 1.1 billion, and adjusting operating free cash flow is EUR 1 billion. representing strong conversion rate of 81% and 71%, respectively. Again, these are figures for 2024. It will be more in 2025 and 2026. We will update our financial targets for 2028 in our full year 2025 results, but we can already tell you that we expect to generate approximately EUR 100 million of synergies on a yearly basis in 2028. This all adds up to a highly attractive value proposition, combining high margins, strong cash generation and a leverage ratio below 2.5x within 3 years, excluding the exercise of call options to increase our stake in Banijay gaming deleveraging should be around 0.5x each year. After years of organic development in the stores betting and gaming industries, focusing on building the best infrastructure platform and delivering the highest growth in the market we are now reaching a major milestone with this consolidation, and it is a major step in the story of Banijay Group. That's all from me. Thank you for your attention, and back to you, Marion.

Thank you, Francois. It is now time for questions. So please state your name and company. Thank you.

[Operator Instructions]. We will take our first question. Your first question comes from the line of Silvia Cuneo from Deutsche Bank.

I'd like to ask 3 questions from my side. The first regarding the revised revenue outlook, what is the current level of visibility you have on Q4, particularly for Banijay Entertainment postponed deliveries and the gaming sports calendar. Are there any other risks to be aware of that could further impact the revenue performance relative to the updated guidance in Q4? Then secondly, considering the commentary around the seasonality and postponement of certain content deliveries in entertainment impact in 2025. Could you provide more color on the overall demand landscape for content, heading into 2026, both from the global sins and the traditional broadcasters as well? And then the third question is on the Q3 adjusted EBITDA margins for both Banijay Entertainment and Live and Banijay gaming, they were ahead of our expectations despite some revenue deceleration. So could you elaborate on the typical seasonal effect that influenced the profitability in Q3? And looking ahead in Q4, what makes you confident you can still make the unchanged guidance? Thank you.

Sorry. Thank you, Silvia. Sorry, I was on mute. So I was saying -- on the outlook for the Q4, of course, we have a very good visibility on Banijay entertainment. And on Banijay Gaming, we are always dependent on sports results. So as Sophie was saying, we have chosen this time to be a little bit conservative because October -- September was a very adverse month for sports reserves. October was not so good. So that's why we decided to be conservative. Actually, November is starting very well. So because there will be the catch-up. So I think we are very confident on the gaming, but you can never predict the sports results. There are still a lot of Champions League games and test some volatility. But again, we have taken a conservative approach on our outlook on Q4. On your question about the demand for content. I think we have seen a good demand for comment from streamers, maybe a little bit less than what we expected on broadcasters and with some, I would say, postponements at this level between Q4 2025 and Q1 2026. On the margin, you want to elaborate?

So on the margin, on Banijay Entertainment and Banijay Live, as we mentioned, we delivered during Q3 2025 and high premium scripted shows like canes or House of Guinness with higher margin rates than well, with higher margin rates, and it was not the case last year as we delivered this kind of high premium scripted shows in Q4. So that's why you have an increase of the EBITDA margin rate. On Banijay gaming, well, -- as you know, this is a first fix business. So we still had an increase of our business and revenue, et cetera, during the first 9 months. So that's why also the EBITDA margin is increasing. But also we had less -- well we had a very strong cost control. And for example, less marketing cost. I remind you that last year, we had Euro Cup plus the Olympic games. And so we increased the marketing costs. So proportionally to the revenue in 2025 as we don't have such big sports events we have not such important marketing cost. That's why also this margin rate is increasing.

Your next question comes from the line of Conor O'Shea from Kepler Chevreux.

Three questions from my side as well. First question, just to make sure I'm understanding this right. For the full year, guidance on adjusted EBITDA at a group level, I think, is mid- to high single digit versus almost around 10% for the 9 months. So I'm just wondering, is there anything explaining that? Or is it seasonal marketing around the fourth quarter, maybe in the gaming business that explains that sequential slowdown? Secondly, I think I saw something in the press about the independence deal may be being complicated by the slowdown in the luxury sector. Maybe you can comment on that. And then the last question, just in terms of some of the proposals in the -- in terms of the budget going through in France. Any impact that you see that you would call out for 2026, either on corporate tax or on pending tax or anything additional there would be very useful.

Thank you, Conor. Maybe Sophie, on the first question.

On the guidance...

This guidance is maintained. It's what we expected. So we maintain our guidance. It's true that we are higher today. I think Sophie was mentioning about the kind of different mix of delivery when it comes to premium scripted on Banijay entertainment and there's also on the gaming side. And if you remember, unfortunately, that increase in France which happened on the second half. So it has an impact, of course, on the EBITDA of the gaming for the second half only. So going impact on Q4 than on the first 9 months, okay? On your second question about the independents, I think we always said we are going to decide on the size of the -- next year, nothing changed. And nothing changed also on the fact that we consider it as a very good business. And I think, yes, the luxury sector has suffered in 2025. But clearly, they have been very resilient and and which is, I would say, a risk testimony to their business model. So not everything that is written in the press is true. On your first question, very difficult to follow the budget today. So we cannot really say much about it. Now it's going to the scene. We see what happens there. So no, it's difficult to comment at this stage. But of course, I recall that we -- I just said that on your first question, we are going through a strong tax reset in France already this year. So I think it shouldn't be the case for next year.

Your next question comes from the line of Ed Young from Morgan Stanley.

Two on Banijay Gaming, please. First, given the maximum player payout threshold in France, that seems like a pretty good mechanism to recoup within the year. So if you put your comment there is a bit more cautious. Is that around ability to capture volumes if you move the lines too far? Or is that really relating to your business outside of France that would affect your ability to get back to where you need to be in the course of the year? And then second of all, you mentioned the World Cup. So wonder if you could give us any outline thoughts about how material do you expect that boost to be given, obviously, it's a different format with more games, but also a time zone adjustment from your European markets. So if we think back in the history of what these tournaments have been, how do you think about the World Cup for next year? Thank you.

On the first question, you're right in France, but we are not only in France. So the adverse results has been seen in our different countries. So that's why we chose to be a little bit prudent on the expectations.

Yes. So on your second question on the World Cup, of course, every 2 years, it's a big event for us, Euro World Cup. And so I think it's when you look at -- we are targeting a double-digit growth on a year -- last year, we had African Cup in Ivory Coast, where we are dealer. We have the Euro, we had the Olympic Games in Paris, where we are leader. So it was a very, very strong year for us in terms of sports calendar and still, we managed to do double-digit growth this year. So it's a great achievement. But next year, of course, World Cup will be a very important element, both for Best Click and Tipico. By the way, we will benefit from it also on our acquisition. And we believe that the time zone is a good one. Today, the time when the games will be played should be good for Europe. So we see that a major event and a revenue booster as you know we don't expect any the fact that it is in the United States is not an issue for us given the programming of the games. And as you said, there will be more games. So it's a positive, a little bit like the Champions League is the fact to have more games in Championship has also been positive. So we see it really positively. Of course, we will give our view on 2026 in next March. But yes, that's a very positive element for 2026.

[Operator Instructions]. Your next question comes from the line of Annick Maas from Bernstein.

Apologies if I have to ask the same questions, but I have been partially cut on the call. So on that note. The first one is, could you please comment on the fourth quarter is the weakness only going to come from the entertainment bids and life is expected to perform as it has year-to-date? Or is also something that we should be aware of in life? The second one is on the independents. Can you just -- with the luxury downturn, you haven't really mentioned the independents today and you used to speak about it a lot. Just tell us how they performed over the last quarter, please? And then I guess with your Tipico acquisition, and I guess the financials of gaming, which are a bit more attractive than necessarily than content. Could there be a scenario where you actually sell your content business and focus purely on gaming.