Betr Entertainment Limited (BBT.AX) Q1 FY2026 Earnings Call Transcript & Summary

Thank you for standing by, and welcome to the betr Entertainment Limited FY '26 Q1 Investor Update. [Operator Instructions] I would now like to hand the conference over to Mr. Andrew Menz, Chief Executive Officer. Please go ahead.

Good morning, and thanks for joining us today for the betr Entertainment Limited quarterly business update for Q1 FY '26. I'm Andrew Menz, CEO of the company. And today, I'm joined by our Chief Financial Officer, Darren Holley, and Chief Operating Officer, Bill Richmond. We'll start on Slide 3 of the presentation. Through the first quarter of FY '26, the betr business continued to demonstrate strong trading momentum with turnover up 27% on the PCP and 16% in September, including the migrated TopSport customers. This period in September lapped the BlueBet and betr customer migration and, therefore, represents a more meaningful year-on-year comparison. This milestone allows us to confidently reaffirm the sustained growth trajectory of our business with organic momentum continuing to build. Net win margin of 10.5% remained in our target range, overcoming well-publicized customer-friendly results in September where the NRL most notably saw customers get the better of wagering operators across the board. Our disciplined approach to generosity and leading trading capabilities continue to provide us with a competitive advantage in generating these consistent net win margins in our target range. With key customer migrations now behind us, we are making deliberate investments in marketing and product to expedite sustainable and profitable growth, in line with our stated strategy to grow both via M&A and organically. This is reflective of our long-held belief that the best product and meaningful brand in the market will be key drivers of our sustainable success in the Australian market. The immediate traction we're seeing in engagement with our new products and enhanced customer experience as well as the rapid uplift in brand metrics following our relaunch in September, position us well to continue to compete with Tier 1 operators and to continue to take share. During the quarter, we finalized our PointsBet offer, securing a 27.7% stake in a profitable and strategically aligned business. We've engaged with the company to ensure that our position as a major shareholder is respected in terms of the company's strategies and operations. We remain firmly of the view that the synergy price available in integrating the businesses is material, and we remain open to exploring those opportunities with the company and other key shareholders. We also completed the selective buyback of PointsBet shareholders, again delivering on each of the commitments we made to the market throughout the process. We remain well capitalized, have strong support from our register, and have a proven team and technology stack for further transformational opportunities, and there remain a number of those opportunities in front of us. Turning to Slide 4. September marked a full year since the BlueBet, betr migration, which now enables us to make more meaningful like-for-like comparisons across key performance metrics. This milestone is important, not just operationally, but also strategically, as it confirms the maturity and stability of our integrated operation. Since the migration, we've seen sustained organic turnover growth, driven by strong customer engagement, prioritizing and efficiently engaging the valuable customers of their respective databases that we've acquired. The September year-on-year turnover growth of 16%, including TopSport, has clearly outpaced a near flat market and evidence is betr taking share. Despite September being a month where sports and racing results skewed in favor of customers, we still delivered a strong net win result for the quarter of 10.5%, again, a testament to trading, data and risk management capability within our organization. As most would be aware, we have seen a continuation of customer-friendly results into October with an above-average percentage of favorites winning races on key Carnival days. Notably, our customers are increasingly favoring higher-margin products like multis and exotics in racing. This is one of the key drivers of the improved net win margins from both the migrated betr and TopSport customers onto our proprietary platform. This was especially evident during the AFL and NRL grand finals, with Same Game Multi turnover outpaced the strong overall turnover growth on these marquee events, again giving us confidence that we can maintain our long-term structural margin advantage when we add incremental scale to our platform. I'll now hand to Darren to talk you through the key trading metrics for Q1.

Moving to Slide 5. Another strong quarter for the company has seen betr record turnover of $363 million, up 27% year-on-year and gross win of $51.8 million, up 34% year-on-year. As outlined on the previous slide, this was aided by a tailwind of softer premigration comparisons for July and August in the PCP, although on a like-for-like basis, the business experienced strong double-digit growth in September, and this has continued into October as we opened Q2. Net win margin for the quarter was 10.5%, within our target range above 10% and overcoming materially customer-friendly results, particularly the NRL in September, which we estimate adversely impacted gross win by 1.25 percentage points. These challenging customer-friendly results have persisted early into Q2, led by the NRL Grand Final, and then on Saturday Thoroughbred racing throughout October, but we are pleased to see the strong turnover growth as evidenced in the September exit rates from Q1, continuing into our peak wagering period ahead of the Melbourne Cup Carnival next week. I'll now hand back to Andrew to take you through some of the important strategic initiatives we are driving in both brand and product.

I will move to Slide 7. As part of our commitment to deliver a modern next-generation customer offering, our brand refresh launched in the first quarter with THE GOAT, bringing to life our challenger brand in a fun and compelling way that has already resonated with our core target audience. With ad recall, a critical element in this category, given our homogenous offering and brand consideration, both showing rapid improvement. This campaign is specifically designed to engage with an audience who are looking for a wagering experience that reflects their lifestyle and values. The refresh sharpens our entity -- our identity, ensuring our brand resonates with our customers on our journey to become a category-defining brand. The campaign approach is a category first and breaks the mold of [ woky ] sports betting ads that have alienated a material cohort of potential customers over the last decade. During the campaign period, we have been pleased to see the betr app featuring prominently at the top of app store rankings, and we look forward to repaying the trust of these new customers with a leading experience across the Melbourne Cup Carnival and beyond. A clearer, more compelling brand drives more efficient performance across all channels, and we are already seeing early signs of uplift in conversion and activity, which will, in the medium term, see us continue to acquire new customers on a very efficient basis. Turning to Slide 8, and complementing our brand relaunch is a strategic upweighting of media placements, taking advantage of opportunities that exist to obtain high audience targeted properties on a more efficient basis than previously available. These strategic assets have historically offered lower cost acquisition and greater brand consideration than a scattergun approach, and we are confident that this investment will pay off over the next 12 months. As you can see, the market for marquee media assets is becoming increasingly rational, allowing us to obtain key slots across the AFL final series and looking ahead to Foxtel summer of cricket. We continue to pursue high ROI and fast payback by our expanded user base and greater engagement. Turning to Slide 10, innovation is central to our growth agenda, providing brilliant customer experiences and differentiating ourselves based on providing products that our customers love. This quarter, we launched our live tracker, a global first innovation in our category. This feature delivers a dynamic real-time experience across high-margin sports and racing markets during inspiration from leading digital platforms. Early customer data shows strong engagement with users actively interacting with this new feature. The ability to own a customer's home screen is highly valuable and efficient marketing when combined with live scores, live in-game updates on customers' bets, and rapid fire racing results offers something of real and meaningful value to our customers. Expanding on the theme of active engagement, we have also partnered with Uber to deliver targeted and relevant advertising to its high-quality digital audience, again seeking to own the live aspect of customers' experience and attention. Targeted digital advertising at key segments and ensuring that we're not advertising to those who do not wish to see our advertising is also critical from an industry sustainability perspective. At the end of the quarter, we successfully executed a rapid integration of Sky Racing into our platform, time to coincide with the Spring Racing Carnival where we see a peak period for customer engagement and activity. This integration represents a notable step change in our racing offering, giving customers access to premium live racing content directly within the betr app. The early results are compelling. Customers who engage with Sky Racing are significantly more active, they engage more frequently and place more bets with betr, delivering a 51% higher net win per active customer compared with the overall customer base. We're continuing to enhance the experience with improvements to odds presentation, streaming quality, user interface and better content with great conviction that Sky Racing is a core pillar of our overall racing offering. As you can see, after a period of bedding down our customer base following the migrations, we are now leading the category innovation agenda in both the marketing and product space, and you will continue to see rapid fire, innovative and differentiated product releases, again aimed at our target market. I'll now hand over to Darren to take you through the quarterly cash flow summary.

Thanks, Andrew. Turning to Slide 13. At September 30, 2025, the company's cash balance was $95.2 million, including client balances of $13.7 million. Net win for the quarter came to $38.0 million. Net cash used from operating activities was $5.7 million and included $0.2 million outflow from the discontinued U.S. operations. Australian operating cash flows were impacted by the seasonal marketing uplift into the Spring Carnival and by $3 million in production costs relating to THE GOAT brand launch, the benefits of which will be derived over the next 3 years. Cash flows from investing activities was $4.1 million, comprising $1.9 million for capitalized technology costs, and $2.2 million in fees paid to advisers for transaction and advisory costs in relation to our PointsBet offer. I'll now hand back to Andrew to wrap up prior to opening up to questions.

Thanks, Darren. Quarter 1 was another strong quarter for trading, reflecting the high quality and valuable database that the company is now able to engage. Operationally, and as we committed in our Q4 announcement in July, we've refreshed and relaunched our next-generation brand, already showing positive signs among our target audience. We've improved our app and our customer value proposition with global first-to-market product innovation as well as the addition of Sky Racing and an overall focus on speed and ease of use. And we've maintained our overall focus on creating shareholder value by ensuring that we deploy available capital for sustainable and profitable growth, and we are highly confident in continuing to deliver on our aggressive inorganic growth agenda over the balance of the financial year. With that, I'll now open up to questions.

[Operator Instructions] Your first question today comes from Phil Chippindale from Ord Minnett.

A couple of questions from me. Just firstly, just on your performance so far in the current quarter, I think in the materials you indicated some strong momentum in Q2 so far, I just want to unpack that. Are you referencing turnover growth there? Or perhaps is that a comment more around net win margin? I'm just noting, I think the September '24 months saw turnover growth around 16%, that was sort of the first clean comparison we had. So how is that comparing to like your internal targets? I guess I'm just thinking about how we should think about turnover growth for the year.

Yes, absolutely, Phil. So what we're referring to for the commencement of Q2 is those key activity metrics around turnover and actives. So a good look at how the business has performed in October thus far from that activity metric perspective is the September exit rate. Obviously, we've highlighted today that we have had some challenging racing results throughout October, that's not uncommon, but there's been a number of, I think, the last 5 Group 1 favorites have been successful. And obviously, that gives -- [ put us ] an edge and has an impact on gross and net win margins, which are slightly behind, but we're still very confident that they will revert to the mean over the balance of quarter and excitingly heading into the Flemington Carnival. So I think the best way to look at the business is to use that September exit rate and apply the company's historical net win margin for how you want to think about it going forward.

Just turning to the cash flows. Typically, first half, you do see a seasonally higher marketing spend. If we look at the cash flows for the quarter just gone, I think cash outflows were around just under $5 million once we exclude the $2 million of transaction costs and the $3 million of production costs. Is it fair to assume sort of a similar level of cash outflow perhaps in the December quarter, before we see a significant improvement in the second half?

Yes, Phil, I'll take that. Yes. Look, I mean, obviously, Q1 is always seasonally a high cash outflow month as we're leading into the Spring Carnival. We'll continue to have marketing investment right through the carnival and look to ease that back once that's finished into late November, into December. So it will start to pare off towards the end of the quarter, but we're certainly looking to continue to invest in that channel leading into next week.

Okay. And then last one just for me. Just on the PointsBet shareholding, you've now got a 27% holding. I'm just wondering what the communication has been like between your company and MIXI thus far?

Yes, Phil. So as I said, we've engaged with PointsBet and the Board of Directors, which is now a majority of MIXI directors, and there's been some -- [ quite a lot ] engagement there, as I said, around ongoing operations and strategies of business ensuring that our significant shareholding is respected as we push on there. As for discussions with other shareholders and with MIXI in particular, we'll have more to say over the next couple of weeks and months as that situation continues to unfold. Obviously, there was quite a bit go into the respective takeover offers, and it's taken a little while for the dust to settle. But we're very confident that we'll be able to engage very well with MIXI and an achievement outcome that's optimal for all PointsBet shareholders, of which whether we're now the two key holders.

Your next question comes from Leo Partridge from Morgans.

Well done on the result. Just I feel has already asked some of my questions. But I guess the main one for me is just on product. Firstly, well done for the integration of the live tracker. With new product innovation, why do you think some of the competition hasn't come out with something similar? And how do you protect new innovations in an industry where there's a lot of similarities? And just following on from that, just on the mix, what proportion of turnover came from your Same Game Multis, or traditional racing in the quarter?

Yes. I'll speak to the product strategy side, Leo, and then I might ask Darren to speak to some of the turnover. In terms of strategy, the way that we think about it is pursuing a differentiated and engaging product and not merely just following me to what other key operators have in the market. Playing the parity game really can't shift the dial and really can't bring customers over. There is a certain baseline of products that customers will expect. And most of those are hygiene factors. They're deposits and withdrawals, it's verification, it's ease and speed of placing a bet and receiving your winnings. Once you're there, our really clear view is that we want to be differentiated. We want to invest our resources in areas that others haven't, and trying to find an edge when we're looking at our target segment. In terms of why some of these products will be replicated and why not, there is a significant amount of development that goes into these products. So they can't always be rapidly copied. And yes, they can be a 6- to 12-month period by a number of operators. However, the key is, I think, to become synonymous with these products and to get to a position where customers know you for that product, and therefore, you can own it. And a good example of this in this category was Ladbrokes with [indiscernible], who was first out with this product, copied by everyone, but it was always something that customers understood and attributed back to Ladbrokes. So I think getting new and innovative products out quickly on a differentiated basis and putting new marketing dollars behind that as opposed to just free bets is the key to get through that.

And Leo, sorry, could you repeat the second part of your question?

Just on the mix, what proportion of turnover would come from Same Game Multis, multis versus just your traditional racing high singles kind of numbers in the quarter?

Yes. Look, I mean, it really depends on what content we've got going. Obviously, we've had NRL and AFL seasons finish up. And we've just had NBA starting in -- from U.S. Sport into this quarter. So it does really depend on the content we've got coming through. What we are seeing, however, is that there is a higher proportion of our turnover coming from those higher-margin products. And that's certainly assisting us in being able to land margins within that 10% plus range that we've spoken about previously.

And I think, Leo, what you see with these higher-margin products like Same Game Multis, is that, they do typically come with a lower average bet size than singles because of that higher margin, because customers are losing at a greater rate, a lot of these see Same Game Multis is an entertainment product, a lottery style product. And therefore, we see as a higher number of bets, but lower turnover per bet as opposed to singles, where punters would take a significantly higher amount. So whilst the turnover percentage might look lower as a percentage of the entire business, its contribution to net win and then to net gaming revenue, it significantly outstrips the turnover attribution that those products would have.

And Andrew, just one more if I could fit one in. How are you guys seeing the competitive environment at the moment coming into such an important key period for you guys?

Yes. Look, I think it's been more rational. I think the charts that we showed on media spend proves out that the market is more rational. It is much more difficult these days to get a good handle on generosity spend. Previously, the vast majority of generosity spend in this category was above the line. So it was very easy to compare where operators were. What we see now is a much deeper investment by most operators in personalization, and therefore, it's a little bit tricky to get a handle on the total generosity spend out there. But I would say that we are existing in a market that continues to be rational. Generosity spend hasn't increased year-on-year would be my best estimate from what we understand. And that's why we've got a market that's flat to very low single-digit growth, but we're confident the market has returned to growth despite that continued rational marketing behavior.

Your next question comes from Paul Davies from Ord Minnett. Pardon me. It looks like Paul's line disconnected. Your next question comes from Andrew Orbach from Taylor Collison.

Nice result. Just high-level thoughts on the Sky streaming, it seems like Tab's allowing people to unpick the thread and allowing operators to advertise, et cetera. Just any high-level thoughts you've got on what that does to the dynamic in terms of them potentially having -- previously had a competitive advantage in that space?

Yes. Thanks, Andy. Look, I think Tabcorp gave up the exclusivity on Sky dating back to when we took it a bit easy in 2018. And -- it's not for me to speak to Tabcorp, but I think they have an incredibly valuable asset that they are now monetizing on a B2B basis across a relatively large segment of the market through the deal with Sportsbet, with us and a number of other smaller operators have taken it on as well. So clearly, that's a strategic decision they've made. I think it's a great thing for the racing industry. I think it brings customers back to racing, allows really easy engagement for customers. And as you can see from the metrics that we've put up, customers love having it there. So I think it's a great thing for the racing industry. It's obviously doing well for Tabcorp, and we couldn't be happier with A, how it looks, and B, where we think we can take the product and again, try and lead on customer experience in that streaming space.

There are no further phone questions at this time. I'll now hand back over for any webcast questions to be addressed.

Thanks, Darcy. Look, there's just one question left. I think we've addressed a number of the other ones throughout those phone questions. But the one that's still remaining is around the cash balance. It hasn't been reduced by $40.6 million for the selected buyback in October. So thanks for that. So the answer is yes. We did complete the buyback in October. And as we announced, that was the amount that we ended up returning to those shareholders. However, after that, the company's balance sheet remains well capitalized to continue to grow both organically and to look at inorganic opportunities as they arise, and we'll certainly work through that as we present our Q2 results and cash flow at the end of December. That completes the questions online. I'll just hand back to Andrew for just closing comments.

Thanks, Darren. Thanks, everyone, for making the time to join us today. As you can see, the underlying business is in a terrific position with our marketing and our product now really ready to compete. We can't wait for Cup week, bring it on, we think we feel like we're in a fantastic position to compete and to provide brilliant experiences to our growing customer base. Thank you again for your time, and we'll talk to you all at the end of the second quarter. Thank you.

That does conclude our conference for today. Thank you for participating. You may now disconnect.