Betr Entertainment Limited (BBT) Earnings Call Transcript & Summary

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

Good morning, and thanks for joining in today for the Beta Entertainment Limited FY '26 Full Year Results Investor Presentation for the 12-month period ended 30 June 2026. I'm Andrew Menz, CEO of the company, and I'm joined today by our Chief Operating Officer, Bill Richmond; and Chief Financial Officer, Blake Matthews. Starting on Slide 2. FY '26 was a year of deliberate investment followed by disciplined execution. In the first half, we strengthened our brand, product and ability to monetize our high-quality customer base, relaunching Better under the Goat, launching Sky Racing ahead of the Spring Racing Carnival and delivering a category-first Live tracker. That investment landed alongside a circa $7 million impact from industry-wide customer-friendly results over the Spring Carnival, leaving half 1 FY '26 normalized EBITDA at a loss of $13.2 million. In the second half and consistent with the guidance we outlined to the market, our earnings model inflected. Bakery margins returned to historical levels. We delivered additional integration synergies and our improved brand drove stronger engagement and better customer economics. We closed half 2 FY '26 with normalized EBITDA of $6.1 million within our $5 million to $8 million guidance range and an improvement of $19.3 million from the first to the second half. And critically, that earnings turnaround is now showing up in cash. Q4 operating cash flow was $2.6 million, a $3.6 million improvement on the PCP and the first quarter of operating cash generation since 2021. That is a decisive turnaround in both earnings and operating cash generation and it's the platform we carry into FY '27 as we outlined on Slide 3. Our confidence in our FY '27 normalized EBITDA guidance of $13 million to $19 million is underpinned by 5 key areas, which we will take you through today. Firstly, the second half FY '26 turnaround, our fast start to '27, strengthening customer economics, our product edge and finally, our readiness for regulatory reform. Today, we also announced that we expect to be operating cash flow positive for the full year with normalized operating cash flow expected to broadly mirror our normalized EBITDA, again weighted to the second half. As with our FY '27 EBITDA target range, our guidance is a full year measure. On your screen, you can see our expectations of operating cash generation, where customer investment is weighted to the first half and earnings and operating cash flow expected to be weighted to the second half of the year, which is consistent with this business historically and the broader Australian wagering industry. Turning to Slide 4. We're pleased to see that momentum already playing out as we open FY '27. In the 7 weeks since year-end, turnover is up more than 20% on the PCP and first-time betters have almost doubled against the PCP. Whilst gross win margin is currently tracking slightly below our target range, continued improvement in customer activity metrics, frequency and same multi turnover give us confidence that we're engaging the right customers on the right product and we will convert this activity into meaningful value as we head into the peak wagering period, and we'll continue to see net win margin in our 10% plus range. Importantly, we have achieved these results at the same time as making material efficiency gains with cost per acquisition and customer promotion costs each coming down versus PCP. an early signal with a genuinely fast start, and it gives us real confidence heading into our most important season with fully finals and Spring Racing Carnival getting underway. Turning to Slide 5, where we show how our focus on customer economics is translating to outsized market share gains. Average net win per user, our best measure of customer value, grew 6% in FY '26 despite the well-publicized customer-friendly results across the industry in the first half. Net win per active customer increased 6% despite those results. And in half 2, net win grew 5.3%, nearly twice the estimated 2.8% growth in the digital market. Together with stronger frequency and turnover per customer, these measures demonstrate improving economics alongside critical market share gains. On Slide 6, we are very excited to introduce Wildcard, our first-to-market live same game multi product, which will be available to customers on tomorrow night game between the dogs and the pie. Wildcard is genuinely a first-to-market product that gives customers greater control as a live event unfolds, creating a distinctive interactive experience and built to extend Wildcards brand and mechanic can move beyond same game multi into racing and other multiproducts and it's designed around our priority customer segments, creating shareable moments and cross-sell opportunities that support share growth in our highest contribution products. innovation that has been devised, designed and developed in-house onto our own proprietary technology, follows our launch of Live Tracker, another first of the category has significant developments in our desire to differentiate our offering by giving customers products and experiences they love and also decreasing our exposure to commercial and regulatory headwinds. Before I hand to Blake, a word on the federal government's recently announced advertising reforms. B support effective evidence-based measures that promote safer gambling and protect children and vulnerable people from exposure to wagering advertising. That has been our long-standing position, and that was the basis upon which we engaged with the federal government on these reforms. In that sense, we see the reforms as a missed opportunity to address the real issue causing concern in our community, and that is broadcast advertising in and around live sports, where no opt or gating mechanism can be applied. Notwithstanding that there remains some final regulatory implementation detail that is yet to be settled, Better is well placed to operationalize the proposed changes that will commence from the 1st of January. Our existing compliance controls across safer gambling and advertising are deeply embedded across the business and our advanced data and AI capability already supports customer level marketing controls, monitoring and reporting. As you will have seen through our relentless focus on innovation, our strategy is built on differentiated product and a genuinely compelling customer experience. reforms support our product-led model and reduce reliance on advertising and inducements where many of our competitors have historically played. Against this backdrop, we are well placed to support an orderly transition to the new regulatory setting, and we'll continue to engage constructively with policymakers and remaining implementation detail as it is finalized. I'll now hand over to Blake to take you through the financials.

Thanks, Andrew. Turning to Slide 9 and our key trading metrics for the full year. Turnover grew 12.3% to $1.594 million, up from $1.4 420 million in FY '25. Gross win increased 10.1% to $215 million, while net win margin of 9.9% was down 0.5 percentage points on FY '25. That margin outcome reflects the impact of industry-wide customer-friendly results in the first half, which reduced EBITDA by approximately $7 million. Importantly, our added scale offset that impact and net wins still grew to $158 million for the full year despite those one-off results in half 1. We closed the year with 156,000 active customers with a greater representation of repeat high-quality recreational customers in that base than in any prior year, as Andrew outlined earlier. FY '26 normalized EBITDA of $6.1 million delivered against our guidance and underpins our confidence in the FY '27 guidance of $13 million to $19 million and positive operating cash flow for the year. Turning to Slide 10. FY '26 delivered a normalized EBITDA loss of $7.1 million. Gross profit of $60.5 million was down 1% on the PCP, representing 42% of wagering revenue compared with 45% in FY '25. This reflects our investment in the introduction of Sky Racing partway through the year, together with customer-friendly Spring Racing Carnival results. Advertising and marketing expense for the year was $28.2 million, up 45% on the PCP, reflecting increased investment in the Better brand, the Spring brand relaunch and customer acquisition. That was a deliberate largely nonrecurring step-up to build the brand, and we'd expect it to normalize as a share of revenue as we move through FY '27, consistent with our disciplined approach to capital allocation. Employee benefits expense of $22 million was up 7% on the PCP, reflecting business integrations ahead of synergy realization. We've delivered $5 million to $6 million since of annualized cost out through those integration synergies, and we exit the year with a leaner, more sustainable organization. Turning to Slide 11. Turning to the balance sheet. At 30 June 2026, we held cash and cash equivalents of $27.6 million, down from $104.9 million at 30 June '25. This reflects investments made through the year, including $41 million in share buybacks. Our balance sheet also carries our strategic equity interest in PointsBet Holdings, a 27.7% stake, carrying $90.1 million at year-end, which continues to give us meaningful strategic optionality. Net assets closed the year at $133.2 million, we remain well positioned to capitalize on the investments made through FY '26 and to fund profitable organic growth in the year ahead. Turning to Slide 12 on cash flows. Net cash used in operating activities was $25.7 million for the year compared to $19.3 million in FY '25, reflecting the investment phase of FY '26. Net cash used in financing activities was $42.6 million, primarily the $41.3 million in share buybacks completed during the year compared with net cash generated from financing of $169.6 million in FY '25, which included proceeds from our capital raise. Cash and cash equivalents closed the year at $27.6 million, down from $104.9 million at the start of the financial year. As Andrew set out, that trajectory has turned. We exited FY '26 with positive operating cash flow in Q4, and we now expect to be operating cash flow positive in FY '27 with cash generation weighted to the second half. I'll now hand back to Andrew. Thanks, Blake. We're entering FY '27 from a genuine position of strength across the 5 components at the outset. FY '26 turnaround with guidance delivered positive normalized EBITDA in half 2 and positive operating cash flow in Q4. Our FY '27 momentum, the fast half that I described earlier, with strong early growth in turnover, engagement and customer acquisition alongside more efficient promo and acquisition costs, improving customer economics and frequency engagement and net win per customer continue to strengthen, translating directly into market share gains of the net win line. Our product edge with the example of Wildcards today, which extends our proprietary product advantage into high contribution same multi and regulatory readiness, the established controls and advanced data capability within this organization support our transition to the new regulatory settings. Together, these factors underpin our confidence in our normalized EBITDA of $13 million to $19 million and positive operating cash flow for FY '27. FY '26 was about proving the model, deliberate investment followed by disciplined execution, converting into a decisive turnaround in earnings and cash generation. The scale we've now built together with a strong exit rate from FY '26 has moved better through a critical inflection point. We're now building towards sustainably self-funded profitable growth, and the Board and management team are focused on converting that momentum into sustainable returns for our shareholders. Thank you for your continued support. We'll now open the line for questions.

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

A couple of questions. Just on Slide 3, you've given a really useful sort of guide on the operating cash outlook, indicating that operating cash in the first half for '27 should be positive, albeit a more modest contribution in second half weighted. Is that -- again, should that basically match up with the EBITDA profile for '27 as well?

It should -- as we work through that EBITDA guidance range, the modeling cash flow suggests that it is going to track that. We've obviously got a range out there that varies. And as such, we expect cash flow to move in line with that. But yes, as we move up through that range certainly target the top end of that, we expect cash flow from an operating standpoint to largely track that.

Okay. Just in terms of investment required for '27. So I think your investing cash flow for the last 12 months was about $9 million. What does that number sort of look like for '27? Is it sort of a similar level of investment required?

Yes. We're acutely aware, as you'd expect, Phil, of our cash investment in our product development. The wildcard launch that we've made recently has been a big car by the team and an excellent product that we're excited about. But we're acutely aware of cash. So our expectation of investment in the product for the year ahead is marginally ahead of where we were in '25, largely offset by that operating cash flow that we expect to generate. And it's that investment into the product that we think gives us the long-term sustainable competitive advantage. It allows us to move away from that higher cost generosity line, increasing our net win margin. And it also sets us up for success in a world where regulatory reforms are really going to make this a product-led game and investment in products, reusable product on our proprietary technology stack really should be where our investment is going to be focused to continue that differentiation strategy and set us up for long-term profitability.

Yes. Understood. Just on that product you mentioned, Wildcard, -- can you just talk about what you're expecting to see in terms of key metrics on the back end of this? I mean presumably, it's an engagement -- you'll see levels of engagement rise. It's obviously in the same game multichannel. So I imagine the margins are quite reasonable. So yes, just be interested to see what you're expecting to see on the back end in terms of outcomes here. And then another question is sort of how did this product come about? Maybe you can talk a little bit about the genesis and without giving away too much of a secret sauce.

Yes. It's really interesting, Phil, and I'm really happy to talk about it that the genesis of the Wildcards idea actually came from one of our hack days, which is where we get the entire organization in a room and spend 2 days working out of our day jobs and into what great new experiences for our customers can look like. And this was a winning entry from our A Day last year. And I think it's a really important staff engagement tool to say that we take the products that our people come up with to understand our customers really well. We take those ideas really seriously, such that we've made this the hero product for launch for this calendar year. We're incredibly excited by it and the team did a great job in bringing it to life. And I think you'll see when you have a guidance over the next few days, it is a highly engaging product. And it allows customers to engage much more deeply with the better app during a game. Obviously, there's a prohibition on live betting in the app, but this is a really unique engagement tool that can increase time in app and increase engagement during a Same Game Multi. We think it's very shareable, very talkable, very easy to ask you which leg of your same Game multi you should be playing a wildcard on. So really, what we're going after here is SG multi share of wallet. And then ensuing games, we think through cross-sell opportunities into racing, leveraging the live tracker, leveraging the Sky feed that we've got and using that app engagement time as a way to increase frequency for those market segments. So we're really excited about it. We hope our customers are as well, and we're genuinely looking forward to seeing how it goes over the AFL into U.S. sports and then a racing version to be launched prior to Sacingarnival as well.