Entain Plc (ENT) Earnings Call Transcript & Summary

Everybody, and thank you for joining us for our interim results. And first of all, I'm delighted to be here to be able to say we are delivering a good set of interim results. Our lineup today is the same as we had in March. We've got Rob Wood, our CFO and Deputy CEO. We've got Sameer Deen, our Chief Commercial Officer; and at the end there, we've got Satty Bhens, who's our Chief Product and Technical Officer. Anyway, so to business. First of all, I'm going to kick off with a reminder of our strategic priorities, and I'm going to give a brief overview of the performance and the strong progress that's been achieved during the first half of this year. Rob is going to take you through the financials. And then Sameer and Satty are going to take you through more details about what we've been doing and specific examples of how we're improving our operational performance. And then it's going to be back to me so I can touch on BetMGM. I'll do a wrap-up, and then we'll open it all up to questions. So let's start with a reminder of who Entain is and what we do. We are proud to be a leading player in the global betting and sporting market. And we do that by providing customers with engaging experiences enjoyed within the safety of market-leading player protection. Our strategic priorities are clear. First of all, organic growth. And you're going to hear shortly about some of the things we've been doing to drive performance in our must-win markets. Margin expansion. Bob is going to talk you through the financials, but he's also going to talk you through the progress we've been making on Project Romer. And then last, growth in the U.S.A. supporting BetMGM to be successful in the largest and fastest-growing sports and betting market in the world. Now when I first spoke to you, I was in March, I was clear that 2024 was going to be a year of transformation. We have to have the business laser focused on fixing the things to get us back to structural growth. And that is exactly what we have been doing, day by day, week by week, month by month to improve our operational execution to return on the group back to structural growth. Also said back then that while I was an interim CEO, I would not be a caretaker CEO. So I have definitely all my sleeves up and now have focused on keeping the business going forward on execution and delivery. And to be honest, I am really delighted with the work that the team has done. We have achieved good results in the first half and the progress we've made with operational improvements is pitiful to the future. We ended H1 ahead of expectations, with Q2 outperformance being driven by both an improving growth in our underlying performance and also good margins at the euros. In our must-win markets, we have now seen Brazil return back to very strong double-digit growth. In the U.K., we have APIs that are moving forward at pace that give us confidence in getting back to growth in that critical market for us. So these results demonstrate that focus on operational excellence is working. Good inputs lead to good outputs. There is just a somewhat frustrating lag factor in getting there. So the good news is that we are starting to now see the delivery of those improvements. So as examples. We have new Bet Builder that started the EPL. We've simplified our customer journeys. We've improved the app experiences. We've got single account, single wallet for Nevada. We've got a new marketing campaign for Sportingbet. We've got digitalized shop windows and there to mention but a few of the things that have been put in place in the last 6 months. So that means that the green shoots that I talked to you about at the last update and now turning into real tangible results. BetMGM is also a business that is in a transformational year. They delivered EUR 1 billion in NGR. Now with enhancements to our product offering, we are starting to see improving performance as well. Our efficiency program, Project Romer is also progressing well with increased confidence, which is why we've increased the net savings target to at least GBP 100 million by 2026. So in short, the Entain has left the station. It's going in the right direction. It's on the right tracks and day by day, we are increasing momentum behind the business. But there is still a huge amount for this business to do, a lot to do, a lot of opportunity. And that's why having Gavin Isaacs jump on board the moving Entain train at the start of September is great. We're very excited to have somebody hobby's experience and reputation to be joining us. The Board has a great deal of confidence in him that he will continue to build on the momentum that we have now. And I personally am very excited to be able to be partnering with him as I transition into the new shareholder. So with that, I'm going to pass on to Rob to run through some of the financials. Thank you, Rob.

Thanks, Stella. Good morning, everyone. As usual, I'll take you through the financial highlights from the first half. I'll provide color on our regional performances, our efficiency program. And finally, I'll discuss EBITDA guidance and our upgraded NGR outlook for the year. So on to the financial highlights. And as always, all the revenue growth numbers that I quote are in constant currency. So kicking off, group NGR was up 8% year-on-year on a reported basis or flat on a pro forma basis, both including and excluding the U.S. Within that, I'll comment separately on the U.S., then online ex U.S. and then retail. U.S. firstly, and as announced last week, BetMGM delivered H1 revenue growth of 6%. Secondly, online ex U.S., which came in ahead of expectations, growing 11% on a reported basis or up 1% on a pro forma basis. This was driven by a long-awaited return to pro forma NGR growth in Q2, which has arrived a quarter or 2 ahead of expectations. However, a closer look at Q2 shows the benefit of the euros and to a lesser extent, Copper America. We were exactly flat year-on-year in Q2 up until the start of the euros in mid-June, yet we ended Q2 at plus 5%. So through both strong volumes and favorable margins, the euros and Copper America added around 5 percentage points to our NGR growth for the quarter, which should be considered one-off versus an underlying growth rate of flat year-on-year. Thirdly, retail now and NGR was up 1%, but 4% lower forma basis, which was in line with expectations. Moving on, EBITDA of GBP 524 million was up 5% year-on-year or down 4% on a pro forma basis. GBP 524 million was ahead of our expectations for H1, and I'll talk through the moving parts on the next slide. Adjusted EPS ex U.S. came in at 21p. Leverage ended the half at 3.2x or 3.7x, including the DPA liability and liquidity remains strong with over GBP 1.3 billion of available cash. Finally, in line with our progressive dividend policy, we've confirmed that the interim dividend will increase by 5% year-on-year to 9.3p per share. Turning now to the EBITDA bridge, which breaks down where the 5% year-on-year growth comes from by segment. Firstly, entirely as expected, U.K. EBITDA was down materially at GBP 43 million lower year-on-year, primarily reflecting regulatory measures introduced in online in the second half of last year, which we lap by the end of this year. The International segment saw EBITDA up GBP 44 million year-on-year, driven by both underlying growth and the benefit of acquisitions, including a GBP 23 million benefit from [indiscernible]. In CEE, EBITDA was up GBP 33 million year-on-year, thanks to the STS acquisition as well as strong growth from SuperSport in Croatia. Corporate costs were GBP 4 million adverse year-on-year, offset by a GBP 10 million year-on-year benefit from closing our B2C esports brand last year. Finally, FX was a bad guy in H1, creating a GBP 16 million year-on-year negative impact on EBITDA as sterling strengthened through the half. Conversely, we see an FX good guy in the balance sheet as our currency approach to debt financing gives us a natural FX hedge. The next slide looks at revenue growth by market as well as EBITDA and EBITDA margin for each of our new segments across both online and retail. Lots of numbers on the page for you to review, I'll just hit some key points now, starting with U.K. Online, which was down 8%, very much in line with expectations following [indiscernible] measures in H2 last year. Importantly, as you'll hear more from Sameer later, we're pleased with the progress in the U.K., and we now look ahead with increased confidence of returning to growth by the end of the year. What drives our confidence? What drives the return to growth? Simply put 2 things in combination. One, our product and player journeys are improving, which is leading to improving revenue run rates. And 2, we lapped prior year adverse changes during H2, meaning that the primary cause of the minus 8% decline in H1 washes out before year-end. To the first point on run rates, we can now evidence improving run rates. We can see the green shoots. For example, our recreational customers are in year-on-year growth. Actives are in year-on-year growth. They were up 12% in H1. And whilst H1 NGR was down on H1 of last year, it was slightly up compared to H2 of last year. So there's half-on-half progression. And then to the second point on lapping prior year regulatory changes, we can now be even more confident that it will lead to year-on-year growth because spend per head has finally stabilized since the drop in H2 last year. So while spend per head, we're still down in H1 on a year-on-year basis, we will annualize flat spend per head by the end of the year, and hence, the year-on-year decline falls away. Sameer will show you later what's driving the stabilization in spend per head, so you can see it for yourselves. In conclusion, for U.K. Online, we have increased confidence of a return to growth by the end of the year. Similarly, we also expect U.K. retail to return to growth in H2 as the shape of the year reflects cabinet rollouts in our marketplace, and we complete our rollout of next-generation market-leading cabinets in the next few weeks. Elsewhere now, international NGR was up 3%. The biggest story within that is Brazil, which returned to strong double-digit revenue growth in Q2, which was ahead of schedule, delivering NGR growth across the full half of 28% year-on-year. That earlier return to growth or early returned to strong double-digit growth, drove our pro forma online NGR growth in Q2 to be flat prior to the euros, whereas we were otherwise expecting low single-digit decline. You'll hear much more on the Brazil turnaround from Sameer later. Outside of Brazil, the rest of International performed in line with expectations in aggregate with Italy with Australia a little ahead and Italy a little behind. Australia returned to flat year-on-year for H1, thanks to growth in Q2 despite the softer market conditions. However, Italy was down 3% across online and retail as customer-friendly football margins in Q1 more than offset volume growth and volume growth was a little behind expectation to. No retail in Italy was particularly impacted by the football margins, given it has a much higher weighting of football, and that's why international retail was negative in the half. I won't spend time now talking to all the other markets, but would make the point that the graphic on the right-hand side illustrates that our list of challenging markets is shrinking. Only the U.K. and Netherlands were a meaningful decline in H1. And of course, we expect the U.K. to return to growth soon. So that leaves only the Netherlands, where the regulatory regime is tightening, and Netherlands represents only 3% of the overall mix. Before we move on, let me just touch on online EBITDA margin, which was 24% for the first half, and we remain on track for our full year guidance of 24% to 25%. The next slide now, this outlines cash flow and net debt movements during the first half. As always, a more detailed cash flow is provided in the appendix. You can see underlying free cash flow was GBP 324 million, a slight improvement year-on-year. Leverage at 30th of June was 3.2x or 3.7x, including the DPA liability. On net debt, there is an FX translation benefit of approximately GBP 90 million due to the strengthening of sterling that I mentioned earlier, offsetting the P&L impact. And lastly, liquidity remains strong with over GBP 1.3 billion in available cash, helped by refinancing activity in the first half. So as we look forward, all our near-term refinancings are done, leverage is stable and liquidity is strong. Moving now to Project Romer, our efficiency program. As a reminder, our focus is to simplify our operating model, enabling us to be more agile in our execution and deliver better experiences for our customers and for our colleagues. And I'm pleased to report that we remain on track for our original targets of GBP 70 million of net savings by 2025. And as announced this morning, we've identified further efficiencies across a long list of initiatives, which will result in achieving at least GBP 100 million of net annual savings from 2026. The scope of the project now extends to almost our entire addressable cost base, excluding marketing and customer bonusing, and I'm genuinely delighted with the work to date. However, there is a huge amount more to do to deliver these benefits, and I'll keep updating on Romer as we progress through the next couple of years. Romer is a key driver of our strategic pillar and margin expansion, and we continue to target a 28% online EBITDA margin by 2026 and towards 30% over time. Now moving to our outlook for 2024 and what's new since March. Firstly, as I touched on earlier, online NGR in Q2 was ahead of our expectations for 2 principal reasons: the one-off benefit from stronger-than-anticipated margins at the euros and then the earlier than planned recovery in Brazil. As a result, we're upgrading our guidance for the full year online NGR pro forma growth to low single-digit positive in constant currency, which compares to prior guidance of low single-digit negative, and we continue to expect to exit the year more in line with market growth. In addition to the NGR upgrade, we are also introducing EBITDA guidance for the year, and we forecast a range of GBP 140 million to GBP 190 million compared to prior expectations, the main moving parts within that are the Q2 online NGR outperformance, which equates to a GBP 15 million one-off EBITDA uplift, a one-off benefit of approximately GBP 30 million due to timing of regulatory changes, which are now coming later in both Brazil and the Netherlands. Those first 2 combined equate to an EBITDA uplift of GBP 45 million in constant currency. However, those upsides are partially offset by a GBP 25 million FX headwind for the full year versus our prior FX expectations. This guidance also includes the marketing provision we discussed in March, which gives us the flexibility to invest behind our stronger performances in key markets like the U.K. and Brazil. So in conclusion from me, as Stella said, we have a lot to do, but we have started the year well, and we've upgraded 2024 guidance. Project Romer is exceeding expectations, delivering a 2026 upgrade and supporting EBITDA margin growth. Our recent acquisitions continued to perform and now our organic business is starting to perform to, led firstly by Brazil and with the U.K. to follow. And we will capitalize on our improving performance with the marketing provision, which in turn will drive fresh momentum into 2025 and beyond. With that, I'll hand over to Sameer for more detail on Brazil and the U.K.

Thank you, Rob, and good morning, everyone. As Stella mentioned, returning to organic growth requires winning in 2 key markets: the U.K., our single largest market and Brazil, our fastest-growing market. Today, I will walk you through our first half commercial results, followed by a more detailed operational update on Brazil and the U.K. Starting with Brazil, I am pleased to announce we have made significant progress and are delivering on the commitments we laid out in March. We saw a sequential improvement in growth from 9% in the first quarter to 48% in the second quarter, and we expect the positive momentum we've built in the first half to continue in the second half. We are taking the same operational turnaround approach in the U.K. as we did in Brazil. And while the U.K. is earlier in its transformation journey, we are seeing encouraging green shoots. We stabilized the decline in the first half of the year, and we are confident the U.K. will exit the year in growth. Combined with our other markets, our overall online business returned to growth in the second quarter off the back of a strong euro. We expect this performance to continue, and as Rob guided, deliver positive low single-digit growth for the full year. Now let me deep dive into Brazil, where I'm extremely pleased with what the team has achieved in the first half of the year. Looking at acquisition, first-time depositors are trending well above 2023 and 2022 levels driven by 2 key marketing changes. First, would significantly increase performance marketing investment at improved payback periods, and we leveraged 365 scores to drive new FTDs to Sportingbet. Second, we revitalized our Sportingbet brand with fresh creative and increased advertising exposure on Open TV, which further supported performance marketing conversion for the business. At the same time, net revenue retention has stabilized, driven by our improving player experience and localized product. Looking forward to the second half, we will maintain course on our current strategy, while working closely with Satty's team to further tailor our products to the Brazilian market. And finally, driving a smooth transition into a regulated Brazil remains top of mind for us. We are ensuring all necessary changes such as tech and regulatory requirements are ready ahead of the anticipated January go-live date. Moving on to the U.K., where I'm pleased to note we are seeing green shoots of progress thanks to the hard work of our new U.K. leadership team. As you can see from the chart, we have stabilized higher spending cohorts while also continuing to grow our recreational player base. In turn, as Rob mentioned earlier, this has stabilized our spend per head. We accomplished this by simplifying some of our core customer journeys, improving our site speeds and introducing Ladbrokes and [indiscernible] coins new rewards and engagement program. Ladbrokes alone has driven an increase in player volumes and more importantly, improvement in conversion to real money actives. In terms of the second half of the year, we have 2 main objectives. First, on marketing, we will shift our focus from driving brand awareness to brand consideration. We're going to do this by optimizing our media mix and launching Omni channel promotions through our retail network. And second, on product, we're going to work closely with Satty to release our in-house pet builder, head of the EPL season starting later this month. We will also redesign our Ladbrokes front end while we continue to enhance site-speed and UX across the U.K. and the rest of our portfolio. So to wrap up, as we continue to execute against our U.K. strategic priorities and annualize against our second half '23 impacts, as I previously mentioned, we expect the U.K. to exit the year in growth. With that, I'll hand over to Satty to elaborate on our progress in product and tech.

Hello, and good morning, everyone. In March, I talked to you about our road map for product improvement and how we are working on both scaling our localization capabilities and accelerating our product velocity. So today, I want to update you on, one, how we are doing -- progressing with that road map; and 2, the difference we are making to our customers and their engagement. So starting with the road map update. You'll recognize this list from our previous presentation. It represents what we've already delivered to customers this year. So let's quickly start with sports. Partly after launching the BetMGM app in Nevada for the Super Bowl weekend, we integrated our MLB and NBA offerings powered by Angstrom, 100% of our SGP markets for MLB were in-house. And our in-play micro bits have also landed really well. And we've seen great momentum over the MLB season. Angstroms play-by-play models saw BetMGM increased the depth and breadth of its baseball offerings, including industry-leading home run markets. We were able to offer all times the number of markets we offered in 2023. We doubled our weekly handle on MLB Single Game Parlays. And a proportion of our actives placing an MLB Single Game Parlay bet was up 40% relative to 2023. Being live for MLB and NBA has also set us up well to go live with our fully integrated Angstrom NFL and college football product for the upcoming season. Switching gears to the U.K. Ladbrokes and Coral have seen meaningful gaming improvements. Ladbrokes, our loyalty and engagement program based on our coin economy capabilities is showing impressive player engagement. Since launching average player days are up 13%, contributing to a rise in the average number of games launched, up over 30% year-on-year. On player experience, our teams have been working flat out to fix the basics, including over 200 UX fixes in the first half of the year. More importantly, perhaps, we've been simplifying the core customer journeys, especially around the Bet Builder experiences and responsible gaming flows. Taken all together, we've trained up our UX, and this has given us a starting point for a fuller much deeper design refresh standing in Q4 and going into next year. Turning to Brazil. Customers are enjoying the faster site speed. In fact, all our markets benefit from our performance work in Brazil. While we have refreshed the app and the brand together with Sameer's team, we've also improved key product journeys. For example, on payments, a quick deposit using PICCs surpassed 1 million deposits just weeks after launch. On sports, we launched our tour products. 83% of our actives had used tour product weeks after launch. As you can see, we're delivering features that resonate well with our customers. Next slide. We have an action-packed pipeline to come later this year. And the great news is that much of this is just weeks away. But I also want to point out that we've also added more product improvements this year. And we can add more to H2 because as discussed in the last presentation, we have been increasing our product delivery velocity. We are now able to release every 2 weeks. We are well on track to release 4x more improvements in 2024 than we did in 2023. We're also on track to launch single account single wallet in Nevada, a huge experience boost for customers traveling into Vegas. On sports, I'm also excited to share that we're launching our in-house Bet Builder product for the EPL season start. It's no secret, we have lagged here, but now we own our own red map, and it's getting pretty exciting for us. Beyond Bet Builder and Single Game Parlay, we continue to improve the [indiscernible] experience. And next up, are improvements to bet tracking and cash-out journeys for all our key markets. On gaming, we will continue to work on player loyalty and engagement tools, building on the success of Ladbrokes, more exclusive content, both in-house and third party, and we'll continue to build on our Jackpot experiences. Finally, on player experiences, we're continuing the relentless focus on app speed upgrades. We have 2 leading-edge speed innovations ready for H2. Each will make a big difference to our app speed metrics. We also have several bigger design improvements on the road map, which will modernize our end-to-end experiences, provide more consistency and include premium experiences in key journey moments. Now the KPIs I've shared today are just a handful of the improving data points we are seeing and that we continue to monitor. Localization continues to be critical, ensuring we have the capacity to focus on market-specific needs. We have doubled our teams dedicated to our must-win markets. And by the end of 2024, we'll have localization capabilities in all our key markets. Of course, the beauty of coupling this local expertise with our global platform means any improvements in one market can be easily leveraged by other markets. So in summary, a lot going on. And we have evidence that the product is getting better, and we can deliver more frequently. Our focus on Brilliant Basic is working, and we're seeing that in our customer feedback. So we are tremendously excited about the delivery of our pipeline in H2, particularly our Entain powered single game pale product and our new in-house Bet Builder. With that, I'll now pass you to Stella for a little bit more on BetMGM and her closing comments.

Thank you, Satty. And so let me talk to you briefly about our joint venture, SyMGM. Firstly, we are strongly aligned with MGM in our aspirations for BetMGM. And that is to build a strong, profitable business for the long term. And as you heard last week, BetMGM's iGaming business is already strong with a very healthy market share at 22%, and it is highly profitable at a contribution of $400 million. And remember that, that is being delivered from just 4 U.S. states plus Ontario. So you can imagine how exciting it is the prospect of Alberta opening up very soon. Conversely, both parents recognize that online sports betting is very much more of a work in progress. We know the market share has weakened, but the reality is much of the great progress that we've been making in our sports offering is still to fully hit the market and connect with the customer. And as I said earlier, inputs do lead to output, but there is just that slightly frustrating lag factor. So as we implement initiatives like single account, single wallet in Nevada, having the Angstrom capabilities for the first time for NFL and creating more integrated customer journeys. We are going to be able to build a much deeper understanding of how BetMGM will optimize its sports offering. And critically, this will guide the choices for strategic investments to deliver a future overall EBITDA of at least $500 million. Given our strength and profitability already in iGaming, we are confident in delivering this goal. And indeed, we expect continued growth over the long term. So back to the main Entain results. In summary, we have a clear and straightforward strategy. Simplicity is beautiful, simple strategies that the entire organization can get behind. That is what drives the momentum. And we are making some really good progress and seeing the evidence coming through our improving underlying performance. So we are in a positive trajectory with Q2 being better than expected and Q3 off to a promising start. And thus, we are able to upgrade our guidance for this year and keep the high level of marketing support that we promised to the market. And that is the first time that we have done our upgrade for quite some time. There is plenty of hard work still to do, but there's also plenty of upside and keep building that momentum. And so I am confident that by having Gavin soon in the driving street -- driving seat, can't speak, driving seat of Entain train. He will with a great Entain team build on the momentum that we have today. So thank you so much for listening. I would now like to open the floor to any questions that you may have.

Hello, sorry, as usual, you wouldn't mind stating your name your company, limit yourself to 2 questions. We have an iPad for those doing virtually. Amy will be helping around the room.

James Rowland Clark from Barclays. My first question is the higher losses that you've guided to for BetMGM for this year. Could you just confirm whether that needs additional taxi injection compares? Secondly, on the guidance, it's a GBP 25 million increase to EBITDA versus consensus expectations. And if you look at your online guidance on the top line, it looks like a sort of 4% improvement to revenue guidance or revenue growth. So that looks like about a 10% drop through if you sort of translate that into the sort of EBITDA to sales drop-through. So that feels quite low. Are you giving yourself more space for marketing? And then finally, if you're putting down you're pushing up FY '24 EBITDA guidance by GBP 30 million for later regulatory change. Does that push down 2025? So any comments on that?

Okay. Thanks, James. First of all, I think the man is going to answer most of those questions is next to me, Rob, would you take some of those questions?

I can, of course, yes. So let's start with BetMGM. Yes, to be clear, the parents do not expect to inject further capital. You remember 10 days ago with the update, there was reference to debt financing. So the expectation is that as and when further capital is required, it will be secured by debt facility at the subsidiary level. And therefore, there's no impact on [indiscernible] cash flows for the foreseeable future. In terms of the upgrade for the year, so I make a GBP 20 million uplift on where company compare consensus at. So at the midpoint, 1065 versus company compare consensus at 104. The answer to your question, yes. So online driven in online NGR driven in Q2, but we are standing behind the marketing investment that we called out in March. So for example, in Brazil, we're seeing fabulous returns on the marketing investment. Sameer's chart showed what's happening to FTDs at the moment. Our FTDs across the whole of [ Venten ] were north of 20% growth in the first half. So we're seeing great returns on marketing, and we expect to invest behind the growth in momentum in the U.K. I know U.K. is still in decline on a year-on-year basis. But as I tried to explain during the presentation, on a run rate basis, we have growth. So it's continuing to invest in marketing behind the U.K. as well. And then the last question was around the impact of the regulatory delays on 2025. I would say no impact because the same changes are still coming. Brazil is still regulating. The KSA in the Netherlands are still implementing the new measures around deposit limits. It's just that it's come later than expected to the benefit only of 2024. So the Netherlands change comes in, in October. So therefore, no impact of 25%. And Brazil, our assumption is it regulates 1st of January 2025. So again, no impact on 2025.

Estelle Weingrod from JPMorgan. The first question I have is on the U.K. I mean, if you look at the NGR growth 3, you mentioned minus 10%. So it's still getting worse versus the previous quarter. So just to understand a bit better why it's not at least stabilizing and perhaps some comments on the competitive landscape in the U.K. Also just a question on your guidance for your online margins in 2016 with the upgrade today on Romer? Does it change the guidance? And perhaps just the last one as well on BetMGM since some of the investment in H2 is coming from bank debt. What sort of magnitude there should we expect for BetMGM in terms of the editor debt for H2?

Thanks for the 3 questions. I think I'll take the first one and maybe Sameer adds to it, which is a question about the NGR performance in the U.K. And I think the correct answer to that question is we're seeing the KPIs improving significantly independent of the euros. But one of the things that we have been lapping is the fact that the regulatory changes hit the business very hard. Now we have in the U.K., the new voluntary code that is agreed by the industry, which it started to be implemented as we go forward. So we are working to the new voluntary code, which sets better level playing field, which we know is going to be helping us get back to the growth figures because the consumers and customers going to be having a journey that is expected and in line with the rest of the industry. So there are some significant changes that are coming through from that side, but also the number of initiatives that are hitting the U.K. are just starting to have a material impact. So when we talked to you back in March, we were diagnosing the problem, then you diagnosis the remedy is through, and then you start to see them a bit later on, which is why things like the that builder for the EPL is so important. But there are many other things taking place in the U.K., too. Sameer, do you want to add anything to that?

Yes. I think just to the point on the user experience, I think we rolled through a lot of changes on top of a lot of changes in last year. And I think just simplifying those journeys, letting customers sort of absorb that, making the play easier, improving performance or all of those things that bring customers back and sort of impacted your impact retention over time. So as Stella said, a lot of that is going into production now. And so we're pretty confident on what we're seeing that it will improve in the next couple of quarters.

Thanks, Sameer. And we're pleased with how Q3 has started for the U.K. as well. So we're having evidence that it's definitely going in the right direction. So there's a second question, which was guidance for 26, I think, on Romer.

And in particular, EBITDA margin is the question. So guidance unchanged for 2026 EBITDA margin relative to November when we pushed it out, 2 moving parts to draw your attention to. One, the room uplift should increase the guidance, absolutely right. Two, you might remember, in March, we guided to the fact that we were closing the new opportunities segment and moving that cost into online. Therefore, for the 2024 EBITDA margin guidance, there was a reduction because of the reallocation of costs. So when you roll that forward to '25, '26, you've got virtually equal and opposite movement. So Romer is an increase to '26, but new opportunities, adoption of that cost base reduces it back down again and where as we were.

And can you take the last one on BetMGM debt?

Yes. So Gary, Deutsche leading the charge in the U.S., very much in discussions at the moment. I would anticipate a facility no more than, say, $200 million.

Monique Pollard here from Citigroup. A couple of questions from me. The first, going back to BetMGM. What I was trying to understand is -- when we have BetMGM update, my understanding was that the investment is really centered around iGaming and bank facility is underpinned by the fact that by gaming is a EUR 400 million annual contribution. If you then found that you were getting good momentum from some of the new initiatives in online sports betting, particularly post kickoff of NFL, could we see additional investments in sports betting? And would that then need [indiscernible] from the parents rather than from the financing facility? That's the first question. The second question, just on the U.K. and [ ionline ]. You've got a new management team that you talked about in place there. So just wondering sort of if you could give any updates on either things like where they came from, some things that surprised them when they started and things that they've been -- seen as very easy own goals then.

Great. Well, thanks for both of those questions. I think, first of all, I'll answer the first question in a qualitative way, and I'll let Rob answer it in a number sort of awake that's what we do, right? So first of all, yes, incremental investment in iGaming because iGaming is really working for us and taking share and building that business makes a great deal of sense. I think to the point that I said in the last part of my presentation, we made a lot of changes for online sports betting. And A lot of those things haven't really connected with the market yet or the customer. So we're going to learn a huge amount about how competitive we can be there and what share we should aim for. But it should be against the context of getting to that goal of at least $500 million worth of EBITDA over a reasonable period. But it would be crazy of us at this stage not to take the data in and see how big and powerful that BetMGM can be. So very data-orientated, learning from what we see in the marketplace and then making the strategic choices for our investments. And I think we're in the best place we could possibly be in understanding what the drivers are and what our potential could be over time in online sports betting. We're learning as we're going with the better product. On our iGaming, we're very, very confident to our position. So anything to add to that?

So most importantly, yes, that incremental investment is in iGaming in the second half of the year versus previous expectations. But as we announced late last year, 2024 was always going to be an investment year, and so there was already budgeted significant investment in OSB. iGaming, we are seeing great results. Last week was a record week for the business in iGaming, from an NGL perspective. The week before was a record from an active perspective, so that the train just keeps moving on in the right direction we want to invest more behind it. So to answer your question around OSB, we already had in our guidance anticipated significant increases in OSB player acquisition, particularly in Q3, Q4 as the new NFL season launches when we feel like we're much closer from a product perspective with the 2 market leaders. So already accounted for, I would say, but it is worth pausing just to reflect on the profitability of BetMGM. If you were to look at EBITDA without the investment that we make in new player acquisition, we're already run rating at about $500 million of EBITDA, right? So the reason why you drop all the way to negative is a decision to invest in player acquisition because the returns are there and we want to grow the biggest business we possibly can in the world's largest and fastest-growing marketplace. So that's the decision and exactly how much we invest will depend on how the returns are looking as we ease through the next couple of years. But it is good when you look back at the things like the state cohorts vintages, as we call them internally. So if you look at 2021 new state launches, they're all expecting to be contribution positive this year. If you look at 2022, state launch states, they're all expecting in aggregate to be contribution positive this year. So the payback is there. But if you want to build a big business and be competitive on the scale of the whole U.S. market, it does require investment in player acquisition at this stage.

Let me move on to the second question, which is about the U.K. and new management setup there. So I'm going to hand that over to Sameer because Sameer has been the architect of this, Sameer?

Yes. So look, from the U.K. perspective, we consolidated the management team across our retail and our digital business. So it's led by our former Head of Retail, Andy Hicks. I would say that I think he's done a great job. The first thing you did is sort of decouple hard European business that was -- so we essentially put the entire European business and U.K. business under one team. And I think it was just a little too much. And so he's really focused the -- we've decoupled that. So we've split that business up now into some of our other leaders across Europe, and we've really dedicated the team to solely focus on the U.K. and really focus on simplifying the product experience and also simplify the marketing, right? I would say that we are very, very brand-focused, brand heavy, and we're really focused on consideration. We really focused on joining the product development with the marketing at the same time, increasing our levels of performance marketing. So a little bit more directed to driving conversion and also have a new marketing lead who just joined us a few weeks ago. So I'm pretty pleased that the team is singularly focused on single largest markets and are executing and simplifying what our customers want from us.

I think the only thing I'd add to it is I think the change in [ tonalysy ] is really important in these things. So the U.K. wasn't getting the care and attention. I think it deserves. It wasn't set up as one unit in the way that Sameer has talked about and putting focus behind an area that is so important to us like this drives change. It drives a change in the focus of the product development team. It drives a change in focus in terms of the way the organization looks at it in terms of resource allocation. And so I think you can see you put the input right you start to get the output coming through. And we're very confident, as Sameer said, of exiting year in growth in the U.K., which is a massive turnaround versus where we were.

Okay. I'm going to go to the lines. We've got David Brohan from Goodbody. So his first question is about the Australia performance. Is it volume or margin driven? And second question DraftKings customer surcharge. Our thoughts on that.

Okay. So I think as is the first one. Sameer, do you want to have a last [indiscernible] okay thanks.

I can take Australia yes. So the answer is volume driven with some margin upside, albeit the margin upside is a reflection of our own player management and improvements in horse rating margin capability in particular. So it is true to say there's a margin, but it's expected structural margin uplift. The rest is volume.

And then the second one was on DraftKings, wasn't it? Surcharge. So I think at this stage, we're observing it with interest. It's not necessarily something we expected to see, but I think it's a kind of watch this space, and we'll see what the customer response is. So that's really where we stand on that one. Somebody, I think I put their hand up.

Simon Davies from Deutsche. Three from me, please. Firstly, on BetMGM and the $500 million target that was, and what is a realistic period of time, and I completely accept that it depends on how much you want to invest in it, but that was the case when you had a previous target. Second was on retail in the U.K. and the rollout of the new cabinets. Can you give us a feel for how that is trading? And lastly, on Australia, it looks like we're going to get some advertising restrictions coming through what, if any, impact do you expect from those?

Okay. Thank you for those. So the first question was on BetMGM and time line. And it will surprise you. I'm not going to give you a definitive answer right now. But I think the answer is, if you look at the expectations of MGM and ourselves, we want to get to that figure in a reasonable period of time. But we want to make sure that we're doing it in the right way, which is why the critical period of understanding where we sit in terms of sports side of things is going to be very important to answering that question in terms of our strategic investments. But at the end of the day, we're definitely having a road map to getting to that figure within a reasonable period of time. But there are nuances involved just in terms of how far we feel that we can actually get our sports betting versus our iGaming businesses to work together, but it is definitely something that's top of the agenda, but we have a great deal of confidence of getting there in a reasonable period. The second question was on -- I think it's on Cascade rollout, the rollout of the new gaming machines in the U.K., which we're very excited about because it is definitely the next generation of gaming machine with real competitive advantage versus what's in the marketplace. Anything to add to that in terms of upside we're seeing?

I think we're seeing strong uplift from the star the Cascade machines. So we're excited about it.

Yes. And then Australia, I don't know if you've got any more insight on the advertising.

I could touch on that. So there is a consultation at the moment around advertising, potential advertising restrictions, also potential bonusing restrictions. So we'll wait to see what comes out of that before assessing impact. The one thing I would just remind is that we've seen it around the world in other marketplaces. When advertising restrictions come in, it tends to play into the hands of the larger established brands. And of course, in Australia with the Ladbrokes brand in particular, but also in [ Neds ] we have large established brands. And there's likely to be exemptions for racing where we're particularly strong as well. But that's the [indiscernible] space.

Joe Thomas from HSBC. Just a couple of follow-up, please. One, you were talking, of course, back in March end of February about the -- about investing as smaller operators are sort of Tier 3, Tier 4 operators tighten their regulatory approach, responsible gambling approach. Are you seeing evidence of that yet? Are you seeing -- and is that driving any of the U.K. outperformance right now, do you feel? And then secondly, again, back on Australia. You had a good performance. I think you cited the market there generally as being soft. Is it -- is the market generally still to that inflection point? I thought it had bottomed out there. That would be useful.

Thank you for the questions. So I think in the U.K., you asked about Tier 3 and Tier 4 operators and whether tightening of the regulation is impacting positively ourselves. We don't think we're seeing that at this moment in time. I think the new voluntary code doesn't come into full force until the end of August, actually, I think is that right time line. So I think we may see that going forward. So I think what's happening in the U.K. for ourselves is -- and the KPI is improving is purely down to the work that we're doing to improve our performance. So I think that might happen over the coming months. I think in Australia, yes, we've had a good performance, and I think it's been described very well. But we also have -- we have 2 things. We have a very good brand down there. We have a great management team down there. So as operators, I think we're very pleased with the team. And therefore, we should, in the long term, expect ourselves to outperform the market anyway. But I think the overall market does remain somewhat soft. I haven't got the exact figures to hand, but it is something where I think we are outperforming the competition.

Yes. And maybe just add. So we'll have to wait and see until the larger competitors report their Q2, Q3 numbers. Our sense is that our growth in Q2 was at least in line with market, hopefully, the right side. And part of that, just to explain is that we are starting to annualize now against some player changes that were made in the prior year, which impacted the top end of the customer base. So that's helping our growth and our relative performance to the market. And then as a marketplace, we're now lapping the introduction of BetStop, which was the national self-exclusion program. I think that was August of last year. So we're lapping that now. So the market, we would hope would be back into positive territory in the second half of this year. And of course, we hope to outperform the market. But I can't say that with certainty yet until we see the larger competitors that would produce their key team numbers.

Ivor Jones from Peel Hunt. In relation to U.K. regulation, could you just talk about the known on. You've mentioned financial vulnerability risk checks in the prior phase, so that's yet to land remember if you said that you have anticipated the stake limits on online slots wherever they might SI goes through. Is there anything else we should be thinking about that is still to land? And then the second question was about the capital allocation it. When you are a chair, will there still be one? Does it sit like a month ready to pop up and does it serve any purpose now it's come to a conclusion?

Okay. Thank you for both of those questions. I think on U.K. slots, which is a very interesting question. We were anticipating at the last update we gave to you or certainly one in March, that, that would have come into law in September with a sort of 6 weeks grace period and then be effective sort of like November time. Clearly, with the change of government, it has dropped a little bit of the priority list of turning that into law. However, if people remember, we're very happy about the change to the U.K. slot limits. We don't see it as a negative for our business. In fact, we see it as a positive for our business because I think there's a lot of people who play high-value slots with, say, Tier 3 and Tier 4 operators who have a poor player experience who probably will move at least certain of them will move to ourselves because we have a very good player experience. We have a great range of products. So actually, we welcome the slot limit that will, I'm sure, come. I don't think there's a question about it coming into the marketplace. I think it's a question of when. And we would see that as a positive for us. We are very strong in gaming. We have the ability to advertise our gaming products in our short windows now. So we see as an opportunity to cycle customers into our better products.

As the U.K. [indiscernible] limits now?

So it's still waiting. Sorry, yes. So that's -- there's probably Q1 of 25 or something like that, we would anticipate.

[indiscernible]

For online stores?

Yes.

They're not there.

They're no any -- Any limits.

What limit you [indiscernible] on state.

So for us, we have -- as you know, from years and years of new changes, we have other ways of looking after Slots customers. And as a result, we really don't have anybody left to stakes above the GBP 5 level, which is why we're looking forward to seeing. So whilst we don't actually have introduced today a GBP 5 state limit on slots, we're looking forward to it coming in because our customers don't play at those levels.

And then second one, which is a good question, which is then I become sure, am I going to have to deal with the monster of the Capital Allocation Committee. Well, I think I'll probably be chairing the capital allocation committee as well as being chair. Like the capital allocation committee is something that is working really well for us. It is a committee of the Board. It reports to the Board. It allows us how in-depth conversations about where we should be allocating our resources. And so far, there's nothing from -- as a Board member that what I would say is bad about it. It's not a monster. I think it's actually turned out to be a very constructive and productive committee. So it's going to stay. Yes.

And perhaps just add that now that we're pleased with the footprint that we've assembled over recent years, we have a fabulous footprint. Now a lot of the discussion points is where within our existing footprint, should we be investing more to upscale and strengthen our market positions within existing marketplaces. So that's a topic for discussion.

[indiscernible] from Bloomberg Intelligence. So the first one, just on Brazil. Could you perhaps talk about impeditive dynamics? And what is it that makes you confident about market share growth with respect to that competition? And then the second one on BetMGM. I know that the 500 million target has been discussed. But perhaps looking beyond that, how confident are you in the sort of a maturity margin and market share outlook? Is there actually some sort of trade-off that has to happen between margin and market share, especially when we think about some of the risk of tax rises.

Okay. Thanks for those questions. Brazil, obviously, a very exciting market, and it is competitive. But Sameer, would you like to talk about that?

Yes, let me take that one. Look, clearly, Brazil is very competitive, large market, big population and a lot of competition both from domestic players and from international players and a lot of people looking to come into the market, I think, post regulation as well. Look, I think it's -- there were a lot of own goals in Brazil. We have a historic brand. We have a lot of trust, but we have a lot of customers who are excited with what we've been doing from a player experience perspective. And just frankly, reengaging with a brand that is trusted in a market where there's a lot of new products, a lot of different sort of a lot of slide by night operations, if you will. And so I think we're confident based on -- it's hard to see where right now there's no sort of clear market share data given that we'll have a better sense of that post regulation. But based on our growth rates, based on what we're -- based on what we're seeing from our customers and customer feedback, I think we're confident that the business is on the right trajectory. And as [ Dale ] said, that when the inputs are right, we'll see the outputs play out over time, and that's what we've been doing. So marketing is good. The product is improving. And you can see that on our social channels, how people respond and how they engage. So I think we're happy about where we are, but obviously, we continue to execute and continue to focus and invest in the market.

Thank you, [indiscernible], Sameer sorry about that. The next question was about MGM, right, and about competitive dynamics. So first of all, I'll answer a bit of it, and then maybe Rob, want to answer it, too. It's -- the U.S. is a hugely dynamic market. It is the biggest and fastest-growing market in the world and still online is a tiny percentage of the total betting and gaming market in the U.S. But we have to learn as we go. And so there are things that are going to change. There is no doubt about that. Today, we know we could develop -- we could deliver the profitability that we're talking about by simply investing just in iGaming. That might just not give us the biggest opportunity for this business. And so the fact that we have the improvements that we have in place, the fact that we can learn from that and then we can make strategic choices. I think it's exactly the right time for ourselves and our partners in MGM to be working with the BetMGM team to say what is the optimal long-term journey to maximize the long-term profitability of this business. We know far more now than we did historically. We have loads of data points and we can take that forward. So I know that's always a bit of a frustrating answer because people want absolutely definitive knowledge, but it is work in progress, and we want to choose the right solution for the best long-term profitability, which is where we actually sit in that journey now. So it's really exciting with iGaming. We work in progress on sports betting, and we will learn and we will share as we go. Is there anything else to add that?

Yes. Perhaps on timing of when we move to GBP 500 million, there is an important point, which is largely outside our control and that is when the new states come online and whether they're gaming or sports betting. So for example, are we going to get New York iGaming next year or Ohio iGaming or Illinois iGaming, they would all be positive for 2026. -- if Texas, which is looking increasingly positive, if Texas OSB comes in, in 2025, that would be a negative on 2026. So there's other moving parts that are outside of our control and hence, relinquishing that target just gives us more flexibility to do the right things. In terms of confidence of at maturity, which is your question around things like EBITDA margins, to repeat what I was saying earlier, if you exclude the investment, the choice to invest in new player acquisition, the EBITDA margin of BetMGM is already well into the 20s, right? So it's already run rating for $500 million of EBITDA today in 2024, but we choose to invest both in iGaming player acquisition and in OSB, particularly when we've got Action Live in the NFL in the second half. And as I mentioned earlier you can see that iGaming profitability is there already, $400 million plus of contribution from that side of the business. And on the sports side, yes, it's taking longer. But if you look at 2022 state launches, for example, as a portfolio, they are expected to be contribution positive this year. So as we progress and that investment in player acquisition as a ratio of the size of the business you've already got falls, then margins come through and profitability come through, and we're looking for the flexibility to evolve that as we go based on what we learn and what we see the opportunity is looking like.

Okay. A question from Ed Young, Morgan Stanley. It's on BetMGM's guidance and kind of difference of BetMGM versus DraftKings and other peers. And can you explain the rationale and ambition to providing regular transparent guidance for financial disclosures, which would help the market understand value of the JV because at the moment, the stock price implies that the market is assigning 0 value or perhaps even a liability.

Okay. Great question. So first of all, I think we have tried to explain the inherent value that exists in the business, particularly through the great performance we have iGaming. But again, in terms of transparency, we are very much into trying to give as much transparency, and transparency comes with risk because we don't always have the answer to say definitively, we will reach x by point. But what we are saying is there is a huge amount of inherent value in BetMGM and we want to be able to do that journey to come back to what I said at the beginning, which is between ourselves and our partners, we want to make the strongest, most resilient long-term business out of BetMGM. And the fundamentals of the profitability that Rob has talked about there show that, that profitability is sat there and we have choices to make for the future. And it would be, I think, very shortsighted of us to choose to limit the opportunity of this great market opportunity. We are the #3 player. We have a great brand in BetMGM. We have a partner as equally committed to it, and we know we've got a very profitable business through iGaming. And we know we've got opportunities to increase in sports. And it is the responsibility of ourselves to try and make sure that we navigate to the best long-term solution. Rob.

That's a great answer. I just perhaps add that I'm sure we'll hear from Adam and team next year with a market event.

Okay. And then final one for me. [indiscernible] from SIG. U.K. is covered, Brazil, we've covered CEE. Poland. Any expectation update on iGaming and just a bit of competitive competition in the market.

So CEE consists of Poland, but it also has got Croatia in there. So let's not forget Croatia. That was also a great acquisition with Supersport. Supersport has been doing amazingly well, double-digit growth year after year, a great management team. I think in Poland is also a great market. It's been competitive in the short period of time. I mean there's been some quite aggressive promotions taking place, but we feel very comfortable in the long-term growth opportunities there. And we haven't got any update on iGaming at this stage.

Okay. Right. Thank you very much. I have to turn…

Well, thank you so much. I really appreciate you being here, and we look forward to the next update. It won't be me giving it, but I'll be in the background running the Capital Allocation Committee as well as the Board. So anyway, we'll be definitely looking forward to the next stage of the evolution, and I'm confident that the momentum that is now in the business will definitely continue because we are on the right track. Thank you very much.