Entain Plc (ENT) Earnings Call Transcript & Summary

Good morning, everybody, and welcome to Entain's 2024 results presentation. Now I know that neither you or I expected me to be doing this. But anyway, here I am. And the good news is that I am very confident that we are on track, and I'm delighted to be here to give you a strong set of results for 2024 for the group. I'm going to be joined here by Rob Wood. He is our CFO and our Deputy CEO. We've also got members of the IR team in the audience along with other members of our leadership team. So to the agenda for today. I'm going to kick off with a brief overview of 2024 performance and the significant progress that we have achieved during the year. Rob is going to take you through the financials, and he's also going to touch on current trading and our outlook. Then it's going to be back to me for more detail about what we have been doing to achieve our strategic goals and why our business is well set to deliver high-quality and sustainable growth in the future and also capture new exciting opportunities. And then finally, of course, we're going to wrap up so you can ask your questions. So let me start with a quick overview. Last March, I actually spoke very frankly to you about the challenges facing Entain. We had to face the brutal truth. We have to roll up our sleeves, and we had to focus on delivering operationally. Today, exactly 1 year later, I'm very pleased to report that we are seeing positive results. Returning to organic growth, both for NGR and EBITDA. We said that we had to deliver in our must-win markets, the U.K., Brazil and the U.S. each of which has exited Q4 with the KPI definitely in the green zone. I'm also pleased to say that we have positive momentum across the other parts of our portfolio, too. However, this is only the start of the journey. There is so much more to do. And I'm going to talk about that shortly. But before I do that, I'm going to going to hand over to Rob to go through the financials. Rob?

Morning, everyone. Thank you, Stella. So as usual, I'm going to walk you through the financial highlights of 2024. We're going to look at it by segment. I'm also going to talk about our guidance for 2025. And lastly, I'll spend some time talking through Entain's medium-term outlook and how we grow revenue, we expand EBITDA margin and most importantly, deliver meaningful cash generation. So starting with our financial highlights from 2024. And as always, all revenue growth numbers that I give are in constant currency. As a group, and therefore, including our share of BetMGM revenue, we delivered GBP 6.9 billion of net gaming revenue, which is up 9% year-on-year or up 4% on a pro forma basis. EBITDA of GBP 1.089 billion was up 12% year-on-year and crucially, that was driven by both the annualization of 2023 acquisitions and a return to organic online EBITDA growth for the first time since 2021. EBITDA finished at the top of our guidance range and in line with our January update. Adjusted EPS was 46.9p or 29.9p including BetMGM. Liquidity remains strong with over GBP 1 billion of available cash. Leverage ended the year at 3.1x or 3.5x, including the DPA, which is better than expected for a couple of reasons that I'll come to later. Finally, we've confirmed a second interim dividend of 9.3p per share. So the total for 2024 is 18.6p per share or GBP 119 million which is in line with our progressive dividend policy. This next slide is a clear illustration of Entain's recovery. Our online business is now firmly back into organic revenue growth. The #1 driver of online returning to growth was the lapping of regulatory changes in the U.K. in 2023. However, pleasingly, we got back to growth sooner than expected. How do we do that? There are many drivers, most of which you'll hear Stella talk through shortly, but two are worth emphasizing now. Firstly, for the first time in a long time, central platform markets such as the U.K. and Brazil saw meaningful product enhancements, for example, introducing coin economies for U.K. gaming customers. Secondly, we address the friction and complexity in our U.K. customer journeys, which was, of course, helped by the voluntary code. Those drivers enable the U.K. to return to market levels of growth in H2 and which in turn helped all the Entain return to market growth. So we're therefore already on track to deliver our targets of market growth in 2025. Moving on to the usual NGR breakdown by segment. And what's really pleasing is the sea of green bars. Excluding known regulatory changes in the Netherlands, you can see we delivered pro forma growth across all of our largest markets. Starting with the UK Online was up 2% for the year, improving significantly from minus 8% in H1 to plus 14% in H2. We expect the U.K. to continue with strong growth in H1 of this year before reaching a more steady state growth rate in H2. UK Retail was down 1% or up 1% on a like-for-like basis. We saw improving trends through the year, which was in line with expectations as we lapped prior year regulatory changes and also the benefit of the rollout of our new market-leading Kascada gaming cabinet. However, the shape of Q4 was a little different to expectations as favorable sports margins offset some market softness in gaming volumes, which have continued into 2025. Moving to international now, where online NGR was up 7% year-on-year and retail NGR was up 1% on a pro forma basis. Brazil continued to exceed expectations, following 48% growth in Q2 and Q3, we saw 65% growth in Brazil in Q4. We, of course, expect more moderate growth in 2025 as the comps get harder, and the market digests the new regulatory regime. Outside of Brazil, international performed in line with expectations, with Australia a little ahead and Italy a little behind. In Australia, the main focus for growth has actually been New Zealand, where we successfully migrated TAB NZ onto the Australia platform and then launch a new online-only brand, betcha. Growth in New Zealand has been good, up 4% for the year and up 7% in H2, but we're still waiting for the legislative net, which is the catalyst for the license market to grow materially. We believe that's on track to come this year but the delay does mean we're a little behind our original forecasts. In Italy, we've lost some share in online, although more recent data show stabilization. Looking by brand, we see that our large omnichannel brand, Eurobet, is performing reasonably well, whereas smaller online-only brands, bwin and Gioco Digitale have ceded some share. Elsewhere, we saw double-digit growth in Georgia and double-digit growth in other important markets that you can't see on this page, like Spain, Canada and Greece. On the downside, Netherlands was the only large market in decline last year as further revenue passes to the black market following new deposit limits in October. Belgium also declined from Q4 following regulatory changes to the product in September. We therefore expect continued underperformance in these two markets into 2025. But note, they only represent around 5% of our group revenue mix. Entain CEE, that continues to perform strongly, up 13% year-on-year in online and up 9% in retail. SuperSport in Croatia delivered impressive double-digit NGR growth every quarter. And in Poland, we're seeing increased promotional intensity from peers who are trying to eat into our market leadership ahead of potential iGaming regulation, but I'm pleased to say the team has done an excellent job and held share despite the competition. growing NGR by 8%, but it has required some EBITDA investment to get there. And finally, the U.S. As announced on the fourth of February, BetMGM delivered 2024 revenue growth of 7% and which was up 13% on an adjusted basis. And after a year of investment and strategic refinement, BetMGM exited 2024, a materially stronger business. And I'll let Stella talk more about that later. As a side note, when you study our accounts in more detail, you'll see we've taken some noncash impairments to reflect the updates I just mentioned on Netherlands, Belgium, Poland and New Zealand, but we have great positions in all 4 of those markets, with exciting opportunities to come, particularly in Poland and New Zealand. Turning now to the EBITDA bridge, and EBITDA grew 8% year-on-year or 12% in constant currency. Working from left to right. Firstly, FX was a bad guy to the P&L last year, creating a GBP 38 million negative year-on-year headwind. In contrast, FX was a good guy to the balance sheet, which I'll come on to later and that demonstrates the FX hedge in our business. Next, our 2023 acquisitions of STS, TAB New Zealand and 365scores contributed an incremental GBP 67 million to EBITDA. And then the most important takeaway from this chart is the next section, which shows that our organic business returned to full year EBITDA growth at 5% powered by online. That strong online NGR growth that we saw in the previous slides, combined with Project Romer translated into organic EBITDA growth online of GBP 70 million for the year. Our organic retail business fared less well. That came down GBP 36 million year-on-year for two reasons. Firstly, in the gaming market, there's softness that I highlighted earlier. Secondly, higher college bonuses in 2024, reflecting a good year for the business, which we can assume will normalize into 2025. Finishing the charts and corporate costs were broadly flat year-on-year as the benefits of Project Romer offset inflation. And we saw an GBP 18 million year-on-year good guy from closing the new opportunities segment late in 2023. The next slide outlines cash flow and net debt movements during 2024. As always, a more detailed cash flow is provided in the appendix. You can see underlying free cash flow was GBP 626 million or GBP 524 million normalizing for working capital timing benefits. Leverage at 31st of December was 3.1x or 3.5x, including the DPA liability. Now those numbers are materially better than expectations, but it's important to note, they're flattered by 2 factors: Firstly, the working capital inflow that I just mentioned, and that will partly reverse in 2025. And secondly, the FX benefit that I referenced earlier. If we back out the working capital benefit, leverage, including the DPA, would have been, say, 3.6x, which is about the level we expect to stay at in 2025 before we begin deleveraging in 2026, and I'll come back to that in a few slides. Lastly, liquidity remains strong with over GBP 1 billion of available cash, helped by refinancing activity in the first half of last year. So as we look forward, leverage is stable in 2025 and reducing from 2026. Liquidity is strong, and we have a clear path to significantly improve cash generation over the medium term, as I'll discuss later. Now moving to our outlook for 2025. We've produced the usual detailed guidance slide in the appendix to help with your modeling. So I'll just hit the key points here. Firstly, current trading, and I'm delighted to say that we've started 2025 strongly. Volumes are bang in line with expectations. And so far, sports margins are ahead of plan. So NGR is ahead but it's too early in the year to be banking margin upside. Across the full year, we expect online NGR to grow in line with our markets. So mid-single digits growth on a constant currency basis. And that's all volume-driven, assuming normalized margins. As you think about phasing, remember that prior year comps did get tougher as we progress through the year. In Q2, we lapped the Euros and Corporate America, and then in Q3, we lapped the acceleration in UK Online that I referred to earlier. And in Q4, we then lap operator-friendly sports results. So it's important that we start the year well, and that's exactly what we've done. Online EBITDA margin is expected to be approximately 25% in 2025, which is flat year-on-year despite absorbing approximately 2 percentage points of impact from the first year of Brazil taxation. So on an underlying basis, there's strong margin accretion coming through. Retail EBITDA is expected to be broadly flat year-on-year as normalized colleague bonuses are then offset by increased staff costs, which we outlined following the U.K. autumn budget last October. And finally, as BetMGM already announced, we expect 2025 to deliver $2.4 billion to $2.5 billion of net revenue and be EBITDA positive for the year. Moving on to the medium-term outlook now. And as this chart shows, Entain has a strong track record of NGR and EBITDA growth. However, in recent years, the lion's share of that growth has come from acquisitions, whilst our organic business absorbed approximately GBP 500 million of regulatory impacts to EBITDA. Looking forward, I'm very happy to say that we're back in a position where our organic business is once again the driver of our growth story. Our online markets are growing at 5% to 8% annually. And although I expect Entain to grow in line with markets this year, we are, of course, aiming to outperform them in the medium term. In addition to NGL growth, we will also grow our EBITDA margin as the benefits of Project Romer and operating leverage flow through. So what does this mean for cash? Whilst our NGR and EBITDA growth is clear, our cash generation has been challenged. The bars on this chart show a clean representation of adjusted cash flow. It takes bottom line cash flow and then removes only the cost of acquisitions and associated financing, dividends and working capital noises, particularly given working capital flat at 2024. And as you can see, over the past 2 years, adjusted cash flow has declined by approximately GBP 400 million. This is 3 main reasons: one, lost cash flow from UK Online caused, in particular, by the last of that GBP 500 million of regulatory impacts I referenced earlier; two, increasing interest rates. So that's just the impact of base rates rising, not the quantum of debt; and three, payments against the DPA settlement. We're confident that this decline is short term in nature, and we will return to strong cash flow generation in the medium term. In fact, we see a clear path to generating over GBP 0.5 billion of adjusted cash flow each year free dividends. Many of you already have this cash generation recovery in your models given previous outlook commentary. But to say it clearly now, there are three drivers that get us from where we are today to that GBP 0.5 billion. One, organic NGR growth and EBITDA margin expansion, which we're already delivering; two, dividends from BetMGM as it follows its pathway to $500 million of EBITDA in the coming years; and three, of course, conclusion of the DPA payments in December 2027. So these three building blocks get us to sustainable and growing cash flows of over GBP 0.5 billion in the medium term. And of course, with both cash generation and EBITDA growth, we expect leverage to trend favorably from 2026 onwards. So therefore, our medium-term outlook is clear. Entain has revenue growth, EBITDA growth, a path to significant cash flow generation and organic deleveraging. With that, I'll hand back to Stella.

Thank you, Rob. And unlike Rob, at least I've changed my sweater even though I'm wearing the same cheap necklace. Moving on, before I go into the detail of our strategic progress, I just think it's worth stepping back a moment and reminding ourselves of who and what Entain is. Entain is a global operator in the sports betting and gaming sector. We are a leader in the industry, providing engaging products and experiences with player safety embedded in our customer focus. We have podium positions in attractive growth markets. We have iconic brands, and we have talented people who are passionate about this sector. We are improving operational performance on a continual basis, and we are rebuilding momentum. This next slide is illustration of the strength of our portfolio. 100% of our revenue is from regulated or regulating markets, with 98% already having a local license. We have at least 85% of our NGR coming from markets that we know have podium positions. 80 -- sorry, 98% of our revenue comes from markets which are in growth. And within that, 93% of our online NGR is coming from markets which are forecast to grow over the next 4 years compound by mid-single-digit growth. These are all reasons to believe there are strong fundamentals, which enable us to deliver sustainable and long-term high-quality earnings, both now and into the future. Our strategy to achieve that success is set out in our priorities, and they are clear: deliver growth, growth in organic revenue, growth in margin expansion, growth in share gains -- market share gains. This should all sound very familiar because it is, it may sound boring, but it is what we set out last year and the strategy and the goals haven't changed. And it is working. Steadily rebuilding our momentum day by day, week by week, month by month. There isn't a magic wand, there isn't a silver bullet. It requires a continual focus on improvement every single day. That's the mindset that we have to have. And critical to the early phase of that transformation is delivering in our must-win markets of the U.K., Brazil and the U.S. So what I'm going to do is give you some detail on what I think are the good inputs that are now starting to lead to the good outputs in those critical markets. So I move on to the U.K. It is our largest market. And as such, its turnaround is absolutely critical to the group's performance. And as a reminder, in Q1 2024, we were at minus 9%. So urgent action was absolutely needed. So we changed the leadership setup combining retail and digital into one focused team. We also have to step back and address the complexity and friction that our customer journeys had without compromising the player protection. As well as improving our simplifying our navigation journeys, the team has been laser-focused on brilliant basics, improving site speeds, increasing stability, improving navigation. All of these things mean that our Net Promoter Scores on both Ladbrokes and Coral are ahead of our expectations at this point in the journey. And coupled with these front-end improvements, we have -- couple with these, we have front-end redesigns, including new features, such as our new in-house Bet Builder product, and our Ladbrokes coin economy, which builds on our Coral coins, which we did last year. We also took a refreshed approach to marketing. Instead of focusing on brand awareness, we're focusing on brand consideration. We also moved our performance marketing to the experts we have in 365scores, and it's really paying back. The middle chart that you can see on here, which I know you've seen before, is a powerful illustration of how addressing the complexity in our customer journeys is reversing the decline in our higher-value customers, while at the same time continuing to build on a more -- quite say that, more recreational player base. The net result is that the UK Online NGR for the year was up 2%. Returning to year-on-year growth ahead of expectations with both Q3 and Q4 ahead of target. Although we should recognize that we had very favorable margins in Q4, which is why the black dotted line, you can see there is shown what we would have got if we had been at normalized margins. So overall, in the U.K., H2, as Rob said, grew at 14% versus H1, which was minus 8%. If we now turn our attention to Brazil. In Brazil, we continue to see progress after a complete overhaul of our go-to-market strategy. Growing consecutively from plus 9% in Q1 to plus 65% in Q4. And this reinvigoration started from the ground up, having lost our way in 2022. This included things like refreshing the brand, refocusing our customer acquisition channels, changing our payment processing, moving from daily to instant withdraws and refining our product to embrace local favorites, both in sports and in gaming. And as you can see on the acquisition and retention slide at the chart, and this is resonating well with our customers. Starting to lead to strong NGR growth. We've also had a relatively smooth transition to regulation in Brazil. Going live on day 1, the first of January, and we are now very pleased to say that we have a permanent operating license in Brazil. We also recently announced that we are now the main sponsor of Palmeiras, one of the Brazilian's most successful and historic football teams, and it's already starting to generate great engagement with our customers as they see that benefit coming through. Brazil is an important growth market, as we've said before. And we now believe that with the changes we've made, we are well positioned to have strong growth going forward with our focused leadership teams and our improved and improving offering. Now I then move on to the U.S. The team have really built momentum during 2024. You've already heard from Adam from BetMGM. Our business is now stronger in virtually every single aspect. BetMGM reasserted themselves into iGaming with expanded content and player engagement. In online sports, the product experience is now smoother, faster and richer. And following -- this followed critical deliveries by the Entain team prior to the delivery of the NFL season. We also have the unlock of Nevada being complete with a single digital wallet for players who go to Nevada and actually play, go into the MGM Las Vegas resorts. The team also redefined their approach to acquisition marketing. To engage more with the BetMGM brand really resonates with that premium mass customer, aiming for quality over quantity. And these changes have all contributed to a significant improvement in the engagement KPIs. And from the chart in the center of this slide, you can just see how the momentum has improved, showing step change improvements versus 2023. Now as we look ahead, BetMGM expects the momentum to continue with EBITDA turning positive in 2025, which represents approximately a $250 million change year-on-year. We also expect revenues to grow substantially with a strong belief that the BetMGM is on its way to achieving GBP 500 million of annual EBITDA in the coming years. Now moving on to KPIs and the key question. How do we ensure that our business is really sustainable for the long term. This is a key question. As we discussed before, there are two KPIs that are really, really want to focus in on. retention and acquisition. And this is shown on this slide. Now I've got no intention of going through the technical details. I just want to focus in on the key takeaway. And the key takeaway is this. There is no point in investing in acquiring customers unless we can retain enough of them. Otherwise, it's just simply a leaky bucket. And the truth is in 2022 and 2023, we have a very leaky bucket. Now the exciting thing, and it really is a really good piece of information is that our retention levels have significantly improved. We are now at the levels where we know we can sustain and build our player base. So we're back, as you can see with the pink line there up to well over the 80% hurdle level to be in sustainable organic growth. And that gives me personally a lot of confidence as it gives the team that we can deliver on our promise of long-term sustainable organic growth. Anyway, moving on, we have made progress, but there is still a huge amount of hard work to do. I know that, the team knows that. But the good news is we have a clear road map, and this slide highlights some of the areas that we're going to focus on through this year and beyond. So for example, for products, we have some exciting plans for free-to-play. We are constantly improving our Bet Builder. Our Angstrom team continues expanding the depth and breadth of the U.S. sports markets. Back-end improvements are also to our central platform are also ongoing, driving increased velocity of new and localized gaming content as well as improvements to our site speed and stability. On the front end, we focus on those core customer journeys from sign-up to logging, to bet slips, to bet tracking and cash-outs and more. Personalization is also another big piece of the puzzle, and we're working on transforming our CRM system to benefit the customer journeys with more personalized and relevant offers. So now before I summarize, I just want to circle back to the quality of Entain's portfolio and how we are actually building momentum. 80% of our volume comes from our top 8 markets where we have leading positions. We also hold #1 positions in other markets such as Georgia and the Baltics. And you can see from this chart, our central tech platform powers our must-win markets of the U.K., Brazil and the U.S. However, we have the benefit of also having other agile tech platforms, powering other key markets which has meant that local momentum has been maintained, while we have prioritized tech development for the U.K., the U.S. and Brazil. So in summary, Entain does have all the attributes to be a truly great business, leveraging long-term, high -- delivering long-term high-quality growth. Through a strong focus on operational excellence, and I can't state that enough, actually getting into the detail of the business and building it day by day. We have started that journey in 2024, and we're building on the momentum in 2025. Our NGR and EBITDA are back to structural organic growth and we have a clear pathway to deliver strong annual cash generation. There is plenty of hard work still to do. But as I said back in August, the Entain train has left the station. It's heading in the right direction, and it is building momentum. And I'm very confident that the great team and talented team at Entain can and will deliver. So thank you for listening today. I'd like now to open the floor to your questions.

[indiscernible] Before we start, and two questions each if you don't mind. I also have an iPad [indiscernible]. Ivor, let's start with you.

Ivor Jones, Peel Hunt. You talked about simplification in relation to the U.K. business on a 2-, 3-year view, will the group still be running 2 main brands with the inefficiency that, that implies? And sticking to two questions, how should I think about the costs that the group is bearing in relation to supporting BetMGM?

Okay. Thank you very much. I'll take the first and maybe you take the second one on that one. So simplification that we're talking about in the U.K. is not to do with the brands so much as the processes that we have the way that we operate, the inefficiency of having the UK Retail separated from digital meant that we weren't leveraging the opportunities of omnichannel. For example, we've had complexity in customer journeys. And we have made significant improvements to the agility of the U.K. team, taking out a layer of management, for example, we increased efficiency there. I'm very proud of having two brands. I think Coral and Ladbrokes have a great presence on the high street. And we have a great history with those. I mean, brands are very expensive to develop and I would hate to lose the richness that they have. So it's really about the operational efficiency that I was talking about. Maybe on to the cost on BetMGM?

Yes. Maybe just one extra point on the brand. Of course, Gala and Foxy is quite a different audience. So they're complementary brands that I would say in the U.K. Cost of supporting BetMGM. So the way to think about it is, of course, our obligation to the joint venture is to provide the technology. And we have a process whereby anything that's done specifically for the joint venture is recharged to the joint venture. And so the cost of that goes through the P&L and balance sheet of BetMGM, anything that's investment into our tech stack, That, of course, also benefits the U.K., it benefits Brazil and so on. And so we absorb all that to ourselves. So to give a rough feel for it, we invest a little over GBP 300 million between OpEx and CapEx into the central platform every year. We believe that gives us sustained competitive advantage you all know online is a product-led sector, that's how we compete. And so therefore, by investing that quantum every year, we give our brands every chance of capitalizing on the podium position and delivering strong growth into the future.

Just a quick follow-up. Does the recharge show up as revenue to the group?

No, just net of cost.

Ben Shelley here from UBS. My first question is, could you just give us an idea of the underlying revenue growth in the online business when we adjusted the comps in the tournament and the euros and sports results. And then my second question is around the market growth assumption for 2025. I'm sure it's not the same story everywhere. So could you just give us some color on where you expect to outgrow the market or undergrow the market? And I guess the U.K. is of specific interest here because we've got regulatory enforcement coming this year, and people think that there's -- you have less daylight to close versus the forthcoming regulations versus smaller operators? Thank you.

Thank you for that, Ben. I'll just talk a little bit about the U.K. I think -- Rob, you can cover some of the underlying revenue question. I think in the U.K., we have come from a very negative position, to a position where we're actually showing very good growth. We feel very comfortable that the regulation changes are not going to be a negative headwind for us. We feel that we have put in place a lot of reasons why we have to believe in the future growth. And so we are very much targeting to increase our market share in the U.K. That's the plan that's in place and the building blocks, I think I talked to you about before on that. So we're feeling that we have really got the momentum behind us and things like the new slot limits come in place. We don't see that as a drag on us at all, given our player base. Do you want to just take part of the other question?

Yes. So in terms of underlying growth, obviously negative in Q1, Q2 was plus 5% reported, but more like flat for euros, the big turnaround came in H2, particularly led by the U.K. We were plus 9% in Q3. That's a good number. There's not too much noise there. And in Q4, whilst we were plus 13%, it was more like plus 9% on a sports margin adjusted basis. So plus 9% in Q3 and Q4. What we've said for 2025 is well, why are you in your mid-single digits for the year if your exit rate is plus 9%. That's because the comps do get tougher in particular with the U.K. as we start to annualize the acceleration saw in the second half of 2024 and then lapping the euros and lapping those strong margins in Q4 as well. But I would say plus 9% is the best answer to your question for the second half of 2024. In terms of relative performance to the market in 2025. So yes, in aggregate, in line within that. U.K., we'd like to think that we're playing catch-up. We have lost a lot of revenue over the last 2 or 3 years as a result of our implementation of regulatory changes. So we'd like to outperform in the U.K. International across the board, in line Australia. We're a little bit the right side. Italy, we're a little bit the wrong side, but in aggregate, in line. In the case of CEE, we have strong #1 positions in both Croatia and Poland are almost there to be shot at and holding share in those two markets would be a good result for us, and the underlying market growth is strong as well. So in line CEE, in line international, hopefully a shade ahead in the U.K.

And just one quick follow-up on underlying revenue growth. Just for 2025, where would you put underlying revenue growth? Because it's mid-single digits, lapping sports. Would it be high single digits if it wasn't for sports results?

No. So across sports results were favorable in Q4 and they helped the euros to outperform normal. But across the whole year, so let me give you real numbers, we were 14.7% for our GGR margin. That was up year-on-year on a pro forma basis by 0.6. Of that 0.6, about half, I would say, is structural in line with expectation. The other half was favorable results really coming through in Q4. So of the 14.7%, perhaps we would have been 14.4% on a more normalized basis. So it's only really Q4 where we have a particular headwind in 2025.

This is Pravin Gondhale from Barclays. Can you just help us sort of understand your assumption behind online growth broadly in line with markets. You partly answered that. But then we have some regulatory changes coming in 2025, be it in Italy or Brazil, which could probably help you to sort of garner or win market share from smaller operators there. In the U.K., you have already said that you anticipate to outperform the market. So why expectations at group NGR growth will be in line with the market? And then secondly, on your U.S. sportsbook development, I mean, the recent strategy sort of adjustments from BetMGM that they'll be focusing more on the premium mass and then the sports -- the promotional spend will be more rationalized towards targeted cohort. How do you think within that strategy, your investments on Angstrom and overall Sportbook project fix?

Thank you very much. I think we'll do a bit of a double act on this one. I think we've probably answered quite a lot of the question about the U.K. But I think one thing that gives us more confidence in terms of our ability to get market share is, one, we're on a returning journey from being in market decline. We put together programs to improve our customer journeys, but we've also put in place a significant improvement in the investment in the customer, both from the quality of the marketing and also the quality of our innovation for the U.K. It had a lot more new product innovation this year, and we're going to continue that into 2025, which is a driver of growth. And we mentioned very briefly the benefit of having 365scores now doing our performance marketing. They are an amazing team. I think the quality of our performance marketing is just a step change with using that skill set. I think we talked a little bit about -- I think you mentioned Brazil. I think in Brazil, there's a lot of shake out of the market. Not everybody is going to get a license. We have a license. We've got a strong brand, and we have positive momentum. So I think there's a degree of confidence that we can have behind that. But it's a big volatile market. Lots of things are going to change. I think you talked about stabilizing market share in the U.S. In the U.S., I think that is a huge positive driver for us going forward. Remember, the total addressable market is still growing very substantially. I think the clear water that we have now between the #4 and 5 player is very significant. And by stabilizing as a strong #3, I think that is something to give us confidence in going forward. And the fact that we are now pivoting into profitability in the U.S. means that, that direction of travel is starting to become much more confident about the future value of the asset in BetMGM. Do you want to comment on some of the other elements?

Yes. Yes. I think you hear a lot of the main points. Perhaps in Brazil, I don't think anybody knows for sure how the license market will grow. In 2024, we need to see how channelization gone. So one aspect is how we perform relative to the license market, but another is the whole marketplace, including the unlicensed operators as Stella sort of touched on. So we'll see how that progresses. I would agree in Italy with the new online licensing regime. We do estimate that roughly half of all operators will close at that point. So that does give us a little bit of market share gain opportunity. But of course, the top 2 with their broad retail footprint do have competitive advantage that we're grappling with, but in Eurobet, we have a high-quality omnichannel business in Italy. Perhaps if this helps with your question on the U.S. So yes, refinement to marketing strategy, but when it comes to product and tech, our mission is simple to deliver the best experiences for all of our customers. And then let them play on whatever bet types games that they would like to. So I don't think that a refinement and marketing strategy impacts the fact that Angstrom is still highly valued to us. And that customer experience piece is really important. So for example, when I look at the Super Bowl performance, it's nice that we had a favorable result for the operators. But what's really nice is that we had 100% uptime throughout. So perfect customer experiences, other operators not so fortunate. And little things like having Angstromised to use their internal word our same game parlay proposition. That meant just random data point, that meant that all our same game parlay bets on the Super Bowl were settled within 20 minutes of the end of the game. Just last year, when we were relying on third parties for those same game parlay propositions, it took around 10 hours. So just in terms of quality of experience, that that's how you win. So yes, we continue to invest in product and tech regardless of marketing strategy.

Okay. I've got the mic. Sorry, I'm going to go to Ed Young's question on Angstrom. So just following up on how is Angstrom performing? How widely has it been rolled out? And what are the thresholds to activate the earnouts?

So let me just talk a little bit about how Angstrom's doing in the U.S., and Rob will deal with the earn-out question. So we're very happy with how Angstrom has settled in. This time last year, we were just getting into -- I think it was -- I can't remember it's baseball or basketball. Somebody remind me.

MLB was first.

MLB first, sorry. And at that point, we've got some good key performance indicators. But only having one main sport, Angstromised isn't really generating the customer experience that we expect. So by the end of 2024, we have got all of the main sports there. And that generates a completely different customer experience. And as I think we saw through NFL, those metrics have really started to come through, of which Angstrom is one key component of that journey. So we feel that it's working really, really well. There's still more to do because once you've actually sorted out the main things you start to build on that, put the icing on the cake, if you like. So it's doing extremely well, very happy with the BetMGM team are very happy with it. So the earnout?

Yes. And perhaps just one little build on Angstrom, so exactly as Stella said all the top 6 sports, but today, prematch only. So the big development for 2025 is Angstromizing the same game parley proposition for in-play as well, which will step change the in-play experience for BetMGM. In terms of the earnout, so just a reminder for everybody, the absolute maximum was $150 million accounts we carry around a contingent liability of around 100, that's sort of an indicative estimate of how it may end up. Payments due over 2025 and 2026. And our guidance is that, that should be considered 2025 weighted. So say somewhere between half and whole is likely to be 2025 and 2026.

I'm going to stay. Stay with me. From [ Algebris ]. We want some more color on the UK Online, the shape of the wages over the last couple of years why the decline spent ahead. Obviously, we have that in a chart, Rob. So I'd love you to talk more about that.

Should I jump straight in? I don't think it's any secret that the last 3 years have been a real challenge for us in UK Online, and it's entirely spent per head growth through that entire period, actives have continued to grow well. The recreational side of the business continue to grow well, but the -- in particular, affordability measures that were put around higher spending customers caused us to lose a significant amount of the business. And that built up over a number of years. I won't go over all the history here, but essentially layering on further restrictions, upon further restrictions, upon further restrictions. We basically made it very hard for customers who play regularly to enjoy their experiences at our brands. That now changed in the first half, in particular of Q2 last year, helped by the voluntary code, which I can talk more about if anybody's not familiar with the voluntary code. That in turn led to the turnaround of that tempered chart or not spent the head, but the contribution from the higher-value segment that you saw from Stella earlier. So for the first time in the second half of 2024, it's now coming back up. And in Q4, spend per head grew in the U.K. for the first time since Q1 of 2021 when the world was in lockdown, so it's been every single quarter for over 3 years, it has been declined in the U.K. for exactly these reasons, is now back into growth in Q4. And if we can carry that on, then that does give us some confidence that we could grow faster than the market in '25.

And I'd just like to add a couple of other things. It's not just about, say, let's improve those journeys. It's about the overall focus on the U.K. What we said a year or so ago was it's one of our must-win markets. I know it sounds very simple, but galvanizing the organization behind that goal making sure we've got product and tech focusing behind delivering better customer experiences, has to sit hand-in-hand with that journey. So people go in there. They have a good experience in terms of the way in which they can interact with us. But then they have to have the right products, they have to have the right engagement. So it is a multipronged approach, and that's one which I think we're starting to see the benefits of, which is why going forward, most of the question earlier, why do we have confidence in increasing our market share, because the inputs have been improved significantly across the piece and this omnichannel approach that we can now have in the U.K., improving the journey, our shop windows we're digitalizing them so that we can actually talk to the customer in a much more interactive way. We've done about 350-400 of them so far out of our estate of 2,300. And that's a journey. You don't do it all in one step, which is why we have this opportunity to continue to optimize as we go forward.

It's Joe Thomas from HSBC. Could you just talk a bit about the impairments, Rob, that you've made? I mean they are large. And I'm just wondering the extent to which you take any lessons from those impairments with respect to capital allocation in future and whether anything could reasonably have been foreseen that wasn't foreseen and how that might have changed perhaps with the capital allocation committee. That would be one question. And then the second thing is, you've talked in the past about consolidation of those sort of in the U.K., this is a U.K. question, but sort of Tier 3, Tier 4 suppliers as the regulations get tighter. And I don't think it's happening yet, but perhaps you could just give us some indication about what you're seeing? And expectations and what sort of tailwind that might bring to the sort of guidance that you're talking about this year?

Do you want to do the first part? And I'll do the second.

Yes, let's talk about the impairment. So it came across 4 different businesses, all reflecting either the regulatory tightening in the Netherlands and Belgium. So the accounting following the reality on the ground. And in the case of New Zealand, primarily relating to the delay in geo blocking or the legislative net, which I can talk more about. And in the case of Poland, I mentioned it earlier, we fought hard to retain our market share ahead of casino liberalization coming, but we did invest behind that, we sharpen pricing, increased bonusing, which matters in a country where you have a turnover tax. So your tax line suffers plus increased marketing dollars as well, but short-term investment to maintain share for when casino liberalization comes. So we're no less excited about the fact that we have a clear #1 in a market that has iGaming hopefully coming in the not-too-distant future. But the -- you don't reflect that upside opportunity from an accounting perspective and therefore, the impairment follows. So four good businesses on the podium in all 4, happy with those positions. Perhaps on the Netherlands, it might be worth pointing out that the impairment is the debit in the P&L, but there's also a credit there from extinguishing future earnouts. So in the end, the amount of money, we -- when we announced the acquisition in the Netherlands, we guided to a total cost of EUR 450 million. The final number will be more like EUR 250 million structured the deal in a way that enabled us to have some protection against tightening regulation.

And then just talking a little bit about -- again, about the U.K. about regulation. Well, first of all, I think it's very important to say we work very constructively with the gambling commission, having a good relationship with the regulators around the world is an important part of our strategy and our journey. So that, I think, is just a context of where we are at. I think in terms of the Tier 3 and Tier 4 operators, I think there will be some headwinds for them going forward. For example, the new slot limits are coming in place in April, May, and they do disproportionately do well. I believe in the -- those high-value players. Going forward with the new slot limits, the player experience isn't as good, and there's definitely going to be some churn in customers who want to play with better product experiences, which I think is a gentle tailwind, should I call it for ourselves. I don't think it's an overnight change, but one of the things that we do, obviously, much better than Tier 3 and Tier 4 is focusing on the quality of the player experience and the entire journey. So I would call it a gentle tailwind at this moment in time for online.

David Brohan. Goodbody. Two questions. Firstly, just on your portfolio of businesses that was outlined today, should we be thinking of that as a fairly consistent, stable over the medium term? Or is there likely to be either disposals or acquisitions there? And then secondly, just on the U.S., there's been a lot of noise around tax hikes and new states potentially legalizing. How do you think about the risks from taxes, but also the opportunities from new states legalizing over the next couple of years?

Okay. I think again, we'll do a double act here because I say a bit, and then you say a bit. So on the portfolio of our businesses, you do all know, we've been very open about it. We have a capital allocation committee that is a subcommittee of our Board. It is an ongoing committee looking on a rolling basis about whether an acquisition or a disposal might make sense or whether we should be putting funds into one area or another. And I think the operational side of the business is for us to make sure that we're doing the best job we can to give the optionality to the Board to make choices in the future. So that's really the way that we look at it. And I think it's a very healthy way of saying, what is the best way of enhancing shareholder value. There are never any sacred cows in that journey, but it's about constant reevaluation. The tax hikes in the U.S., I think I'll let Rob talk to it in a bit more detail going forward. But I think one of the consequences might be that we get more iGaming markets open up as people want to get more revenue from this side of things. And remember, there are many, many more sports markets currently than there are iGaming markets, and we're much stronger in iGaming. So the opportunities for more markets opening up there, we see as a tailwind drop than a headwind. Rob?

And so the answer is exactly what I would have said on the U.S. as well. Maybe within the context of 2025. Of course, we're monitoring the New Jersey situation, which could represent a headwind for the year. But equally, it looks likely that Missouri and Alberta are coming a little bit later than expected. And so that sort of in-year investments for a new state launch is probably less negative on 2025. So therefore, we're reiterating our positive EBITDA guidance. at the moment. And then perhaps if I just one build on the first question. I think Stella's slide really summed up the quality of our footprint, and that, in particular, 85% to 90% of our revenue is coming from markets where we're on the podium, it's really compelling, right? We have good positions all around the world. Those growth statistics, 98% of our revenue coming from markets in growth and within online, 93% coming from markets growing at least mid-single digits. So when you have that quality footprint and you have a stable balance sheet, as I went through earlier, where, of course, we expect to delever significantly from '26 onwards, that's an important backdrop to those kind of discussions.

Okay. I just -- I've got a couple more online. One from AJ Investments. Could you comment on the change of CEO and where we are with the search for the new one?

So where are we in the search of the new CEO? Well, first of all, I just want to reassure you, I'm focused 100% on the operational performance of the business. And that's really important. And what I have said to the organization, I'm here as long as it takes, yes. If it takes a short time, that's fine. If it takes a long time, that's fine, too. Because the key thing is to make sure we have continuity in the business, and we're building on the momentum that we currently have. Now separately, there is a process that will be conducted or is being conducted by the Board. And the best thing to do is make sure we have the opportunity to get the right long-term solution. But today, for me, it's about delivering operationally.

Thank you. And then just another one from Ed Young on marketing ratios. Can you give us color on the development for the online business across UK&I international and CEE, so we can understand what's being invested behind the growth, please?

Stella, should I take that?

Yes. I don't know if everybody heard the question, but...

Marketing ratios.

Marketing ratios, yes.

So 2024 saw a small improvement in our marketing rates. So a benefit to EBITDA margins. Why? Because our pro forma spend in marketing was upper fraction, around 2%, whereas revenue, as you saw earlier, grew 6%. So mathematically, a margin improvement there. In terms of where is that 2% investment coming from sort of allocation by geography, we over-indexed in 2024 in the U.K. and Brazil, sort of reflecting the opportunities there. And the compensation is not because we were pulling back anywhere but just regulatory changes. So where marketing restrictions come in, for example, the Netherlands. As a consequence, you make some savings there. As I think about the segmental split, CEE, we have such strong positions in both SuperSport and STS, they're almost synonymous with sports betting. So the marketing ratio is actually a lot lower there, albeit I did touch on Poland earlier that we have increased the spending in Poland to defend our share. Other than that dynamic, I don't foresee a change particularly moving forward. And indeed, Croatia is contemplating marketing restrictions right now, which could come in later year, which obviously is not unhelpful for EBITDA. U.K., the growth is back. So I'm sure we'll continue to invest behind that. and Brazil and expect us to continue to invest behind that in 2025 as well. I think those are the main stories.

That quantitative answer to the question, which is really important, which is I think what was both the purpose I think it's slightly the wrong question, if I may be so bold, the right answer to the question is how we're spending the money as well because qualitatively, it's about thinking -- it's actually qualitatively and quantitatively it's about where you spend your money and how you spend your money. And we started to do things differently in the organization, which is starting to pay off. Where we put the performance marketing and what the paybacks are in the performance marketing. We can improve performance marketing, so our payback comes down by 2 or 3 months. That's the equivalent of putting a lot more money behind the brands. We also are in the journey. We're not there yet of how we actually have more fluid with the way that we invest our marketing. So we're getting payback in a certain market and it's working well. We should have the organizational agility to move spend from one location to another or move it from one brand to another. And we are in the early stages of that. But the size of the prize is huge. We spent -- it's our biggest single discretionary line of investment. And if we can improve that in terms of the things that I've said, then the opportunities for growth become much more significant. So that is definitely part of the journey. And as I touched on in the presentation, from performance marketing side, we're now starting to leverage the skill set of 365scores, which is a real opportunity going forward. But there are many other ones as well about the scale and the type of investment that we make. I think it's a combination to the answer.

I think it's a great point, and I'm just going to build on it to make sure we really land it. The ability to centralize performance marketing, as we've done, means that you can compare with confidence the returns across market. And that might sound obvious, but if your different markets are computing player values in different ways, you get inconsistent methodologies and therefore, answers that are not necessarily like-for-like. So having the same team with the same approaches to player value CPAs ratios enables that comparison. So we can say, I'm not going to say which ones because it's competitively sensitive, but enabled us to pull back in some markets where the paybacks were longer and invest more in others where the paybacks are shorter. And actually, what we've done is put more money to work, but hold paybacks the same put more money to work, good paybacks, increasing the efficiency in the model. So it's a really important change in Entain in 2024 that's paying off.

Final question, please.

[ Conroy Graham ] from Bloomberg Intelligence. So first of all, just on the UK Online. What structural factors remain in play to make you confident in volumes, maybe not just this year but sort of in the medium to long term as well? Might you not just be cannibalizing the retail business. And then on the -- on BetMGM, you spoke a bit about your improvement in retained customers. Do you have a sense of how many -- or the share of those customers that are perhaps active on some of your peers' apps as well. How might that compare with some of your other more mature markets?

Well, so again, we'll do a bit of a double act here, because it's working well. So UK Online we've gone from stalling our growth, which we've talked about quite a lot, to actually getting UK Online back to growth. And it's the continual focus against multiple different aspects to get that growth going there. And remember, there's a big gap still between us and market leaders in our share, and we know that our share has gone backwards significantly over the last 2 or 3 years, so that share is there to be regained. And we have great latent value in the brands that we do online so that we know that customers are willing to come to us as long as we deliver what they want, and we lost those customers. We have lots of data to say that the customers faded away from us for all the reasons that have been said. So we think that capacity to grow is definitely there. To the question about cannibalization, I think we should look at it in a slightly different way, which is we have a competitive advantage that we have a presence on the high street with a huge presence on the high street with Ladbrokes and Coral. And we should be doing an omnichannel approach. We should have customers who can go into our retail shops, and actually then transfer into playing with us online and vice versa. The experience in a retail shop should be very different to playing online on a mobile phone. We have Kascada stations. We have the ability to have so many more features and markets available to people. So that's the challenge of how to navigate that journey. But because there is so much space versus where we were before, we have got -- we capture that market share. And certainly, the work today, I think, is proving that, that is possible for us to do. The second question, I think, was on U.S. and retaining customers. I don't know whether you can take that one?

Yes. Let me do that. And perhaps just a couple of more thoughts on the UK Online market. The UK Online has been going strong for 20 years, and it still grows year after year after year. So there's no sort of sign of leveling off. Why is that? Well, we're constantly evolving the product. So more engaging experiences, look at what in-play produces now versus just a few short years ago. So really engaging people from whistle to whistle in any sporting occasion. Also, things like the rise in popularity of women's sport is really helpful, not just because it appeals more to a female audience, but also as more high-quality content for our existing customers to bet on. So there's continued drivers of growth even in a more mature market like UK Online. When it comes to retention in the U.S., so some of these stats might be a bit stale, but a lot of customers research says that in some of the more advanced markets, frequent sports betters and gamers have 3 or 4 apps on their phone, whereas in the U.S., it's 2 to 3 at the moment. So it's a little behind. Is that just because the U.S. is a little less mature? Or is it a reflection of the fact that in sports betting, there's only really 6 or 7 operators still competing hard in the U.S., whereas if I look at Brazil, is what, 70-plus operators have been licensed U.K. as well. So it could be a reflection of that. What I do know when I look at our own business, player engagement metrics really accelerated in the second half of the year, particularly after the Angstrom product integrations in the summer, pre-NFL, and then increased marketing investment, particularly in gaming. So those engagement KPIs like player days have consistently improved, and that's led to improved retention, which, as you heard from Stella earlier with those -- with that slide, your net revenue retention is the #1 KPI of -- or lead indicator of sustained revenue growth, and that's progressing well in the U.S. as well.

Right. I think unless there's any more questions, I think we need to draw this to a close here. I very much appreciate you joining us today. I'm sure we're going to be seeing many more of you in sessions coming up with investor road shows, et cetera. if anybody -- well, if anybody's got any questions that have not been answered, please direct them to the IR team. That's what they're here for. And on that, I would just like to say thank you very much for your attention, and see you again soon. Thank you.

Thanks everyone.