Entain Plc ($ENT)

Hello, everyone, and thank you for joining the Entain 2026 Q1 Trading Update. My name is Lucy, and I'll be coordinating your call today. [Operator Instructions] It is now my pleasure to hand over to Stella David, CEO, to begin. Please go ahead.

Thank you, and good morning, everyone, and welcome to today's Q1 results call. I am delighted to be speaking to you again and sharing another strong set of Entain results. I'm also very pleased to be joined by Mike Snape for his first Entain update. So welcome, Mike, and it's great to have you on board. This morning's call will broadly follow our usual format. I will begin with an overview of the quarter, then Mike will take this opportunity to share some initial reflections before he runs through the Q1 trading performance, and then we will finish with your questions. So let's get started. Entain continues its positive trajectory. Our diverse and globally scaled portfolio of podium positions is a powerful engine, which is proving it can deliver consistent and sustainable growth. We maintain our relentless focus in executing against our strategic priorities, which saw us exit last year with strong momentum, and this has continued so far this year. I'm also very proud of the leadership team we have in place who are focused on increasing both our pace and our capacity, enabling us not only to do more but also continue to improve our delivery. Now turning to Q1. The group delivered results in line with expectations. Net gaming revenue was up 3%, within which online was up a healthy 5%. Importantly, Q1 being in line was despite most markets experiencing particularly customer-friendly sports results. So a better reflection of our underlying performance and momentum is volume growth. In Q1, our volumes were up 8% with an impressive plus 10% for online. Our online NGR and underlying volume growth has not only accelerated from our 2025 exit rates, but continues to come from across our portfolio, and I'm delighted that Q1 marks our eighth consecutive quarter of online growth. The U.K. once again was a standout performer, delivering another great quarter. And we fully expect to have gained both share in online and retail. This sets us up well to withstand the impact of the draconian tax increases better than the competition. And a point worthy of note, we paid GBP 574 million in U.K. taxes in 2025, whilst the growing black market pays 0 tax. Hence, we remain focused on lobbying government to take action to stop the advertising and promotion of these unlicensed sites. Australia's recovery continued and is now back to meaningful year-on-year growth, and we expect to continue to having made solid market share gains. So a great performance, which reflects the new management's disciplined and reinvigorated approach. Elsewhere, Spain, Canada, Greece, Georgia and New Zealand, all continued their double-digit NGR growth. A market that's been steadier than anticipated this year is the U.S. Now I won't repeat it in detail, but as you heard from Adam earlier this week, BetMGM continues to execute its plan, deliver profitable growth and remaining rational in a noisy market. This disciplined approach allows them to remain comfortable of delivering EBITDA still within their guided range, albeit at the lower end despite softer top line growth. We have strengthened our foundations, improved operational execution and are back to delivering high-quality top line growth. And we have a strong pipeline of activities to continue that journey. These include the many opportunities from AI enablement, improvements to player journeys and exciting new features such as side bet jackpots, revamping the U.K. Ladbrokes app, and our sporting interaction brand in Canada going forward in a very positive way. The wider rollout of SportingBOT, our new AI assistant ahead of the World Cup, as well as deepening our engagement with sports fans across Europe with new campaigns and partnerships. We're focused on driving greater efficiency, effective capital allocation, and as I have flagged before, we are fully committed to strong cash generation. So just to summarize before I pass to Mike. We have started 2026 with strong momentum. The business is well positioned, getting sharper every day, and we are navigating the impact of the U.K. tax raises as well as anyone. We are reiterating our full year guidance and remain confident in generating over GBP 500 million of cash annually from 2028. We have a strong team and a busy pipeline of initiatives, and I'm excited about the opportunities in the year ahead. And while it is early days, Q2 has got off to a strong start, and we look forward to the World Cup in June. And on that note, over to Mike. Mike?

Thanks, Stella. Good morning, everybody. I'm delighted to be here. Before I talk through the Q1, and Stella has really captured the key headlines already, just a few thoughts on first impressions and a flavor of what we've been focusing on in my first few weeks. I think it goes without saying this is clearly a strong business with a model that's performing well. The full year results in March, and this update is testament to that. We're growing volumes, we're growing share and we're building growth on growth. The front end of the business, the customer-facing part, if you will, is delivering, and we see continued opportunity to do that across all of our markets, a diverse portfolio that gives us the ability to both trade through different macroeconomic conditions and most importantly, absorb or mitigate financial shocks such as the U.K. tax increases. That said, as you heard from Stella at the full year and today, there is far more for us to do to unlock value here. We have significant potential to optimize our cost base, both to improve operational leverage as we continue to grow volumes and also importantly, to accelerate investments in driving the top line, taking advantage of all the opportunities available across the portfolio, particularly in markets like the U.K., where the tax increase has changed the competitive landscape. This does not mean a new project. It's not time bound with an end date or a target. It's putting in place the right model to support the business through the continuous improvement and driving growth. And today, from what I've seen, we're only in the foothills. We also need to ensure this growth converts to cash. Alongside driving volume and revenue, cash, deleveraging and balance sheet flexibility are our top priorities, and you can expect our approach to capital investments and other actions going forward will reflect this. This, again, is an area where we see a lot to go for and will be a consistent theme we talk to going forward. So lots of exciting opportunities ahead. Lots for me still to learn, but Stella and I are looking forward to sharing more of our thoughts and our plans at the interims in the summer. Coming back to Q1. And as a reminder, all the growth numbers that I quote today are in constant currency. It's worth highlighting that alongside NGR and sports margins, we've included volume growth in the release today. It's a metric we've often referenced in remarks and in previous presentations, and we think it gives the cleanest picture of underlying performance, removing some of that noise from sports margins. So as Stella has already said, we've had a strong start to 2026 with the momentum from last year not only continuing but accelerated into Q1. Group NGR was up 3% with strong volume growth of 8%, again evidencing the underlying health of our business, adjusting for that sports margin noise. Online NGR was up 5% with volumes up 10%. Customer-friendly results pulled sports NGR down 1%, but was more than offset by ongoing iGaming strength, up 9% in the quarter. Similarly, in retail, softer sports margins were supported by wages growth in gaming for overall volume growth of 3%. Importantly, this total result was driven across the portfolio and with volume growth accelerating through the quarter in our largest online markets. The U.K. and Ireland turned in another fantastic result. Total NGR was up 6% with online at 13%, all the more pleasing, given we're lapping a 23% comparator from last year. Retail also continues to perform well, flat on a like-for-like basis, and we see customers continuing to engage strongly with our gaming and sports terminals with that volume and wages growth reflecting our leadership position on the U.K. high street, which we're taking every opportunity to capitalize on. We can't make any claims on market share yet as the data hasn't been released. But when it does come through, we're confident it will show we are continuing to recapture share. That high-quality retail offering remains an important omnichannel differentiator for our online business, and we believe makes us best positioned to navigate the U.K. market as it digests the recent tax changes. Moving on to international. Also a strong start to the year across many markets with volumes up 9%, but offset by unfavorable sports results. International Online NGR was 2% higher with gaming performing well, up 8% dampened by a 1.4 percentage point year-on-year sports margin headwind against tough margin comp and reflecting customer-friendly sports results, particularly in February. That adverse sports results impact was most pronounced in Brazil and Italy, both of which saw a particularly challenging margin but pleasing volume growth, especially in Italy where volumes were double digit year-on-year. We also continue to grow strongly in many other markets. And again, a special mention to Australia, which was up 12%, the first double-digit NGR growth quarter since 2022 as we continue to see the benefits of new leadership and the fantastic work the team are doing there. International Retail, as many of you know, is predominantly Italy sports betting. So this was also impacted by sports results, but we remain very confident in the quality of our estates and future growth opportunities. On Entain CEE, it's again, really a story of sports results offsetting healthy volumes in Croatia. Given the product mix weighted particularly to football betting, a minus 7.1 percentage point sports margin drag in Croatia pulled NGR growth lower for the quarter. Poland, however, benefited from the migration to the CEE sportsbook and the revamp of the app. So in summary, we've seen a good start to the year. We delivered strong volume growth across our markets, and that's allowed us to digest unfavorable sports results. And so we remain firmly on track for our FY '26 expectations, but there's plenty more for us to do. I'll now pass to the operator and open the call for your questions.

[Operator Instructions] The first question today comes from Ed Young of Morgan Stanley.

Two questions, please. First of all, on the U.K., you cited some shift in the competitive dynamics. I wonder if you've seen anything so far already. Obviously, the U.K. growth numbers are very strong, momentum to be entering that change anyway, but I wonder if you could just give a bit more color there on what you're seeing. And then second of all, a similar question on Australia. As you mentioned a long time since we've seen double-digit growth. How much of that is market level support? How much of that is share gains? And I guess, how do we stitch together the result with the changes from the leadership change we've seen down there and the changes that we made to business?

Ed, nice to hear your questions. Let me try and answer those 2 for you. So I think the first question was, have we seen -- what impact have you seen in the U.K. since the taxes went up at the beginning of April. It's really too early to say. I think the more important point is that we have definitely been increasing our share in the U.K. in advance of those tax increases. And part of our strategy is to continue to increase share. And certainly, in gaming, if you look at the market, there is a long tail of Tier 2 and Tier 3 operators all having very small percentage shares of the market. So within the regulated sector, we definitely see there's an opportunity to continue to build on that share gain. And we will see over time just how much of an impact the black market has on the overall growth of the regulated sector. But as I think I said in my opening remarks, it's very important that we continue to lobby with government to encourage them and others to stop the inroads into the U.K. black market. But we're very happy with where the U.K. is performing so far. And then the second one was on Australia. Yes, it's great that we've seen double-digit growth. We believe that is absolutely driven by market share gains. I think the team there is doing a great job. We've been very strong historically in racing. They're expanding the focus more to sports in general now there, which is a really good opportunity for us because the market is much wider than racing, even though that's very important. So I think the team there have got a good strategy, and we're hopeful that we'll continue to build share as we go forward.

The next question comes from Estelle Weingrod of JPMorgan.

First, can you comment on the phasing of margin progression, H1 versus H2? I mean you have the U.K. gaming tax starting in April, which will, therefore, be more impactful in H2. But the phasing of the World Cup-related investment is likely to be more H1 weighted in June, I believe, and organic growth will likely be more H2 weighted given sport comps across international and CEE. Any color would be helpful. Another question on the U.K. as well. Can we get -- maybe it would be helpful to get a clearer read on what's driving the U.K. market, particularly sports. How do you see the competitive environment evolving into the World Cup? And is there anything notable you'd highlight perhaps in terms of latest product developments? And if I may, just the last one on Brazil. We've now seen unfavorable spot results for like, I think, over the last 3 quarters. Can we get an idea of what's the underlying volume growth in Brazil at the moment?

Okay. So I think you've got 3 questions there. One is about margin progress during the year. The second one is more of a read on the U.K. and the competitive environment and Brazil unfavorable sports results.

I think if we pick up the modeling questions offline with the IR team and just go into the U.K. a bit, that's probably be best.

Yes, I think that's probably the easiest way of dealing with it. So we'll do a follow-up with IR. In terms of the U.K., in terms of what's happening. I think we've been on a journey of increasing market share over the last 18 months or so. Our customer journeys have improved dramatically. We've had new features that have been added in. We've got new features that continue to come out. We've got better Bet Builder, both in football and in horse racing. We've also got a new Ladbrokes experience, which is coming out in advance of the World Cup. In terms of the kind of phasing of activities, yes, the World Cup starts in June, but it does go on into July. And so that way it does straddle both halves of the year. I think my observation on the World Cup, it will be great for volumes. But it's going to be a bit of a roller coaster ride because in the early days, there are many more teams playing and margins could be wildly fluctuating because there'll be high scoring lopsided games. I think towards the second half of the World Cup, it will be more equally based competitors. And I think there'll be some lovely upsides there, particularly given that most of our markets are in the World Cup, with the exception, I think, of Italy and Poland who were expected to qualify. Most of our other markets are actually playing in that. And any other comments on that, Mike?

I just say on the U.K., and it relates back to Ed's question as well because we see the huge potential on the cost base in the business, we've really not taken our foot off the gas in terms of driving that U.K. business forward. Many other companies, I think, given the severity of the U.K. tax increases will really be pulling back off growth driving investment. We've absolutely not done that. We're taking advantage of everything that we see in the market at the moment. And this is merely the start of what we think we can achieve with that U.K. business.

Yes. Okay. And then I think on Brazil, yes, you're absolutely right. Sports margins have been very poor in Q1. Volume has been up. So that's a positive. But I think it's something that everybody needs to watch out just in terms of that is probably one of the worst performing sports margins that we have seen in the short term, and let's see how that goes. But underlying volumes have been positive, which is good news. And have we covered all the questions there? Okay.

The next question comes from Ben Shelley of UBS.

Congratulations, Mike, on the new role. A couple of questions from me. One, in terms of your group online sports wager growth or even more broadly, group volume growth. Can you give us a bit of an idea how much do you think you've benefited from recycling in the quarter? Or rather how much do you think -- how much of this is simply strong underlying business performance? And then I guess on online volume growth versus the full year guidance, online volume growth is at 10% in the quarter and you have the World Cup ahead of you alongside momentum across the business. How are you thinking about that 5% to 7% online revenue guidance for the full year?

I think on the recycling point, it's really difficult to say. And clearly, there's a lag in terms of the data that we get through from customer accounts and as we close the quarter, but it's something that we'll definitely start to look at for the previous quarter, more as we get through this one. On the volume piece, as you can see, we're reiterating the previous guidance that we've had. I would draw your attention to the fact, and I think you've done it for me that the volume growth was significantly stronger than that. The NGR growth was at the lower end of that range because of the sports margin. We're very focused on continuing to drive volume across the rest of the year, and we're very comfortable with the guidance that we've got out there.

[Operator Instructions] The next question comes from Rasmus Engberg of Kepler Cheuvreux.

I was just wondering about the World Cup. How much of your 5% to 7% online growth is sort of relating to the World Cup and how much is underlying?

Okay. So on the World Cup, thanks for the question. It's a good thing for us. It's not as big a thing as you might think. I mean it's probably worth about 1% or something like that across the year is really where we would anticipate that to be as an upside. It's bigger than the Euros, but it's not as dramatic as you would think. It's important also to recognize the point I made earlier is that we shouldn't over commit to what it's going to give because I think there will be some volatile sports margins, particularly in the early half of the whole activity. What I think it does is provides a good recruitment drive opportunity because that's when you get a lot of people are interested in signing up to apps. So I think it's more about the recruitment side of it, where I would say you get the big value from it. It's an exciting activity. I think it will be good for some of our markets, particularly the ones which are in the same time zone. So big markets like Brazil will be very engaged in it. Markets like Australia and New Zealand also will be very engaged because it's about basically watching it live. But that's kind of where we're at. It's a positive, but it's not a major driver of overall numbers this year.

And sorry, just a follow-up question. From an earnings perspective, I guess, but for this year might be invested in attracting and reactivating customers rather than driving earnings in the short term?

Exactly. It is more of a recruitment driver than anything else, yes.

The next question comes from Pravin Gondhale of Barclays.

Firstly, on Poland, are you back to winning your sort of loss shares in the -- lost market share in the country now you have done the migration? And what's your sort of outlook on the iGaming regulation in Poland? And is there any sort of update on iGaming rollout in New Zealand since full year results and other regulatory updates elsewhere in the world?

Okay. I'll take that one. So in Poland, we've always had a process of making sure we have maintained a profitable business. As I think most people know, there have been a lot of new entrants to the market that have gained share, but at a very high cost. What I think is encouraging is -- and I think before I go that far, I think we make the vast majority of all profit that is made in Poland based on our common sense approach to the numbers. It's true, we did lose share. I think what we're seeing now is some encouraging signs of starting to gain share back off the back of continuing to support the brand, which is very strong. Also, the migration, as you mentioned, onto the Croatia Sportsbook is bearing fruit. And so we're optimistic for the future in Poland. In terms of iGaming legislation, I think it is significantly in the future. I mean the current regime there is not open to iGaming at the moment. So I think in the medium term, we would suggest that, yes, legislation for iGaming will come through, but I wouldn't be putting into any forecast right now. If you go to New Zealand, iGaming is going ahead, going live at the end of '26, beginning of '27. There's going to be a toleration regime put in place from May. What's exciting about that is we have the only legal betting sites, which is with TAB, the New Zealand government relationship that we have. And so when iGaming comes out, there's going to be like 15 licenses that are going to be allowed, of which we will have TAB, which will be the only one that will be doing casino and sports. And we're hoping to have 2 other brands as well out of those 15 labels. So our outlook for New Zealand and iGaming is very positive. But the majority of the impact of that will start to hit from 2027 when we can start to advertise and promote iGaming.

The next question comes from Jamie Bass of Citigroup.

Just one question from me, please. Stella, it's a follow-up on what you were saying there about using the World Cup as a recruitment driver. Just wondering if you have any data from previous World Cups or potentially the Euros on retention once you have sort of acquired customers who are downloading the app for the first time. Once the World Cup is over, do you have any data on whether they then engage in other leagues such as the Premier League?

So we have lots of data about retention and value of customers. We have a team who work on -- I lost the word actually. I've got a cold, so my brain is a little bit foggy. But performance marketing, that's the word I was looking for. Performance marketing. Our team in the performance marketing across most of the world now are really, really strong at getting -- understanding the payment, paybacks, the recruitment efficiency that we get from investing in areas like this. So actually, it's kind of day-to-day BAU stuff that we do with that team. It's a 365 sports team that do most of our performance marketing around the world, and we would apply the same rules to that as we do for the World Cup as we do for any recruitment drive. So we're very hopeful that we will get some strong retention off the back of the activities we do.

And just to add to that, the performance marketing discipline and model that we have here is one of the most impressive things to me that I've seen at Entain coming from a consumer retail background. And so we're very careful to make sure that we don't waste money. Lots of people, obviously, in tournaments like the World Cup will bet and then never bet again until the next World Cup. And we have a very, very good model to try and identify and weed out that type of thing so that we don't waste marketing money on it. That's reflected in the level of marketing that we do around the World Cup. So we're absolutely in it, and we're absolutely open for business. But you won't see us blast it all over ITV and Sky because we just don't waste money in trying to lean in too heavily. We do think about paybacks in every pound that we're spending.

I appreciate it. I've got my meds with me. Any other questions coming through? No.

We have no further questions at this time. I'd like to hand back to Stella.

Thanks so much. So look, thank you so much for participating. We're really pleased with how the year has started. We believe we're firmly underpinning our 2026 expectations. And I'm very confident that our strong momentum positions us well to seize opportunities ahead. and to be a long-term industry winner. I myself and Mike look forward to speaking to you at the interims. And of course, if you have any follow-ups, then please do contact the IR team who will definitely be there to help. And on that note, thank you, and goodbye.

Thank you.