Lottomatica Group S.p.A. (LTMC) Earnings Call Transcript & Summary

Good morning. This is the Chorus Call conference operator. Welcome and thank you for joining the Lottomatica Group First Quarter 2025 Results Conference Call. [Operator Instructions] At this time, I would like to turn the conference over to Mr. Mirko Senesi, Head of IR of, at Lottomatica. Please go ahead, sir.

Thanks, operator. And morning, everyone. Welcome to Lottomatica Q1 2025 results presentation. I'm here today with our CEO, Guglielmo Angelozzi; and our CFO, Laurence Van Lancker. Now the floor directly to Guglielmo for the presentation. Guglielmo, please.

Thank you, Mirko. And good morning, everybody. Very happy to start with Page 2 of the presentation. We're off with a very good start of the year. This is at market level. Online market continues to grow in a very healthy manner in the first quarter 2025, with 18% -- being 18% up compared to same period last year. Payout for sports is very good, better than the normalized levels, both for online and retail, much better than the same period last year. And Lottomatica continues to outperform the market. This results into the best Q1 ever for us at EUR 220 million of EBITDA, which is 47% up on our reported base compared to the same quarter of last year. Let's now go to Page #3. It's important here to -- there's a bunch of things in this call. And we wanted to focus on the short-term good news, which are several, but also then have a deep dive on the structural advantages. In terms of short-term good news, we're happy to announce that we increased the target synergies for the PWO, former SKS, integration of EUR 12.5 million, all cost synergies, which brings the target at EUR 87 million by 2026. 61% of the synergies are already secured to date. And another very important element that I want to share is that the platform migration is underway and on track. This is usually the most complex part of an integration. All developments, tech developments have been completed. And we've pressed the button both for the retail and online. And the migration process will proceed and complete during the summer, most likely ahead of original plans. The second very good news is that -- as you know, but it's important to stress, is that we have successfully refinanced more than 50% of our debt, EUR 1.1 billion, with run rate savings in interest cost of EUR 24 million per year. At the same time, we've received an upgrade on the rating, credit rating, both by Standard & Poor and by Moody's. And we've extended maturities, all maturities, to 2030 and beyond. Last but not least on the short-term good news is that, following the authorization from the AGM on the share buyback, the Board has yesterday evening approved the start of the buyback by June, by next month basically, for the next 18 months, up to 10%, which is roughly EUR 500 million. And this is again a reaffirmation of our discipline on capital allocation and focus on shareholders' return. Now going on to the structural advantages. Given the macroeconomic context we are in, we thought it was important to stress again a couple of things, which relate more to the sector and to the sector in Italy and not only to the company itself. Well, first of all, we have not even [ written it ], but we are resilient to tariffs. That's pretty much self-explanatory, but more importantly, we believe the business is very resilient to macro headwinds in general. This was the case in previous economic shocks and recessions. Think about 2007, 2010 global crisis, global financial crisis; high inflation period lately. So resiliency to the tariffs, resiliency to slowdown of GDP, resiliency to inflation, all very good news, underpinned in our case also by a business model which relies upon a franchising model. So with a big part of the -- our cost base which is, by the way, variable. The other point is around the business model. We've talked several times about what are the key elements at base of our success. And we've highlighted a few, but we want to take the occasion, like we did last time in focusing on the long-term opportunity of the channel switch, to focus a little more on what's really at the heart of our competitive advantage, what has been at the heart for now and for the future. And so on top of the omnichannel, on top of the multi brand, what is this asset which we call Lottomatica core? Which is basically about a unified technology, data, processes and organization, which is delivering superior competitive performance. Now let's go for a second to Page #4. I don't want to spend too much time here. You have plenty of data that allow you to compare the GGR of the Italian market, of course, our addressable market, to, for example, the GDP changes. And the first graph on the left is during the period of the global financial crisis. The graph in the center is what's happened pre COVID, during COVID and after COVID; and also lately, the reaction of the Italian market to inflation, also compared to other discretionary consumer spending sectors. So the Italian gaming market has proven to be very, very resilient. Now let's go to next page, Page #5, and let's deep dive to the source -- one of the sources of our competitive advantage, also, hopefully, for the years to come. We've seen this model in the past. These are the 6 pillars of our business model which are the backbone of what we're doing. And of course, there is omnichannel. Of course, there is multi brand, but we wanted to show you how the other 4 elements really are built inside and how you should look at them in reading the current performance and also helping you understanding where the company is going. It all starts with a proprietary technology in terms of gaming platform and then AI platform. Then it goes into our integration capabilities. When you talk about integration capabilities, many times, people think about the integration of -- that you do of companies when you buy them. And that's, of course, a great source of value which we've been able to leverage in the past few years and currently, but there's a part within it which is really about the integration of data, customer experiences, processes, digital marketing capabilities that, together with the proprietary technology, drive an excellent offer and maximize customer engagement. Let's go one layer deeper, Page #6. What does this really mean when we talk about proprietary technology? In terms of gaming platform, it means that we do own our tech stack just called Pegasos. All the key modules are in house, the player account management, promo engine, the betting platform, the risk management. And I can go on for a while. And these are -- these assets are integrated across the brands. This is a first huge enabler of value creation of what I'll tell you in a minute. Second side is the proprietary cross-brand AI platform which is called LAMP, which is based on a dedicated data lake. It's based on the integration with gaming platforms; with external modules like the CRM; and with external data sources, market trends, geolocation data, third-party data vendors. I'll get that into a minute. This is the enabler. Then going one layer up, most importantly, data. We have -- apart from transactional data, we have a huge amount of behavioral and third-party data, which provide an incredible -- incredibly insightful in that single customer view. We have tens of data sources, hundreds of digital custom variables, hundreds of business custom variables. And we have tools, which you can see under the [ voice ] customer experience, which allow us to accumulate additional behavioral data on the customer experience. How is the customer moving in its journey through our assets? How can we replicate and improve the customer journey through these -- really the hard analysis of these data? This is done through processes and practices which are built around an operating model which is customer journey led, so it's in the view of the customer; and of course, several advanced digital marketing assets which I'll talk in a minute. This altogether leads to offer excellence and customer engagement of quality, which now we've opened a couple of items for each of them. And I'm still at the theory part, but I want to, we want to share with you the framework then we'll go into a few examples and numbers. You want your offer to be large and deep. All these infrastructure that I mentioned to you allows us to have a wide and deep offer to meet the preferences of a large set of customers, improves the opportunities of cross-selling and improves our capability to do the proper pricing both in sports betting and in casino. In terms of customer engagement, the 2 most notable items are that we are able through these infrastructure to do customized activation, basically relevant content at relevant time to -- in general but also to the relevant customer in terms of communication, which is our capability to personalize messages and content at scale through the different platforms, offering a very unique proposition and communication to every single platform. In a nutshell, which is Page #7, this Lottomatica core is, in the end, an integrated martech ecosystem which realizes a strong integration between transactional data -- all of us, all of the player in the industry have a ton of transactional data, but we are able to put this data together with deep behavioral data, deep third-party data. And this allows us, with our engines, with our models, with our AI agents, to boost personalization and maximize customer engagements. Now 3 quick examples and then I'll get to the bottom line of this. Page #8, a couple of examples on offer excellence, AI-led risk management. We've set up an agent which basically does accept roughly half, 45%, of the sports betting tickets automatically, which means 2 things. We improve payout and we improve customer experience, 150 milliseconds on average to accept these tickets. This is great. And the percentage of tickets which are managed this way is increasing through time. On the other side of the slide, you can find another application of this martech ecosystem, which is unfortunately we have bots bet in -- against us. And they're very smart, so we've set up an agent which is fighting against these basically. We first launched that on the 2 most important brands, Goldbet and -- most importantly in terms of size, Goldbet and Better and Lottomatica. And as you can see, after a while of using this system, basically the, let's call them, approaches from these bots have basically gone to 0. Then we moved that on to Betflag. Same story. So this is basically about early inhibition of nonprofitable speculative users with -- just to give you an idea: The average payout of these tickets which have been rejected is 104%. And after a while, these guys, these bots, they turn somewhere else because clearly they're making less money with us. Another example is on the offer excellence, Page #9, AI agent for predictive model of casino content offering. The standard way for -- in casino offering is usually static- or algo-based. It goes to the generic player. You don't target the player. It's the marketing team choosing which products to list. And now out of the library, you can have some algo-based proposition which is relatively static. You can put new content and so forth, but this is for all the players. Then we are switching to an AI-based system which is driven by the behavior of relevant clusters of customers. It's driven by the popularity of -- potential popularity of some games for certain relevant clusters of players. It's based on pricing, so the payout, the RTP, of the games. And there are lots more variables that can be added and we are adding to the model. The important point is this is player specific. It's already in production. It's in production on a subset of customers. It's going to be extended over time to the entire customer base. And this is about the breadth and depth of the offer. It's about the customer experience and it's about the pricing also. Another examples. Tailored-based communication for the customer base to boost engagement and ARPU. You can study -- these are examples. Clearly you can study, from time to time, relevant clusters of players; for example, those who have lately lost money on sport or casino or both. And you can do tailored communication or bonuses to them. And we've seen that you can have a material improvement of the weekly ARPU of those who are subject to this type of campaign vis-à-vis the others. Or you can go, for example, in sports, but you can [ reply ] the same on casino. You can identify a group of customers which is particularly sensitive to certain type of triggers in terms of novelty of bets on some soccer teams or on some players. And there is an example here of a day of main teams match when the agenda, when the calendar was full compared to another period of time: Pisa, Avellino, Foggia, 3 teams which are not particularly usually in the top tier but -- when there was less offer in the calendar. And with this type of engagement, we've been able to achieve huge numbers on, say, second-tier matches compared to first-tier matches when the calendar was crowded. Last but not least, another example of customer engagement. If you're able to identify preferences in your customer base, for example, the type of sports, the type of leagues, the type of teams, and you have an AI agent which allows you to generate a campaign automatically for the relevant target -- I'm talking about the image creation and the creation of the campaign. You can achieve, you can literally do this in a minute compared to, like, hours or half a day of work, which means this is basically online real time. And it's scalable. And the click-through rates when you present content which is in line with the preferences of your cluster of customers, it's 3x -- the click-through rate improves 3x; and with this, the economics. So these are examples, but this is to show you, Page #12, that we started these in 2023 with Goldbet and Better. Now then we applied a part of these to Betflag. Now with -- when the migration is completed, these and additional features will be applied to Planetwin and then, next year, to Totosì. So the story in the end is this is a source of sustainable competitive advantage, but the full potential is yet to be captured because it has to go through all brands. It has to go full scale on all brands. And we can add and we have plans to add more and more features along the way. So I hope this helps put in context also having a long-term perspective on what we're doing. Now with these, I hand over to Laurence. Laurence, please.

Thank you, Guglielmo. On Page 14. As Guglielmo said, we had a good start of the year, with revenues growing plus 33% year-on-year, reaching EUR 586 million in Q1 2025 compared to EUR 440 million in Q1 2024. EBITDA is up 47%, totaling EUR 220 million in Q1 2025 compared to EUR 150 million in Q1 2024. Margins have also increased from 34% to 37.6%, also supported by the favorable payout this quarter. Moving to Page 15 and looking at the financials by segment. We continued to see strong growth year-on-year in Online revenues, at plus 59%. As well as Sports Franchise was also plus 59%. And broadly flat in gaming. Similarly, looking at adjusted EBITDA: Online has grown 55% year-on-year, Sports Franchise 132% and gaming flat. So you can see that the margins and, as a result, also the growth in Sports Franchise has benefited from favorable sports payout in this quarter. Going to operating cash flow. So if you look at the left-hand side, you can see the profile of our CapEx spend for the first quarter. So recurring CapEx are flat year-on-year at EUR 21 million, broadly in line with what we had last year. And this is comparing versus Q1 2024 that does not include PWO, so this shows you just the scalability of our model in terms of CapEx. Concession CapEx are in line with the guidance we have given this year. So we spent EUR 15 million this quarter. And the EUR 29 million of one-off -- of growth CapEx include predominantly carryover items that we had guided to at -- in our full year 2024 results. So carryover bolt-ons of EUR 15 million and deferred payments of EUR 4 million. This excludes Goldbet. On top of this, we've also got the integration cost and -- CapEx related to the PWO that amount to EUR 10 million. If you look at the right-hand side, you can appreciate the year-on-year improvement, so -- on the operating cash flow, where we improved, increased from EUR 110 million in Q1 2024 to EUR 184 million in Q1 2025. And this is driven by the improvement in EBITDA as well as benefiting from the scalable CapEx that we just discussed. If we go to Page 17. So we can see the evolution of the net debt, decreasing to EUR 1.8 billion at the end of the quarter. So in terms of net financial debt. We have EBITDA of EUR 220 million, if you look at the path from end of year '24 to end of quarter, first quarter, '25. So EBITDA EUR 220 million. Net working capital, slightly negative. It's typical of the seasonality -- of our seasonality. EUR 65 million of CapEx that we described earlier. Then we paid EUR 10 million to the sellers of Goldbet, and this is again in line with guidance. We had EUR 27 million of payments due. We paid EUR 10 million, so we're now left with a bit more than EUR 17 million left to pay. Then you have financial expenses and leases of EUR 29 million; and other items, which include integration costs of about EUR 11 million. This brings us to a net leverage level of 2.1x, so we're at the lower end of our financial policy that we've stated and we've had since the time of IPO of we want to stay in a range of between 2x to 2.5x on a steady-state basis. And this is -- also makes it the right time to start our buyback program. Page 18. This is a quick recap of the refinancing in which we refinanced a bit more than half of our total debt stack. We did it on the 24th of April, where we refied EUR 1.1 billion to redeem the EUR 565 million senior secured notes due 2028 and EUR 500 million of floating-rate notes due 2030. This was attractively priced at 4.875%, resulting in a run rate savings of EUR 24 million per annum and an overall cost of debt slightly above 5%. Our credit rating also has been reviewed one notch up to BB by S&P and to Ba2 by Moody's. And with that, we've completed the presentation.

This is the Chorus Call conference operator. [Operator Instructions] The first question is from Clark Lampen of BTIG.

First question is going to be on the online migration for the casino ecosystem. Normalized growth this quarter downticked slightly [ on a ] sequential basis. And I know that's a good thing as it relates to forward growth of the online ecosystem. I'm curious if you're seeing any signs that the migration is picking up pace and, if so, how we should think about modeling growth over the balance of the year. Second question that I have is on the data and personalization push. I'm curious if you could give us some context around how early on we are. I know that, across the brand portfolio, about 3 of the 5 brands have some degree of coverage right now, but would it be possible to give us a little bit more color around player-based penetration or even what you might expect in terms of derivative benefits for engagement or spending? And then last question, just on housekeeping. The buyback, Laurence, is that something you expect to deploy programmatically more opportunistically? Any color there would be appreciated.

Sure. I could start with the third one. So the buyback program, we will [ follow it ]. We will put in place a program with a bank that has the capabilities to carry out the buyback. And I would say it's -- it will be, let's say, a programmatic program. It will be a -- it will be programmatic, but the -- we always -- as we've always said, we have the flexibility. We'll always have the flexibility to interrupt it at any point in time should there be sort of attractive opportunities of -- more attractive opportunities of capital deployment. I think, on your first question, if you think about the growth -- I mean we continue to see -- and we have -- we do not change sort of our perspectives on how we look at sort of growth for the various segments, as we've -- I mean these are just our sort of best estimates of market growth, but broadly speaking, we'll always continue to see online market growth at -- in the mid-teens; Sports Franchise growth in the mid-single digit; and gaming in-line of sort of -- with the latest trends that we've seen, declining mid-single digit. So this is -- that framework hasn't changed. Now if you look at -- and this is pretty much validated, if you look -- particularly if you look at sort of the iGaming, for example. It has grown in the high teens in the quarter, so we'll continue to see this trend holding true. Sports in general tends to be harder to predict on a month by month because you will have to predict also the payout, but clearly when you look at year-on-year performance, especially when you have more sort of an important distance between the payouts -- so if you have very high payout and very low payouts -- so you have -- you'll see an -- you have to look at the GGR. And the bets clearly get impacted by some -- you have some impact in relation to the payout because of just the recycling of bets. So -- but for that, we continue to hold the view that it's -- that the -- on a normalized basis that the GGR growth of the market for sports is in the mid-single digit -- for sports retail. For iSports, it's we'll continue to see this in the teens.

I'll take, Clark, the one on data and personalization. Look. A lot has been done, but there's a lot to go. Let's start from the brands. The 2 brands which are most advanced on this, simply for historical reasons, where we started creating the infrastructure, are Goldbet and Lottomatica. Better is the sports version of Lottomatica. And now with the migration of PWO and -- Planetwin is going to be, basically by the end of the year, on to the very same level, so those 2 brands are going to be equal. Then you have Goldbet, which is already on a part of the infrastructure but -- mostly on sports, but not all of it. So that will require a little more time. And Totosì will be mainly a topic of next year, after the start-up is gone and the brand is stabilized. So a lot has been done in terms of brand, a lot more to go. In terms of features, this depends very much on the area you look at. Let me make some examples. When -- the first example, on the risk management. On the risk management, I will tell you that, in terms of how much -- the features, pretty much in every respect, on risk management are already in execution on the entire customer base, so in this case, it's more a topic of brand extension, not feature extension which is already running on full scale but you have to extend it on the brands. Still, on offer excellence, when you come to AI predictive modeling of casino content offering, that's in production on a subset of customers. So the feature is there. It's already operational. We have not put anything in here which is at the concept, a project stage. It's already stuff which is up and running, but it's up and running on a subset of the customers. So the first point here is extending that in a safe manner to the entire customer base, and then you have brand extension. So you have 2 levers here. When it comes to personalization, it's still very early in the sense that it's up and running. It's working on a subset of the campaigns and of the customer base. There is tons of additional elements that you can take into account to increase the level of personalization. I mentioned the type of sport, the league, the team, but you can add a lot more. So here you have new features, the extension to the entire customer base and, of course, the extension to all the brands. So it depends very much on what you're looking at, but the concept, the playbook is the same. Now the infrastructure is there. Everything is there, so it's a matter of, once you have something new, roll it to the entire customer base. Increase the feature. Roll it to all the brands. That's exactly where we are and where the big opportunities -- but it's all stuff that it's up and running, with a huge potential of extension.

The next question is from Ed Young of Morgan Stanley.

The first question is around online growth. As you've shown in the presentation, the online market delivered good growth in Q1, but March was a bit weaker, particularly in sports. The data shows that April saw good growth in iGaming. Did you see something similar in terms of a recovery quarter-to-date in sports? i.e., should we view March as a blip? Or is there anything to call out? The second is on the regulatory outlook. I just wonder if you have any updated thoughts or expectation for the ongoing new licensing process and how your development and conversations for Totosì are going. And then third, with the buyback. You've talked about it competing with M&A. And Laurence, there you spoke about flexibility. I wonder if on the M&A front you could just give any updated thoughts on the market, your view on Italy or outside of Italy and what the competition in assets and price expectations look like at this point.

Ed, I'll take the first and the third. So the short answer, it's a -- let's call it a blip in the sense that iGaming has been good. And I think the numbers for the sports just came out on Agimeg 2 minutes ago. And you'll see a sort of market growth of 15% April-on-April, April '25 and April '24. So we continue to see good growth in the market. I think, on number three, how we look at M&A, I think -- we -- I mean I think there's more -- it's more of the same of what we discussed previously. There's not really much to say about competition on the assets. We maintain our framework of analysis of M&A, which is Europe, B2C, regulated and the verticals in which we operate. I think there are clear opportunities that we continue to monitor and that it's -- at the right time, we'll talk about it, if there's anything relevant to talk about, but I would say that nothing has changed in terms of our approach to M&A internationally. And in Italy, the -- I mean there is -- we're talking about continuing very selectively our bolt-on strategy.

Yes. So Ed, on the licensing, I'll make then a very quick comment also on growth. So the licensing for online continues as planned. In -- applications are due by end of May. We don't see any sign, for the moment being, of any intention to postpone the date for the submission of the application, so we stick to the base case of the awarding of the new concessions in September. Totosì continues to have a good momentum both for the customer base that we've already put together. It's showing good traction but also in terms of interest. As we said, it's very likely, given the fact that the -- continuing to operate the current concession until the very last minute comes basically at 0 cost for the existing players, that the transition in whichever direction, Totosì or whatever else, is done at the very last minute because that is the thing which makes more sense, but we confirm both the timing, the approach and the good commercial traction that we see in the [ project ]. And then let me tell you we'll be happy, in any case, also if Totosì does a little less than we planned and we gain extra market share on the other brands because of the redistribution of the market share. The important point for us is the total, but so far, so good. Super quick comment on the online growth, Laurence mentioned, continues to be very healthy in April for all segments. So also because, March, you had -- there was such a good payout, and so much spend in January and February, that you have to consider that when you look at the March data. So April looks very healthy. I think it's also a very good sign that, when you come and look at the total market share for us in April, on the total Online, that's aligned to Q4, which has been the highest quarter ever, with the difference that we are in the middle of a migration, which is usually a complex period. We've seen it in the past. We've seen it at the time of Lottomatica. So April, we matched basically the Q4 market share, the highest ever, in -- really in the middle of a large migration. I think it's pretty good and it's pretty reassuring.

The next question is from Estelle Weingrod of JPMorgan.

The first one, on the drop-through from GGR to NGR. On Online specifically, at the GGR level, it was plus 25% year-on-year; and plus 17% at the NGR level. Just to understand there. And same question but, I guess, opposite direction: Within the Gaming Franchise, we've seen GGR minus 5% year-on-year and flat at the NGR level. And just last one, just do you have any updates at all on the timing of the process for the retail concession?

I can take the same -- the first 2, maybe starting from the second one. On the gaming retail side and the Gaming Franchise, well, we are also -- we are benefiting from the bolt-ons that we've carried out also last year, which as we had indicated also for this year, at an EBITDA level broadly stays flat. And then you obviously -- the impact of the distribution and sourcing has -- is positive on the revenue side because of the way we account for the margin of AWP. So if -- when we move from direct to -- from indirect to direct, you move from margin to gross revenues, so that's more of an accounting effect, but if you look at the -- again, the -- at the EBITDA level, you'll -- we're going to continue to see flat year-on-year, again predominantly [ as a result of ] bolt-ons. The first one, from -- in Online, sort of from GGR to NGR. And here it's of -- GGR to revenues. It's partly a bit because of the -- some of the segments -- a mix effect of the relative -- of the segments that are growing year-on-year. And it's also a bit more of a promotional activity that are predominantly linked also to the fact that we are going through an -- the integration of PWO.

Yes. So Estelle, on the retail concession process, look. We understand there is an advanced, very advanced, draft on the government side, on the regulator -- ministry of finance side, which, I mean, looks pretty well thought and balanced; same type of, again, balanced and constructive approach of the online framework. Of course, it's completely different type of business, so that's not -- you cannot make a match, but I'm talking about in terms of quality of the regulation. It's -- but again the point there is that has to be negotiated with the regions and it has to be taken from there. So we can appreciate there are very -- there is a lot of focus and very positive efforts on the regulatory and government side on this. Again, there is a very rational and balanced approach, again, but then it will have to go through the discussions with the region, so it's hard to make a forecast. But I will say the overall judgment on this is, I would say, positive, both for the focus, the effort and the balanced approach.

The next question is from Fabio Pavan of Mediobanca.

Congratulations for the results. I will just have to follow up on these: First one is a question on the PWO improved synergy target. Could you elaborate a little bit more on this? You were expecting the potential improvement in recent past. Or this is something you have been discovering recently. The second question is related to the core part of the presentation. When you're referring on the potential expansion and then -- for '25 and then the scale-up for '26, this is something which has to do with all the brands or with some brands in particular.

So I'll take the first one. So the improved synergies, it is predominantly related to the distribution costs in PWO, so how we look at the distribution contracts with our -- with the network, so it's in alignment with the rest of the -- with the standards of our group. As we -- sort of disclose the level of synergies once we -- the synergies once we feel we have a high degree of confidence ultimately that we can achieve them. So now was the right time because we have a high degree of confidence of achieving the EUR 12.5 million, and hence the announcement.

Yes. So Fabio, on the Lottomatica core. Well, look. This is an infrastructure. It's basically a product that -- it's going to cover all brands. So the endpoint of this is the maximum amount of feature on the entire customer base on all brands. That's the end game. Then of course, you get there through a process because you add new features every time you scale it up on the customer base, depending on the feature, taking into account different complexities. And you move it to the various -- you scale it to the various brands also taking into account the history of those brands. There's no doubt about the endpoint, all features, and always improving, all customer base, all brands.

The next question is from Andrew Tam of Redburn Atlantic.

Just the first one, just in terms of the personalization work to drive the increasing ARPU. How should I be thinking about it in terms of is this an initiative to improve your bonusing and promo efficiency? Or should I be thinking about this in terms of driving higher staking volumes and staking growth from the end customers here? And then secondly, just a housekeeping question just on the buybacks. Obviously a significant shareholder has been selling-down in recent times. Just thinking through how that buyback works around potential sell-downs from significant shareholders and things like that from a timing perspective, please.

Yes. So Andrew, this is Guglielmo. So the personalization point. And this is just an example here of something which is -- which we are already doing. There's many other things here. The concept here is -- the overall concept is each client wants something different in terms of product, slightly different offer, the way you communicate to them and the way you basically bonus and make promotions to them. So this is on point number two and three. This is not about the offer, clearly, this specific example, but the first effect of these should be a -- should be double. So you should, ideally, increase the share of wallet because you become more meaningful to that client. You get nearer to that client. And another way to see that is that, with the same money, marketing money, you should get more. Or if you want to get the same, you should spend less money. So that is about the existing customer base, but then of course, given the fact that this can be used with clearly less variables available -- but also prospects, respecting the -- you have tons of regulations to respect, but it can be used for prospects. It can be used for customers which are at very early stage, so -- maybe also to reduce churn, not with customers that are already pretty sticky to you and you want to increase the share of wallet. Depending on the phase on the target that you use and depending on the phase where the customer is, you can use this for multiple reasons. The base application will be a customers you -- customer you already own, basically own, between [ comms ]. And you increase the share of wallet and you improve the marketing efficiency, but then you can use the early stages also to drive down churn and build a quicker engagement. But with a more limited set of variables, you could use that potentially also on prospects. So that's the idea.

On the second question, for the buyback. I mean these are on-market purchases that are mainly run -- that are done by a program; or an algorithm, if you wish, so -- and the buyback cannot be directed to a specific shareholder and -- including the largest shareholder that you were talking about. And in -- particularly in light of the Italian rules, you have to treat everyone equally, so look at them as an absolutely standard sort of buyback with on-market purchases.

Got it. Just a follow-up on the personalization question. How much of that personalization comes from what you know about the customer from your retail channel and your existing omnichannel approach versus just acquiring customers exclusively through the online channel?

Currently those -- the amount of knowledge that we have from the customers that we acquire from the retail comes once they are online, so you start to know them. Because before, when they are in the retail, you don't really know them. Of course, you have some background data, but this background data, like third-party data, are usually not enough to drive an effective personalization, hyper-personalized approach. So the short answer to your question is, if they remain fully retail, there's very -- there's other tools that we use but not for the personalization. If they are retail and then they migrate to online -- so they get an account and you start observing the behavior. Then they get into the loop. And there's a significant part of the customer base which goes through that journey, but if it stays a -- pure-retail customers, then this is not the key tool.

The next question is from Domenico Ghilotti of Equita.

A few follow-ups and a question. So the first follow-up is on the buyback. So I'm trying to understand. So if you complete the buyback, basically you have a mid- to high single-digit EPS accretion. So I assume that this is a benchmark also for your M&A. So you are looking at something that is more accretive and you are setting some kind of benchmark for the buyback. Second, on the synergies, just a follow-up on the phasing: so if you can remind us where you are today. And how much can be delivered by the end of this year and next year, considering also your upgraded guidance? And last, just for a clarification. So if I have to take the Q1 [ number on a ] normalized basis, where are you in terms of Online margin? Because I think that you were targeting something like mid-50s as a, let's say, structural level.

Okay, Domenico, various points. On the first questions, for the buyback. Yes, for sure, EPS accretion is definitely a metric that we look at when we assess M&A. It's not the only one sort of just from a financial perspective. Also -- there's also a strategic element, but from a financial perspective, yes, it's a metric, but it's not the only one that we look at when we [ assess ] M&A opportunities. But it is a good benchmark, as we mentioned a number of times earlier. [ I totally agree ]. On the synergy side. The incremental synergies, we will see them. We expect to see them in full in 2026. We would not change the -- it's because it's a rolling process that takes time. The implementation of the review of all the sort of contracts with the network is, again by nature, a rolling process, so for this year, we would not want to commit to a number yet. And sort of a conservative case is that you don't assume any for this year. And we'll see the full extent, the full run rate synergies next year. So the EUR 12.5 million. For the Online margin. If we look at it on a normalized basis, it's probably about, around 1 point lower. And this is the effect of the payout. Just a few things to keep in mind: One is when we look at margins on a quarterly basis. Obviously margins also take -- vary, depending on the level of activity that you have in that particular quarter. If you spread your fixed costs over -- equally amongst the -- all the quarters, the quarters that have higher margins are the ones where you have higher revenues, right, so Q1 and Q4 tend to have better margins typically, okay? The things may change temporarily, but that is sort of -- we're talking about principles. The second consideration I would make on the margins is, on the last call, we said that, with the inclusion of PWO, we would expect to see margins in the low 50s, okay; and that as we continue to grow over time, we will see we -- there is -- it is not unreasonable to expect that we'll get into the mid-50s, more in the medium term.

The next question is from Chiara Pampurini of Intermonte.

I have a couple of question. The first one is on Totosì. We will see its impact from 2026 with the online concession, but I want to know if the project is already ongoing, if you are already closing some deals. And the second question is if you can give us some color on bolt-on acquisition ongoing.

Chiara, this is Guglielmo. On Totosì, yes, for sure, it's ongoing. It's up and running. It's already -- I mean it's the full year impact is 2026, but we expect the uptake to be in Q4, as the cutoff date for the current concession is September. And yes, we've already signed deals. It's ready -- there's already market share attached to that and growing. So short answer, it's operational. It's working well. It has traction. And we are preparing for the cutoff date, which is September, to see, hopefully, a ramp-up in Q4 and then the full speed in '26. On the bolt-ons, we continue to look at them with a very strong filter in the sense that we are very selective about the quality of the assets. We are more and more selective about the quality of the assets that we look at. And we continue to be disciplined on price, but for sure, there are some interesting opportunities out there that we continue to scout and we will continue to execute on. So I don't know, Laurence, if you want to add something on these points.

I think you covered them. I mean what you've seen in the first quarter is the carryover from 2024, where we closed a number of deals. And that's what you see in the CapEx. And then going forward, as Guglielmo said, we're working on our pipeline and we continue to maintain the same discipline on price. And therefore, sort of when that will materialize, we'll -- sort of we'll disclose them as they become -- as we are more progressed.

The next question is from Simon Davies of Deutsche Bank.

Two from me, please. Firstly, on the buyback, should we assume that that's an 18-month linear progression in terms of the buybacks? Or is there any reason why you shouldn't accelerate that process and move more aggressively to the front end? And secondly, how much capacity do you think that leaves you in terms of acquisition spend? And how far above the 2x to 2.5x leverage range would you be prepared to go for the right kind of deal?

I mean the linear -- it all depends also on the -- on how the algorithm works over the buyback period. It is, I mean -- but the intention is to go up to EUR 500 million. The easiest way to model it is, as you suggest, with a linear interpolation. It also depends on the -- given the vast -- mostly this will be funded by our cash flow generation, so if we see that there is an opportunity to accelerate, we'll have to think about that and see a bit later in the process whether that's worth doing. Again here we want to make sure that -- because we are now completing the integration and we feel that we are, on a steady-state basis, in a good place on leverage at the low end, we want to continue to remain -- we committed to our financial policy. We want to stay where we are -- that's a zone of comfort. And we will stay between 2x and 2.5x. Now in terms of M&A, which is more of an -- for exceptional -- let's say, extraordinary sort of activity. So M&A, we would -- we could exceed the 2.5x, but I think this is not a hard guidance. But on a soft basis, we don't see going above 3x.

The next question is from Andrea Bonfà of Banca Akros.

Most of my questions have been already answered, but I got curiosities again on M&A. In the light of the share buyback, can we rule out any M&A for this year? And secondly, are you definitely looking more abroad than Italy? How is the state of the art?

Andrea, no. I mean the buyback tool allows you to stop anytime, so we have no constraints on -- I mean the buyback does not provide a constraint. The buyback is for us a tool to allocate capital on a -- given the sort of the attractive returns that it offers. We can stop it at any time, so if there's an attractive opportunity, we stop the buyback and we do M&A. That's simple. So there's no time constraints on that. In terms of the M&A, clearly what we said is now in Italy we're just talking about, for the time being, from -- we're talking about bolt-ons. And sort of as we discussed on the -- I think, on the question that sort of Ed asked earlier, it's M&A, international M&A. We will continue to adopt the same framework of analysis, so the situations we monitor all fall within this. And it's, again, Europe, B2C, regulated and verticals in which we operate. So businesses that we know well, we can price well and understand well. So this is the sort of the framework that we have been continuing to -- we've continued to do it for a while and we'll continue like this going forward.

Gentlemen, there are no more questions registered at this time.

Thank you, operator. If there is no more question, I think we can close the call. Thank you all for participating. Bye-bye.

Ladies and gentlemen, thank you for joining. The conference is now over. You may disconnect your telephones.