OPAP Holding Société Anonyme (ALWN) Earnings Call Transcript & Summary

Ladies and gentlemen, thank you for standing by. I am Gelly, your Chorus Call operator. Welcome, and thank you for joining the OPAP S.A. conference call and live webcast question-and-answer session to discuss the second quarter 2023 financial results. Please note, a video presentation has been distributed and is also available on the OPAP Investor Relations website. [Operator Instructions] The conference is being recorded. At this time, I would like to turn over the conference to Mr. Jan Karas, CEO of OPAP S.A. Mr. Karas, you may now proceed.

Thank you, Gelly. Good evening or good morning to everyone, and welcome to our regular Q2 2023 Results Conference Call. I'm very pleased with the set of results that we have announced, delivering strong upwards top line performance across all channels and verticals. We continue also to record solid operating profitability, allowing us to be confident on the delivery of our communicated outlook for the year. On the operational front, we are very glad with the tangible progress we are showing, upgrading further our customer experience and rejuvenating our recreational mix. The first steps of our OPAPONLINE.gr entertainment hub, the upgrade of our retail Sportsbook platform and the continuous evolvement of the OPAP store app supported also by our new Free Win Game was amongst the few successes that we presented to you earlier in the presentation that we have shared with you. We are also happy to announce a record interim dividend of EUR 1 per share to be paid in November. Continuing our general shareholder remuneration, while at the same time, we are looking to further complement our shareholders' remuneration by expanding it with the share buyback program funded by any additional surplus cash after maximum dividend has been paid. For the remainder of the year, we are having a very busy and solid commercial plan towards delivering sustainable value to all our shareholders. Hopefully, you have reviewed and enjoyed the results, recorded video we shared with you earlier today. So we will jump directly to our Q&A session. Gelly, over to you.

Thank you, Mr. Karas. [Operator Instructions] The first question is from the line of Draziotis, Stamatios with Eurobank Equities.

Just a couple, if I may, please. Could we start with the shareholder remuneration? If you could describe us your thought process regarding the interim dividend distribution, I guess the obvious question is what this means for total shareholder returns out of 2023 numbers, profits? Or I guess what I'm wondering is whether it's reasonable to assume that you will top up the interim dividend with the profits that you will generate in the second half of the year? So that's the first question. And secondly, yes, just on online. I mean this posted quite healthy growth rates in the second quarter. I'm just wondering what has the experience been from the launch of online KINO? Have you seen any meaningful migration so far to the online channel? And you had given some targets, I think they were a couple of years ago about online. Are they the same? Because you've proceeded with the revamp of your product offering since then. So I'm just wondering what you expect in terms of online penetration in the coming years?

Good afternoon from Pavel Mucha. I will take the first question about the interim dividend. So to answer you, definitely you can expect remaining dividend to be [ paid ] next year. Basically, we've announced in the past and you were used to pay -- you were used to us paying twice a year, interim in the autumn and remaining dividend in the summer following year. So it is very reasonable to assume that we will distribute the second half year profits as a remaining dividend for the 2023.

Thank you. On the online side, the -- what is the expense of online KINO so far? So the -- on your question regarding KINO. We are referring here for the rest of the audience, the OPAPONLINE.gr, our entertainment hub that we have launched a few months back. The KINO is one of the games that we are offering as part of our online lottery portfolio now, obviously, one that is getting a lot of customer interest. We are in the first stage. All of the online products that we had before, they certainly appreciate and explore the new broad portfolio, and we are excited about their engagement with the other games and the development of their time spent on the website as well as the spend and the amount of games that they play. So that's so far going in a positive way. But we obviously don't stop here. As you may have noticed, we have started in -- back in July, communication, so [ ATL ] campaign for our OPAPONLINE.gr platform. And as such, we are expecting in the periods to come, especially now with the back-to-school period kicking in, more and more order and it is new customers joining this new proposition and exploring its merit. So that's where we are today, and we hope we have only the most positive expectations going forward because, obviously, online and online gaming is a trend, and we don't want to stay behind, and that's why we enrich this portfolio, and we will continue to do so. So there is much more coming in the world of OPAPONLINE.gr. And alongside of those evolutions, we expect also accordingly the online share on the total lottery gaming to grow towards double-digit numbers.

Got it. And I guess what this means for the online channel as a whole within your mix? Are you still targeting something similar to what you had referred to a couple of years ago regarding your own digital offering? Or has anything changed?

I'm not sure what exactly you referred to in several years ago target, but our ambition, like I said, is a double-digit share of lottery. If you are asking what exactly is that number...

I think it was close to 200 million, if I remember correctly, something like that, 180 million, 190 million.

I would like to abstain now from specific numerical commitments as to where our online will be. But the important thing is that we will explore this opportunity to the max. And like I said, and if you also look around Europe, the double-digit share or lower double-digit share is the trend, and we expect that we will go down that road ourselves as well. Keep in mind also, part of your question was how it's influencing retail. The important opportunity of online that we want to explore is an incremental business. Those are incremental opportunities for -- for current customers to play on occasions that they couldn't play in retail, especially given its space and time limitations. And very importantly, also attracting customers who, for any reason, don't want to engage with retail and other customers, and they want to enjoy the game on their own. This is a new opportunity for them as well. So there are both current customers being developed from a retail customer to a hybrid customer is one important group. But likewise, it's attracting the completely new customers to our games.

The next question is from the line of Pointon, Russell with Edison Group.

I've got 3 or 4, if that's okay. My first one, could you just talk in terms of how perhaps the fires in Greece might have tempered your expectations from earlier in the year? And has there been any change -- notable change in customers' behavior? My second question is in terms of Free Win, could you just talk about the economics of that to you and the potential financial benefits? Because it's obviously easy to see there's a cost in terms of the payouts that you give to customers. But what are the financial positives? I think in your presentation, you talked about customers up for the app. My third question is in terms of VLTs, there was a slight step back in the quarterly run rate of the revenue there. So could you just talk about that? And my final question is in terms -- with respect to the share buyback. Could you just talk about why you're going for share buyback rather than further -- the reinvestment plan that you've had previously?

I got a second, third and fourth question. Could you please repeat again the first one?

Yes, it's really just about how the tragic fires have been happening in Greece over the last few months. Has that tempered -- has that tempered your outlook at...

You're referring to fires. I don't understand -- all right. Yes. Now I understand. Yes. Thank you. So starting with that, Obviously, the very unfortunate events of extreme heat that unfortunately turned into extreme fires, and according to many, those were probably worst fires in the last at least 15 years, with a lot of negative implications. For us, it was obviously -- also for our business, it was obviously a disruption as well as many areas have been affected. Several stores have been closed for several days. And very importantly, it certainly influenced the psychology of customers in the -- in the affected areas. So yes, it had an influence. We obviously are not able to exactly size as to what influence that was, but it was certainly not a usual -- a usual summer, unfortunately. By the way, speaking on that front, we as OPAP have also provided a lot of help to the affected communities, as many others did to help this extraordinary situation. On your second point, regarding the Free Win logic, it's relatively simple. We want to attract customers to our stores. We want to attract those who come -- generates [ IDs ] for customers to come more often and give them a reason to come more often, that's one thing. And the other thing is further promote the important element of our business, and that is affordable entertainment. With us, no matter how much money you are prepared to spend, from a few euros to more euros, we have options for everyone. And we decided to take it to the extreme and the ultimate definition of affordable entertainment is ability to play for free. And that's what we want to offer to our customers, to play, play it, come, play for free. Once a day, you have a chance to win EUR 100,000 through an exciting and engaging game provided through the digital app of OPAP stores. What's in it for us? Point #1, we are acquiring customers. We are bringing them more often. Point #2, when they are winning, we are giving them -- while we are giving the money, we are giving them also an opportunity to play. And they want to play and they enjoy to play. Most of the winnings that people are collecting are single or low double-digit euros. And most people just want to maximize their chances to win and they keep recycling and playing and enjoy what we offer them in the wider perspective of the whole portfolio. So that's the whole thing. People come more often and play. So activity is the name of the game, and that's where the return on investment as well is. Assessment of the whole business case and how much our forecasts, which are -- certainly even for this Free Win game, positive in terms of P&L implication, is something that we will come back to in the next month because we are now in the early days of the whole proposition. Third question was around VLT activity. Indeed, we see a little bit slowdown. But at this moment, nothing that would significantly concern us because it's largely connected with the activity of players and how often they come. And that was affected during Q2, but not to an extent that would make us anyhow concerned. We have counteracted this with a dedicated campaign focused on activity of players, and we see continuous solid performance on VLT aligned with our expectations. So hopefully, we will not have any surprises on that front. For the fourth question, I will hand over to Pavel.