Entain plc Reports Q3 Results and Advances Strategy

Entain Plc, a leading entity in the global sports betting and igaming sector, has shared its financial performance for the third quarter of 2023 and provided insights into the acceleration of its operational strategy.

For the period from July to September 2023, Entain reported that its Net Gaming Revenue (NGR) across the group, inclusive of its US operations, rose by 7% (10% in constant currency). The group’s NGR, excluding the US, also saw a 7% increase (9% in constant currency), though on a proforma basis, it experienced a 5% decrease.

The online segment of the business showed a 9% increase in NGR (11% in constant currency), aligning with revised projections, despite a proforma decrease of 6%. This figure adjusts to a 17% increase in constant currency when regulatory impacts are excluded, maintaining a proforma flat rate. The quarter also saw a 2-3 percentage point impact due to customer-favorable sports outcomes in September, alongside a substantial 26% year-over-year growth in active customers (10% on a proforma basis).

Retail operations remained strong with a 4% NGR growth (4% in constant currency), with a proforma decrease of 4%. BetMGM, Entain’s US-based operation, continued its robust performance, recording approximately $458 million in Q3 NGR, marking an approximate 15% year-over-year increase. BetMGM holds an 18% market share across its operational jurisdictions, excluding New York, and leads in the igaming domain with a 26% market share. The start of the NFL season marked a successful period for BetMGM, with customer experience enhancements showing significant investment returns. BetMGM is on track to achieve the higher end of its $1.8-$2.0 billion NGR forecast for FY2023 and expects to reach EBITDA positivity in the second half of the year.

In the context of sustainability, Entain has continued to lead and progress within its Sustainability Charter initiatives.

Regarding the advancement of its operational strategy, Entain has articulated a clear pathway following a transformative three-year period, aimed at refining earnings quality, bolstering operations, and realigning structures to seize future growth opportunities and enhance shareholder value.

During a recent management presentation, the company emphasized its commitment to a focused market portfolio optimized for organic growth and return on investment. This includes prioritizing markets with high growth and returns such as the US, Brazil, CEE, and New Zealand, driving profitable growth in core markets, and exiting from smaller, non-core operations.

Entain aims to return to organic growth, at a rate commensurate with its markets (circa 7% CAGR) from 2025. The company has set a target to increase US market share to 20%-25% by reinforcing product and pricing capabilities, customer acquisition, and exploiting the omnichannel potential.

The execution of Project Romer is projected to escalate Online EBITDA margins to 28% by 2026 and 30% by 2028, simplifying organizational structure to enhance operational leverage and achieve cost savings of £100 million (net savings of £70 million) by 2025.

Finally, Entain plans to reinforce its governance by appointing four new non-executive directors, including Amanda Brown from 8 November 2023, and establishing a capital allocation committee composed of non-executive directors.

In relation to financial guidance, Entain Plc has provided an update that aligns with its strategic directives. For the fiscal year 2023, the company has confirmed adherence to its EBITDA projections, ranging between £1.00 bn (US$1.22 bn/€1.15 bn) and £1.05 billion, as initially communicated on September 25, 2023. Despite consistent volumes in October, Entain notes that sports margins have been affected by customer favorable results, resulting in an approximate £45 million impact on EBITDA. This variance is anticipated to be contained within the fourth quarter without extending into future projections.

Looking ahead to fiscal year 2024, Entain anticipates a modest uptick in pro forma Online NGR, with growth in the low single digits supported by a resurgence in the latter half of the year. The Online EBITDA margin is expected to be positioned between 24% and 25%, indicative of the company’s strategic efficiency and profitability focus. For detailed financial projections and guidance, stakeholders are directed to consult the comprehensive resources available on Entain’s investor relations website.

Jette Nygaard-Andersen, Entain’s CEO, commented: “Entain has undergone a profound transformation over the last few years, and now has strong foundations from which to move into its next phase of growth. We have made significant investments in responsible gambling initiatives. While these steps have impacted EBITDA, they are unquestionably the right thing to do to improve our long-term prospects.

“From here, we have a clear plan to focus our portfolio for organic growth, drive our market share in the US, improve our operational leverage, and increase our EBITDA margins. The wide range of initiatives that are underway will cement our position as a customer-focused industry leader, enable us to achieve our strategic ambitions, and deliver enhanced returns for all our stakeholders.”