OPAP Holding Societe Anonyme Unsponsored ADR

Thank you very much, Gelli. Good evening and good morning to everyone, and welcome to our regular Q3 2024 results conference call.

OPAP stellar performance in Q3 was propelled by the remarkable growth of Tzoker, strong sportsbetting activities, and the exclusive growth of online casino. Moreover, I'm very pleased with the outstanding progress in our online segment, which constitutes to build its growth trajectory.

In Q3, online operations contributed a robust 31% to the group's revenues, setting a new record and highlighting the digital focus of our strategy. Moreover, I'm excited to share this quarter's achievements.

Our EuroJackpot and Tzoker EXTRA, special draws promotion has driven a double-digit revenue uplift while Tzoker Group Play and Bet Boss increased engagement. Finally, solid profitability and increased margins allow us to be confident on the delivery of the upper end of 2024 outlook.

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. Gelli, over to you.

Good afternoon, Jan. Good afternoon, Pavel.

Congratulations on the numbers. My first question is, I'd like to try and get a feeling for where the genuine surprise was in the figures, if that's okay.

So, would it be possible to highlight what you probably consider to be the exceptional revenue from the Mega jackpots in the period? And is it reasonable to assume that the strong growth in sports and casino were in line with your expectations, or was that also better than expected?

Second question is, you mentioned, you attracted 600,000 new players with the jackpots. Could you give some feel for how many of these dropped away after the Mega jackpots, et cetera, and how many retained?

Thanks very much.

Hello. Thank you very much for your question.

So, regarding the exceptional performance in specific numbers, Pavel will comment in a second. I will give you a perspective on the rest of the question.

The exceptional performance in Tzoker was obviously called exceptional, because as we said, this was the second jackpot ever, and certainly, second -- and first even longest line of jackpots in a row in the whole 66 years history of OPAP. So that was certainly exceptional.

When it comes to casino performance, it is not something that we would consider exceptional in the same terms, but it's performing well and healthy, and continuously it's meeting and exceeding our expectations. So, casino performance is something we're excited about, but certainly not something that we would consider exceptional to the degree the Tzoker Jackpot was.

When it comes to sportsbetting, the period that we have behind us, and I can say all the way to now, has shown healthy payout. Again, a bit different terminology here because when it comes to sportsbetting results and the payout that we record, it always dependent on the results of the particular games, and if the luck is more on the customer side or on the provider or our side as OPAP.

So, here, I wouldn't call it exceptional. Either this was a good, healthy balance payout in this case, in the last period that we have seen, not only Q3, but even lately, I can comment.

When it comes to new customers, you asked about the 600,000, just to give you an idea how this number -- where is this number coming from, we obviously having very large part of the gaming in OPAP stores anonymous, we have two sources of data that we reflect on, one is OPAP store app registrations where we smartly de-anonymize the base, and second source of data is our regular tracker, when we are asking customers or sample of customers, how much they have played and what they have played, and when they have played, and from these records, we are then projecting the overall impact that our campaigns or new propositions are bringing. So, that's where the 600,000 number comes from.

For the obvious reasons of anonymity, it's not that easy to track how many of these specifically the new ones stay or will keep playing, but that's something that we will see in the future trackers as to how the customer base behaves, because it's important to know that the customer come -- that the customer that come on such an extreme jackpot occasion is obviously rather occasional customers, and they are driven by very high jackpots. So that remains to be seen how much we will see them again when the high jackpots will come.

So, sorry for a long answer, but I hope it was useful. Pavel will give you more on the numbers.

Hello. Good afternoon from me.

You asked how much EXTRA revenues the extraordinary jackpot gave us. So, as Jan mentioned, it was very long jackpot series [indiscernible].

We estimate that it brought additional EXTRA roughly €15 million new GGR as a kind of one-off GGR within September. Thank you for your questions.

Thank you, guys. Thank you.

Yes, good afternoon. Thank you for the presentation.

Just a few questions from my side. On the guidance, so you haven't formally upgraded the guidance range despite very strong results that we saw in nine months.

Are there any concerning trends that you see in the fourth quarter that point to bit slower growth? Is it an explanation why you haven't upgrade your guidance?

Because the upper-end range in terms of revenues, €2.2 billion GGR, implies, on my calculations, about minus 5% growth in the fourth quarter, basically. Yeah, so that's my first question.

Thank you.

Thank you for your question. I think the statement on its own we mentioned that we are confident reaching the upper end of the guidance we have provided, speaks for itself when it comes to how much we may exceed the guidance, which might be your question.

This is something we don't want to speculate about and change now last minute. If things will go well, we are certainly optimistic in those expectations.

We don't see any concerning trends. Now, if you ask, but we also have experiences over the past of some unpleasant surprises, especially on the weather side that we might be facing.

So, let's look forward optimistically. That's certainly what we mean with our statement.

Understood. Thank you very much.

My second question on the margin side, and we saw a material decline in SG&A cost quarter-on-quarter in the third quarter, and EBITDA margin improvement over 37%. Do you see this kind of cost base as a new normal?

And do you see EBITDA margin over 30% sustainable going forward?

Certainly, margin over 30% is sustainable. We have indicated that EBITDA margin in the mid-30%s, around 35%, is something what we see for future.

It's a bit tricky to look at margin in a particular quarter. There are ups and downs, because, as we communicated, we launched Eurojackpot at the beginning of the year.

There was a Euro, so there are quarters where we have some very strong activations and very strong communication, which may impact margin in the particular quarter. So, you may see some oscillation and fluctuation, but the long-term sustainable margin is around 35%.

Okay, understood. And my final question is whether you can provide any comments on the renewal of the Scratch license, that I believe expires in a couple of years from now?

And also, any comments on exclusive licenses renewal process?

We have now initiated the conversations with Ministry of Finance about the Hellenic Lotteries license that expires early 2026, and we will certainly do and behave in a similar way following obviously our interest to renew the big licenses in 2030 accordingly as well. Those discussions, however, at this moment have not started yet as it's too early for that.

Understood. Thank you so much.

Thank you.

Yeah, hi. Thanks for taking my questions.

So, my first question is about the impact of the Mega jackpot. Can you kind of strip that out for us?

Like excluding that, what would be lottery's growth in Q3? That would be my first question.

Apologies. Just to make sure I understand correctly, are you asking what would be the growth if there would not be the Mega jackpot in Tzoker?

Yeah. So -- or in other terms, what kind of a tailwind did you get from that, if you can elaborate or point that out?

It's a bit tricky question to answer because there is no such thing as a normal performance of Tzoker, because this by nature, this game oscillates up and down. But if you ask, generally Tzoker is performing well and healthy ever since we have upgraded the game.

So, we would certainly see a performance that would meet or exceed our expectations even with the normal jackpot. I don't know if that's an answer that covers you, please ask if not.

I already partially answered earlier that we saw roughly around €15 million EXTRA GGR. So, the growth would be, let's say, by [some 3 percentage points] (ph) lower if we wouldn't have this EXTRA jackpot.

Perfect. Thank you.

In Q3.

Yeah. You just touched upon the guidance, so -- in response to a question.

So, Q4 seasonally being the strongest quarter, so should we think about the guidance as a threshold sort of, and not necessarily that you report around that? Is that a lower end or lower bound?

Is that the right way to kind of look at it at the moment?

Could you please repeat your question? We did not understand.

Thank you.

I'm saying, with Q4 seasonally being the strongest quarter in OPAP's business, the guidance kind of comes across as cautious. So, should we look at the higher end as probably the threshold that you kind of expect, or you will be over and above that?

Is that a fair way to interpret it?

Apologies if it was not understood. We provided the guidance that we are -- update, that we are confident that we will reach the upper end of the guidance.

And as I have tried to express in my previous answer, we don't see any concerning trends ahead of us. So, possibly we may reach even better, but that's not something we want to speculate on at this moment, because as much as many things can go well and better, there is also things that can go wrong like weather that caused us major issues last year.

Sure. Yeah, thank you.

So, just coming back to -- some of the other operators in -- at different markets have pointed out that they have seen unfavorable sports results in October. So, is that something that you are seeing as well?

No. As we have said before, the results we've seen in Q3 and continuing even until now is pretty normal.

Okay. And just one final question.

Sorry for the long list. So, I've been reading news about tourist spend starting to decline in Greece, though tourist numbers are still going up.

So, how do you see this? And do you think it can translate into some kind of a near-term headwind for your growth?

We don't usually see a direct impact of tourist. We, every year, do some local promos in the touristic areas to bring tourist in our stores, but that's relatively negligible impact.

The key impact we have is tourists coming to Greece. So, as a tourist industry bringing money to Greece and Greek people, then [indiscernible] money playing with us.

And on that front, we are pretty happy with the results so far as you have seen.

Sure. Thank you.

That's all from my end.

Thank you. I will give you a bonus answer.

When you were mentioning the comparison to other sportsbetting providers, please keep in mind that our structure is slightly different than an average online-only player, because we have a very strong retail as well embedded in our numbers, and that is a [pre-game] (ph) predominant market. So it may not be apples-and-apples comparison with pure online players.

Perfect. Thank you.

Hey. Yes, good afternoon, and congrats on the great set of results.

My questions, does the new format in UEFA Cup's league phase, would you expect this to generate more GGR on betting? And if this will be the case, would you be able to quantify to what extent?

The second question has to do with KINO and Tzoker. If the migration of players to online is continuous, or is the situation stabilized until now?

And if you can comment, I understand you're in negotiations with the Finance Ministry. Last time, if I remember correctly, you paid €190 million for 12 years license of Hellenic Lotteries.

Taking into account the rather weak performance of Hellenic Lotteries, and recently, you booked an amortization expense of €7.4 million, would you say that the new license would require a larger amount of years going forward for this amount you paid last time? If you can comment on this?

Thank you very much.

Thank you. So, first, more attractive content and new content in football obviously is more markets, more activity, more matches to watch, more fun, more excitement, more business.

So, we certainly see this as a positive upside. At this moment, I would not like to speculate as to how much this will exactly bring, but you can do the math as to how much it adds in the overall calendar we see throughout the year.

When it comes to KINO and Tzoker, we don't see that much migration of -- from retail to online, and we don't see the business challenge as such anyway, because what we are doing is expanding customers play. So, people do play in OPAP stores and they also play in online at the same time, which is the case for majority of the players.

And that's certainly a trend that will continue, and that's a trend that we welcome, because we want our people -- our customers to enjoy, to play anywhere they want. And if it's retail or online, it's their choice.

And usually it's both, and that's what our ambition is. When it comes to Hellenic Lotteries license price, while obviously the previous license might set some benchmark, it is relatively irrelevant.

At this moment, the discussion between us and the Ministry of Finance will be about fair price for the business that's ahead of us, and that's a very different time period base. And most importantly, perspectives, because there is much more games now being offered to the customers, much stronger online.

So, it's a very different place than when the discussions were happening last time about the license. It's not also only about the price of the license that I'm sure we will find some fair agreement or I hope we will find some fair agreement with the government and Ministry of Finance, specifically, in this case, it's also about some commitments that we have there, especially as you may be aware, our €50 million tax obligation that currently we need to follow in Hellenic Lotteries, and that's certainly not something that we consider sustainable.

Okay. And one last question, if I may.

If we assume that there will be some kind of consolidation in the online market and taking into account that you have a 50 -- or circa 50% the market share through Stoiximan and OPAP Online, would you consider potential new acquisition in this field if you are able to do so?

We are quite happy with our dual brand online strategy. So, at this moment, this is not something that we would be considering.

And generally, as you know, OPAP is not involved in M&A activities, anyway. So, no.

Okay. Thank you very much.

Thank you.

Yes, good afternoon, and thanks for taking my question. My question, first to online casino, which as you said, they had experienced explosive growth.

Can you shed a bit more light on that? I mean, why is that?

Is it the type of games offered? Do you sense that there is a change in the preferences of the players?

And what can we make out for the future trends? Thank you very much.

Thank you very much for your question. There is many studies and theories as to why online casino is so successful.

I think the key ones that everybody agrees of the -- what is the underlying elements of the success is, A, it's something that is tempting for the younger generation of customers, so think Gen Z, obviously following the regulatory -- excuse me, responsible gaming limitations. It's relevant for this generation.

It's fast, it's colorful, it's exciting, that's why they like it, and it offers entertainment. So, for us, this is a great inspiration for everything that we do because it's a clear confirmation that offering a game and just a chance of winning or losing is not enough, it's not enough anymore, and people want more.

So that's not only for our online casino, the strategy, across our whole portfolio, we try to give customers more, more gamification, more entertainment, more second chances to win, more fun, and generally, offer an experience, not just a bet placement. And online casino does all this very right as a vertical and ticks many boxes for the younger audience, and I think that's the key reason behind the dynamic growth.

Okay. That's clear.

Thank you very much.

Thank you.

Thank you very much, and thank you all for being with us today. Our IR team will be looking forward to answer any other questions you may have and dive deeper in your inquiries as always.

We are now focusing on our Christmas and New Year's Eve commercial initiatives, aiming for a strong year-end and making you all happy and satisfied and hitting our expectations we have presented to you. Thank you all very much, and have a great day, and I hope it's not too early to wish you and your loved ones a joyful Christmas period.

Thank you, and see you soon again. Bye-bye.