Entain (LSE:ENT) Q3 2026 Earnings Call

0:00 Welcome to Entain's Q3 call. I'm delighted to be speaking to you again and sharing another pleasing update on Entain's performance. Joining me today are CFO Michael Snape and our investor relations team. On our call this morning, I'm going to begin with the headlines of our Q3 performance. Mike will then provide more details on trading and our outlook for the rest of 2026. And then we will open it up to your questions. So, turning to the headlines. Endtime performed well during Q3. Not only does it mark our tenth consecutive quarter of online growth, this consistency demonstrates our ever-strengthening operational execution and how that is translating into resilient performance.

0:46 Importantly, Q3 highlights the strength of our diverse and globally scaled business. Not all markets or results will go our way all of the time. but the breadth of our portfolio and the product offering enables Entain to consistently deliver growth while also navigating headwinds. During Q3, we continue to see broad-based momentum across our business. In the UK, our hard work and investment is driving market share gains and partly offsetting the increased tax burden. Whilst elsewhere, Spain, Canada and New Zealand all continue to deliver double-digit growth. These helped us absorb the headwinds of particularly customer-friendly sports results in August and September, and the ongoing volatility in Brazil.

1:36 Excluding Brazil, Q3 online NGR grew 5%, driven by volume growth of 7%, affirming the strength of our underlying momentum. BetMGM also continues to perform well. As you heard from Adam and the team earlier this week, they remain focused on their execution and continue to lean into BetMGM's competitive strengths. BetMGM delivered a solid quarter and remains on track with guidance for the year. Across our markets, our continued focus on improved product and customer experiences is driving consistent top-line growth. At the same time, we're making good progress with our initiatives to improve efficiency, increase agility and become better connected to capture our scale advantages.

2:27 Despite our resilient performance and ongoing optimisation initiatives, our industry is already navigating a more challenging UK tax environment. The speculated further tax hikes, this time on gaming machines, threatens the viability of many of our shops, with significant consequences to jobs, local communities, the UK high street, as well as the racing industry more widely. So whilst we will continue to strongly urge the government to fully consider the broad economic impact of any tax decisions, Ensign must also remain focused on delivering what is in our control. With our strong foundations, global footprint and disciplined allocation of capital, this supports our confidence in delivering our group's guidance for 2026 and sees Entain well positioned to be a long-term industry winner.

3:25 Thank you. Over to Mike.

3:27 Thanks, Stella. Good morning, everybody. As Stella said, we're really pleased with the Q3. It's another quarter that reinforces both the quality and value of our diverse portfolio and that ongoing momentum we're seeing across the group. Turn to the numbers, and as ever, all growth rates are referred to a constant currency. Overall group NGR agreed 2%, with online up 3%, and retail flat on a like-for-like basis. Those headline growth rates belie much stronger on underlying performance, due to both particularly unfavourable sports results weighing on the margin, as well as continued challenges and deliberate actions taken in Brazil, even before the ban introduced in September. Excluding Brazil, online NGR grew 5%, supported by strong volume growth up 7%.

4:12 Year-to-date, that puts us for OnlineX Brazil up 8%, reassuringly ahead of our 5% to 7% guidance. Coming back to the margin, it was a very different picture for sports and gaming this quarter. Gaming delivered yet another strong quarter, up 8%, so we're very happy with that result and fantastic delivery by the teams. Sports, however, was down 3% due to those sports results. Football in August and September, which more than offset a strong finish to the World Cup in July. As you remember, Q3 lapsed a weak sports margin comp prior year, and the quarter was broadly flat versus that. Compared to a normalised planned margin, Q3 sports results were roughly a 4% drag on the quarter's online growth. Similarly, this was felt in retail, with NGR down 2%, despite volumes being up 2%.

5:00 To add some colour from the markets, as usual, let's start with the UK and Ireland. UK and Ireland delivered yet another outstanding quarter as we continue to regain market share with online NGR up 14% driven by standout volume growth of 15%. Despite that heavy sports margin impact, online sports were still up 3% while gaming accelerated to 17%. In retail, our UK business continues to be the strongest proposition in the market and an integral part of the high street where we proudly employ over 12,000 colleagues up and down the country. In Q3, NGR was up 3% on a like-for-like basis, as both sport and gaming continued to perform well. That UK performance is a consistent trend, and it's been driven by three things.

5:48 Improved product, whether that's choice, features or speed. Increased disciplined investment, as we've lent into market turbulence driven by the higher gaming taxes, whilst many others have pulled back. And of course, best-in-class execution. It's strong evidence that our returns-based focus alongside operational excellence is a winning formula. Moving to international, again some really strong performances, weighed down by sports results and of course the ongoing situation in Brazil. Overall NGR was down 4% and online NGR down 3%, reflecting the challenge in Brazil market and customer-friendly football results in Europe. Just as we talked to at the half, even before the shutdown in September, the Brazil performance was a combination of both the market and the deliberate choices we made to not chase unprofitable growth, unlike many of the competition.

6:39 Excluding Brazil, international online NGR was up 1%, so positive, but still weighed down by those sports results. That margin impact was most pronounced in Italy, where the margin was down more than 3 percentage points year on year. But importantly, volume growth remained strong at 9%. That underlying growth provides a strong foundation to build on as we revitalise the Eurobet brand and strengthen the proposition. We have every confidence that the changes the team are making there will begin to shine through and we see huge opportunities ahead in Italy as an integral part of our portfolio. Elsewhere in the world, Spain, New Zealand, Canada, all up double digit despite those adverse sports results. Australia continues to perform well with online growth in line with expectations. Final mention to Entane CEE which continues to perform strongly with online up 4% alongside double digit volume growth.

7:32 In summary, we continue to perform in line with expectations through our returns on disciplined investment and operational excellence. Our diverse globally scaled portfolio continues to demonstrate we are well positioned to navigate any regulatory or market volatility and we are focused on controlling what we can control while strengthening the foundations of the business. I want to again emphasize as a final point, behind continued growth and consistent execution, our priorities remain very clear. Optimize our cost base, improve cash generation, strengthen the balance sheet, all with an absolute laser focus on shareholder value. I'll now hand back to the operator for your questions. Thank you very much. To ask a question, please press star followed by one on your telephone keypad now. And if you change your mind, please press star followed by two.

8:21 When preparing to ask your question, please ensure that your device is unmuted locally and we kindly ask participants to limit themselves to one question and one follow-up question. We have a question from Ed Young at Morgan Stanley. Ed, you are now live.

8:35 Hey Ed. Good morning. First is on UKNI, obviously lots of initiatives across the four brands bearing fruit given the acceleration you're seeing. Can you help us with what you're seeing from the competitive set and the general environment, i.e. is the higher RGD finally sort of making an impact on the competitive dynamics? And then the follow-up you mentioned on Italy there, you sort of talked about the Eurobet revitalisation. Can you give some colour on what really lies behind that and reasons for optimism? So obviously volume was better than Thank you for joining us today.

9:45 18 months or so ago, I guess, when we really started to see some of those improvements starting to get put together and then sequentially hit the market. But over time, we've been improving the coin economies on things like Foxy and Gala. We've now introduced a refreshed Ladbrokes app. we've got general improvements in the app that have been recognised by external benchmarking on both Coral and Ladbrokes so these are all things which are moving the dial in the right direction which is basically what we said we would do so giving a more competitive offering I think is driving those market share gains which clearly we're very very pleased about in terms of the impact of the tax coming into the market I have to say it's still really early days I mean it only started in April Thank you very much.

10:48 I don't think we've seen a huge change in the UK right now I think there's some indications that things will be moving there's a lot of activity by black market operators increasing their investment behind Thank you for joining us today. and using the benefit of having that visibility both on the high street and online for both Ladbrokes and Coral. So that's really what we're seeing at the moment. Mike gave, I think, quite a good detailed answer on Italy, but I can hand back over to Mike if you just want to say a couple more words about Italy.

11:39 I mean, without it being too... Robert I said it's across the piece we've got a new team in Italy who've really been doing drains upon the business and and what to do with the Eurobet brand and really how we can realize its full potential whether it's about operational execution in the retail whether it's about the online technology platform deployment of marketing spend bringing the best in class of tools from all across the group and applying them to that market is really going to pay dividends and we'll be able to update a bit more on that at the full year Thank you very much, Ed. Our next question is from Estelle Weingraud at JP Morgan. Estelle, you are now live.

12:20 Hi, good morning. So, also two questions for me. The first one on Brazil. I mean, it's been a very competitive market. What it was, you did both sports betting and iGaming. I mean, we'd like to understand better where the weakness has been coming from. And I guess also if Bolsonaro was to win, OSB could be back on the table. How would you approach Brazil then as it's been challenging and would you consider not entering again? And I just have a question on Austria. I know Austria is relatively small, but it's been a recent topic of discussion given the expected gaming sector overall in 27. What framework are you expecting at the moment? You would likely have to exit before year end for a few months. What's your best take on Austria and the likely impact it would have?

13:06 Thank you.

13:07 Thank you, Estelle. I'll take the first one on Brazil and Mike's going to take the second one on Austria. So yes, obviously Brazil is proving to be a volatile and challenging market. Clearly, the fact that the entire market was closed down with a provisional order on the 25th of September has had has had obviously a clear impact for many of us. Prior to the market being shut down, as I think we said in the presentation, we were always already taking what we would call pragmatic approach to making sure that we were investing in the right sort of customer and not chasing volume at any cost. And I think that has proven to be the right thing to do because the fact that the market can be closed down with no notice just put you at a degree of risk if one doesn't take a sensible approach.

14:03 In terms of the market opening back up, clearly we don't know what's going to happen. Presidential results will be on the 25th of October. I can't predict what's going to happen. But I think one of the things that I can say is our brand, Sporting Bat, is a great brand. It's been around a long time in Brazil. It's got one of the best equities and it's predominantly a sports brand. It's about 70% sports. So if the market came back and it was sports only, then I think we'd be well set for that. If it came back and there's advertising bans, then I think we'd be relatively well set for that because we've got long-term brand equity. So our intention is to reopen up Brazil, but seeing what the framework looks like when it eventually happens and making sure that we're doing it with the appropriate level of investment to be what I call proportionate and sensible.

15:03 So that's really where we're at. So if I hand over on Austria.

15:06 Yeah, I mean, on Austria, currently the call-off period is drafted at nine months, but everybody in the industry is lobbying against that. If it does pass, it will come in at some point in 2027. I think there's two important points. One is that the performance of that business in recent times, you know, the EBITDA contribution has been weighed down by player claims. So whilst we might have an impact to overall online NGR growth, The impact on EBITDA is pretty de minimis. So it's not something that concerns us, but clearly we would like to be able to get up and running. The second point is that we have followed all of the rules. We've done everything that the government could want us to do. We've paid our taxes. We've managed player claims. We're in the best possible position to capitalise on that market. So if we see a return, we are going to be the most competitive person in that market when it regulates properly. So we've got optionality, which is always what we like to have.

16:02 Thank you. Thank you very much, Estelle. Our next question comes from Ben Shelley at UBS. Ben, you are now live.

16:10 Hi, Ben. Hi, good morning. Good morning and thanks for taking my questions. I've got three, please. One, you've reiterated your £500 million 2028 free cash flow target, appreciate some regulatory and tax uncertainty, but putting that to one side, can you outline the key drivers in getting there? What are the biggest swing factors or buckets versus 2026 and what should we be thinking about? Next, I wanted to ask about the cost base. As you've highlighted a number of optimization opportunities, it would be helpful if you could elaborate on where you see the greatest scope for improvement. And then along similar lines, should we expect a discrete cost savings program to be announced at some stage? Or is management more focused on delivering margin expansion through a broader, more holistic approach to group cost efficiency?

16:55 I'll take all three of those Ben I mean look and this is a trading update you know rather than the full year where we'll talk about a lot of these things we've reiterated the 500 million because at the moment that's the existing guidance that we give to cash generation the reason we continue to reiterate that because we haven't recut it yet we will do something at the full year to articulate that in a different way is we remain very very confident about this business's ability to generate cash Thank you very much. We won't be announcing any kind of project Roma 2. Managing our costs, optimising the cost base is a way that we're running the business.

17:43 It's not a discrete project. It's something that we think about and do every day. It's something the Exco talk about alongside growth and it's a critical component in being able to generate cash in the long term. We'll obviously keep updating people and you've already seen where we've made some headcount reductions and other initiatives and we may announce things like that but we're not going to announce a big project. um it's it's simply not a one-off exercise it needs to be sort of woven into how we run the business thanks very much thank you very much thank you very much ben our next question is from jamie bass at city jamie you are now live good morning thank you very much for the questions i also have two um first one is again on brazil um From your understanding of the process as it goes through Congress, if it does go live again, as it stands, I understand the licenses have essentially been revoked.

18:39 So would you expect that you would have to go through the licensing process again and pay a fee for the license again in Brazil when it reopens? And second question on Italy, on the sports results impact, could you give any kind of breakdown of how much of that has come from customer friendly results in Serie A versus the Champions League? Thank you.

18:58 Okay, well, let me just talk about Brazil. I mean, clearly, we don't know exactly what's going to happen. We don't anticipate that when it opens, we're going to have to reapply for our licenses. But, you know, we take whatever comes our way. At the moment, the provisional measure is for 120 days, at which stage it either gets ratified, changed or revoked. And so we are planning for, you know, multiple of potential scenarios. But you had to ask me for my best guess. I think the market will reopen in some form or another and we will be we will be back there. On Italy, the football is very strong, very strong indeed.

19:46 And Serie A, poor sports results. Champions League, poor sports results. So both of those facts were true. And we also were very strong in the south of Italy with Eurobet. And in particular, the sports results for football were weak in the south of Italy. So hopefully that answers the question.

20:08 Got it. Thank you. Thank you very much, Jamie. Our next question comes from Andrew Tam at Rothschild & Co. Andrew, you are now live.

20:20 Hi, good morning. Just a quick one. I threw a part one on New Zealand. Can you talk about your confidence in the New Zealand auction process and the decision to bid for three licenses there, given the notable absence of some of your main peers? and the second part of that is there any risk that New Zealand kind of looks like Brazil post the liberalization of that market and then finally are there any potential impacts or flow-on impacts from the Australian Austrac action into the New Zealand licensing decision at all? Thanks.

20:55 We were delighted to get everything that we wanted in New Zealand and we feel incredibly confident about the opportunity there. It was surprising to us the mix that came through on the licenses, but I can't say that we're disappointed that that's the competitors that we now have. We're really excited about that market. I wouldn't ever describe it as something that could end up looking like Brazil. I think that it's going to be a really great place to operate. We already have a presence there and we really enjoy working on the ground with New Zealand and we look forward to taking that forward with gaming.

21:30 And then I think your other question was on AUSTRAC. AUSTRAC is clearly an ongoing process. We're very transparent about that. So there's no new news there. This is something that we'll work out over time. And clearly, just to emphasise what Mike said, we have a very strong relationship in New Zealand already because obviously we are the sole provider of sports betting through Tab New Zealand. So we feel very confident about the opportunity there. and excited about the fact that we have three labels.

22:02 All right, thank you. Thank you very much. Thank you, Andrew. Our next question comes from Pravin Gondel at Barclays. Pravin, your line is now open.

22:16 Hi, thanks for taking my questions and good morning to all. Could you chat about the underlines of volume strength here? I mean it was impressive to Q3 excluding Brazil and UK was clearly a standout but now from here we have sort of slightly tougher Q4 comp and there's no world cup next year and then UK comps would also get tougher so how sort of how do you think about sustaining that I think I'll get online growth excluding Brazil into 2027 and sort of the broader underlying momentum on volumes and the top line there thank you

22:55 I'm not quite sure we fully heard the question. The line wasn't perfectly clear, but I think you're already talking about sustainability of online growth in 2027. And the answer is that, you know, you always have, you know, puts and takes. Thank you very much. New first-time depositors, but we have other factors which we're excited about. One we just talked about was the opportunity of an entire new market with New Zealand. We believe we've also got strong momentum in a number of the different markets where we're focusing in on to get growth, whether that's places like Spain or Canada or it's...

23:49 UK Continued Momentum because we're continuing to increase share. So we have a multitude of initiatives in place that gives the confidence that there should be continual growth that will come through the business. I think that was the answer to the question. If I missed anything, I apologise.

24:05 Just bringing it back to this year, I mean, you're right about Q4. If you think about our guidance is 46%, including Brazil, ex-Brazil, we're saying we're going to be at the very top end of that 5% to 7% guidance that we gave before. In this print, we've said year to date, we're seeing online experts up 8%. So you can do the maths that there's a slightly softer Q4 in there. Given the sports margin results that we saw in Q3, we have to, you know, factor in that there are things that we can't control. And ultimately, this growth number is what flows to the EBITDA guidance, which is the most important part of what we guide to.

24:45 Thank you both, and I'm sorry about the line, but you both answered questions clearly. Thank you very much. Thank you very much, Pravin. Our next question comes from Luis Ashinshia from Deutsche. Luis, you are now live.

25:00 Hey, good morning. Thank you so much for taking my questions. If the UK government were to increase the machine gaming duty to 40%, I suggest stating certain media reports, How much of the resulting tax headwind could the company realistically mitigate through machine mix optimization, state rationalization, and cost efficiency initiatives?

25:29 Thanks for the question. So in terms of the challenge that we currently face regarding a potential increase to machine gaming duty in retail, there is, as I think you'll see in the UK press, a lot of pushback against taking such an action to potentially increase the The duties from 20% to 40%. So let me explain why it's so important that we get this message through to government. First of all, since this time last year, already 630 betting shops have closed across the industry. and that's before putting the gaming tax up. If the gaming tax is put up as potentially muted, then independent analysis has shown that circa 1500 betting shops across the industry were closed and circa 16,000 jobs would be lost and the net take by the treasury would go down. Thank you very much.

26:45 and so that's the focus at this moment in time. Clearly we can't control what comes out of the budget but we will have mitigation plans that we will put in place should there be any increase but at the moment the key focus is trying to make sure that the key message that putting the taxes up closes shops, reduces jobs and reduces tax intake.

27:09 Look at the performance of the UK business even in the face of the existing increase in tax. We've got the best portfolio on the high street. I think we've got one of the best online businesses you can have. We are best placed to deal with anything that comes down the road and benefit from where others will struggle.

27:29 Thank you so much for my follow-up. Given the recent regulatory developments in Brazil, have you changed your investment plans Headcount or marketing commitments or even your technology roadmap because of the recent developments or are you waiting to see what ultimately happens with the market before you make any long-term decisions?

27:56 we have a relatively small team that work in Brazil they are focused on doing other things to the group while we wait and find out what the Brazil outturn ends up being but I think as we said before the key thing is to make sure we have a sensible approach to investment in Brazil given the volatility that we have seen and when the market opens up that we will continue a a Thank you so much for taking my questions. Thank you, Louise. Our next question comes from Richard Stuber at Deutsche. Richard, your line is now open.

28:54 Thank you. Good morning. Thanks for taking my questions. Just a couple, please. First of all, hi, can you hear me? Yes, yes. Oh, hi. Sorry. So the first question is, could you give us an update on the timing of the remaining stake of Entain CEE? And I know that you're still slightly above your leverage target, but would you consider doing share buybacks given where the current shares are trading? And my second question is a more sort of a high level question, I guess. and regarding sports results I guess historically a lot of people used to sort of bet on sort of the wind draw and used to look at sort of favourites winning but are we seeing more generally people betting now more on things like player performances more acres without just having the wind draw so therefore you're going to see greater margin volatility going forward yeah any sort of colour around what people are betting on in football would be great thank you

29:48 If I talk to the first one, clearly when we've got something to say on NTNCE, we'll say it, but I wouldn't randomly comment on it on a trading statement call. You're absolutely right on the leverage, and that's a very, very big focus for us, and that's our primary objective. But after we've got leverage to where we eat, would like it to be, then clearly at this share price, buybacks is something that we need to consider. But the primary focus is to deliver the business and strengthen the balance sheet.

30:21 And then on to sports results. The reality is players like to have more exotic bets these days. You're seeing across the industry people, you know, Moving away from single bets to acres or multis. And that I think is going to continue to be the case. And sometimes you get a really good, you get really good margins from that. And sometimes you don't. But long term, I think the trend in margins should be positive from doing that. But importantly, it generates the interest level with the players that is so important. and certainly in our business I think that was lagging with multis certainly over the last two or three years. I think we've got a very competitive product now and across the World Cup for example the level of multi-play was much higher than it was previously so that is something that I think is here to stay. but there is more volatility associated with that and therefore we just have to live with that volatility but look at the underlying margin contribution.

31:34 Thank you. Thank you Richard. Our next question comes from Jack Cummings at Barenburg. Jack, your line is now open.

31:44 Good morning, thanks for taking the questions. Two questions, please. First one on Australia. I think the half-time performance was ahead of expectations, but the Q3s, you've said it was in line with expectations. I appreciate you flagged tougher comps, but anything to mention there in terms of competition? And do you think you continue to grow market share in Q3? And then my second question on international. So international online NGR was down 3%, but plus 1% excluding Brazil. Were volumes also positive if you excluded Brazil in the quarter? Thank you.

32:15 So in Australia, we're still very, very happy with the performance in Australia. I think we spoke to the fact that you'd see some slowdowns. We were comping last year. We do believe that we're gaining market share. We think the team are executing really strongly on the ground and we expect to continue to gain market share in that market.

32:34 And then I think the other question was about where our volumes were in the rest of international. Off the top of my head, they're about plus 3%. Yeah.

32:47 Thank you. Thank you very much, Jack. Now for our final question, we come to Conroy Gaynor from Bloomberg Intelligence. Conroy, you are now live. Hello. Conroy, your line is open.

33:09 Hi, sorry about that. Good morning, everyone, and thank you for taking my question. I just had a follow up on the machine gaming taxes. I think your position is pretty clear on what this means for the retail landscape in the UK and jobs and everything like that. But I guess my question is, what things can you do? What levers can you pull to ensure that any kind of shake out of this ends up in your online ecosystem, as opposed to, you know, competitors or black market?

33:40 Well, it's a very complicated question because we haven't actually had the increase in machine gaming duty, which I hope we won't have. And so stage one is we continue to lobby with the facts to say that it will not generate a positive outcome for the Treasury. In terms of the positioning ourselves on the high street, we are the best, I believe, by far, retail operator industry. Thank you for joining us today. if there were to be increase in taxes we would be a relative winner in the fact that we would gain market share in retail it is a much more complicated question regarding people migrating from retail to online there are a number of people who in particular value the experience of going into retail and don't want to be online customers but then if it does go online some customers go online then clearly there is work to do uh to make sure that we capture as much of that as possible but i think we have to take this in a staged approach which is we are looking at all aspects of this uh we have we have a very strong project team working on potential outcomes but our primary focus in terms

35:14 of messaging right now is that this is a really bad idea for people for jobs for the high street and we'll continue doing that until the budget Thank you so much for the question. So I just want to wrap up by saying thank you very much for listening today. Clearly, if you have any follow up questions, please do follow up with Davina and the investor relation team. Thank you so much.