Entain PLC Business Update Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Ed Young - Morgan Stanley - Analyst : Hello. Thank you for taking my question and thank you for the presentation. You've given some very useful directional information on contributions. And you've also said, Gary, that that's any only one measure, whole percentage, taking volume, player growth, there has lots of other factors, but you haven't given us any absolute numbers on contribution. You haven't given us any of the extra KPIs you mentioned. So I wonder if you could help us bridging from where we sit now towards your 2026 number. You said '24 is an investment year, '25, also an investment year or do you know, at this point where it sits? So can you perhaps help us with the shape of what we might look at in next year into '25 to reach your '25 point. Thanks.

Question: Ed Young - Morgan Stanley - Analyst : Okay. And just in terms of a follow-up, you've spoken about multichannel. I think it's an area you guys have long been excited about and the technology there and I guess your licensing's maybe there. Can you just talk a little bit about what you're seeing in your current multi-channel and multi-state customers in terms of net spend and displacement of spend? I'm just really commentary on the fact that one of your parents owns 100% of land-based profit and 50% of online profit. So wonder if you could just help us think about whether the business is positioned to really fully lean into that. Thanks.

Question: Ed Young - Morgan Stanley - Analyst : What I mean is when you have a player who's playing in multiple states, you have these more valuable online customers, are they simply spending more, i.e., you are capitalizing on a whole load of spend that otherwise not making or are they also displacing some of their spend net from retail to online?

Question: Ed Young - Morgan Stanley - Analyst : Okay, useful. Thank you.

Question: Joe Graff - JPMorgan Chase & Co. - Analyst : Good morning, guys. Thanks for doing this and taking my questions. My first question is the 30% EBITDA margin target, I know that's longer-term, I'm presuming margins that aren't close to 30% in your 2026 EBITDA target. Can you talk about where do you see margins in 2026 relative to that long-term target of 30%? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. DECEMBER 04, 2023 / 4:00PM, ENT.L - Entain PLC Business Update

Question: Joe Graff - JPMorgan Chase & Co. - Analyst : Okay, Adam, your prior comment, you talked about incentives for the joint venture partners. It sounds like you may want to have wanted to add something based on that specific question to your joint venture partners. Have the -- how have have the incentives or workings with the partners evolved over the last two years? And maybe how are they going to be different in '24 and beyond?

Question: Joe Graff - JPMorgan Chase & Co. - Analyst : Thank you very much. Appreciate the thoughts.

Question: Kiranjot Grewal - Bank of America - Analyst : Hey, guys. Just a question on iGaming. We've seen iGaming become more competitive with the big OSB operators really focusing the efforts to take share there. I mean, this is a category that's typically seen as more competitive than OSB. What gives you confidence that you can maintain your market share here? And also related to that, could you perhaps comment on the cross-sell from iGaming into OSB? I think you already commented on OSB into iGaming. Thank you.

Question: Kiranjot Grewal - Bank of America - Analyst : And on the point of next year being an investment year, I think you called out EBITDA, we should expect to be negative next year. I mean, how big a negative EBITDA should we expect for another way to phrase that question is like, how much cash does that BetMGM have on the books to invest?

Question: Kiranjot Grewal - Bank of America - Analyst : Thank you.

Question: Carlo Santarelli - Deutsche Bank - Analyst : Hey, guys. Thank you very much for taking my question and thanks for the comments. I just want to ask that the 22% share in Ontario was, I think, surprisingly strong. And I wanted to understand maybe how you've approached that market relative to some of the other US markets that are comparable, obviously, where you have the opportunity like in New Jersey or Pennsylvania or Michigan to offer both products and what's kind of worked there relative to -- or what has been the differentiator there relative to those markets?

Question: Carlo Santarelli - Deutsche Bank - Analyst : Thank you very much. That was helpful. Gary, if I could just ask one follow-up. What is the cash on the balance sheet as it stands now?

Question: Carlo Santarelli - Deutsche Bank - Analyst : Okay, understood. Thank you.

Question: Shaun Kelley - Bank of America - Analyst : Hi, good morning, everyone. Thank you for taking my questions. So obviously the reinvestment in the push in sports to reaccelerate share here I think is the critical message, just kind of wondering what channels should we look for on the outside looking in to kind of measure or gauge some of the things you're going to do here? Should we expect your increasing promotions? Will it be more targeted existing or new customers, just maybe some of the channels you guys are going to lean on? Is there going to be a big national marketing push? What should we kind of think of in terms of scope and scale as we see you reengage some of these customers at?

Question: Shaun Kelley - Bank of America - Analyst : Thank you for the clarity and the detail. And just as my follow-up, Adam, you had a really interesting comment about the evolution of your relationship with Entain on some of the structuring around your technology resources there and maybe the ability to adapt a little faster, just wondering if you could elaborate on that a little bit.

Question: Shaun Kelley - Bank of America - Analyst : Perfect. Thank you very much.

Question: Stephen Grambling - Morgan Stanley - Analyst : Hi, thanks. I just want to clarify a couple of things. First, I think you mentioned earlier, 40% of your cross-sell is from iGaming into sports, to clarify that's, again, iGaming first into OSB. And then how would you characterize that the other way, OSB into iGaming? And perhaps what's the split of customers who start in neither iGaming or OSB? Thanks.

Question: Stephen Grambling - Morgan Stanley - Analyst : Helpful. And I guess you can't provide maybe who -- what the mixes of each or even maybe what the number of unique customers are on the platform at this point?

Question: Stephen Grambling - Morgan Stanley - Analyst : One other one I'll sneak in is just, as you're referencing the reinvestment, I guess, how are you thinking about where customer acquisition costs should shake out now versus maybe a few years ago when you first were investing in new states versus now kind of reinvesting in sports betting? Thanks.

Question: Stephen Grambling - Morgan Stanley - Analyst : Got it. Helpful. Thanks so much.

Question: Daniel Politzer - Wells Fargo - Analyst : Hey, good morning, everyone. Thanks for taking my questions. So I would just want to follow up, right now, you guys are at 17% share, active share and your bridging your long-term goals at 20% to 25%. Can you maybe bridge us to how you get there? Is it a different mix of states or more iGaming states that are coming on? And in that guidance, are you assuming any incremental states outside of just that North Carolina that's set to launch next month?

Question: Daniel Politzer - Wells Fargo - Analyst : Got it. And then just for my follow-up, I think you mentioned earlier in the call that there was a $300 million EBITDA improvement year over year, which I think would put you around $140 million for 2023. So as we think about 2024, I mean, I guess how does that -- how should we think about that comparing to your loss in 2023? And similarly, I think you guys also mentioned that there is a higher allocation of Entain costs, if there's any way to quantify that impact in terms of your losses in 2024? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. DECEMBER 04, 2023 / 4:00PM, ENT.L - Entain PLC Business Update

Question: Daniel Politzer - Wells Fargo - Analyst : Okay. All right. Thank you for that. Appreciate the detail.

Question: Brandt Montour - Barclays - Analyst : Good morning, everybody, and thanks for doing this and thanks for taking my question. So if I was to just follow up on Shaun's question on the promo and the investment strategy for '24. I guess -- as it relates to the rollout of Angstrom capabilities that you plan on taking on, if that all goes to plan. Maybe give us a sense for the NFL capabilities from angstrom, if that can kind of hit in the first half of the year or for waiting for next football season? And does the timing of that rollout dictate the flow of your promo reinvestment around sports?

Question: Brandt Montour - Barclays - Analyst : Yes, does the timing of your planned rollout for Angstrom capabilities dictate the flow of promos around OSB?

Question: Brandt Montour - Barclays - Analyst : Yes, that's really helpful. And you gave some stats on CPAs coming down, I think it was on the iGaming side. Maybe you could just talk about the philosophy around bringing CPAs down and your LTV to CAC structure or strategy and if you think that that will -- if you might need to reverse in '24 calendar year, on either of those philosophies to get what you want in terms of market share?

Question: Brandt Montour - Barclays - Analyst : That was a very clear way to describe my question, yes. Thanks for that.

Question: Brandt Montour - Barclays - Analyst : Perfect. Thank you.

Question: Joe Thomas - HSBC - Analyst : Good afternoon, everyone, and thanks for taking my question. So the first thing, if you wouldn't mind, just elaborating a little bit, please, is the journey that you've been on from obviously targeting EBITDA positive this year or on the second half of this year. And then going into negative territory next year and requiring a year of investment. You referenced, Adam, that is -- maybe because of products better. But I don't recall you saying it was pulled before or has an Angstrom changed the thinking around that? Just perhaps you could just give us some thought processes around or perhaps you just belatedly think that you weren't marketing enough to start off with? Any thoughts around that would be appreciated.

Question: Joe Thomas - HSBC - Analyst : Understood. That's clear. Thank you. And just a follow-up here is in terms of the investment that you're putting in, it's understandable what you're saying. How do we measure, as the year goes on, how successful or otherwise that is? Is it the market share data that we see coming out on a monthly basis, or is it something else?

Question: Joe Thomas - HSBC - Analyst : Right. Thanks very much.

Question: Joe Thomas - HSBC - Analyst : Thanks very much, both of you.

Question: Robin Farley - UBS - Analyst : Great. Thank you. Two questions. One is, when you talk about your market share growth in states where you were operational on day one versus states where you started later, are the factors that led to those later launches sort of fully eliminated, like should we see BetMGM operational in day one going forward in new markets? And then also, I just wanted to clarify your comment that you'd be kind of self-funding going forward. It sounded like at least one, if not both of your JV partners mentioned something like they were going to be making additional investments. And so -- I guess, how do we square that with what you were saying, with being able to self-fund? Thanks.

Question: Robin Farley - UBS - Analyst : So can we conclude that it sounds like you maybe are actively looking at additional things outside of the base plan that in terms of additional investment. I don't know if that would be M&A, but it sounds like that's what the JV partners are expecting?

Question: Robin Farley - UBS - Analyst : Great. That's super clear. Thank you very much. Just one minor thing, could you say what month you expect Nevada to be on the single wallet? And then that's truly it for me. Thanks.

Question: Robin Farley - UBS - Analyst : Thank you. Thanks very much.

Question: Chad Beynon - Macquarie - Analyst : Good morning, Thanks for everything so far and for taking my question. Just in terms of the in-house and exclusive slot content, you talked about that as a big driver of your success and upcoming success as well. Is there a magic recipe in terms of your view, kind of using third-party games versus in-house? And then secondarily, you mentioned success that you've had with Buffalo and Aristocrat game, they've obviously made a pretty sizable acquisition. It sounds like Aristocrat will become a bigger player in terms of iGaming content. How does that roll out kind of portend growth for you guys? Thanks. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. DECEMBER 04, 2023 / 4:00PM, ENT.L - Entain PLC Business Update

Question: Chad Beynon - Macquarie - Analyst : Thank you very much, Adam. Appreciate it.

Question: Joe Stauff - Susquehanna - Analyst : Thank you. Good morning or good afternoon now. Adam, Gary, I wanted to ask about just kind of the 30% EBITDA margin goal. And I think the slide said it includes structural margin advantages, I assume from your partners. Historically, you had stated that was around 600 to 700 basis points. I guess, the question is, is that still accurate? And is that the right way to interpret that slide that you presented?

Question: Joe Stauff - Susquehanna - Analyst : Got you. And then, just regarding, say, the fixed expenses that you have relative to the contribution margin structure, when is it fair to say that that's going to reach a level at where it's largely sort of scaled up and would grow at a more normalized level from there? Is that implied in your '26 guidance? Is that going to be earlier? What's the right way to think about that timing?

Question: Joe Stauff - Susquehanna - Analyst : Got you. Thanks, guys.