Entain Reports Strong Q3 Growth but Warns of Potential UK Tax Increase Impact

Entain has announced that its performance in the third quarter of 2024 exceeded expectations, with online net gaming revenue (NGR) growing by up to 10% year-over-year.

Newly appointed CEO Gavin Isaacs also cautioned investors about the potential consequences of a possible tax increase on the UK gambling industry. Isaacs warned that such a move could “have a materially, detrimental impact on the economic contribution of wider industry.”

The gaming group reiterated its statement from the previous month that its UK & Ireland online operations returned to year-over-year growth “sooner than expected.” Additionally, all key markets showed growth throughout the quarter. Off the back of a “stronger than expected” Q3, Entain has updated its full-year forecast for 2024, now expecting online proforma NGR growth to be in the mid-single digits on a constant currency (cc) basis. This revision reflects the company’s “increased confidence for the balance of the year.”

Isaacs, who took on the CEO role in early September, emphasized that Entain is already on a path of “strategic and operational improvement.”

Exceeding Expectations in Q3

In its financial update, Entain reported that total group NGR, which includes its 50% stake in BetMGM in the U.S., rose by 8% compared to the same period last year, with a 10% increase in constant currency (cc) and 7% on a proforma cc basis. Excluding U.S. operations, group NGR was up 7% year-over-year, 8% cc, and 6% proforma cc. Online NGR increased by 10% YoY, 12% cc, and 9% proforma cc. Retail NGR remained steady year-over-year and in constant currency but fell by 1% on a proforma cc basis.

On a proforma cc basis, gaming NGR grew by 6% YoY, while sports NGR increased by 5%, with sports wagers rising by 3% and sports margins improving by 0.2 percentage points. Online, gaming NGR rose by 9% YoY, and sports NGR increased by 8%, with sports wagers growing by 3% and sports margins up by 0.4pp. In retail, gaming and sports NGR both declined by 2% and 1%, respectively, while sports wagers rose by 2%, although sports margins dropped by 0.5pp.

“My first few weeks as CEO of Entain have reaffirmed my view that this is a very good business operating in a highly attractive global industry,” Isaacs commented. “Entain has great brands, an enviably diverse global portfolio, and is bursting with talent, ambition, and opportunities.”

Potential UK Tax Increase Raises Concerns

Per market, Entain's UK & Ireland NGR rose by 2% year-over-year proforma cc, with online NGR increasing by 6% and retail NGR falling by 2%. Gaming NGR grew by 3%, while sports NGR fell by 1%, with sports wagers remaining flat and sports margins increasing by 0.1pp.

Entain highlighted that the UK & Ireland online growth was a result of “lapping prior year regulatory implementation as well as product, offering, and customer journey enhancements.” Deputy CEO and CFO Rob Wood added during the company’s Q3 earnings call that they expect mid-single-digit growth to continue into next year.

However, Isaacs also used the earnings call to issue a warning to the UK government amid speculation about an impending tax hike on the gambling industry. He stated: “Until the budget is announced, it’s all conjecture. We continue to highlight to the treasury that a putative tax increase would have a materially, detrimental impact on the economic contribution of wider industry, putting at risk thousands of jobs, funding for sports and racing, as well as benefiting the black market.”

International Growth and Strategic Decisions

Entain’s international NGR saw a 9% increase proforma cc, with operations in Brazil continuing to “outperform expectations” with a 48% rise cc. Online NGR increased by 10% proforma cc, while retail NGR remained flat proforma cc. Gaming and sports NGR, along with sports wagers, grew by 9%, 8%, and 3%, respectively, with sports margins up by 0.1pp.

In Central and Eastern Europe (CEE), NGR rose by 11% proforma cc, with online and retail NGR up by 13% and 2%, respectively. Gaming and sports NGR increased by 19% and 8%, with sports wagers up by 10% and sports margins rising by 0.2pp. The company also highlighted that SuperSport in Croatia is “continuing to perform particularly strongly.”

Entain also revealed that its board’s Capital Allocation Committee had completed a review of strategic alternatives for Crystalbet, concluding “not to pursue a sale.” The Georgian sports betting and gaming brand was deemed to have “strong growth and cash generation,” with third-party interest not exceeding its value to Entain as an “attractive part of our global portfolio.”

BetMGM, Entain’s joint venture with MGM Resorts International in the U.S., has seen an “encouraging start to H2,” with Q3 NGR growth of 18% cc and a “market share stabilisation” of 15%. The company noted that BetMGM had record iGaming revenues in Q3, with first-time deposits (FTD) up by 70%. Additionally, BetMGM saw “strong online sports to gaming cross-sell” during the NFL season, and “encouraging trends” from its single account single wallet integration in Nevada.

FY24 Outlook and Confidence Moving Forward

In light of its strong Q3 performance and increased confidence for the remainder of the year, Entain has revised its FY24 guidance. The company now expects mid-single-digit proforma cc growth in online NGR (up from a previous low single-digit forecast), and group EBITDA is expected to be towards the top of its £1.04bn to £1.09bn guidance range.

“Entain is already on a path of strategic and operational improvement, with the strong Q3 performance demonstrating the progress achieved so far,” Isaacs concluded. “We are at the beginning of the journey, and I’m looking forward to accelerating our progress, leading the business in our next growth chapter, and capturing the many exciting opportunities ahead.”

By fLEXI tEAM