Earnings call transcript: FDJ United sees 30% revenue growth in Q1 2025

FDJ United reported robust revenue growth of 30% year-on-year in its Q1 2025 earnings call, driven by strong performance in the French Lottery and Retail Betting segments. Despite a slight decline in the online betting and gaming sector, the company maintains strong fundamentals with an overall "GOOD" financial health rating according to InvestingPro analysis. The stock price responded positively, rising 1.53% to close at 30.50 USD, with current analysis suggesting the stock is undervalued based on InvestingPro’s Fair Value model.

Key Takeaways

• FDJ United’s total revenue increased by 30% compared to the previous year.
• The French Lottery and Retail Betting segments saw a 4% revenue increase.
• Online betting and gaming revenue declined by 10% at constant currency.
• The company anticipates stable revenue for 2025 with potential market entry in Finland.
• Stock price increased by 1.53% post-earnings announcement.

Company Performance

FDJ United demonstrated strong financial performance in Q1 2025, with total revenue reaching 925 million euros. This builds on the company’s impressive track record, with trailing twelve-month revenue of 3.18 billion USD and a healthy gross profit margin of 55.4%. The French Lottery and Retail Betting sectors were major contributors, with revenues of 640 million euros, marking a 4% rise. While the online betting and gaming sector experienced a 10% decline, the company maintains robust cash flows and an Altman Z-Score of 4.37, indicating strong financial stability.

Financial Highlights

• Total Revenue: 925 million euros (+30% YoY)
• French Lottery and Retail Betting Revenue: 640 million euros (+4%)
• Online Lottery Revenue: 79 million euros (+14%)
• Online Betting and Gaming Revenue: 231 million euros (-10% at constant currency)

Market Reaction

Following the earnings announcement, FDJ United’s stock rose by 1.53%, closing at 30.50 USD. Analyst consensus remains optimistic, with price targets ranging from 30.81 USD to 53.05 USD. The company’s P/E ratio of 15.28x suggests reasonable valuation metrics, while InvestingPro analysis reveals 8 additional key insights about the company’s valuation and growth potential.

Outlook & Guidance

FDJ United expects stable revenue growth throughout 2025, with continued expansion in the French Lottery and Retail Betting sectors. The company has demonstrated its commitment to shareholder returns, having raised its dividend for 6 consecutive years, with a current dividend yield of 6.82%. The company is exploring potential market entry in Finland and anticipates a more favorable comparison basis in the second half of the year. A Capital Markets Day is scheduled for June 24 to provide a detailed market outlook. For comprehensive analysis of FDJ United’s growth prospects and financial metrics, investors can access the full Pro Research Report on InvestingPro.

Executive Commentary

Pascal Soffer, a key executive, expressed optimism about market growth, stating, "We are positive on the fact that there is growth, maybe between mid and high single digits, still possible on those markets." He also highlighted the company’s commitment to dividend growth, emphasizing, "Our objective is to continue to grow year on year this level of the dividend."

Risks and Challenges

• Regulatory changes in key markets like the Netherlands and UK could impact operations.
• A decline in online betting and gaming revenue may affect overall profitability.
• Market saturation and competition in established sectors pose challenges.
• Economic uncertainties and currency fluctuations could influence financial results.

FDJ United’s Q1 2025 earnings report underscores its strong market position and strategic focus, despite challenges in the online gaming segment. The company’s proactive measures and market adaptability are expected to sustain its growth trajectory in the coming quarters.

Full transcript - FDJ United (FDJU) Q1 2025:

Conference Operator: Hello, and welcome to the SDG first quarter twenty twenty five results conference call. Please note, this call is being recorded. And for the duration of the call, your lines will be on listen only. However, you will have the opportunity to ask questions at the end of the call. It can be done by pressing 1 on your telephone keypad to register your question.

Press 0 and you’ll be connected to an operator. I will now hand you over to your host, mister Pascal Soffer, executive vice president in charge of finance, performance, and strategy to begin today’s conference. Thank you.

Pascal Soffer, Executive Vice President of Finance, Performance, and Strategy, SDG: Thank you, and good evening to you all. First, I would like to apologize for this unusual late call due to the board that has been held exceptionally today or this afternoon. You might have read the press release that we published a few minutes ago, and the presentation that I’m going to comment is available online or will be in the coming minutes in the investor section of our corporate website. I will keep this Q1 twenty twenty five revenue presentation brief to allow maximum time for the Q and A questions. So if we begin with the highlights, during the first quarter of twenty twenty five, our revenue amounted to €925,000,000.

It’s an increase of 30% year on year on a reported basis, and it’s a 1% decline at comparable perimeter. We saw a good momentum in French Lottery and retail for betting with revenue up 4% to €640,000,000 based on stakes after 6%. The retail revenue was up 2%, but based on stakes up 5%, which shows a good dynamic in our point of sale. The gap between revenue and stakes is explained by forecasting results and for the growth to the operator, notably in football. I would come back to that later.

In comparison, the lottery revenue was more closely correlated to space. The online lottery revenue increased by 14%, one four, year on year driven by a strong increase in active players. And now the online accounted for 15% of total net revenue, up notably from 14% in q one twenty twenty four. Now on the online betting and gaming side, the revenue was 231,000,000, down 10% at constant currency. We recorded a solid growth in active players of more than 5% quarter to quarter and nearly 10% year on year.

However, we were impacted by increased gaming taxation in The Netherlands in The Netherlands, but more importantly, by a stricter regulation implementation both in The UK and The Netherlands. As we indicated earlier in the year, during full year 2024, no surprise. Excluding those two countries, revenue was up circa 8%, thanks to the good performance recorded in all the other countries, notably in France. So if I move to the next slide, if I as I hope the presentation is now online, you will see on this slide on the left side, a a split of revenue by business unit by business unit for the first quarter of the year as reported and that of last year on a pro form a basis. You will find as appendix to this presentation, the 2024 pro form a quarterly revenue breakdown by EU for the group as it it was an information that we have not provided yet, and we thought it was important for you to adapt.

The chart on the right side is just a more formal visual representation of our revenue mix by business units. I would comment our two largest business units in detail in the next slide in in few minutes. Meanwhile, I would just add a few words on the two smaller business units. First, on the international lottery, revenue was €38,000,000, down 22% because of nonrecurring elements at PLI, the Irish lottery, most notably an exceptional number of jackpot winners in draw games that has driven the playoff payout up, and this should normalize over the year. And on payments and services revenue, the revenue reached $16.01 €6,000,000, up 1%.

If I now move to the French Lottery and retail for betting, so let’s now delve into our French operations and the three rights. Starting with lottery, we have a revenue of €528,000,000, up 5% driven by both Dru and Instant Games. Dru Games posted a very good quarter, thanks to an excellent performance from Euromillion with a rollover jackpot that started on the March 7 at €130,000,000 before being won on the twenty eighth at the maximum amount of €250,000,000. More broadly, we saw €11 million jackpot over €75,000,000 that we classify high jackpot, of which seven of more than €130,000,000. We have a different old record of euro million on those last growth.

This euro million long cycle has boosted the recruitment of new players more than 300,000 in the week of the March 24, of which nearly 200,000 on March 28 alone, and this will fuel the online growth over the coming month. Instant games also contributed to the overall lottery growth. We have successfully launched as such as the Wyandor and Bonpierre, both available online and at point of sale, as well as online exclusives such as. Online luxury revenue, as I said in my intro, was up 14% to €79,000,000 with the recruitment of new players being boosted by the attractive rollover checkbox I’ve just mentioned. The online revenue accounts now for 15% of total of total It was 14% in the first quarter of twenty twenty four.

Now if we move to retail sports betting, showed also a good momentum. The increase in stakes, high single digits, that showed dynamic activity was not only driven by a great number of football events, thanks to the new format of the European football competition. Indeed, five French clubs progressed quite far ahead further supporting the betting activity. However, a lower operator margin due to numerous and several results for the operator led to a 1% fall in revenue to €112,000,000 and this situation will normalize over the year and will also show the growth of the future quarter. It’s something that we have usually we have regularly with a quarter with a price payout that is higher than the average, and it’s normalized on the next quarter, fueling the growth of those quarters.

So no problem. A good momentum on for betting offline. Now let’s move to online betting and gaming. The revenue of this BU was 231,000,000, down 10% at constant currency. We recorded a solid growth in active players of more than 5% quarter on quarter and nearly 10% year on year.

However, we were impacted by increased taxation in The Netherlands and more importantly, as I said in the highlights, a stricter regulation implementation in both United Kingdom and The Netherlands. In The Netherlands, if I zoom a little bit, the largest impact came from the introduction of a new monthly net deposit limit on October 2024. As a reminder, it’s €7,700 net deposit limit and €300 net deposit limit for those under 24 years old. And we have a second impact that we also commented on during our full year from mid February with a stricter implementation of those limits demanded by the regulator. These measures significantly reduced revenue of the licensed operators, but they also led to a sharp drop in the channelization rate as the market share of unlicensed operators increased in 2024 and now exceed 50% according to the regulator.

To a lesser extent, a second impact also presented in our full year came from the increase in the rate of game duty from 30.5% of GGR to now 34.2%. And finally, we also recorded a reduction of the Sport betting DGR margin of more than 100 basis points in Q1 on the back of unfavorable sports results. It’s the same element that I already commented when I talked about the retail French sports betting. All this led to a 41% year on year decrease in Q1 revenue in The Netherlands. In The UK, the revenue declined by 27% from an unfavorable q one twenty twenty four basis and because the implementation of regulatory measures have been put in place in q two and in q three in 2024.

Excluding those two countries, the revenue is up 8% driven by a good performance in other markets, notably in France over our three brands, Universe, Pyrenees, ZEZERF. In q one, FGT United has also continued to deploy successfully proprietary platforms. In France, Early February, we cannot finalize the separation of player accounts between lottery and the rest to give rise and betting gaming open to competition, preparing the future merger by the mid mid mid twenty twenty five of finance borrowing and the turf. And in The UK, Early March, we have successfully migrated R32 on the TAM to the to the internal team with TAM and also to the operating platform, what we call Kinglet’s operating platform. To end this presentation, a few words regarding our financial calendar.

Our general meeting of shareholder will be held on the May 22 at 02:30PM period time. At this meeting, shareholders will be asked to approve a dividend of €2.05 per share for 2024, up 15% year on year. The dividend will be paid on May 27, and we will hold a capital markets day in Paris on the June 24 in the afternoon. And finally, our h one results will be published on the June 13 after the closing of the market. I thank you for listening to me tonight.

And now I’m ready to answer your question along with Mark.

Conference Operator: Thank you, ladies and gentlemen. As a reminder, if you would like to ask a question or contribute on for this call, please press 1 now on your telephone keypad. And to reroll your question, press 2. Also ensure your line remains unmuted locally, you will be advised when to ask your question. The first question comes from the line of Ed Young calling from Morgan Stanley.

Please go ahead. Thank you very much. I’ve got three questions, if that’s okay. The first is on lottery. Obviously, growth

Pascal Soffer, Executive Vice President of Finance, Performance, and Strategy, SDG: was a a decent number in the

Conference Operator: quarter, and lottery growth was also solid in digital, but it was a bit slower than what was achieved last year. Do just see that as a a comp issue or anything else to call out? And how should we expect that number to trend? Obviously, we talked about percent going to q four, but how should we think about growth in this lottery into the q two and q three? Second of all, in online in The UK, you mentioned there about regulatory measures nothing in q two and q three.

So should we expect an improvement over the coming quarters and perhaps a slightly longer term one connect to that? How do think about the competitive dynamics when many competitors have already lapped their regulatory measures? And then finally, mentioned re platforming onto the pound as well as KFC. Should we expect to see a revenue benefit from that in those markets, or is it more about setting the foundations for the future years? Thanks.

Pascal Soffer, Executive Vice President of Finance, Performance, and Strategy, SDG: Yes. Thank you, Heather, for your questions. First on lottery, is there a comp issue? We had quite a low number of events in the q one compared to the q one last year. At the end of the quarter, with this 200,000,000 extra jackpot, it has a little bit it’s a little bit more rebalanced.

But what is true is that we will have a quite busy q two with a lot of events that are scheduled. So it will definitely fuel the growth of the lottery over q two and the rest of the rest of the year. So we don’t we don’t fear that the growth of the lottery would would not be would not be good on the rest of the year. We also think it’s not exactly luxury, but it’s it’s really right in France that we will get some benefits from the high PPO that I price price sales or low margin that we add on the on the on the the of full taking retail because usually when we have this situation with an activity that is very dynamic, but but higher price sales, it will drive business because the players globally have the have the the money to to spend a little bit more in the in the next quarter, second, but also third and and and next quarter. So for us, no no no problem.

No elements negative element on that. Yeah. On the online on The UK, yes, we have the toughest comparison basis in q one when you look at at what we did last year, And we have some regulation measures that apply to us because we were on a license review from q two and q three, and we can expect it to gradually have a a need an easier comparison basis. And regarding the the competition, we know that a part of our competitors have already been through this this license review. We hope that we will get through in the coming months and be able to be more, I don’t want say aggressive, but more dynamic in our marketing and way of and and sales measures.

And the third third element was what can we expect from the migration of the TAM over TAM that has migrated from micro yielding to the to The kingdom TAM. It’s mostly we don’t wait. We don’t we don’t think that it will drive a lot of new business, but it’s the first element to have one platform over all our jurisdiction and to drive a better capacity to drive growth, but more on the on the medium term. It’s more of a sanity to have one platform over The UK as we were in the palm on the silver palm on the limited brand, but not on the 32 red brands, which will help us to have more more synergy adding one platform. It’s a it’s a the main thing that we are waiting from this this first migration.

Conference Operator: Thank you. The next question comes from the line of Matthew Spiegelman calling from SWC. Please go ahead.

Analyst, Various (Morgan Stanley, HSBC, BNP Paribas): Good evening. Thanks for for hosting the call today. Just, you know, really a few questions for me. The first is, you made a few assumptions regarding these pretty substantial changes in the regulation and the taxation in The Netherlands in The U. K.

We’re just wondering now that you have a full quarter of data, how you feel about those assumptions, what if anything came in better or worse and how all that is trending? The second is, I did think it was impressive that you gained players sequentially as well as year over year despite these regulatory headwinds. Just wanted to see if you could offer us any initial thoughts or updated thoughts on sort of the long term growth of these online Kindred markets and how you’re thinking about that these days? And then finally, just on the regulatory outlook, you know, are there any areas you guys have on your radar for potentially new regulation or or any anything that you are watching closely from here? Thank you.

Pascal Soffer, Executive Vice President of Finance, Performance, and Strategy, SDG: Okay. Thank you for your question. So if we we have faced the the headwind that we are talking about mostly in 2024 and late twenty twenty four, beginning of ’20 ’20 ’5. We don’t don’t expect new elements to come over the year except the one that we already know. For example, the level of tax is not regulation tax, but still it’s an impact will come into force in France in in h two.

So we know we know that perfectly, but we don’t foresee other deterioration, other negative elements that will come into force short term in in 2025 in the foreseeable future. What we have done is we if we talk about Netherlands, clearly, the impact was important. It was important for us, but for all the other the all the other operators, the the market has shrinked globally. And now we are working on the the ways of regaining a part of what has been lost And what is a good element for us to work on is that the level of active players has continued to grow. So we have an ARPU that’s, obviously, has been reduced, but the number of players, if you look only at Netherlands, has continued to grow by something like 15%.

Overall, year on year on the on all the OBGPU, it’s it’s almost 10. So we are quite positive on our capacity to continue to recruit, to grow our active active user baseline, and to find the way to help them go through this regulation limit. If I just comment one element on The Netherlands, but it is globally, it’s it’s it’s a very good example. What is all about is how you engage your customers to be able to raise the limits that have been put in place by the regulator, showing that they have the the level of revenue that is compatible with those level to be raised. And we are trying to find a way to do it in a seamless way, to do it in a way that is not a burden for the players.

And today, we are working hard to put in place those kind of measures. So we have some elements that will make it possible for us to to have a to have a better better figures in the coming quarters and years. And if you look at the the your other question was regarding the regulatory headwinds, what is our view on the capacity of the markets we are in to to grow in the medium term. We will provide a more comprehensive view on our vision of the market during our Capital Markets Day in the coming months. But what I can already say is that we are positive on the fact that there is growth, maybe between mid and high single digits, still possible on those markets because the the measures have been already put in place in some in some jurisdictions.

And we also think that we are the one of the best operators to cope with those kinds of regulation measures. It’s in our DNA to be able to cope with that. We know also that a part of the of the competitors in certain markets will think that it’s too harsh for them to continue to continue to be a player. Just I I take the example again of Netherlands. There were 27 operators in Netherlands in 2024.

’2 have got now, so it’s twenty five twenty five operators. We think that this number will get down. And as we are the leader of the market, we will we will benefit from from from that. This is one element between others, but, clearly, our vision is that there is growth on both market, not at the level that we have seen in the in the next in the previous year. It’s not a double digit, a 20% growth year on year, but it’s maybe a mid to high single digit.

We will get through that more in details during our our CMD. And on the regulatory measures, yes, your first question was, do we expect new regulatory measures? So far, no. It’s a question more in the jurisdiction where we are operating of how the regulator is interpreting and is asking us to comply with the actual measures. It’s more a discussion with the with the regulator on the way we should comply as it’s usually not really straightforward.

It’s there is a there is a part of of adjustment on room for interpretation, and there is some clarification that we still still are looking forward. We don’t foresee new important measures that should be put in place in the coming months, again, in the foreseeable future.

Analyst, Various (Morgan Stanley, HSBC, BNP Paribas): Is that I appreciate it. Thank you, Mitch. Yeah. That’s really helpful. I appreciate it.

Thank you.

Pascal Soffer, Executive Vice President of Finance, Performance, and Strategy, SDG: Thank you.

Conference Operator: The next question comes from the line of Joe Thomas calling from HSBC. Please go ahead. Hi, Joe. Good evening. Thanks for taking the calls.

Just a a couple of things that I wanted to understand. The the first thing was the sports results impact in in the online and retail business. I I haven’t yet seen the the presentation. But is it possible to to quantify the the euro million impact in those sports results for us, please? So that’d be quite helpful.

The the second thing is just with respect to your guidance for the year. I know you you say in the in the statement that you’re on the right trajectory. I just wondered if there are any any nuances that we should be aware of. You know, I guess the top you know, the the big picture numbers still hold, but it are are you getting there in a different way? Perhaps you can comment on that.

And then finally, on Kindred, I I just wondered if there’s still any timing you have to do of the portfolio of countries that Kindred is operating in. Or are you happy that that that it can withdraw from the b? Thanks.

Pascal Soffer, Executive Vice President of Finance, Performance, and Strategy, SDG: Okay. Maybe so. Just on the spot results in France, it’s clear, as we said, that the stakes were up by high single digits. And you see that the overall revenue is slightly down. The explanation is really the operator margin.

So that’s I think you have the figure. It could give you an idea of the overall impact. Yeah. We have something like hundred basis points of difference on the level of price sales or in the or you can can also say operating margin. It’s it’s as as you as you want.

And we we we know that it will normalize because it usually doesn’t. We will work it to to be normalized. It will normalize, and we are positive about that because we have in terms of feeling to respect that something like not not something like precisely 76.5% return to players, and we are over. We’ve been above this gap where we are the first quarter. Yeah.

Definitely, for for it has to go down. And as you know, this is clearly something which is expected to fuel the growth in the coming coming weeks or months. And so you’ll see the the printer adding a one wheel with the reinvest their winnings in the in the next batch. Yeah. And your second question is regarding the guidance of the euro.

Are we in the right trajectory? The the the answer is yes. We were not surprised by by our results of of q one. Globally, we are we are globally in line with the direction that we that we foresee. And the way we see the way that we will do it over the year is still the same.

We will have some growth in the for in the lottery side and for betting retailer in France, and we will have a slight decline in the global online betting and gaming view as we have said during the full year. And concerning online betting and gaming view, we will we’ll we add a very tough basis of comparison in in q one, as I said. This basis of comparison will ease gradually during the year and will be clearly clearly easier in h two and in particular in q four when we will lap The Netherlands major impact that we added in q four. So you can also have that in mind. The euro will not be totally all the all the quarter will not look like the previous the previous one.

But it’s not materially different from what from what we we foresee just one month ago, a little bit more than one month ago when we delivered our full year guidance. Not materially different. And the gap your third question is on the portfolio of countries. There is no, for us, big issue today looking at where are the which countries we should withdraw also. Last year, the the big move has been done to stop the operation in The US that were really not profitable and with no possibility to be profitable, which was the the decision that we’ve taken by the previous previous owner of of Kindred, and we were very happy of this decision.

Today, this is not the point to to withdraw from from countries globally. No no problem. What we are looking at is really to to be ready to to take the opportunity of the opening of the market in in Finland. It’s a country where we are operating today, and we are waiting for the for the regulation to come. So for us, it’s an important one.

And globally, in our and we will also extend that more in detail during the CMB. But what we are doing in 2025, beginning on 2026, is to just transition and add the one platform that is needed to continue to grow and continue to add new countries into our portfolio. The question for us is to add new countries and to add new countries, we have to do it in a very synergistic way. And to do that, we have to have we have to finish the work that we it’s currently ongoing to migrate under one platform, one time, one sports betting platform, one casino platform, one poker platform over the older the older OBT side, and it will give us a competitive advantage compared to most of our competitors that don’t have this one platform very efficient to operate over over European countries.

Conference Operator: Thank you for that. Could could could I just follow-up on on that last point? Are there any

Pascal Soffer, Executive Vice President of Finance, Performance, and Strategy, SDG: particular countries that you’ve got in

Conference Operator: mind that the the where you are, that you would like to be for for Canada now?

Pascal Soffer, Executive Vice President of Finance, Performance, and Strategy, SDG: I think it’s a little bit too early. Other otherwise, I will just do all the CMD today, but but but I can I can I can try to to to give you an answer anyway? There there is two two ways to to to do to do it. It’s we have it’s new countries where a clear regulation is in place because this is the only way for us to where we have foreseeable growth, where we have a potential possibility to to operate in a in a quite good good way, favorable way, or to have a better position in country where we are. So when we are supplied to be the free position, it can be done by investing in those countries, but it can be done also other ways.

So it we will we will have the two aspects reinforcing our position in certain countries where we can be better and and going in new countries where the regulation is is clear and favorable. Sorry. I can I I will not provide the, you know, same of the countries now, but globally, you have you have all what I can tell you today? Okay. Thank you very much.

We won’t be back in The US, obviously. Yeah. Not not The US. At The US, for us, we know it’s not possible to to be profitable in this jurisdiction. Otherwise, yes, it’s it’s clear.

It’s clear. No problem. Not The US. Thanks.

Conference Operator: The next question comes from the line of Jafar Nessari calling from BNP Paribas. Please go ahead. Hi. Good evening. I’ve got two questions on hello.

Two questions on the lottery, please. The the first one is on the digital mix shift, which was up a hundred basis points in this quarter from 14 to 15%. And I assume that’s completely clean and and pro form a. There’s no there’s no mix here. We’re talking about lottery.

Is the is the margin benefits of the digital mix the same in the new fiscal environment? And I know the new fiscal environment is not before July. But should we still have in mind that if you shift 1% of your business from point of sale to online, the margin is roughly double for for that for that business, please? And then another question just very broadly ahead of the France tax change in July. You you’ve already started implementing changes.

Could you maybe just give us a bit more color about the the things mostly cost mitigation you’re doing in the lottery division? I think one of the areas with with Salesforce rationalization, anything that you’ve been able to implement ahead of that change.

Pascal Soffer, Executive Vice President of Finance, Performance, and Strategy, SDG: Okay. Very clear. Thank you, Jafar. First question on the lottery. Does the change in the tax framework as modified what we said about the the relative the the relation when we go online.

The question is the the answer is simple. It’s yes. It is exactly the same. As the tax framework has changed, not online or offline, but globally. So we have a level of revenue that is 1.1 of these points under what we used to have, but the same the same effect, relative effect of the shift to online is is still there, and it’s a very good good thing.

Second thing, yes, the tax will change from July in France. What we have said is globally, we in 2025, the the part of the performance plan that is related to 2025 will be mostly saving the cutting some some budget. And we are preparing the more structural measures such as those that you have referred to, namely the reorganization of the sales force, etcetera. It’s preparation on 2025, and we actually it will be put in place gradually from 2026. In 2026, anyway, we will have the full year impact of the previous reorganization that we are that we are currently ending.

So over the year, we will have more and more positive impact of this of this current reorganization. To be clear, the current reorganization is the all the point is to reinternalize 100% of our sales force. One third of the sales force was given to contractors with a specific contract. Those contracts are are are being terminated. They will be terminated by the end of the year, all of the all of those.

And gradually, are terminated over 2025, and we will gain something like 1% margin by this termination of contract because we reinternalize with savings. And globally, this will be ended by the end of 2025, adding a full year impact 2026. And in 2026, we will begin the the the third set third level of the regulation of the sales force that we are currently preparing to be held in twenty twenty six, twenty twenty seven globally. This is this is all the point. So I think it’s I haven’t told you questions.

Thank you very much. Thank you.

Conference Operator: Ladies and gentlemen, as a final reminder, if you’d like to ask a question, press star one at any time. The next question comes from the line of Philip Constantin, the calling from Bridger. Please go ahead.

Analyst, Various (Morgan Stanley, HSBC, BNP Paribas): Hi. Thanks for taking my question. Had two, please. One was on your lottery payouts and your lottery pricing. If there’s any thought about adjusting that to offset the tax increases.

And my second question was on capital allocation. Just given at the twenty twenty two Investor Day, you guys have talked about an 80 to 90% dividend payout is coming below that in 2024 and at the low end in 2023. So I’m curious kind of how you think about the payout ratio and just capital allocation over the next year? Thank you.

Pascal Soffer, Executive Vice President of Finance, Performance, and Strategy, SDG: Thank you, Filipe. So on your first question on the luxury payout, we have already done some improvements on the payout of the different games, and we’ll continue over time to streamline those those payout where it is possible, where we have interest to to do that. We cannot do that just instantly as it is linked to relaunch of a of a game. It’s quite an heavy process to be held, but it is clearly our intention when we will renew the lotto, renew the run again, or renew some scratch cards to try to optimize the level of payout. Add more, I think, capacity to do it in the past because we have done some a lot of those kind of things.

For example, our number one game called the cash scratch card has been launched at 75% payout. Now it’s at 70.5, seven zero point five. So it has been reduced quite significantly. I don’t think it’s possible to reduce it by a lot still, but we are we are looking at some optimization on different games. It is possible on some different games to to put in place both optimization, and it will be put in place over time.

Your second question was related to capital allocation and our dividend policy. Our dividend policy was before 2024 to serve dividends between 8090% of the of the consolidated net results. It has changed now. We have we have a guidance that is more to provide a growing dividend year on year. And what we have done this year is that we have we have the the level of payout is something like 77 percent, but applying to to not to the same KPI, applying to the restated net results that is restated to remove the PPA amortization notably.

So it’s not really comparable. We cannot compare the 80 to 90% that we had before to the 77 we have provided this year. And globally, what you have to have in mind and to answer your question on the capital allocation is that our objective is to continue to grow year on year this level of the dividend, not the payout. The payout would be the result of the calculation, but to continue to grow in volume as a dividend that we are serving to our to our shareholders. It is possible because our business is generating generating cash.

And even in a quite tough year, that is 2025, with a guidance globally stable revenue, we still are in a position to reduce our leverage from 1.9 to 1.7. So if you take into account the fact that all the market has considered this year as not very good year, it’s still it’s a good year regarding our cash generation and capacity to serve a growing dividend to our shareholders.

Conference Operator: There are no further questions. So I will hand you back to your host to complete today’s conference. Thank you.

Pascal Soffer, Executive Vice President of Finance, Performance, and Strategy, SDG: So thank you very much to have listened to us, Mark and me, during this call. And now the next meeting that we will have will be on the AGM of the twenty second of of May. So let’s see you or hear you after the AGM of the of the twenty second of of May. Goodbye. Thank you.

Bye bye.

Conference Operator: Thank you for joining today’s call. You may now disconnect.

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