Earnings call transcript: Lottomatica Q1 2025 revenue beats forecast, stock dips

Lottomatica Group SpA reported its Q1 2025 earnings, showcasing a revenue of €586 million, slightly surpassing the forecast of €582.08 million. The stock currently trades at €23.53, reflecting a remarkable 97.46% return over the past year. According to InvestingPro analysis, the company appears overvalued at current levels, with an RSI suggesting overbought territory. The company’s robust performance, driven by substantial growth in online and sports franchise revenues, has contributed to its strong market position.

Key Takeaways

• Revenue for Q1 2025 was €586 million, a 33% increase year-over-year.
• EBITDA improved by 47% YoY, reaching €220 million.
• The stock price fell by 0.77% post-earnings call, reflecting cautious market sentiment.
• Successful debt refinancing and share buyback program initiated.
• Online revenues and sports franchise revenues both grew by 59%.

Company Performance

Lottomatica demonstrated impressive growth in Q1 2025, with revenues climbing 33% compared to the previous year. The company’s EBITDA also saw a significant increase, rising by 47% year-over-year. This performance underscores Lottomatica’s strong foothold in the Italian gaming market, bolstered by its innovative technology and strategic initiatives.

Financial Highlights

• Revenue: €586 million (+33% YoY)
• EBITDA: €220 million (+47% YoY)
• Margins increased to 37.6% from 34%
• Online and sports franchise revenues both surged by 59%

Market Reaction

Following the earnings announcement, Lottomatica’s stock experienced a slight decline of 0.77%, closing at 20.70. This movement contrasts with the company’s robust financial results, suggesting that broader market conditions or investor caution might have influenced the stock’s performance. The stock remains within its 52-week range, indicating stable investor confidence in the long term.

Executive Commentary

CEO Guilman Gelozzi remarked, "We have not even written it, but we are resilient to tariffs," highlighting the company’s adaptability in challenging economic environments. CFO Lawrence Valanger added, "We continue to maintain the same discipline on price," emphasizing the company’s strategic focus on maintaining competitive pricing.

Risks and Challenges

• Economic Uncertainty: Potential macroeconomic challenges could impact consumer spending and market dynamics.
• Regulatory Environment: Changes in gaming regulations could affect operations and profitability.
• Competitive Pressure: Intense competition in the gaming sector may necessitate increased investment in innovation and marketing.
• Market Saturation: As the Italian gaming market matures, sustaining high growth rates could become challenging.
• Currency Fluctuations: Exchange rate volatility might impact financial results, given the company’s international operations.

Q&A

During the earnings call, analysts inquired about the ongoing Totosea project, with management confirming its progress and market share gains. The flexibility of the buyback program was also discussed, with the company indicating its potential interruption for mergers and acquisitions. Additionally, Lottomatica reiterated its focus on European B2C regulated markets for future growth opportunities.

Full transcript - Lottomatica Group SpA (LTMC) Q1 2025:

Guilman Gelozzi, CEO, Lotomatica: morning, everyone. Welcome to Lotomatica Q1 twenty twenty five Results Presentation. I’m here today with our CEO, Guilman Gelozzi and our CFO, Lawrence Valanger. Now the floor directly to Guilman for the presentation. Guilman, please.

Thank you, Mirko, and good morning, everybody. Very happy to start with Page two of the presentation. We’re off with a very good start of the year. This is at market level. Online market continues to grow in a very healthy manner in the first quarter twenty twenty five with 18% being 18% up compared to same period last year.

Payout for Sports is very good, better than the normalized levels both online and retail and much better than the same period last year. And Lautomatica continues to outperform the market. This results into the best Q1 ever for us at €220,000,000 of EBITDA, which is 47% up on our reported base compared to the same quarter of last year. Let’s now go to page number three. It’s important here to there’s a bunch of things in this call and we wanted to focus on the short term good news, which are several, but also then have a deep dive on the structural advantages.

In terms of short term good news, we’re happy to announce that we increased the target synergies for the PWO former SKS integration of €12,500,000 all cost synergies, which brings the target at €87,000,000 by 2026. ’60 ’1 percent of the synergies are already secured to date. And another very important element that I want to share is that the platform migration is underway and on track. This is usually the most complex part of an integration. All developments tech developments have been completed and we’ve pressed the button both for the retail and online, the migration process will proceed and complete during the summer, most likely ahead of original plans.

The second very good news is that, as you know, but it’s important to stress it, that we have successfully refinanced more than 50% of our debt, 1,100,000,000.0, with run rate savings in interest cost of €24,000,000 per year. At the same time, we’ve received an upgrade on the rating both by Standard and Poor and by Moody’s. And we’ve extended maturities, all maturities to 02/1930 and beyond. Last but not least on the short term good news is that following the authorization from the AGM on the share buyback, the Board, yesterday Ehring, approved the start of the buyback by June, by next month, basically for the next eighteen months, up to 10%, which is roughly hundred million euros And this is, again, a reaffirmation of our discipline on capital allocation and focus on shareholders’ return. Now, going on to the structural advantages, given the macroeconomic context we are in, we thought it was important to stress again a couple of things which relate more to the sector and to the sector in Italy and not only to the company itself.

First of all, we have not even written it, but we are resilient to tariffs. That’s pretty much self explanatory. But more importantly, we believe the business is very resilient to macro headwinds in general. This was the case in previous economic shocks and recessions. Think about February, global financial crisis, high inflation period lately.

So resiliency to the tariffs, resiliency to slowdown of GDP, resiliency to inflation, all very good news underpinned in our case also by business model, which relies upon franchising model, so with a big part of the our cost base, which is, by the way, variable. The other point is around the business model. We’ve talked several times about what are the key elements at the base of our success and we’ve highlighted a few, but we want to take the occasion, like we did last time, in focusing on the long term opportunity of the channel switch to focus a little more on what’s really at the heart of our competitive advantage, what has been at the heart for now and for the future. And so on top of the omnichannel, on top of the multi brand, what is this asset, which we call Automatica Core, which is basically about a unified technology, data processes and organization, which is delivering superior competitive performance. Now let’s go for a second to Page number four.

I don’t want to spend too much time here. You have plenty of data that allow you to compare the GGR of the Italian market, of course, our addressable market to, for example, the GDP changes. The first graph on the left is during the period of the global financial crisis. The graph in the center is what’s up and pre COVID, during COVID and after COVID, and also lately the reaction of the Italian market to inflation also compared to other discretionary consumer spending sectors. So, the Italian gaming market has proven to be very, very resilient.

Now let’s go to next page, Page five, and let’s deep dive to the source one of the sources of our competitive advantage also hopefully for the years to come. We’ve seen this model in the past. These are the six pillars of our business model, which are the backbone of what we’re doing. And of course, there is omnichannel, of course, there is multi brand, but we wanted to show you how the other four elements really are built inside and how you should look at them in reading the current performance and also helping you understand where the company is going. It all starts with the proprietary technology in terms of gaming platform and then AI platform.

Then it goes into our integration capabilities. When you talk about integration capabilities, many times people think about the integration that you do of companies when you buy them and that’s, of course, a great source of value, which we’ve been able to leverage in the past few years and currently. But there’s a part within it which is really about the integration of data, customer experiences, processes, digital marketing capabilities that together with the proprietary technology drive an excellent offer and maximize customer engagement. Let’s go one layer deeper, page number six. What does this really mean?

When we talk about proprietary technology in terms of gaming platform? It means that we do own our tech stack, just called Pegasus. All the key modules are in house: the player account management, promo engine, the betting platform, the risk management, and I can go on for a while. And these assets are integrated across the brands. This is a first huge enabler of value creation and of what I’ll tell you in a minute.

Second side is the proprietary cross brand AI platform, which is called LAMP, which is based on a dedicated data lake. It’s based on the integration with gaming platforms, with external modules like the CRM and with external data sources, market trends, geolocation data, third party data vendors, I’ll get that into a minute. This is the enabler. Then going one layer up, most importantly, data. Apart from transactional data, we have a huge amount of behavioral and third party data which provide an incredibly insightful in-depth single customer view.

We have tens of data sources, hundreds of digital custom variables, hundreds of business custom variables, and we have tools which you can see under the Voice Customer Experience, which allow us to accumulate additional behavioral data on the customer experience. How is the customer moving in its journey through our assets? How can we replicate and improve the customer journey through these really the hard analysis of these data? This is done through processes and practices which are built around an operating model which is customer journey led, so it’s in the view of the customer. And of course, several advanced digital marketing assets, which I’ll talk in a minute.

This altogether leads to offer excellence and customer engagement of quality, which now we’ve opened a couple of items for each of them and I’m still at the theory part, but we want to share with you the framework, then we’ll go into a few examples and numbers. You want your offer to be large and deep. All this infrastructure that I mentioned to you allows us to have a wide and deep offer to meet the preferences of a large set of customers, improves the opportunities of cross selling and improves our capability to do the proper pricing, both in sports betting and in casino. In terms of customer engagement, the two most notable items are that we are able, through this infrastructure, to do customized activation, basically relevant content at the relevant time in general, but also to the relevant customer in terms of communication, which is our capability to personalize messages and content at scale through different platforms, a very unique proposition and communication to every single platform. In a nutshell, which is page number seven, this Lautomatica core is, in the end, an integrated Martech ecosystem, which realizes a strong integration between transactional data.

All of us, all of the players in the industry have a ton of transactional data, but we are able to put this data together with deep behavioral data, deep third party data, and this allows us with our engines, with our models, with our AI agents, to boost personalization and maximize customer engagement. Now, three quick examples and then I’ll get to the bottom line of this. Page number eight, a couple of examples on offer excellence. AI led risk management. We’ve set up an agent which basically does accepts roughly half, 45% of the sports betting tickets automatically, which means two things: we improve payout and we improve customer experience, one hundred and fifty milliseconds on average to accept these tickets.

This is great and the percentage of tickets which are managed this way is increasing through time. On the other side of the slide, you can find another application of this MarTech ecosystem, which is unfortunately, we have both betting against us and they’re very smart. So, we’ve set up an agent, which is fighting against this basically. We first launched that on the two most important brands, Goldbet and most important in terms of size, Goldbet and Betel Automatica. And as you can see, after a while of using this systems, basically the let’s call them approaches from these bots have basically gone to zero.

Then we moved that onto BetFlag, same story. So this is basically about early inhibition of non profitable speculative users, which just to give you an idea, the average payout of these tickets which have been rejected is 104%. And after a while, these guys, these bots, they turn somewhere else because clearly they’re making less money with us. Another example is on the offer excellence, page number nine, an AI agent for predictive model of casino content offering. The standard way for casino offering is usually static or algo based.

It goes to the generic player. You don’t target the player. It’s the marketing team choosing which products to list now out of the library. You can add some based proposition, which is relatively static. You can put new content and so forth, but this is for all the players.

Then, we’re switching to an AI based system, which is driven by the behavior of relevant clusters of customers, driven by the popularity of potential popularity of some games for certain relevant clusters of players. It’s based on pricing, so the payout, the RTP of the games. And there are lots more variables that can be added than we are adding to the model. The important point is this is player specific. It’s already in production.

It’s in production on a subset of customers. It’s going to be extended over time to the entire customer base. And this is about the breadth and depth of the offer, it’s about the customer experience, and it’s about the pricing also. Another example, tailor based communication for the customer base to boost engagement and ARPU, you can study these are examples clearly. You can study from time to time relevant clusters of players, for example, those who have lately lost money on sport or casino or both, and you can do tailored communication or bonuses to them.

And we’ve seen that you can have a material improvement of the weekly ARPU of those who are subject to this type of campaign vis a vis the others. Or you can go, for example, in sports but you can reply the same on casino. You can identify a group of customers which is particularly sensitive to certain type of triggers in terms of novelty of bets on some soccer teams or on some players. And there is an example here of a day of main teams match when the agenda, when the calendar was full compared to another period of time, Pisa, Velino, Forge, Three teams which are not particularly usually in the top tier, but when there was less offer in the calendar. And with this type of engagement, we’ve been able to achieve huge numbers on, say, second tier matches compared to first tier matches when the calendar was crowded.

Last but not least, another example of customer engagement. If you’re able to identify preferences in your customer base, for example, the type of sports, the type of leagues, the type of teams, and you have an AI agent which allows you to generate a campaign automatically for the relevant target, talking about the image creation and the creation of the campaign, you can achieve you can literally do this in a minute compared to like hours or half a day of work, which means this is basically online real time and it’s scalable. And the click through rate when you present content which is in line with the preferences of your cluster of customers, it’s three times the click through rate improves three times and with this the economics. So these are examples, but this is to show you, page number 12, that we started this in 2023 with Gold, Bet and Better. Now then we applied a part of this to BetFlag.

Now with when the migration is completed, these additional features will be applied to PlanetWin and then next year to TOTO C. So the story in the end is this is a source of sustainable competitive advantage, but the full potential is yet to be captured because it has to go through all brands, it has to go full scale on all brands and we can add and we have plans to add more and more features along the way. So I hope this helps put it in context also having a long term perspective on what we’re doing. Now with this, I hand over to Laurence. Laurence, please.

Lawrence Valanger, CFO, Lotomatica: Thank you, Guillermo. On Page 14, as Guillermo said, we had a good start of the year with revenues growing plus 33% year on year, reaching EUR586 million in Q1 twenty twenty five compared to EUR440 million in Q1 twenty twenty four. EBITDA is up 47%, totaling EUR220 million in Q1 twenty twenty five compared to EUR150 million in Q1 twenty twenty four. Margins have also increased from 34% to 37.6%, also supported by the favorable payout this quarter. Moving to Page 15 and looking at the financials by segment.

We continue to see strong growth year on year in online revenues plus 59% as well as sports franchise was also plus 59% and broadly flat in gaming. Similarly, looking at adjusted EBITDA, Online has grown 55% year on year, Sports franchise at 132% and Gaming flat. So you can see that the margins and as a result also the growth in Sports franchise has benefited from favorable Sports payout in this quarter. Going to operating cash flow. So if you look at the left hand side, you can see the profile of our CapEx spend for the first quarter.

So recurring CapEx are flat year on year at 21,000,000, broadly in line with what we had last year. And this is comparing versus Q1 twenty twenty four that does not include PWO. So this shows you just the scalability of our model in terms of CapEx. Concession CapEx are in line with the guidance we have given this year. So we spent EUR 15,000,000 this quarter.

And the EUR 29,000,000 of one off growth CapEx include predominantly carryover items that we had guided to in our full year 2024 results. So carryover bolt ons of EUR 15,000,000 and deferred payments of EUR 4,000,000. This excludes gold debt. On top of this, we’ve also got the integration costs and CapEx related to the PWO that amount to 10,000,000. If you look at the right hand side, you can appreciate the year on year improvement.

So on the operating cash flow, where we improved increased from EUR 110,000,000 in Q1 twenty twenty four to EUR 184,000,000 in Q1 twenty twenty five. And this is driven by the improvement in EBITDA as well as benefiting from the scalable CapEx that we just discussed. If we go to Page 17, so we can see the evolution of the net debt decreasing to €1,800,000,000 at the end of the quarter, so in terms of net financial debt. We have EBITDA of EUR $220,000,000, if you look at the past from end of year twenty twenty four to end of quarter twenty first quarter twenty twenty five. So EBITDA of $220,000,000.

Net working capital slightly negative, it’s typical of the seasonality of our seasonality. 65,000,000 of CapEx that we described earlier. Then we paid EUR 10,000,000 to the vendors the sellers of Goldbet, and this is again in line with guidance. We had EUR 27,000,000 of payments due. We paid EUR 10,000,000, so we’re now left with a bit more than EUR 17,000,000 left to pay.

Then you have financial expenses and leases of EUR 29,000,000 and other items, which include integration costs of about EUR 11,000,000. This brings us to a net leverage level of 2.1 turns. So we’re at the lower end of our financial policy that we’ve stated that we’ve had since the time of IPO of we want to stay in the range of between two to 2.5 terms on a steady state basis. And this is also makes it the right time to start our buyback program. Page 18, this is a quick recap of the refinancing in which we refinanced

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Lawrence Valanger, CFO, Lotomatica: bit more than half of our total debt stack. We did it on the April 24, where we refied EUR 1,100,000,000.0 to redeem the EUR $565,000,000 senior secured notes due 2028 and EUR 500,000,000 of floating rate notes due 02/1930. This was attractively priced at EUR 4.8 resulting in a run rate savings of EUR 24,000,000 per annum and an overall cost of debt slightly above 5%. Our credit rating also has been reviewed one notch up to BB by S and P and to BA2 by Moody’s. And with that, we completed the presentation.

Chorus Call Operator, Conference Operator: Thank you. This is the Chorus Call conference operator. We will now begin the question and answer session. The first question is from Clark Lampin of BTIG.

Clark Lampin, Analyst, BTIG: Thanks very much for taking the questions. I have the first question is going to be on the online migration for the casino ecosystem. Normalized growth this quarter downtick slightly on a sequential basis. And I know that’s a good thing as it relates to forward growth of the online ecosystem. I’m curious if you’re seeing any signs that the migration is picking up pace.

And if so, how we should think about modeling growth over the balance of the year? Second question that I have is on the data and personalization push. I’m curious if you could give us some context around how early on we are. I know that across the brand portfolio about three of the five brands have some degree of coverage right now. But would it be possible to give us a little bit more color around player based penetration or even what you might expect in terms of derivative benefits for engagement or spending?

And then last question just on housekeeping. The buyback, Lawrence, is that something you expect to deploy programmatically, more opportunistically? Any color there would be appreciated. Thank you again.

Lawrence Valanger, CFO, Lotomatica: Sure. I could start with the third one. So the buyback program, we will follow it. We will put in place a program with a bank that has the capabilities to carry out the buyback. And I would say it’s will be, let’s say, a programmatic program it be programmatic, but the we always as we’ve always said, we have the flexibility we’ll always have the flexibility to interrupt it at any point in time should there be sort of attractive opportunities of more attractive opportunities of capital deployment.

I think on your first question, if you think about the growth, I mean, we continue to see and we have we do not change sort of our perspectives on how we look at sort of growth with the various segments as we’ve I mean, these are just our sort of best estimates of market growth. But broadly speaking, we always continue to see online market growth at in the mid teens, sports franchise growth in the mid single digit and gaming in line with sort of with the latest trends that we’ve seen declining mid single digit. So this is that framework hasn’t changed. Now if you look at and this is pretty much validated if you look at particularly if you look at sort of the iGaming, for example, it has grown in the high teens in the quarter. So we continue to see this trend holding true.

Sports in general tends to be harder to predict on a month by month because you would have to predict also the payout. But clearly, when you look at year on year performance, especially when you have more sort of an unimportant distance between the payouts. So if you have very high payout and very low payouts, so you’ll have you’ll see you’ll definitely have to look at the GGR and the bets clearly get impacted by some they have some impact in relation to the payout because of just the recycling of bets. So but for that, we continue to hold the view that it’s on a normalized basis that the GGR growth of the market for sports is in the mid single digits for sports retail. For iSports, it’s we continue to see this in the teens.

Guilman Gelozzi, CEO, Lotomatica: I’ll take, Clarke, the one on data and personalization. Look, a lot has been done, but there’s lot to go. Let’s start from the brands. The two brands which are most advanced on this simply for historical reasons and where we started creating the infrastructure are Golbet and Lotomatica. Better is the sports version of Lotomatica.

And now with the migration of PWO, Planet Twin is going to be basically by the end of the year onto the very same level. So those two brands are going to be equal. Then you have GoldBet, which is already on a part of the infrastructure, mostly on sports, but not all of it, so that will require a little more time. And TOTO C will be mainly a topic of next year after the startup is gone and the brand is stabilized. So, a lot has been done in terms of brand, a lot more to go.

In terms of features, this depends very much on the Let me make some examples. The first example on the risk management. On the risk management, I would tell you that in terms of how much the features pretty much in every respect on risk management are already in execution on the entire customer base, so in this case it’s more a topic of brand extension, not feature extension which is already running on full scale, but you have to extend it on the brands. Still on offer excellence, when you come to AI predictive modeling of casino content offering, that’s in production on a subset of customers.

So the feature is there. It’s already operational. We have not put anything in here, which is at the concept project stage. It’s already stuff which is up and running, but it’s up and running on a subset of the customers. So the first point here is extending that in a safe manner to the entire customer base, and then you have brand extension.

So

Domenico Ghilotti, Analyst, Equita: you have two

Guilman Gelozzi, CEO, Lotomatica: levers here. When it comes to personalization, it’s still very early in the sense that it’s up and running. It’s working on a subset of the campaigns and of the customer base. There is tons of additional elements that you can take into account to increase the level of personalization. I mentioned the type of sport, the league, the team, but you can add a lot more.

So here, you have new features, the extension to the entire customer base and, of course, the extension to all the brands. So, it depends very much on what you’re looking at. But the concept, the playbook is the same. Now the infrastructure is there, everything is there, so it’s a matter of once you have something new, roll it to the entire customer base, increase the feature, roll it to all the brands. That’s exactly where we are and where the big opportunity is.

But it’s all stuff that it’s up and running with a huge potential of extension.

Clark Lampin, Analyst, BTIG: Very helpful. Thank you.

Chorus Call Operator, Conference Operator: The next question is from Ed Young of Morgan Stanley.

Ed Young, Analyst, Morgan Stanley: Good morning. Thank you for taking my questions. The first question is around online growth. As you’ve shown in the presentation, the online market delivered good growth in Q1, but March was a bit weaker, particularly in sports. The data shows that April saw good growth in iGaming.

Did you see something similar in terms of a recovery quarter to date in sports, I. E, should we view March as a blip? Or is there anything to call out? The second is on the regulatory outlook. Just wonder if you have any updated thoughts or expectation for the ongoing new licensing process and how your development and conversations for Totissia are going?

And then third, with the buyback, you’ve talked about it competing with M and A. And Laurence, today, you spoke about flexibility. I wonder if on the M and A front, you just give any updated thoughts on the markets, your view on Italy or outside of Italy and what the competition in assets and price expectations look like at this point? Thank you.

Lawrence Valanger, CFO, Lotomatica: Hi. I’ll take the first and the third. So short answer, it’s quite a blip in the sense that iGaming has been good and I think the numbers for the sports just came out on AGIMEG two minutes ago. And you’ll see a sort of market growth of 15% April on April, April ’20 ’5 and April 24. So we continue to see good growth in the market.

I think on number three, how we look at M and A, I think we I think there’s more it’s more of the same of what we discussed previously. There’s

Ed Young, Analyst, Morgan Stanley: not

Lawrence Valanger, CFO, Lotomatica: really much to say about competition on the assets. We maintain our framework of analysis of M and A, which is Europe B2C regulated and the second verticals in which we operate. I think there are clear opportunities that we continue to monitor. And it’s at the right time. We’ll talk about it if there’s anything relevant to talk about.

But I would say that nothing has changed in terms of our approach to M and A internationally. And in Italy, there is we’re talking about continuing very selectively our bolt on strategy.

Guilman Gelozzi, CEO, Lotomatica: Yes. So I don’t the licensing, I’ll make then a very quick comment also on growth. So the licensing for online continues as

Lawrence Valanger, CFO, Lotomatica: planned.

Guilman Gelozzi, CEO, Lotomatica: Applications are due by May. We don’t see any sign for the moment being of any intention to postpone the date for the submission of the application. So we stick to the base case of the awarding of the new concessions in September. Totosi continues to have a good momentum, both for the customer base that we’ve already put together. It’s showing good traction, but also in terms of interest.

As we said, it’s very likely given the

Lawrence Valanger, CFO, Lotomatica: fact

Guilman Gelozzi, CEO, Lotomatica: that the continuing to operate the current concession until the very last minute comes basically at zero cost for the existing players that the transition in whichever direction, Totosi or whatever else, is done at the very last minute because that is the thing which makes more sense. But we confirm both the timing, the approach and the good commercial traction that we see in the project. Then let me tell you, we’ll be happy in any case also if Totosi does a little less than we planned and we gain extra market share on the other brands because of the redistribution of the market share. The important point for us is the total, but so far so good. Super quick comment on the online growth that Laurence mentioned continues to be very healthy in April for all segments.

Lawrence Valanger, CFO, Lotomatica: So

Guilman Gelozzi, CEO, Lotomatica: also because March, had there was such a good payout and so much spend in January and February that you have to consider that when you look at the March data. So April looks very healthy. I think it’s also a very good sign that when you come and look at the total market share us in April, the total online has aligned to Q4, which has been the highest quarter ever with the difference that we are in the middle of a migration, which is usually a complex period. We’ve seen it in the past. We’ve seen it at the time of Lautomatica.

So April, we matched basically the Q4 market share, the highest ever in really in the middle of a large migration. I think it’s pretty good and it’s pretty reassuring.

Ed Young, Analyst, Morgan Stanley: Great. Thank you for the color.

Guilman Gelozzi, CEO, Lotomatica: Thank you.

Chorus Call Operator, Conference Operator: The next question is from Estelle Weingroth of JPMorgan.

Estelle Weingroth, Analyst, JPMorgan: Hi, good morning and thanks for taking my questions. The first one on the drop through from GGR to NGR. On Online specifically, at the GGR level, it was plus 25% year on year and plus 17% at the NGR level. Just want understand there. And same question, but I guess opposite direction within the gaming franchise.

We’ve seen GGR minus 5% year on year and flat at the NGR level. And just last one, just do you have any updates at all on the timing of the process for the retail concession? Thank you.

Lawrence Valanger, CFO, Lotomatica: I can take the same the first two. Maybe starting from the second one. On the gaming retail side, on the gaming franchise, well, we are also we are benefiting from the bolt ons that we’ve carried out also last year, which, as we had indicated also for this year, at an EBITDA level, probably stays flat. And then obviously, the impact of the distribution and sourcing has is positive on the revenue side because of the way we account for the margin of AWPs. So when we move from direct to from indirect to direct, you move from margin to gross revenues.

So that’s more of an accounting effect. But if you look at the again, the EBITDA level, you’re probably going to continue to see flat year on year, again, predominantly as a result of bolt ons. The first one from in online, sort of from GGR to NGR, and here it’s of GGR to revenues, it’s partly a bit because of the of the segments mix effect of the relative the segments that growing year on year. And it’s also a bit more of promotional activity that are predominantly linked also to the fact that we are going through the integration of PWL?

Guilman Gelozzi, CEO, Lotomatica: Yes. So Estelle, on the retail concession process, look, we understand there is an advanced very advanced draft on the government side, on the regulatory Ministry of Finance side, which, I mean looks pretty well thought and balanced, same type of again, balanced and constructive approach of the online framework. Of course, it’s a completely different type of business, so you cannot make a match, but I’m talking about in terms of quality of the regulation. But again, the point there is that has to be negotiated with the regions and it has to be taken from there. So we can appreciate there are very there is a lot of focus and very positive efforts on the regulatory and government side on this.

Again, there is a very rational and balanced approach again. But then it will have to go through the discussions with the region. So it’s hard to make a forecast. I would say the overall judgment on this is, I would say, positive both for the focus, the effort and the balanced approach.

Estelle Weingroth, Analyst, JPMorgan: Okay. Thank you.

Chorus Call Operator, Conference Operator: The next question is from Fabri Pavana of Mediobanca.

Fabri Pavana, Analyst, Mediobanca: Yes. Hi, good morning all. Congratulations for the results and thank you for the presentation. I would just have two follow-up on this. First one is a question on the PWO improved synergies target.

Could you elaborate a little bit more on this? You were expecting the potential improvement in the recent past or this is something you have been discovering recently? The second question is related to the core part of the presentation. When you’re referring on the potential expansion and then for ’25 and then the scale up for 2026. This is something which has to do with all the brands or with some brands in particular?

Thank you.

Lawrence Valanger, CFO, Lotomatica: So I’ll take the first one. So the improved synergies, it is predominantly related to the distribution costs in PWO. So how we look at the distribution contracts with the network. So it’s an alignment with the rest of the the standards of our group. And if we sort of disclose the level of synergies once we feel these synergies, once we feel we have a high degree of confidence, ultimately, that we can achieve them.

So now is the right time because we have a high degree of confidence of achieving the $12,500,000 and hence the announcement.

Guilman Gelozzi, CEO, Lotomatica: Yes. So Fabio, the Lotomatica core, look, this is an infrastructure, it’s basically a product that is going to cover all brands. So the endpoint of this is the maximum amount of feature on the entire customer base on all brands. That’s the end game. Then, of course, you get there through a process because you add new features every time You scale it up on the customer base depending on the feature, taking into account different complexities and you move it to the various you scale it to the various brands, also taking into account the history of those brands.

There’s no doubt about the endpoint, all features and always improving, all customer base, all brands.

Fabri Pavana, Analyst, Mediobanca: Thank you.

Chorus Call Operator, Conference Operator: The next question is from Andrew Taum of Redburn Atlantic.

: Hi, good morning. Thanks for taking my question. Just the first one, just in terms of the personalization work to drive the increasing ARPU. How should I be thinking about it in terms of is this an initiative to improve your bonusing and promo efficiency? Or should I be thinking about this in terms of driving higher staking volumes and staking growth from the end customers here?

And then secondly, just a housekeeping question. Just on the buybacks, obviously a significant shareholder has been selling down in recent times. Just thinking through how that buyback works around potential sell downs from significant shareholders and things like that from a timing perspective, Thanks. Yes. So Andrew, this

Guilman Gelozzi, CEO, Lotomatica: is Guillermo. So the personalization point and there’s this is just an example here of something which we are already doing, there’s many other things here. The concept here is the overall concept is each client wants something different in terms of product, slightly different offer. The way you communicate to them and the way you basically bonus and make promotions to them. This is on point number two and three.

This is not about the offer, clearly this specific example. But the first effect of this should be double, so you should ideally increase the share of wallet because you become more meaningful to that client, you get nearer to that client. Another way to see that is that with the same money, marketing money, you should get more or if you want to get the same, you should spend less money. That is about the existing customer base. But then, of course, given the fact that this can be used with clearly less variables available but also prospects, respecting that you have tons of regulations to respect, but it can be used for prospects.

It can be used for customers which are at very early stage, so maybe also to reduce churn, not with customers that are already pretty sticky to you and you want to increase the share of wallet, depending on the phase on the target that you use and depending on the phase where the customer is, you can use this for multiple reasons. The base application will be a customer you already own, basically own between commerce, and you increase the share of wallet and you improve the marketing efficiency. But then you can use the early stages also to drive down churn and build quicker engagement, but with a more limited set of variables, you could use that potentially also on prospects. So that’s the idea.

Lawrence Valanger, CFO, Lotomatica: On the second question for the buyback, I mean, are on market purchases that are mainly run by that are done by a program or an algorithm, if you wish. So the buyback cannot be directed to a specific shareholder, including the largest shareholder that you were talking about. And in particular, in light of the Italian rules, you have to treat everyone equally. So look at them as an absolutely standard sort of buyback with on market purchases.

: Got it. Just a follow-up on the personalization question. How much of that personalization comes from what you know about the customer from your retail channel and your omni channel approach versus just acquiring customers exclusively through the online channel?

Guilman Gelozzi, CEO, Lotomatica: Currently, those the amount of knowledge that we have from the customers that we acquire from the retail comes once they are online, so you start to know them. Because before, when they are in the retail, you don’t really know them. Of course, you have some background data, but this background data, like third party data, are usually not enough to drive an effective personalization, hyper personalized approach. So the short answer to your question is, if they remain fully retail, there’s other tools that we use, but not for the personalization. If they are retail and then they migrate online, so they get an account and you start observing the behavior, then they get into the loop and there’s a significant part of the customer base, which goes through that journey.

But if it stays a pure retail customers, then this is not the key tool.

: Got it. Thank you.

Ed Young, Analyst, Morgan Stanley: Welcome.

Chorus Call Operator, Conference Operator: The next question is from Domenico Ghilotti of Equita.

Domenico Ghilotti, Analyst, Equita: Good morning. Few follow ups on the questions. So the first follow-up is on the buyback. Understand. So if you complete the buyback, basically, you have a mid to high single digit EPS accretion.

Should I assume that this is a benchmark also for your M and A? So you are looking at something that is more accretive and you are setting some kind of benchmark for the buyback. Second, on the synergies, just a follow-up on the phasing. So if you can remind us where you are today and how much can be delivered by the end of this year and next year considering also your upgraded guidance? And last, just for a clarification.

So if I have to take the Q1 number on a normalized basis, where are you in terms of online margin? Because I think that you were targeting something like mid-50s as a structural level.

Lawrence Valanger, CFO, Lotomatica: Maybe go for various points. On the first question for the buyback. Yes, for sure, EPS accretion is definitely a metric that we look at when we assess M and A. It’s not the only one. Sort of just from a financial perspective, there’s also a strategic element.

But from a financial perspective, yes, it’s a metric, but it’s not the only one that we look at when we there’s M and A opportunities. But it is a good benchmark, as we mentioned a number of times earlier, and I totally agree. On the synergies side, the incremental synergies, we will see them we expect to see them in full in 2026. We would not change the because it’s a rolling process that takes time. The implementation of the review of all the sort of contracts with the network is, again, nature, a rolling process.

So for this year, we would not want to commit to a number yet. And sort of a conservative case is that you don’t assume any for this year and we’ll see the full extent with the full run rate synergies next year, so the 12,500,000. For the online margin, if we look at it on a normalized basis, it’s probably about around one point lower. This is the effect of the payout. Just a few things to keep in mind.

One is, when we look at margins on a quarterly basis, obviously, margins also take vary depending on the level of activity that you have in that particular quarter. If you spread your fixed costs over equally amongst the all the quarters, the quarters that have higher margins are the ones where you have higher revenues, right? So Q1 and Q4 tend to have better margins typically, okay? Things may change temporarily, but that is sort of we’re talking about principles. The consideration I would make on the margins is on the last call, we said that with the inclusion of PWO, we would expect to see margins in the low 50s, okay?

And that as we continue to grow over time, we will see we there is it is not unreasonable to expect that we get into the mid-50s more in the medium term. Thank you.

Chorus Call Operator, Conference Operator: The next question is from Chiara Pampuri of Intermonte.

Estelle Weingroth, Analyst, JPMorgan: Thank you. Good morning. I have a couple of questions. The first one is on Totosea. We will see its impact from 2026 with the online concession.

But I want to know if the project is already ongoing, if you are already closing some deals? And the second question is if you can give us some color on bolt on acquisition ongoing. Thank

: you.

Guilman Gelozzi, CEO, Lotomatica: Hi, Thiago. This is Gudjano. On TOTO C, yes, for sure, it’s ongoing. It’s up and running. It’s already I mean, it’s the full year impact is 2026, but we expect the uptake to be in Q4 as the cutoff date for the current concession is September.

And yes, we’ve already signed deals. It’s already there’s already market share attached to that and growing. So short answer, it’s operational, it’s working well, it has traction and we are preparing for the cutoff date, which is September to see hopefully a ramp up in Q4 and then the full speed in 2026. On the bolt ons, we continue to look at them with a very strong filter in the sense that we are very selective about the quality of the assets. We are more and more selective about the quality of the assets that we look at, and we continue to be disciplined on price.

But for sure, there are some interesting opportunities out there that we continue to scout, and we will continue to execute on. Donald or Lawrence, if you want to add something on this point.

Lawrence Valanger, CFO, Lotomatica: I think you covered them. Mean, what you see what you’ve seen in the first quarter is the carryover from 2024, where we’ve closed a number of deals, and that’s what you see in the CapEx. And then going forward, as Guillermo said, we’re working on a pipeline, and we continue to maintain the same discipline on price. And therefore, sort of when that will materialize, we’ll so we’ll disclose them as they become as we are more progressed.

Chorus Call Operator, Conference Operator: Okay. Thank you. The next question is from Simon Davies of Deutsche Bank.

Simon Davies, Analyst, Deutsche Bank: Yes. Hi, guys. Two from me, please. Firstly, on the buyback, should we assume that that’s an eighteen month linear progression in terms of the buybacks? Or is there any reason why you shouldn’t accelerate that process and move more aggressively to the front end?

And secondly, how much capacity do you think that leaves you in terms of acquisition spend? And how far above the two to 2.5 times leverage range would you be prepared to go for the right kind of deal?

Lawrence Valanger, CFO, Lotomatica: I mean, the linear it all depends also on how the algorithm works over the buyback period. It is I mean, the intention is to go up to EUR 500,000,000. The easiest way to model it is, as you suggest, with the linear interpolation, it also depends on the given the vast majority mostly this will be funded by our cash flow generation. So if we see that there is an opportunity to accelerate, we’ll have to think about that and see a bit later in the process whether that’s worth doing. Again, here, we want to make sure that because we are now completing the integration and we feel that we are on a steady state basis in a good place on leverage at the low end.

We want to continue to remain we’re committed to our financial policy, want to stay where we are that’s a zone of comfort and we will stay between two and two point five turns. Now in terms of M and A, which is more for exceptional, let’s say, extraordinary sort of activity. So M and A, we could exceed the 2.5 turns, but I think this is not a hard guidance, but on a soft basis, we don’t see going above three times.

Simon Davies, Analyst, Deutsche Bank: Great. Thank you very much.

Chorus Call Operator, Conference Operator: The next question is from Andrea Bouncer of Banco Acros.

Lawrence Valanger, CFO, Lotomatica0: Hello. Good morning to everybody. Most of my questions have been already answered, but I got my curiosity again on M and A. In the light of the share buyback, can we rule out any M and A for this year? And secondly, are you definitely looking more abroad than Italy?

How is the state of the art? Thank you very much.

Lawrence Valanger, CFO, Lotomatica: No. I mean, the buyback tool allows you to stop anytime. So we have no constraints on I mean, the buyback does not provide a constraint. The buyback is first a tool to allocate capital on a given the sort of the attractive returns that it offers. We can stop it at any time.

So if there’s an attractive opportunity, we stop the buyback and we do M and A. That’s as simple. So there’s no time constraints on that. In terms of Ed M and A, clearly, we said is now in Italy, we’re just talking about for the time being, we’re talking about bolt ons. And so as we discussed on the I think on the question that Ed asked earlier, it’s M and A international M and A will continue to adopt the same framework of analysis.

So the situations we monitor all fall within this. And it’s again, Europe, B2C regulated and verticals in which we operate. So businesses that we know well, can price well and understand well. So this is the framework that we have been continuing to look we continue to do it for a while, and we’ll continue like this going forward.

Lawrence Valanger, CFO, Lotomatica0: Okay. Thank you very much.

Chorus Call Operator, Conference Operator: Gentlemen, there are no more questions registered at this time.

Guilman Gelozzi, CEO, Lotomatica: You, operator. If there is no more question, I think we can close the call. Thank you all for participating. Bye bye.

Chorus Call Operator, Conference Operator: Ladies and gentlemen, thank you for joining. The conference is now over. You may disconnect your telephones.

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