OPAP SA (OPAP.AT), the Greek gaming giant, has reported a record-breaking quarter, achieving its highest ever quarterly gross gaming revenue (GGR) in Q4 2023. The company also celebrated a milestone with a full-year GGR surpassing €2 billion for the first time. The full-year recurring EBITDA has exceeded expectations, reaching €745 million. OPAP has announced a substantial shareholders' remuneration, and is looking forward to a solid financial and operational performance in 2024, with plans to bolster its online customer base and sports betting offerings.
Key Takeaways
- OPAP SA reported record quarterly and full-year GGR for Q4 and FY 2023, respectively.
- The company's full-year recurring EBITDA outperformed, amounting to €745 million.
- Shareholders to receive a general remuneration of €0.85, adding to the previously distributed €1 interim dividend.
- OPAP anticipates a strong performance in 2024 with a focus on digital growth and sports betting enhancements.
- The company's EuroJackpot product has launched successfully, meeting financial and operational expectations.
- OPAP is committed to combating illegal gambling in cooperation with state authorities.
Company Outlook
- OPAP expects to maintain solid financial and operational performance through 2024.
- The company plans to increase online customer base penetration and average revenue per user (ARPU).
- Investments in marketing will continue, with a focus on EuroJackpot and the upcoming Euro event.
Bearish Highlights
- OPAP has likely lost market share in sports betting but remains strong overall.
- The suspension of domestic horse racing operations represents a low single-digit loss, not significantly impacting profitability.
Bullish Highlights
- The company aims to improve sports betting offerings, emphasizing reliability, speed, loyalty schemes, VIP services, and call center support.
- OPAP will continue to invest in growth initiatives while maintaining a similar EBITDA margin as the previous year.
Misses
- Despite record GGR, OPAP acknowledged a potential decline in sports betting market share.
Q&A Highlights
- OPAP has a strong platform base with partner OpenBet and plans to enhance front ends, support, and operations.
- The company's guidance for GGR growth includes contributions from the successful launch of EuroJackpot.
- OPAP emphasized its efforts to fight illegal gambling, with an indicative turnover of €2 million in the illegal market.
In the earnings call, OPAP SA outlined its strategy for the coming year, which includes leveraging new digital technologies to enhance customer propositions. The launch of new games, a new lotto, and a new platform for both retail and online PAME STOIXIMA are part of this strategy. OPAP's focus on continuous improvement and investment in marketing and growth initiatives suggests a proactive approach to maintaining its market position and pursuing further expansion, particularly in the online sector. The company's commitment to combating illegal gambling and its cooperation with state authorities highlight its dedication to corporate responsibility and ethical business practices. Investors and stakeholders can expect further updates from OPAP in the next quarterly call.
InvestingPro Insights
OPAP SA's impressive performance and strategic focus on digital growth and sports betting enhancements are mirrored in the data and insights from InvestingPro. With a market capitalization of $6.69 billion USD and a Price/Earnings (P/E) ratio of 15.09, the company stands as a significant player in the gaming industry. The adjusted P/E ratio for the last twelve months as of Q4 2023 is slightly lower at 14.86, indicating a potentially more attractive valuation for investors considering the company's earnings.
InvestingPro Tips highlight the company's impressive gross profit margins, which stand at 59.36%, showcasing OPAP's ability to effectively manage its cost of goods sold and maintain profitability. Additionally, the company is recognized for its ability to provide shareholder value through dividends, with a substantial dividend yield of 10.74% as of the latest data. This is particularly noteworthy as OPAP has maintained dividend payments for 24 consecutive years, demonstrating a strong commitment to returning value to its shareholders.
For those interested in further insights and tips, InvestingPro offers 13 additional tips for OPAP SA, which can be found at: https://www.investing.com/pro/GOFPY. These tips, combined with the real-time metrics provided, offer a deeper understanding of the company's financial health and market position. Readers looking to access these insights can use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
Full transcript - Greek Org of Football Prognostics (GOFPY) Q4 2023:
Operator: Ladies and gentlemen, thank you for standing by. I'm Gaily, your Chorus Call operator. Welcome and thank you for joining the OPAP SA Conference Call and Live Webcast question-and-answer session to discuss the Fourth Quarter and Full Year 2023 Financial Results. Please note, a video presentation has been distributed and is also available on the OPAP Investor Relations website. All participants will be in listen-only mode and the conference is being recorded. At this time, I would like to turn the conference over to Mr. Jan Karas, CEO of OPAP SA. Mr. Karas, you may now proceed.
Jan Karas: Thank you very much. Good evening or good morning to everyone, and welcome to our regular full year 2023 results conference call. I'm excited with the set of results announced delivering in Q4 2023, record high quarterly GGR and achieving a full year GGR record surpassing the €2 billion threshold for the first time. On top of that, we concluded the year with full year recurring EBITDA that exceeded our latest outlook, landing at €745 million. 2023 was a year of change for OPAP, in which a broad set of enhancements and improvements in our customer propositions were implemented, while we leverage new digital technologies to upgrade the overall customer experience, both in retail and online, and proceeded the transformation of our traditional games to make them more relevant to the latest trends in gaming. New Tzoker, new lotto, launch of opaponline.gr, new platform for both retail and online PAME STOIXIMA are just some indicative examples. We are also glad to announce a general shareholders' remuneration of €0.85 that comes on top of that €1 already distributed as interim dividend in November 2023. We anticipate 2024 to be another year of solid financial and operational performance, benefited by OPAP's unique proposition and strategy. Hopefully, you have reviewed and enjoyed the results recorded video we shared with you earlier today. So we will jump directly to our Q&A session. Gaily, over to you.
Operator: Thank you, Mr. Karas. Ladies and gentlemen, at this time, we will begin the question-and-answer session. [Operator Instructions] Our first question is from the line of Draziotis Stamatios with Eurobank Equities. Please go ahead.
Stamatios Draziotis: Hello, there. Thank you very much for taking my questions. Could I start with a question, operational one regarding online, and particularly regarding the performance of OPAP Digital, excluding Stoiximan, I'm just wondering the momentum does not seem to be -- to have been as strong as maybe one could have anticipated this year. And certainly, it has been more tepid, if you like, relative to Stoiximan. So if you could comment on that and why this has been the case, and the areas you think could maybe drive the performance and improve the momentum in 2024, maybe online, for example? So that's the first question. Secondly, on VLTs, VLTs, actually just on the cost side, I noticed that the agent commissions seem to have ticked a bit higher as a percent of the revenues. Could you tell us why this was the case? Does it have to do with the mix of machines? And lastly, on the shareholder remuneration policy, you talked about maximizing returns for shareholders. And indeed, this is what you've been doing with the €1.85 return in 2023. Could you maybe tell us how we should about cash returns in 2024? You are saying that the bulk of net profit will be distributed as dividend. But given free cash flow is likely to exceed net profit, is that a scope for you to pay a dividend in excess of net profits? Yes, that's pretty much it. Thank you.
Jan Karas: Thank you very much for your questions. We will start from the first one. So in terms of OPAP online performance, it's a slightly different story vertical by vertical. We -- starting with the Opaponline.gr, we have achieved a year-over-year growth of 40% that we certainly consider as a very healthy development and evolution. The whole Opaponline.gr proposition, it's in its really early stage. Last year was about new games into the portfolio. This year, we have a lot of additional enhancements to the customer proposition in our sleeves, and we are expecting that this year, we will be focusing more on growing the penetration, the base, as well as growing the ARPU of the existing customers. So I cannot share with you now what is that we will be doing, but rest assured that we are far from concluding on the success. As on the contrary, we want to be building what we call online entertainment destination. And I think we have a pretty attractive cocktail there, because a sense of our business is giving people a chance to fulfill their dreams and that's always the key reason why they will be coming and playing, but gaming in online is about so much more than that. So a lot of social networks, familiar features, gamification, loyalties, our programs, discussion forums and more entertainment is what we will be adding to the cocktail. So there is more to come here, and we expect that very healthy double-digit growth to continue. When it comes to casino, the evolution of our vertical has certainly been, at least at market trends, if not above. So we like the casino performance. On sports betting, as we have communicated, we have changed the sports betting platform itself, which was very important for the -- one of the essential elements of sports betting and there is stability and quality of the core. We still believe that we have a space for improvement on the proposition itself to be competitive with the top-tier players. And we certainly continue on that journey. So again, here, a lot is coming, especially now before the euro, despite of this proposition. And hopefully, we will see a much bigger growth in both active base as well as in revenues from this vertical in the foreseeable future. So that's on the online. In terms of the VLTs, could you please repeat the question because I was not sure if you are referring to revenue shares for our VLT vendors or revenue sales for the retail network?
Stamatios Draziotis: Yes, it's actually with regards to the network, the agents effectively. If I've done the math correctly, the commissions as a percentage of revenues have increased a bit. I think there is a different structure, right, if machines are in your betting outlet or they are in gaming hole, if you could just shed some light as to why at the consolidated level, we've seen this uptick?
Jan Karas: Thank you very much. That's a very good question indeed. So when it comes to revenues or commissioning schemes, as we call it, for the retail network agents, those who operate the gaming venues. We haven't made any major change in the commissioning scheme that, however, commissioning scheme is not fixed percentage from the GGR. It's much more complex. That is -- there are a set of subsidies that are different bonus schemes, reflecting size of the revenues generated by the specific gaming holes, et cetera. So, it's a variable commissioning scheme that is reflecting the performance and several other commercial factors. As such, we always take care of the healthy P&L of the network, and we are paying a lot of attention to the sustainability of the network, which was a big topic for us throughout COVID, but obviously, it's something that we keep an eye even now. So that might be an explanation for some of the year-over-year differences that you are seeing, but there is no major change in the commissioning scheme. And the third question, I will hand over to Pavel.
Pavel Mucha: Good afternoon from me. So we remain committed to our standing dividend policy that is to distribute the maximum 100% of the net profits with a minimum of €1 dividend per share. Additionally, we might consider further special dividend distributions. And of course, we are now complementing this dividend policy with the share buyback, which we started in September last year, which -- where we really use any additional surplus cash after maximum dividend was paid. So that remains in place dividend and share buyback with no change.
Stamatios Draziotis: I'm so sorry. I kind of lost you. So, could you just repeat the question? I'm sorry, for the rest of the audience, my line got cut off. Sorry about that. I just lost you when you started to respond, sorry.
Pavel Mucha: Okay. So what I said that we are committed to our dividend distribution policy to distribute 100% of our net profit with a minimum of €1 dividend per share. We may complement it in future with any special dividend distribution like we did in the past and like we have a good track record. And we are complementing this dividend policy with additional share buyback, which we started in September last year, but we only use any additional surplus cash after maximum dividend has been paid. So we want to continue to pay maximum shareholder returns also going forward.
Stamatios Draziotis: Okay. Got it. Got it. Thank you, so much. Thank you.
Operator: The next question is from the line of Pointon Russell with Edison Group. Please go ahead.
Pointon Russell: Good afternoon, all. A couple of questions. Just going back to the previous question, you said that, the casino market share has gone up in the online world. Could you just give a view of what's happened in sports betting? Have you increased market share? And you referenced that, there will be some improvements to drive that business forward. Could you just talk about what those improvements are? Is it the odds? Is it the platform itself? My second question is on marketing. Now, if you look back over the last three years, relative to revenue, it's been a pretty consistent percentage, which is, I would say, is pretty good given online, which is more competitive, has increased in the mix. So, could you just talk about the trends for that going forward, especially in light of essentially, you're guiding to a flat margin year-on-year? And my third question is, just on instance and passes, which had a challenging fourth quarter that followed a weak Q3. Now, apologies, I've got about halfway through your presentation so far. So, if you've addressed it there, I apologize. It would just be good to get a feel for why you think instance and passes will improve in 2024? Thank you.
Jan Karas: So -- starting with the sport betting, where we are and where we are improving. If you're a bit familiar with sports betting, I think you will probably understand that, there is no golden egg to be fixed to become successful in sports betting. It's a rather complex agenda, and you need to do many things right to meet and exceed the customer expectations. So, starting from the end of your question. The platform, as I said, we, now, after the change last year, have a very solid base to build on with our partner, OpenBet. But it's not only about the platform. That's an important base. It's about what you build on that and very importantly, also how you enhance your front ends and overall support and operations of the game. So, the key areas where we are aiming for improvement, meticulously following the customer research we are doing to understand where our gaps are is across all the -- starting from the basic layer of reliability, speed, cash in, cash out functionality, registration process, et cetera, going on to the next level of loyalty schemes where we will be launching a very competitive one pretty soon, taking care of your VIPs, your call center services and how much attention you pay to taking care of any problems along the way. You mentioned also, very correctly having competitive thoughts is always very high on our agenda and always agenda that you need to continuously follow. So there is no specific thing that, I would say, we will change next months and things will dramatically change in terms of performance. It is really about that continuous improvement across many fronts that we are aiming for. Both -- in a nutshell, the proposition that you will see our customers will be able to enjoy during EURO, I believe, will put us in a really good place in terms of competitiveness on Greek market. Yeah. Handing over to Pavel, if I covered you, I don't know if you are there. If we can move to the next --
Russell Pointon: Yeah. Sorry, could you just clarify a bit, you said, it was market share online, was that positive in the year? Or did you lose share? Or is it stable?
Jan Karas: We have been -- in terms of sports betting, we have been likely losing market share. But overall, we didn't -- I mean, across the noncompetitive world. And very importantly, on a group level, which is our dual brand strategy that we follow, we continue to keep a strong market share of 50% plus.
Russell Pointon: Okay. Thank you.
Pavel Mucha: Now, on your marketing question, there are some trends. We are always trying to have prudent management, of course, across all categories, including marketing. Obviously, we need to continue to invest into our business. We just launched EuroJackpot, so naturally, you can expect that it's a new important vertical, which is trying to address also non-players. So, we will continue -- this is a new thing on EuroJackpot. Also, we have Euro in 2024 ahead of us. We have a competitive world in the online where obviously, we have to react to the competition. And also, there are certain inflationary pressures and also the -- all the assets in terms of sponsorship. There is also high inflation there. So, across all these fronts, there is sort of upward trend, but you shouldn't expect anything dramatic, and we are always trying to be prudent and diligent. And the third question on Instant and Passive. Can you please just repeat that? Would you be so kind?
Russell Pointon: I'm sorry. I think sort of bad luck on the line. My third question was with respect to the -- and again, I apologize, I'm halfway through watching the video for your presentation. So, if I've missed something, I do apologize. Why -- could you talk about why you think Instants and Passives will improve in 2024, the initiatives you're doing? Thank you.
Jan Karas: SCRATCH and Passives, certainly a category where we continue to see an opportunity to increase penetration in the market, innovate the product, innovate way we present it in the point of sale. So, there is quite a plethora of activities that we will be doing. But just highlighting some of the key ones. It's a complete refresh of the way we present SCRATCH product in OPAP stores. So, even now, if you come to a OPAP store you will see EuroJackpot communication all over the place. But the counter where the spontaneous purchase happens is fully dedicated to Scratch. And that's just the beginning, we will be doing much more with SCRATCH in OPAP stores to really strengthen its presence and stimulate the spontaneous purchase. Likewise, in the indirect networks, we are increasing the presence. So, you may see in many markets and tobacco shops, increased presence of SCRATCH visibility, again, for the same reason. Last but not least, the portfolio, we see opportunity in further growing the families of SCRATCH where there is a lot of synergy between similar products that are for a specific target group. And cherry on the cake and essential new element of our strategy is the gifting proposition, where SCRATCH is being established as something that people use as a gift on different occasions, not only on Christmas, but Christmas would be the main period of time. So that's in a nutshell about Scratch. Passives is a slightly different story, and that's a product that is really making us happy. We have done innovation of the product last year, a refreshment of the product in terms of the winning structure logic. But equally, we are paying attention to the general positioning and evolution of the product. So you will see modernized design, refreshed communication, so that we make the rather traditional product more relevant to the new generation customers also with different special additions, et cetera. So that's hopefully giving you an answer to your question.
Russell Pointon: Thank you very much.
Jan Karas: Welcome.
Operator: The next question is from the line of Nekrasov Maxim (NASDAQ:MXIM) with Citi. Please go ahead.
Maxim Nekrasov: Yes, hello. Thanks for taking my question, and congratulations with a good fourth quarter results. I have actually a couple of questions on guidance. So the first one is regarding your top line, your top line guidance of 3%, 5% seems to be ahead of GDP and private consumption expectations next year. So I was wondering what segments and products specifically, do you expect to drive that growth? And also what are your offline versus online growth assumptions? And the second question is regarding margins. So your EBITDA guidance of €750 million, €770 million, a bit lower growth versus top line if we compare it to your current EBITDA for €745 million in 2023. So does it mean that you expect to see also additional investments into growth initiatives that could affect margins in 2024?
Jan Karas: Thank you for your question. So in terms of where the growth comes from, the primary growth driver is, obviously, online with our dual brand strategy. That's where we see a lot of opportunities. But also in retail, we see it not only sustainable, but even in retail, we see an opportunity for single-digit low to mid, high numbers or percentage growth. So that's where primarily VLTs are expected to continue to shine. And over and beyond that, it's not any specific vertical, but rather the nurturing and evolving the entertainment notion of retail experience where the element of affordable entertainment seems to be something that is resonating really well with our customers, and that's what we want to play with, giving people this everyday disconnection from the everyday voice and programs and letting them enjoy the experience in OPAP stores for affordable money. On the second question, Pavel wants to share?
Pavel Mucha: Okay. Well, when you look at our reported EBITDA, obviously, our EBITDA growth and the range, which we provided is pretty much in line with the GGR guidance. Through when you take into consideration the recurring EBITDA, it's coming to a bit lower percentage to which you referred to. Basically, we plan to remain at the same margin. So the margin, which you saw for the full year 2023, we expect to have similar level of mid-30s margin in 2024. But, obviously, we are continuing to invest into growing our business. So it's -- that's definitely something what we do. We can see as we are planning some increase in sponsorship and CSR activities. We will grow in the marketing expenses, as I mentioned, EuroJackpot, Euro and some other. There are also persistent inflationary pressures across all the categories. But overall, we believe we provided a conservative margin and basically -- obviously, last year, we came with a guidance. And because of very volatile payout in sports betting, we were revising it in our Q3 call. Finally, Q4 ended up well. But we prefer to give a bit on a conservative level and realistic to that guidance throughout the year.
Maxim Nekrasov: Thank you so much.
Pavel Mucha: Thank you.
Operator: The next question is from the line of Mantzavras Paris with Pantelakis Securities. Please go ahead.
Paris Mantzavras: Yes. Thank you. Good afternoon and thanks for taking my question. Actually, a couple of questions if I may. The first refers to the suspension of operations for the domestic horse race track. I understand this was a loss-making activity for you. So the fact that you suspended this activity, and other things being equal, should benefit your profitability. Could you give a bit more color on the size of these benefits? And the second question refers to the latest trading update. If you could give us some color on what's happened in the first couple of months of the year, whether we are seeing any volatility in sportsbook payout? Thank you very much.
Pavel Mucha: Thank you. So horse racing, look, over the years, we have taken the best efforts for the revival and good development of the horse racing activity, and we did major investments there. But ultimately, there was dramatic decline in the number of registered horses and basically, that led up to the decision to terminate the lease of the horse racing facility and we stopped organizing the horse races all in line with the concession agreement. Although, we invested in the past and we tried, I must say, in the last -- certainly, in the last year, we try to optimize the level of investment. So you should not expect any dramatic improvement of the profitability. It was a low -- very low single-digit loss, which we discontinued. So it will not be major boost to the P&L. What I just remind, we continue to have the concession agreement in place. And what we offer to our players is the foreign races. So that one, we continue to do and this one, marginally positive. Now on your second question as to how is it going so far? All I can share with you at this stage is that so far, it's meeting our expectations, and we are evolving towards the provided guidance. So it's going well. We are obviously, these days, extremely excited about our new baby, the EuroJackpot that I'm sure you will be pleased to hear that we have after many months of preparation successfully launched without any problems. And even here, so far, the results are meeting our expectations. And when I'm referring to results, I'm not referring to primarily to the financial ones, even though they are also on expectations, but too much more than that. Excitement of our agents, the retail network, the commitment, we see that, early reactions of customers, the campaign being positively received. So all of the key KPIs, let's say, not only the financial ones, but also non-financial ones are on a good track. So, I'm looking forward to share with you more in our next quarterly call.
Paris Mantzavras: That's very clear. Thank you very much.
Jan Karas: Thank you.
Operator: [Operator Instructions] We have another question from Draziotis Stamatios with Eurobank Equities. Please go ahead. Mr. Draziotis, can you hear us?
Stamatios Draziotis: Apologies. I was on mute. Sorry, sorry. Hello, again. So I was just wondering, do you have any anecdotal data or maybe data that you've discussed with the relevant commission regarding the legal market? Are they relevant authorities? Have they been -- have they -- are they continuing their efforts -- to be legal gambling? Any -- any granularity you could provide would be very helpful? Thank you.
Jan Karas: Thank you for your question. We have -- in terms of numbers in your question you may have noticed, there was an indicative number provided around €2 million turnover being the size of the illegal market that is obviously something that concerns us. As with our responsible approach, we prefer our customers to enjoy the games in a very different way than in illegal venues. As we stated many times before, an important part of our ESG strategy is active cooperation with the state authorities to fight illegal betting, and our activities on this front never stopped. But we need to remind ourselves that it's the state authorities call and their action to fight against illegal betting. So, I don't want to comment on their initiatives and their success, but it's an initiative that keeps continuing, rest assured.
Stamatios Draziotis: Thanks very much. Thank you.
Jan Karas: You're welcome. Thank you for the question.
Operator: The next question is from the line of Puri Karan with JPMorgan (NYSE:JPM). Please go ahead.
Karan Puri: Hi, everyone. Just a quick one from my side, please. The guidance that we've given for GGR growth, 3% to 5%, does it already reflect your expectation of revenue contribution from the EuroJackpot product, just to get a better understanding of that, please?
Pavel Mucha: Yes, it does. Yes.
Jan Karas: Simple answer, yes.
Karan Puri: Perfect. Thank you so much.
Operator: [Operator Instructions] Ladies and gentlemen, there are no further questions at this time. I will now turn the conference over to Mr. Karas for any closing comments. Thank you.
Jan Karas: Thank you very much, Kelly, and thank you very much to all of you for being with us today and for your questions. Our IR team will be looking forward to answer any other questions you may have and deep dive into your inquiries offline. So we will be looking forward to talk to you again in a couple of months upon the Q1, 2024 results announcement, where we will have further updates from our Eurojackpot launch, among others. Thank you very much for being with us today, and have a nice rest of the day. Bye.
Operator: Ladies and gentlemen, thank you, Mr. Karas. Ladies and gentlemen, the conference has now concluded, and you may disconnect your telephone. Thank you for calling, and have a good afternoon.
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