Entain’s underlying EBITDA rises 13% as CEO hints at further geographic expansion

Entain has posted a 13% year-on-year (YoY) rise in EBITDA to almost £1bn as the London-listed giant championed its geographic diversity and in-house tech as the core reasons for a stellar 2022.

Entain recorded £993.2m in EBITDA for full-year 2022 compared to £881.7m in 2021, with the group highlighting the welcome return of retail income following Covid-19 lockdowns.

However, Entain did note that underlying online EBITDA fell 8% YoY to £828m as the firm highlighted emerging regulatory headwinds in the UK and Germany, along with strong 2021 pandemic comparables. Elsewhere, retail EBITDA soared 319% to £280m.

Additionally, net gaming revenue (NGR) jumped 12% YoY, or 10% in constant currency (cc), to £4.3bn in 2022 compared to £3.9bn in 2021.

The FTSE 100 operator also reported its three-year CAGR (compound annual growth rate) had increased 12%.

Elsewhere, Entain confirmed active customers in 2022 jumped 7%.

Despite the impressive top-line numbers, online NGR dipped 1% in 2022, although Entain said this shifted to a YoY increase of 3% when discounting the Netherlands and the impact of regulatory change in the UK.

Management did note that there was an 8% uptick in Q4 online NGR, mainly in part to the first-ever winter World Cup held in November and December.

The company’s US-facing JV in partnership with MGM Resorts, BetMGM, continued to be a shining light.

Entain said it expects the US operator to be EBITDA positive in H2 2023 after it recorded 2022 NGR of $1.44bn, an increase of 71% YoY and above the firm’s initial expectations.

BetMGM now holds a 29% market share in igaming and 18% in sports betting where it operates in the US.

Entain said it was on track for its expected long-term market share of between 20% and 25% and that it expects BetMGM will return NGR of between $1.8bn and $2bn in 2023.

The FTSE 100 operator championed improvements to its user experience for BetMGM, with average monthly igaming customers jumping 51% and sports betting customers up 61% in Q4 2022 compared to Q4 2021.

Looking ahead, the business expects long-term CPA rates of approximately $250 to remain in place and that its EBITDA margin will sit between 30% and 35%.

Outside of the US, regulatory headwinds in the UK didn’t make for pretty reading as online NGR fell 9% YoY.

In fact, online NGR in H1 was down by 15%, although Entain said H2 saw online NGR in line and active customers at a record high in a slightly more positive outcome.

The looming impact of the white paper into the Gambling Act 2005 review has seen the firm implement several safer gambling restrictions, which has hampered operations.

Staying with regulatory headwinds, in Germany, where the bwin brand received a licence in November, NGR slumped 22% YoY as Entain blamed new regulation.

In more positive news, online in Brazil, the Baltics and Central and Eastern Europe (CEE) all performed well in 2022.

Brazilian NGR jumped 20% as Entain awaits the expected regulation of the market. Active customers were up 25% compared to 2021.

Despite high levels of inflation in the Baltics, NGR increased by 5% and active customers were up by 17%.

In CEE, where Entain made a move in the market after acquiring leading Croatian operator SuperSport, NGR rose 24% YoY. SuperSport currently holds a 50% market share in Croatia, with Entain looking to use the country as a springboard for further expansion in CEE.

Entain said there was still at least 40 regulated markets where it did not hold a presence and could potentially move into to expand its global presence, as part of its commitment to only operate in regulated or regulating markets by the end of 2023.

Entain did not provide any further 2023 guidance beyond that of its BetMGM venture. The operator said that it remained “excited by the opportunities ahead” and that 2023 had started with positive underlying momentum.

Touching on the group’s performance in 2022, CEO Jette Nygaard-Andersen said: “We have made excellent progress in 2022 across both our growth and sustainability pillars, to drive greater diversification across our business model, greater scale to leverage our capabilities as well as higher quality and more sustainable earnings. These achievements are testament to the high quality and talented teams we have across the Entain group.”

Reflecting on Entain’s performance, Edison Group’s Russell Pointon said 2022 was “stronger than expected” and noted 2023 was lining up to be a positive 12 months for the firm overall.

He said: “Further expansion into regulated territories including Brazil and Canada shows a continuing commitment to broaden Entain’s customer base, and CEO Jette Nygaard-Andersen hints at further expansion in her statement. The company’s share price is beginning to recover from the news that a second takeover bid by MGM had been surprisingly ruled out a month ago.

“The interest in a takeover may well re-emerge later down the line, but for now Entain will have to grapple with the UK government’s long-awaited white paper on the gambling industry, which could well be released later this month.

“Entain’s focus on player protection and aligning with regulation globally suggests the company is looking to stay ahead of the game, while its statement alludes to regulatory headwinds in 2023, albeit there is no financial guidance for the year,” he added.

Despite the top-line growth for full-year 2022, Entain’s share price was down by 5.9% at the time of writing to 1,310p.