OPAP : Q4 2023 Transcript

112 Leof. Athinon, Athens

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"OPAP S.A Fourth Quarter & Full Year 2023 Financial Results Conference

Call"

Thursday, 14th March 2024, 16:00 (GR Time)

Conductors:

Mr. Jan Karas, Chief Executive Officer OPAP

Mr. Pavel Mucha, Chief Financial Officer, Executive Director OPAP

Conference Call Conducted by Chorus Call Hellas

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OPAP Fourth Quarter & Full Year 2023 Financial Results

OPERATOR: Ladies and Gentlemen, thank you for standing by. I am Gelly, your Chorus Call operator.

Welcome and thank you for joining the OPAP S.A conference call and Live Webcast, Question and Answer Session to discuss the Fourth Quarter & Full Year 2023 Financial Results. Please note a video presentation has been distributed and is also available on the OPAP Investor Relations website.

At this time, I would like to turn the conference over to Mr.

Jan Karas, CEO of OPAP S.A.

Mr. Karas you may now proceed.

KARAS J:Hello everyone and welcome to our Q4 and full year 2023 financial results update. Likewise previous quarters I'm joined by our CFO Pavel and we will present you in this video the business and financial update and we will be waiting you at our scheduled conference call later today at 4 p.m. Athens time to take your questions. First of all, I would like to provide you with a high-level overview of our 2023 achievements before Pavel takes you through our financials.

2023 marked a year in which OPAP embraced change through implementing a broad set of enhancements and improvements in customer proposition. We leveraged new digital technologies to make our offering more personalized, fun and easy to access while upgrading the overall customer experience both in retail and online. In addition, we proceeded with the transformation of our traditional games to make them more relevant to the latest trends in gaming.

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OPAP Fourth Quarter & Full Year 2023 Financial Results

These actions, which are aligned and consistent with our fast forward strategy, have been perceived positively by our always expanding customer base leading our Full Year 2023 GGR above the EUR2 billion threshold for the first time. In addition, fully recurring EBITDA landed at EUR745 million exceeding our latest outlook.

We are always committed to generating the maximum value to our shareholders and alongside a robust cash position we are glad to proceed to a total shareholders remuneration for the year of EUR1.85 per share out of which EUR1 has already been paid as interim dividend. Now let's dive into our operational developments. First of all, everyone at OPAP is excited with the most recent edition of Eurojackpot in our games portfolio, a historical milestone for both our company and the Greek gaming market. I will share with you more details in my presentation.

Another innovation that showcases our constant focus on upgrading and digitalizing the retail experience is Tipsters, the first digital sports betting community provided by a gaming company in Greece aiming to generate even more social interactions among our players and elevating the entertainment notion of our OPAP stores.

Finally, our legacy games Lotto and Tzoker recorded promising early signs of growth following the recent revamp through the offering of more attractive propositions, whereas OPAPonline.gr revenues jumped by more than 40% year over year and continues to enjoy our players preference while at the same time satisfies their appetite for digital entertainment. Before handing over to Pavel that will present our financials I would like to point out that for 2024 we are

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OPAP Fourth Quarter & Full Year 2023 Financial Results

expecting another year of growth coupled with a solid commercial plan in both retail and online channels. Pavel over to you.

MUCHA P:Thank you Jan and hello to everyone. Before we move on to the results I would like to briefly comment on the market and the overall economy side. The Greek economy remained robust in 2023 despite persisting high inflation and high interest rates and costs associated with natural disasters, while on the other hand benefited by increased investment levels, solid tourism revenues and prudent fiscal position.

The trajectory is projected to continue in 2024 with solid growth and further fiscal discipline, while private consumption is forecasted to pick up on the back of lower headline inflation, increased employment level and wage improvements. Within this environment OPAP recorded solid financial performance thanks to its affordable proposition and diversified earnings profile and we are well positioned for another successful year.

Turning now to our Q4 2023 facts and figures GGR landed to record high levels of EUR581 million up by 7.5% year on year on the back of normalized sportsbook payout aided also by positive early signs from the revamp of Lotto and Tzoker while online posted strong growth. Q4 EBITDA increased by 3.7% year on year shaping at EUR210 million benefited by the uplifted revenues, while impacted by higher costs.

Net profit came in at EUR101 million, decreased by 67.2% or by 13.9% on a recurring basis compared to the respective quarter last year mainly due to one-off profit in Q4 '22, which includes EUR181 million from Betano disposal.

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OPAP Fourth Quarter & Full Year 2023 Financial Results

Moving to the next slide and our Full Year results. Full year '23 GGR landed to EUR2.88 billion, higher by 7.7% versus last year, mainly attributed to strong retail performance alongside solid growth in online.

Gross profit from gaming operations increased by 6.7% year-on-year driven by top line growth with margin remaining at strong levels. EBITDA marginally decreased by 0.8% while remaining broadly stable on a like-for-like basis on the back of opex pickup.

And finally, net profit decreased by 31.1% or increased by 0.7% on a recurring basis recording healthy margins. Following a track record of solid growth rates, we are optimistic for another year of growth in both revenues and profitability.

We expect OPAP to organically grow outperforming Greek GDP consensus and more specifically GGR to range between EUR2.15 billion and EUR2.2 billion, while EBITDA is projected to come in between EUR750 million and EUR770 million.

The projections are, of course, subject to the assumptions of a stable macro environment and the absence of any unexpected and material changes on the legal, regulatory and taxation regime.

Moving on to the next slide, our top line is moving from strength to strength while our profitability showcases resilience with a positive momentum across all key performance indicators.

On the next slide and shedding more light on the Q4 performance of individual segments, numerical lotteries

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OPAP Fourth Quarter & Full Year 2023 Financial Results

increased by 1.9% year-on-year mainly attributed to strong Tzoker performance and the impressive Lotto upside following its transformation into an annuity game.

Betting up by 12.4% year-on-year, on the back of solid sports betting performance aided by the normalization of Sportsbook payout, while Virtuals and Powerspin continued their upward momentum recording strong growth.

VLTs increased by 3% year-on-year posting elevated quarterly performance accompanied by increased walk-ins also aided by the ongoing machines' optimization which is bringing positive result.

Instant & Passives slipped by 5.2% year-on-year marking the end of a transitional year for the games and anticipating to re-attract players' interest in 2024. Online casino grew significantly by 25.7% year-on-year, on the back of higher gaming demand and broadened customer base.

Commenting now on the cost side, increased GGR resulted to higher revenue related costs, while opex increased on the back of elevated operational activity.

On the specific elements, payroll expense in full year 2023 increased by 8.6% year-on-year due to higher wages to alleviate the increased cost of living of our employees and to attract talent in a tight job market.

Marketing expense increased by 10.4% year-on-year, on the back of higher costs to support both our retail and online activity, to promote new propositions and secure new sponsorship agreements.

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OPAP Fourth Quarter & Full Year 2023 Financial Results

While other opex marked a 17.5% year-on-year increase, mostly associated with increased litigation expenses, while excluding this, other opex marked a much lower rise of 6% year-on-year.

In the next slide and our profitability analysis, recurring full year '23 EBITDA shaped at EUR745 million remaining at the same with thelast year levels, while margin remains high at around 36%. Moreover, recurring net profit in full year '23 grew by 0.7% year-on-year with margin at 21%.

Finally on my last slide, OPAP's cash position remained strong at the end of the year at EUR487 million with net debt/EBITDA shaping at a very low 0.23x while the company generated solid operating cash flows and retained flexible funding sources.

Our prudent financial performance allows us to propose to the General Meeting, which is scheduled to take place on the 25th of April, the distribution of a total remuneration to the shareholders of EUR1.85 per share, broken down to EUR0.60 as remaining dividend, EUR0.25 as capital return, and the EUR1 interim dividend already paid back in November 2023. Regarding our share buyback program, as of 8th of March we have acquired approximately 3.4 million shares of a total value of EUR52.5 million. Those, together with previously acquired treasury shares, bring our own holding to 1.41% of share capital. Subsequently, circa EUR98 million euro remain to be paid out until the end of the year. With that I am passing you back to Jan.

KARAS J:Thank you, Pavel. Now please allow me to provide you with further details on our business and operational

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OPAP Fourth Quarter & Full Year 2023 Financial Results

developments. 2023 was overall a really successful year, where we reaffirmed our commitment to strengthen our brand, continue to disrupt our customers by offering innovative propositions throughout our entertainment portfolio and repositioned some of our traditional offerings to uplift engagement and playability levels.

Now let me mention some of our 2023 highlights regarding our retail operations. First of all, we revamped our legacy games, Lotto and Tzoker, and the new propositions have been highly welcomed by our players so far. In addition, we enriched our Pame Stoixima offering, supported by a new platform, resulting in record high customer base over the last years, further boosting betting performance, while,

OPAP Store app, the pillar of our retail digitalization process, upgraded overall players' experience and had positive appeal to younger, tech-oriented audience. Moreover, the continuous refreshment of the VLTs cabinets with new, modern ones, with larger HD screens and new games, is well on track, leading to increased walk-ins in our Play stores.

On top of that, online entered a new era with the launch of opaponline.gr, our iLottery platform, offering the best-in- class entertainment experience and uplifting engagement while the replatforming of our sportsbook enhanced the elements of speed and fun to the game. We are excited with the performance of our online casino games. Their portfolio has exceeded 3,000 different games which continue attracting new audiences, especially female and Gen-Z.

It is noted that our online casino recorded increased activity rates by 36% year-over-year, supported by gamification

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OPAP Fourth Quarter & Full Year 2023 Financial Results

elements that consist an important part of our online strategy, with 40% of our casino active base having engaged last year with our free-to-play games.

Now I would like to share with you the very positive early performance of our rejuvenated draw-based games proposition. As you may remember, back in October we proceeded with the transformation of Lotto from jackpot game to an annuity game, which led to a significant increase in winners per draw and refreshed players' interest in the game. We are happy that Lotto continues recording very positive results with the game generating 114% higher turnover, 81% higher GGR and a 7% increase in columns versus the pre-launch period.

Now, regarding Tzoker, we repositioned the game in December, which now awards a guaranteed EUR100,000 prize to the second category winners, while it continues giving millions of euro to the first category winners. We are very glad about the game's early-stage results, with a 39% increase in GGR, despite a 31% decrease in columns versus pre-launch.

Let me also remind you that,in both games we have increased the column price from EUR0.50 to EUR1. We are very pleased with the way the players have welcomed our revamped games and we are optimistic about their future performance in the new era of our draw-based games portfolio.

Now, I am thrilled to present you a milestone proposition from OPAP, the highly anticipated multi-million Euro jackpot game, which is now, since last week, offered also in Greece,

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OPAP Fourth Quarter & Full Year 2023 Financial Results

aiming to elevate players' experience and significantly expand our clientele base.

The game awards from EUR10 million up to EUR120 million prizes and is played exclusively in OPAP stores, where you can play also via OPAP Store app. The Eurojackpot has its draws twice a week, every Tuesday and Friday, and the winning pool is fed from bets by 19 European countries, now including Greece.

We will follow up on this exciting endeavor in the first quarter 2024 results update, in which we will have the first numbers available.

In the next slide let me introduce you to Tipsters, the first bettors' community in Greece provided by a gaming company. Tipsters phygital community is available in our stores through the OPAP Store app, aiming to upgrade the retail experience and strengthen the image of our stores as entertainment destination, adding an additional layer in the in-store experience and supporting socialization.

With more than 65,000 registered Tipsters, 70% of which are active publishers and 22,000 average bets published on a daily basis so far, Tipsters has apparently captured bettors' community interest and boosted engagement levels. We are very proud about this innovative fascinating initiative, which upgrades betting to a unique social network of fellow players who share insights, compete with each other and enjoy the thrill of the game.

Next, on our regular retail estate update, our stores have consolidated their position as a point of reference for high-

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