Welcome to the FDJ Group First Quarter 2025 Results Conference Call. Please note this call is being recorded, and for the duration of the call, your lines will be on listen-only. However, you will have your opportunity to ask questions at the end of the call. This can be done by pressing star one on your telephone keypad to register your question. If you require assistance at any point, please press star zero, and you'll be connected to an operator. I will now hand over to your host, Mr. Pascal Chaffard, Executive Vice President in charge of Finance, Performance, and Strategy, to begin today's conference. Thank you.
Thank you, and good evening to you all. First, I would like to apologize for this unusual late call due to the board that has been held exceptionally today, this afternoon. You might have read the press release that we published a few minutes ago, and the presentation that I'm going to comment on is available online or will be in the coming minutes in the investor section of our corporate website. I will keep this Q1 2025 revenue presentation brief to allow maximum time for the Q&A questions.
If we begin with the highlights, during the first quarter of 2025, our revenue amounted to EUR 925 million. It is an increase of 30% year-on-year on a reported basis, and it is a 1% decline at comparable perimeter. We saw a good momentum in French lottery and retail sports betting, with revenue up 4% to EUR 640 million, based on stakes up 6%.
The retail revenue was up 2%, but based on stakes up 5%, which shows a good dynamic in our point of sale. The gap between revenue and stakes is explained by sports betting results and unfavorable to the operator, notably in football. I will come back to that later. In comparison, the lottery revenue was more closely correlated to stakes. The online lottery revenue increased by 14%, one-four, year-on-year, driven by a strong increase in active players. Now, the online accounted for 15% of total lottery revenue, up notably from 14% in Q1 2024. Now, on the online betting and gaming side, the revenue was EUR 231 million, down 10% at constant currency. We recorded a solid growth in active players of more than 5% quarter-on-quarter and nearly 10% year-on-year.
However, we were impacted by increased gaming taxation in the Netherlands, but more importantly, by stricter regulation implementation, both in the U.K. and the Netherlands, as we indicated earlier in the year during full year 2024, no surprise. Excluding those two countries, revenue was up circa 8%, thanks to the good performance recorded in all the other countries, notably in France. If I move to the next slide, as I hope the presentation is now online, you will see on this slide, on the left side, a split of revenue by business unit for the first quarter of the year, as reported, and that of last year on a pro forma basis.
You will find, as appendix to this presentation, the 2024 pro forma quarterly revenue breakdown by BU for the group, as this was information that we have not provided yet, and we thought it was important for you to have that. The chart on the right side is just a more formal visual representation of our revenue mix by business unit. I will comment on our two largest business units in detail in the next slide in a few minutes. Meanwhile, I would just have a few words on the two smaller business units. First, on international lottery, revenue was EUR 38 million, down 22% because of non-recurring elements at PLI, the Irish lottery, most notably an exceptional number of jackpot winners in draw games that has driven the player payouts up, and this showed a normalized over the year.
On payment and services revenue, the revenue reached EUR 16 million, up 1%. If I now move to the French lottery and retail sports betting, let's now delve into our French operations and the right. Starting with lottery, we have a revenue of EUR 528 million, up 5%, driven by both draw and instant games. Draw games posted a very good quarter, thanks to an excellent performance from EuroMillions, with a rollover jackpot that started on the 7th of March at EUR 130 million, before being won on the 28th at the maximum amount of EUR 250 million. More broadly, we saw 11 million jackpots over EUR 75 million that we qualify high jackpots, of which seven of more than EUR 130 million. We have beaten all the records of EuroMillions on those last draws.
This EuroMillions long cycle has boosted the recruitment of new players, more than 300,000 in the week of March 24, of which nearly 200,000 on March 28 alone, and this will fuel the online growth over the coming months. Instant games also contributed to the overall lottery growth. We have successfully launched, such as the Royaume d'Or and Bonne Paye, both available online and at point of sale, as well as online exclusives such as Expédition Jungle . Online lottery revenue, as I said in my intro, was up 14% to EUR 79 million, with the recruitment of new players being boosted by the attractive rollover jackpots I've just mentioned. The online revenue accounts now for 15% of total revenue. It was 14% in the first quarter of 2024. Now, if we move to retail sports betting, we showed also a good momentum.
The increase in stakes, high single digits, that shows dynamic activity was notably driven by a great number of football events, thanks to the new format of the European football competitions. In these, five French clubs progressed quite far ahead, further supporting the betting activity. However, a lower operator margin due to numerous and proverbial results for the operator led to a 1% fall in revenue to EUR 112 million. This situation will normalize over the year and will also fuel the growth of the future quarter. It's something that we have regularly with a quarter with prize payouts that is higher than the average, and it's normalized on the next quarter, fueling the growth of those quarters. No problem, a good momentum on sports betting offline. Now, let's move to online betting and gaming. The revenue of this B U was EUR 231 million, down 10% at constant currency.
We recorded a solid growth in active players of more than 5% quarter-on-quarter and nearly 10% year-on-year. However, we were impacted by increased taxation in the Netherlands and, more importantly, as I said in the highlights, a stricter regulation implementation in both the U.K. and the Netherlands. In the Netherlands, if I zoom a little bit, the largest impact came from the introduction of a new monthly net deposit limit on October the 1st, 2024. As a reminder, it's EUR 700 net deposit limit and EUR 300 net deposit limit for those under 24 years old. We had a second impact that we also commented on during our full year from mid-February with a stricter implementation of those limits demanded by the regulator.
These measures significantly reduced the revenue of the licensed operators, but they also led to a sharp drop in the channelization rate as the market share of unlicensed operators increased in 2024 and now exceeds 50%, according to the regulator. To a lesser extent, a second impact also presented in our figures came from the increase in the rate of game duty from 30.5% of GGR to now 34.2%. Finally, we also recorded a reduction of the sports betting GGR margin of more than 100 basis points to one on the back of unfavorable sports results. It is the same element that I already commented when I talked about retail French sports betting. All this led to a 41% year-on-year decrease in Q1 revenue in the Netherlands.
In the U.K., the revenue declined by 27% from an unfavorable Q1 2024 basis, and because the implementation of regulatory measures has been put in place in Q2 and in Q3 in 2024. Excluding those two countries, the revenue is up 8%, driven by good performance in other markets, notably in France, over our three brands, Unibet, Parions Sport, and ZeTurf. In Q1, FDJ United has also continued to deploy successfully its proprietary platform. In France, early February, we finalized the separation of player accounts between the lottery and the rest of the rights and betting gaming open to competition, preparing the future merger by mid-2025 of Parions Sport and ZeTurf. In the U.K., early March, we have successfully migrated 32Red on the PAM to the internal Kindred PAM and also to the sports betting platform, what we call Kindred Sports Betting Platform.
To end this presentation, a few words regarding our financial calendar. Our general meeting of shareholders will be held on the 22nd of May at 2:30 P.M. Paris time. At this meeting, shareholders will be asked to approve a dividend of EUR 2.05 per share for 2024, up 15% year-on-year. The dividend will be paid on May 27th, and we will hold a capital markets day in Paris on the 24th of June in the afternoon. Finally, our H1 results will be published on the 13th of June after the closing of the markets. I thank you for listening to me tonight, and now I'm ready to answer your question along with Marc.
Thank you, ladies and gentlemen.
As a reminder, if you'd like to ask a question or contribute on today's call, please press star 1 now on your telephone keypad, and to redo your question, press star 2. Also, ensure your line remains unmuted locally. You will be advised when to ask your question. The first question comes from the line of Ed Young calling from Morgan Stanley. Please go ahead.
Thank you very much. I've got three questions if that's okay. The first is on lottery. Obviously, growth was a decent number in the quarter, and lottery growth was also solid in digital, but it was a bit slower than what was achieved last year. Do you just see that as a comps issue or anything else to call out? How should we expect that number to trend?
Obviously, we've talked about crescendo in Q4, but how should we think about growth in digital lottery instead of Q2 and Q3? Second of all, in online in the U.K., you mentioned there about regulatory measures lapping in Q2 and Q3. Should we expect an improvement over the coming quarters and perhaps a slightly longer-term one connected to that? How do you think about the competitive dynamics when many competitors have already lapped their regulatory measures? Finally, you mentioned replatforming onto the PAM as well as KSP. Should we expect to see a revenue benefit from that in those markets, or is this more about setting the foundations for future years? Thanks.
Yes, thank you, Ed, for your questions. First, on lottery, if there are camp issues, we had quite a low number of events in Q1 compared to the Q1 last year.
At the end of the quarter, with this Euromillions extra jackpot, it has a little bit more rebalanced. What is true is that we will have quite a busy Q2 with a lot of events that are scheduled. It will definitely fuel the growth of the lottery over Q2 and the rest of the year. We do not fear that the growth of the lottery will not be good on the rest of the year.
We also think it's not exactly lottery, but it's exclusive rights in France, that we will get some benefits from the high PPO, that high prize payouts or low margin that we had on the sports betting retail, because usually when we have this situation with an activity that is very dynamic, but a high price payout, it will drive business because the players globally have the money to spend a little bit more in the next quarter, second, but also third and next quarters. For us, no problem, no negative element on that.
Yeah, on the online on the U.K., yes, we have the sharpest comparison basis in Q1 when you look at what we did last year, and we have some regulation measures that apply to us because we were on a license review from Q2 and Q3, and we can expect to gradually have an easier comparison basis. Regarding the competition, we know that part of our competitors have already been through this license review. We hope that we will get through in the coming months and be able to be more, I do not want to say aggressive, but more dynamic in our marketing and way of sales measures. The third element was, what can we expect from the migration of the PAM over PAM that has migrated from Microgaming to the Kindred PAM?
It's mostly we don't think that it will drive a lot of new business, but it's the first element to have one platform over all our jurisdiction and to drive a better capacity to drive growth, but more on the medium term. It's more the sanity to have one platform over the U.K., as we were on the Kindred PAM on the Unibet brand, but not on the 32Red brand, so it will help us to have more synergy having one platform. It's the main thing that we are waiting from this first migration. Thank you.
The next question comes from the line of Matthew. Speaker Martin calling from LWC. Please go ahead.
Good evening. Thanks for hosting the call today. Just really a few questions for me.
The first is, you made a few assumptions regarding these pretty substantial changes in the regulation and the taxation in the Netherlands and the U.K. We're just wondering now that you have a full quarter of data, how you feel about those assumptions, if anything came in better or worse, and how all that is trending. The second is, I did think it was impressive that you gained players sequentially as well as year-over-year despite these regulatory headwinds. Just wanted to see if you could offer us any initial thoughts or updated thoughts on sort of the long-term growth of these online Kindred markets and how you're thinking about that these days. Finally, just on the regulatory outlook, are there any areas you guys have on your radar for potentially new regulation or anything that you are watching closely from here? Thank you.
Okay, thank you for your question. If we have faced the headwinds that we are talking about mostly in 2024 and late 2024, beginning of 2025, we do not expect new elements to come over the year except the ones that we already know. For example, the level of tax, it is not regulation of tax, but still, its impact will come into force in France in H2. We know that perfectly, but we do not foresee other deterioration or other negative elements that will come into force short-term in 2025, in the foreseeable future. What we have done is, if we talk about Netherlands, clearly the impact was important. It was important for us, but for all the other operators, the market has shrunk globally. Now we are working on the ways of regaining a part of what has been lost.
What is a good element for us to work on is that the level of active players has continued to grow. We have an RPU that obviously has been reduced, but the number of players, if you look only at Netherlands, has continued to grow by something like 15%. Overall, year-on-year on all the OBG BU, it is almost 10%. We are quite positive on our capacity to continue to recruit, to grow our active user baseline, and to find the ways to help them go through these regulation limits. If I just comment one element on the Netherlands, but globally, it is a very good example.
What it is all about is how you engage your customers to be able to raise the limits that have been put in place by the regulator, showing that they have the level of revenue that is compatible with those levels to be raised. We are trying to find a way to do it in a seamless way, to do it in a way that is not a burden for the players. Today, we are working hard to put in place those kind of measures. We have some elements that will make it possible for us to have better figures in the coming quarters and years. If you look at your other question, it was regarding the regulatory headwinds, what is our view on the capacity of the market we are in to grow in the medium term?
We will provide a more comprehensive view on our vision of the market during our capital markets day in the coming months. What I can already say is that we are positive on the fact that there is growth, maybe between mid and high single digits, still possible on those markets because the measures have been already put in place in some jurisdictions. We also think that we are one of the best operators to cope with those kinds of regulation measures. It's in our DNA to be able to cope with that. We know also that part of the competitors in certain markets will think that it's too harsh for them to continue to be a player. I take the example again of Netherlands. There were 27 operators in Netherlands in 2024, two absorbed. Now, so it's 25 operators.
We think that this number will get down. As we are the leader of the market, we will benefit from that. This is one element between others, but clearly, our vision is that there is growth on those markets, not at the level that we have seen in the previous years. It's not a double-digit 20% growth year-on-year, but it's maybe a mid to high single digit. We will get through that more in details during our CMD. On the regulatory measures, yes, your first question was, do we expect new regulatory measures? So far, no. It's a question more in the jurisdiction where we are operating of how the regulator is interpreting and is asking us to comply with the actual measures. It's more a discussion with the regulator on the way we should comply, as it's usually not really straightforward.
There is a part of objections of room from interpretation, and there is some clarification that we still are looking for, but we do not foresee new important measures that should be put in place in the coming months, again, in the foreseeable future. Is that okay for you?
Yeah, that is really helpful. I appreciate it. Thank you.
T hank you. The next question comes from the line of Stéphane Thomas, calling from HSBC. Please go ahead.
ETA, good evening. Thank you for taking the call. Just a couple of things that I wanted to understand. The first thing was the sports results impact in the online and retail business. I have not yet seen the presentation. Is it possible to quantify the Euromillions impact of those sports results for us, please? That would be quite helpful. The second thing is just with respect to your guidance for the year.
I know you say in the statement that you're on the right trajectory. I just wondered if there were any nuances that we should be aware of. I get the big picture numbers still hold, but are you getting there in a different way? Perhaps you could comment on that. Finally, on Kindred, I just wondered if there's still any tidying up to do of the portfolio of countries that Kindred is operating in, or are you happy that it's been withdrawn from places where it shouldn't be? Thanks.
Okay. Maybe just on the sports results in France, it's clear, as we said, that the stakes were earned by high single digits, and you see that the overall revenue is writing down. The explanation is really the operator margin. I think you have the figure. It could give you an idea of the overall impact.
Yeah, we had something like 300 basis points of difference on the level of price sales or in the. You can also say operator margin, as you want. We know that it will normalize because it usually does, and we will work to be normalized. It will normalize, and we are positive about that because we have in France a ceiling to respect that is precisely 76.5% return to players, and we are over. We've been above this gap in the first quarter. Yeah, clearly, first of all, it has to go down. As you know, this is clearly something which is expected to fuel the growth in the coming weeks and months. You see the punter having won reinvest their winnings in the next bet. Yeah. Your second question is regarding the guidance of the euro.
Are we in the right trajectory? The answer is yes. We were not surprised by our results of Q1. Globally, we are globally in line with the direction that we foresee. The way we see the way that we will do it over the year is still the same. We will have some growth in the lottery side and sports betting retail in France, and we will have a slight decline in the global online betting and gaming BU, as we have said during the full year. Concerning online betting and gaming BU, we had a very tough basis of comparison in Q1, as I said. This basis of comparison will ease gradually during the year and will be clearly easier in H2 and in particular in Q4, when we will lap the Netherlands' major impact that we had in Q4.
You can also have that in mind. The year will not be totally, all the quarter will not look like the previous one. It is not materially different from what we foresee just one month ago, a little bit more than one month ago when we delivered our full year guidance. Not materially different. Yes, your third question is on the portfolio of countries. There is no, for us, big issue today looking at which countries we should withdraw off. Last year, the big move has been done to stop the operation in the U.S. that were really not profitable and with no possibility to be profitable. It was the decision that has been taken by the previous owner of Kindred, and we were very happy of this decision. Today, this is not the point to withdraw from countries globally, no problem.
What we are looking at is really to be ready to take the opportunity of the opening of the market in Finland. It is a country where we are operating today, and we are waiting for the regulation to come. For us, it is an important one. Globally, in our, and we will also explain that more in detail during the CMD. What we are doing in 2025, beginning on 2026, is to transition and have the one platform that is needed to continue to grow and continue to add new countries into our portfolio. The question for us is to add new countries, and to add new countries, we have to do it in a very synergetic way.
To do that, we have to finish the work that is currently ongoing to migrate under one platform, one PAM, one sports betting platform, one casino platform, one poker platform over the old OBGU side. It will give us a competitive advantage compared to most of our competitors that do not have this one platform very efficient to operate over all the European countries.
Thank you for that. Can I just follow up on that last point? Are there any particular countries that you have in mind where you are that you would like to be for Kindred now?
I think it is a little bit too early. Otherwise, I would just do all the CMD today, but I can try to give you an answer anyway. There are two ways to do it.
It's new countries where a clear regulation is in place because this is the only way for us to where we have foreseeable growth, where we have a potential possibility to operate in a quite good way, favorable way, or to have a better position in the country where we are. When we are top five, to be top three position, it can be done by investing in those countries, but it can be done also other ways. We will have the two aspects, reinforcing our position in certain countries where we can be better and going in new countries where the regulation is clear and favorable. Sorry, I will not provide the name of the countries now, but globally, you have all what I can tell you today. Thank you very much. We won't be back in the U.S., so it's not the U.S.
The U.S., for us, we know it's not possible to be profitable in this jurisdiction. Otherwise, yeah, it's clear. It's clear. No problem. Just the U.S.
Thanks. The next question comes from the line of Jaafar Mestari Colling from BNP Paribas, please go ahead.
Hi, good evening. I've got two questions on hello, two questions on lottery, please. The first one is on the digital mix shifts, which was up 100 basis points in this quarter from 14% to 15%. I assume that's completely clean and pro forma. There's no mix here. We're talking about the lottery. Is the margin benefit of the digital mix the same in the new fiscal environment?
I know the new fiscal environment is not before July, but should we still have in mind that if you shift 1% of your business from point of sale to online, the margin is roughly double for that business, please? Another question, just very broadly ahead of the France tax change in July, you've already started implementing changes. Could you maybe just give us a bit more color about the things, mostly cost mitigation you're doing in the lottery division? I think one of the areas was sales force rationalization. Anything that you've been able to implement ahead of that change?
Okay, very clear. Thank you, Jaafar. First question on the lottery, does the change in the tax framework have modified what we said about the relative revolution when we go online? The answer is simple. Yes, it is exactly the same.
Has the tax framework changed not online or offline, but globally? We have a level of revenue that is 1,100 basis points under what we used to have, but the same effect, relative effect of the shift to online is still there, and it is a very good thing. Second thing, yes, the tax will change from July in France. What we have said is globally, in 2025, the part of the performance plan that is related to 2025 will be mostly savings, cutting some budgets, and we are preparing the more structural measures, such as those that you have referred to, namely the reorganization of the sales force, etc. It is a preparation on 2025, and it will be put in place gradually from 2026. In 2026, anyway, we will have the full year impact of the previous reorganization that we are currently ending.
Over the year, we will have more and more positive impact of this current reorganization. To be clear, the current reorganization is the all the point is to reinternalize 100% of our sales force. One third of the sales force was given to contractors with specific contracts. Those contracts are being terminated. They will be terminated by the end of the year, all of those. Gradually, they are terminated over 2025, and we will gain something like 1% margin by this termination of contract because we reinternalize with savings. Globally, this will be ended by the end of 2025, having a full year impact 2026. In 2026, we will begin the third level of reorganization of the sales force that we are currently preparing to be held in 2026, 2027. Globally, this is all the point. I think I haven't heard your question.
Thank you very much. Thank you.
Ladies and gentlemen, as a final reminder, if you'd like to ask a question, please press star 1 at any time. The next question comes from the line of Philippe Constantin, the colleague from Bridger. Please go ahead.
Hi, thanks for taking my question. I had two, please. One was on your lottery payouts and your lottery pricing, if there's any thought about adjusting that to offset the tax increases. And my second question was on capital allocation, just given at the 2022 Investor Day, you guys had talked about an 80-90% dividend payout. It's coming below that in 2024 and at the low end in 2023. So I'm curious kind of how you think about the payout ratio and just capital allocation over the next year. Thank you. Thank you, Philippe.
For your first question on the lottery payouts, we have already done some improvements on the payouts of the different games, and we will continue over time to streamline those payouts where it is possible, where we have interest to do that. We cannot do that just instantly as it is linked to a relaunch of a game. It is quite a heavy process to be held, but it is clearly our intention when we will renew the Lotto, renew Euromillions, or renew some scratch cards to try to optimize the level of payouts. We had more, I think, capacity to do it in the past because we have done a lot of those kind of things. For example, our number one game called Cash Scratch Card has been lowered at 75% payout. Now it is at 70.5%, 70.5%, so it has been reduced quite significantly.
I don't think it's possible to reduce it by a lot still, but we are looking at some optimization on different games. It is possible on some different games to put in place those optimizations, and it will be put in place over time. Your second question was related to capital allocation and our dividend policy. Our dividend policy was before 2024 to serve dividends between 80% and 90% of the consolidated net results. It has changed now. We have a guidance that is more to provide a growing dividend year on year. What we have done this year is that we have the level of payout is something like 77%, but applying to not to the same KPI, applying to the restated net results that is restated to remove the PPA amortization, notably. So it's not really comparable.
We cannot compare the 80-90% that we had before to the 77% we have provided this year. Globally, what you have to have in mind, and to answer your question on the capital allocation, is that our objective is to continue to grow year on year this level of dividend, not the payout. The payout will be the result of the calculation, but to continue to grow in volume the dividend that we are serving to our shareholder. It is possible because our business is generating cash. Even in a quite tough year that is 2025, with a guidance of globally stable revenue, we still are in a position to reduce our leverage from 1.9 to 1.7.
If you take into account the fact that all the market has considered this year as not a very good year, it's still a good year regarding our cash generation and capacity to serve a growing dividend to our shareholders.
There are no further questions, so I will hand you back to your host to conclude today's conference. Thank you.
Thank you very much to have listened to us, Mark and me, during this call. The next meeting that we will have will be on the AGM of the 22nd of May. Let's see you or hear you at the AGM of the 22nd of May. Goodbye. Thank you. Bye-bye.
Thank you for joining today's call. You may now disconnect.