Good morning, and Welcome to Entain's Q1 Trading Update Analyst and Investor Call. I will now pass over to CEO Jette to open today's call.
Thank you. Good morning, everyone, and thank you for dialing in to our Q1 update. I'm joined on this call by Rob Wood, CFO and Deputy CEO, and the IR team. As usual, I'll give a brief overview of our performance. Rob will talk through our Q1 trading performance in more detail, and then we'll open up to Q&A. I'm pleased to tell you that Entain has seen a strong start to 2022. Our online business has traded in line with expectations, lapping the very strong comparables from last year. I'm pleased to see retail rebounded strongly with volumes settling around 5%-10% below pre-COVID levels.
We continue to deliver on our strategy with our focus on the customer at the core. We continue to expand and grow by attracting broader audiences with great products, engaging content, and new, exciting experiences. This has seen our actives grow by 34% over the last 2 years as we engage with customers across geographies and products. Our campaign for Coral around Cheltenham included an industry-first 3D advert in Piccadilly Circus that really caught customers' imagination. What was particularly encouraging about Cheltenham was that we led with our refreshed brands and great customer engagement.
This saw our actives for our U.K. sports brands increased by over 40% on Cheltenham 2020, which demonstrates the power of providing customers with a great offering, supported by great experiences. Continuing this momentum ahead of entry, Coral is kicking off an immersive VR jockey experience at racecourses around the U.K., further widening our engagement activities to reach both new and existing customers in interesting, fresh, and engaging ways. Similarly, refreshed campaigns in Australia for both Ladbrokes and Neds brands launching shortly will continue to create more social and engaging experiences for customers.
BetMGM continues to deliver as it reinforces its leadership across North America. The Super Bowl was a huge event and drew to a close a busy NFL season. The baton quickly passed to March Madness, which likewise saw successful player engagement, delivering impressive KPIs across the board. Volumes, actives, and FTDs were all more than double last year, and cross-sell has been really encouraging. Just this week, the newly regulated Ontario market went live, and I am delighted that BetMGM, as well as partypoker and bwin, received licenses. You'll hear a lot more from BetMGM at the Capital Markets update on May 12. We also continue to make progress on our sustainability strategy.
Having seen the very encouraging results from ARC in the U.K., we are rolling out trials across a number of our international markets and look forward to sharing further results at our next Entain Sustain event in November. As with ARC's expansion, we recognize player protection must be addressed at a global scale. Therefore, I am extremely proud of Entain to be a founding partner of the Global Gaming Alliance, alongside others in our industry and tech champions such as Meta. This is a collaboration of global gaming and technology companies with the combined purpose of promoting higher standards and safeguards in our rapidly evolving industry. As we continue to grow, we are developing the structures and processes to ensure our business is fit for our future.
Data analytics, product development, customer experience, marketing, and culture are all core to our Entain platform alongside our industry-leading technology. They are also vital disciplines that drive a truly customer-centric business. We are excellent at data analytics, and our single vast data lake gives us a significant and powerful competitive advantage. We want to do more, more with data to inform decisions in both our traditional and widening offering, which will drive significant value for our business in the future. You will see us enhance and reinforce our investments and teams around all the core elements of our platform. We'll update you as we go, but all of us in the leadership team see very exciting opportunities ahead. With that, I'll hand you over to Rob.
Thank you, Jette. Morning all. I'm pleased to say we've started the year well, with group NGR up 34% in constant currency, which is in line with our expectations. Our business has returned to a more normalized shape this year, but of course, there's noise in the year-on-year growth numbers because of what was happening with lockdowns in the prior year. So let me try to give a little more color on underlying performance. Starting with online. As expected, online NGR growth for Q1 came in at -6% in constant currency. To give this context, this lapsed the 32% NGR growth we reported in Q1 last year. So over two years, we were up 25% or up 12% on a CAGR basis. On the three-year CAGR basis, Q1 was up an equally strong 14%.
Those growth numbers are all despite absorbing regulatory impacts in Germany and the Netherlands. On an underlying basis, our track record of double-digit online growth continues. This growth continues to be delivered across our geographies. Actually, despite the strong comparators last year, several of our top countries, Australia, the Baltics, and Brazil, all achieved strong double-digit year-on-year growth in Q1. Our performance continues to be actives led. Q1 saw 34% growth in actives over two years, which pleasingly includes 8% growth versus last year, which is no mean feat given lockdowns in the prior year. Let me now touch on the UK and Germany, where regulatory impacts are ongoing. In the UK, like many operators, we implemented tighter checks on affordability last year, and they continue to have an impact.
However, the impact has been in line with forecasts and hence we see no change to the outlook. Pleasingly, through the great work from Don and his team, we've seen U.K. actives in Q1 grow by 22% over the last two years, and that includes 4% growth versus the lockdown-boosted prior year. We're therefore well-placed to continue to take further share in the U.K. in 2022. In Germany, the playing field remains uneven while we wait for enforcement. However, encouragingly, we expect gaming licenses to be issued shortly, which should then be a catalyst for clamping down on non-compliant and unlicensed operators. Gaming licenses will also then further strengthen our position as the most regulated global operator with 99% of our revenues already coming from regulated or regulating territories.
Another one of Entain's key differentiators is that our online revenue has the strongest blend of geographic diversification and product diversification. If we include half of BetMGM, our largest market, the U.K., will only be around 20% of the total pie this year. M&A is a key part of our growth strategy, and it helps to further our geographic spread. We've already been busy this year with new acquisitions in Canada, Latvia, and Poland, and we have a healthy pipeline of opportunities ahead. Turning to retail now, where we've been delighted to see our customers return in volumes to engage with the very different in-store experience versus online.
This is particularly evident with strength in gaming machines and self-service betting terminals. Retail trading remains at around 5%-10% of pre-COVID levels on a like-for-like basis, led by the U.K. and Italy. Now the challenge is to find like-for-like growth from here as we continue to invest in the digitalization of our estates and continue to drive significant value through our omni-channel expertise. Moving now to the U.S., where BetMGM continues to deliver a consistent and strong performance in line with our expectations.
Our market share for the last three months to February, where we operate, was 24%, which continues to see us challenging for the number one spot. During Q1, we launched in New York, Louisiana, Puerto Rico, and Illinois, taking our count to 22 markets and giving us access to over 41% of the U.S. adult population. The team are now busy with the Ontario launch this week. As expected, promotional behaviors have eased since the initial excitement around the New York launch and the Super Bowl.
As Jette just touched on, activity levels were very strong for both the Super Bowl and into March Madness. In summary from me, we are pleased with our performance and continuing momentum as evidenced by the 34% increase in our group NGR in Q1. This growth is entirely in line with our expectations as we laid out with our full year results last month, and therefore, our outlook for 2022 remains the same. With that, I'd like to turn the call to Molly, who will moderate the Q&A.
Thank you. If you would like to ask a telephone question, please signal by pressing star one on your telephone keypad. That is the star or asterisk key, followed by the number one. As a reminder, please ensure that your mute function is turned off to allow your signal to reach our equipment. We will take our first question today from Ed Young of Morgan Stanley. Please go ahead.
Good morning. Just two questions for me, please. Rob, you mentioned the active numbers in the U.K., which seem very promising. Could you also maybe give us some color on the revenue performance there in context, please? And then secondly, you mentioned Germany licensing sounds promising. Are there any other updates, Netherlands or Brazil in terms of your expectation in those markets? Thanks.
Hey, good morning, Ed. Rob, can I hand both to you? NGR, U.K., and Germany license, Netherlands.
Absolutely. Morning, Ed. NGR in the U.K. was down 15% in the U.K. in Q1. That is off the back of, I think I'm right in saying 41% growth in the prior year. Very strong growth over the two years in NGR, but particularly pleasing that it's actives led, as you allude to. In terms of licensing in Germany and Netherlands, the only update really I would suggest is it does feel that German gaming licenses are getting close now.
We had expected it to be the H1 of this year that they would be issued, and I understand that is hopefully coming fairly soon. Of course, that's one of the important catalysts to start creating an environment of enforcement against non-compliant operators, and indeed, hopefully increasing pressure on suppliers to the industry to stop supplying non-compliant and unlicensed operators. That's a positive development.
On Netherlands, sorry, any updated view on when that might be possible?
No. We were told to expect six months when we put our application in December. Continue to expect to be live in the H2 of the year.
Thank you.
Thank you. As a reminder, it is star one to queue for a question. We will take our next question from Monique Pollard of Citi. Please go ahead.
Oh, morning, everyone. Thanks for taking my questions. Just two from me, please. Just firstly, in terms of the win margin, obviously a strong online win margin, up 20 basis points, despite last year also being strong. Just wanted to have an update on whether, you know, 12% online win margin is still the right one long term. Then secondly, on the U.S., could you give any update that you're seeing in terms of competitive intensity in key states from your operators? Obviously, as you allude to, New York, we've seen some pullback given the very high tax rate in that state. Whether you're noticing any other differences in other states in terms of competitive?
Sure. Good morning, Monique. Rob, do you wanna continue with win margins, and then I'll talk about U.S. and competitive environment?
Yep. Happy to. Morning, Monique. You know, during the course of last year, I did say I expect our win margins to revert to the usual 11%-12% range. It does feel that we're at the higher end of that range, for sure, and of course, we've just put out a quarter at just over 13%. I think there is upward pressure on that number, but let's see how we go through 2022. I'll decide whether we need to uplift expectations beyond that.
Yeah. On the U.S. and BetMGM. It's right. I think we are seeing that, specifically when it comes to the promotional environment, that it has cooled off a bit. And also, as we all recognized over the last couple of months, we see more and more operators start to talk about building a sustainable business and targeting a break even over the next years, which of course we welcome, and I think that's a really positive development. When it comes to the CPAs, I mean, obviously the CPAs, they continue to vary with seasonality and launches into new, bigger states, dependent on how the competitive environment is there. And we do expect to see that CPA levels will still be higher.
Probably, as we go through the next cycle of the NFL season, we will continue to see the CPA level being elevated. We still remain our focus and commitment around the $250 being an average blended CPA when we look forward. Then I think also encouragingly for us, as Rob mentioned in his introductory remarks, that we're now in 22 states, which means that we are basically reaching 41% of the market, and that means that for us, things like national marketing becomes more and more important in effective marketing. Still a competitive environment.
Differences from state to state, specifically now entering Ontario. I mean, we're only four days in, but for sure that will be a very competitive environment we'll see in Ontario. The good thing from our side is that we're also seeing that we are ramping up faster. We remain at a rational player in the market. The team has full flexibility to deploy their marketing money where they get the best ROI. Therefore, we're very happy to continue to invest on that basis into the new markets.
Understood. Thank you very much.
We will take our next question from Michael Mitchell of Davy. Please go ahead.
Yes. Good morning. Thanks for taking my questions. Two, if I could. The first on actives, and thanks for the color in terms of the two-year performance. You mentioned the U.K. contribution or U.K. performance within that, but I just wonder what else you call out kind of by key product and key geography as a kind of a standout driver of your 34% two-year growth in actives. That's the first question. Then the second question, any concerns about the impact of any kind of U.K. macro softness on your online division? I guess I'm just talking and thinking about consumer demand one and maybe cost inflation, two. Thank you.
Good morning to you as well, Michael. Just a general comment on macro and then I'll hand you over to Rob on actives and maybe more detail. Macro environment is not something that plays a big part when we do our forecasting and reforecasting. It's not something that we see immediately impact on our businesses. I guess part of the reason is that if you look at the average bet size, it's around GBP 10.
It's not the first thing that impacts households. Of course, you know, we follow this very closely every time we're reforecasting and we have the different assumptions in our models. Overall, macroeconomics is not a big theme when we do our different forecasting sessions. Rob, over to you on actives and if you wanna say anything more around macro.
Yeah. Let me add a few comments on actives. Morning, Michael. From a product perspective, no great difference really between sports and gaming, I'd suggest. Geographically, generally speaking, as a rule of thumb, NGR growth is similar to actives growth. There are one or two exceptions, but that's generally the case. Therefore, where we've grown in places like Brazil and Australia, it's actives-led. We're seeing strong actives growth there. There are one or two exceptions. Italy, for instance, in Q1 had a really strong margin. And therefore, whilst actives were backwards, NGR held up more favorably. Generally speaking, actives is the main driver for NGR and therefore what you see from an NGR performance perspective for revenue, it's similar for actives.
Great. Thanks for the color.
We will take our next question from Kiranjot Grewal of Bank of America. Please go ahead.
Good morning, guys. Just two questions from me. Firstly, there's been a lot of noise in the run-up to the U.K. regulatory review. Could you perhaps remind us if you've made any changes in the run-up to this? Because I know some of your peers have commented on it, and perhaps what the impact could look like. And then secondly, could we talk about New York? It's of course a unique state given the tax structure, and we've seen quite a big change in strategy for some of the competitors since the launch. Could you potentially comment on how you've changed anything, if anything, and where you see your market share trading there eventually? Thank you.
Sure. Good morning to you as well. Let me start with the U.K. I think we talked about this quite a bit also in our full year results that during 2021, we have made a number of implementations around our whole approach to responsible gaming. As you know from our side, it's about affordability schemes, it's about safer gambling initiatives or self-certifications. It's about AML and SOF checks. Then of course, in addition to all this, we also have our app technology, which allows us to do, first of all, much more research and scientific approach around the markers of protection that we use in these models. Secondly, of course, predictive models and real-time interventions.
This is something that through the years, we as well as other operators have worked diligently on. The UKGC has been much more clear during 2021 in what they were expecting and therefore the different, you could say communication and discussions we've had there, has been much more clear. From our side, it's something that we've implemented as we went along 2021, and this is also when we talk about the impact, this is something that is now in our model. We don't call anything out as some other operators do.
We don't call out affordability impact as this tightening is that's basically the world we operate in. For us, it's business as usual. You could say it's part of doing business, and every time we reforecast, we look at the prior quarter, and then we update our forecasting. Just to be clear, it's incorrect any views that we have not taken actions, and that others has lesser pain to come. We work diligently on all our different measures and have very, very strong protection schemes in place, whether it comes to affordability or safer gambling, self-certification, AML and SOF.
Of course, I would say which is really encouraging, and we've, as you know, rolled it out to our UK brands and the results there are really encouraging and we continue to see good results, which will be important when we go forward because it gives us an interactive model with the customers so you don't have to wait, interact with them. For example, asking them to call or send an email. We do this in an interactive manner, real time, which means that we can bring customers onto a safer player level, and therefore we will also be able to have much more sustainable relationship with the customers going forward. You know, we work on this all the time.
We constantly upgrade our models, so it's not something that we are only doing now just because we're expecting the Gambling Act Review to come out soon. That's on U.K. and the different initiatives going on there in terms of responsible gaming. When it comes to New York, I think we have said from the beginning that we have the same approach to New York that we have to any other state. We are here to build a sustainable business for the future, so we are being rational around our spend when it comes to marketing. Therefore, when we look at our performance there, it's really in line with expectations.
We launched a couple of weeks later than a couple of the other operators, so therefore there's a little bit of noise in the first month of the market shares that we are looking at. That's why when you pull out the New York numbers, you will also see our market shares tick up a percentage or so. Overall, you know, we are committed to New York. We are dead determined on building a sustainable business here.
We also believe that we can do that. By the end of the day, the way the team operates, as I just mentioned in my other remark, is that they basically allocate their marketing spend where it has the best return on investment. Having said that, I think it's a really good sign that we are seeing some of the other operators being open about them dialing down their promotional spend here after the first couple of months in New York.
Super. Thank you.
I hope.
We will take our next question from Joe Thomas of HSBC. Please go ahead.
Good morning, Jette. Good morning, Rob. Just a couple of things, please. First thing, I'm just interested in your comments, Jette, about the development of the kind of international trade body or the association for responsible gambling. Just wondered what practically that might mean you have to do in your international business and whether we can expect that to impact the pace of revenue growth, I suppose. It would be useful to have an end view there. Second thing is anti-money laundering.
You've just mentioned it. I just wondered if, you know, we've been sort of swept up in a debate around responsible gambling in the U.K. Wondered if there's anything new to come on anti-money laundering, or source of funds at all? I could just ask one final one on the Netherlands. Just how long do you think it will take to get back to previous levels of profit in the Netherlands? Is that gonna be a quick turnaround, or is it gonna take a long time? Thanks.
Hey, good morning, Joe. Let me touch on the first two points, AML and the GRA, and then I'll hand you over to Rob for Netherlands. Just when it comes to AML, no, there's nothing new here as we expected. We haven't heard any new news coming out around AML and SOF. We don't expect it to be something that's a headline in the GRA. The reason I mentioned it is that there's been a lot of focus on, you know, affordability, and I think it's important to recognize that actually, when you look at the toolbox as an operator, we do a number of things.
Affordability is one thing, but certainly anything we do on self-certification and safer gambling is equally important, as is, of course, all the different other checks that we have and our ARC program. That was why I called it out. We don't expect any news there. When it comes to the TGA, really this is an international organization that goes beyond our current industry. That's important. I think it is really important that we gather, let's say, every single operator that wants to be part of making sure that we have the proper safeguards around the industry in general. It's not only about gambling, it's also about gaming, and it's about the different international technology platforms.
That's really a cooperation there, where we try to have a dialogue around what is the appropriate safeguards that operators in the industry should have. Of course, there's the other element of what we're doing internationally, which is ARC, which we've started now trialing in our international markets. Here you will see us when trials are done, and trial will be done in a localized basis because we need to adjust them to the different local regulations.
You will see us start rolling ARC out internationally. You know, everything that we are doing here is really making sure that we engage everyone in the industry around building a sustainable industry, both for gambling, but certainly also for other areas of the gaming. You have DraftKings and Meta and so forth also joining these efforts. Rob, over to you on the Netherlands.
Thank you. Morning, Joe. On Netherlands, I think we'll see a reasonable recovery in NGR as we progress through the H2 of the year. We do need to wait to see just exactly which operators are licensed, in what order, what the timetable of licensing and launching looks like before we can have a better view. Really need to wait to see. We do benefit from a strong brand in bwin. That's the key point. It's not as if we're whilst you can't use your previous customer database, we of course start with one of the strongest brands in the Dutch market. That's encouraging. That's NGR. EBITDA would take longer, of course, because there's a new tax, and there'll be marketing investments to go with it as well. From an EBITDA perspective, a longer rebuild, NGR quicker.
Thanks a lot.
We will take our last question today from James Rowland Clark of Barclays. Please go ahead.
Hi. Morning. Morning, everyone. Most of my question's been asked already, but I just wanted to ask on your M&A pipeline. You said at the last update you were very happy to go above the three times leverage for the right kind of deals. I wondered if, as you look across the landscape if valuations privately are matching sort of public valuations, and whether that presents more or less opportunities for you at the moment. Perhaps also you could provide a steer on sort of timings of bolt-on deals. Thank you.
Hey, James. Good morning. I can't give you a specific steer on our M&A pipeline, but we are, as always, working with a very strong M&A pipeline and looking both at bigger type deals as well as the roll-ups and bolt-on deals. We look at this every single time on its own merits when it comes to valuation. There's nothing at the moment to your question around the different valuation levels. There's nothing at the moment that we believe we couldn't pursue if we wanted to. That's the key thing here. Other than that, I would say you should stay tuned, but we continue to look at opportunities that we have in different M&A areas.
As you know, we're looking at it from a lens of three perspectives, both when it comes to entering new markets if it allows us to go into markets faster than organically and take a top three position, then of course deepening our presence in core and existing markets, which would typically be the smaller roll-ups, and then of course expanding into new areas that we're also looking at. We continue to have the price discipline that is always core to what we do, but there's nothing that limits us in terms of pursuing targets at the moment. Did that answer your question?
Thanks very much.
Good.
Yeah. That's great. Thank you.
Thank you. I would now like to turn the conference back to you, Jette, for any additional or closing remarks.
Great. Thank you, Molly. Thank you all for dialing in and listening in today. As our Q1 results demonstrate, Entain continues to deliver strong, sustainable, and diversified growth. This year to date, performance is in line with our expectation, and we remain well positioned to deliver on our strategic opportunities as we look to the rest of 2022 and beyond. If you have any other questions, do get in touch with David and the IR team. From us, thank you and goodbye.