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Good morning, it's the GVC's Q3 Trading Update Call. I've got Rob here, CFO, and I'll give you a short overview of the trading update, and then we can crack on and do the normal Q&A.So it's been a very strong quarter. And this morning, we've upgraded our results for our first time since May, and we're now guiding to an EBITDA range of GBP 670 million to GBP 680 million. Guidance has been driven by another quarter of very strong Online performance, 12% ahead in terms of NGR if you take out -- adjust for the World Cup, it was about 14%, so another quarter of double-digit growth. And we're gaining -- continue to gain market share in all the key territories. Our U.K. retail has performed better than we expect as well and we're very confident there of continuing to take market share in the coming years. We launched the BetMGM app in New Jersey in September, and we launched everything as close to our LFL as we had promised. A few weeks of the trading update have been very encouraging, in fact they're better than even what we expected. We are now targeting a 10% to 15% share of the New Jersey market in the next 6 months.Refinanced the debt. I'm going to let Rob, he can cover off more of that. And the integration of the Ladbrokes Coral business is progressing well, and we expect the migration of Ladbrokes Coral and Gala online brands to commence in Q4, and they'll be completed by the second half -- by the end of the first half of next year. The first integrations have gone, and Gala Spin and Gala Casino have gone without any issues whatsoever, so it's all good there.In terms of the German regulation, nothing where we stand at the moment. We're still awaiting an update enhancements on sports betting license process. But we've seen the most -- by far the most likely scenario is a continuation of status quo and also some legal challenges. And this will roll on, the status quo will roll on until the newest State Treaty in 2021.We've got some important news in Brazil. It's going to regulate sports betting with a tax rate of 1% of turnover, which equates to 10% in NGR, so that was a positive. We expect to get regulated in Brazil in 2020.We've just launched the GVC Global Foundation to support our [ online-based ] CSR initiatives around the world. So that's a sort of the headlines from this trading update. And just to summarize the cracking quarter, we upgraded our results once again, really happy with the slots and to the launch in the U.S. And we're pretty happy about U.K. Retail as well, we think we're going to get our market share there over the next few years. And as I said, we've updated our numbers for the first time since May.So on that note, I'll just -- we'll just crack onto Q&A, yes? Let's do it. Okay. [indiscernible]
It's [indiscernible].
All right.
[Operator Instructions] Your first telephone question from today is from the line of Ed Young with Morgan Stanley.
Three questions for me, please. The first one on sports margins. They're up this year on top of growth last year. Can you just give us a feel for how much this is really just results for the market and how much is favorable geographic mix or other factors like mobile mix? Or are you pushing the certain products to customers? My second question is on the U.S. KPIs. If things are going well, would you consider investing harder than currently? And what might the investments look like next year? And then third, I appreciate this is a revenue call, but given potential consolidation in the industry going on and your comment that Ladbrokes Coral would be integrated by H1 next year, can you give some thoughts on the company's place in consolidation in the market? And what would you look for the most? Is it scale or new markets or double down on existing markets or accretion or stronger U.S., how do you think about that?
Okay. I'll do the U.S. investment, and I'll do the M&A stuff, and then I'll let Rob crack on the sports margins. So in terms of the U.S., would we consider increased investment, I would say no. I mean I think we are investing a decent amount at the moment, and it's -- I think it's pretty competitive out there. There's a lot of companies spending even more than we are. There's a lot of people out [indiscernible] I'd say it's early days. We're very pleased with what we're seeing. And we remain one -- to be the #1 player in that market. So if you're going to be the #1 player, you need to be effective, you need to be -- you're going to invest a lot of money. So no, I wouldn't rule it out. I wouldn't rule out increasing our level of investment, not really because it's still early days. If we see the terms are justified and strategically we need to invest more, then we definitely will do so. And that is consistent with the joint venture and that's consistent with where we are with NGM and some of what they want to do.In terms of M&A, nothing really has changed. We are, at the moment -- yes, I mean we could do another big deal at the moment. As I say, the Ladbrokes Coral saying is going -- integration is going well, we're integrating most of it by second half of next year. But at the moment, we're really just looking at continuing to look at bolt-ons. As we've said repeatedly in the past, we're looking at bolt-ons in markets where we're sort of subscale or where we're nonexistent. We're always looking, we're looking at the moment. So that -- it has to be regulated as well. We're not really looking to increase our percentage of unregulated earnings. So nothing that was announced last week has changed where we stand these in terms of M&A. So if we need to, if there was opportunity, then yes, I mean operationally we're in a good spot to do that. I think we just continue to look at bolt-ons and another few opportunities out there we're looking at and maybe we'll get 1 or 2 bolt-ons over the line in the next 6 to 9 months. And on sports margins, it's all yours, Rob.
Sure, I'll take that. So I would say the majority is results-driven. There are some structural movements, but generally fairly immaterial. Take for example in Australia, we talked about how [indiscernible] has gone up. In the U.K., affordability measures, KYC exemptions, the customer base is becoming more recreational and that's a positive to margins. But broadly, I would say results is the main driver. And in Retail, again, results will be a positive momentum helped by SSBTs. But as you know on the horse side, we did initiate BPG for all customers at the start of the year, so that's a little bit of a drag on our margin at the moment. But generally speaking, results are still a primary driver in England.
The next question is from the line of Monique Pollard with Citigroup.
A few questions from me. The first is on the guidance, up versus EBITDA. Is it correct in thinking GBP 10 million of that guidance upgrade at the low end is from a lack of cost this year for any change to the German regulatory regime? The second is just on New Jersey market share gains. Obviously, we get that monthly data. How quickly do you think in that market could we expect to see some of those share gains come through? And then finally, on the U.S., just wondering, since its relaunch, as you say, it's been going very well, how useful has the MGM customer database been proving for you in terms of cross-selling those customers sports betting?
Okay. So to guidance?
Okay. The EBITDA guidance gets -- that we've upgraded, we said when we announced the GBP 650 million to GBP 670 million range at the interims that if there wasn't any material spend on German bonusing, we'd be towards the top end of that range. The fact that we're now beyond the top end of that range talks to our performance as well. So a bit of both, I would say.
Okay. Let's talk New Jersey. So yes, we're shooting for 10% to 15% market share sort of midway through next year. I mean you'll see the total revenue of those New Jersey numbers come out in the next couple weeks. I mean our results could still be well below others as a result of a release that's been put to the schedule in the last sort of few weeks. The results that we've got are very encouraging. And I'd wouldn't be saying we could get 10% and 15% halfway through next year if the results weren't encouraging.In terms of MGM database, I think it's too early to say. We've hedged it to a certain degree, but we haven't really cracked on, on that front, so I can't really tell you how useful that database is going to be. But we've always been optimistic. So [ big ] database is customers who have obviously went, in terms of sort of gaming, in all likelihood. But can I give you some definitive answer on how good it is, how useful it's going to be? No, I can't at the moment. The main thing is we've kicked it off. We launched when we said we would launch. Results are good, and we expect to get 10%, 15% of the New Jersey market in midway through next year. And you'll see some numbers in a few weeks. We'll still be lot of work to do, but that's the theory I'm giving you based on the KPIs we're seeing in the first few weeks. So we're pretty happy about it. Okay.
The next question is from the line of Stuart Gordon with Berenberg.
Just a couple of things for me. First of all, on Germany, obviously, slightly later resolution to the regulatory environment there. But should we still consider you will anticipate making some increased investment into that market once the path forward is clear? And secondly, just on Brazil, you're expecting some regulatory resolution next year. Could you give us some color on what sort of the annual NGRs are in Brazil, and the growth trajectory of that reaching just [ the FX ]?
Okay, in terms of Germany, yes, I mean as I say, we're expecting the status quo to roll onto the next [ phase ] of State Treaty in 2021. I mean that's not guaranteed, but that's what that's based on, the intelligence and information we've got, that's what we got. That's what we're expecting. Now I understand your question properly, as and when we get that market is fully regulated, then we are very confident that our commitment to State Treaty, that we would be able to -- we'd be fully regulated for a casino and poker, then yes, we would definitely increase our level of investment. We would probably put some money behind that casino and poker, which we can't currently market into Germany. And probably, there'll be a few more entrants into the market as well. So we would probably increase our investment. It wouldn't be too seismic, to be honest with you, because I think the bwin brand is so strong in Germany, and new entrants into the market is not something I'm particularly wary of because we've been in there for so long, and the market -- the brand is so strong. I'm not fearful of anyone coming into that market. It's really -- it's mainly really ourselves and Tipico, the 2 big players there, but we would probably tweak it up, we'd probably pick up a little and as soon as we are able to get regulation on the casino and probably market the casino a little bit more than we have at the moment, which is [ not an investment ].In terms of Brazil, we've never given NGR numbers for it. It sits as a #6, #7 market. And in terms of growth, [ share ] growth rate for that market, it's between 40% to 50% at the moment annualized in constant currency. So that's what we said the last time we reported, and that's where we are at the moment. It's, again, it's a market we've been in for a long, long time. 2008, we've built that brand up for nearly 10 years, really, we've been building that brand up, the 2 brands, Sportingbet and Betboo, primarily Sportingbet really. And we've got a big head start in that market. It's been growing aggressively for quite a long time. And as I said, we don't get actual NGR numbers because it's a top 6 market, it's the #6 market in the group given the size of the group now. You can imagine, it's a meaningful amount of NGRs it's generating. And the mine potential of the market is very large. I mean a lot of people talk about the size of the U.S. opportunity, which is obviously, we think is a great potential. But we're -- given the huge advantage we've got in Brazil in terms of the [indiscernible] in that market, the market share we've got in there, I think the Brazil opportunity is not far behind actually the U.S. opportunity in some respects. So yes, we like Brazil. Rob's smiling, he's happy [indiscernible] gets a little excited [indiscernible].
[indiscernible]
The next question is from the line of Simon Davies with Deutsche Bank.
Firstly, just on gaming, bit of a slowdown there in the third quarter. Obviously, very tough comps with the World Cup in the prior year. Are there any other factors at play there? And should we expect a decent pickup in growth rates in the fourth quarter? And secondly just on the U.S., can you just talk about plans for any launches into further states? Are you in a position to give any guidance or any feel for the likely direction of startup losses going into 2020?
Okay, I'll do gaming, and I'll let Rob talk about the U.S. and losses and you probably can do the launching, as much as me really. In terms of gaming, yes, it was a bit small, better than World Cup, but also a slight -- a slowdown in poker, and we have communicated that before we cleaned up, the quality on the cash rooms in the partypoker business. That was mainly as a result of giving cash games a bigger push. And then [indiscernible] poker, is important that the quality of the cash, cash rooms as clean as we possibly can, so it's clear up there. Things like [ boards ] and all sorts of things. So yes, that slowed down in Q3. In Q4, we expect partypoker to get going. That work is now more or less completed and I'd expect the gaming growth rate to pick up again in Q4 because most of the impact really has been as a result of the partypoker slowdown for the reasons I've just given. And I'll hand you to U.S. -- to Rob for the U.S. loss season. And you can talk about the markets we're going to come back into as well.
Sure. Well, we have the CEO of the U.S. JV is presenting his view of the next few years to our board meeting next week. So I'll have a better idea then, I think. I don't think we're expecting significant losses, but we would expect losses given the curve of states opening up and for all the reasons we've talked about before, the profitable assets that are already in the JV from the brands, meaning you don't have to blow your brains out about designing marketing, et cetera. We'll really have a better number to guide next time we talk.In terms of state openings, we think there'll be a couple of minor state launches before the end of the year. New Mexico and West Virginia are on the cards, and we continue to feel good about getting access to all major states over the next year or 2.
[Operator Instructions] Next in line is Gavin Kelleher with Goodbody.
Just one for me. Just on machines, obviously, minus 39% in Q2, minus 36% in Q3. Can you just give a bit of color on the trends you're seeing there? And should we see a further improvement as we move into Q4 and next year?
Sure, I'll take that. So little bit of the Q2 impact was a more free bet spend. So we did try and do a little bit of activity around bonusing that then softened off and has fallen away by Q3. So I'd say that's probably the biggest delta between the 2. As I've said before, I think the impact that you see from changing regs in retail in Week 1 is pretty consistent with where it ends up. So what we've seen in Q3, I'm pretty confident it's going to stay at around that level, and we continue to optimize our slots proposition, and we have the market-leading cabinets. We're continuing to put new games out there. So it's most interesting for our competitors and it's the best offer in the high street. So [indiscernible] games improved with the other competitor closures, independents, et cetera. You might see some improvement that way. But from a sort of stand-alone like-for-like basis, the current level is about right.
The next question is from the line of James Rowland Clark with Barclays.
I've got 3 questions, please. The first is on Brazil. You're clearly very optimistic and very confident about that country and the growth expectations there. Could you just remind us, as you have before, what the market share is that you have there, and what the sort of competitive environment is like at all? Secondly, on online staking trends, would you be able to give us an idea of the shape of staking through the quarter, and the sort of exit rate you saw at the end of Q3? And then finally on the German regulatory costs that you were originally guiding to roughly the GBP 10 million in this year, should we be thinking about that next year or early 2021, potentially?
Okay. I'll do number one, I'll let Rob do the stakes and the German costs. How much market share we've got in Brazil. I know we're the biggest in Brazil. I know the size of the market, but I think we're by far the biggest. What do you think?
Our estimate is somewhere between 25% and 40%. We don't actually share [indiscernible].
So that's [indiscernible] really. As I say, we are undoubtedly -- what's the competitive environment, starting to play big over there for poker. Then we don't really focus on that side of things. And the sports --[ as much as a ] horse race, I mean, we -- I mean honestly, I don't think we're -- 365 has some investment pieces and other things have made that bit of an impact. I think William Hill tried once and failed. I think they're going to try again. And so really for ourselves, we've been in there for quite some time and we're -- there's a few smaller local operators, but really nothing too material. So that will definitely change, that some people will think [indiscernible] that market. And that might kind of [indiscernible] others undoubtedly will have it on their roadmap, particularly since ours has topped it up here. Undoubtedly, others will come into the market. But so at the end of the day, regulation is a positive for us. It will become more competitive, but the brand is out there, it's been well-established with a significant advantage. And I'd much rather a market be regulated and be more competitive than us just having some sort of dominant position in an unregulated. And obviously, when it regulates, the opportunities in the market will be much greater, so the growth potential can be even greater as well. Because at the moment, we can only really market free to play and we are doing that and we're spending a lot of money over there. We have been for a long time, on TV, all free to play. But if it regulates, we can it -- far more new money marketing exceptions. And so the market should kick on as a result around [indiscernible]. Hope that answers your question. Oh, no [indiscernible] Rob, yes?
On '18 exit rate, I mean it's not enough looking at the states over 13 weeks. Let's look at it over a 2-week period, it depends what's happening on margins during those 2 weeks. So nothing's being sustained in exit rates. What you would say is that 5% online space across the quarter, given strong margins, and therefore, recycling impact and World Cup impact. That's the best way to get a feel, I would suggest, for the true staking levels. And Germany, so whether we have to spend money to incentivize customers, bonus customers through migrating or separating somehow sports versus gaming, of course, depends on the regulation. Probably doesn't hurt assuming that, that is required, and if it isn't, then there will be an update in due course.
The next question is from the line of Michael Mitchell with Davy.
Yes, just one left on my side. Ken, you mentioned in the U.S. KPIs better than even expected. Was that a general comment or were there specific KPIs that you're referring to? I mean I'd be interested in your view on things like growth in actives in the first month, [ excise CPA ], things like that.
The KPIs were really focused on really as new fundeds, the level, the size of the deposit and there's a perspective value the players were recruiting. So that's the sort of KPIs that we're looking at, at the moment. Needless to say, when you've spent money, really sort of rough time and I've only got 2 weeks of data, you're really looking at the [ quality ] number and you clearly are [ getting at ] the quality of the players and what the potential is in terms of lifetime value. So that's what we're looking at, at the moment. And as I say, they're pretty encouraging. When you see the New Jersey numbers, of course, we're still going to be behind, let's just say, half-to-half way through to next year. That's the 10% to 15% market share. That's what we're shooting for, those are the KPIs we're looking at.
I'd just add that we can see that, for example, [ SCVs ] are going up week-on-week-on-week, which is encouraging. Stakes [ progress ] on that size is compared very well across degrees. Just a bit too early yet to change our predicted LCV models to know exactly what the lifetime value of these customers are, so that takes a bit longer before the correlation is sufficient. But I need good signs on things like that size.
And just a follow-up on that, if I may. I mean you obviously quantified where you think that the share could be midway through next year, the 10% to 15% in [ retail in ] Germany share being #1. I mean do you have a view in terms of what kind of the #1 player in this market will have in market share terms?
Probably between 20%, 25%, I'd guess, somewhere in that mark, yes.
[Operator Instructions] The next question is from the line of Ivor Jones with Peel Hunt.
In relation to U.K. online, if Paddy Power Betfair and Sky merge, does that make the online attractive, [ which is not ] investing less than Ladbrokes Coral ahead of that? Second one, just on U.K. retail, is it going better enough that you would start to think about investing more than you previously planned in the shops that remain and change the business model? And then last one, the GVC [indiscernible] responsibility initiatives, does that apply some change in the way you handle responsible gambling outside the U.K.? I guess I'm thinking particularly about whether the U.S. would be -- would have a unified approach for the U.K.? And is that potentially negative for revenue as you impose global standards?
Okay. I'll take that one. The U.K. online, no, the deal was announced, the prospective deal that was announced last week, it doesn't really change our plans for the U.K. in terms of investment, it's a 0 impact for us. We continue down the same path in terms of the level of investment and in terms of prospective growth and the opportunity in the U.K. So that didn't impact it in any way. The U.K. retail, the better results that we were getting, did that change the -- our view of U.K. retail in terms of bit more investment? Not at this point, it's not changed our minds in that respect in terms of investing anything more than we've previously communicated and the way we look upon the U.K. Retail. In terms of the initiatives around the responsibility, it affects the way we look at responsible gaming outside the U.K. But I think the thing -- we're very serious about responsible gaming outside the U.K. and it's and again, a dozen of these initiatives we've announced sort of [ practice ] this in terms of our approach in the markets outside the U.K. or the growth potential than in the market, so outside the U.K. as a result. So that's not all your questions, unfortunately. But and so hopefully that answers that one, yes.
At this time, there are no further questions. I would like to hand back over to Kenny for any closing remarks.
Okay. Thanks for listening. Hopefully, we've answered your questions, and I've just got a bonus point, and into the next round of the World Cup, where we’re hopeful we'll beat Japan, so Ireland's are coming home, Gavin. Cheers, have a good one. Bye.