Operator: Thank you for standing by, and welcome to the Betr Entertainment Limited FY27 Q1 investor update. All participants are in a listen-only mode. There will be a presentation followed by a question and answer session. If you would like to ask a question via the phone, you will need to press the star key followed by the number 1 on your telephone keypad. If you would like to ask a question via the webcast, please enter it into the ask a question box and click submit. I would now like to hand the conference over to Mr. Andrew Menz, Chief Executive Officer. Please go ahead.
Andrew Menz: Good morning, and thanks for joining us today for the Betr Entertainment Limited quarterly business update for Q1 FY27. I am Andrew Menz, CEO of the company, and I am joined today by our Chief Operating Officer, Bill Richmond, and our Chief Financial Officer, Blake Matthews. As we indicated when we released our full-year results in August, we have made a fast start to FY27. In Q1, turnover grew by 19%, with our investment in product and brand driving share gains and the right kind of customer activity. Whilst the World Cup provided a tailwind early in Q1, the exit rate from the quarter evidences that there is strong underlying growth in the business attributable to that marketing and price investment, which has created a more compelling proposition for our customers.
Andrew Menz: Wildcards is a revolutionary product that was built for and is resonating strongly with our target market of sports Same Game Multi and recreational racing punters. Rapid innovation remains a critical competitive advantage for the business, reducing the cost of promotional generosity and allowing for real and meaningful product differentiation in a cluttered market. Q1 is always our heaviest investment quarter as we avail ourselves of the material customer acquisition and reactivation opportunity during footy finals and the lead up to Spring Racing Carnival. This year, customer-friendly results, particularly on marquee sporting events, were a drag on gross win margin and therefore on cash. Both marketing, CapEx, and cost base landed on plan with a net variance to our cash forecast attributable to those results of circa AUD 4 million. In October to date, margin has rebounded strongly and net win is up more than 70%.
Andrew Menz: More than half the estimated Q1 results related cash impact has already been reversed. This supports our confidence heading into the peak of the Spring Racing Carnival. We today reaffirm our FY27 guidance. Normalized EBITDA in the range of AUD 13 million to AUD 19 million and positive operating cash flow for the year. We are going to take you through the operating progress behind that confidence in today's presentation. Turning to slide 4. Overall, turnover of AUD 432 million was up 19.1% on PCP, with the World Cup providing an early tailwind. The quality of the active customers here matters just as much as the top-line growth. We see our customers betting with us more often as we continue to win share of wallet from competitors, and those customers are choosing our higher contribution products. We saw that Same Game Multi penetration rose 7% and Same Race Multi penetration rose 25%.
Andrew Menz: As I have outlined, in October to date, gross win margin has rebounded to above historical levels and turnover continues to grow faster than the market. Our continued promotional efficiency means that net win conversion has been outsized, with those desirable customer characteristics running alongside more normalized sports and racing results. In Q1, customer-friendly results took around 1.8 points off gross win margin for the quarter. Sports was the main driver through the World Cup and Same Game Multis on the AFL and NRL finals. In racing, we saw a run of Saturdays where favorites and well-backed runners outperformed their historical levels. Specifically though, we continue to be more efficient in our generosity spend. Generosity of 3.5% of turnover was 30 basis points better than the PCP. A meaningful decline in circumstances where there was strong turnover growth.
Andrew Menz: Also, because cost of sales is tied to turnover, that stronger turnover at lower margin accelerated around that AUD 4.2 million of cash outflow in the quarter. As I said, half of that has already turned around in October to date. We launched Wildcards in late August as the first Same Game Multi product that enabled customers to improve their chances of their bet winning during a match. Early take-up and results are strong. 75% of our Same Game Multi actives are taking up Wildcards, and customers are now adding an extra 2 legs on average and at AUD 6.50 higher odds on average. Therefore, we are better able to optimize our generosity. Promotional costs are 37% lower using Wildcards compared to more traditional Same Game Multi generosity.
Andrew Menz: Wildcards is now live across racing, AFL, NBA, and the NFL, and is a key demonstration of our innovation agenda, giving our customers products and experience that they love and creating a differentiated, more compelling customer experience. The well-publicized advertising reforms start on 1 January 2027, and we are ready for them. The business already has strong controls in place for safer gambling, anti-money laundering, and advertising compliance. Our data and AI capability already supports customer-level marketing controls, monitoring, harm minimization, and reporting. We do not therefore need to make any knee-jerk reactions to any risk and compliance settings to our offering, our marketing or our product suite. We have always taken a long-term view, and accordingly, we do not expect the reforms to have a material impact on trading or our FY27 guidance.
Andrew Menz: We will keep working constructively with regulators as the remaining details are finalized and further reforms are implemented over the course of 2027. As we have said many times now, our model is product-led. We are winning on differentiated products and customer experience, not on advertising and inducements. We made a conscious decision well in advance of these reforms to go that way, and we are confident that it will continue to pay dividends as those reforms take place over the course of the next 12 months. I will now hand over to Blake to take you through the finance position for the quarter.
Blake Matthews: Thanks, Andrew. Moving to slide 8. Q1 turnover was AUD 432.3 million, up 19.1% on the PCP. Gross win was AUD 53.5 million, up 3.2%. The growth in turnover saw net win grow to AUD 38.4 million, up 1%, despite softness in net win margin at 8.9% in the quarter. Pleasingly, October has seen a sharp margin recovery. Year to date, to 26 October, turnover is up 15.9% to AUD 568.5 million, and net win is up 14.9% to AUD 54.1 million. Year to date net win margin has lifted to 9.5%, and October itself is tracking above 11%. Moving to slide 9. We opened the quarter with AUD 27.8 million of cash and closed with AUD 18.5 million, including AUD 11.1 million of client balances. Trading was the whole variance in Q1. The customer-friendly results accelerated our anticipated cash outflow, with marketing, CapEx, and the cost base all landing net on plan.
Blake Matthews: More than half of that results impact has already reversed in October. Consistent with guidance, we expect operating cash flow to be positive in FY27, weighted to H2. At forecast turnover and margin, operating and total cash turn positive in Q3 and build through Q4, and we do not require any additional equity capital. Moving to slide 10. Net cash from operating activities was -AUD 6.8 million. Payments to suppliers and employees were AUD 43.9 million, including AUD 5.3 million of marketing and seasonally higher admin and corporate costs. The underlying cost base reflects the FY26 cost actions. Payments for intangibles were AUD 2.1 million in capitalized platform development, including the build and deployment of Wildcards. There were no financing cash outflows in the quarter, with interest on our NAB facility sitting in operating cash flows. We enter the peak racing season with AUD 7.4 million of available cash and marketing already front-loaded.
Blake Matthews: Cost outflow steps down in Q2, and H2 is meaningfully cash generative. I will hand back to Andrew.
Andrew Menz: Thanks, Blake. As we have already outlined, October trading supports our FY27 outlook. We are up to a much stronger start. October to date turnover is AUD 136.2 million, up circa 7%. Gross win margin of 15.4% is up 2.7 points. Net win of AUD 15.7 million is up 73% year on year at a net win margin of 11.5%. Promotional costs as a share of turnover are down around 30% against the same period last year. That continued turnover outperformance, combined with net win margins above our target range, have allowed us to reverse half of that cash shortfall from Q1 results already in the month of October to date.
Andrew Menz: It shows that we have generated the right activity in Q1 with the right customers, and we are now in a position to monetize them over the peak Spring Racing Carnival period, as has been evident by the performance in October so far, and as we expect over the Melbourne Cup Carnival. Our priorities are clear. We need to turn the momentum that we have into sustainable shareholder returns, delivering positive operating cash flow, and being very disciplined with our cash balance. In the product space, that first to market Same Game Multi and racing products have been launched with Wildcards extended across racing from Everest Day, the NBA and NBL. In terms of mix and margin, changes to our tote offering as part of the move to a national tote and deeper Same Game Multi and Same Race Multi penetration continue to improve our contribution margin on our customer activity.
Andrew Menz: Data and AI continue to drive down those generosity costs whilst engaging our target customers better than ever. You have already seen that we have been able to energize the base through Q1. We are aggressive through finals and spring with discipline in acquisition and reactivation, seeking only those right and more valuable customers for the business. From a capital perspective, we will continue to deploy selectively, look for where the returns are strongest, and aimed at creating long-term shareholder value. We go into Melbourne Cup Carnival in very strong shape. Turnover is growing, margin has rebounded, Wildcards is live in racing, and our customers are more engaged than ever. Again, we reaffirm guidance for this year. Normalized FY27 EBITDA between AUD 13 million and AUD 19 million, and positive operating cash flow for FY27. We are looking forward, and we are very ready for our biggest week of the year.
Andrew Menz: Thank you, and we will open the line to questions.
Operator: Thank you. If you would like to ask a question via the phone, you will need to press the star key followed by the number 1 on your telephone keypad. If you would like to cancel, please press star 2. If you would like to ask a question via the webcast, please type your question into the ask a question box and click submit. Your first question today comes from Phil Chippindale from Ord Minnett. Please go ahead.
Phil Chippindale: Good morning, gents. Thanks for your time. First question from me, just on customer numbers. They decreased from about 156,000 to a bit over 150,000 on an active basis. Can you tell us, you have mentioned prioritizing the right clients, so I sort of understand that, but just thinking about the future, what are you expecting in terms of how that trends perhaps over the next 12 months or so?
Andrew Menz: Well, look, Phil, I think the point on our active customer base is that it is entirely quality over quantity. What we are seeing is increased turnover and revenue per active, and our generosity and our product spend has been focused on engaging those right customers. We have made a conscious decision in this business to let some of those more promiscuous customers, who are very difficult to generate any net gaming revenue from, we have let them go. In a world where taxes and fees continue to increase, we do need to find the right clients and invest in the right clients to make sure that we are maximizing the profitability of the customer base. So active customers is an important measure, but what we are really looking for, it is those more valuable actives, and we will continue to invest in those right customers over the balance of the Spring Racing Carnival.
Phil Chippindale: Okay, thanks. Obviously, one of the best numbers I think in your results was this 19% growth in turnover. Can you maybe make a comment as to how you think that compares to others and perhaps system/market growth?
Andrew Menz: Yeah, I think there is enough competitor reporting out there to suggest that 19% for the first quarter is a significant outperformance on the market. This market has been flat to low single-digit turnover growth over the last 12 months, therefore, our performance in Q1, we think, is significantly outstripping the market and evidencing top-line share gains. I am most impressed by the turnover growth, particularly in circumstances where we have been so disciplined in the generosity spend. It shows that we are winning customers from our competitors. We are winning share of wallet from across the board because of this differentiated product and what we think is a much more compelling customer proposition than we have been able to have out before. It is that innovation agenda, that investment in product that we have spoken about, that is driving the turnover.
Andrew Menz: We have confidence, therefore, that that growth, not at 19% long term, given the World Cup tailwind, but turnover growth faster than the market is definitely sustainable for this business over the balance of the financial year.
Phil Chippindale: Okay, thanks. Last one is for Blake. Your investing cash flow for the quarter, I think, was a little bit over AUD 2 million. That includes some Wildcards investment. What does that number sort of look like on a run rate basis for the rest of the year? Is AUD 2 million about the right sort of level?
Blake Matthews: Thanks, Phil. Yeah, in summary, it is. We are looking at the moment, Wildcards is out, which is obviously very exciting. We are looking at what is next on that roadmap, and we have got some exciting innovation ahead. That number in terms of forecasting ahead, would certainly be that AUD 2 million or lower. It certainly would be increasing as we move through the balance of FY27.
Phil Chippindale: Okay, great. Thanks. That is all from me.
Operator: Thank you. Once again, if you would like to ask a question from the phone, please press star one and wait for your name to be announced. Your next question comes from Leo Partridge from Morgans. Please go ahead.
Leo Partridge: Morning, gents. Appreciate you have reaffirmed the full-year earnings guidance, but it would be helpful to get a sense of just how you are thinking about the net win margin assumption sitting at the low and the top end of that range.
Bill Richmond: Yeah, Leo, it is Bill. Certainly from our net win margin, we very much budget across the year. It is a 12-month number, and as we saw in Q1, some of that very much comes down to timing. There were some very punter-friendly results in the last few days of the quarter, particularly with the AFL Grand Final, the AFL Preliminary Final, both going punter-friendly ways. Certainly, we have always budgeted and had a really strong record of producing that mid-10% range. That is certainly very much where we expect things to land across the entire year. We do not love variance during the year, but it can happen in one quarter on the back of some results. But certainly, our confidence remains really strong around that number.
Bill Richmond: As Andrew touched on, there has been some really strong structural improvements across the business, both in the product range, driven by the Wildcards, driven by the single tote. That has certainly been a strong structural change for margin going forward as well. All the investment we are making in product allows us to be more efficient with generosity, which gives us greater confidence in those margins going forward as well.
Leo Partridge: Thanks, Bill. Just another one, I guess, on the product you mentioned. Wildcards seems to be going well. You have gone into other sports and you are now into racing. I appreciate that a lot of that spend is already made, but if you were to extend that into, say, more sports, if it continues to go well, how much extra cost should we be factoring in, if any? Just comments on your thoughts around that.
Bill Richmond: Yeah, certainly the heavy lifting is already been done with Wildcards. The popularity of it certainly means we will be looking to put it across other sports. As Andrew touched on, it is on the AFL, NFL, and NBA already. We have launched in racing as of a couple of weeks ago. The racing has been incredibly popular with punters. Certainly that is an area we will continue to invest on and look whether it is appropriate for the other racing codes as well going forward. Certainly, our punters are responding positively to it, so we will certainly be looking to put it on NRL and other sports early into next year. The heavy lifting with it is already done. While there will continue to be a small investment going forward, any larger investment, which Blake touched on, will be in other areas.
Bill Richmond: I think you will see some other really exciting things from us, not just this quarter, but into next year as well.
Leo Partridge: Well, thanks, Bill. Just, I guess, obviously, it is a pretty competitive period at the moment. What are you seeing from the competitive standpoint, guys?
Andrew Menz: Yeah, Leo, I think what we saw was a lot of promotional discipline from most operators up until Everest and Caulfield Cup Day. I think we saw a bit of an explosion in free-bet turnover across the market at that time. We did not play that game. With leveraging Wildcards, we are looking to be targeted with our generosity to the right customers and target with our product offering to those right customers as well. So competition has been intense, as it always is. It had been relatively disciplined until that time. We will continue to hold our line and our discipline over the next week and continue to back in the product and experience to make sure that we have got the right customers coming through over the balance of the Melbourne Cup Carnival next week.
Leo Partridge: Awesome. Thanks, guys.
Operator: Thank you. There are no further phone questions at this time. I will hand the conference back to Andrew Menz for any webcast questions to be addressed.
Andrew Menz: There is no webcast questions for us this morning. That does conclude today's call. We thank you all again for your time and your support, and good luck to all the punters on Tuesday. Thanks very much.
Operator: That does conclude our conference for today. Thank you for participating. You may now disconnect.
