888 has stated that its revenues in the first quarter of 2024 are slightly ahead of guidance, but year-over-year declines have been reported across all segments.
Commenting on the trading update, CEO Per Widerström noted that he was “confident” that the operator would “return to growth from Q2 2024” thanks to its progress in adapting to regulatory and compliance changes.
888 Q1 down but ahead of guidance
Publishing its Q1 trading update, 888 declared a group revenue for the period of £431.2m, which is slightly higher than the £420m to £430m guidance range set out in the operator’s FY23 results last month.
However, in comparison to the same period last year, group revenue is down three per cent (Q1 2023: £445.5m).
Revenue was up two per cent in comparison to Q4 2023, but the group expects “revenues to return to year-on-year growth from Q2 2024 onwards”, with FY2024 revenue growth expected to be “consistent with the mid-term target of five to nine per cent annual growth”.
Per vertical, gaming revenue improved slightly by one per cent to £272.2m (2023: £269.8m), while betting revenue dropped by 10 per cent year-over-year to £159m (2023: £175.7m). Average monthly player actives rose by six per cent YoY to 1.8 million (2023: 1.7 million).
Sportsbook stakes fell by five per cent YoY to £1.35bn (2023: £1.43bn) with a net revenue margin of 11.8 per cent (2023: 12.3 per cent).
Widerström commented: “I am pleased to report that Q1 2024 revenue was slightly ahead of our guidance, with strong player volumes converting into improved revenue run rates.
“Having lapped various regulatory and compliance changes during the quarter, and with increased marketing investment supported by an exciting product pipeline, we remain confident in a return to growth from Q2 2024.”
Segment performance
Across UK&I online operations, average monthly actives rose by nine per cent to 1.27 million (2023: 1.17 million), but total revenue fell by one per cent YoY to £164.4m (2023: £166m).
Gaming revenue growth of four per cent to £101.9m (2023: £97.8m) was offset by an eight per cent decline in sports revenue to £62.5m (2023: £68.1m), which 888 says was driven by “increased customer investment across the Cheltenham Festival relative to the prior year”.
The operator added that revenues are expected to return to year-on-year growth from Q2 onwards thanks to “strong customer engagement, new product launches and the annualisation of safer gambling changes”.
888 noted that international revenue rose by six per cent in comparison to Q4, but is down two per cent YoY to £136.5m (2023: £139.7m). Betting revenue declined by 22 per cent to £20.5m (2023: £26.3m), while gaming revenue improved by two per cent to £116m (2023: £113.6m).
The operator added that the annualisation of significant compliance changes from February saw a four per cent YoY growth in February and March, “driven by the core markets of Italy, Spain and Denmark”.
For retail, total revenue dropped by seven per cent to £130.3m (2023: £139.7m), following a two per cent decline YoY in shops and a “challenging basis of comparison” as Q1 revenue was consistent with Q4 2023.
Betting revenue in the segment declined by six per cent to £76m (2023: £81.2m), while gaming revenue dropped by seven per cent to £54.3m (2023: £58.4m).
Q2 and beyond
888 highlighted that its Value Creation Plan announced in March offers medium-term financial targets of a five to nine per cent revenue growth, adjusted EBITDA margin improvement of approximately 100bps per year, focus on “deleveraging to reach net leverage of 3.5x or below by the end of 2026” and “embedding new ways” of operations.
The operator referenced as well its new corporate identity of ‘evoke plc’, which will be launched in May 2024 subject to shareholder approval at the AGM on 13 May 2024 to “better reflect a new ‘One Company’ approach”.
In addition, 888 spotlighted that the reset of its operating model is “well progressed, with £30m 2024 operating cost savings being reinvested into more profitable marketing to drive growth, in line with the VCP”.
During the quarter, the operator also announced the sale of its selected US B2C assets to Hard Rock Digital, concluding its strategic review of its stateside operations.
Subject to regulatory approvals, the sale of selected assets and closure of remaining operations are expected to occur during 2024, with an ongoing EBITDA improvement of £25m per year from 2025.
Widerström concluded: “I was delighted to outline our multi-year value creation plan alongside our full-year results in March, and am pleased to report a strong quarter of progress against these plans.
“We are moving decisively and at pace to position our company for long-term success, and I look forward to providing further updates about our progress in the coming months.”
