During Entain's Q3 earnings call on Thursday, CEO Stella David expressed confidence that Brazil’s regulated gambling market will reopen, despite a recent ban by President Luiz Inácio Lula da Silva. Entain, which operates under the SportingBet brand, was impacted by a provisional measure from the president in late September, immediately halting licensed gambling activities in Brazil. This ban is pending a vote in Congress, which will decide its permanence.
Following the ban, Brazil’s Supreme Federal Court has been urged to overturn it, leaving thousands of local employees without work. One potential outcome is the return of licensed gambling, possibly limited to sports betting.
David shared her insights with analysts during the earnings call, stating, "Clearly, we don’t know exactly what’s going to happen. At the moment, the provisional measure is for 120 days, at which stage it either gets ratified, changed, or revoked, so we are planning for multiple potential scenarios. But ask me for my best guess. I think the market will reopen in some form or another and we will be back there."
In the third quarter, Entain's group net gaming revenue (NGR) for Brazil fell by 36%, a decline attributed to their "disciplined marketing and player engagement in an increasingly challenging market" prior to the gambling ban enacted on September 25.
In addressing questions about the Brazilian market, David reiterated that Entain would adopt a cautious strategy in response to the provisional ban. “Prior to the market being shut down, we were already taking what we would call a pragmatic approach to making sure that we were investing in the right sort of customer and not chasing volume at any cost,” she said. “And I think that has proven to be the right thing to do because the fact that the market can be closed down with no notice does put you at a degree of risk if one doesn’t take a sensible approach in terms of the market opening back up.”
Earlier in August, David and CFO Michael Snape noted that Entain's Brazil NGR for the first half of the year had decreased by 25%, citing a "highly adverse" sports margin in Q1. Snape characterized the Brazilian market as "incredibly difficult and unpredictable" and emphasized that Entain was avoiding an aggressive spending spree there, hopeful of recovery in the second half of the year.
Discussing the company’s strategy, David highlighted the focus on profitable growth and the strong brand recognition of SportingBet as they await a clearer regulatory framework in Brazil. “I can’t predict what’s going to happen, but I think one of the things that I can say is our brand SportingBet is a great brand,” she remarked. “It’s been around a long time in Brazil. It’s got one of the best equities, and it’s predominantly a sports brand that’s about 70% sports. So if the market came back and it was sports only, then I think we’d be well set for that.”
The recent betting ban is expected to impact Entain’s profitability. The company indicated last month that its full-year EBITDA forecast will likely be on the lower end of the projected range of £910 million to £960 million. Excluding Brazil, they anticipate FY'26 online NGR growth at the upper end of 5-7% on a constant currency basis.
In the UK and Ireland, Entain saw a 14% increase in online NGR during Q3, surpassing expectations, with a 15% rise in volume despite unfavorable sports results. Overall, group NGR climbed by 2%, with online NGR rising by 3%, and by 5% when excluding Brazil. David attributed these market share gains to enhancements made to their brands and digital offerings.
While discussing potential tax increases, David noted the impact of a proposed doubling of the UK’s machine games duty (MGD), which could arise in the upcoming Autumn Budget. She warned that such an increase could accelerate closures of betting shops and lead to job losses. “Since this time last year, already 630 betting shops have closed across the industry,” she stated. “If the gaming tax is put up as potentially muted, then independent analysis has shown that circa 1,500 betting shops across the industry were closed, and circa 16,000 jobs would be lost, and the net take by the Treasury would go down because of those direct impacts.”
David emphasized the importance of communicating the adverse effects of such tax hikes on the already struggling high street and stated that Entain is well-prepared to handle any potential tax increases. “We are the best, I believe, by far retail operator in this space, and we’ve continued to increase market share over time,” she asserted, noting the company's experienced staff and established presence. "If there were to be [an] increase in taxes, we would be a relative winner in the fact that we would gain market share in retail."
