During Entain's Q3 earnings call held on Thursday, CEO Stella David expressed her optimism regarding the reopening of Brazil's regulated gambling market, despite recent government actions to impose a ban. This ban was enacted by President Luiz Inácio Lula da Silva through a provisional measure on September 25, which halted licensed gambling operations in the country, impacting companies like Entain’s SportingBet brand.
The provisional measure is currently pending a vote in Brazil's Congress, which will decide its future—permanent ban, amendments, or revocation. Since its enforcement, there have been moves from Brazil's Supreme Federal Court aiming to overturn this ban, leaving thousands of local workers without employment.
There is speculation that should gambling return, it could be restricted to sports betting only. David detailed her expectations for the market's revival, sharing with analysts, "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 and 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."
Entain's net gaming revenue (NGR) in Brazil fell by 36% during the third quarter. This downturn is attributed to "disciplined marketing and player engagement in an increasingly challenging market, prior to the immediate online gambling ban announced on 25 September," according to the company.
David emphasized a cautious recalibration approach for returning to Brazil post-ban, highlighting, "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. 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."
Previously, back in August, both David and CFO Michael Snape noted that Entain's NGR in Brazil for the first half of the year had decreased by 25% on a constant currency basis, reflecting a tumultuous sports margin during Q1. Snape described the Brazilian gambling environment as “incredibly difficult and unpredictable,” stressing that the company was deliberately sidestepping a spending race.
On the topic of brand strength, David reaffirmed that Entain is focused on ensuring profitable growth through recruitment and maintaining the standing of SportingBet as they await regulatory clarity. She declared, "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. 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 potential impact of the Brazilian betting ban may affect Entain's profitability; the company noted it anticipates its full-year EBITDA to remain at the lower end of the £910 million to £960 million forecast range. Excluding Brazil, Entain expects FY26 online NGR growth at the upper end of a 5-7% range on a constant currency basis.
Meanwhile, the online NGR from the UK and Ireland rose by 14% during Q3, surpassing expectations, and was complemented by a 15% volume increase, despite facing unfavorable results in sports betting. Overall, the group's NGR increased by 2%, with online NGR climbing 3%, and 5% when Brazil is excluded from the equation.
David attributed Entain’s increased market share in the UK and Ireland to significant upgrades in its brand and digital offerings. She stated, "Clearly, we have been doing a lot of initiatives to improve our customer offering. That was also already in play 18 months or so ago, I guess, when we really started to see some of those improvements hitting the market."
Furthermore, David addressed potential hikes to the UK’s machine games duty (MGD), which could be included in the upcoming Autumn Budget. Concerns arose after the Social Market Foundation recommended raising taxes on retail operations, leading to warnings from David about possible closures of betting shops and job losses. She pointed out, "Since this time last year, already 630 betting shops have closed across the industry, and that’s before putting the gaming tax up. 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, resulting in around 16,000 job losses, and the net take by the Treasury would go down because of those direct impacts."
However, she remained confident that Entain is well-equipped to handle such tax increases, asserting, "We are the best, I believe, by far retail operator in this space, and we’ve continued to increase market share over time. When there’s any disruption, we are well versed with how to deal with that. We’ve got the most motivated staff and we really know how it works. So, 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."
