Key Points
- Lottomatica is still confident that it’ll get the Cirsa merger approved in Q2 2027, and shareholders are due to cast their votes on 23rd and 30th of November.
- Lottomatica Q3 adjusted EBITDA increased 3% to €200m, but if you look at the normal payouts, it’s a different story altogether, up 17% to €234m.
- I suppose you could say it’s a bit like comparing apples and pears, Cirsa reported a similar impact from sports results in Q3.
Lottomatica had 2 very different (to say the least) adjusted EBITDA growth rates for the 3rd quarter, 3% to €200m on a reported basis, and then 17% to €234m after adjusting for normal payouts. Where does that €34m difference come from, and why should investors care? The answer lies in that huge all-share merger with Cirsa, worth €2.8 billion.
CEO and Chairman Guglielmo Angelozzi told analysts that it’s all going according to plan, and Q2 2027 is still the targeted date for the deal to close. Then there’s the shareholder vote on 23rd November to look forward to. Integration of Cirsa is already underway, with Angelozzi saying the two teams are getting on famously, chemistry is good, let’s say.
Italy Is Eating Into The Retail Market, And Running Away With The Online Wins
It seems Italy likes Lottomatica, and the company is raking it in there. As is online sports betting market share, up 2.1% to 34.8%! Total online market share is now at 31.7%, another 0.9 points up from last year, and iGaming chipping in with 0.6 points to that increase.
Angelozzi says September was a record month for online market share in general, and sports betting on its own had a record quarter too. Sports betting had the highest quarter ever, apparently, and we had to have a steady approach to get there. It was all about slowly but surely eroding the market share from the competition.
Lottomatica took in €35.2 billion in bets in the first 9 months, an 8% increase. Online betting made up a big part of that, €24.2 billion or 69% of the total. Online bets themselves went up 12%, while retail sports betting was up 11% from a small base of €3.1 billion.
Gaming machines did the opposite, bets in that area fell 2% from €7.9 billion.
Guess what the first-half results looked like? Online revenue was up 13% to €525 million, but both retail divisions declined.
Angelozzi told analysts something very straightforward when asked about the retail network: it’s oversupplied. And budget law proposals? Just politely declined to say anything about them, for now.
One Quarter, Two Profit Stories
The reason for the big gap between the €200m reported EBITDA and the €234m ‘normalised’ figure was all down to the payout rate. Finance chief Laurence Van Lancker explained that “the payout was 3 points higher in Q3, which makes sense when you think about it.”
Lottomatica adjusts its results by taking an average payout rate over a rolling three-year period. And at the moment, those averages are 85.5% for online betting and 80.5% for where people physically go to gamble. These ‘normalised’ figures are what the company uses when it’s setting its expectations.
Full-year adjusted EBITDA guidance is still going to be between €940m and €980m. Management is confident they’ll hit the upper end of that range.
When it comes to cash flow from operating activities, we see a similar story. It was up 8% on a reported basis and 22% after ironing out the payout differences. Management also kept warning that Q4 results could yet mess with the figures we’ve got.
The growth in iGaming slowed to a crawl of 9% in October. When analysts asked why this had happened, Van Lancker just shrugged and said “We’re not concerned about it”. He also stuck to his guns when it came to what he expected to happen in the online market next year, which is still going to be in double figures.
Cirsa Brings Its Own Asterisk to the Party
Cirsa’s earnings call a day after Lottomatica’s revealed a similar situation with sports results.
Cirsa got stung to the tune of €10m in EBITDA because of some customer-friendly scores. If we take that out of the equation, its own growth would have been more like 17%. What it actually reported was 11.1% with revenue of €628m and EBITDA of €203m. The adjusted figure has already taken into account a €7.9m add-back for merger-related costs. Leave that in and EBITDA would be €195m.
Cirsa’s nine-month performance is a bit more positive. They reported net revenue of €1.89bn and EBITDA of €599m. That gives them a margin of roughly 32%. They’re still on track to hit the upper end of their 2026 EBITDA guidance which is €800m to €820m.
Cirsa’s revenue guidance is €2.5bn to €2.56bn. If they manage to hit the EBITDA target that would put their margin at a similar 32% to their nine-month result.
Lottomatica managed to pull a 38.7% margin on revenue of €1.7bn. Of course both companies use their own version of revenue and adjustments, so we don’t get a direct comparison. Even so their reported figures show that Cirsa isn’t quite so good at turning its revenue into EBITDA.
Spanish slot machines are still where Cirsa makes most of its profit. In Q3 that segment had a margin of 53.6% and revenue was up 6.9%.
The online part of their business is a bit more of a mixed bag. Revenue was up 14.3% to €446.7m over nine months, but EBITDA actually fell 4.9%. If you do a quick calculation that puts Cirsa’s online margin at around 17%. Lottomatica’s online business reported a 57.9% margin in the first half.
What the €2.8bn Deal Actually Promised Up?
When these two companies announced the all-share deal back on 2 September, they were pretty confident that the combined business would be raking it in, to the tune of pro forma adjusted EBITDA of almost 2bn euros.
They also threw in a fairly modest annual pre-tax savings target of around €115m, and that’s supposed to kick in by the end of the third full year after they tie the knot. As you’d expect, it looks like a big chunk of that will come from cutting operating costs, to the tune of €101m, with another €14m coming from the fact that they’ll be carrying less debt.
Regulus Partners thought the target was pretty laughable, calling it “staggeringly unambitious” in a note they passed on to NEXT.io. But they also reckon there’s a lot more growth potential hidden in there. They think Lottomatica’s experience in Italy could bring in around €350m extra revenue if they can use it to expand in Spain.
The Hurdles to Jump, Shareholder Approval, Regulators and an Exit Clause
The merger still needs shareholder approval and the nod from the competition authorities.
Lottomatica shareholders are voting on the 23rd of November, while Cirsa shareholders get to have their say on the 30th, or maybe the 1st of December, if the vote doesn’t go down smoothly on the first day. There was originally a vote set for the 25th, so keep an eye on your final notice.
The companies have filed the necessary paperwork with the competition authorities in Italy, Spain, Mexico and Morocco, and they’ve also formally requested clearance from the guys in Brussels. But don’t get too excited, this is just the first step, and they still have to get the green light from the authorities.
Under the deal, Cirsa shareholders will get 0.668 new Lottomatica shares for each of their Cirsa shares, plus a bonus €1.56 dividend that adds up to around €262m in total.
If you’re a Cirsa shareholder and you decide to vote against the merger, you can choose to opt out and get €13.20 in cash per share, less any cash you’ve already got stashed away somewhere.
But here’s the thing: the deal only goes ahead if less than 5% of Cirsa’s shareholders opt out. After that, Lottomatica shareholders will be in charge with 67.5% of the combined business, while Cirsa shareholders will hold 32.5%. And as for Blackstone, they’ll still be the largest shareholder of all, with around 24% of the business.
They’ll also get to appoint two directors to the expanded board, which will now have 13 members instead of 11.
And if all goes to plan, the companies are proposing to hand out a whopping €744m in capital return after the merger. That could come in the form of a special dividend, a tender offer, or, who knows? A bit of both.
Lottomatica is currently running a debt of €2.164bn, which is roughly 2.4 times its adjusted EBITDA. And Cirsa’s net debt of €2.104bn is equal to 2.66 times their EBITDA. All told, they’re looking at a combined debt of over €4.2bn, which, of course, will shrink a bit if they go ahead with that capital return.
Lottomatica is expecting around €30m in one-off merger costs, mainly in the first quarter of next year. And Cirsa is also expecting around €20m in merger costs, although they’re not as clear on when these will hit.
Expert Analysis: The Yardstick Gets Its Say
We believe that investors need to give more consideration to the word “normalised.” Adjusted EBITDA for the first nine months stood at €665.5m. If the payouts are normalised, the EBITDA becomes €715.1m.
For two out of three quarters in the current year (Q1 and Q3), reported EBITDA was more than €17m behind the corresponding normalised figure. Bad sports performance can explain the situation, as shown by Cirsa’s €10m loss during Q3.
However, investors could fairly question whether part of these higher payouts represents the price of acquiring market share. We cannot prove that, and management denies it. However, with the nine-month numbers available now, the question needs to be raised.
A three-year average is relevant only when there have not been any changes in the market structure. The Italian licensing policy changed in November 2025 – this fact needs to be taken into account.
According to Angelozzi, there are too many retail outlets in Italy. At the same time, Cirsa adds its Italian slot machine segment, which grew 2.1% in nine months. Speaking of potential bolt-on acquisitions, Angelozzi said “The focus is certainly not going to be Italy.” It is clear that investors would ask how the shops would fare.
The biggest challenge in Spain, on the contrary, would relate to the combined business. The issue has little to do with the €115m savings target. Regulus is correct to note that the number appears timid, but it has nothing to do with the poor online margin of Cirsa.
With every 10-percentage-point improvement in the margin, about €45m could be added to the revenue based on nine-month online sales. By summer next year, will it be 3%, or 17%?
We believe that both figures will lose importance. What matters is whether Cirsa manages to stop decreasing its online profit while maintaining revenue growth.
Explore more:
Share
4 views
