Playtech announced a growth in revenue as well as adjusted EBITDA for its financial year 2023. CEO Mor Weizer praised the “strategic” and “operational” progress made by all of Playtech’s subsidiaries.
Playtech’s revenue from ongoing operations increased 6.6%, to EUR1.71bn ($1.85bn/£1.46bn/£1.46bn). The growth in both the B2B as well as B2C segments is expected to drive this increase.
Weizer highlighted the US expansion as a highlight of his year. Weizer highlighted several highlights for 2023. These included opening a new live casino in Pennsylvania, and increasing the number of licences to 11. Additional applications are pending.
The B2C segment delivered revenue exceeding EUR1.00bn in other areas for the very first time. Weizer focused his attention on Snaitech and said that the brand is well-positioned to take advantage of the low penetration in the online market.
Weizer stated that “our talented colleagues in the global workforce are responsible for this outstanding performance.” “Despite significant disruptions from geopolitical conflicts during the past year, our colleagues have delivered for our customers. We are grateful to all of them.”
Caliplay: The conundrum
The ongoing litigation with Caliplay, a Mexican company, is a stark contrast to the revenue growth.
Caliplay filed a lawsuit in October 2023 to cancel its partnership with Playtech.
Caliplay was created as a joint-venture between Playtech, a company based in the United States and Caliente, whose main market is Mexico. Caliplay, however, is seeking to terminate the legal relationship it has with Playtech. Caliplay made this process public because it said it would impact the way its business is run in Mexico.
Playtech responded to the cancellation request by announcing steps in November that would resolve the conflict. Caliplay’s actions in the Mexican courts were also deemed to be in violation of contractual agreements made under a strategic agreement signed in 2014.
Playtech is now claiming additional fees that Caliplay has not paid. Caliplay is disputing fees that it owes, including B2B license fees and B2B service fees.
Playtech stated that Caliplay had not paid the B2B license fees due in August 2023, and B2B service fees due in July 2023. It did, however, include the EUR86.5m in its full-year revenues, saying that it was highly likely cash would be collected.
Playtech has disclosed that it holds derivative financial assets valued at EUR730.2mi as part of its M&A call options. These assets make up 22 percent of Playtech’s total assets. This is dependent on the outcome of the case, and could result in the cancellation of the Playtech M&A option.
The group is of the opinion that the option expired. It first mentioned its expiration in the interim report published by the 22nd September 2022 for the period ending 30th June 2022. The group’s position hasn’t changed with regard to expiry on 31 December 2022 or 2023.
Caliplay is still valued by Playtech, even though the case continues. Trial is scheduled for October.
Playtech stated that Caliplay is a very important client. Caliplay is a very important customer for Playtech.
Revenues from B2B up to EUR684.1m by 2023
Caliplay’s solid results are mentioned several times by Playtech when discussing its 2023 performance.
B2B revenue, including the Caliplay Partnership, was up 8.2% at EUR684.1m. Playtech stated that the Americas region was responsible for the largest growth in revenue, up 46.4%.
Playtech stated that Caliplay, in Mexico, remains the main driver of Latin America. It also highlighted the early success of Galerabet and Wplay in Colombia.
Playtech also mentioned “significant” opportunities for growth in the US. Several operators have launched across several states. Playtech highlighted a “very good” beginning to a new relationship in Canada with NorthStar.
Revenue record for B2C
In B2C sales, revenues reached EUR1.04bn – a new record. This represents a 5.5% increase year on year.
Playtech stated that Snaitech, which is based in Italy, was responsible for the growth. Revenues here increased by 5.2% to EUR9.47bn. The group stated that this growth was due to retail and online sales, with the Snaibrand maintaining its top market share.
Snaitech is looking to acquire bolt-ons in Italy, and there are also talks of M&A. Playtech also said that there will be a significant increase in the online concession payments, which makes it uneconomical to many smaller operators. It adds that this will lead to more M&A opportunities.
Playtech also made mention of the HappyBet Brand, which reported further losses in 2023. Some of the losses were due to litigation expenses from years past, but they are expected to decrease in 2024.
Sun Bingo, as well as other B2C businesses, also reported growth in this segment. Playtech attributed this to more efficient marketing and a higher retention rate of players because of improved user experiences.
Profits rise to EUR105.1m as revenue increases
Playtech’s costs were generally higher. Distribution costs, before depreciation or amortisation, were the group’s largest outgoing at EUR1.15bn. This was an increase of 6.5%.
Administrative expenses, before depreciation or amortisation were also level at EUR146.7m. The year-end depreciation was higher by 14.3% at EUR194.4m.
Playtech reported EUR89.8m of costs related to the impairments of intangible assets, intangible property and plant. It said that this relates to the loss of Quickspin EUR9.6m, Eyecon EUR7.8m and mainly sports B2B EUR72.2m.
This impairment was due to underperformance in the UK’s online market, which is becoming increasingly competitive. The value of this carried down from EUR17.5m EUR9.7m
Quickspin’s revenue dropped as it went through a period of transition. It did, however, show some signs of recovery following a realignment of its internal management.
The loss of 2 significant retail contracts, whose value dropped from EUR236.2m down to EUR164.0m, was the final reason for the decline in sport B2B.
The pre-tax profits increased by 146.7% despite higher costs. Net profit after paying EUR130.7m in income tax was EUR105.1m. This is a 158.9% increase.
Playtech took into consideration the effect of discontinued operations in 2022. These generated an additional EUR47.0m. Despite this, the bottom-line net profit was still 20.0% greater.
The adjusted EBITDA for 2023 increased 7.1%, to EUR423.3m.
What are the expectations for 2024?
Playtech has said that its current business operations have been “solid”. The company noted that B2B growth was strong across all regulated markets, including in the Americas.
It set an adjusted EBITDA medium-term target for B2B of EUR200.0m – EUR250.0m, and a target B2C of EUR300.0m – EUR350.0m.
Weizer stated, “In conclusion, we are very confident about our ability to implement our strategy and continue to deliver value to our shareholders.”
What do analysts say?
Neil Shah, Edison Group’s director of research, provides an independent analysis on the numbers.
Shah acknowledged that the results show good progress on both a strategic and an operational level. He also acknowledged that challenges remain, including the dispute with Caliplay.
Shah stated that “with the group admitting the outstanding amount EUR86.5m in revenue for 2023 all eyes will turn to Playtech when the case is heard in October and could result in significant revenue loss if Caliplay fails to meet its obligations.”
Playtech’s balance sheet is resilient, with a leverage of 0.7x. This is a result of its successful US operations and strategic alliances. It saw strong divisional growth in particular, the Americas, where revenues grew by 46 percent. B2C performances remained stable with a 5 percent increase led by Snaitech.
