• Adjusted EBITDA: EUR243 million, up 11%.

• Group Revenue: EUR907 million, up 5%.

• Adjusted Operating Cash Flow: EUR151 million.

• Leverage: Declined to 0.5 times, down from 0.7 a year ago.

• B2B Revenue: EUR382 million, up 12% on a constant currency basis.

• B2B Adjusted EBITDA Growth: 38%.

• B2B Adjusted EBITDA Margin: Expanded by 510 basis points.

• B2C Revenue: Flat.

• B2C Adjusted EBITDA: Declined 6%.

• Sale of Snaitech: Total enterprise value of EUR2.3 billion.

• Cash Received from Caliplay: Over EUR150 million post period end.

• Expected CapEx for 2024: Approximately EUR170 million.

• Effective Tax Rate for 2024: Circa 30%.

• Revenue from Live Casino: More than EUR150 million.

• Revenue Growth in the Americas: 37% in constant currency.

• Revenue Growth in the US and Canada: More than 200% in H1.

• Revenue Growth in Regulated Markets: 16% in constant currency.

• Revenue Growth in SaaS: More than 40% in H1 2024.

• Warning! GuruFocus has detected 3 Warning Signs with FRA:DVL.

Release Date: September 30, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Playtech PLC (PYTCF) reported an excellent financial performance in H1 2024, with adjusted EBITDA of EUR243 million, up 11% and ahead of expectations.

• The B2B division saw significant growth, with adjusted EBITDA increasing by 38%, driven by strong performance in the Americas.

• The company finalized a revised strategic agreement with Caliplay, setting the foundation for growth in both domestic and international markets.

• Playtech PLC (PYTCF) reached a definitive agreement to sell Snaitech to Flutter for EUR2.3 billion, realizing significant shareholder returns.

• The balance sheet remains robust, with leverage declining to 0.5 times, and further reduced to 0.2 times on a pro forma basis after cash received from Caliplay.

Negative Points

• B2C revenues remained flat, and adjusted EBITDA declined by 6% compared to last year due to customer-friendly sporting results.

• HAPPYBET saw revenues fall by 7% in H1, driven by the rationalization of retail sites in Germany and Austria, leading to the decision to close the Austrian business.

• The revised agreement with Caliplay will result in a EUR30 million to EUR40 million cash headwind in 2025 compared to 2024.

• The US business remains loss-making, with negative EBITDA in the teens to the better part of EUR20 million, and profitability is still a few years away.

• Revenue growth in Europe was flat at constant currency, with declines in Greece and Poland offsetting growth in Spain, Italy, and Ireland.

Q & A Highlights

Q: When do you expect the Americas region to become profitable and generate EBITDA? A: Chris McGinnis, CFO: The US business is currently in an investment phase and is loss-making, with negative EBITDA in the teens, nearing EUR20 million. Profitability is a few years away, but the demand and expansion, particularly in live casino facilities, are promising. We are balancing investment with the growing momentum in the US market.

Q: What is the roadmap for Hard Rock Digital outside of Florida? A: Mor Weizer, CEO: Hard Rock Digital is focusing heavily on Florida, where it holds a prime position. They are also establishing themselves in other states like New Jersey and have acquired assets to facilitate market entry in other gaming states. Over time, they aim to expand both within the US and internationally.

Q: Can you clarify the accounting and cash impact of the new Caliplay agreement? A: Chris McGinnis, CFO: The EUR31 million annual impact is an estimated full-year amount. Dividends from Caliplay will be received by the US holding company and then distributed to shareholders, ensuring cash flow is not trapped in Mexico. The new structure is designed to facilitate this.

Q: How significant is the live segment in unregulated Asia compared to Brazil? A: Chris McGinnis, CFO: The live segment in Asia is relatively small, whereas Brazil is a much larger market for us. We expect Brazil to grow significantly once regulations come into effect, with established partnerships like Galera.bet and other licensed operators.

Q: How will the new incentive plan affect Playtech's strategy? A: Mor Weizer, CEO: The incentive plan aims to align management with shareholders to create long-term value. It supports the execution of our strategy without changing it, focusing on growth and value creation for shareholders.

Q: Is there any ambition for Caliplay to list publicly to show its value? A: Chris McGinnis, CFO: A listing is ultimately Caliplay's decision. While they considered a SPAC listing in 2021, the new US holding company structure may achieve similar goals. A listing is not a goal in itself but could be considered in the future.

Q: What are the prospects for iGaming liberalization in Florida? A: Mor Weizer, CEO: It's too early to predict iGaming regulations in Florida. Hard Rock is currently focused on sports betting. When iGaming regulations do come, we are well-positioned with Hard Rock as a partner.

Q: How will Galera.bet compete in Brazil's market, and does it have sufficient balance sheet strength? A: Mor Weizer, CEO: Galera.bet has a targeted marketing strategy different from larger operators. We believe it will be a self-sustained business soon after regulations come into effect. Playtech's investment will be strategic and focused on supporting growth without excessive spending.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.