Playtech witnessed a year-over-year rise in income and modified earnings before interest, taxes, depreciation, and amortization in the 2023 fiscal year. The company’s chief executive, Mor Weizer, voiced contentment with the organization’s “strategic and operational” advancement.
Playtech attained a net profit of €1.051 billion, fueled by robust performance in both its business-to-business and business-to-consumer segments. The company’s ongoing operations revenue expanded by 6.6% to €1.71 billion (£1.46 billion/$1.85 billion).
Weizer emphasized the company’s expansion in the United States, noting the inauguration of a third land-based gambling facility in Pennsylvania and the increase in licenses to 11, with additional applications pending.
The business-to-consumer segment also experienced a notable milestone, exceeding €1 billion in revenue for the first time. Weizer specifically mentioned Snaitech, stating that the brand is well-positioned to capitalize on the under-penetration of the online market.
“Underlying this performance are our skilled colleagues across the world,” said Weizer. “They continue to serve our clientele despite significant disruptions caused by geopolitical conflicts this year, and we are deeply appreciative of their efforts.”
Despite the positive revenue growth, the ongoing legal case with Caliplay, which targets the Mexican market, remains a source of concern.
This disagreement has been ongoing for some time, with the most recent development being Caliplay’s legal action in October 2023 aiming to terminate its partnership with Playtech.
Caliplay is a collaborative venture between Playtech and Caliente, a Mexican gaming operator. However, Caliplay is now seeking to end its legal ties with Playtech. It has made this public because it claims this is impacting the operations of its regulated business in Mexico.
Playtech responded to the request to dissolve the agreement in November, declaring that it was taking steps to resolve the conflict. It also stated that Caliplay’s actions in the Mexican court proceedings violated the contractual agreements under the strategic agreement established in 2014.
Now, Playtech has filed additional claims against Caliplay, involving unpaid charges. The dispute includes a disagreement over the charges Caliplay should pay, primarily B2B license fees and supplementary B2B service fees.
Playtech asserts that Caliplay has not paid the B2B license fees due in August 2023 and the additional B2B service fees due in July 2023. However, it acknowledges an outstanding amount of €86.5 million from the year’s revenue and states that it is highly likely to recover the cash in full.
Playtech has detailed its position, stating that it holds a €730.2 million acquisition call option (a derivative financial asset). This represents 22% of Playtech’s total assets. However, this is subject to the court’s decision, which could potentially invalidate Playtech’s acquisition call option.
The entity feels the alternative is outmoded and initially brought up the alternative being outmoded in its interim report for the six months concluding June 30, 2022, published on September 22, 2022. The entity did not alter its stance on the maturity date in either 2022 or 2023.
Nevertheless, despite the ongoing legal proceedings, Playtech still stated it values Caliplay as a client. The case is set to go to trial in October.
“Caliplay remains a very important client,” Playtech stated. “The firm is committed to maintaining an open dialogue with Caliplay to discuss the path forward.”
Business-to-business revenue in 2023 climbed to €684.1 million.
Coincidentally, Caliplay’s performance surfaced numerous times as Playtech discussed its 2023 outcomes.
Beginning with business-to-business, which encompasses the Caliplay partnership, revenue in the area expanded by 8.2% to €684.1 million. Playtech stated the Americas was the primary driver of growth, with revenue increasing by 46.4%.
In Latin America, Playtech stated Caliplay remains a key driver in Mexico. However, it also commended the success of Wplay in Colombia and the early performance of Galerabet in Brazil.
Playtech also mentioned a “substantial” growth opportunity in the United States, with multiple operators launching in multiple states. In Canada, Playtech highlighted the “outstanding” start to its expanded relationship with NorthStar in Canada.
Business-to-consumer revenue reaches a record high
Regarding business-to-consumer, revenue reached a record €1.04 billion, up 5.5% year-over-year.
Playtech emphasized Snaitech in Italy as a key driver of expansion, with earnings in the area rising by 5.2% to €94.7 billion. The organization stated this was fueled by growth in both physical and internet operations, adding that the Snai brand remains a market share leader.
Playtech also mentioned focused acquisitions to enlarge Snaitech, particularly concentrating on Italy. Furthermore, Playtech stated it anticipates internet licensing fees to increase considerably, making it challenging for numerous smaller operators to stay afloat. It added that this would generate further acquisition opportunities.
Elsewhere, Playtech mentioned the HappyBet brand, which experienced further losses in 2023. However, part of this was related to past legal settlement expenses, and losses are predicted to be lower in 2024.
Also within this segment, Sun Bingo and other B2C businesses reported growth. Playtech attributed this to more effective marketing spending and increased player retention due to enhanced user experience.
Earnings growth drove an increase in net profit to €1.051 billion.
On the cost side, Playtech experienced higher overall expenditures. The group’s primary expense was distribution costs before depreciation and amortization, which came in at €1.15 billion, a 6.5% increase.
Other notable costs included administrative expenses before depreciation and amortization, which remained at €1.467 billion. Depreciation and amortization increased by 14.3% to €1.944 billion for the year.
Playtech also highlighted €89.
Playtech documented a €8 million impairment loss, encompassing tangible and intangible assets. This included a €7.8 million impairment for Eyecon, a €9.6 million impairment for Quickspin, and a substantial €72.2 million impairment for the sports B2B business.
The primary reason for Eyecon’s impairment was heightened competition in the UK online marketplace, resulting in subpar performance. Its valuation decreased from €17.5 million to €9.7 million.
Quickspin’s impairment was attributed to the business undergoing a transitional phase, leading to a reduction in revenue. However, following an internal reorganization, the business is now overseen by the “ive” business unit and is exhibiting signs of improvement.
Lastly, the impairment of the sports B2B business was due to the loss of two significant retail contracts during the year, causing its valuation to decline from €236.2 million to €164 million.
Despite the elevated costs, revenue growth resulted in a 146.7% increase in pre-tax profit, reaching €235.8 million. After settling €130.7 million in income tax, net profit reached €105.1 million, a 158.9% increase.
Playtech also factored in the influence of discontinued operations in 2022 on profits, which generated an extra €47 million. However, even considering this, net profit still expanded by 20.0%.
Furthermore, adjusted EBITDA for 2023 expanded by 7.1% to €423.3 million.
What regarding 2024?
Playtech declared that its 2024 commencement was “strong.” It emphasized robust underlying growth trends in its B2B business across regulated markets, including the Americas, as well as in its B2C business.
Thus, the organization has established its business-to-business medium-term adjusted earnings before interest, taxes, depreciation, and amortization objective at 200 million euros to 250 million euros, while the business-to-consumer goal is 300 million euros to 350 million euros.
“In general, we are certain in our capacity to carry out our plan and continue to produce value for investors,” Weize stated.
What do market experts say?
Market experts have independently examined these figures, and Neil Shah, head of research at Edison Group, shared his thoughts.
Shah agrees that the outcomes demonstrate significant progress in strategy and operations. However, he also points out that difficulties remain, particularly with the ongoing dispute with Caliplay.
“Considering the group’s acknowledgment of 86.5 million euros in outstanding income for 2023, all eyes will be on Playtech in October when the case goes to court, which could result in a substantial loss of income if Caliplay fails to meet its payment obligations,” Shah said.
“Despite this, Playtech remains in a solid financial position with a leverage ratio of 0.7x, due to its successful operations and strategic partnerships in the United States. By sector, the company achieved strong growth, particularly in the Americas, where revenue increased by 46%, and business-to-consumer performance remained stable, increasing by 5%, driven by brands like Snaitech.”
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