Playtech witnessed an upswing in both earnings and adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) in the 2023 fiscal year compared to the preceding year. Chief Executive Officer (CEO) Mor Weizer expressed his gratitude for the group’s advancement in “strategic planning and daily operations.”
Playtech achieved strategic progress in the 2023 fiscal year, with a net profit of €1.051 billion.
Playtech’s ongoing operations revenue expanded by 6.6% to €1.71 billion (£1.46 billion/$1.85 billion). This growth was driven by advancements in both its business-to-business (B2B) and business-to-consumer (B2C) segments in 2023.
Reflecting on the past year, Weizer emphasized the expansion into the United States. He highlighted several key achievements from 2023, including the establishment of a third physical casino facility in Pennsylvania, increasing the number of licenses to 11, with additional applications in progress.
In other areas, the B2C segment achieved revenue exceeding €1 billion for the first time. Here, Weizer focused on Snaitech, stating that the brand remains well-positioned to benefit from the limited penetration of the online segment.
“The foundation of this performance lies in our skilled colleagues across the globe,” Weizer stated. “Despite significant disruptions from geopolitical conflicts this year, they have consistently delivered for our customers, and we express our sincere appreciation to all of them.”
The Caliplay predicament
However, amidst this backdrop of revenue growth, the ongoing legal case with Mexico-facing Caliplay persists.
This disagreement has been ongoing for a while, with a notable development in October 2023 when Caliplay initiated legal action to terminate its partnership with Playtech.
Caliplay is a collaborative venture between Playtech and Caliente, a Mexican-based operator. However, Caliplay is now seeking to end its legal association with Playtech. The company has made this move public because it asserts that it is affecting the operations of its regulated business in Mexico.
Playtech responded to the dissolution request in November, announcing steps to settle the dispute. The company also asserted that Caliplay’s actions in the Mexican court proceedings violate the contractual agreements under the strategic arrangement established in 2014.
Now, Playtech has filed additional claims against Caliplay, involving unpaid charges. The dispute includes a disagreement over the charges Caliplay is expected to pay, primarily B2B license charges and supplementary B2B service charges.
Playtech claims that Caliplay has not paid the B2B license charges due in August 2023 and the additional B2B service charges due in July 2023. However, the company acknowledges €86.5 million in outstanding revenue for the year and states that it is highly probable to recover the funds in full.
In outlining its stance, Playtech stated that it holds a €730.2 million acquisition call option (a derivative financial asset), representing 22% of Playtech’s total assets. However, this is contingent on the court’s ruling, which could potentially invalidate Playtech’s acquisition call option.
The group feels the choice is outmoded and initially indicated its expiration in its six-month report for the period ending June 30, 2022, released on September 22, 2022. The group’s position stayed the same as of December 31, 2022, and into 2023.
However, despite the ongoing legal matter, Playtech still expressed its appreciation for Caliplay as a customer. The case is scheduled to go to court in October.
“Caliplay remains a very significant client,” Playtech stated. “The firm is committed to continuing an open discussion with Caliplay to talk about future directions.”
Business-to-business income in 2023 rose to €684.1 million
Interestingly, Caliplay’s strong performance was mentioned multiple times when Playtech discussed its 2023 results.
Starting with business-to-business, including the partnership with Caliplay, revenue here rose by 8.2% to €684.1 million. Playtech stated the Americas was the biggest driver of growth, with revenue increasing by 46.4%.
In Latin America, Playtech said Caliplay remains a major force in Mexico. However, it also applauded the success of Wplay in Colombia and the early performance of Galerabet in Brazil.
Playtech also mentioned the “enormous” growth opportunity in the United States, with numerous operators launching in several states. In northern Canada, Playtech highlighted the “outstanding” start to its expanded relationship with NorthStar in Canada.
Business-to-consumer revenue hits a record high
As for business-to-consumer, revenue reached a record €1.04 billion, up 5.5% year-over-year.
Playtech asserts that Snaitech, which operates in Italy, is a key driver of its expansion, with income from the enterprise rising by 5.2% to €94.7 billion. The group indicates that this was fueled by growth in both physical and online operations, adding that the Snai brand has retained its market share leadership.
The company also discussed targeted acquisitions to expand Snaitech, particularly focusing on acquisitions in Italy. Moreover, Playtech stated it anticipates online franchise fees to rise significantly, making it challenging for many smaller operators to be profitable. It added that this would create more chances for acquisitions.
Conversely, Playtech mentioned the HappyBet brand, which experienced further losses in 2023. However, a portion of this was linked to historical legal settlement expenses, with losses anticipated to shrink in 2024.
This section also included growth in Sun Bingo and other B2C businesses. Playtech attributed this to more effective marketing expenditures and higher player retention rates due to enhanced user experience.
Revenue growth propelled net profit to €1.051 billion.
In terms of expenditures, Playtech’s total expenses were higher. The group’s primary expense was distribution costs before depreciation and amortization, which totaled €1.15 billion, an increase of 6.5%.
Other noteworthy costs included administrative expenses before depreciation and amortization, which remained at €1.467 billion. Depreciation and amortization climbed by 14.3% to €1.944 billion for the year.
Playtech also noted that 89.
Playtech encountered a significant financial hit, amounting to eight million euros, impacting both physical and non-physical assets. This included a substantial seven million eight hundred thousand euro loss for Eyecon, a nine hundred sixty thousand euro loss for Quickspin, and a considerable seven million two hundred twenty thousand euro loss for the sports B2B operations.
The Eyecon loss was primarily attributed to underwhelming performance stemming from heightened competition within the UK online marketplace. Its value plummeted from seventeen million five hundred thousand euros to a mere nine million seven hundred thousand euros.
The Quickspin loss was a result of the business undergoing a transitional period, leading to a decline in income. However, following internal reorganization, the business is now overseen by the “ive” business unit and exhibits signs of improvement.
Finally, the sports B2B business loss was triggered by the termination of two major retail agreements during the year. Its value decreased from two hundred thirty-six million two hundred thousand euros to one hundred sixty-four million euros.
Despite elevated expenses, revenue growth resulted in a substantial one hundred forty-six point seven percent surge in pre-tax profit, reaching two hundred thirty-five million eight hundred thousand euros. After settling one hundred thirty million seven hundred thousand euros in income tax, net profit reached one hundred five million one hundred thousand euros, representing a remarkable one hundred fifty-eight point nine percent increase.
Playtech also factored in the impact on earnings from discontinued operations in 2022, which yielded an additional forty-seven million euros. However, even considering this, the final net profit still experienced a twenty percent rise.
Moreover, adjusted EBITDA for 2023 witnessed a seven point one percent growth, reaching four hundred twenty-three million three hundred thousand euros.
Concerning 2024, Playtech asserts that the year has commenced with strong momentum. The company highlights promising growth prospects in its B2B business within regulated markets, including the Americas, as well as in its B2C business.
As a result, the business has established an adjusted EBITDA target for the business-to-business sector ranging from €200 million to €250 million, while the business-to-consumer sector is aiming for between €300 million and €350 million.
“In general, we are confident in our capacity to carry out our plan and continue to produce value for investors,” Weize stated.
What do market experts think?
Neil Shah, head of research at Edison Group, examined the data and provided independent perspectives.
Shah agrees that the outcomes show progress in strategy and operations. However, he also highlights that difficulties persist, particularly with the ongoing dispute with Caliplay.
“Given the organization’s acknowledgment of €86.5 million outstanding in 2023 revenue, all eyes will be on Playtech in October when the case goes to court, which could lead to a substantial revenue loss if Caliplay fails to meet its payment commitments,” Shah said.
“Despite this, Playtech remains in a strong financial position with a leverage ratio of 0.7x, due to its successful operations and strategic partnerships in the United States. In terms of segments, the company has witnessed strong growth, particularly in the Americas, with revenue up 46%, and its business-to-consumer business remains strong, growing by 5%, driven primarily by brands like Snaitech.”
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