Caliplay dispute eclipses Playtech’s progress
Caliplay dispute eclipses Playtech’s progress
Playtech earnings review, 888’s US B2C sale, sector leaders take bad news hit +More
Playtech sees US progress in spite of Caliplay legal dispute.
In +More: Bally’s appoints committee advisors.
888 sells its US B2C biz to Hard Rock Digital.
Flutter and DraftKings take a hit from bad news trifecta.
BettingJobs’ Jobsboard features country manager and senior accountant roles.
Just let me hold you like a hostage.
Playtech’s ups and downs
The grapple game: The dark shadow of ongoing litigation with its largest client Caliplay hung over Playtech’s annual results call, with the added revelation that the Mexican operator owes €86.5m in unpaid B2B fees.
Nowhere to run to, nowhere to hide: Neither CEO Mor Weizer nor CFO Chris McGinnis shied away from the importance of the situation, highlighting the resolution of the dispute as “our main short-term priority.”
Like a fool I’m in a cage: Peel Hunt analysts noted: “If the dispute was to continue through FY24 [and the court case in London is not scheduled until October], we estimate that ~90% of B2B EBITDA and ~34% of group EBITDA, would be trapped in debtors.”
Another analyst, speaking on condition of anonymity, went one step further: “Without Caliplay the B2B business is structurally unprofitable.”
Didn’t we almost have it all: In the early 2010s, Playtech was riding high with all-encompassing deals and exclusive arrangements with the likes of William Hill, Ladbrokes, Paddy Power, Gala Coral and many more. “Their pricing power was immense,” said the analyst.
“Their revenue was sky high but so were their costs,” they added.
“Now the stranglehold has been broken massively and they are left with the costs. It would seem their costs and revenues are completely out of sync.”
Don’t forget to read the small print: Recall, the dispute centers around a call option that enabled Caliente to buy Playtech’s 49% share in the Caliplay joint venture. Playtech claims the option has expired.
Just two years ago, the two parties were preparing to float the business via a SPAC but the deal became a victim of worsening market conditions and the Aristocrat-MBO takeover saga.
The SPAC deal would have seen Caliente owner Jorge Hank Rhon sell up and the independent company targeting the US and other LatAm countries. A future IPO or sale remains likely in the medium term.
“Caliente would have looked at Playtech’s previous disputes and realized that you have to take them right to the edge or they won’t negotiate,” said an insider.
The dispute rather dampens the enthusiasm for Caliplay’s continuing excellence. B2B revenue from Latin America was the group’s fastest-growing segment, with Caliplay accounting for the majority of a 32% rise in revenue to €198.7m.
“The underlying performance of Caliplay has been remarkable,” said Weizer.
Don’t hold your breath: McGinnis said cash-flow generation was still strong but the situation has put on hold any hopes shareholders might have for dividends.
From hard luck to Hard Rock: Progress in North America is good with revenue up 82% to €13.2m. More importantly, the building blocks are in place with high hopes for Hard Rock Digital – in which Playtech has a small €79.8m stake – expanding iCasino beyond New Jersey and its 10 other US clients, which include Rush Street Interactive, BetMGM and Parx.
Live casino revenue was another highlight, with revenue up 24%. Playtech has built its third US studio (in Pennsylvania) and a second in Lima, Peru.
“We are playing catchup [in the US],” said Weizer. “But I think we are getting there.”
Brazil lies third on the CEO’s list of priorities, after Caliplay and the US.
By the numbers: Aside from the litigation woes, Playtech revealed some strong numbers with group revenue up 7% to €1.7bn and adj. EBITDA up 9% to €432m. Snaitech drove B2C revenue up 5% to just over €1bn, with adj. EBITDA rising 6% to €250m. B2B revenue grew 8% to €684m, with adj. EBITDA up 14% to €182m.
Non-regulated revenue was down 17% to €139m after Ontario and South Africa were transferred to regulated markets.
Asia now accounts for less than 10% of revenue. “Asia is highly cash generative. We keep it because we can invest the cash in other territories,” explained Weizer.
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+More
Breaking: Georgia’s sports-betting efforts came to an end overnight when Republicans wouldn’t agree to Democrat demands over putting revenue toward needs-based education funding. Via PlayUSA. See Compliance+More next week for more.
Macquarie and legal firms Potter Anderson & Corroon and Sullivan & Cromwell have been appointed by the special committee of Bally’s board to help evaluate the take-private offer from major shareholder Standard General.
Evolution said it has entered the Delaware market via a deal with sole operator Rush Street Interactive.
1/ST Technology has announced a partnership with bet365 to provide horseracing betting content.
Deal Talk
Digital marketing specialist InclineBet has snapped up full service creative agency Random Colour Animal for an undisclosed sum. RCA was founded by Jo Dennis and specializes in brand, UX/UI and marketing asset design for the iGaming sector. Dennis will stay with InclineBet as head of sales and account management..
By the numbers
Nevada returned to record-breaking ways in February as the Las Vegas Strip numbers for February showed a 12% rise to $800m, boosted by the Super Bowl taking place in the city. Las Vegas Locals were also up nearly 4% to $242m. Total Nevada GGR increased 8.5% YoY to $1.34bn.
North Carolina is off to a “strong start” with over $198m of handle and $42.7m in GGR being generated in the first week, according to figures provided by the state lottery.
Read across
In Compliance+More this week, the NCAA came out against college prop bets, while in California, Victor Rocha, conference chair of the Indian Gaming Association, said sports betting is likely to be back on the ballot in 2026 with OSB to follow in 2028.
LosIngesos+Mas reported on the numbers from the online opening of the state of Córdoba, Argentina.
On social
The word on the Strip: Wild rumors are circulating in Las Vegas about the Ohtani controversy.
888 sells US B2C to Hard Rock
The handover: 888 has swiftly concluded the strategic review of its US B2C online operations and opted to sell selected assets to Hard Rock Digital for an undisclosed sum. The B2C operation is active in four states including New Jersey, via the 888Casino, Michigan with SI Sportsbook and SI Casino, and Colorado and Virginia with sports-betting alone.
888 said the completion of the deal would happen in stages with the task likely finished in Q4.
It added the exit is expected to benefit the company’s adj. EBITDA by ~£25m from 2025 onwards with £10m of that invested into “growth and value creation” initiatives.
Recurring injury: However, one-off costs related to the ending of the SI partnership will cost the company £40m, including the previously announced brand licensing termination fee to be paid between this year and 2029.
Congregating in another dimension: Recall, 888 canned its partnership with Sports Illustrated earlier this month and put its B2C presence in the US under review, with a sale of the business one of the options. The exit from Sports Illustrated and now the US B2C scene entirely marks the first major moves by CEO Per Widerström.
The company said this week it planned to change its name to Evoke, pending shareholder approval, and had embarked upon a “value creation plan.”
Picture this: 888’s renaming and value creation plans got something of a vote of confidence from shareholders, with the share price rising over 6% on the day of the earnings announcement on Tuesday.
🤔 Remembrance of share price strength past for 888 shareholders
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The shares week – DraftKings and Flutter
Bumps in the road: The online sector was hit by a trifecta of bad news on Wednesday as the NCAA called for an nationwide ban of prop betting on college sports, New Jersey State Sen. John McKeon put forward a bill that proposes a 30% tax rate and The Wall Street Journal reported on a letter from Sen. Richard Blumenthal of Connecticut to eight sports-betting operators demanding answers on how they target VIPs.
The news hit the share prices of market leaders DraftKings and Flutter, which fell nearly 7% and over 8% respectively on the day, representing a combined $3.8bn in market value.
Unfortunate timing: The team at Jefferies noted the three pieces of news came while they were in conversation with Flutter CEO Peter Jackson and CFO Paul Edgecliffe-Johnson. On the responsible gambling front, the team said Flutter has “always positioned itself” as a well-behaved corporate citizen.
On the potential for tax increases, meanwhile, the team suggested this was a “likely narrative” as markets mature.
“Where taxes have risen elsewhere, operators recapture lost margin in less favorable odds to customers and market share shifts to the larger operators,” the team added.
On the potential loss of NCAA props betting, the team at JMP estimated such a ban could mean up to $200m might be at risk based on 2023 revenues. They added that the worst-case scenario long-term hit to EBITDA for DraftKings and Flutter would be $45m and $55m respectively.
“That said, we believe these operators have the pieces in place to shift wallet share from prop-style betting into traditional game outcomes,” the team added.
Everything flows: On the earnings call this week, there were questions from analysts on the EBITDA flow-through differential between Flutter US at ~35% vs. the >50% at DraftKings. “This has been a bit of a sticking point for investors,” the analysts at CBRE suggested.
But they suspected Flutter’s guidance “could prove conservative.”
“That said, we do expect the promotional environment to remain competitive in FY24.”
Further reading: ‘America made a huge bet on sports gambling. The backlash is here.’ The WSJ.
💥 Flutter and DraftKings suffer prop ban fall
Earnings in brief
Allwyn: The last year of Camelot’s tenure as the operator of the UK National lottery before Allwyn became the licensee in February turned out to be a negative one. Total revenue fell 4% to €3.93bn while adj. EBITDA was down 5% to €181m, which Allwyn blamed on unforgettable jackpot cycles in the EuroMillions game.
Revenues excluding the Camelot acquisition were up 6% to €4.25bn
Analyst takes
Bragg Gaming “could be a target for global content suppliers,” suggested the team at JMP after the company said earlier this week it had formed a special committee to consider “strategic options” in a “consolidating” iGaming market.
Returning CEO Matevž Mazij said on the earnings call that the review came about as a “result of an increased M&A activity across the space. And, obviously, recent increased interest in Bragg.”
He added strategic opportunities may include a sale of the company or of this asset, a merger, financing or further acquisition of tech and content assets or any other strategic initiatives.
Calendar
Apr 17: Entain
Apr 18: Rank
Apr 24: Evolution, Kambi
Apr 26: Betsson
May 1: MGM Resorts
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