888 Holdings plc

Hi, everyone. Good morning and welcome to our 2021 annual results. I'm happy to be here with Yarev Defnaou who is in our London office. And we'll start with the agenda on slide three. I'll walk you through some of the highlights of the year, and then I'll hand over to Yariv to go over the financials. And then I'll walk through some of the really, really exciting strategic process that we did over the course of 2021 and coming up. And then we'll open up for some questions. But before we go into the presentation, I just wanted to address something unpleasant that you all saw in the news last week that came from the UKGC and relates to the sanctions that we got as a company. This is something that I would say is something that we're not proud of as a company. I think it's not a happy moment for us in the history of 888. because we do see ourselves as a responsible operator that takes customer safety, adhering to regulations, and meeting the highest standards extremely seriously. And we completely recognize that there were some clear issues in our policies and our procedures at the time that didn't work properly, and we deeply regret those. It happened to us, but when we recognized it, we immediately took quite significant and severe actions to fix all of them as fast as we could. We also learned a lot as an organization of what went wrong. and we made a lot of effort to fixing the processes in our procedures. This, as we know, is something that's evolving, and we recognize that there's a change for an ongoing effort, and we simply can't keep our eyes off of this domain. I am personally committed to continue investing in this ongoing effort and doing whatever it takes to bring us back to the highest standards of the industry, which is a natural place for us and a place that we can be proud of again. Going back to the presentation and going into our full year results, which was a really positive picture of a business that's in a really good shape and a good position. So it's great to be able to report another set of record results for us as a group with revenues up in the year 15% to $980 million. in line with the mid-teens growth that we guided in the half-year results. Just to put this into context, it's 75% higher than what we managed to achieve in 2019. So over the course of the last two years, we have truly managed to transform the scale of our business. As well as a strong organic growth that we had in 2021, we were really busy on the strategic expansion and strategic front. In the U.S., we signed the landmark deal with Sports Illustrated and launched the first market there. In September, we announced a transformational acquisition of William Hill, a deal that we were all working on for a long period, and the company was very, very happy with to sign it in September. In December, we announced the sale of our Bingo business, which will enable us to focus and increase our investment in the fantastic growth opportunities that we have ahead of us. But I'll talk a lot about all of these developments and our refined long-term strategy. But first, I want to hand over to Yariv to walk us through the financials from 2021.

Thanks, Itay. Good morning, everyone, and thank you for joining us on this virtual presentation. I'm delighted to be presenting today another set of strong results. Starting with slide six, you can see the financial highlight for 2021. I will expand further on the driver behind the 2021 performance over the next few slides, but a few highlights here. Revenue was up 15% to $980 million, led by strong growth in our B2C business. Adjusted EBITDA increased by 6% to 165 million. The EBITDA margin was down slightly to 17% as we continue to increase investment in our U.S. B2C expansion. If we exclude the U.S. losses, the EBITDA margin is fairly stable versus last year. Cash generation was solid, and the balance sheet remained strong. Free cash flow was 103 million compared to adjusted EBITDA of 165 million despite more than 20 million of exceptional items that impacted the working capital. This basically leaves us with a net cash position of 175 million. This excludes player balances, but includes PSP balances, which are now included in the net cash to align with others in the industry. Last point, considering the plan to raise equity as part of the William Hill transaction, the board has decided not to declare a final dividend for 2021. beyond the interim dividend that was declared after our half year result. The dividend policy, however, remain unchanged. Let's move to slide seven. You can see our quarterly revenue built up over the last few years. Since 2019, we have transformed the scale of this business with a focus on achieving growth in key regulated market through differentiated product, AI-driven optimization, and increasing brand awareness. As you can see here, the growth trend accelerated during 2020, and we delivered another record year of revenue in 2021. The strong growth over the last years have been driven by a higher customer activity. Monthly active customer in 2021 were 36% higher than the level of 2018. And in recent months, we have been seeing encouraging trend at player activity. Slide eight. One of our key goals is to build 888 into one of the leading regulated online betting and gaming businesses. We made further progress in 2021 with 17% growth in our regulated and taxed revenue, taking the mix to 74% of total revenue in 2021. This process will continue this year, and with the new regulated market, such as Ontario and Netherlands, we expect already this year to cross the 80%. On the right-hand side, you can see how diversified the business is from a geographic perspective. The UK remains the biggest market with 40% of revenue, and Italy now makes up 12% of our revenue after growing 37% in 2021. The rest of EMEA was down from 38% to 34%, following regulatory changes in Germany and the Netherlands and weakness in the Nordics. But with this bucket, we also seen some strong performance from growth market such as Romania and Ireland. The America including the US made up 13% of our revenue. Following the receipt of the license, we are excited about the launching on a locally regulated basis in Ontario in the coming weeks. Together with our plan to launch in three or four additional states in the US during the course of this year, we expect to see further growth of the America business. Turning to slide nine, I will walk you through how we convert our revenue into adjusted EBITDA. Our gross profit represent the revenue less variable costs such as gaming duty, royalty and rev share for third party, which is mainly contact provider and payment costs. We paid 184 million in gaming duties, reflecting our growth in regulated market but we were able to offset most of the increase with efficiency in our other direct costs. As a result, the gross margin was broadly stable at 66%. Marketing. Marketing is the biggest investment we make as a company. We invested in 2021 $307 million in marketing, using our big data and marketing expertise to drive efficient and effective customer acquisition across our brands and market. Our marketing ratio increased by a little over three percentage points, which partially reflected our increased investment in the U.S. with the launch of SI Sportbook in September. Our operating cost increased by only 3%, reflecting our embedded operating leverage and our scalable proprietary technology. This all ended up with adjusted EBITDA margin was a little under 17%, with scale benefit from our growth being offset by our increased investment in the U.S. and other strategic marketing to drive long-term growth. Slide 10, a few words about our cash generation. During the period, we converted about 75% of our adjusted EBITDA into free cash flow, excluding one off items. The net working capital movement of minus $25 million includes more than $20 million of one-off items, principally related to transaction costs and FX losses. CapEx was $31 million, and after reflecting tax payment, we generated free cash flow of $103 million. Now moving to slide 11 to discuss current trading and outlook. Firstly, I will touch on current trading. We have started 2022 with improved momentum. And as you can see from the chart, trend of active customer and revenue started to improve from October. Average daily revenue in January and February are up by mid single digits relative to Q4 2021. While this represented double digit decline year on year, this will be growing quarter after three declining quarters and it will be fully reflecting the impact of all regulatory and compliance headwinds that we have previously discussed and also in line with our expectation. 2022 has several growth drivers, such as Germany, the launch of Ontario that we plan for April, the additional states launch in the US, and the planned relaunch of the Netherlands. With these new launches, our continued product development and customer focus in our key markets we are confident that we are on track to achieve our 2022 target. In terms of any additional and more formal guidance for the year ahead, we will probably be able to update on this only when we release our Q1 trading update. I will now hand over to Itay to tell you a bit more about our strategic priority, key achievement and growth plans.

Thanks Yareev. And turning to slide 13, I thought it would be useful to start with providing you an outline of our refined growth strategy. As we have a clear framework to deliver sustainable long-term growth, build around these three areas. Firstly, our market focus. It means that we ensure our investment in our resources. We invest in the resources in the markets with the most attractive opportunities where we can deliver superior returns. Secondly, reinforcing our sustainable competitive advantages. These are the three core pillars that act as enablers. and really drive market share gains. All of this is underpinned by our continued investment in talented people in the group. Thirdly, we will be supporting our growth with further strategically and financially attractive M&A with targeted M&A that enables us to benefit from our scale's advantages. I'll now walk through each one of these in more detail and cover how in 2021 was a huge year for us in terms of the progress we're delivering against these elements of our strategy. So turning to slide 14. And these are what we call our market archetypes. So we have three core markets. We have the UK, Italy, and Spain. These make up 59% of our revenues, and we saw revenue growing in them by 18% in 2021. And as we continue to grow or hold share in those markets, This was despite marketing restrictions across both Italy and Spain. And this strong performance really shows the power of our brands, our product, and our customer experience and demonstrates the value of the continued investment in these areas. Next is what we call our growth markets. These are a well-defined group of regulated or regulating high-priority growth opportunities for us. where the market conditions are right for strong structural growth. And our capabilities in those markets give us strong confidence in our ability to out-compete the market in those areas. These markets represent 21% of our total revenues, but they grew by 26% in the year. Within this group, there's a sizable evolving opportunity around 3%. interesting markets, Germany, Netherlands, and Ontario, Canada. Independent analysts estimate these three markets offer a potential combined market size of over $10 billion. And during 2021, we launched 888 Sports in Germany on a local license powered by our in-house Sportsbook platform. I'm pleased also to announce that we received our license in Ontario earlier this month, and we are in the process of applying for a license in the Netherlands, and we aim to invest heavily in these markets in order to build 888 into a top-tier brand in all of them. I'll cover the U.S. developments in the next slide, but the last basically long-term opportunity, which includes further growth markets, emerging growth markets such as Latin America and Africa, which we aim to address through a combination of M&A or local partnerships and where we have strong active pipelines of opportunities. Finally, the global scalability of our platform in our business means that we can generate high incremental returns from a long tail of other markets, serving customers from over 100 jurisdictions on a remote basis. We call these our optimization markets. And the focus is on efficient cash generation there. Revenue from these markets was flat in 2021, reflecting our strategy to focus our investment in other markets where we see more growth opportunities. Moving to slide 15. So the USA... It's a really huge opportunity for our business and for the industry. Revenue in the year was up 6%, but we made great progress in creating a platform for profitable long-term growth in the market with most of the required assets are already now in place. So first of all is the technology. We launched the SI Sportsbook in Colorado over our in-house sportsbook platform, and we are pleased with the launch from a technical perspective. Owning all of our technology gives us a low unit cost of production as well as enabling us to differentiate our product and our experience in the market. Brand is the second one. So Sports Illustrated is a household name brand in the U.S. market, and its owners and our partners, the ABG Group, continue to make huge progress, such as growing the digital user footprint from 30 million just a year ago when we signed the deal with them to over 50 million by the end of 2021. And as SI built out its brand, we are working on deepening the integration between SI, so Sports Illustrated website, content website, and Sports Illustrated sports book. And we have some really exciting plans for 2022, including integration of the relevant content into our app. Operational expertise is the next one. We believe that combining this strong brand with our 25 years of experience in successfully operating a gaming and betting business can create a unique customer experience and enable us to carve out a sizable and loyal player base in the U.S. market for SI Sportsbook. This operational expertise means delivering the same product and content leadership, world-class marketing and customer excellence in the U.S. that has underpinned our 25 years of successful operations in the rest of the world. Growing market access deals. So we have secured further market access deals, and we're now planning to launch three to four additional B2C markets with SI this year, starting with Virginia almost imminently in Q2. In the medium term, we expect to be in around 12 to 15 states, attractive states for us in the U.S., We also launched poker B2B with WSOP in Pennsylvania in the middle of last year, and we're now ready to launch in Michigan subject to approval, which will bring us to be live in five out of the six states in the U.S. that offer online poker. Now, on the next few slides, I'll cover our three pillars of competitive advantages that will drive market share growth in all of our markets, including the U.S., So moving to slide 16. So the first of these three pillars is our product and content leadership plan. Our products are designed around the six product principles that we've mentioned in the past. Safety, usability, content rich, entertainment, innovation, and scalability. During the year, we made further strong progress on each one of these core pillars of our products. We migrated most of our sportsbook volumes onto our in-house platform and have just recently completed the Spain migration as well, giving us full control of the customer experience and allowing us to produce a really differentiated and innovative experience. These successful migrations give us confidence going into the future as tech integrations can be more dominant and might come with William Hill. On the casino side, we rolled out more quality content and further developed our AI-based recommendation engine. These smart algorithms ensure that customers are seeing these games that are most relevant for them out of our portfolio of 3,000 games. Think about Netflix or Spotify when you imagine the 888 Casino app and the games that it offers to its consumers. Our in-house studio, Section 8, is a really key asset for us. It makes up around 5% of our content by volume of the games. But in terms of the revenue, these are nearly 15%. In other words, these are disproportionately popular and profitable games in our portfolio. We rolled out lots of cool, successful new games here in 2021, including Mad Max Fury Road and Millionaire Genie Megaways. I'm really excited about the future, and I'm also happy to share with you that we have confirmed our plans to double our investment in the development of in-house games in the very near future. Turning to slide 17, the second of our core competitive advantages is our world-class marketing and brands. So 888 is a world-renowned gaming brand and the only true online casino brand, only true global online casino brand supported by our world-class marketing capabilities. Our performance marketing teams are experts in using real-time data to optimize activity across our marketing channels, enabling us to react in real-time to changing market conditions and deliver superior return on our marketing dollar investments. In order to build on our position as a leading global brand, I'm delighted to tell you about our new master brand strategy called Made to Play. This single 888 brand strategy is a new approach for us, and it will unify all of our sub-brands, 888 Casino, 888 Sports, 888 Sports, and 888 Poker under a single, consistent, and strong brand position. Having been one of the very first online casinos and coming up to our 25th anniversary, our brand awareness, trust, and credibility is really significant. We believe that our made-to-play plan really unites behind a strong brand message. But rather than just telling you about this, let's have a quick look at a teaser of our master brand campaign that's coming up soon.

Dive into the 888 experience because it's made to so many slides.

Oh, my.

It's made to unwind.

It's made to excite.

It's made to unite. It's made for the newbies and for the OGs.

Houston, I have a full house. It's made for you. And you. And you. And you. And you. Huh?

It's just made to play. Yeah, that works.

888-MADE-TO-PLAY

Hope you enjoyed that as much as I did and saw the huge amount of excitement and fun you can get on the different 888 brands. So moving on to slide 19. And our third source of competitive advantage is our customer excellence philosophy. I'll outline a few of the developments that we had here in this area. So one of our key focuses is building out a really deep understanding of our customers in the key segments. The more we know about our customers' expectations are, the more we can develop the best product and offers to keep the customers happy and safe and keep them returning to us. As you can see in the chart, our customer satisfaction score has been rising consistently over the last years. This reflects the growing focus we're placing on making sure we deliver increasingly quick, efficient customer service using our technology and team to identify customer pain points early and resolve them or stop them happening from the first place. Safer gaming is a key part of our customer excellence plan and an area that we believe we can and we should score highly with our customers on. During the year, we fully rolled out our control center in the UK and have started in other markets, meaning now that around 40% of our global customers base have access to this cutting edge safer gaming interface. We have seen very positive response to this and are continuing to roll it out across further markets. We also continue to enhance our observer tool. This is an AI platform that assesses all players in real time and creates risk scores and flags that identify where there could be risk or potential harm. Where we see this developing, we then step in and intervene to reduce the risk of customers. During 2021, the observer tool prompted almost 1.3 million customer interactions, including automated system responses to player activity. Turning to slide 20. The third foundation of our growth strategy is value creation plan through value enhancing M&A. And during 2021, we made huge progress in this area. Firstly, we announced a transformational acquisition of William Hill, which will almost triple the size of our business. This fits perfectly within our strategy by reinforcing our leadership position in the core markets, strengthening our position in our growth markets, and introducing a few additional markets to focus on. In addition, William Hill is the UK's leading sportsbook brand. And this asset, along with the really strong challenger brand, Mr. Green, will support our sustainable competitive advantages. The William Hill business has strong complementary products and technology, great customer focus, and a team of talented people that will come with that business. This will enable us to further reinforce our product leadership plan and improve our customer experience even further. We look forward to telling you more about the William Hill acquisition in the coming months as we move towards completion. Alongside this landmark acquisition, it also has been a year of activity with other areas, the launch of our long-term strategic partnership with Sports Illustrated in the U.S., and the announcement of our bingo business, which will allow us to increase our focus in our core growth opportunities. We also continue to assess a range of different M&A and partnership opportunities worldwide as we continue to build our position as a global leader in the online gaming and betting space. We are particularly focused on strategic investments in emerging and attractive markets, which will have excellent long-term growth potentials for the group. Moving to slide 21. I'm really pleased to outline our refreshed ESG framework called Made for the Future. As we continue to grow as a business and focus on our long term goal to be a global online betting and gaming leader, we are putting more and more focus in long term sustainability. We are launching a refreshed ESG framework built around three pillars. And overall, over the course of the year, we will develop and announce robust targets for each one of these pillars. So the first pillar is made to play safely, reflecting our commitment to prevent harm through safer gaming. Our goal is to normalize the use of our safer gaming tools. Over 40% of our active customers in Q4 2021 had limits in place, and we are working to increase this by both encouraging players to place limits themselves and increasing the number of customer limits that we are proactively putting in place for them. Our second pillar is made to play together, reflecting our commitment to ensure an inclusive, vibrant, and supportive workplace. Our people are the foundation of everything that we do in 888. And creating a positive work environment where people can be the most innovative, creative, and productive is critical for our future. The third pillar is made greener. The urgency and importance of the climate crisis requires all of us to take part And at the end of 2021, I was really pleased to announce our commitment to net zero carbon emission by 2035. All of this is supported by our robust corporate governance framework, including oversight of these critical areas from the new ESG committee in the board that was set in 2021. So moving to the last slide, slide 21, and to conclude, 2021 was a really great year for 888, both from a financial perspective, but it was also a truly transformational year, both operationally and strategically for the business as we continue to make significant progress against our plans to become a global online betting and gaming leader. As we look into 2022, We have started the year well, and we're really looking forward to completing the deal with the William Hill acquisition and further reinforcing our long-term growth plans, including our expansion into the U.S. With that, I'll be very happy to take your questions. Thank you.

Thank you. If you would like to ask a question over the phone, please signal by pressing star one on your telephone keypad. That is the star or asterisk key followed by the number one. Please ensure your mute function is turned off to allow your signal to reach our equipment. We'll take our first question today from Ed Young of Morgan Stanley. Please go ahead.

Hello, thank you very much for taking my questions. I've got three, if that's okay. One on William Hill and two on the US. First from William Hill, you said the brand was taking share at the time of the acquisition. I just wondered if you could comment in general terms, as that continues, how has the development of the William Hill business been generally over the last quarter? I guess, would your current trading statement look better or worse if we included William Hill pro forma? And then on the US, first of all, on World Series of Poker, you said you'd be in five of the six states that have poker soon, hopefully. Obviously, recently, there was news that GG Poker was chosen as their partner in Ontario. Is there any comment you can make on that? And should we take that as a signal over time that the 8 to 8 relationship with World Series of Poker will end, you'll transition to the 8 to 8 brand, including in the US states you're currently in over time? Or do you think that will continue for a long time? And then finally on SR, you mentioned there the huge growth in unique visitors and how excited you are about the growth of that asset. Does that change your view on investment at all? So if you believe even more strongly in the brand, should we take that to mean that you want to invest more behind it or should we take it to mean the opposite in the sense that you can get an even higher proportion of a very attractive across all customer acquisition? Thanks.

Okay, thanks, Ed. So I'll answer those questions. So first of all, a William Hill performance is something that we can't comment on at the moment. So we shared the numbers that were public at the time, and I can't comment further on William Hill's performance at the moment, so sorry I can't share more information about that. On U.S. and WSOP, so our deal and commitment with Caesars is ongoing and we're developing into more markets. Like I said, we're just about to launch in Michigan. We will have the highest footfall in terms of poker in the U.S. out of all operators. The deal that they announced with GG Poker in Ontario is a separate territorial deal. We have an exclusivity with them in the U.S. Canada, although, is close to the U.S., but it's not the same country. We're also, by the way, planning, we're launching 888 in the U.S. and not SI in the U.S., so those deals are done separately. So from that perspective, there's nothing to read into that deal apart from that we're continuing to support WSOP, and we also have ambitions for 888 poker brand in the U.S. market. But our first and most focus at the moment from the 888 B2C perspective is SI and getting that off the ground in further markets and developing all of these assets that are coming with this brand, like the media exposure that I mentioned, the growth of media exposure. So SI as a sports destination has significantly grown its presence, and that's through the very successful digitalization that the group that owns the brand has done in the last couple of years, and it's growing on an ongoing basis. In order to effectively monetize that, we need to do a lot of work with them And that's exactly in our plans in 2022. Things like the integration of content that I mentioned, creating clear customer flows between the two and leveraging on all the other great assets that Sports Illustrated has in the U.S. market. If it's the events that they have in the marketplace. If it's further brand partnerships that they're doing, like with the ticket sales, so there's SI Tickets that launched recently, which is tickets for sporting events. That's also an area that we're looking to partner with. And many more initiatives that the ACE, the Sports Illustrated brand is is doing in the U.S., we need to leverage all of those, tighten up the integration between the two assets, and be able to monetize it better and effectively reduce the CPAs in the market and increase the loyalty through all of these unique experiences and assets that we can offer to our SI Sportsbook customers in the U.S. through this partnership. Okay, thank you very much. Thank you.

We will take our next question from David Brohan of Goodbody. Please go ahead.

Morning, guys. Just two questions for me. Firstly, on dividends, how quickly post-deal completion should we expect to see dividends return? And then just also in the US, in terms of losses for 2020 or for 2022, Given this kind of four launches planned this year, should we be expecting a material step up on FY21? Thanks.

Yeah. Okay. So I will take this question, David. So with regard to the dividend, so the decision of the board right now is to suspend the dividend for 2021, the final one. We thought it make no sense to distribute now dividend to the shareholder and then coming after and ask money from as part of the equity that raised that we planned for the William Hill transaction. There is no change to the dividend policy that we have in place. With regard to the US, so US, the losses in the B2C were pretty much as expected, around 18 million in 2021. You can expect that this level of losses will increase in 2022, but I would say it will be a single digit of a million dollars increase in the losses in the US. And again, with our restriction to give guidance now, we cannot go into more details than this.

Perfect. That's great. Thank you.

We will take our next question from Simon Davies of Deutsche Bank. Please go ahead.

Yeah, morning. A few from me. Firstly, on sports, particularly week in the second half, down 40%. Can you break that down for us a bit in terms of the impact of weaker sports margins, the impact of market withdrawals, and also if you saw any impact in terms of migration over to your sports book, was there any sort of churn resulting from that? The second question is just looking at the UK market, again, weaker in the second half, and again, you've alluded to tougher responsible gaming measures. Can you walk us through the impact degree to which that decline was self-inflicted. And lastly, just on your investment in in-house studios, you're talking about doubling investment from what to what and how many people do you currently employ in the studio business and where do you see that going to? Thank you.

So maybe I will start on the sport on a financial matter and then Etai can add more. So the sport in the second half was indeed affected by decrease in volume, as well as lower margin, as well as the withdrawal from the Netherlands. All these were affecting our sport business in the second half versus the first half. We don't see anything related to the migration to our platform, but I will let Itay comment more on the sport side before we go to the UK.

Yeah, so we see no negative impact from migration. However, a year of migration is obviously first and foremost focused on having a smooth transition of players from one platform to the next. In this year, we also launched sports into the U.S. market for the first time. So we launched SI Sportsbook over the new platform in Colorado. So that had that required us to adapt our platform to the U.S., let's say, localize it in terms of the way it's presented, in terms of the offering. So there was a lot of investment in that. And migration, again, the main focus was smooth migration, no negative impact, and moving forward. forward. We're looking to invest further in the sports platform in terms of more, I would say, customer experience features and things that enhance the engagement of customers with our sportsbook. We're overall very pleased with the platform that we have. We're very pleased with the key principles that led us to make this decision to become autonomous in our sports betting, which is the ability to control the technology, to control the product, to link strongly between trading, and marketing, which is something that you can do, and pricing with your own platform. So all of these are working very well. It's still a young platform, and we have many plans ahead of us to enhance it further, and we definitely see sports as a critical growth area for us as a group because we're growing from a relatively small market share base to what I would call a mid-term market share base. That's our ambition in our core markets. Okay, so now with regard to... Do you see any material shift in customer churn? No, we don't. Okay, thank you.

Okay, Simon, with regard to the UK, so UK indeed was lower in the second half versus the first half, but this is related also to what's happened to the market. We were indicating about 20% decline in the second half versus the first half. And if you look at the data from the UKGC, we were actually exactly on this number. So all the market went down 20%. We consider that to be they're going back to normality in terms of the split between retail and online. And all the lockdown and COVID impact were actually gone in the second half of the year. In our case, it's also all the regulatory change that we did. We announced about a year ago an impact of 70 to 100 million We mentioned at that time about 30 million related to Germany while substantially all the remaining were related to the UK. We did a lot of changes on our platform of responsible gaming. We started this already in Q4 2020, but we really completed everything in the mid year. So in a way, the second half represent already the new set of rule on our compliance platform. And therefore, you know, you can see that as something that is the level that will take us into 2022.

I'll just address... Do you see a further incremental cost in 2022?

No, we don't see any further impact of the regulatory change on 2022 compared to the level that we saw in the second half of the year, and more specifically on Q4.

Right.

I'll just address, Simon, your last question regarding Section 8, which is what we call our internal game studio. So this has been, over the years, a very, I would say, strong asset for us, a bit of a hidden gem in our portfolio. The games are performing really well against all of the top studios in the industry. So they're competing heads to heads in 888 Casino. They're not getting a real preferential treatment, but they're performing against the best games in the industry and hitting the top 10 and top 20 lists on our rankings on a regular basis. Therefore, we decided... to increase our investment there in order to increase the share of wallet in our games, which is obviously both from a financial perspective, more effective for us, but also from a customer experience and uniqueness that we can offer. These are games that can be found only on the 888 platform and the customers like them, enjoy them and come back to them. And therefore we see also, this is a potential to kind of increase the engagement and the the uniqueness of our platform. In terms of investment, I won't go into specific details, but I'll say we have over about the resources, but we have over 120 games that were developed by Section 8 over the years. The plan, and in the last year, there were about 14 or 15, something like that. That's more or less the yearly capacity that we had in the last few years. So we've decided to grow that quite significantly, and we expect the output of the studio to be in line with the investment that we're putting. So somewhere between, you know, we will see 25 to 30 games a year through Section 8. And obviously, if this continues to show the great results that it does, we can and plan to invest in this further. This is a really, really strategic and important asset for us as a group

Great, thank you.

We will take our next question from Richard Stupor of Numis. Please go ahead.

Hi, morning Isai, morning Gareth. Just a couple left for me please. You mentioned in your release that you have lowered certain product stake limits in the UK. Can you just be precise in terms of what they actually are? And the second question on the US, several of your competitors have guided to revenues in the U.S. in 2022. You did 22 million last year. Could you give some guidance what you think will be this year, given all the new launches you're doing? And also, a subsequent question on the U.S., do you expect 2022 to be your peak year of losses? Thank you.

Okay, so with regard to the... With regard to the limit in the UK, I don't think we can go into the details now for what are the limits. And also, there are significant set of rules which altogether provide the responsible gaming framework. So what I can say that there are few significant reduction in all these threshold You know, in the announcement of the GC, they were talking about 40,000 until we do a source of fund check. This was cut by half, and many, many others were cut significantly. So that's with regard to the limit in the UK. With regard to the US, so in terms of the revenue, I cannot comment, again, we cannot provide guidance, but we definitely expect to see growth coming in the U.S. this year, considering the additional states that we will be launching this year, plus some support coming from what already launched, Colorado and other markets in the U.S. In terms of the losses, I think your assumption about 2022 becoming the peak for the losses probably make sense. However, I would not assume a significant reduction in the losses in 2023, but it's definitely after that it's reasonable to assume that we will start to see decline in the level of losses that we are generating in the U.S.

Great. Thanks very much.

As a reminder, if you wish to ask a telephone question, please signal by pressing star 1. We will take our next question from Mark Fortiades of Canaccord, Genoese. Please go ahead.

Yeah, morning guys. Just two questions from me. Firstly, just on the numbers, I see you've identified some FX losses in the P&L and they've sort of moved from having been in the cost of sales line. So can you just elaborate on that, please? And then secondly, just you alluded to new market opportunities and openings. So I wondered if you could give a little bit more detail on the opportunities you see there.

OK, so I will take the FX and leave it to discuss about the additional markets. So FX until 2022 financial, all the FX impact on the business were part of the financial costs. This year, with discussion with our auditor, the decision was that part of the FX impact needs to be embedded into the cost of sale. And this is what we did this year. In order to present like for like EBITDA, we obviously adjusted the EBITDA to remove these FX charges. In general, the FX charger, as we are a dollar company reporting, So we are mainly exposed to the change in the pound versus the dollar in our business. With regard to other markets, Itay, I hand over to you. Yeah, thanks, Mark.

So, yeah, the other markets, I think the three really – so the ones that we've been successful in in the last few years, which we mentioned, are obviously our core markets that kept growing. We had a few emerging growth opportunities in Europe that we focused on in the last years, markets like Romania, Portugal, France. Sweden, and some other smaller markets. But I think there are three very significant opportunities for us and for the industry, which are Germany, Netherlands, and Ontario, which represents more or less half of the value of the Canadian markets. Again, like I mentioned before, the three of these together represent a total addressable market of around estimations of analysts is around 10 billion. So putting that into context, that's bigger than the UK and arguably some of the biggest markets globally. In these markets, we already have experience. We have brand presence. We have teams working on them. We have marketing material. We have everything that it takes to make those a significant part of our portfolio of growth countries. And now that marketing is opening there and enabling us to work under local regulations, we see this as a significant part And let's say the most significant global opportunity alongside the U.S. And we're planning to launch in all of them, obviously subjected to regulatory approvals. In Germany, we launched sports. We're in the process of getting gaming licenses in Germany. And we have been active in the market in Germany for the last 20 years. We know it very well. Ontario, Canada, we've also been there since day one of the company. And Netherlands is a market that we were in. We had a really Nice piece of business there that closed down for a period, and we're working on getting a license and relaunching there during the summer. So we really see this as a medium to long-term growth potential for the group that we're starting to focus as these markets open up for us.

Okay, thank you. Again, if you would like to ask a question over the telephone, please signal by pressing star one on your telephone keypad. We will pause for a moment to allow everyone an opportunity to signal. At this time, we have not received any further telephone questions. I will now hand over to Rosie for any questions from the webcast.

There are no questions on the webcast. I'd like to hand back to the speakers for any additional or closing remarks.

Okay, so thank you, everyone, for joining us today. As you heard, 2021 was a fantastic year for 888. And entering into 2022, we're starting with a strong, with a positive momentum, and we're really excited about the long-term growth plans ahead of us. As you heard, there are many of them, including William Hill, further markets, U.S., and more opportunity. And we look forward to updating you on all of these again very soon. So thank you very much again for joining us.