Playtech PLC

trajectory in the years to come. Playtech has transformed in recent years into a much higher quality business, and today I will outline our strategy and how we plan to deliver shareholder value. Looking forward, I'll outline our strategy and explain how we expect to drive revenue growth and expand margins for both the B2B and B2C divisions. Turning to slide four, I will recap H1 before handing over to Andy to update you on the excellent financial performance in the first half of the year. I want to update you on the five strategic priorities for 2022 that we outlined at the fully results back in March. We continue to consolidate our footprint in Latin America. Caliente in Mexico remains our number one customer. We expect W-Plan Colombia to increasingly contribute to growth within the region. Finally, we are extremely excited about Brazil, given the large addressable market size and our favorable position in the market, Canada, by entering new states and adding new customers. We signed several new deals with operators, including Winbet, Golden Nugget, Resorts, 888, and Northstar, amongst others. We migrated parks off the platform of a key competitor in their home state of the US and Ontario in Canada. Further applications are progressing in other US states. We now have over 120 employees in the U.S., including the hiring of a talented chief commercial officer. As I've said before, our investment in the U.S. won't be to the level of B2C operators, but the size of this team in the U.S. is evidence of our confidence in the business, and we are excited to have opened a live facility in Peru, which will allow us to take advantage of further growth opportunities within the LATAM region. We also added 50 new brands to our SaaS platform, bringing the total to over 300 since launching the offering. The Snytec business continues to exceed our expectations and it has maintained its number one market share in Italy. It has transformed post-pandemic into a higher margin and less capital intensive business given the acceleration to online during the COVID-19 pandemic. Finally, we have made further progress on our sustainability success strategy to drive our ESG commitments. The Public Policy Board Committee set up late last year has already met five times as it ensures the right measures are in place to implement ambitious targets to meet our sustainability goals while we continue to grow the Playtech Protect offering. Finally, we are providing long-term assistance for Playtech employees and their families that have been affected by the Ukraine crisis. I will discuss the Ukraine situation further on the next slide. We have over 700 members of the Playtech family based in the Ukraine and the safety of our people and their families remains our biggest priority and the group continues to provide support. Playtech's response to the crisis, driven by its employees, included 24-7 support, including transportation, accommodation support for those displaced, supplies and shelter, logistical assistance, and mental health and wellbeing support. On the business side, operations were minimally disrupted due to the robust business continuity processes in place. Any critical infrastructure in the Ukraine was relocated prior to the crisis as part of the Kiev site to ensure business continuity. Before handing over to Andy for a review of the financial performance, I just want to say I'm incredibly proud of how our Playtech employees have responded throughout the crisis, and it's at times like this that make me proud of the family culture that we have at Playtech. I now hand over to Andy. Thank you.

For those of you who think I'm having a nervous breakdown, finally, I'm wearing trainers because I've got a very bad back, so I apologize. Thanks, all. I'll start on slide seven with the financial highlights in what was an impressive performance in H1. Adjusted EBITDA came in at 204 million euros with a very strong performance from both B2B and B2C. The B2B performance was driven primarily by regulated markets, with the Americas and Europe in particular seeing impressive growth. Within the B2C segment, the online segment continues to show strength despite the reopening of retail sites in Italy, the combination of which led to adjusted EBITDA growth of 143% in B2C. Cash generation was also very strong in the period, further strengthening our balance sheet. The strong cash generation was supplemented post-period end by the proceeds from the finalto sale, with leverage now well below one times. Looking forward, momentum has continued into H2 with both July and August seeing very good growth. And whilst mindful of the economic risks, we feel confident for the remainder of the year. Moving on to slide eight, I'll highlight the key figures in the half. Group revenues grew 73% compared to a COVID impacted H1 2021. This was driven by the B2B divisions which saw revenue growth of 148% and B2B gambling where revenues grew 17%. Group adjusted EBITDA came in at 204 million with B2C growing 143% while B2B grew 7% in the period. Excluding Asia, the B2B business saw a shear. Turning to slide nine, looking at more detail within the B2B division, total B2B gambling revenue saw growth of 17% and 13% on a constant currency basis, in the half to 312 million. This was 11% on an underlying basis, defined as being online only and excluding sports. The primary driver was within regulated markets, which grew 31%, where the Americas saw revenue growth of 50% and Europe was up 39%. The strong performance in the Americas was driven by Caliente, and this business continues to outperform, where there were increasing contributions from other customers such as W Play in Colombia. In Europe, a very strong start from the strategic agreement with Holland Casino in the newly regulated Netherlands market helps contribute to the stellar growth in the half, illustrating the significant growth opportunities of newly regulated markets. There's also strong growth seen in other markets, including Italy, Poland, and Spain. The UK business saw revenue growth of 7%, with the reopening of retail sites partially offset by a slowdown in the online business caused by the uncertain regulatory climate. Unregulated markets, excluding Asia, saw flat revenue growth versus H121, with a good contribution from Brazil as that market prepares for regulation, offset by Germany moving into the regulated segment. Turning to slide 10, I will look at the performance of the Snytec business compared to prior years. For details of the smaller components of our B2C division, I've added those in the appendix. This was an excellent performance by SNAI in the first half in what is now a structurally different business post-pandemic. SNAITEC saw revenue growth of 182% compared to the same period last year, with EBITDA growth of 154%. While these growth rates have been distorted by the impact of the pandemic in the period, I want to highlight a couple of points. First, as you can see, the online business remained broadly stable, with revenue decline of only 5% in H1 this year, despite retail shops being open for the whole of H1 this year. Secondly, adjusted EBITDA margin in H1 was significantly higher than pre-pandemic levels, illustrating a structurally different business we now see, where the high margin online business makes up a much greater proportion of Snytech. Moving on to slide 11, the cash disclosed on the balance sheet is 681 million euros, but of this it includes client funds. Adjusting for this, the balance is reduced to 556 million euros, and then deducting a further 80 million that is needed for operation, leaves us with available cash on the balance sheet of 466 million at the half year. This has been further enhanced post the half year end with net proceeds from the finalto sale, part of which was used to repay the remaining balance of the RCF. Taking all this into account, we have now an undrawn RCF and cash that we can deploy of £517 million. Turning now to slide 12, we will look at our balance sheet. As always, we take a prudent approach to our capital structure and leverage. Our balance sheet remains in a very strong position, supported by the strong cash generation in the half, with adjusted operating cash flows of £217 million. There was a further cash inflow post-period end, as I've just mentioned, with the completion of the finalto sale, and we took the decision to repay the remaining balance on the RCF. Finato sell reduced leverage further with the net debt to EBITDA falling well below one times, which gives us flexibility in managing the business going forwards. Our £530 million bond, which is maturing in October 2023, we've begun the refinancing process as well as looking to extend our RCF. Finally, at the last set of results, we talked about the significant increase in fair value of the options related to our strategic agreements in LATAM, and we've seen a small increase in the valuation of these. Finally, on slide 13, I will discuss current trading outlook. We've seen a strong start to H222, with the business continuing its momentum from the first half of the year. The performance continues to be driven by both our B2B and B2C businesses. And looking to the rest of the year, we expect the momentum in both B2B and B2C to continue. While the business continues to perform very, very well, we remain mindful that the macroeconomic outlook remains uncertain, particularly taking into account the strong performance in H1 and the momentum into H2. The board is confident of Playtech's prospects.

Thanks, Andy. Moving on to slide 15, I'd like to lay out our strategy for both the B2B and B2C divisions that will help to deliver revenue growth and expand margins. Starting with B2B, we outline three objectives. Firstly, we want to extend our lead in regulated markets. Secondly, we have made significant investments across attractive parts of the business, namely live casino, SaaS, and managed services. It's time to harvest these to drive revenue growth with good operating leverage. And finally, we want to concentrate on the B2B business, driving efficiencies, the benefits of which we can utilize across other parts of the company. For B2C, we want to capitalize on the market leadership position that Snytech enjoys in Italy and drive further organic revenue and EBITDA growth. It's no secret that Happybit has been underperforming. Having now moved the operations to reside under the Snytech management team, we expect to see the business improve going forward. Given the flexibility of our balance sheet and potentially attractive opportunities both within Italy and the rest of Europe, we would consider targeted M&A to expand Snytech and leverage the B2C expertise that we have running that business. And we expect all of this to be achieved in a duplication and only focus on areas that are truly strategic to the business. This will be done with a view to reallocating resources and targeted investments to help us achieve the first objective of extending our lead in regulated markets while ensuring appropriate cost base. On to slide 17, where I will talk through our strategy for the US, where we have been laying the foundations for future growth. We estimate that the total market opportunity in the US is around $3 billion of annual revenue for B2B players. This figure excludes what could be generated through structured agreements. We see opportunities across all our products, but our focus will be on key strength in online casino and live, while we will also pursue sports betting opportunities in key strategic deals. We are confident that it is early days in the US, particularly as it relates to iGaming. 30 states have legalized sports betting so far compared to only seven for iGaming. The revenues from sports betting activities are roughly the same as iGaming. However, the tax revenue generated from iGaming in just these seven states is nearly double that of the tax revenue generated from sports betting in 30 states. This is ideal for Playtech as iGaming is one of the company's biggest strengths and have been putting in place the foundations in the US to ensure we can benefit when further states legalize iGaming. We have signed multiple multi-state deals with key operators and we will continue to sign more. That's not to say we will ignore sports betting because we simply won't. We see sports betting as strategically important for key partners in the US who want a comprehensive offering from a single provider. Now on slide 18, moving on to LATAM, where we have previously talked about how our success in this region is based on delivering on our structured agreements. The blueprint for these structured agreements is Caliente in Mexico. The idea is to select a dominant partner in a country with favorable market dynamics and look to grow with that partner as the market grows. The results with aligned incentives can be spectacular. Revenues within Mexico, the majority of which is with Caliente, have grown at a CAGR of 72% between 2015 and 2021, and Caliente now represents our largest customer measured by revenues. We expect growth to continue in the years ahead, although clearly the growth rates on this slide won't be realistic going forward given the scale of the business. The attractive economics of a structured agreement which typically include both a revenue share and an additional service fee component mean that the incremental profit margins are very high. These structured agreements typically include an option to convert the service fee component into equity, thus achieving additional flexibility to crystallize value, particularly in the event of a corporate transaction. On slide 19, we highlight the other countries in LATAM where we have other structured agreements, and also some figures to highlight the potential size of the opportunity in the region. Revenues from W Play in Colombia have been accelerating since its migration to Playtech technology in late 2020, and we expect this business will be a significant contributor to our revenues going forward. We are extremely excited about the Brazilian market, given the huge addressable market in the sports-made country and the structured agreement we have signed with GaleraBet. As with the others, the GaleraBet agreement includes the customer software license agreement, as well as an option over a significant non-controlling equity stake in the operation. Our structured agreement with TenLot and the Red Cross brings exclusivity in Costa Rica and we are operating under the only license available there. During 2021, we launched in Costa Rica and also launched our structured agreement in Panama with OnJock under the brand Betcha. Looking ahead, we are focused on executing these opportunities to drive growth in the region and see further potential opportunities in Chile and Peru. We view Europe as a region that still contains several markets that are either regulating or under-penetrated where Platea can take full advantage. I'd like to talk you through an example of a newly regulated market that excites us, where Playtech is well positioned, the Netherlands. The Netherlands, a top 10 market in Europe, launched its online market at the end of 2021. Holland Casino is the state-owned operator there, with 14 casinos across the country. To coincide with the online market opening up, we launched our exciting new strategic agreement with Holland Casino in the race for market share in the Netherlands. We are providing a full turnkey offering, including our IMS platform, all products and services, such as marketing advice and CRM services. And we are off to an impressive start. Holland Casino was the biggest driver of growth by customer in H1, surpassing our internal expectations. With a 20 year agreement for our software as well as a 10 year agreement for services in place, this is just the start of a long and prosperous relationship. Over the next two slides, we give further detail on how we intend to monetize the significant investments we have already made, particularly in live casino and SaaS. I'll start with live casino. As you are familiar with, live casino is an extremely attractive vertical that we expect to continue to grow significantly over the coming years. This is driven by two major trends. Firstly, there is a shift to online from retail as the world digitizes, and this is accelerated due to the pandemic. Secondly, within online, there is a growing trend away from RNG towards live, as players want more of an interactive, immersive experience, which we expect to accelerate, driven by technological advances and new products. The combination of these drivers means that industry analysts predict the live casino market to reach $18 billion based on GGR by 2025, up from $6.9 billion in 2021, a CAGR of 28%. And we are seeing strong growth within regulated markets such as the UK and Spain. But more importantly, we are well positioned in extremely attractive regulated markets like Brazil and the US. And we have already made significant investments to capitalize on this attractive product vertical. We have 10 studios currently operational with a further one in Pennsylvania under construction. The latest one to open is in Peru which was launched earlier this year and will help us to support growth within the attractive Latam region and particularly Brazil. We have more than doubled the number of tables over the past four years. We have invested heavily in the latest cutting edge technology. We have invested in buying branded gaming rights such as Jumanji. And these investments have already been made. Also, I remind you that the nature of live casino business, the model, is such that additional players can be added to tables at minimal cost. This means there is a significant operating leverage and leads to live casino being margin accretive to the overall B2B division. Turning to slide 22. You will recognize the pyramid that I've used previously to illustrate our go-to-market strategy and how we empower B2C companies around the world. This shows how the various business models of Playtech address the needs of any type of operator across the world. I want to focus on the bottom of the pyramid and the SaaS platform, which we soft-launched in 2019, and since then, the success has far surpassed our expectations. We see SAS as helping to serve two purposes. Firstly, there are many operators across the world where a comprehensive strategic agreement or conventional license does not make economic sense given implementation costs. We can address this by offering a plug and play type SaaS model where operators can easily access our platform and products under the same commercial model with limited implementation costs. This significantly expands our addressable market. Secondly, the SAS model is not only targeted at small midsize operators. It is also used to provide a low friction method of exposing as many operators as possible to the Playtech technology. Once a foot in the door is achieved, it can be much easier to cross an upsell to other Playtech products. For customers, this offering means much lower overhead costs, given IT infrastructure costs are borne by Playtech. And implementation and customization time is reduced, also reducing costs for the customer. From Playtech's perspective, SaaS is an attractive business model. Given investment has already been made, there is high operating leverage, which ensures a set of operators of different types in different countries. Playtech has been building out the infrastructure for its SaaS business since 2017, including data centers in local markets. And it has added over 300 brands since launching the SaaS platform. While revenue from the SaaS business has been growing strongly, the revenues from each operator represents a very small proportion of their wallet. Thus, there is ample scope to increase wallet share amongst these existing customers. Given the high operating leverage and investments already made, this will be margin accretive and drive higher return on capital employed. Moving to slide 23, where we outline our medium term strategic priorities for the B2C division. Drive further organic growth at Snytech, execute happy bed strategy, targeted M&A to expand Snytech. Given that we have the investor event straight after this presentation, I don't want to steal Fabio and the team's thunder. So I'll just briefly touch upon a key few points. Italy is one of two largest gambling markets in Europe, and we have a gem of a business to take advantage of this significant opportunity as we look to extend our leader. We've talked in the past, prior to the pandemic, about the hugely under-penetrated online segment in Italy. And you could see it in Snytec's numbers. In H1 2019, online represented only 25% of Snytec EBITDA and only 12% on a revenue basis. Fast forward to today, and those percentages are remarkably different. At the EBITDA level, it's over 50%. And on a revenue basis, it's 26% in H1 2022. While there was an ongoing shift to online prior to the pandemic, this has been hugely accelerated as a result of COVID-19. And the result is a fundamentally sounder business. Snytech is not only a higher margin business, but also a less capital intensive one. And what's more is that online penetration in Italy is still only around 25%. With the mature UK market having online penetration north of 50%, there is ample room for the higher margin, less capital intensive online business to continue to grow in the years ahead. With Snytec's strong brand and leading online offering, it is ideally positioned to capture this opportunity. I'd also like to take this opportunity to highlight the strength of Fabio and the rest of the management team to transform the Snytec business post-pandemic into a much higher quality business in such short space of time is remarkable. You'll get to hear much more about Snytec and the rest of the B2C division at the investor event that follows straight after the conclusion of this presentation, including how they will achieve their new medium term EBITDA target of 300 and 350 million euros. Four years ago, by the way, it was 180. Now turning to slide 25. We continue to deliver on our sustainable success commitments and aim to continue leading our industry when it comes to ESG. Starting with governance, last year we created a sustainability and public policy committee tasked with providing challenge and oversight on sustainability matters at the board level. This committee has already met diversity, equity, and inclusion. We introduced new targets for senior management at the end of 2021, and we continue to accelerate progress on gender diversity in leadership levels of the organization. On the environment, we have committed to the science-based target initiative to also strengthen data disclosure, reporting, and the approach to carbon reduction through an environmental working group. On safer gambling, we have stake limits, gambling digital tools, and tools and strategies used by players to manage their gambling. Finally, as discussed at the beginning of the presentation, we are providing long-term assistance for Playtech employees and their families that have been a clear, that I don't see sustainability as a box ticking exercise. For our industry to continue to thrive, it is vitally important that all stakeholders . On slide 26, I want to use in H1, which drove adjusted EBITDA of 204 million euros. The results highlight that geographic diversification will continue to drive top and bottom line growth for the group in the years to come. We have a flexible approach with different business models, which mean our B2B business can serve any operator in the world. In Snytech, we have an amazing company with one of the leading B2C management teams in the world, and we will continue to grow this business towards its medium term EBITDA target of 300 to 350 million euros. And finally, I want to remind you of two investor events where we get to highlight the multitude of growth opportunities that exist across Playtech. You won't have to wait too long for the first one. The Snytech management team will showcase the strategy and incredible growth potential of the business straight after this presentation. The second investor event has been provisionally scheduled for December 1st, where the focus will be on the B2B segment, where we will focus on the growth opportunities in the Americas. Andy and I will now take any questions. Thank you.