Playtech CFO says it’s time to focus on cash as EBITDA climbs 28% in 2022
Playtech has set a new medium-term EBITDA target for its B2B segment, while also emphasising the need for a renewed focus on cash generation.
Playtech reported a 33% year-on-year increase in revenue to €1.6bn, while adjusted EBITDA climbed 28% to a record of €405.6m.The strong performance can be attributed to robust demand in Playtech’s B2B business, particularly in regulated markets, where revenue grew 14% year-on-year to €632.4m.
B2B adjusted EBITDA was €160.2m, which Playtech stressed it achieved against the backdrop of the war in Ukraine, where it employs over 700 people.
Additionally, the company’s B2C segment, which includes Italian sports betting and gaming firm Snaitech, experienced a significant 48% surge in revenue to €983.1m.
Adjusted B2C EBITDA was €245.4m.
Given the strong performance, Playtech has announced a new medium-term Adjusted EBITDA target for its B2B segment of between €200m and €250m.
Breaking down 2022 B2B performance, Playtech said it recorded 31% growth in Europe, excluding the UK.
Revenue reached €184.6m driven primarily by the Netherlands, with strong contributions from Poland, Spain and Ireland.
In the Americas, Playtech continued to perform well, generating revenue growth of 27% to €144.7m.
Caliente in Mexico remained a key driver of strong revenue growth, while Brazil also performed well in 2022 as the market moves towards regulation.
Asia revenue declined 18% due to competitive pressures and the impact of lockdowns in China and Malaysia throughout the year.
Playtech CFO Chris McGinnis: “The company has been investing for growth in recent years, and as a result, the focus has been on EBITDA within the company. Going forward, I believe we need to balance this and also focus on cash generation.”
In the B2C segment, Snaitech’s online business performed ahead of expectations with year-on-year revenue growth of 2%.
Snaitech’s adjusted EBITDA margin reached 56% in 2022, down 3% on 2021.German-facing HappyBet, now integrated into Snaitech’s operations, remained loss-making, with negative EBITDA of €10.8m.
However, Playtech said it has implemented “strategic and operational measures”, including upgrading HappyBet’s technology infrastructure.
Elsewhere, Sun Bingo White Label saw 5% year-on-year revenue growth to €65.3m in 2022, while adjusted EBITDA for this segment came in at €2m.
Despite the company’s success, Playtech’s new CFO Chris McGinnis said he had identified areas for improvement, including the need for cash generation.
“The company has been investing for growth in recent years, and as a result, the focus has been on EBITDA within the company. Going forward, I believe we need to balance this and also focus on cash generation,” he said.
McGinnis said this is not a cost-cutting story, although he believes there is scope to improve cash generation, particularly within the B2B segment.
During the earnings call, CEO Mor Weizer was asked why Playtech does not simply shut down loss-making B2C brand HappyBet.
“We have reasons to believe that the German and Austrian markets are very, very appealing markets. I think we can turn this business around, although it will be initially a low-scale business and we will grow it to scale.
“Germany is one of the largest betting markets in Europe. This is why we believe that there is a real opportunity in the short- to medium-term around sports betting and hopefully in the coming years around gaming as well.”
On the company’s new medium-term target for Adjusted EBITDA in B2B, management was asked whether this would be achieved organically or through M&A.
CFO McGinnis said new deals aren’t necessarily a prerequisite for that ambition: “I think we have enough deals in our pipeline, including the Hard Rock deal.”Moreover, he said Playtech has a very strong pipeline of new SAS customers and should be strong enough based on the growth prospects of current customers to deliver on the targets.
Current trading & outlook
Despite the uncertain macroeconomic outlook due to geopolitical tensions and inflationary pressures, Playtech said it has enjoyed a strong start to 2023.
This success was largely driven by the company’s subsidiaries, Snaitech and Caliente, which it said demonstrated the resilience of a diversified portfolio.
Snaitech’s medium-term adjusted EBITDA guidance has been maintained at €300m to €350m.