Playtech PLC

LSE:PTEC

Earnings Call Transcript 2022-Q4

[Moran Weizer, CEO & Executive Director]

Good morning, everyone. Firstly, I want to thank everyone for attending today. We are very excited to be able to first discuss our excellent results and then outline our B2B strategy in an Investor Day that follows straight after. For that, we will be joined by several members of the Playtech management team as well as a special guest.

Starting on Slide 2. I'll begin by taking you through the highlights before handing over to Chris McGinnis, our new CFO, who will take you through the financials and the outlook. I'll then finish by running you through our strategic priorities.

Turning now to Slide 3. I'm delighted to report a fantastic set of full year results, which include record revenues for Playtech and an impressive adjusted EBITDA of EUR 406 million, up 28% in the first full year post-pandemic.

The B2B division is now well-positioned across multiple growth opportunities with good momentum, as we head into 2023. The Americas division continues to deliver impressive growth, led by strong performances from our structured agreements, while Live is capitalizing on the structural growth drivers we see in this product vertical. Given recent agreements we have signed in 2023, this is primed to continue.

The SaaS and Services segments are an enabler to capture value across the B2B division, as I will discuss in more detail in the coming slides. Given the strong pipeline of opportunities, we are confident in our growth trajectory in the years to come, and as such, we are announcing a new medium term EBITDA target for B2B of EUR 200 million to EUR 250 million.

For B2C, the excellent Snaitech team continued to execute on their strategy. Their large retail footprint is an extremely important asset and is being leveraged to drive growth in the higher margin online business. We reconfirm today the medium term EUR 300 million to EUR 350 million EBITDA target we set at the interim results back in September.

Looking ahead, 2023 has started strongly across both B2B and B2C divisions, and mindful of the current macroeconomic climate, we expect this momentum to continue as we are on track to deliver on our strategic objectives.

I will now hand over to Chris. But before that, I want to introduce Chris, who you know for many, many years. But Chris, on a personal level, from the day you started, I saw a rising star, a raw diamond, and I'm very, very proud to have you by my side as the new CFO of Playtech, and I wish you the best of luck. I know that you will do extremely well. And I'm very, very proud that actually our new CFO grew from within Playtech and took over as the new CFO. So the floor is yours.

[Chris McGinnis, CFO & Director]

Thanks, Mor. I should be a familiar face to most of you, but for those of you who don't know me, I took over as Playtech's Chief Financial Officer in November of last year. While the role might be new to me, Playtech is anything -- but I joined the company in 2017 and was most recently the group's Deputy CFO and Director of Investor Relations. I've thoroughly enjoyed my first few months in the role. And for those of you that I don't know, I look forward to speaking to you in the very near future.

I'll start on Slide 5 with the 2022 financial highlights and what was a record performance for Playtech. Group revenues grew 33% in 2022, reaching just over EUR 1.6 billion with an adjusted EBITDA of EUR 406 million, representing growth of 28% compared to 2021. Adjusted operating cash flow was a healthy EUR 397 million, providing flexibility to fund future growth opportunities as well as the potential for future capital returns. This strong cash flow, combined with the proceeds from the sale of Finalto, drove deleveraging down to 0.7x net debt-to-EBITDA, an attractive position to be in, given the current interest rate environment.

In 2022, we also partially repaid our bond that matures in October with an early repayment of EUR 330 million, leaving about EUR 200 million to be repaid later this year. That early repayment has reduced our annual interest costs by over EUR 10 million.

Playtech is off to a good start in 2023 with strong results in January and February across both B2B -- B2C and B2B. While we're mindful of the macro uncertainty, Playtech is well placed to deliver on its medium term targets.

Moving to Slide 6. Delving deeper into the divisional results, you can see that the strong performance was driven by both the B2B and B2C divisions. B2B revenues were up 14%, with adjusted EBITDA seeing growth of 15%, driven by regulated markets. We saw a strong growth, particularly in the Americas and Europe.

EBITDA margins remained flat as we continue to invest in strategic initiatives to drive future growth. Moving forward, there's going to be an increased focus on improving cash generation, and I'll go into this in more detail later in the presentation.

Within B2C, revenues grew an impressive 48% in 2022. The growth was partially boosted by retail sites being opened for the full year after been closed for parts of '20 to '21 due to the pandemic. Despite the retail sites being reopened, the online business improved -- proved very resilient. Margins declined slightly in 2022 due to the impact of these retail sites being reopened post the pandemic. Cash generation was extremely strong with free cash flow growing 41% compared to 2021.

Turning to Slide 7. We'll look at B2B division in more detail. Total B2B Gambling revenue was EUR 632 million, representing growth of 11% on a constant currency basis. The primary driver was again regulated markets, which grew 18% in constant currency, with growth of 27% in the Americas and 31% in Europe, both on constant currency. The strong performance in the Americas was driven by Caliente and this business continues to outperform, while there were increasing contributions from other customers such as Wplay in Colombia and Parx in the U.S.

In Europe, a strong start from the agreement with Holland Casino in the Netherlands helped contribute to the impressive growth in the year, illustrating significant growth opportunities of newly regulated markets, while Poland also continued to perform well. U.K. business, which is now down to only 20% of B2B revenues, saw declines of 5% on constant currency with the positive impact of the reopening of retail sites more than offset by a slowdown in the online business caused by the uncertain regulatory climate as well as reduced revenue from the Entain partnership.

In response to the U.K. government undertaking a review into existing gambling laws in the U.K. that we're all very familiar with, several operators are taking preemptive measures such as stake limits and affordability checks. Unregulated markets, excluding Asia, saw a strong growth in the year, particularly in the second half with Brazil the standout performer as it saw significant growth and is on the path to being regulated in the not-too-distant future. Unregulated Asia markets saw revenue declines of 21% on a constant currency basis, partly down to the impact of further lockdowns in China and Malaysia during the year.

Turning to Slide 8, I'll look at the B2C division in further detail. The strong performance of B2C in '22 was driven by Snaitech, where resilient online performance in combination with the reopening of retail halfway through the year in '21 resulted in adjusted EBITDA growth of 39%. The HAPPYBET business in Germany and Austria continues to be loss-making with an adjusted EBITDA loss of EUR 11 million in 2022. It is now under the superb Snaitech management team and with the turnaround plan in place, we expect improvement within this business in 2023.

Turning to Slide 9, I'll look at the performance of Snaitech compared to prior years. This was an excellent performance again by Snaitech in 2022 and what is now a structurally different and higher quality business post-pandemic. Snaitech saw revenue growth of 54% compared to 2021 with adjusted EBITDA growing 39%.

While these growth rates have been somewhat distorted by the impact of the pandemic in the comparative period, I want to highlight 3 points. First, as you can see, online revenues grew slightly in the year, up 2%, despite the reopening of retail halfway through 2021.

But in the second half, online revenues were up 10% compared to the comparative period in 2021, illustrating that the growth of the online business during the pandemic was not just driven by a shift from retail to online, but also new customers being onboarded by -- via the online channel, thus increasing the overall addressable market.

Second, while revenue growth rates in retail were elevated due to the pandemic in the comparative period, I want to point out that retail sales are within 10% of pre-pandemic levels. This is an impressive performance given the following 3 headwinds that the retail business has faced.

One, a small proportion of franchise retail shops closed permanently post-pandemic; two, some customers were permanently shifted to the online channel; and three, in January 2022, there was an introduction of the requirement for ID cards to enter retail shops in Italy, which likely deters -- that permanently deterred some customers.

Finally, adjusted EBITDA margin in 2022 of 28% is significantly higher than pre-pandemic levels in 2019, illustrating the structurally different business we now see, given the balance between online versus retail. This shift which we see as permanent, has resulted in Snaitech becoming a higher margin, less capital-intensive, and thus generating a much higher return on capital employed. Therefore, it's a fundamentally higher quality business.

Turning now to Slide 10. We will look at the net debt bridge. We made good progress last year, strengthening the balance sheet and deleveraging. The company had strong cash generation in 2022 with an adjusted operating cash flow of EUR 397 million in the year. The sale of the noncore asset, Finalto, was completed in July and provided a further boost to the balance sheet. This allowed us to repay the EUR 333 million of the EUR 533 million -- EUR 530 million bond that matures in October 2023.

This significantly reduces our interest cost going forward. For the remaining EUR 200 million, we are currently evaluating our finance options, but have flexibility given our RCF and cash generation. This culminated net debt-to-EBITDA reducing to 0.7x as at the end of '22 and provides flexibility around capital allocation, which I discuss further on the next slide.

On Slide 11 I will discuss our prudent approach to the balance sheet and capital allocation. Giving a snapshot of the current debt on the balance sheet, we have 2 senior secured notes outstanding. One is the remaining EUR 200 million due to expire in October of this year, which has an interest rate of 3.75%. The second is a EUR 350 million bond at a rate of 4.25% that matures in March 2026. We also have an RCF of EUR 277 million, which was fully undrawn as at the 31st of December, 2022.

In 2023, we've had some significant cash outflows to start the year, the main one being the equity investment in Hard Rock Digital which amounted to approximately EUR 80 million. This is a landmark agreement which we're incredibly excited about and furthers our U.S. strategy as well as providing opportunities for growth globally.

This investment, along with other cash outflows early in '23 means that, on a pro forma basis, our leverage is around 1x, up from 0.7x at the year-end. Looking forward, we need to be mindful of the significant Snaitech concession payments, which we continue to expect to be in the region of EUR 250 million to EUR 300 million. There are indications from Italy currently that the government peers intent on launching this tender process with cash payments expected to be split across 2024 and 2025. Our priority remains on investing to take advantage of the significant growth opportunities we see within both B2B and B2C.

Within B2B, the current , as countries move towards regulation, is likely to offer further opportunities to invest in strategic agreements. While within B2C, we want to be in a position to be able to deploy capital, continue to support and back the excellent Snaitech management team. Potential cash returns to shareholders will be reviewed post the refinancing and taking into consideration our future commitments and investment priorities to fund growth.

On Slide 12. My first days as CFO have been both exciting and challenging. I'm incredibly proud to work at Playtech with its amazing people, a culture of looking after its staff, which has been demonstrated by our response to the Ukraine, and the intense focus we have as a company, and customer satisfaction, which permeates throughout the business.

As with any organization, there's room for improvement, and here I outline 3 immediate areas where I can see room for improvement that I can also influence. First, 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. I started this presentation by giving further disclosures on free cash flow and operating cash flows than previously, which allow more scrutiny around these cash flow measures going forward. I also think there is scope to improve cash generation in the business, particularly within B2B.

Second, the B2B division is complex with multiple product lines and sub-divisional units, some of which may no longer be core. I've also begun to implement a tighter rein on costs, the benefits of which will be used to fund the exciting opportunities for growth we see across all parts of the business.

Finally, I'd like to provide additional disclosures to improve transparency. I started within this set of results where we've given KPIs for the retail and online segments of the Snaitech business. These figures can be found in the appendix.

At the next set of results, in line with peers and to facilitate comparability, I'm also committing to reallocating bank charges related to the online business at Snaitech to be recognized within EBITDA. They are currently recognized within finance charges. The pro forma numbers are in the appendix. I will continue to review in the coming months with the goal of providing the most relevant information to understand our business, and in particular, B2B. I will update further at the interim results later this year.

Finally, moving on to Slide 13. The path of the global economy is currently difficult to predict, with the U.S. banking crisis adding to the already uncertain macroeconomic environment. Despite this, Playtech has started 2023 very strong, driven by both Snaitech and B2B. The multiple growth opportunities within B2B, particularly across the Americas with the recent Hard Rock Digital and also the NorthStar agreement, has meant that we're also confident in our medium term future within B2B, and thus, we are announcing a new medium term adjusted EBITDA target of EUR 200 million to EUR 250 million.

As we announced at the interims, Snaitech has a medium term target of EUR 300 million to EUR 350 million, which we are reconfirming today. Putting these together gives a medium-term group EBITDA target of EUR 500 million to EUR 600 million. While the business continues to perform very well and we have managed to limit the impact of the Ukraine crisis on our business thus far, we remain mindful of the risk of disruption as the war continues. Overall, taking into account the strong performance in 2022 and the momentum at the start of 2023, the Board is confident for Playtech's prospects for 2023 and beyond.

I'll now hand back to Mor to update you on our strategic priorities.

[Moran Weizer, CEO & Executive Director]

Thanks, Chris. 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 outlined 3 objectives. Firstly, we want to be the partner of choice for newly regulating markets. Secondly, we have made significant investments across attractive parts of the business, namely Live and SaaS. While we have made good progress so far in these segments, we want to ensure we capitalize on the significant market opportunities these represent. And finally, we want to ensure that our resources across the B2B division are allocated to the B2B growth areas we've just discussed, therefore, ensuring a better alignment of costs and revenues.

For B2C, we want to leverage our retail presence to grow Snaitech's online business. HAPPYBET has always been a retail-focused business. Under the very capable Snaitech management team who have experience in optimizing a business for the online segment, we see a path to growing the online segment. We would consider targeted M&A to expand Snaitech and leverage the B2C experts that we have running that business. And we expect all of this to be underpinned by our sustainability framework, which we discuss in more detail later on in this presentation.

On to Slide 16 where I will add a bit more color around our B2B medium term strategic objectives. We aim to be the partner of choice for newly regulating markets. Given the structural growth driver of a shift towards markets regulating, the geographic focus of the next chapter in our growth story continues to be the Americas alongside Europe. We have been laying the foundations across both regions, which are starting to bear fruit, and I'm excited to talk to you through this in more detail over the coming slides. On the product side, our primary focus will continue to be online casino and live casino supported by IMS, while sports will play a role in selected strategic deals.

As we noted on the previous slide, while we have made good progress in Live and SaaS, we want to capitalize on this significant opportunity going forward. Finally, we are currently undertaking a thorough review of the B2B business where we are looking to become more efficient, review underperforming businesses and eliminate duplication, the benefits of which will be reallocated to those areas that are truly strategic and where we see strong growth potential, whilst ensuring an appropriate cost base.

On to Slide 17, where I am extremely excited to talk to you about 2 new agreements recently signed in North America that illustrate our approach of using strategic agreements to capture the opportunity in attractive geographies. The first one is a long-term strategic partnership signed with Hark Rock Digital, the exclusive global vehicle for online for Hard Rock International, the iconic global entertainment brand. Hard Rock International has cemented itself as a marquee name worldwide, not just in gambling, but more widely in entertainment. HRD will combine the strength of this global brand with a proven management team, some of whom we at Playtech have known for many years and believe to be amongst the strongest in the online gambling industry.

We are delighted that Rafi Ashkenazi, the Executive Managing Director and Executive Chairman of HRD, has agreed to speak at the Capital Markets Day being held straight after this earnings presentation. The deal will see Playtech supply its live casino and casino products amongst others, in North America, while outside of North America, these products will also be supplied in addition to the IMS and services, including marketing and operations. As part of the agreement, Playtech has also invested $85 million in exchange for a low single-digit percentage minority equity ownership stake, the proceeds of which will be used to help fund Hard Rock Digital continue the global expansion.

For Playtech, this partnership significantly advances our position in the North American market and is very much in line with our B2B strategy. In February 2023, given the early success of its partnership with NorthStar, where we have a software and services agreement, Playtech also announced an expansion of its partnership where we have taken an equity investment.

The proceeds of this investment will be used to accelerate the growth of NorthStar's footprint across Ontario and future regulated markets across Canada. The latest agreement also expands the scope of Playtech's offering to NorthStar to include operational and marketing services in addition to the IMS platform, Casino, Live casino, Poker and Bingo solutions already launched.

Now Slide 18, and moving on to LatAm. We have previously talked about how our success in this region is based on delivering on our structured agreements, which I will talk about in more detail at the Investor Day after this event. The blueprint for the structured agreements is Caliente in Mexico where we achieved great success. On this slide, 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 Wplay in Colombia have been growing 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 Brazil market given it is on the path towards regulating, has a huge addressable market in the sports med country and the structured agreement we have signed with Galera.bet. As with the others, the Galera.bet agreement includes the customer software license agreement, as well as an option over a significant yet non-controlling equity stake in the operation.

Our recent structured agreements will be operated alongside others in the region, including in Guatemala, Panama and Costa Rica. Looking ahead, we are focused on executing these opportunities to drive growth in the region and see further potential opportunities in Chile and Peru.

Through partnering with over 180 licensees globally, Playtech has amassed a huge amount of knowledge on the gambling industry, including customer acquisition and retention, how to manage risk and operational know-how. And this knowledge transfer is hugely valuable to our partners, particularly for those where we have strategic agreements in place.

For those operators that are looking to launch online in newly regulating markets, this know-how can prove invaluable in ensuring that they take advantage of being one of the first to market in a market opening up and make the most out of the vital initial period where rapid market share gains can be made. Our experience of navigating a newly regulating environment, which can be tricky, is also extremely useful, while we also have the benefit of deeply embedding ourselves into our partners' operations, thus providing for a sticky customer relationship.

For those that are already established, our technical expertise can offer a way to get the most out of Playtech's technology to help deliver further growth. All in all, our services offering provides a win-win situation for both Playtech and our licensees.

On Slide 20, we outline our progress made in the hugely attractive Live segment in 2022 and plans for 2023. You'll be hearing from our Head of Live, Edo Haitin, at the B2B investor events straight after this event, so I don't want to steal his thunder.

But here is a brief summary. The Live business has performed well in 2022 with revenues growing by 26%. Brazil was the standout performer and now represents one of our largest markets for Live. We signed several notable customers in the year, including FanDuel and Golden Nugget. The number of players using our Live product in 2022 increased by circa 90% compared to 2021, illustrating that our content offering resonates well with the customers.

We continue to invest in the business and launched the Peru facility to cater to the fast-growing LatAm market, meaning, we now have 10 studios fully operational. We also expanded the Romania facility to meet the growing demand. As Edo will talk about it in much more depth, we have invested heavily in content, utilizing and third-party IP. We have launched games with augmented reality as well as the first ever live game with a virtual sports element. This best-in-class content allows players to spend more time in the Playtech ecosystem, thus driving cross-selling opportunities.

We have also launched several successful bespoke games for carefully selected Tier 1 operators such as Entain and Flutter. Looking forward, we have exciting opportunities coming up in 2023 and beyond. The U.S. market is a big focus for us in Live. Our content is first-class, which we think will resonate with the U.S. audience. We have 2 studios fully operational in Michigan and New Jersey, with 1 under construction in Pennsylvania.

We are also looking to expand existing studio capacity to meet growing demand across multiple regions. Innovation is part of our DNA and we will continue to invest into new concepts and content to give operators a first-class range of products.

Finally, we have integrated the Quickspin business into Live and will serve as the RNG arm with multiple games already planned to be rolled out. I'll let Edo update you further on this exciting development.

Turning to Slide 21. For those that are unfamiliar with our SaaS business, it was launched in 2019 for those operators that do not use the IMS, but want access to our content in a plug-and-play type SaaS model. At the moment, it is available for live, Casino and Poker, with other products expected to be rolled out in the future.

This helps to address the long tail of operators that don't have access to our IMS platform and increases our addressable market. The SaaS model also provides a low-friction method of exposing as many operators as possible to Playtech's technology. Once a foot in the door is achieved, it can be much easier to cross and up-sell other Playtech products.

Finally, having a broad range of customers from multiple countries across different product sets means, our revenue base is more diversified, which makes our B2B revenues more resilient to any changes. So why it is attractive for operators? They can access Playtech's market-leading content without the overhead cost of running IMS. The time to market for SaaS is extremely short, thus ensuring operators remain up-to-date with changing consumer tastes and maintain market share.

Lastly, implementation costs and customization time is reduced, also reducing cost for the customer and Playtech alike. So in other words, a very high-margin business. All the infrastructure is in place for the SaaS segment. Playtech has been building it out since 2017, including data centers in local markets. And we have added over 350 brands since launching, with more than 100 brands in the pipeline to launch in 2023. In terms of revenue, we have generated EUR 32 million in 2022 from the SaaS business, up 87% from 2021 from over 350 brands.

Thus, the revenue per customer is still low. This provides us with a significant opportunity to increase our wallet share with each of these operators. As a result of our confidence in this business and ability to leverage our existing position, we are setting a medium term revenue target of EUR 60 million to EUR 80 million. And given the contribution margin is very high, we expect to see a material contribution of B2B EBITDA from the SaaS business in the medium term.

Moving to Slide 23, where we outline our medium-term strategic priorities for the B2C division. Snaitech's retail footprint is a significant advantage and we intend to leverage this presence in order to grow Snaitech's online business. Two, as previously touched on, HAPPYBET has been underexposed to the online sector. The Snaitech management has several initiatives underway, including upgrading the technology infrastructure, enhancing the product set and new marketing strategies to increase brand awareness. Therefore, we expect to see the business improve going forward.

And three, 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 expense Snaitech and leverage the B2C experts that we have running that business. Italy is the largest gambling market in Europe and we have a gem of a business to take advantage of this significant opportunity as we look to extend our lead here. 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 2022 results suggest that this is proving to be sticky, with online revenues actually up 10% in the second half of 2022 versus the second half of 2021. Despite this, online penetration is still only 26% compared to more than 50% in the more mature U.K. market, so we still have a large price to aim for.

The shift towards online has resulted in a fundamentally higher quality business. Snaitech is not only a higher-margin business, but also less capital-intensive, and thus its return on capital employed is improving. With Snaitech's strong brand and leading online offering, we expect to continue to capture this opportunity.

Finally, I'd also like to take this opportunity to highlight the strength of Fabio and the rest of the management team. To transform Snaitech -- the Snaitech business post-pandemic into a much higher quality business in such a short space of time is remarkable.

Moving on to Slide 25. I would like to dive into one of the key strategic advantages that Snaitech has in Italy, the ability to leverage its retail presence to grow its online business. The advertising ban in Italy makes the large retail footprint and incredible valuable asset in building a strong brand, acting as a significant barrier to entry for new entrants given the cost of replicating such an asset, and Snaitech is making full use of it. Its omni-channel approach to technology ensures customer experience is optimized for both retail and online, maximizing cross-selling opportunities.

The reason why having a retail footprint and potentially transitioning customers to online is so attractive, is summarized in those 2 charts on the right-hand side. The average GGR per customer for those that are already retail customers is more than 3x higher than those acquired directly online, for example, through affiliate marketing, while the churn rate is much lower, meaning the lifetime value of each customer acquired through retail is higher -- by far higher.

Now turning to Slide 26. At Playtech, we are committed to growing our business in a way that has positive impact on our people, our communities, the environment and our industry. In 2020, we launched Sustainable Success, a 5-year sustainable and responsible business strategy. I'm pleased to tell you that 2022 saw significant progress across a number of key areas within this strategy, including governance, safer gambling, diversity, as well as climate change.

Starting with governance. 2022 saw the appointment of a new Chief Sustainability and Corporate Affairs Officer to drive forward further progress. We have also set stretching targets linked to the remuneration of executives underlying the importance of this area. We are well-known for investing into technology to make the gambling experience safer and raise industry standards. That's why in 2022, we integrated our industry-leading Playtech Protect tool into our IMS and continue to develop this offering further.

We will make further progress in 2023 too with planned improvements to real-time monitoring. A particular area of focus in 2022 has been to accelerate our progress towards achieving workplace equality. We have increased the percentage of females in senior leadership and management positions to 26% and 40% in the Playtech executive management team.

We recognize there is more to be done, but I can assure you that this is a priority that remains front and center for all of us on the board. We are equally mindful that urgent action is required to substantially reduce the impact of climate change. That's why we have set ourselves a target of reducing Scope 1 and 2 emissions by 40% by 2025.

Despite the energy turmoil last year, we took great strides towards this target by shifting to renewable energy sources across the Playtech estate. We also formally committed to set a near-term and net zero science-based targets through the science-based targets initiative. As you can see, we are not standing still on any of these priorities despite other distractions last year. I'm passionate about each and every one of these topics, which is why we have fully integrated sustainability and responsible business practices into every aspect of our strategy. I look forward to keeping you informed of further progress.

On Slide 27, I want to outline our 2023 strategic priorities. In B2B, we are continuing to focus on the Americas region. In the U.S. and Canada, we are excited to build on the strong foundations we have laid, having signed a number of agreements in 2022 and at the start of 2023. The regulatory environment remains very attractive from our perspective.

In LatAm, we are excited about the opportunities in both Brazil and Colombia and expect this to increase their contribution to the B2B business, while sowing the seeds for further growth in the medium-term by looking to enter new markets such as Peru and Chile. We have made significant investments into Live and SaaS, and we expect these to continue to deliver good growth in the coming years.

In the B2C division, we will focus on leveraging our valuable retail presence to drive growth in online in Snaitech. And as Chris will discuss in more detail at the investor event shortly after, we will be focusing on driving efficiencies across the business to ensure we can continue to invest in core strategic growth drivers.

On to Slide 28. I want to remind you of the investor events straight after the earnings presentation, where the focus will be on the B2B segment and the significant growth opportunities in the Americas and Live Casino. Last year, we set a medium term adjusted EBITDA target for our B2C business of EUR 300 million to EUR 350 million. Today, as you have heard, we are additionally setting a medium term adjusted EBITDA target for our B2B business of EUR 200 million to EUR 250 million. Taken together, you can see our confidence in the potential Playtech has to deliver going forward from the excellent platform and customer base it has today.

Thank you very much. Chris and I will -- we will -- yes,, I know, we'll take any questions. But, last but not least, very, very important for me, and for us as a company.

And finally, I will say, on to Slide 29. I would now just like to take a moment to provide an update on the situation in the Ukraine. I feel very, very strongly that our people are the most important asset of Playtech. And for more than 12 months now, 700-plus Playtech employees and their families have had their lives turned upside down. They remain front of mind, and we are committed to doing all we can to ensure their safety. I have personally been moved by the generosity and support displayed by our colleagues, who continue to do whatever they can to support both those who remain in the Ukraine and those who have been forced to leave.

This is a constantly evolving challenge, but we will do whatever is necessary for as long as the war continues. In terms of our operations, we acted quickly last year to ensure there were minimal disruption to our business activities and to those of our clients. To add further resilience to our operations in the region, we have taken a decision to open a new site in Warsaw and expect this to be up and running in the near future.

And now, we will take any questions you may have.

[Unidentified Analyst]

Just three questions for me, if I may. Firstly, around B2B, this new target that you've set medium term of EUR 200 million to EUR 250 million. Is there an assumption of that -- in that around further deals? Or is that achievable on an organic basis?

And then secondly on Live. Could you just remind me what percentage of your Live revenue comes from regulated markets currently?

And then finally on SaaS. Customer acquisition has been very strong there. You mentioned another 100 in the pipeline for 2023. Could you give any sense of what the pipeline looks beyond that? And I suppose, with your medium term targets, is that expected to be driven more by new customer acquisition or actually increased revenue per customer?

[Chris McGinnis, CFO & Director]

Yes, I'll take the first one. Yes, the B2B target doesn't need to have new deals. I think we have deals in our pipeline, including the Hard Rock deal. I think we have enough visibility with, obviously, the existing customers we have and the growth we're seeing and structured agreements we've launched that are in relatively early stages.

So new deals aren't necessarily a prerequisite for that. Obviously, we've given a SaaS target today, which will come -- I think it was maybe one of your next questions, which is a mix of wallet share expansion within the existing customers, but also we have a very strong pipeline of new SaaS customers as well, and it's actually delivering them and getting them live, that we need to do. So it's going to be a mix.

But I think the business is strong enough and the customers we have now and the growth prospects they have, I think we'll be able to -- we can get to the targets through that.

I think the second was a percentage of Live regulated. I think it's -- much, much higher proportion is regulated compared to some of the other competitors in that market. You'll hear a lot more from Edo about it later today in the presentation. But the percentage is broadly the same as our overall B2B percentage split of regulated versus unregulated.

[Moran Weizer, CEO & Executive Director]

And on SaaS, obviously, we indicated earlier the medium-term target for revenue, EUR 60 million to EUR 80 million, which is more than doubling the business again. We refer to 350 with another 100 brands underway. Medium term, I will say the following. If you calculate the EUR 32 million and divide it by the 300-plus customers, we -- because some were launched towards the end of last year, but when you think about the overall number we had throughout the year, contributing to revenues, it was, let's call it, because it's easy to calculate.

And when you divide the EUR 32 million by 320 brands, it's per customer. It's EUR 8,000 a month for Playtech, which is a very, very small number for us. And therefore, I believe that going forwards, medium term target is not less than 500 brands, which can be achieved given the 100 on the way or underway relatively easy. But at least 500 -- I don't want to get ahead of myself, so I will refer to 500 brands. And obviously, we want to increase the share of wallet and we believe that Playtech, given the quality of its products and given the methodology we have built around the engagement with such brands, we believe that we can actually take more market share from others.

We can increase the share of wallet as we call it. And I believe that it will be a combination of both new -- more new brands or more brands as well as a higher share of wallet. Between the 2, we set a target of EUR 60 million to EUR 80 million, which is more than doubling the business as a starting point, and we feel comfortable -- very comfortable about it.

I think that what people should be aware about the SaaS platform is, and the key word there or the key term there is diversity. 350, no reliance on Playtech, as not reliant -- being reliant on any particular customer that generates very high volumes to the company, obviously, done on a non-exclusive basis, giving access to customers.

The beauty of this business, people start with 1 game, a number of games, and then they start extending. We recently actually saw some demand for IMS tools, which is obviously a good sign. So we are very excited about this business. It comes with a very, very high margin, which we will refer to in the Investor Day and this is why we are excited about this opportunity.

[Edward Young, Morgan Stanley]

Thanks. Edward Young from Morgan Stanley. I've got two questions, and I'll try and step on what you're covering in the investor event shortly. But first of all, on B2B, you've talked a little bit about identifying some areas that could be noncore. I'm looking for some efficiencies in that. I guess the broad question there is, do you still think it's important to have a full spectrum offering, which is what you've sometimes referred to in the past? You've talked just then about cross-sell and up-sell in SaaS. So when you say noncore, there are certain segments of B2B that simply aren't growing well enough or producing enough cash? Or is it more about efficiencies within each of the sort of separate segments you expect to still offer everything to everyone in that regard?

And then the second question is on B2C. You spoke about targeted M&A. Just to understand what you mean by that in terms of some of the opportunities. Would that potentially be increasing your scale in Italy where, as you mentioned, you're already a fairly dominant player, or scaling up HAPPYBET in Germany, or potentially looking at other geographies as well? How do you see the sort of possible areas you could allocate capital to in that business?

[Chris McGinnis, CFO & Director]

I'll start the first, you might want to add to it. But -- on the first one, I think it's going through B2B. Obviously, we've grown B2B significantly over a long period. And Playtech history is -- obviously is a B2B company. It's -- that's been done organically, but inorganically as well. And there are a lot of different components to that business. I think it's probably efficiencies across all of it. Obviously, there are areas we want to keep investing in. But some portions of it, we will look and decide are they performing as well as they should be, are they still strategic, things like that. So I think it's a very comprehensive review of the entire B2B business, both individually and as a whole. Do you want me to do the B2C M&A?

I think there's -- when Fabio presented and the team presented in September, they talked about this targeted M&A. I think they described it and we certainly agree and support them. There's -- obviously, there's Italy. That's their home market. If there's opportunities there, which -- there's been a lot of consolidation in Italy. So there's probably fewer opportunities left, but there's not none. There's still opportunities in Italy, but certainly fewer perhaps of a certain scale.

Then also, they have assets in the HAPPYBET in Germany and Austria. So I think that's definitely an area as well of potential. And certainly, it's a small business, , I think it's a business that would benefit from more scale. -- they don't need to be huge acquisitions, but a couple of smaller -- 1 or 2 smaller ones might give them the scale to help accelerate the turnaround of that business.

And then there's potentially other opportunities where -- across Europe where, if we can look at it and leverage Fabio and the team that they might be worth pursuing as well. So I think there's 3 different routes you could go down, but I think there's -- it's all about leveraging Fabio and the team and getting the most out of them.

[Moran Weizer, CEO & Executive Director]

Keyword I will say is targeted, right? It will be very targeted, very specific to build the scale of the business and we should never lose sight of the fact that this business is on a journey transitioning from retail to online. We proved to be very, very successful doing that. And Fabio and the team has done an amazing, remarkable job really, and this is our top priority. Our top priority is, first, to continue the organic growth of Fabio -- of Snaitech by Fabio and the team. We believe that there is still a massive -- a very significant opportunity for us within Italy, within Germany and Austria, now that they took over that business.

But we are not ruling out targeted M&A. I think that we have come out of COVID-19 stronger than ever. We proved the model. It's now about focusing on organic growth, but at the same time, it's maybe the right time to start looking at targeted M&A within Italy, within Germany and Austria and potentially even outside of that. But we will be very careful, but it's -- we wanted to flag that because we can't rule it out. And after 1.5 years after we came out of -- yes, 1.5 years after lockdowns were lifted, I think that it's right for us to start thinking about it and consider that.

[Richard Stuber, Numis Securities]

Richard Stuber from Numis Securities. A few, if I may. The first one is the EUR 200 million and EUR 250 million medium term target. How much of that is going to be from savings and how much of that is going to be from top line growth at sort of similar type of margins?

The second question is on Live. I think you said revenues were up 26%, but players were up 90%. Could you explain what's going on there? Is it just the sort of geographical mix, which -- in that part? And the third question is in terms of your leverage, I think you said you got 1x net debt-to-EBITDA on a pro forma basis. What is your sort of medium term target, please?

[Chris McGinnis, CFO & Director]

Sorry, Rick, can you repeat the second question?

[Richard Stuber, Numis Securities]

Live, 26% revenue growth versus 90% player growth. Why is it so much lower spend ahead?

[Chris McGinnis, CFO & Director]

That one, I think it's easy. We'll defer to Edo. He's got a slide on that in his presentation later.

[Moran Weizer, CEO & Executive Director]

This is why I said just I would take the second question and then defer it to Edo.

[Chris McGinnis, CFO & Director]

I think --

[Moran Weizer, CEO & Executive Director]

But he has a very, very good answer and we included that in the presentation.

[Chris McGinnis, CFO & Director]

There is a whole table full of . On the medium term target, I'll also cover that in the Investor Day, but it's more growth driven, to be clear. We're -- we have loads of growth opportunities. I think we have opportunities for efficiencies, but that's to do exactly that to be as efficient as possible in terms of capturing the growth. So I don't want anyone to come away thinking this is a cost-cutting story or a restructuring story or anything like that. It's a growth story. But we need to do that in as efficient a way as possible.

And then in terms of the leverage target, we're at 1x now. I'm not against having higher leverage, but it has to be for the right opportunity. In these markets, I'm not going to do anything aggressive or reckless. I'm going to take a prudent approach, as I said. And I'm always going to have an eye on the near to medium term cash flows, which, as I highlighted at the moment, there's the bond later this year and then there's the Snaitech concession payments, which we're getting increasing visibility. I would say that the government for once seems a bit more determined to actually proceed with that.

That's the view coming from Italy and Fabio and the team that I spoke to yesterday for the latest update. That is the view that the government currently is looking to start something in late 2024 or 2025. So that will obviously impact our leverage as well when that comes. But that being said, we -- I like our leverage where it is because it gives us flexibility that going to targeted M&A without doing anything huge, but if the right opportunity comes along, we can pursue it, so.

[Unidentified Company Representative]

As we have a hard stop at 10, we have time for one more set of questions. There'll be a much lengthier Q&A period after the CMD.

[Ivor Jones, Peel Hunt]

Ivor Jones from Peel Hunt. Could you shut HAPPYBET? It seems to get a lot of airtime for a low-revenue material loss business when you got other investment opportunities. Is there a reason you're not just talking about exiting?

And then secondly, the 2 problem children in B2B, can you just talk about the future of Asia revenue? Do you recover the bad debt? I know that's relatively small, but is it flat or grow? And is it impacted by the change in the shareholder register around the M&A activity last year? Does it feel more secure or less secure?

And in the U.K., could you just point to the -- how much of that U.K. revenue is coming from things like sports and retail that we might think is more defensive in the face of regulatory change?

[Moran Weizer, CEO & Executive Director]

The first one, can you remind me the first -- exiting?

[Ivor Jones, Peel Hunt]

HAPPYBET. Why can't you shut it?

[Moran Weizer, CEO & Executive Director]

Yes. We can shut it down, but we have all reasons to believe that actually the German and Austrian markets are very, very appealing markets. And over time, as Europe continues to regulate, eventually, they will regulate. Eventually, it will be allowed. France is now considering online casino many, many years after it allowed poker and sports. And I think that we should never forget that actually the German market used to be one of the largest online gaming and betting markets for our industry and we believe that it is still very, very attractive. And I think that actually, given the feedbacks that we have from Fabio and team that we can turn around this business, it will be initially a low-scale business and we will grow then the scale. It will position us very, very well for any coming regulations in the German market.

Be aware that in Germany, the regulations around sports dictate that high rollers have to be registered in retail in order to become online and this is why we believe that there is a real opportunity in the short, medium term around sports and hopefully, in the coming years around gaming as well. If that happens and if we own a business like HAPPYBET in Germany and Austria that we believe can be turned around relatively quickly, we believe that we will be very well-positioned, if not best positioned alongside 1 or 2 other companies that are still committed to this market.

On Asia, I will say, obviously, given the COVID-19 issues, yes, we had some bad debt, but in recent months or soon after that, we started basically with collection basically resume to the original levels it was before. We feel comfortable. It is stable now. Nothing to do with any shareholder. It's the same business we had many, many years ago. We are focused on it, maybe less focused than before because we are focused on regulated markets, but still an important part of our business and a highly cash-generative business for us. So obviously, we have gone through a difficult period of time, COVID-19. It had an impact on the bad debt. But obviously, as we came out, it stabilized in terms of size and numbers and also in terms of collection.

As for the U.K., obviously, as you could see in the results, as outlined by Chris, obviously, Playtech is one of the most diversified businesses out there, both outside -- I mean, in terms of U.K., but also outside of the U.K. Outside of the U.K., rest of the world, Europe as well as the Americas, we grew significantly, in some cases, more than 30%, in one case, more than 40%. So obviously, we see good growth opportunities.

The U.K. still remains an important market for us and we are committed to the U.K. market. We are supporting our existing customers as they put themselves preemptive measures being very proactive, preparing for the new gambling act around affordability and stake limits as indicated by Chris. So we have a very big commitment to our partners, not to forget that, obviously, these -- some of these operators like Flutter, Entain, 365, William Hill have a very big business with us outside of the U.K.

And this is why we remain committed to the U.K. U.K. remains not an insignificant part of our business. It will remain one of the largest contributor to our industry in the foreseeable future. Whether we push more retail opportunities versus online, I think that what will happen is after these preemptive measures were put in place, we will see obviously a reset of numbers. But we believe despite macroeconomic climate changing, right, that there is still some opportunities in the U.K. and it will resume -- the growth will be resumed. Again, we have to factor in the macroeconomic climate change. But overall, taking a medium term view, U.K. will remain a very important market for an industry and accordingly for hence Playtech as well.

[Chris McGinnis, CFO & Director]

The only thing I'll add to that very quickly is the U.K. to start 2023 has been stable. So I don't want to say it's the sort of headwinds from the regulatory change and the actions the operator taking are behind us. I don't think we're there yet, but there is some signs perhaps that the worse is behind us, obviously, with -- the white paper is still to come.

[Moran Weizer, CEO & Executive Director]

Yes. Actually, we saw some growth, but we didn't want to reflect on that because it included some sales of systems, right, one-off sales, and this is why we decided not to come out with big statements. But it does basically support the view, right? This system sale basically was around retail. So we are looking both into retail and online. Definitely, retail can obviously act as a balance to any impact on online. But between the 2, we see some -- we still see some opportunities. And I will say that -- U.K., as I said, we remain committed, very important market for us, alongside a lot of focus we put on the Americas and the rest of Europe.

[Chris McGinnis, CFO & Director]

I think we have to stop there. And Simon, you'll get the first question at the Investor Day. Apologies.