Ladies and gentlemen, thank you for standing by. I'm Constantinos, your call operator. Welcome, and thank you for joining the Intralot conference call and live webcast to present and discuss the first half of twenty twenty-four financial results. All participants will be in listen-only mode, and the conference is being recorded. The presentation will be followed by a question and answer session. Should anyone need assistance during the conference call, you may signal an operator by pressing star and zero on your telephone. At this time, I would like to turn the conference over to Mr. Nikolaos Nikolakopoulos, Group CEO of Intralot. Mr. Nikolopoulos, you may now proceed.
Hello, everyone. Let me first of all welcome you to the presentation of our financial results for the first half of this year. I will have a brief introduction, and then I will invite our Group CFO, Andreas Chrysos, to walk you through the detailed results. I will start by saying that in this period, we maintained a stable trajectory, and we successfully mitigated most of the exchange rate challenges that we had, that we faced in Argentina. In the second quarter, there was an absence of a significant jackpot in the U.S., so there was no boost in the sales performance. But at the same time, I can say that our continued investment in marketing in Turkey, in Bilyoner, has already, in the last couple of months, begun to yield positive results.
Now, looking ahead, I would say that we are cautiously optimistic. Statistically, first of all, we do anticipate a major jackpot in the U.S., and along with a strong second half, both in Turkey and in Argentina, both of those operations traditionally are backloaded, meaning they see stronger performance in the second half than the first half of the year, and we do also believe that this will complement the solid results that we have already seen, both in Australia and Croatia. Obviously, a key focus for us is going to be the renewals, the extensions of existing operations, and also the expansion in new business that we are after through various RFPs.
As you probably know, last week we have announced three-year extensions in the Netherlands, where in NLO, we extended the retail sports book, and also in Ireland, where PLI extended again for three years, the entire lottery contract that we have there, while we remain optimistic about the various opportunities that we have in front of us. With that, I would like to give the floor to Andreas, and then have you take any questions that you might have. Andreas, please.
Thank you, Nikos. So let's after this short introduction, let's move directly to the first half of 2024 financials presentation. So if you have it in front of you, if you go to page 5, we see the revenue analysis per business activity. So our management contracts activity line, including projects in Turkey and in Morocco, performed substantially better by EUR 7.6 million year- over- year, representing a 25.4% growth. This effect comes fully from Bilyoner, as Nikos already said, which is a result of the intense marketing activities undertaken by Bilyoner to boost the market share in a market which is growing in Turkey, the online sports betting market substantially.
In euro terms, the revenue in Turkey grew by 67%, managing to fully counterbalance the negative effect of the headwinds of the Turkish lira. This positive effect was partly counterbalanced by the lower revenue in Morocco, attributed to the lower scale contract that we have now in the country, compared to the old contract that was in effect last year. In licensed operation, we see a lower performance of EUR 7.4 million compared to the respective period of last year, affected by the steep devaluation of the peso in Argentina in 2023. But we already see a smaller deficit in the second quarter of 2024, compared to the same quarter of last year, as we see gradually the effect of the devaluation smoothing out.
On the technology activity line, the organic growth in Oceania affected revenues positively by 3.5%, but on the other hand, the Argentinian technology line business here as well affected negatively the FX translation and was lowered by EUR 2.9 million. The performance in the U.S. was marginally lower, primarily affected by the timing of the jackpots occurrence compared to previous year, as Nikos also mentioned previously. Turning to page 6, we see the overall PNL performance for the first half of 2024, compared against 2023 respective period. The revenue line was marginally lower, affected by the currency devaluation in Argentina, which impacted by EUR 10.3 million in total. Although in local currency, this year revenue presented a 131.4% growth.
counterbalance to the larger extent by the better performance in the rest areas of the world, and especially in Turkey. At this point, I would like to mention that the effect that we are discussing in Turkey actually occurred in the last month of the year. The respective period of 2023 does not include this impact. This means that the rest businesses are performing much better in order to counterbalance the effect that we see this year, which is gradually smoothing out, as I previously mentioned. The better performance in Turkey also affected the gross profit line, which was better by EUR 2.7 million in the half of 2024.
And this was almost entirely attributed to the second quarter's performance, an indication of what Nikos previously said, that the actions undertaken with the intense marketing activities are showing the results already in the second quarter, and we expect an even better performance in the remaining of the year. So moving down to the OpEx line, the year-on-year increase is entirely related to Bilyoner. Again, because it invested significant amounts to increase the markets and strengthen its presence in the local market, and we see the results already in the revenue line.
As a result of the above, EBITDA for the period was lower by EUR 3.3 million, and if we analyze this further, it all comes from Argentina and Turkey, with Argentina being down by EUR 2.4 million due to the effects already analyzed. And also Turkey, which was negative by EUR 1.6 million. All other projects performance partially counterbalance this deficit of EUR 4 million from these two companies. The second quarter's performance was in line with last year's EBITDA performance, and the EBITDA margin was in the region of 34% for the first half of 2024. Higher depreciation and amortization in the first half of 2024 versus 2023 because of the hyperinflation impact year- over- year of Bilyoner license.
Moving down to the EBT line, it was lower by EUR 10 million due to the EBITDA, the depreciation and amortization, the interest and refinancing expenses variance. The net income after tax and minority interests was positively affected by a reversal of the deferred tax liability coming from Bilyoner, following the harmonization of inflation accounting treatment and the IFRS and local accounting tax principles, therefore, being this line slightly better year- over- year overall. Turning to page number seven, the upper two graphs clearly show the signs of the stabilization and have been analyzed in details in the previous slides.
On the bottom left graph, operating cash flow was lower by EUR 5 million, attributed mainly to the lower recorded EBITDA, and to a smaller extent, to a negative swing of working capital, mainly due to the impact on inventories, the majority of which coming from the U.S., referring to equipment building that will be installed to clients such as in Illinois and Ohio in the next period throughout the year. CapEx was lower by EUR 2.5 million, mainly due to the lower investment requirements in the U.S.
On the bottom right of the slide, we see that the net debt and leverage ratio, adjusted for the restricted cash referring to debt servicing and repayments, remained at the same level as at the end of 2023, in the order of EUR 330 million- EUR 340 million regarding the net debt. Regarding the leverage ratio, 2.6-2.7 times, respectively. Turning to page number 8, we see the net debt movement bridge from December 2023 through June 2024. Free cash flow generation for the first half at EUR 22.4 million, and the net interest payments at EUR 15.7 million, sorry.
Overall, net debt as of June thirtieth stood at EUR 362.2 million, and adjusting the impact of the EUR 24 million from restricted cash, adjusted net debt stood at EUR 338.2 million euros, keeping adjusted net leverage ratio at 2.7x , as already mentioned previously. So after the successful raise of funds amounting to EUR 235.4 million in the first quarter of 2024, which required a guaranteed deposit of EUR 24 million and EUR 6.2 million of issuance costs, the company proceeded with the full redemption of its notes due September 2024, amounting to EUR 230 million euros, more or less.
In addition, the company proceeded with the capital payments of EUR 5.8 million towards the term loan in the U.S.. But due to the negative FX movement on our U.S.-denominated debt, the gross debt increased by a total of EUR 2.4 million.
... lastly, moving on page number nine, we see the contributions per region in our revenues and EBITDA. In terms of EBITDA, North America had a slightly better performance, while Europe and Oceania performed performance partly counterbalance the lower performance in South America, due to Argentina, and in the rest of the world, attributed to Bilyoner was small, and to Morocco, already mentioned in the previous slides, to a larger extent. So this has been the performance of the Intralot group for the first half of twenty twenty-four, and we are now at your disposal for any questions you may have. Thank you.
Ladies and gentlemen, at this time, we'll begin the question and answer session. Anyone who wishes to ask a question may press star followed by one on their telephone. If you wish to remove yourself from the question queue, then you may press star and two. Please use your headset when asking your question for better quality. Anyone who has a question may press star and one at this time. One moment for the first question, please. The first question comes from the line of Osman Memisoglu with Ambrosia Capital. Please go ahead.
Hello, many thanks for the opportunity. Regarding your comments for Turkey and Argentina, you mentioned seasonality will help. For Turkey specifically, will there be any other changes at the operating level? Do you expect, for example, to continue to spend on marketing at the same pace, at the same intensity? That's my question. Thank you.
Yes. Let me answer that, Osman. In Turkey, what we have done in the past period is that we augmented our acquisition and retention spending in order to increase our market share, an end result that we have achieved. Now, what we have experienced in the end of the first and the second quarter of the year is that from very small operators, not the market leaders, there was an aggressive policy of spending in order to take market share. So we had practically to cope with that and make sure that we were going to maintain and increase what we have gained in the previous months, which again, we have achieved.
In the last couple of years or months, we have seen that this attitude has completely changed and things went normal again, which in my point of view, is a little bit of, you know, a normal situation as you cannot continue to spend and increase the acquisition cost. So all in all, we do expect that we are going to get back in our normal spending, in order not only to maintain, but also to continue increasing the market share, and if there is something abnormal again in the market, we will be ready to adjust.
Understood. Thank you, Nikos.
The next question comes from the line of Petros Tsourtis with Optima Bank. Please go ahead.
Yes. Hello, everybody. One question, if I may. You mentioned on your press release and earlier, that you are pursuing a large number of commercial opportunities in North America and Australia. Can you give us more color on them, please? And when we should expect positive news, I mean, within the third quarter, in the fourth quarter of the year or in twenty twenty-five? Thank you very much.
Okay. Let me tell you what is also public and to give you some dates and as much color as I can. On the pipeline, where we have already submitted proposals because the RFP process has already started and it's underway in Australia, where the TLC that has 90% market share as an operator in Australia is in a process of revamping or changing their technological infrastructure. This is the first one. In U.S., we have submitted on the fifth of August, if I'm not mistaken, Illinois, which is the monitoring system for give or take 50,000 VLTs in the state, and also two other opportunities, one in Loto-Québec and the other in, well, in Ontario, in Canada.
All of those four, we have already submitted, end of July, beginning of August. And I presume, because there is a process with presentations and, you know, all the process of the RFP, questions, answers, reference visits, I believe that within the year, before the end of the year, we are going to have some news. Now, what lies ahead is, we have Missouri, which is a big state in terms of lottery in the U.S., mid of September, that we are going to submit. We have a small VLT project in Nebraska that the submission date is first of October. We have Western Canada Lottery Corporation , that they are going to issue-...
An RFP, I think it's going to be also mid-October for the iLottery, and we have Maryland at the end of October, I think it was, should be around twenty-eighth. We have also some other opportunities that we're discussing without an RFP process. I believe that we are going to have either an extension or some new some news to announce within the month of September.
Yeah. Thank you very much.
The next question comes from the line of Fani Tzioukalia with Euroxx Securities. Please go ahead.
Hi, hello from our side. One quick question, please. Would it be possible to clarify on the working capital increase within the second quarter specifically, and how would you say it's evolving with towards the second half of the year? Thank you.
Compared to the first quarter, the working capital has been improved, but we still have the impact on the inventories, which we also mentioned in the first quarter of the year. Referring to infrastructure on hardware, specifically in the U.S., which are being built and are currently in our inventory in the warehouse, which will be installed in the clientele base in the next few months, so we expect this to smooth out and also move from the inventories to the CapEx line, which of course will, you know, have an impact on the revenues as well.
Because, as you can imagine, when we install this, these new products, in the market, it will also generate some additional revenues, and especially in clients such as, in Illinois and Ohio, as I already mentioned.
Okay. So you mentioned that, there's a quarter- on- quarter improvement on the working capital, so we should expect a gradual improvement, towards the end of the year?
Correct, Fani. Correct.
Okay. Thank you. Thank you so much.
Welcome.
The next question comes from the line of Russell Pointon with Edison Group. Please go ahead.
Good evening, gentlemen. A couple of questions from me, if that's okay. Could you just talk firstly a bit about the trends between Q1 and Q2 in the U.S., in terms of what you're seeing at the, you know, from the users? And I note that, profitability moved around a bit relative to the revenue. Moving on, and have you seen any impact from, you know, there's some fears that the macro environment is getting slightly more challenging for people, so have you seen any impact on that? Second question is on Turkey, just to push you a bit on the margin. I think the margin has effectively halved over the last twelve months. You sound a bit more confident about, your marketing spend normalizing.
So how much of that margin could potentially come back in Turkey? And my last question is, it looks as though there was quite a big pickup in the winners payout ratio in the second quarter. So could you just talk about what's driving that, please? Thanks.
Andrea, let me take the first one about the U.S. and the trends.
Okay.
What we have seen, first of all, there are two specific categories that I would like to address differently. In the U.S., the market, give or take, is 65% instants, 35% draw-based games. The draw-based games, they have a huge effect on the jackpot, and especially Powerball and Mega Millions are games that are driven by the jackpots. So the absence of a significant jackpot clearly has skewed the picture. That's why I said in the beginning that statistically, we should expect something to come in the next months until the end of the year.
Therefore, this category, not only in our clients, in our customers, but generally in the whole U.S. market, the U.S. lotteries, experienced a decline versus last year. The second thing, now it is the issue of instants, when we are in our operation, in our customers, close to 2% year-on-year growth, where the market, I think, is running north of 1%, so all in all, there is, I wouldn't say a decline, but it is not the growth that we should expect, especially even as last year it was driven by the, as I said, by the jackpots. I think this is going to be normalized. We don't see that there is an impact on consumer spending.
Scratch card instants is the indicator of that, and I think we are on a good track, and when the jackpots are going to come, things are going to get normal. Finally, you can see that, you know, we managed to increase our EBITDA in the U.S. because, as we've seen these trends, and we've seen the jackpot not realize in the first half, we took some measures in order to be cautious on spending.
... Yes, let me take the Turkey margin. I think Russell and Nikos already mentioned the issue with Turkey. So we are facing a quite intense competition in Turkey, which indeed has led to a lower margin compared to last year. You know, how much of it will be recovered? This is something that we cannot assume currently. It depends on the market conditions. And I think Nikos already said that we face some intense competition from smaller players, which is something that we did not expect. In any case, we will try to safeguard our market share there and actually enhance it. This is our primary target.
In order, you know, to strengthen our presence in the market, which, by the way, is continuously growing, so we cannot, you know, make you know a provision of how much of the margin will be recovered. Depends on the market conditions. In any case, the absolute number is going to improve. Now, regarding the last question, I think you mentioned about the payout, which is indeed slightly higher. By the way, let me tell you that this refers to a very small part of our gross profit, which is, you know, our business in Argentina, so this is the only licensed operation.
So this is the only part of the world where we are having, you know, this, the payout. So it's a very small part of the business. We expect that this throughout the year will be smoothed out. But again, we are not talking about a material impact on the overall numbers.
Thank you very much, Andreas and Nikos.
As a reminder, if you would like to ask a question, please press star and one on your telephone. Once again, to register for a question, please press star and one on your telephone. And ladies and gentlemen, there are no further questions at this time. I will now turn the conference over to management for any closing comments. Thank you.
Thank you very much for the attendance and the interest. I hope we'll cover, we covered, you know, the major parts of our first half. Before we close, I would like to read the statement from our chairman, Mr. Kokkalis. "Half-year results confirm the company's stable course and maintenance of key financial indicators at desired levels, in spite of FX headwinds and seasonality effects. Strengthened by the group's improved financial position, the company continues to deploy and take live its new advanced lottery engine, LotosX, and further developing the entire lottery technology ecosystem in developed markets such as Canada.
At the same time, we are currently pursuing a large number of promising commercial opportunities in North America and Australia, while renewing the trust and cooperation with existing important clients, such as in the Netherlands and in Ireland. Again, thank you very much.