Good morning, everyone. Thank you all for attending today. It's good to see a lot of familiar faces here. On to slide two. I'll begin with the highlights before handing over to Chris, who will take you through the financials and the outlook. I'll then update you on our progress against our strategic priorities. Turning now to slide three. I'm pleased to report a strong performance in the first half, with adjusted EBITDA of €92 million, consistent with the upgraded expectations communicated in last month's trading statement. The overall performance reflects the revised terms of the Caliente Interactive agreement. We saw solid underlying growth within the B2B business. At the same time, we continue to make excellent strategic progress in core markets, in particular the Americas, where we have laid the foundations for significant growth in the U.S. and Brazil.
The disposal of Snaitech, which completed in April, has bolstered our balance sheet, giving us the flexibility around capital allocation. Given the solid start to H2, we are on track to deliver fully adjusted EBITDA for 2025, ahead of expectations. As we transition back to our roots as a pure-play B2B business, the Board remains confident in our ability to execute our strategy over the medium term. I will now hand over to Chris, who will take you through the financial performance and outlook.
Thanks, Mor. On to slide five, please. Before we look at the numbers, I think it's important to note the two major events that took place in the first half of this year, which are, of course, the completion of the sale of Snaitech, as well as the revised terms of our agreements with Caliente Interactive taking effect. These big changes have fundamentally reshaped Playtech, and we are pleased that the financial performance of the group, which includes the impact of these changes, has come in ahead of expectations. Now, looking at the numbers, group revenue for the first half came in at €387 million, down 10% year-on-year due to the impact from the revised agreement with Caliente Interactive.
As a quick reminder, under the revised agreement, which came into effect on the 31st of March, the additional service fee will no longer be collected, reducing revenue, while direct costs are also slightly reduced. As previously communicated, our share of income from Associates as a 30.8% direct equity holder is now included within group-adjusted EBITDA. We've put a slide in the appendix that walks through the comparison and changes at revenue and EBITDA level, so you can see the effect the new Caliente Interactive agreement has had in the period and how underlying group earnings have grown. Excluding the Caliente Interactive impact, group revenue was flat year-on-year in the first half.
This performance also absorbed several headwinds we saw in the first half of the year, such as the Brazil regulatory transition issues, the implementation of the VAT in Colombia, and the exit of a major operator from Asian markets. Adjusted EBITDA in the first half came in at €91.6 million, ahead of consensus expectations prior to our August trading update. On an underlying basis, adjusted EBITDA grew 5% year-on-year in the first half, reflecting the strength of our core operations. We have maintained a strong balance sheet, ending the period in a net cash position due to the net proceeds from the Snaitech sale. Finally, our free cash flow generation in the first half was impacted by the timing of dividend payments from Caliente Interactive, totaling $20 million, which were received post-period end. Turning to slide six.
Looking at the B2B division in more detail, H1 revenues declined 9% to €348 million. On an underlying basis, revenues grew by 3%. Also, on an underlying basis, Latin America saw revenue growth of 5%, as the tailwind from Brazil's inclusion within regulated markets in our reporting was partially offset by the previously flagged headwinds in Brazil and Colombia. The U.S. and Canada region continues to see very strong momentum, with revenues increasing 64%. Looking at Europe, excluding the UK, revenues grew 4%, driven by Poland and Spain. In the UK, revenues declined 3% due to the continued impact of an operator insourcing their self-service betting terminals. Elsewhere, in unregulated markets, revenues declined, reflecting the reclassification of Brazil as a regulated market.
From a cost perspective, and you can see more details with a breakdown in the appendix, continued investment into strategic areas such as live casino in Brazil and the U.S. was largely offset by tight cost control, which resulted in B2B costs increasing by only 2%. Now on to slide seven, where I will talk you through the performance of our B2C division. B2C revenue declined 17% year-on-year to €41 million in the first half, while adjusted EBITDA loss narrowed from €4.3 million to €1.5 million. HappyBet saw a 19% decrease in revenue, driven by the closure of the Austrian business and the ongoing winding down of the German operations. Adjusted EBITDA losses narrowed significantly to €2.3 million for the same reasons.
As announced in May, we have initiated a disposal process with another German operator, which includes the transfer of HappyBet's German franchise partners and associated hardware subject to negotiations. This marks a key step in our exit from the non-core HappyBet business. Elsewhere, our Sunbingo and other B2C operations were impacted by enhanced regulatory requirements in the UK, which contributed to a 17% decline in revenue and a reduction in adjusted EBITDA. Turning now to slide eight, where we look at our net debt bridge from the end of 2024 to the end of June 2025. Following the disposal of Snaitech and the payment of the special dividend, we received just over €300 million in net proceeds. As a result, we ended up with a net cash position of €77 million as at the end of June.
It's worth flagging that this net cash position is elevated, as there are outstanding liabilities from the Snaitech disposal totaling just over €90 million. These liabilities, which are not due until 2026 and 2027, include a portion of management bonuses related to the deal, taxes on the Snaitech sale, and dividends to holders of unvested LTIPs. Adjusting for these on a pro forma basis, we would have had a slight net deposition of €15 million at the end of the period. Turning to our borrowing facilities, in Q2, we successfully repaid the remaining €150 million outstanding on our €350 million March 2026 bond, using a portion of the Snaitech proceeds. This leaves us with a single €300 million bond, which matures in June 2028, alongside our recently secured €225 million revolving credit facility, which replaced our previous facility and currently remains fully undrawn.
On to slide nine, Playtech continues to maintain a strong balance sheet, which provides us with the flexibility to allocate capital in a disciplined and strategic manner. Our approach is focused on driving long-term growth while delivering value to shareholders. We are actively deploying capital to high-growth areas such as the U.S., Brazil, and live casino, where we see strong momentum and scalable opportunities. In addition, we're investing in both new and existing structured agreements that support our expansion into regulated markets and reinforce our B2B leadership. Our M&A strategy remains disciplined. We are open to creative acquisitions that align with our strategic priorities and regulatory trends, with a clear focus on enhancing Playtech's position as a pure-play B2B technology provider. At the same time, we continue to evaluate mechanisms for returning capital to shareholders, including dividends and buybacks, ensuring that any action taken is both sustainable and value accretive.
This balanced approach allows us to invest in growth, maintain financial resilience, and deliver returns, all while remaining agile in a dynamic market environment. Turning to slide 10. As you recall, at our 2024 full-year results, we introduced a new medium-term adjusted EBITDA target of €250 to €300 million. We have a starting point of approximately €150 million in adjusted EBITDA for 2024 when you adjust for the revised Caliente Interactive Agreement. I'll now walk you through the key levers we're deploying to reach this target. First, our U.S. business is in growth phase and, as a result, has annual losses of approximately €15 million. This is primarily due to the significant investment being made within the live segment, as we have three studios now operational in the U.S., with small but rapidly growing revenue.
Given the structural growth drivers and demand from operators, we see a clear path to profitability over the coming years. A strong operating leverage on the revenue growth translates into narrowing EBITDA losses and then ultimately positive EBITDA. Secondly, we have identified underperforming businesses within the Playtech group that contributed more than €20 million in annual EBITDA losses. Of that, a significant amount relates to HappyBet, which we've discussed, and where there's a process underway to wind down that business. The remaining underperforming businesses will be addressed in the coming periods with actions already being taken. Next, as Mor will talk about in more detail, we are well positioned in markets such as Brazil and Mexico, partnering with the biggest and most ambitious brands, which should drive further earnings growth over the medium term.
Finally, we continue to identify inefficiencies across our processes and footprint while taking steps to eliminate duplication. This will ensure our B2B business operates with the right cost base and that our resources are focused on the growth areas that we've just discussed. Finally, moving to slide 11 and our outlook. We've seen a solid start to H2 with performance tracking in line with normal seasonality. We plan to continue to increase investment in the second half, particularly in the U.S. and Brazil, where we see strong and sustained demand for our products. Despite the increased investment, we're on track to deliver full-year 2025 adjusted EBITDA ahead of expectations, reflecting the strength of our core business.
For guidance, we now expect full-year 2025 CapEx, which includes capitalized development, to be between €80 million to €90 million, which is a reduction from our previous guidance of €90 million to €100 million, which is due to lower capitalization rates and a disciplined approach to capital spending. We maintain our effective tax rate guidance of between 25% to 28%. Our financial performance and good strategic progress in the first half of the year keep us firmly on track to meet our medium-term adjusted EBITDA and free cash flow targets of €250 million to €300 million and €70 million to €100 million, respectively. With clear strategic priorities, strong execution, and a strong balance sheet, the Board remains very confident in Playtech's prospects for the remainder of 2025 and beyond. I'll now hand back to Mor to take you through our strategic priorities.
Thanks, Chris. On to slide 13. I'll begin by highlighting two landmark milestones completed in H1 that fundamentally reshaped Playtech into a highly focused B2B business. Let's start with Snaitech, a transformational deal and a clear example of our commitment to deliver shareholder value. We acquired Snaitech in 2018 for €846 million at an attractive EBITDA multiple of 6.1 times. Alongside the Snaitech team, we successfully transformed this business from a predominantly retail operator into a higher margin, less capital-intensive, technology-driven omnichannel leader. In September last year, we announced the sale of Snaitech to Flutter Entertainment for €2.3 billion, representing a premium EBITDA multiple of 9 times. This transaction, completed in April 2025, delivered a cash return of more than 3 times our initial investment, with €1.8 billion distributed to our shareholders through a special dividend paid in June. On to Caliente Interactive, our most successful structured agreement to date.
After a challenging period, we restored our strong and collaborative relationship with Caliente Interactive by signing a revised strategic agreement in September 2024, which completed at the end of March this year. This agreement represents a good outcome for both parties and lays the foundations for the next phase of growth for our partnership. Under the new structure, Playtech now owns a 30.8% equity stake in Caliente Interactive and a newly formed U.S. incorporated holding company for Caliente's online business. Importantly, this partnership is already delivering cash returns. Caliente Interactive declared and paid its first dividends to Playtech in early H2. On to slide 14, where I will outline Playtech's investment case. There are two elements that are important to understand when looking at the company and its prospects following the Snaitech sale.
Firstly, operationally and commercially, we are a high-growth B2B business providing technology to the majority of the leading brands in the industry. We provide these brands with our market-leading innovative content across a range of verticals, including the rapidly growing live casino segment, where we are gaining market share in key markets. One of our greatest strengths is our presence in some of the fastest-growing regulated markets in the world, including the U.S., Brazil, and Mexico. We offer a range of innovative business models to ensure we are able to extract the appropriate level of value for the software and services that we provide. Taken together, we have an attractive set of levers that will see us deliver on our ambitious medium-term adjusted EBITDA and free cash flow targets set six months ago.
We have a collection of highly valuable assets on our balance sheet with a total book value of over €1 billion. Book value is generally regarded by the market to be a conservative estimate of realizable value. Nevertheless, in the interest of prudence, we will use this measure. The largest asset by far is our 30.8% equity stake in Caliente Interactive, which has a book value of €726 million. Our other assets are at an earlier stage in their development, yet they have the potential to grow strongly and ultimately generate significant value for Playtech shareholders. In the U.S., our low single-digit equity stake in Hard Rock Digital gives us strategic exposure to a rapidly growing business with a market leadership position in Florida's online sports betting market.
In Brazil, we also hold a nominal cost option on 40% of the equity in Galera.bet, which was amongst the first batch of operators to be granted a license in the newly regulated Brazilian market. I'm really excited about this business, and you'll hear me explain why in a few slides. In Colombia, we hold a nominal cost option on 50% equity in a leading online gaming operator, Wplay, representing a strategically valuable asset. Next, we have a valuable 49% equity stake in LSports, the real-time sports betting data provider covering over 100 sports, with some of the lowest latency rates in the market, and the business is growing rapidly. We have equity stakes in various other assets, such as Algosport, whose profits have continued to grow, as well as assets such as Nostar and the Sporting News.
Underpinning our investment case is our commitment to deliver shareholder value, including through shareholder distributions. In summary, Playtech offers access to a high-growth B2B business complemented by highly valuable assets and a strong commitment to delivering shareholder value. On to slide 15. Here, I'll briefly outline the strategic priorities that will drive our progress towards achieving our medium-term adjusted EBITDA target of €250 to €300 million. Firstly, we will continue to prioritize regulated and regulating markets, with a clear emphasis on those offering the greatest long-term growth potential. Markets such as the U.S. and Brazil are currently in the investment phase, but we are confident they will deliver substantial returns over time. Others, like Mexico, are already highly cash-generative and provide a strong foundation for scalable growth. Secondly, we will concentrate our product investments in areas with the highest potential for profitability and return on capital.
Playtech is renowned for the breadth of its product offering, but there are certain verticals that provide the greatest opportunity. We believe that live casino and casino present the greatest opportunity for growth, supported by our market-leading PAM+ platform and our value accretive services business. Thirdly, our transition into a highly focused B2B technology company is a natural moment to review our operational efficiency and agility, as Chris McGinnis touched on. This means addressing underperforming businesses, streamlining operations, eliminating duplication, and building a leaner, more responsive organization that can adapt quickly to changing market dynamics and customer needs. By executing on those core priorities, we will optimize resource allocation, reduce structural complexity, and improve cash generation, positioning Playtech for sustained long-term success. On to slide 16. Let's now turn to one of the most exciting, strategically important growth drivers in our B2B business, our successful partnership with Caliente Interactive.
The overall Mexican online market is set to grow 21% in 2025. Despite its scale, we think there is capacity for further growth in the years ahead. According to industry analysts, GGR per adult in Mexico averages $35. This compares to $65 in the Philippines, a market with similar demographics and digital infrastructure, but a much lower GDP per capita, suggesting a significant opportunity for further growth in Mexico. As many of you know, Caliente Interactive has long been the undisputed market leader in Mexico's online sector. Over the years, its technology platform has been finely tuned to reflect the unique preferences and behaviors of local consumers, giving it a distinct competitive advantage. At the same time, Caliente Interactive's scale enables it to invest aggressively in marketing, reinforcing its leadership position. This sustained investment has created a brand that is unrivaled in Mexico.
For example, Caliente sponsors 13 out of 18 teams in the Liga MX, the country's top football league. With Mexico set to co-host the 2026 FIFA World Cup, Caliente's dominance is expected to reach new heights, as the tournament will significantly amplify its visibility and further solidify its brand leadership. Beyond Mexico, Caliente's ambitions extend to other markets. Later this year, the company plans to enter Peru's newly regulated market, marking the first step in a broader expansion strategy across Latin America. At the same time, Caliente is actively exploring other markets across the region, carefully evaluating the most exciting opportunities for future expansion. Moving to slide 17, where I'll provide an update on the current and future growth drivers of our U.S. business.
After signing partnerships with all of the major operators throughout 2024, we have seen very strong momentum in the first half of this year, with revenue growth surpassing 100%. A key factor behind this growth has been our ability to expand wallet share amongst tier-one operators. Our live casino business made material progress following a successful launch with DraftKings across the three largest iGaming states. By the end of June, we were operating more than 50 active live tables in our U.S. studios, and we continue to invest in additional capacity to meet the strong and growing demand of our products. Our expansion with existing operators into new states creates a further avenue for growth. In June, we announced our entry into West Virginia, our fourth iGaming state, where we launched with major operators, including DraftKings, RA Street, and BetMGM.
We also expanded our relationship with Delaware North, launching online sports in Arkansas and multiple products in West Virginia. Through our equity stake in Hard Rock Digital, we benefit from their unique leadership position in online sports betting in Florida. The cash generated from Florida supports Hard Rock Digital's expansion into other states across the U.S. and other international markets, where we are also positioned to capture value from their growth. Margin accretive platform deals are especially attractive given the value that accrues to Playtech when operators use both our PAM+ platform and content. We now have three U.S. operators utilizing our platform, with revenue from this subset growing significantly, and we expect this to be an increasing contributor to our U.S. growth. Finally, we continue to prioritize the development of innovative content tailored to the U.S. audience, as we look to increase wallet share amongst operators.
In H1, we released 20 new games, including branded titles such as Robocop Collect-them and Deadliest Catch. Our content strategy is delivering results. Multiple Playtech titles consistently rank amongst the top 25 games in industry reports, underscoring our ability to compete with established suppliers and reinforcing the strength of our content portfolio. As we deepen our U.S. presence, our focus remains clear: innovation, operational excellence, and supporting our partners to capture long-term growth opportunities. Moving to slide 18, let's turn to Brazil, one of the most exciting and fastest-growing markets in the world. The official launch of Brazil's regulated online gambling market in January marked a historic milestone for the industry and a major opportunity for long-term growth. Industry analysts project the market to grow at 15% annually, reaching GGR of $17 billion by 2030.
That said, as with any major regulatory shift, there have been some well-publicized bumps in the road to begin with. Brazil introduced some of the strictest onboarding requirements globally, leading to unusually high KYC rejection rates and, as a result, lower than expected volumes across the industry in the first half of the year. Given our strong partnerships with leading Brazilian operators, this has had an impact on us as a B2B supplier. Let me be clear: we see this as a temporary headwind. Our conviction in Brazil's future is reflected in our decision to invest further in the country. We are building a state-of-the-art live casino studio in São Paulo, on track for completion by the end of 2025. This will allow us to deliver localized, premium content with native-speaking live dealers creating an authentic experience for Brazilian players. To support this, we are scaling our local presence.
Our team in Brazil is expected to grow to over 100 people this year, and we are continuing to invest in talent and infrastructure to capture this opportunity. We have signed partnerships with some of the country's leading operators, strengthened our position through our structured agreement with Galera.bet, and we are in the final stages of securing an agreement with a major player, which has the potential to be one of the largest operators in the Brazilian market. Let's now turn to slide 19, where I'd like to cover our progress in live casino. Throughout the first half of 2025, we saw strong and sustained demand for live, with revenues up 9% year-on-year. A standout region was the U.S., where we delivered over 300% revenue growth following a series of successful launches with DraftKings across the three largest iGaming states.
Across our 15 studios, we now have over 470 tables, an increase of 5% versus the end of 2024. In response to strong demand, we are investing in further capacity expansion across all of our U.S. studios to capture the growing opportunity we see. We are also expanding across Latin America. Live casino is proving to be highly popular in Brazil. While our new São Paulo studio is under construction, we are expanding our Peru facility to meet the surge in demand and reinforce our leadership in the region. On the product side, we are building on the success of our landmark partnership with MGM Resorts. Earlier this year, we launched a dedicated studio on the MGM Grand Casino floor, bringing the energy of Las Vegas directly to online players in regulated markets outside the U.S.
Along with the game show Family Feud, the studio also broadcasts a variety of interactive table games, all hosted in a fully transparent glass studio on the MGM Grand Casino floor, visible to the public 24/7. We also introduced Vision Blackjack, a game that replicates the look and feel of a live table while operating entirely on RNG technology. Unlike traditional live dealer games, it eliminates the need for human dealers and video streaming, enabling faster gameplay, lower operating costs, and highly scalable deployment. Live casino continues to be a high-growth, high-margin vertical for Playtech. With strong performance in the U.S., expansion across Latin America and Europe, and continued product innovation, we are well positioned to capture the next phase of growth in this space.
On to slide 20, where I want to highlight the growing importance of our services business, which is set to remain a key contributor to B2B revenue growth. Through partnering with over 200 licensees globally, Playtech has amassed significant knowledge on the gambling industry, including customer acquisition and retention, risk management, and operational know-how. In addition, Playtech can optimize its products to maximize their value for operators. Our services have been hugely valuable to partners, particularly those with strategic agreements in place. This is a key competitive advantage and an important contributor to their success. To meet strong demand, we are now rolling out our services offering to a broader set of operators, enabling a greater proportion of our licensees to benefit from optimization of Playtech's products and our marketing and operational expertise.
Given our revenue share model with operators, this should act as a tailwind to revenue growth, providing a win-win model for both Playtech and its licensees. Finally, slide 21, where I summarize Playtech's investment case. Playtech has clear levers for medium-term growth. In terms of geographies, we see the greatest opportunity in the Americas, most notably the U.S., Brazil, and Mexico. From a product perspective, we expect live casino to be an increasingly important contributor. Given the significant investment across these areas and our ongoing work on operational efficiency and addressing underperforming businesses, the foundations are in place to achieve our medium-term adjusted EBITDA and free cash flow targets. We own highly valuable assets such as our stakes in Caliente Interactive and Hard Rock Digital.
Both of them, along with our other assets, occupy strong positions in their local markets, and we see significant potential for them to continue increasing in value. Our strong balance sheet provides the flexibility to pursue both organic and inorganic growth opportunities, while also supporting future shareholders' returns. We are confident in continuing to deliver shareholder value over the medium term, and I'm really excited about what is in store as we embark on the next chapter at Playtech. Thank you all for listening. Chris and I will now be very happy to take any questions you may have. A quick reflection on the age, right? I just turned the glasses. I just turned 52 weeks ago, a big milestone for me, and I just celebrated my 20th year anniversary with Playtech. You should all go easy on me.
Moving on to Q&A, we'll first take questions from inside the room. Once all of those are exhausted, we'll then move to the conference call line and take any questions there.
Morning, morning guys. David Brown from Goodbody. Three for me. Firstly, on the live casino from Playtech products, is there any KPIs you can share on how this has performed versus comparable games in your live business? On the SaaS business, another very strong period of growth. How long do you think the future runway of growth is in that business? Finally, on the U.S., any kind of sense on timeline for the U.S. to get to profitability?
Thank you. I'll go take the first one.
I'm sorry.
Take it.
The first one, David, can you repeat that live casino comparable? I didn't catch it.
Yeah, just any KPIs you can share on how, you know, customers, customer metrics look on your live from Vegas versus your other live product.
Yeah, I think the Vegas one, it was interesting. It was a new concept, right? We were, I think both MGM Resorts and us were quite excited about it. Obviously, we're still ramping it up. I think 12 months ago, when many of us were at G2E in Las Vegas, we had a couple tables operational at the Bellagio and a couple at MGM Grand, which were dual play. In recent months, we've opened the whole studio in the MGM Grand. In parallel to all of that, we've been ramping it up with customers and rolling it out. Obviously, it's not available to anyone in the U.S., but it's being broadcast elsewhere. I think we had modest expectations, but the KPIs have probably surpassed our expectations. It's still modest.
I would describe it as a new adjacent product in terms of innovation and offering something new and a key part of what we're doing. I think the KPIs are probably better than expected. However, overall, I would say in terms of impact, it's relatively modest. You look at the 400+ tables we have across the whole business, and you're talking about a relatively small number. Nonetheless, it's something we've been quite excited about.
If I may just elaborate a little about it, I think that it's too early to suggest and quantify it, right? I think that what we do see is a very strong demand by various operators that decided to take the product. You have to understand that when you roll it out, and we indicated that it is for online customers outside of the U.S. in regulated markets, which means basically that we need to go through the certification and licensing in each and every country where we would like to offer that because it's a new product streamed from Vegas. We see strong demand for customers. The pipeline is there already secured. We are rolling out in different territories, and I think that we will be sometime next year, we'll be in a better position to quantify that, but it's looking very, very encouraging.
We are very excited about this opportunity, as evident by the increased investments further extending the relationship to Family Feud game show and additional tables. Very encouraging, yet too early to quantify. Still small in size, given that it's early stage, early days. On SaaS, maybe I'll pick up, I'll continue with SaaS. We still believe that there is a long list of customers that will onboard onto our product. We use now SaaS not only as a model for small, mid-size operators, but also certain operators, such as in the U.S., such as in Brazil, the long tail in each and every country, in each and every regulated country. Therefore, we still see a lot of demand, and we still see the pipeline growing. Having said all that, there is also a very, very attractive opportunity for Playtech to increase market share.
Today, Playtech represents less than 5% on average. Playtech represents less than 5% of the overall market share for the small, mid-size operators. If we only double that to become seven or eight, or double it to 10%, we double the business together with the existing customers. It's horizontally to additional customers in additional territories where existing customers extend together with us to additional countries, such as Brazil is a good example, even in the U.S. Beyond that, obviously, vertically, where we can grow together with them and grow the market share of Playtech. We are developing, we developed earlier this year an entire program of campaigns, working together, campaigns, including promotions, together with the operators to expose the Playtech portfolio within the portfolio that they had before. Remember, these are small, mid-size operators. Some are also big operators, and they never had Playtech.
It's for the first time they have Playtech, and we now work together with them on a program to expose Playtech, expose it to the, you know, to end-user customers. This is why we believe that it still has a lot of potential going forward.
On U.S. profitability, it's a bit of a, to be honest, it's a bit of a moving target, but that's a positive in that what we're seeing in the U.S. is as we build the infrastructure, which is largely live casino, but more than that, but a big majority of the investment is live casino, both CapEx and then OpEx to run these facilities. As we're building and expanding, it's just leading to more demand, which then requires more building and expanding. If we stopped sort of expanding, we could probably get to a break-even in profitability within, I don't know, 18 to 24 months. However, that would not be the right thing for the medium to long term for Playtech. At the moment what we're seeing is a demand, and we're sort of, you know, trying to keep up with it, to be honest. That requires more investment.
That's going to delay profitability. At this point, probably a few years away, for being honest, but again, it's a very positive thing because we're seeing a lot of demand for our products in the U.S., particularly live. Okay. Thank you.
Thank you. It's Roberta Ciaccia from Investech. I have three questions on the same subject, actually. Sweepstakes in the U.S. There's been a lot of noise in the press regarding the court case in California. Other companies have been involved. You haven't been mentioned, but I wanted to know if you can. First, if you can quantify what is your exposure to that business. Secondly, which states you actually operate in. Third, what is your position going forward? If you're doing it, do you want to keep doing it, or will you select state by state? What's your view going forward on that? That's it for me.
I'll take the first part on quantifying it, and then leave the rest to Mor. On quantifying, I mean, overall, we see it as immaterial. Just to give you a bit more color around that, you know, circa 1% of group revenues or, you know, single-digit millions kind of amount on a revenue basis. A small amount that we, you know, largely consider immaterial.
Yeah, and I'm happy that Chris started because he put it into context, right? It's 1% of overall group revenues. I will say that we always took a conservative approach. This conservative approach meant that we only worked with a very selected few operators of size that we knew obtained certain legal advice alongside Playtech in only selected few states. From the outset, Playtech has not been involved in many of the states that some other operators do operate in and other suppliers supply their software and services into. Our approach is very conservative. We monitor the developments. Our models in each and every state are somewhat different. I won't get into the individual states. There is a list, not a very long list, by the way, left. We obviously take a very conservative and prudent approach towards sweepstakes.
We were one of the first to pull out of California, even ahead of anything happening there. This is the nature of Playtech. Sometimes you pull out of the market. Sometimes you buy into Hard Rock Digital before the market is regulated when there are still certain, obviously, certain concerns about whether Hard Rock will be able to operate in Florida. I think that it's the natural development. Putting it back into context, it's 1% of revenues. We take a very conservative approach. We will follow the fluid changing and fluid regulatory environment in the U.S. We will continue, and this is the most important thing, we will continue to further establish ourselves in the regulated states across the U.S. with the largest and leading online gaming operators. This is our focus. It was the focus, it is the focus, and will remain the focus going forward.
I think it's evident by the growth, the 100% growth in the U.S., 300% growth in live casino. We only just started. I think this, alongside the fact that it's only 1%, puts it in context and our approach to the U.S. and the activity in the U.S. altogether.
Can you just confirm these revenues are classified under unregulated revenues?
Yes, that is correct. Yes, as was Brazil before it was regulated, even though many refer to it as regulated.
Morning, James Eaker from Jefferies. There's a couple for me, please. Firstly, just in terms of capital allocation, like a sort of newish slide, what would you be comfortable with in terms of leverage going forward, either for buybacks or M&A? Secondly, just in terms of UK tax discussions, have you got a view on what we should expect and the implications for Playtech? Thank you.
Yeah, I'll take the first one on capital allocation and leverage, and then Mark can touch on the UK regulation. On leverage, there's no change. This is what I've said in the past, but I see it more as a medium-term sort of target and not something we would look to get to immediately. One to two times net debt to EBITDA is, I think, where we'd feel comfortable operating. Obviously, the numbers you've seen today, we're in a net cash position, so it's very under-levered. However, I did flag some of the liabilities that aren't captured in that number, which takes us to a small net debt position. That gives us flexibility to increase leverage.
I think we would do that in a measured way, not in one fell swoop, but it's something I think we will look to do over time to get that leverage back to a probably more efficient level.
The second question was the implication of the tax reform in the UK, right?
If you have a view around what you think that might be, please share it.
I don't think that we have a view. Remember that we are one step removed. We already adapted to any changing market conditions, including changes of regulations, regulatory changes, as well as tax increases. However, I will say that we truly think that it's important that the government engage with the operators and understand the implications of such increasing taxes. We understand policymakers, we understand the fiscal pressures. However, sometimes there are some unintended consequences. You take the Netherlands, for example. What happened in the Netherlands? They increased the taxes, and it pushed the industry towards illegal activity. At the same time, it created a shortfall in tax receipts of €200 million. Sometimes there are some intended consequences for increases in tax. I will add that it's not yet clear because we have gone through certain changes in other territories.
We also changed from the, we also experienced that in the UK when they first introduced the tax. I can say that it's not yet clear how it will evolve and develop because sometimes what happens, like I said, some go to illegal, but the government, the UK government, has a better enforcement approach in the market. It does lead to operators leaving the market because it's not sustainable for them. In this case, the type of customers that Playtech has, i.e., the largest and leading operators in the market, as a matter of fact, may over time benefit from an increase in tax. Increase of tax is, by definition, not a great thing day one. May have unintended consequences, but the longer-term implications are not yet clear for certain types of operators, i.e., the leading and largest, which are the type of operators that Playtech has.
Thank you. Ivor Jones from Peel and happy birthday again.
Thank you very much.
Clearly more. You talked about cost cutting. You talked about, I think, cost growth in the first half of around 2%. Can you just help us give some way of scaling what the cost cutting potential is within the plans to increase investment in certain parts of the business for that building block towards the EBITDA target? Secondly, Brazil more. You talked about hoping to sign up another big licensee. With and without that licensee, is there a way of you talking about your % share of the Brazilian market? We can make a forecast of the total, but what do you think your share might be of your part of that market? Then last one, following up on David's question about the U.S. It sounds like it's like a fully costed local business.
Does that mean its mature margin is 20% EBITDA, or is it drawing on a lot of group costs and it's a 40% or 50% contribution type of business? How should we think about scaling that opportunity? Thank you.
Yeah, I can take the first and the third, and Mark can take the middle one. Cost growth and cost cutting, I think if you look at the slide in the appendix, the numbers won't be exactly like that every time, but I think that's sort of our goal going forward in that what you don't see in those numbers is that we've removed costs from the business. Costs have gone down. You can see the lines, you know, like operational costs, things like that are generally flat. However, live, an area of investment, you can see a significant increase in costs because we're, you know, we're still investing, and all of that together leads to a relatively modest increase in overall costs. We're, you know, we took in 2024, we took over $20 million of costs out of the business.
Again, cost overall still went up a little bit in 2024, but there was a, you know, it's called a significant amount of cost cutting that happened. The year is not over, so I won't give a number in 2025, but we've also, you know, we've taken further costs out of the business, but then continued to invest in other areas. One thing that I think is a given is the underperforming businesses that I've flagged that have been a drag. Whether you consider that cost cutting or not, it's an underperforming area, which is a drag on EBITDA, and we will address that. We will not be sustaining, you know, $20+ million of EBITDA losses, you know, indefinitely. Obviously, we've talked about the HappyBet business, and that's being addressed, and we're in that process, and we've started processes around other assets as well.
That's an easy one to say to that, you know, in the future that $20 million of loss will not be there. Maybe just since I'm already talking, I'll jump to U.S. margins and the more. In U.S. margins, I think they will be lower than group margins for the main reason it's live casino, and you have to build live casino facilities in each, not necessarily every state. West Virginia is allowing you to use facilities in the other states, but the big states so far, New Jersey, Michigan, and Pennsylvania, have required you to have facilities in state. Obviously, live casino is a scale business, and you look at our facility in Latvia or Romania, some of the big ones, we can serve from there many, many locations around the world. You get a lot more operating leverage and scale benefits out of those facilities.
The U.S., you know, the way it's at least gone so far, it's not the same model, right? You need to build multiple facilities. That will put a cap on margins, so to speak. Without putting numbers on it, I do think U.S. margins over time will probably be a bit lower than, say, some of the group overall. That being said, the U.S. opportunity is so significant, and we're so underpenetrated there still from a market share perspective that, yes, maybe margins will be a bit lower than the group, but the magnitude of the opportunity there for Playtech, it can be one of our largest markets over time. We're as convinced as ever about the investment we're making in the U.S.
Yeah, on Brazil, as you know, the market has turned into a regulated market in the beginning of the year. They introduced the strictest onboarding process and the strictest set of regulations worldwide, more than the U.S., which had a severe impact on the operators. Some operators saw an impact of 20%. Other operators saw an impact of 70% on their business. However, this is why we were very focused in the first four or five months of the year in order to ensure that our software and our platform will accommodate the new onboarding requirements and will do that at the best and will do that in the best way. Today, Playtech customers onboard fastest in the market. It's being measured every month, and within four to five months, not only we improved it, we are now market leaders in terms of the onboarding process in Brazil.
Given the fact that the numbers are picking up, the levels of GGR that we saw in August are at the same level we saw before regulations were put in place. After the market went backwards significantly, remember that there is tax involved. There is, I'll be very open and say, there is still a small impact from, not small, but there is still impact of the tax because it's now deducted. From a royalties perspective, we are not yet where we need to be, but it's growing. We see accelerated growth. We see all the operators improving the onboarding processes. In terms of market share, it's hard for me to estimate because we have a partnership where I know we have more than 50% market share across all content and products that are provided by the operators.
We have other operators, Betanova 365, and a long list of other well-established operators where Playtech obviously is amongst many others, and it does not provide a platform, and it does not provide sports. We believe that our market, our share of wallet is more 5% to 10%. I think that the way we approach it now that the market is stable and growing fast, the way we think about it is growing organically with existing customers, extending to new customers that are not yet our customers or that we already secured an agreement with but have not yet launched, sorry, extend the relationship that we have with the group of Galera.bet, which consists of today four brands, right? Not just Galera.bet, it includes also Luva Bet, F12, and Brazil Bet.
As we indicated earlier, I can't name it as of yet, but we are in advanced stages of discussions with what we believe will be one of the largest operators in Brazil. I can tell you that it's a name, it's a brand name, it's a company that I, in my entire 20 years in Playtech, never had as many positive feedbacks about the potential of a company like that across all jurisdictions, including the U.S., just to put it into perspective. We can't name them as of yet, but it's a massive opportunity for us. They have access into the market, and they are very well established in the market, not yet in online sports betting and gaming, but definitely a very significant opportunity for Playtech. The market is growing.
The market has gone through the first cycle of regulatory changes that had a severe impact on the business, now stable, fast growing. Playtech extends its reach together with existing customers, new customers, its partnership, structured agreement with Galera.bet, and hopefully soon a new agreement that presents a significant opportunity for Playtech in Brazil going forward.
Is the new relationship potentially another 2% on top of your 5% to 10% or another 10% on top of your 5% to 10%?
What do you mean? 2% to 5%?
Sorry.
You said maybe you thought roughly your market share of operators in Brazil.
In certain operators, in the largest well-established operators like Bet365 and others, I believe that Playtech is 5% to 10%, right? For each, right? Amongst them. For Galera.bet, for example, given the fact that we work together, they use our PAM+ as part of their infrastructure. They have our sports, so they onboard through sports, they onboard through casino as well, but a lot of the customers come from sports and then convert to gaming. Playtech has a 50% market share, 50+% market share. With this customer, I believe that Playtech will have a significant share.
I understand now, sorry, I didn't understand the first answer. I was trying to understand Playtech's share of the whole Brazilian market. I think you're answering about Playtech's share.
Yeah, but it's very hard to estimate. I need to do the calculation. I don't have it out of the top of my head. I apologize because I need to calculate the 50% of Galera.bet, any share within the market, and then the operators that we have, the 5% to 10% of those we operate with, those that just launched, those that will be launched, and then this new opportunity. I think that the way I described it just indicates and is evident, you know, it's evidence that Playtech is, why Playtech is so excited about Brazil. I will come back to you. I'm not trying to avoid it. I simply don't want to give you a number that I can't stand behind, right? I'll do the calculation and hopefully by the end later this year we will have a clearer view because the numbers are also changing.
Remember, some of our operators tripled over the course, those that went down 70%, right? Tripled the business since the beginning of the year to date, right? A lot of changing, a lot of moving elements there. I will come back. I'll try to come back with some answers so you can also model that and we will try to be as helpful as possible in this matter.
Thank you.
Hi, morning. Richard Stuber from Deutsche. Two questions, please. One on sort of Caliente, another on Brazil as well. In terms of Caliente, you mentioned that they may be looking to expand outside Mexico. Are they a well-recognized sort of brand or have any sort of presence outside at the moment? In that case, would you expect them to have to invest quite heavily? Consequently, do you expect any impact on potential sort of dividend and payouts? Do you expect dividend and payouts to continue to grow despite them having to invest in new markets? That's the first question. In terms of Brazil, just to follow up what Ivor was saying, is this new partner, which you will be announcing shortly, going to be more of a structured agreement or is it more just kind of a rev share?
Would you expect it, would you expect over time to outperform the Brazilian growth market? To go more than 15%? Given your positioning at the moment in terms of, you know, in some of the larger names but partnered with some of the smaller names, do you still expect to grow more than 15% over the next five, ten years?
Okay, so on Caliente, I will say that Caliente is a very well-recognized brand, also outside of Mexico. They do a lot of marketing activities that are picked up by different neighboring countries. There is also one other or two elements that are kind of almost one and the same, and it is the marketing. You have to understand when someone advertises on ESPN, ESPN has a certain, just as an example, right? It's the same for other media providers. Certain media providers are shared among certain countries, clusters of countries across Latin America. When you advertise on ESPN, it will be picked up by definition. If Caliente advertises on ESPN on a certain video stream, it will be picked up by all the audiences in the countries that ESPN streams into.
Therefore, this is why not only will it be picked up, but it will be alongside people that follow the Mexican League. Some people will follow the Mexican League, but you can argue that certain people in Peru will not follow the Mexican League. The countries that they are looking into share the same media channels that they already use and invest into, and therefore, by definition, the end user customers are exposed to the brand Caliente. This is part of the approach they take when they select where it is best for them to establish themselves. Also, obviously, the competitive landscape, the market entry point, market access, licenses, et cetera, et cetera. Has this answered the question?
Yeah, I guess the question is if they have to, you know, normally when you enter a new market, there'll be sort of loss-making for a short time. I guess it's very cash-entry in just Mexico at the moment. Will that impact your?
Yeah, I will say they look at the competitive, they look at the development of the market, right? How young the market is. Peru is a relatively new market, right? It's only just been regulated. It's an even playing field, right? Secondly, the competition, they looked at the competition. They saw that they can compete well against the other competitors. Yes, it will come with certain investments into marketing, specifically into Peru, alongside certain other marketing activities that they already do that are picked up by the end user customers in Peru. They believe, and we strongly support their view, that they have more than a fair chance to become one of the leading operators in Peru. They will all operate it centrally from their existing operations, obviously. There are some operational leverage there.
Altogether, it answers, it ticks all the boxes for them in terms of licensing, the development of the market, the competitive landscape, the marketing being used already, and the marketing investment they intend to allocate for the Peru market.
Maybe just to add, I think you were getting at financial implications. I think they can, I think they're going to be relatively modest in entering these new markets. They're not going to come and be uber aggressive with marketing spend to the point where it's going to impact our share of income drastically or our dividends, right? There may be an impact, or maybe you wouldn't see the same level of growth. Remember, there's still growth to come in Mexico, as more outlined on this slide. I think they can balance continued growth and use some of that for expansion in these other markets without having a very material impact.
Yes, on Brazil and the 15%, right? 15% is a big number. I don't want to get ahead of myself and commit to more than 15%. However, I truly believe that we laid the foundations for accelerated growth that potentially can be more than the 15% or the market growth. If the market grows at 15%, Playtech will be able to grow vertically with existing customers, horizontally with additional customers, alongside that with Galera.bet, and alongside that with this potential customer of Playtech. I think that when you add all of that together, Playtech has the potential to exceed the market growth, whether it is 15%, 17%, or 12%. I'm not yet ready to commit.
Once we announce, I believe that we will be in a better position because it will be another building block which will be significant, which brings me to the second part of your question, whether it is a structured agreement. Structured agreement is the definition of structured agreement for us, is the combination of software and services. You can argue that it's a structured agreement, but it will likely not involve equity or an option for equity. It will be a very comprehensive relationship that will involve software and services that are very lucrative and attractive for Playtech. Thanks very much. Thank you. Are there any more questions in the room?
Hi, Harvey Robinson from PAMU. Just a quick question in terms of going forward in terms of disclosure and KPIs as you become more software and services again. Have you got any intentions to give us much a feel for where gross margins would be on a more traditional basis? Would you be looking at things like net retention and churn that we would look in software? Are those things you might start talking to over time? I don't expect it to happen overnight, but...
Yeah, I think disclosure as a whole, without necessarily referring to the specific KPIs you mentioned, Harvey, is something we're looking at. It's something I think, as any company evolves, your disclosure and KPIs you provide need to evolve as well. Obviously, Playtech this year in particular has undergone significant change, kind of as Mor said, back to our roots as a B2B technology provider. I think looking at the KPIs you provide and if those are the ones we're giving now, the right ones, or if there are any additional ones, is something we do need to consider. Even just looking at our B2B business, it has changed a lot in recent years with SaaS that we've talked about. I think alongside that, we need to keep looking at which KPIs we provide, and some of the ones you mentioned are certainly ones we'll give strong consideration to.
Yeah, I don't want to put Chris on the spot here, but I will be keen to develop the conversation. I think that is extremely important now that we move back to our pure play B2B status. I think that once people will understand the barrier to entry, the stickiness of the Playtech products, as well as the low churn rates, I think that people will start understanding better the quality of the offering of Playtech, which will allow people to value the relationship. You know, some of our relationships, I joined in 2005, like I said, 20 years in Playtech. I remember BET365 back then, right? And Betano is a customer from day one and still is the case. It is the same with Betfred and the Tote.
The Tote joined, now the Tote is part of Betfred, that are customers of Playtech for the last 20 years, never left us. The same goes with other customers that joined Playtech, like I said, very low churn rates. I'm very keen to better understand how Playtech can, what KPIs will allow people to understand better Playtech and highlight the strength of Playtech, because I think that there are a lot of strengths that are not fully understood, maybe understood, but not fully understood by the market and the shareholders of Playtech. It can be very helpful. It will also help us to improve where we need to improve, right?
Thanks, Ivor Jones from PAMU. Can I go back to Rich's question? Is there cash sitting in Caliente to fund investment? I guess we were probably both assuming it would come out of operating cash, but is there a cash pile sitting there to fund it? The second thing, on slide 24, when you show adjusted EBITDA excluding the Caliente impact, and you get to $61.9 million, is that taking out the contribution in the first quarter from the old arrangements, but not adding back in pro forma what you might have got under the new arrangements? Is it quite a hair-shirty number?
In the first part of your question, they keep working capital. That can change if they're, not that they've done it M&A, but hypothetically, if they were doing small M&A, they could keep a little bit extra cash for a period. Generally, they keep a few months of working capital in line with the shareholder agreement we have in place. They're not sitting on boatloads of cash or anything like that. They generally return it other than a few months of working capital needs. In terms of the Caliplay numbers, maybe we take it offline and we can walk you all through it later, Ivor, or anyone else. Generally, we've tried to adjust both numbers to make them apples to apples so that you can see the trend and the number that is on a like-for-like basis.
Let's maybe take that offline and we can walk you through it step by step.
Thank you.
If there are no more questions in the room, can we move to the conference line and see if there are any questions from there that we can take?
Thank you. If you would like to ask a question, please press star followed by one on your telephone keypad. When preparing to ask your question, please ensure your device is unmuted locally. We have a question from Andrew Tam with Rothschild & Co. Redburn. Your line is open, please go ahead.
Hi guys, thanks for taking my question. Good morning and happy birthday. I've just one question from me. Could we get some more color on your unregulated exposures? On my numbers, there's about 19% of good revenues in unregulated, and we've heard U.S. sweeps at just 1%. Can you give us some more color on where the other 18% is? Second to that, can you give us an outlook on what you expect to happen to those unregulated revenues? Do you expect those to shrink? Are you actively shrinking those? Is that a part of the market that will be increasingly less of a focus over time and just naturally shrink by attrition? Finally, I just wanted to think about, I guess, what are the longer-term impacts on that? Do you regard those exposures to be higher margin? What do you think will happen as that shrinks? Thanks.
Yeah, so unregulated, I'll run through some of the numbers. I think our percentage might be a little bit higher than what you suggest, Andrew, particularly if you include Sunbingo and HappyBet, which are fully regulated. I think we're well into 80% being regulated, so a relatively small amount unregulated, certainly compared to others in the industry. Unlike perhaps in the past, at Playtech, we don't have a very high degree of concentration in any unregulated market. It's quite a long tail. To give one example, one of the biggest is the unregulated parts of Canada. Obviously, Ontario in Canada is regulated, but the other parts of Canada are unregulated. I use that as an example because that's the type of unregulated markets we want. Similar to Brazil, which last year was unregulated and now it's regulated, we expect further parts of Canada to regulate.
I wouldn't use the word attrition that you sort of used in your question, Andrew. I think it's more, it's our strategy. Our strategy is to focus on regulated and soon to be regulated markets. You'll see this transition over time. Yes, unregulated should go down, but it's not about us necessarily targeting to exit or reduce it. It's us targeting markets that we expect to regulate, so they'll stay in unregulated. Sometimes these unregulated markets grow like Brazil did in advance of regulation. You might see it go up in a period, but then it'll take a step down when it moves to regulated. I think that's the way to think about unregulated, both numbers and sort of how they fit into Playtech. They are not a focus other than markets that are unregulated where we see a path towards regulation. That's what we focus on.
There's no particularly high degree of concentration there, like I said, and it's markets like the unregulated parts of Canada. I think that, you know, they make up most of that with a relatively long tail of different jurisdictions.
Thank you.
We now turn to Harvard Battery with BNP Paribas. Your line is open, please go ahead.
Thank you, and thank you for taking my question. I just have one. Did Playtech or anyone affiliated with Playtech procure the so-called short report on Evolution AB, written and released by the Israeli company Black Cube back in 2021? Not sure what was the question. Have Playtech or anyone affiliated with Playtech procured the so-called short report on Evolution AB, written and released by the Israeli company Black Cube in 2021?
Obviously, we can't. It's nothing, not a question for us. It's a question for people involved in this matter.
Okay, thank you.
Okay, if there are no further questions, I'll hand back to the speaker team.
Right, if there are no more questions, that's it for now. I'd just like to thank you all for attending, and the team will see you in six months for the full year results.
Thanks, everyone.
Thank you.