Gambling Insider caught up with Playtech CEO Mor Weizer following the announcement of the company's 2018 full-year financial results. The supplier's revenue increased 54% to €1.24bn ($1.4bn), in-part explained by the early success of its Snaitech acquisition (read the full round-up here).
Weizer spoke about Playtech’s performance and hopes for 2019.
Talk us through the highlights of Playtech’s 2018 financial results.
2018 has been an extremely busy year, delivering some financial and strategic progress. We delivered a 54% increase in revenue and 7% increase in EBITDA. We launched in 10 new regulated markets, which will deliver the next phase of growth. There has been excellent progress on short-term targets, with Sun Bingo, Asia stabilisation and progress in the US, where we submitted our application in Q4. It has been a transformational period for Playtech and we start 2019 with a vastly improved investment case.
We enhanced our quality of earnings and now over 80% of total revenue comes from regulated markets. This was in part due to the acquisition of Snaitech. The business is outperforming our expectations. This made us less reliant on Asia; the headwind in the first half in Asia was obviously painful for us and our shareholders. But, following the decisive actions we took, we have seen revenue stabilise.
In terms of outlook, we are excited about the future as we are one of the only gambling businesses to expect growth in EBITDA in 2019 and we look forward to the many opportunities in front of us, including the US.
What accounts for Playtech’s fall in reported net profit?
What accounted for that is Snaitech is very different between EBITDA and net profits, for historical reasons. The second part is Asia, where we lost market share.
Your report mentions Snaitech offsetting the Asia decline; is this reflective of Playtech’s approach moving forward i.e. looking more towards Europe due to competitive pressure in Asia?
We have been focused on regulated markets for a number of years. We are actually, genuinely, the most global company across the space; the most global business across the space. We operate in more than 30 regulated markets, more than any other supplier, and this remains our focus. Obviously, the three largest brands – which are all operators – build their business in a combination of regulated and unregulated markets, including GVC and PokerStars.
Therefore, we always believe you need to find the right balance between regulated and unregulated. However, as I said earlier, 80% of our revenues are now regulated and our focus remains on regulated markets. We’ve had accelerated growth of more than 25% in regulated markets outside of the UK, given the fact the UK is coming under a little bit of pressure. But, even when including the UK, there is solid double-digit growth.
Snaitech is referenced several times in Playtech’s financial report; in your pursuit of regulated markets, are there any other M & A opportunities you are exploring?
I can’t really comment on that but M & A remains an inherent part of our strategy. We remain opportunistic but we will be very conservative and responsible towards M & A. We do believe, following a number of acquisitions including Snaitech, we will be very focused on organic growth and we expect a lot of organic growth in the coming years.
So we are not under pressure to do any M & A and there are a lot of opportunities for organic growth for us.
This time next year, how much of your business will comprise of US activity?
I think it’s too early to quantify that, not least because it’s all dependent on the pace of regulation in the US. Currently, it’s very focused on New Jersey and a couple of other states. Obviously, there are quite a lot of other states looking to regulate and I believe it will take some time for these regulations to come through and the states to become significant. But definitely the opportunity in the US over time – it will take some years – will become very significant and Playtech will enjoy the significant revenues and profit streams created in the US.
How pleased are you with the 54% revenue increase and how do you see this in comparison with your competitors?
It is partly due to the acquisition of Snaitech; we are extremely excited about this opportunity, which is exceeding our expectations. We are very happy with the performance and, given the strategy of focusing on regulated markets and the accelerated organic growth, I believe the performance of Playtech is very significant, even when compared to other software providers.
How confident are you of hitting your adjusted EBITDA target of €390m to €415m for 2019?
Obviously, we put a range out there but we feel very confident about this range. We look forward to a very successful 2019. We are coming into the third phase of the company: the first phase was establishing our leadership in the early years of online gaming, then transitioning from unregulated to regulated markets. We have defined our strategy to accelerate growth from 2020 and beyond and I’m very excited about the future for Playtech in 2019 and onwards.