Bally's Intralot S.A. (BYLOT) Earnings Call Transcript & Summary

Ladies and gentlemen, thank you for standing by. I am Mina, your Chorus Call operator. Welcome, and thank you for joining the INTRALOT conference call and live webcast to present and discuss the first half 2023 financial results. [Operator Instructions] And the conference is being recorded. [Operator Instructions]. At this time, I would like to turn the conference over to Mr. Chrysostomos Sfatos, Deputy Group CEO of INTRALOT. Mr. Sfatos, you may now proceed.

Welcome to the earnings call for the first half of 2023. I will pass the mic to the group CFO, Mr. Andreas Chrysos, for his statements.

Good afternoon, ladies and gentlemen. In the first half of 2023, INTRALOT continued to grow and presented healthy cash flows, supported by strong operational metrics following the same trend of the last 2 years. Strong EBITDA growth for the period as well as higher last 12 months EBITDA of EUR 130.6 million, compared against EUR 123 million at the end of 2022, indicates the continuous improvement on the operational front. In addition to this, the strategic choice to exit from markets with lower margins and engage further in higher profit margin contracts and markets is marked by the growing EBITDA margin, which reached 35.8% in the first half of 2023, which was an increase of 9 percentage points year-over-year. Improved credit profile with lower leverage ratios and continuous deleveraging are the targets on the financing front, in which INTRALOT has already shown substantial progress in the last 2 years, and we will continue the same way in the next short-term period. Yesterday, we announced during our shareholders' meeting, the plan for a share capital increase by rights issue that will strongly contribute to the company's deleveraging efforts expecting to bring the net leverage ratio below 2.8x. This will allow us to free up cash flows accompanied also by the strong technological capabilities which will be directed towards addressing significant opportunities that we see ahead in the U.S. market and in other areas of the world we are focusing on. The first half of 2023, key takeaways are the strong EBITDA growth of 14% year-over-year, positive earnings after tax, a further decrease in leverage ratio as well as strong operational cash flow generation, which was higher by 20% year-over-year. We are now moving to the 6 months of 2023 financial presentation that you have in front of you. In Page #5, we see the results of our licensed operations, which have contracted by around 66% or EUR 43.2 million, due to the license expiration in Malta in July 2022, affecting negatively the first half of 2023 revenues. In Argentina, although in local currency terms, there was a substantial increase year-over-year, headwinds in the [indiscernible] resulted were slightly lower performance in euro terms. Turning to Page #6. We will notice a material improvement in the performance of our technology projects, which have been improved by around 5%. Key takeaways in this activity line are, first of all, the high revenues in the U.S. for the 6-month period, organically driven by the growth in the Numerical and Instant games and secondly, a better performance in our business in Croatia. Finally, turning to Page #7. We see a significantly improved performance of our management contracts which has improved by EUR 8 million or 36.7% primarily driven by the strong momentum of our online business in Turkey with our company Bilyoner and the growth of the respective sports betting segment by more than 2x year-over-year in the country. Strong performance has been partially mitigated by the headwinds in the local currency. And now moving to Page #8. We see the overall profit and loss statement performance metrics for the 6 months versus a year ago. Take aways on the operational front are the following, the lower performance. First of all, the lower performance in the revenue line year-over-year analyzed in detail in the previous slides, but primarily affected by the license expiration in Malta. Secondly, the gross profit line, as mentioned already, was affected strongly by the shift of the business to more profitable lines of activities, and therefore, it was better by 12% or EUR 6.3 million, accompanied by a better margin of 8.5 percentage points versus respective period in 2022. Thirdly, the OpEx line was better by 5.2% or EUR 2.6 million, primarily due to the ability of the group to adjust its cost base very quickly following the license expiration in Malta. If excluding this effect, the OpEx line was pretty stable year-over-year. Therefore, the increase of the top line was directed down to the EBITDA, which finally stood at EUR 62.8 million for the period, 14% better compared to the respective period of last year. In line with the gross profit margin, EBITDA margin of sales was also higher by 8.9% points versus last year. As a result of all the above metrics, but also due to the lower depreciation and amortization result of EUR 4.6 million, EBITDA was strongly positive and doubled if compared to the previous year, standing at EUR 16.3 million versus EUR 8 million in 2022, while the bottom line result continuing in positive trajectory for one more reporting period, indicating the improvement on the operational as well as on the financing front. A major highlight of the P&L is also the improvement of the last 12 months metrics with EBITDA reaching EUR 130 million trajectory and EBITDA and earnings lines being also strongly positive, which is one more indication of the positive outlook of our performance. Turning to Page #9. The upper graphs have already been analyzed in detail in the previous slides. Focusing on the bottom left of the slide, we see the operating cash flow standing at EUR 50 million for the first half of 2023 which was higher by 20% compared to the respective period of 2022, which was a direct effect of the higher EBITDA. Net CapEx was higher by EUR 3.6 million versus a year ago, mainly due to the higher CapEx needs in the U.S. On the bottom right of the slide, we see the implication of the continuously improved performance on the financing as well as on the operating front with a net debt and net debt-to-EBITDA ratio standing at EUR 480 million and 3.7x, respectively, at the end of June 2023, considerably improved not only versus a year ago, but also compared to the respective performance 6 years ago metrics at the end of 2022 -- 6 months ago, excuse me. Turning to Page #10. We see the net debt movement bridge for the 6 months from December '22 through June 2023, indicating a strong free cash flow generation of around EUR 21 million and an overall improved net debt by around EUR 10 million in the 6-month period. This metric was also positively affected by a gross debt movement of EUR 11 million. That includes the capital payments towards the term loan in the U.S. and the favorable effect from the FX differences for our U.S. dollar-denominated debt. Lastly, on Page #11, we see the contribution per region in our revenues and EBITDA. The key takeaway from this slide is that there is a balanced contribution on basic operational debt metrics between North America and the rest of the world. Since around 46% of the revenues and 54% of our EBITDA comes from North America, with the rest coming from the rest areas of the world. And at this stage, the presentation of the results for the first half of 2023 is finished, and the INTRALOT executive team is at your disposal for any questions you may have.

[Operator Instructions] The first question is from the line of [ Schaus Lino ] with PSquared Asset Management.

Two questions from my end, please. Could you provide us a kind of an update on how you think about the refinancing, particularly what kind of timing you have in mind? And also, if you could kind of repeat the comments you made at your opening statements, did I understand correctly, you're doing a rights issue that gets leveraged down to 2 turns? If you just could repeat that and give a bit more color around it.

Yes, thank you very much. Indeed, we announced yesterday in our shareholders meeting, a share capital increase coming up. Basically, the shareholders authorized the Board of Directors to present the terms of such a share capital increase via rights issues, the same way we did rights issues last year. So this -- the time frame for this to announce the terms and prospectus is by the end of September. And we also plan to do the refinancing. So part of these proceeds will be used for the further refinancing. And our goal is to take the leverage ratio below 3x, and we believe it will be below the area of 2.8x according to our plans. But the details of the rights issue will be announced by the end of September. And also, we are in discussions with banks for issuing a retail bond here in Greece and also getting a syndicated loan with a group of banks. So the refinancing of the EUR 356 million outstanding, our '24 notes which expire on September 15, 2024, so basically in a year from now, they will be refinanced by means of these 3 moves; some of the funds that will be raised from the rights issue, a retail bond and the syndicated loan. And we are in discussions with the banks, of course, and soon, we will be announcing some more details about this. So the time frame for having all the funds to refinance the notes is in the next couple of months, definitely before the end of -- I mean the plan is to do this before the end of 2023.

[Operator Instructions] The next question is from the line of [ Carlis Konstantinos ] with Euroxx Securities.

Could you provide us a guidance for the full year 2023 turnover? And where do you expect the total -- the net CapEx for this financial year to -- as a full number? These 2 questions, please.

Yes, we normally do not provide guidance. We are excited about the strong results that we have presented for the first 6 months. Actually, from what we know, the third quarter is stronger than the second quarter, which was weaker than the first quarter, but this is normal. The first quarter had 2 jackpots in the United States, which contributed significantly in the first quarter results, which didn't happen in the second quarter. Usually, we have 2 such events per year. We had 2 strong jackpots in the months of July and August, which is going to contribute significantly in the second half results. We also have announced that we have some income coming from our new Taiwan contract, which will be a very strong onetime income coming in the fourth quarter. And we see continuously strong performance in our Turkish operations, which will also be probably more heavily loaded in the fourth quarter. So with all this considered, we stand by our optimism for completing this year with much stronger performance than last year. And the 6-month results are indicative to that end. But giving you specific guidance, I would refrain at this point.

The next question is from the line of Barbato Francesco with JPMorgan.

This is Jemma Permalloo from JPMorgan. I just wanted to maybe come back on the refinancing question and I just want to make sure I heard it correctly. So are you -- did you say that you're already in discussions with banks and you're possibly looking at a retail bond. So just curious if you're looking at a Eurobond? And then my second question along the lines of refinancing. Are you planning to do anything in the U.S. at all? And by that, I mean, when I look at the refinancing that you did last year, that was through the loan, the dollar note and the terms there were quite attractive. I was just curious to know if you're planning anything at all in terms of U.S. when you're thinking about refinancing.

Let me start from the second question. Right now, the U.S. market is not as attractive as it was last year. So we're continuing to service that loan that we had last year. We are not looking to refinance that loan right now. Our focus is on the '24 notes that expire in 12 months from now. And as I said, I mean, you're asking specifically about the bond part. And this -- the plan is to issue a retail bond here in Greece because the rates are much more attractive here. But the chances will be smaller than what you usually see in the international high-yield market. That's why we have 3 different sources of financing.

[Operator Instructions] 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 very much for participating in this earnings call. And as I said, we will be making more announcements on the refinancing front and on the share capital increase front later in September. Thank you very much, and look forward to the next one.

Ladies and gentlemen, the conference has now concluded, and you may disconnect your telephone. Thank you for calling, and have a good afternoon.