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

Ladies and gentlemen, thank you for standing by. I am Geli, your Chorus Call operator. Welcome, and thank you for joining the Intralot conference call and live webcast to present and discuss the 6 months 2025 financial results. [Operator Instructions] The conference is being recorded. [Operator Instructions] At this time, I would like to turn the conference over to Mr. Nikolaos Nikolakopoulos, Group CEO of Intralot. Mr. Nikolakopoulos, you may now proceed.

Thank you. Good evening or good morning, everyone. Thank you for joining our first half conference call for the first half -- the results of the first half of 2025. I will start with a brief introduction, and then I will give the floor to our CFO, Andreas Chrysos, to walk you through in detail with the numbers and the operational performance. On the first half, we experienced a stable performance with a slight increase in revenues and EBITDA despite the absence of a significant -- any significant jackpot activity in the U.S. I think it's worth noted here that August in the U.S. seems to be a good month in terms of top line performance for the industry. In general, the Powerball jackpot has already accumulated in USD 950 million, which is, if I'm not mistaken, among the top 10 jackpot in the history of Powerball, and we really hope that this trend is going to continue next week also. Again, on the first half, we experienced a significant operating cash flow generation that practically help us to move our net leverage ratio close to a multiple of 2.3. On new projects, we're going live in Nebraska previous month in July, where we had an implementation on time and I should say, on a record time frame. We managed to renew Idaho and Montana in the 2 contracts in the U.S. And we have ended with OPAP in a binding MOU to provide technology for the next tender of Hellenic Lotteries, continues the strong partnership that we have with the Greek operator. I'm sure you all know that last month, we announced the acquisition of the international division of Bally's Interactive, a transaction that we believe that is going to be transformative for the industry and obviously for the group. The new entity will remain in the Athens Stock Exchange. The main business, the majority of the business is going to be on the digital part -- digital services, more than 73% of the total revenues are going to come from digital and B2C. And that transaction is expected to close in Q4 this year. And it is noted here also that the integration of the technology stack that we have started a few months ago is almost concluded. We believe that we are going to have a unified technology stack within October. With that brief introduction, let me ask Andreas, as I said, to walk you through the operational performance and the results. Thank you.

Thank you, Nikolaos. Good afternoon, good morning to all of you. The operational performance of the first half of the year, as also Nikolaos stated, was pretty stable, and this was depicted in the P&L metrics versus a year ago. At the same time, this was also characterized by a strong operating, but also free cash flow generation, supported to a large extent from a strongly positive working capital. The operating cash flow for the period was approximately $72 million (sic) [ EUR 72 million ], almost EUR 27 million higher versus the expected period of last year. The cash balance at the end of the quarter stood at EUR 67 million, almost EUR 2.4 million higher versus the year-end of 2024, while at the same period, the group repaid approximately EUR 20 million in loan amortization in the U.S. term loan and the Greek syndicated loan. During the same period, Intralot satisfied one of its obligations to restrict additional amounts for coupon payments of EUR 6.4 million as per retail bond requirements. Adjusting the free cash flow generation for these 2 elements, it stood at around EUR 29 million. Summarizing all the above, adjusted net debt for the first half landed at EUR 303 million improved by around EUR 53 million versus year-end of 2024, reflected also on the improved adjusted net leverage ratio, as also Nikolaos mentioned, it's 2.3x versus year-end. So we are now moving to the first half of 2025 presentation. So going directly to Page #5. We see the revenue analysis per business activity. Our technology activity line was higher by EUR 2.9 million, mainly driven by the better performance in our U.S. business. Although the service revenue for the first half of the year was negatively affected by the lower jackpots compared to the respective period of 2024, this was offset by increased equipment sales versus the first half of 2024. Better performance in our Croatian business as well as a solid performance in our Argentinian technology line activities also supported the revenue performance of each activity line. License operation in Argentina was higher by EUR 2 million year-over-year, with improved macroeconomic conditions supporting market growth. In local currency terms, the results for the current period posted an increase of 91.4% compared to the same period of last year. The game management activity line was lower for the first half of 2025 by EUR 2.2 million. Despite the continued growth of the local online sports betting market in Turkey, the revenue performance was impacted by adverse accounting effects related to the hyperinflation in the Turkish economy, which contrasted with a positive effect in the same period of last year. In addition, higher investment in player and acquisition -- in player acquisition and retention activities calculated in the revenue line also affected the revenue performance negatively, but resulted in an increased market share at the end of the first half of 2025 versus previous quarter by around 1%. Turning to Page #6. We have the overall P&L performance for the first half of 2025 compared to 2024, which, as already stated, it was pretty stable. Revenue was slightly higher in the first half and around 5% lower in the second quarter versus the respective quarter of last year, affected primarily by negative FX movements. Gross profit was lower by 12%, mainly due to the higher cost of sales coming from the U.S. due to the increased merchandise sale activity that supported the revenue line but came with an increased cost of sale. EBITDA at almost equal levels year-over-year due to the prudent cost handling in the OpEx line, mainly in the U.S. and in Turkey, managing to fully counterbalancing -- to fully counterbalance the negative impacts on the gross profit line. EBITDA margin stable at around 36%. Earnings before tax in the first half of 2025 amounted to EUR 9.8 million compared to EUR 6.1 million in the first half of 2024. The reduction of debt has led to lower interest expense for the period, which was also positively affected by lower reorganization costs in the first half of 2025, resulting to a much better EBT performance in current versus a year ago. Turning to Page #7. The upper 2 graphs have been analyzed already in the previous slides in detail. On the bottom left graph, the operating cash flow was higher by EUR 27 million, mainly due to the strongly positive working capital movement. CapEx was slightly higher, at slightly higher levels compared to the last year period, primarily due to increased CapEx spendings in the U.S. On the bottom right, we see the net debt and the leverage ratio, adjusted for the restricted cash referring to debt servicing and repayments, was EUR 303 million and 2.3x, respectively, for the first quarter of 2025, better by EUR 35 million and 0.6x, respectively. Turning to Page #8. We see that the adjusted net debt movement bridge from December 2024 through June 2025, stood, as already stated, at EUR 303 million, reflecting a reduction of EUR 52.7 million, while adjusted net leverage ratio improved to 2.3x from 2.7x at year-end, underscoring the company's enhanced credit profile. The solid financial performance in the first half is evidenced by the generation of EUR 43.5 million in free cash flow. During this period, principal repayments of funded debt totaled around EUR 20 million, while net interest payments amounted to EUR 14.6 million. Furthermore, other movements amounted to EUR 24.1 million, driven by favorable foreign exchange effects on the U.S. dollar-denominated debt. Lastly, on Page #9, we see the contributions per region to our revenue and EBITDA. North and South America revenue performance, namely USA and Argentina, counterbalanced fully the deficit in the rest of the world, while EBITDA contributions were either stable or better year-over-year in all jurisdictions. And at this stage, the presentation of the results for the first half of 2025 is finished and the Intralot executive team is at your disposal for any questions you may have. Thank you so much.

[Operator Instructions] The first question is from the line of Pointon Russell with Edison Group.

I have a few questions, please. Can I just start off in Turkey. Could you just talk about the actual constant currency revenue growth in Turkey in Q2 and the first half? Apologies if I've missed it because management operations revenue is down by over 30% in Q2 and the currency depreciated by quite a bit, but that indicates underlying declines. And you mentioned a number of things there in terms of investment in player acquisition and retention and that's affected revenue, but also your number of active customers has increased year-on-year quite nicely. So could you just unpick some of those parts, please, and their effects on the revenue?

Yes. thank you, Russell, for the question. So the underlying growth in Turkey of the 6-month period versus last year were around 6%.

Okay. And all of those other -- you talked about investment in player activity and whatever, how much of an impact were they on the growth?

It was around EUR 2 million.

Sorry, it's Nikolaos. It is difficult to now, to practically calculate the impact on the growth that the investment is happening because practically, especially all the promotions and the marketing that we are spending, we are expected to have an impact also long term and not realized on the same necessarily quarter. This is the first thing that I think you should take into consideration, if I understood the question.

Yes. I didn't know you had a good increase in customers year-on-year. So it's showing that you're gaining share. So okay. Can I just move on to Croatia. I mean you've had a good performance there. I'm just interested in -- the growth there has been quite volatile over the last 18 months. Could you just talk about why it is so volatile? Is that inflation? Is it other factors?

Russell, can you please repeat the question because...

What is the volatility?

What is the volatility on what?

Just in terms of -- if you look at the growth rates between the halves over the last 18 months or so in Croatia, it's been quite volatile. So could you just give some indication of why that is? Is it -- are there macro issues? Is it inflation?