Playtech plc (PTEC) Earnings Call Transcript & Summary

Hello all, and a warm welcome to the Playtech 2021 Interim Results Call. My name is Lydia, and I'm your operator today. [Operator Instructions] It's my pleasure to now hand you over to our host, Chris McGinnis, Director of Investor Relations. Please go ahead, Chris.

Thank you. Welcome to Playtech's 2021 interim results presentation. We have our Chairman, Brian Mattingley; our CEO, Mor Weizer; and our CFO, Andrew Smith. They'll be giving you an update on the business, followed by a Q&A session. [Operator Instructions] There's no Q&A facility on the webcast. The conference call details can be found in the RNS we released this morning and also on our website. With that, I'll hand over to our Chairman, Brian Mattingley.

Thank you, Chris. Good morning. And thank you, everyone, for joining us today for the interim results for 2021. I'm Brian Mattingley, the Chairman of Playtech, a position which I took up on the 1st of June 2021, so I've only been 3 months in the seat. I am sure some of you will be aware I have gained significant experience in the sector, having been both CEO and Chair of 888 Holdings [ as one of the founders ] of the Gala Group. I say that because, whilst only being with Playtech for a very short time, I have had the opportunity of meeting with many of the team. And I'm immensely impressed by their passion, knowledge, dedication and expertise. The company has a very strong reputation within the industry at large, but now I can categorically state that the quality of the technology, the professionalism, the dedication of the team as well as the overall offering makes this an unrivaled company within the industry. This combination gives me great confidence in Playtech. And I'm delighted to have the opportunity to work with Mor, Andy and the rest of the team as Group's Chairman and help capture the exciting opportunities that lie ahead. I would now like to hand you over to Mor to take you through our results presentation.

Good morning, everyone. And thank you, Brian. I just wanted to say that I'm looking forward to working with you as we embark on the next chapter of Playtech's journey. Brian has such deep experience in our industry. And we will look to leverage this wherever possible, including in the U.S. market. Now on to Slide 3 and the highlights for today's presentation. Over its history, Playtech has built the leading position in regulated European market. And while this region will continue to offer opportunities going forward, the major driver of the next step of our growth story will be the Americas. We can already see this in the H1 results, in which the Americas grew more than 100%, driven by Caliente, Wplay and our other customers in the region. This growth means we are already approaching the medium-term revenue target of EUR 100 million which we set just 1 year ago. Andy will discuss in more detail later, but you will have seen in our results this morning that we have recognized a significant gain in our accounts related to the options we hold in these businesses, which gives an indication of the progress we are making. While these gains are an accounting requirement and unrealized, we believe they highlight the value we are creating in these structured agreements and their importance to our business going forward. We are executing our strategy and laying the foundation for growth in the U.S., and this will become a significant growth driver for us in the future. Growth in our Live Casino business is accelerating. We believe we have the leading offering in regulated markets, and we are ideally positioned to capture the significant opportunity in this segment in the U.S. and globally. And last but by no means least, the results highlight the continued amazing execution by Fabio and the team at Snaitech. Snaitech is the market-leading brand in one of the most underpenetrated online markets in Europe pre pandemic. It means it remains underpenetrated and presents a huge growth opportunity for the group. Snai's brand and offering give it the ideal position to capture the huge opportunity in Italy going forward, and I will explain more on this later. I will now hand over to Andy to take you through the financials. And I will be back later to look at the results and outlook in more detail.

Thank you, Mor. I will start with Slide 5 and the financial highlights. Overall, we had a solid performance in the first half and finished in line with expectations from the start of the year despite losing an additional 3 months of revenue from retail in Italy due to a longer-than-expected lockdown. Despite the challenges that came with the pandemic, adjusted EBITDA for the half was EUR 124 million, driven by strong performances from B2B online and Snaitech's online business. The standout performance in B2B saw regulated revenues from the Americas grow 106% at constant currency, with the majority of this coming from Lat Am. Snaitech grew online EBITDA by 118%, which helped to partially the mitigate significant impact of the retail closures throughout H1. You have seen in our results, and as Mor mentioned, that we've recorded a significant unrealized gain in the fair value of our call options related to the structured agreements in Latin America. This demonstrates the progress we've made and the value creation in this region, and I'll go into more detail on this shortly. Slide 6 shows EBITDA performance by month during 2020 and H1 2021, with the pandemic making quarter-on-quarter comparisons difficult. Looking at the far right of the chart, in July and August this year, you can see an increase in EBITDA following the easing of lockdowns in Italy. And the EBITDA performance is particularly pleasing given that these months are seasonally weaker. This bodes well for the remainder of 2021. Turning now to Slide 7, we will explore the performance of B2B Gambling in more detail. It is worth noting that we have broken out what was previously called the other regulated line into regulated Americas, which includes the U.S. and Lat Am; regulated Europe; and regulated rest of the world to look at the nuances in each region in greater detail. Regulated revenues in the Americas grew by over 100% at constant currency, and this was driven by the excellent performance from Caliente in Mexico as well as the increasing contribution from Wplay in Colombia. Regulated markets in Europe grew by 19% at constant currency despite our sports business being impacted by retail closures, particularly in Greece. On an underlying basis, growth was 31%. In the U.K., the B2B Gambling business was impacted by retail closures in Q1 as well as the changes to the Entain contract that we previously announced. On an underlying basis, the U.K. B2B Gambling business grew at a healthy 7%. Overall revenues from B2B Gambling saw a strong growth of 17% at constant currency and 24% on an underlying basis, albeit against an easier comp from H1 last year. Turning to Slide 8, I will look at the B2B Gambling costs and the margin. As a reminder, in March, we committed to improving our B2B cost disclosure. I haven't materially changed the way we present B2B Gambling costs in my time as CFO, as I believe in consistency where possible, but this is something I told you I would revisit this year to reflect the evolution of our B2B business and the way our cost base is managed. You can see from the table at the top that our B2B costs increased by 17% to EUR 195 million. However, this does not reflect the strong cost management within the business with deeper analysis required. Looking at the bottom left table, and this is a new disclosure. There are certain costs which are customer led and support Playtech's wider offering. These costs include live dedicated tables, which are low margin but drive the overall live business as they attract customers who then move to nondedicated tables, increasing both scale and the margin from these tables; hosting, which is largely a pass-through cost; hardware, which also tends to be pass-through costs, albeit this can vary, as we saw in 2019 where we made a significant profit from hardware; and finally, B2B white label. On the bottom right table, we can see that the remaining costs when taking the EUR 195 million and minus EUR 41 million come to EUR 154 million. And this is the number that we will dive deep into on the next slide. Turning to Slide 9. I mentioned I will look at the underlying B2B Gambling costs which exclude the costs detailed on the previous slide. And you'll see the EUR 154 million being the total on the bottom of the middle column. You will recognize the disclosure in the first 4 rows, as these are the same line items as we've previously disclosed. You will notice a new row called strategic expenditure, which comprises of investments in the U.S., Lat Am and live being our strategic growth areas. And finally for this slide, as discussed at the full year 2020 results in March, you have an increased in -- costs in Asia compared to H1 last year due to the change in the contract with our largest Asian distributor, which all things equal saw an increase in costs but they were overmatched by an increase in revenues. And the reason for this change was to provide greater flexibility for Playtech. Turning to Slide 10. The B2C segment is comprised of Snaitech; the HappyBet business in Germany and Austria, which is now under Snaitech management; and the white label business, which includes Sun Bingo. I will look at Snaitech in detail on the following slides. Looking first at HappyBet. The business generated an EBITDA loss of EUR 5 million in the period compared to a loss of EUR 4 million in the comparative period. The business is retail weighted and was impacted in the period by retail closures in Germany and Austria. As previously discussed, we believe the assets of this business remain highly attractive. And the integration of HappyBet into Snaitech is nearly complete, and the Snaitech betting platform was activated in mid-May. Finally, looking at the white label line: The Sun Bingo contract represents almost all of the revenue and EBITDA. And Sun Bingo saw adjusted EBITDA of EUR 5.4 million in the half. Turning now to Slide 11, we will look at the performance of Snaitech. Adjusted EBITDA was EUR 52 million and represents a growth of 10%, which was materially better than the drop in revenue, due to strong cost control and a significant contribution from the higher-margin online business. The online business saw excellent adjusted EBITDA growth of 118% to EUR 73 million, which was driven by the shift to online during the national lockdown in Italy and supported by sports events continuing during H1 this year compared to sporting cancellations that we saw in H1 last year. Further, the impact to EBITDA of the drop in revenues was limited, as Snaitech's franchise business model means that most of its costs are variable in nature with a low fixed-cost base. As a result, Snaitech's adjusted EBITDA margin grew from 22% last year to 33% in H1 this year. Turning to Slide 12 and looking specifically at Snaitech's online business. Gross online revenue grew 92% to EUR 204 million, whilst tax and bonuses increased by slightly less, resulting in net revenue growth of 95% in H1. After questions at our full year results in March, when we reported this for the first time, I want to go into further detail on Snaitech's online margin. This slide shows a reconciliation of how Snai and several Italian operators report their adjusted EBITDA margin, the margin that would be -- compared to the margin that will be comparable as reported by other international players. Snaitech deducts gambling taxes and bonusing from its gross revenue to report its net revenue. This is commonplace in the Italian market. The online adjusted EBITDA margin on this basis is calculated using net revenue and was 59% in this half. The comparable margin with international players, which ignores the effects of bonusing and taxes, reduced gross revenue and equates to 36% in this half. Turning now to Slide 13, we will look at our balance sheet. As mentioned at the full year results, we drew down the majority of our revolving credit facility as a precautionary measure in Q2 last year. Whilst we remain cautious on the macro backdrop, we repaid EUR 100 million of the RCF in H1, followed by a further EUR 50 million at the start of H2. This leaves approximately EUR 160 million drawn down. In 2020, we suspended shareholder distributions as a result of the impact of COVID-19 in order to preserve cash flows. We are continually evaluating the timing of resuming shareholder distributions while taking into account the performance of the business; upcoming cash flows, including the Finalto disposal proceeds and the Snaitech license renewals; as well as the overall macroeconomic uncertainty due to the pandemic. Playtech remains committed to resuming shareholder distributions when appropriate and prudent in the future. Turning to Slide 14. As mentioned earlier and as you're all aware, we have several structured agreements in Latin America, with the largest ones today being Caliente in Mexico and Wplay in Colombia. As a reminder: We generate revenues from structured agreements through a combination of revenue share, cost-plus services and, finally, share of profit. With the share of profit, each of the agreements has a call option to convert into equity. Given the growth in Lat Am, especially in Mexico and Colombia, the value of these options has exponentially increased. And as a result, these assets have been independently valued with a total value of EUR 343 million. This highlights the extent of the value generated by our structured agreements, and Mor will touch on this a bit later. However, it is important to note that the valuation of the options is not the same as the expected value of Playtech's equity stake in each structured agreement. The independent third-party valuation of each of the options is derived from a DCF in the first instance; and then contains many assumptions, including the likelihood of each of the call options being exercised and then with a number of different scenarios as to timing and Playtech's likely percentage holding as well as taking into account the maturity curve of each business. Should there be a catalyst and Playtech exercised any of the call options in the future, the value of the equity arising under these options would be expected to be materially higher than we have disclosed which is valuing the option alone. Slide 15 shows the movements in cash flows in the period. As flagged at the full year results in March, our 2020 year-end cash balance included a benefit from the timing of the PREU tax payable in Italy of EUR 90 million, which the government moved to be payable at the start of this year. We therefore -- this EUR 90 million therefore was reversed, and so I've taken this number out at the start, so there's -- with EUR 252 million as a starting point. The red box shows the cash movements in H1 excluding the timing of this impact and excluding the impacts of the RCF. And the underlying adjusted gross cash increased from EUR 252 million at the end of last year to EUR 283 million at the end of H1 this year. Finally, on Slide 16, we will look at the outlook. We've seen a strong start to H2 in July and August, as I previously mentioned. We expect the momentum in B2B online to continue, driven by Americas and regulated Europe. We expect Snai to continue to perform strongly, driven by online and the reopening of retail, as mentioned earlier. We remain cautious about the ongoing macro uncertainty caused by the pandemic and the possibility of further lockdowns. However, taking into account the strong performance in H1, together with the momentum in the business into H1 and retail revenues expected to be generated throughout the second half, the Board is confident of Playtech's prospects for the remainder of 2021 and beyond. And with that, I'll now hand back to Mor to update you on our strategic priorities.

Thanks, Andy. First, I want to update you on our progress against the 2021 priorities I set back in our full year results. We have been delivering again on all our priorities despite the ongoing challenges we have encountered from the pandemic. To be very clear about it: The Americas have been and remain our absolute priority. We have continued our momentum in the U.S. with existing and new customers. We are still in early days, but we have launched with Parx Casino in Michigan. And we are making strategic progress, which I will tell you about in the coming slides. We have continued to drive growth and value in our structured agreements in Latin America. As Andy said, Caliente growth is again excellent. We have also signed a major new structured agreement in Brazil, which is an extremely exciting market for us given its size and potential. Our SaaS revenue has more than doubled in H1. I said Snaitech will continue its online momentum from the second half of 2020. While the retail closures in Italy continued for much longer than expected, Snai's online business more than doubled its EBITDA and we remained the #1 sports brand in Italy. We made further progress on our sustainable success commitments, which I will elaborate on later. Finally, the Finalto process is ongoing and we are progressing well with our simplification of the group. So despite the effects of the pandemic, we delivered on all our strategic priorities during H1. As always, this has been down to the amazing dedication of our people at Playtech; and for that, I'm very, very proud. Over the next few slides, I want to tell you about the huge opportunity in the U.S. market for Playtech. First, I want to give you some detail on the size of the opportunity for Playtech as a B2B player in the U.S. The opportunity for Playtech includes iGaming sports betting and platform or PAM [ deals ]. There are a wide range of estimates for the overall size of the market in the U.S. with some forecast of more than $60 billion. We are assuming a long-term market size of circa $40 billion in order to be conservative. Market sizing estimates on Jefferies indicate that it is expected to be a more than $19.5 billion GGR market for online sports betting. We have conservatively assumed that sports betting third-party market share [ is 1/3 ], with the remainder likely to be sourced in house, but the B2B opportunity is still over $800 million when using a 10% to 15% take rate. iGaming is also gaining momentum with additional states looking at regulating. Estimates suggest that iGaming will be over $19 billion GGR market. Using July data, the GGR from iGaming market across only 3 states, Michigan, Pennsylvania and New Jersey, was basically bigger than the total U.S. sports betting market across more than 20 states. When we use a 75% third-party market share and a royalty rate of 10% to 15%, this gives B2B suppliers a huge revenue opportunity of around $1.8 billion. We also have a significant opportunity for our leading IMS platform technology, including the Player Account Management and the advanced functionality to run these businesses. We believe this will become increasingly important over the coming years in light of the massive marketing investments and the need to have best-of-breed tools for customer retention. When you add it all together, we are looking at a total addressable market opportunity of circa $3 billion. Even if we take a modest 10% share of the B2B market, which I'm confident that we will, it is $300 million revenue opportunity for Playtech. And this does not even include our opportunity for structured agreements in the U.S., which we believe could be at least another $100 million in the medium term when looking at our history of executing these transactions in other markets. Turning to Slide 20. As I have said before, we are taking a state-by-state approach to the U.S. market. We launched in New Jersey and Michigan. And we are pushing ahead with the licensing process in further states, with a number of additional licenses already secured. We have a strong pipeline of interest for our products in multiple states, and we are building our U.S. presence based on where we see the most demand. The market is split into operators of 3 tiers in various sizes. We are in discussions with all 3 tiers. We are in advanced stages with a Tier 1 operator and progressing discussions with several Tier 2s as well as with state-focused operators who have limited market share driven by their focus on only a selected few states. However, these operators have huge potential once they leverage our leading technology offering. From an online sports perspective, we are penetrating the market with selected few strategic operators as part of some multistate, multiproduct opportunities for us. We are in advanced discussions for casino and Live Casino, and we will provide these products to all tiers of operators. As part of our multistate Live Casino strategy, we are progressing well on our live studios in the U.S., and the Michigan facility is imminent. We will also be offering our SaaS products in the U.S. following its early success in other markets, allowing us to capture the opportunity with each and every U.S. operator. We are focused on traditional B2B deals similar to in other markets. We are also in talks on select structured agreements in the U.S. following the success in other markets. We are also speaking to many potential strategic partners in order to extend the distribution of Playtech products and technology. Looking now at Slide 21. As I've said before, when looking at capturing the opportunities in the U.S. market, Playtech has unrivaled product and technology, a flexible and open architecture and a completely unique turnkey offering that allows us to extend our reach to managed B2C services. And accordingly, Playtech is very well positioned. These are the reasons we believe we are different and why we can significantly grow our U.S. market share over time. We have a comprehensive sports product covering online and retail that supports the largest operators in each jurisdiction we offer it. We have some of the world's [ best ] online casino slots games and one of the best live casino products. And most importantly, our proprietary IMS platform means Playtech is the only provider in the market that has a solution covering online and retail sports, online slots and live casino all integrated into the industry's leading technology platform. This has driven our success across many other markets and positions Playtech to succeed in the U.S. Turning to Slide 22, I want to demonstrate what I mean when I say we are accelerating our presence in the U.S. As well as being live with bet365 and BetMGM, we launched with Parx Casino in Michigan during H1. And we are underway with our strategic distribution partnerships with NOVOMATIC and Scientific Games as well as other operators we've secured which we will announce in due course. With NOVOMATIC, we will deliver our SSBT retail sports solution through NOVOMATIC's ActionBook sports wagering kiosk in several states. And we will jointly market our mobile sportsbook and Player Account Management technology to new prospective customers. With Scientific Games, we signed a global distribution deal for our iGaming product, which will drive growth for us and our partner across several markets, including the U.S. We have an organizational structure in place, and we have appointed a new COO of the U.S. business. And we will have approximately 100 employees in the U.S. team by the end of this year. We have license applications in progress in further states and are planning further applications in the months ahead. We are in continuing talks to extend our reach and working on our pipeline of potential structured agreements. We are working very hard to push in the U.S. market, and I'm very excited about our ability to capture the opportunity in the coming years. Before we move on, let me just remind you that there are currently only 5 states allowing iGaming, with Nevada allowing only poker. Sports betting regulated much more recently, and the 26 states which now allow it offer a range of either online, retail; or a combination of the two. Looking at Slide 23. We announced at the beginning of H1 a very exciting multistate, multiproduct deal with the Greenwood companies that own and operate the Parx Casino, the leading casino and racetrack operator in Pennsylvania. With this deal, we are partnering with the Greenwood companies in Michigan, Indiana, New Jersey and Pennsylvania. We already launched in Michigan in H1 and we have integrated a third-party sports product into our IMS platform. Our migration is underway in Pennsylvania, where we will launch casino and the IMS in the coming months. This deal highlights the demand for a superior offering in the U.S., particularly our industry-leading IMS platform and Player Account Management. I said it once. I will say it again: For Playtech in the U.S., this is just the beginning. You will be seeing a lot more formats in the near future. Now moving over to Slide 24. In Latin America, our focus is on structured agreements. In these agreements, Playtech receives its traditional revenue share royalties along with a share of the profits in the operation. We also typically receive an option to convert the share of profits into a significant noncontrolling equity stake in the business. Caliente in Mexico is continuing its excellent growth and was our outright global #1 customer in H1. The momentum is continuing in this business and growing faster than we expected. Wplay in Colombia has been accelerating [ since its ] migration to Playtech software in late 2020, and this business will be a significant contributor to our revenues going forward. Our structured agreement with Tenlot and the Red Cross brings exclusivity in Costa Rica, as we will be operating under the only license available there. In H1, we launched in Costa Rica. We also launched our structured agreement in Panama with Onjoc, where we have the first-to-market advantage. Now we will focus on executing these opportunities to drive growth in the region. I told you back in March that Brazil is a hugely significant market opportunity for us given its size; and love for sports, especially football. We have now signed an exciting new structured agreement with Galera.bet in Brazil, which includes the customer software license agreement as well as an option over a significant noncontrolling equity stake in the operation. Galera.bet is the official sponsor of 3 major football clubs in Brazil, including the largest which is [ Corinthians ]; and the business has a long-term agreement including exclusive rights with them. It is also the official TV show partner of one of the most popular TV channels in Brazil. This is just to give you a flavor of the exciting opportunity ahead with Galera.bet. We are very close to launching with casino and Live Casino, and I can't wait to update you more on this deal in the coming months. We are also developing our first Live Casino facility in the region in Peru in order to serve our fast-growing customer base in Latin America. With the strong performances from Caliente and Wplay alone, we are already approaching our EUR 100 million annualized medium-term target we set last year. Moving to Slide 25. I have told you about the amazing flexibility of Playtech's B2B business model, and you will see this as well over the next few slides. We can offer games on a SaaS basis, just our software, software and customer support, software with support and marketing or structured agreements. Our structured agreements are B2B deals. We offer a full turnkey solution with all our products and services, usually to local heroes who already have a strong retail presence in their respective markets. You can see from the slide that we are dominated -- dominating the Latin America region with these structured agreements, and we have accelerated significantly in the last 2 years across several countries. As Andy has described to you, our structured agreements also carried a significant benefit of an option to convert the profit share to a significant noncontrolling equity stake in the business if there was ever a corporate event. Turning to Slide 26, you can see our amazing track record of our structured agreements, so far, and the value we have created from them. We created nearly EUR 1 billion of cash from William Hill since we started the deal in 2009. This includes the amount we received for selling our stake in the William Hill online business as well as the dividend received during the agreement and the royalties we continue to receive. Similarly, we generated over EUR 450 million cash from Ladbrokes in total since the structured agreement started in 2013. From Caliente, we have already generated over EUR 150 (sic) [ EUR 150 million ] cash in a much shorter time. As you can see, all of these are still going. It shows the potential when you look at all the structured agreements on the previous slide as well as others in our pipeline and still to come. Moving to Slide 27. In H1, we signed an exciting new strategic agreement with Holland Casino ahead of the market regulating in October. This is the state-owned operator with 14 casinos and gives Playtech a significant opportunity. We will be providing a full turnkey offering including the platform, all products and services such as marketing advice and CRM services. We are also launching a new Live Casino facility next to a Holland Casino site. I can't wait to tell you more about how we are progressing together in the near future. Turning to Slide 28 and our overall Live Casino operations. Our revenue run rate is over EUR 100 million, and growth is strong with an EBITDA margin of over 35%. This is a scalable business and there is a significant room for margin expansion. We are investing heavily in Live Casino to meet the demand. As I mentioned already, our studios in the Netherlands, Michigan and Pennsylvania are imminent; along with New Jersey and Peru, both under development. These will add to our existing operational studios in Latvia, Romania, Spain and Belgium. Our momentum is building in Live Casino and you will be seeing more and more of Playtech in this space. Turning to Slide 29 and Snaitech. As Andy discussed today, the retail part of the Snaitech business was severely impacted by the pandemic, driven by longer-than-expected lockdown throughout H1. However, we took decisive actions throughout last year to focus on the online part of Snaitech in order to capitalize on the strength of the Snai brand and to reinforce its online presence and leadership in Italy. These actions helped Snai deliver 95% growth in online revenue, which helped drive 118% growth in online EBITDA in H1. We are confident that online activity will remain at a high level even after retail returns simply because the pandemic has only accelerated the inevitable shift to online. When we bought Snaitech, the Italian market was only 10% online. It is estimated to be 26% online in 2021 and is forecasted to remain underpenetrated at 19% to 20% even after retail normalizes in 2022, so the opportunity is huge. To put it into perspective. Online penetration in Italy is less than 1/2 that of the U.K. in 2021 and is expected to go back to only 1/3 that of the U.K. on a post-COVID normalized basis in 2022. Since the lockdown is in Italy and retail largely returned, Snaitech continued to perform strongly in online. And we estimate that normalized EBITDA will range at a level of around 50% in the foreseeable future given the high online margin. Given the underpenetrated market, the online share of EBITDA has a runway to continue improving. This gives you an indication of the very exciting future of Snai and why we see it as a truly premium asset. We have transformed this business into one that is online led. We see potential for further margin expansion. And with Fabio and his management team at the helm, I'm more confident than ever that this business will continue to provide significant growth for Playtech moving forward. Turning to Slide 30. Although Asia is a smaller part of the group, it remains a valuable part given its high margins and strong cash generation. The key for us in this region is stability. The business has remained stable across H1 and has benefited from the changes we made to our operating model there. The additional distributor we added in H2 2020 has given us more operational flexibility going forward, and the business is more diversified geographically compared to previous years. Now turning to Slide 31. We have been delivering on our sustainable success commitments during 2021. Starting with governance: We have created a sustainability and public policy committee to provide challenge and oversight on sustainability matters at Board level. In addition, we have launched an external stakeholder advisory panel to challenge our approach to sustainability and ensure we are doing the best we can. As the leading technology provider in the industry, our customers look to us to pioneer technology which ensures that players experience gambling entertainment in a safe manner. Consumer protection is absolutely key in this industry and we want to remain at the forefront of its development. To support this, we further expanded our Playtech Protect offering and added 2 new signings with Holland Casino and the Ontario Lottery and Gaming Corporation. We have committed to a science-aligned target to reduce our carbon footprint. Further, in recognizing the significant impact of the pandemic on mental health, we have launched a GBP 3 million COVID Recovery and Resilience Fund in partnership with the Charities Aid Foundation to support 44 charitable organizations across 9 markets. We will publish a full progress update on sustainable success on our website in the coming days. Turning to Slide 32 and our near-term deliverables in H2. The U.S. remains the top priority for us [ and to push hard ] to significantly accelerate our presence by continuing with license applications in further states, by signing further deals across all tiers and by leveraging our full service offering and platform technology to keep increasing our pipeline. Most importantly, we will focus on hitting the milestones by launching our live studios and taking the next steps with Parx Casino and others. In Latin America, we will continue executing on our structured agreements to drive growth while also making a big push to launch the exciting new deals with Galera.bet and others I mentioned earlier. Thirdly, we will push again to sign another 50 brands. We keep challenging the team to do these, and every 6 months, we have delivered. I'm challenging them again. And we will continue to leverage this offering to make it more significant in the future. For Snaitech, we will build on the excellent momentum in online. And we are fully confident in Fabio and his management team to largely maintain the online growth while also supporting the return of retail. We will continue to execute on our sustainability objectives as part of our sustainable success commitments, overseen by the new committee. Finally turning to Slide 33. We invite you to join us for a Capital Markets Day in early December, where we will do a deep dive into our key areas of investment. We will focus on the U.S., Latin America and the Live Casino business. We will also update you on Snaitech's sustainable success and we will announce our medium-term financial targets. I look forward to welcoming you there and explaining further why I am so excited about Playtech's future at the forefront of this industry. Thank you very much. Andy and I will now take any questions you may have.

[Operator Instructions] Our first question today comes from Ed Young from Morgan Stanley.

The first one is on the U.S. opportunity and particularly when it comes to the sports addressable market there. You're saying you think that 33% share for third parties is potentially a bit conservative. That's significantly above where that share is now. And obviously you go to the names of whether it's FanDuel, DraftKings, BetMGM, Caesars, PointsBet, whoever you choose. They're all in house, and the direction of travel has been for more insourcing. You can see it with SBTech and DraftKings or PENN and theScore, so do you think the market is going to become significantly more fragmented than it is now and it is in other markets like the U.K.? Or do you think that those operators are going to reverse course and end up outsourcing? Or I just want to try and understand how you think about the size of that opportunity for third party and sports in the U.S. That's my first question, please.

Yes. Yes, I do believe that the market will become more fragmented over time. And I believe it is only because there will be a lot more states that will become regulated and a lot more casino groups and other operators that will penetrate the market. On top of that, I do believe that a lot of existing operators that were focused on 1, 2 or a limited number of states will extend over time to other states. And accordingly, I think that taking a long-term view, which is what we indicated this morning, gives the B2B providers 1/3 of the market as the market share opportunity. I believe that certain new companies will take market share over time. Don't get me wrong. Obviously the market is dominated by the likes of DraftKings and BetMGM and FanDuel, and -- but over time, I believe that the market will become more fragmented as we saw and experienced in other markets.

Okay, understood. And then the second question: I wonder if you can talk a little bit more about Live Casino. I appreciate you've added some disclosure, which is very useful. Could you let us know what the growth was all in, in H1 if you include your agent distributor? And perhaps you could give us a picture of what revenue growth has trended like over the last couple of years. And I was struck by your plans. You've obviously got a lot of construction undergoing. Could you give us an idea of the size of the facilities that you're building in terms of table numbers and time line? Or another way of putting it, where do you expect to be in terms of tables at the end of this year, for instance? That would be just useful color to see where the trajectory of that business is going.

I'll take the first one, Ed. I don't think we're going to give -- we've never broken out live. And I think, although we gave a little bit of extra disclosure, we haven't actually given the full disclosure on live yet. What I would say is that it has seen significant revenue growth. And obviously there's -- it is a scale business. And so that's the revenue growth has been significantly and is a significant drop-through to EBITDA and EBITDA growth and margin expansion, but I think the key point I'd like to note is that there's been a very high-quality EBITDA growth because our growth is -- we've seen [ vast ] growth from regulated markets. So we haven't been relying on unregulated and Asian markets to see that growth in live, which I think is very, very important. Do you want to do the second [ part of the question, Mor ]?

Great. And in terms of -- yes, in terms of tables and what sort of you expect to be at and how that's trending. that Would be useful.

Yes. So Ed, in a very not typical to me, I don't have it from the top of my head and I will have to come back to you. However, I will say the following. During the pandemic, we've started establishing 4 new studios including 3 in the U.S. and 1 in Peru. At the same time -- this is in the Americas. And at the same time, we established a number of studios, some of which were not even mentioned this morning. 1 was mentioned in Holland, but others are underway that -- and we will announce those over time. I don't have the number of tables out of the top of my head. However, I can tell you that we have been successful establishing these 3 studios that we build, 1 alongside the other, over a very short period of time. And by mid next year, we will have more than 5 new studios that we established during the period. I will say -- I will also add that we build -- given our experience and the expected growth, I -- basically once you build the infrastructure, right, it is scalable. We always cater for increased growth over time in our Live Casino facility. And I obviously will come back to you with the -- exactly the number of tables that we have in each studio.

Yes. I [indiscernible], Ed. I don't think it's -- as far as I know, and I will double check with the guy that runs live, I don't think there's actually any commercial sensitivity on giving you with the exact numbers, so we'll come back to you on that.

Appreciate it. And 7 years of following the company, Mor, I finally got a question you didn't know off the top of your head, so I'll take that as a win. Could I -- just 2 very quick ones for clarity. They're very short. Just on your Snai, you said about -- you've given the comparable margin. That's very helpful. Just for clarity, though: International operators don't exclude bonusing. They do exclude tax, obviously. They put tax below net revenue, so again I'm fine if it's a follow-up, but could you tell us what the mix is between bonusing and tax in that line so we can look at the exact like-for-like comparison to international operators? And then on Slide 7 -- again I don't mind if it's a follow-up. You've given online ex sports and Entain contract changes. How material were the Entain contract changes? Because I think it's probably more useful to look at it online ex sports, from my point of view. It's either those now or later, that would be great.

No, no. I'll take it. On the first one, I'll have to come back to you once [indiscernible] sensitivity on that. So the -- so Chris will follow up with you. Obviously, as expected, the question on the U.K., that was -- actually also expected it from you. I'm actually not going to give the -- I'm not actually going to give the exact split, but I think it's fair to say that both the sports and the changes to the Entain contract were both material. And although I can see why you're asking for it, I think the relevance is obviously that is a onetime impact in terms of comparability, so as soon you're through the year, then in terms of the percentages, you don't need to [ do the maths ] anymore. It may be a lower number, but also maybe it's a lower number on a lower number as opposed, compared it to last year. So -- but I think it's fair to say -- so they're both pretty chunky parts of the big swing from the negative to the positive.

Operator, can you take the next question from Gavin Kelleher at Goodbody, please?

Just 2 for me, please. Just firstly on is the Snaitech has again delivered very impressive online growth. You've obviously had retail open, I think, for 2 months now or just over 2 months. Can you give me, can you give us any sort of flavor on how online is performing? [ Obviously I ] don't want kind of exact numbers, but as the revenue growth remained very strong, what sort of activity or behavior is Snaitech seeing? It's obviously acquired a number of retail-type customers in the period. Have they remained sticky to online? Are they going back into retail? Is overall spend increasing? Or how should we view it at this stage?

Yes. So I will say the following. Retail has resumed. However, it's not at the same label -- the same level compared to 2019. It is approximately 20% below that. Still if you think about the EBITDA in light of the shift and transition to online, the level of EBITDA -- the level of monthly EBITDA we generate now is higher than 2019, 2020 or ever before. So you can see that the business improved significantly, and this is holding up even after retail -- after the retail reopened in Italy. Just to explain: In Italy there is a green pass, which means basically the only people that were either infected and recovered, vaccinated or [ had tests ] can enter the shops. The green pass is a government standard. It's not specific to gaming, as you know, but it has an impact on the business. We believe that retail will be flat over time. However, we believe that, if the green pass will be taken away or in a post-COVID world, we can still continue to grow this business by 5% to 10%. Online, we expect to continue growing. Yes, I assume that some customers will choose to move back to retail. However, we still expect a lot of growth from the levels we are at today, so -- and the growth we expect is a solid double-digit growth. I won't give the number now, but the expectation that we have based on conversations with Fabio is that, while the business is at a high level of EBITDA, we still see a lot of room of at approximately -- not a approximately but at a double-digit growth rate in the coming years. As I mentioned in the last set of results, I said that we are aiming at 45%. I said 45% of EBITDA being generated by online. Actually we are approaching that number. We are above this number and approaching -- and believe that we will be approaching 50% in the foreseeable future. From a revenue perspective, it will still be approximately 70%-30% split in light of the different -- margin difference between retail and online. So altogether, the business over the course of COVID-19, post COVID 19 -- in a green pass world not yet post COVID-19, [ without ], the business is performing stronger than ever with high levels of revenues in online, by far, higher revenues in online, slightly below -- or not slightly but 20% below on retail, which is again potential for growth; and altogether a higher level of EBITDA, with now approaching 50% of that in online. And this highlights why we believe this business, which outperforms the vast majority of operators across Europe, is a such premium asset; and why we strongly believe in the future of this business and its contribution to the overall success of Snaitech.

If I could just add a couple of additional points. Obviously you always say -- you always expect me to be a little bit more conservative. What I would say is don't forget we -- it's -- over the last 18 months, it is difficult to pick a period [ that's come as ] normal. And we've only had 2 months or 2.5 months post the lockdowns easing. And obviously, in that period, you -- it's very difficult to distinguish and sort of extrapolate and pick a long-term trend for a number of reasons: one, because it has to be a bit of a boost when you first come out of lockdowns. Having said that, they are seasonally quieter months. I think, if you add to that also, we've also seen the benefit from the marketing ban. And actually, in terms of our EBITDA, in the -- since the start of H2, there's been certainly quite a few weeks where there's been a very favorable sports payout. So there's a lot of variables that go into it. And I think, given the fact we've only disclosed 2 months and we're only halfway through September, I'm a little bit cautious in making [ too many ] pronouncements on it, but what I would say, and I totally agree with Mor, that the signs are very, very good. And it would appear that we are going to be exiting COVID in a better place than where we went into it.

Perfect. If I may, just one comment, Ed. It disturbed me that you managed to basically ask me a question that I didn't have an answer out of the top of my head. I can tell you now -- and that's a benefit of doing it remotely and not face to face. At least there is one benefit. And it is that I asked our Head of Live. And by the end of this year, we will have more than 250 tables. However, we believe that, over the course of the coming years, this number will increase significantly. We will have 250, but we are basically preparing the infrastructure to recruit more dealers and deploy more tables as necessary. Further demand, we will see.

So thanks, Gav. Operator, please, could you take the next question from Simon Davies, please?

Just a couple from me. Firstly, just returning to that point on live, can you just give us a sense of the capacity increase that you're seeing through these 5 new studios, I guess, providing a context in terms of the 250 tables you just mentioned? Secondly, on Italy, where have we got to in terms of the renewal of betting licenses? And what are you expecting in terms of the costs of those licenses? There's been some suggestions that the [ number issued ] was going to be restricted. Do you have any information on that? And lastly, very simply, tax rate, where do you think that's going to be for the full year and for next year? It seems to be on an upward trend.

Yes. It's I think I'll probably take all 3 of those. On the tables, I think we'll just come back to you with the numbers, as we said earlier, just because I don't think they're particularly sensitive numbers, so we can give you more details on that. And Snai licenses: Look. It's bouncing around all the time, as you know. I mean I talk to the guys every week and it's the first question I ask them. And should -- it's getting moved each time, frankly. I think the next -- the best guess at the moment is -- at the earliest, is the back end of next year and, I think, possibly into 2023. And I think we still -- once again, it's also bouncing around. I don't think there's any certainty on the amount. I think, in terms of when I -- thinking about funding, I'm working on about 250 million, give or take, but it is very much give or take. Obviously the other thing we need to do is come out of [indiscernible] normalized world to actually see how we want to deploy capital. And obviously there is going to be a balance given the fact that we expect the future to be online, albeit the return on licenses and the return on the retail estate is very strong. So I think the answer is put it at 250 million and at the start of 2023, but frankly, if you ask me every week, that will bounce around. Finally, on the tax rate, I think I'll come back to you on the details, Simon, and the reason being is because, after we did the move to the U.K., the actual -- the P&L tax rate is actually quite complicated because there's a lot of moving parts, specifically things to do with deferred tax assets and those sorts of things. And frankly, I'm not even -- I don't really consider it a relevant number. It's the reason I don't consider it a relevant number is because our cash tax rate, which I think is the relevant number, is significantly lower because cash tax rate benefits from the deferred tax assets we have in Italy. And so actually I think we tend to pay around mid-single-digit, maybe slightly higher, cash tax in Italy, whereas the P&L tax rate in Italy still remains at, I think, 30%. And as I say, particularly this year because this is the year we did the move to the U.K., I think it's very important, Simon, really to read the disclosures, read the detail and then come back to us how to model it rather than trying to online that -- on this call, if that's okay.

Operator, please, can you take the next question from Kiranjot Grewal at Bank of America?

Just 3 questions from me. Slide 21 was really interesting, re your product offering. Are you able to flag any key products that you're still waiting to receive a license for in the U.S.? i.e., are there any products that haven't got a license in any state yet? The second question is around your structural agreements in Lat Am. Are these exclusive? For example, are you able to make another similar agreement with a different operator in Brazil? And then lastly, could you rank your growth priorities? Is the U.S. the key, Lat Am or Live Casino? Or perhaps to put it another way, what's the biggest opportunity for Playtech?

Yes. So in terms of the products and the licensing process, we have to go through a licensing process of each and every product, the company itself but also -- and obviously the individuals involved with the U.S. operations, but the products themselves have to go through a certification process. We have been successful in New Jersey and Michigan. However, we are doing the same in further states and intend to extend beyond that with further applications in further states. Over time, it's a process we have to go through. We are very experienced with that. We have done this more than 30 times now outside of the U.S. We are going to do this. We have done this some -- a number of times in the U.S. and we will continue to do this in the coming months. On Lat Am and exclusivity, usually when we enter into a structured agreement but not necessarily always the case, we do enter into an exclusivity but only, and this is very, very important, only for marketing purposes. So if we provide software plus certain services, including marketing, usually the only exclusivity we will accept is around marketing. And therefore, it still provides us with the flexibility and optionality to enter into other arrangements that include software and services. There are never restrictions on any -- on the provision of us providing software or services. And it is mainly designed in order not to create -- or to avoid the conflict of interests when we support the marketing purposes of our partner in the corresponding market. As for the U.S., we see -- obviously, as you can imagine, given the questions so far, Live Casino, we believe, given the trend we see outside of the U.S., will become extremely important over time. I believe that, in light of the CapEx requirements and the expertise required in order to operate such a business, there is a barrier to entry. There are only a very limited number of offerings in the U.S. market currently. And in light of the pace and the [ rate ] in the U.S., I think that it's the operators will continue to outsource it. And therefore, it is a massive opportunity for us. As we think about the U.S. market, we see an opportunity for obviously Live Casino and casino, but beyond that, I wouldn't rule out other opportunities that we have for our Player Account Management system or, in other words, our IMS platform and technology as well as sports betting. In terms of sports betting, in light of the dominance of certain big operators, we will penetrate the market with a selected few strategic partners in each and every state or as part of a -- multistate, multiproduct, including sports, relationships that will be very, very comprehensive.

All right. Can I just go back to my first question, on your licenses in the U.S.? So if I think of myself being in New Jersey or Michigan, exactly what products can I sign up with Playtech today?

Again can you repeat the question? What products are licensed already?

Yes, yes, that's the question. So in Michigan, New Jersey, can I get everything?

Currently -- yes -- no. So currently the IMS -- currently it's very focused on gaming, IMS and casino and Live Casino. And we are in the process of obtaining the certification required for sports in a number of states.

We have time for one final question. Operator, please, can you take the question from Richard Stuber and Numis, please?

Mor, Andy, just a quick one actually, sort of following up on -- so I think it was Slide 19. I think the -- it was [indiscernible] framework for identifying the opportunity in the U.S. In terms of sports betting, iGaming and sort of the platform, are there any sort of -- are you missing any sort of capabilities to, I mean -- sorry. Are your existing capabilities sort of sufficient to take advantage of this opportunity? Or is it simply you just need to get the licenses and the partners to exploit this?

The answer is no. We believe that we have everything we need. And as a matter of fact, we are always looking to extend that by partnerships and by certain bolt-on acquisitions. I can tell you that we strongly believe that we are extremely well positioned with the products that we have, including the IMS, live, Live Casino, sports betting, both SSBTs in retail and online. And we did announce recently an investment into a company called GameCo, which actually extends our reach into a new category of games within casino. And we will be looking to do the same in the future. So we believe that we can refine and sharpen around the edges, but we believe that the opportunity is there. The entire market is up for grabs. And we will definitely play a significant role in that in the coming years.

Thanks, operator. That concludes today's call. Thanks, everyone, for joining.

Ladies and gentlemen, this concludes today's call. Thank you for joining. You may now disconnect your lines.