Playtech plc (PTEC) Earnings Call Transcript & Summary

Good morning, everyone, and welcome to the Playtech 2021 Full Year Results Call. My name is Seth, and I'll be the operator for your call today. [Operator Instructions] I will now hand the floor over to Chris McGinnis to begin. Please go ahead, Chris.

Thank you, operator. Welcome to Playtech's 2021 final results presentation. With me today are our Chairman, Brian Mattingley; our CEO, Mor Weizer; and our CFO, Andrew Smith. They will give an update on the business followed by a Q&A session. I'd just like to remind everyone on the call today that Playtech is currently in an offer period under U.K. takeover code and will be bound by those rules during today's call. [Operator Instructions] The conference call details can be found in the RNS we released this morning. With that, I will hand over to our Chairman, Brian Mattingley.

Good morning, everybody, and thank you for joining us today. Before handing over to Mor and Andy to take you through the highlights of our results, I would like to say a few words about the various expressions of interest in Playtech. To be clear, today's presentation is about the results. And given that we are in an offer period, we are very limited in what we can say. Indeed, everything we can say has been disclosed in this morning's release. So I would politely ask you to keep your questions focused on the 2021 results and the outlook for the business. I am pleased that despite all the corporate activity at the company throughout the whole of 2021, we delivered a fantastic set of results. Looking forward, we have a compelling strategy for growth and are experiencing real momentum across all our businesses. Regardless of the outcome of any ongoing corporate activity, I have great confidence in the future prospects of Playtech. I will now hand you over to Mor.

Thank you, Brian. Good morning, everyone, and thank you for joining us today. Now on to Slide 3 and the highlights of today's presentation. I want to start by addressing by far the most important issue for Playtech today. We have over 700 members of the Playtech family based in the Ukraine. The safety of our people and their families remains our biggest priority, and the group's crisis management team continues to lead a comprehensive response to the crisis in the Ukraine. Playtech is making every possible effort to support employees and their families, including assisting with relocation to safer parts of the country or to other countries. We deployed our assets and built an entire organizational structure, including 24/7 transportation services and accommodation support for those displaced and to get people out of affected areas. We have been providing emergency supplies and shelter, logistical assistance as well as 24/7 communication hotline to offer a means of support, be transportation, mental health and well-being support or anything else that they need at all times. It is actually our own people and our own employees that are leading these initiatives and helping their colleagues. We have hundreds of volunteers across the company that are working day and night to help as much as possible and keeping continuous contact with our colleagues. We have also been overwhelmed with generous offers and requests from our people all over the world asking how they can support our colleagues and their families affected by the crisis. And that is what makes Playtech the family I always tell you about. My thoughts and also the thoughts of all of the Playtech people are with our colleagues in the Ukraine and their families in this difficult time. For any of you in the Ukraine watching us today, always remember that your safety and wellbeing is our utmost priority and we will support you throughout for as long as the impact of this crisis continues. Moving on to Slide 4 and the highlights for today's presentation. Playtech had an excellent 2021. We navigated the impact of the COVID-19 pandemic, and we have refocused the company and our B2B and B2C businesses are now heavily weighted towards the high-growth, high-margin online segment as well as Europe. The main driver of the next chapter in our growth story will be the Americas. We have been laying the foundation for our business in the U.S. The building blocks are in place, and this will become a larger contributor for us in the future. I'm excited to tell you more later on. We continued our dominance in Latin America with excellent growth from Caliente and increasing contribution from Wplay. We already surpassed our medium-term target of EUR 100 million just 18 months after we set it. Growth in our Live Casino business is accelerating. We believe we have the leading offering in regulated markets. And with our 4 new Live facilities launched in 2021, we are ideally positioned to capture the significant opportunity in this segment in the U.S. and globally. Snaitech saw a record performance in 2021. This set of results highlights the incredible job done by the Snaitech team led by Fabio. Snaitech is the market-leading brand in Italy and is ideally positioned to capture the huge opportunity in the region going forward. I'll 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'll start with Slide 6 and the financial highlights. Overall, we had a very strong 2021 with adjusted EBITDA of EUR 317 million, driven by strong performances from B2B online and Snaitech. This strong performance was ahead of both our internal as well as our -- as well as market expectations. It is also worth noting that this was despite the lockdowns in Italy lasting 3 months longer than initially expected. H1 was severely impacted by retail closures for most of the period. While in H2, the online strength continued and we benefited from the reopening of retail shops in Italy. The strong performance in B2B saw revenues from the Americas grew 64%, while Europe grew 25%. Snaitech grew online EBITDA by 54%, which helped to mitigate the significant impact of the retail closures throughout H1. You will have seen in our results this morning that we've updated the valuation of the call options relating to the structured agreements in Latin America. These have been valued at EUR 622 million, up EUR 279 million from the interims, and this demonstrates the progress we've made and the value creation in the region. On Slide 7, I will quickly look at a few figures for the overall business. Given the different timings of lockdowns in various countries in 2020 and '21 and the cancellation of some sports events in 2020 due to the pandemic, the 2 years are not easy to compare. That being said, the group grew revenue 12% in '21 as impacts from the pandemic began to normalize, particularly in H2, while both B2B and Snaitech online performed very well. Turning now to Slide 8, we will explore the performance of B2B Gambling in more detail. Overall, B2B Gambling saw very strong growth, which was driven by the Americas and the overall strength in online. Regulated revenues from the Americas grew by 64%. This was driven by the excellent performance for Caliente in Mexico as well as an increasing contribution from Wplay in Colombia. Regulated markets in Europe grew by 25% at constant currency and on an ongoing basis, growth was 42%. This was driven by strong results from existing customers in the region as well as a continuing trend of new markets regulating. Overall in the U.K., the B2B Gambling business fell driven by retail closures during H1 as well as the changes to Entain contract. On an underlying basis, the U.K. B2B Gambling business grew 2%. The growth in revenues from unregulated markets, excluding Asia, came from Canada and Brazil and was partly offset by the drop in unregulated revenues in Germany following regulation changes. Revenue from Asia increased by 1% with the region continuing to face challenges. Overall, revenues from B2B Gambling saw a strong growth of 11% at constant currency and 20% on an underlying basis. Turning to Slide 9. I will look at the underlying B2B Gambling costs of EUR 340 million in 2021, which exclude the hosting hardware, Live dedicated tables and B2B white label costs. You'll remember I discuss this when I presented the new cost disclosure back in September. What the reported numbers don't show is that excluding our strategic expenditure and changes to our operating model in Asia, B2B costs had a minimal increase, which reflects the intense focus we have put on spending money in a targeted way with a focus on strategic initiatives. The cost base in '21 includes EUR 63 million invested in LatAm, the U.S. and Live, our strategic growth areas. Our business in Asia remains highly cash generative. As discussed at the interim results, additional costs were incurred in order to change our business model in the region to provide greater flexibility. Turning to Slide 10. I will look at the performance of Snaitech compared to prior years. Details of the smaller components of our B2C division on today's announcements and in the appendix to this presentation. Snaitech had a fantastic 2021, particularly considering its retail business was effectively closed with the entirety of H1. Snaitech's online business continued to see impressive growth throughout the year. When comparing the 2021 performance to 2019, you can see how Snaitech has been transformed, specifically the online business since before the pandemic. As you will recall, when we acquired Snai in 2018, one of the main reasons was the under-penetrated online channel in Italy. It is clear that the pandemic has accelerated that shift with the online business now materially higher than pre-pandemic. Snai is consistently running at a materially higher run rate now than before the pandemic, and that gives us great confidence in this business for 2022 and beyond. Turning now to Slide 11, we'll look at our balance sheet. As always, we continue to take a prudent approach to our capital structure and leverage, and our balance sheet remains in a very strong position supported the strong cash generation in 2021. We took the decision to repay EUR 150 million on the balance drawn down on our RCF. This leaves approximately EUR 160 million drawn down. We have no immediate refence requirements, and we'll be reviewing our long-term financing structure as well as the outstanding balance of the RCF once we've received proceeds from the Finalto sale and a great clarity on Playtech's future. Finally, the valuation of call options in our structured agreements in Latin America have increased by EUR 279 million and then now valued at EUR 622 million, and I will discuss this in more detail on the next slide. On Slide 12. As a reminder, we have several structured agreements in Latin America with the largest ones today being Caliente in Mexico and Wplay in Colombia. We generate revenue from structured agreements to a combination of revenue share, cost plus services and a share of profit. These agreements also include call options to exchange their share of profit into equity. The value of these call options as at 31st of December increased [ since H1 ] results were announced. Since [ H1 ] results, we announced that we were working on the transaction with Caliente to list its business in the U.S. by a combination with a special purpose acquisition company. As of December, the probability of a transaction had increased. And as a result, the valuation of the options related to Caliente also increased. In total, these options, which have been independently valued at EUR 622 million as at the end of December, which is an increase of almost EUR 300 million from what we post our interim results. The independent third-party valuation of each of these options contains many assumptions including the likelihood of each of these call options being exercised and with a number of different scenarios as to timing and Playtech's likely percentage shareholding -- as well as taking into account the maturity curve of each business. These options will continue to be revalued each reporting period going forward and the carrying value on our balance sheet will be updated accordingly. It should be noted that if a transaction involving Caliente either looks less likely at any point or has not materialized, that the valuation of this option may fall in future reporting periods. Finally, on Slide 13, we will look at current trading and outlook. We've seen a strong start to 2022 with the business continued its momentum from H2. The performance continues to be driven by our B2B online business, particularly in the Americas and a very strong Snaitech performance, and we would expect this trend to continue. However, while the business continues to perform very well, we remain cautious given the ongoing pandemic and the crisis in the Ukraine. We have managed to limit the impacts from the Ukraine crisis on our business to this point, but the longer the situation continues, the more the risk increases. Overall, taking into account the strong performance in '21 and the momentum into '22, the Board is confidence of basic prospects for the remainder of this year and well beyond. And with that, I'll hand you back over to Mor.

Thank you, Andy. Starting with Slide 15. First, I want to update you on our progress against the 2021 priorities I set out this time last year. We have delivered again on all our priorities despite the challenges we encountered in the first half of the year from the pandemic. The Americas have been and remain our strategic priority. We have continued our momentum in the U.S. with existing and new customers. We have now launched with Parx Casino in Michigan, New Jersey and Pennsylvania. We are making further progress with Parx, and I'll tell you more about it in the coming slides. We have continued to drive growth in our structured agreements in Latin America. As Andy said, Caliente growth is once again amazing. Wplay has been accelerating further, and we have launched in Panama, Costa Rica and recently soft launched with our most recent agreement in Brazil, which I first told you about back in September. We signed a further 100 new brands using our SaaS model and our SaaS revenue nearly doubled in 2021. I said Snaitech will continue its online momentum from H1 into H2, which it did. While the retail closures in Italy continued for much longer than expected in H1, retail reopened in H2, and as a result, Snai's overall EBITDA grew 38%. On top of this, we again remained the #1 sports brand in Italy. We also made further progress on our sustainable success commitment, which I will tell you more about in a minute. Finally, the Finalto sale process is nearing completion, and we are progressing well with our simplification of the group. As you can see, we delivered on all our strategic priorities during 2021. As always, this has been down to the amazing dedication of our people at Playtech. Turning to Slide 16. We delivered on our sustainable success commitments during 2021 and continue to make progress this year. Starting with governance, we created a Sustainability and Public Policy Committee, which is now meeting regularly and providing challenge and oversight on sustainability matters at Board level. We also launched an external stakeholders advisory panel to challenge our approach to sustainability and ensure we are doing the best we can and always seeking ways to improve our approach. In terms of environment, our Carbon Disclosure Project score improved to B. And in terms of Diversity, Equity & Inclusion, we introduced new targets for diversity in our senior leadership and management roles. Just one example is that our executive leadership team has gone from having hardly any females in 2018, to 30% in 2021, and our successful efforts in the Ukraine are led by some incredible female leaders at Playtech for whom I have the highest respect. However, I recognize that we have a lot more work that needs to be done to get our diversity levels where we want them. As the leading technology provider in the industry, our licensees rely on us to pioneer technology, which ensures that players experience gambling entertainment in a safe manner. Consumer protection is absolutely essential, and we will strive to remain at the forefront of its development. To support this, in 2021, we further expanded our Playtech Protect offering and added new signings, including Holland Casino and the Ontario Lottery and Gaming Corporation. Further, in recognizing the significant impact of the pandemic on mental health, we launched a GBP 3 million COVID Recovery & Resilience Fund in partnership with a Charities Aid Foundation. And through this, we supported 44 charitable organizations across 9 markets. In total, during 2021, we supported over 100 charities and community organizations. And of course, as I mentioned earlier, we are supporting our employees in the Ukraine as much as possible and will continue to do so. Now moving to Slide 17, and I want to give you more details on the impact of the Ukraine crisis on our B2B business specifically. Our crisis management team has worked around-the-clock since the day of the invasion of Ukraine by Russia. Playtech has robust business continuity plans in place and we activated these plans immediately to minimize disruptions, and we continue to do this. We have been doing everything possible to provide aid and support to our employees in the Ukraine and also helping to transfer those that are eligible to leave the country while relocating others to safer areas. The B2B business has various functions in the Ukraine, but none of those functions are wholly run from there, and we transferred critical infrastructure to outside the Ukraine ahead of the invasion as part of our risk management process. So now there is no critical infrastructure run out of the impacted areas. We have parts of some functions there in the Ukraine, including quality assurance and some development teams. However, we shifted to staff in other regions in order to support the workload and delivery of projects. We will continue to update you as the situation in the region evolves. Of course, the safety of our employees and their families is absolutely the overriding concern and remains our biggest priority. Turning to Slide 18. We are laying the foundations for our future in the U.S. market. As I've said before, we continue taking a state-by-state approach. We launched in New Jersey, Michigan and Pennsylvania, and we have received new licenses also in Arizona and Mississippi. And we are pushing ahead with the licensing process in further states with a number of additional licenses close to being secured. We have a strong pipeline of interest for our products in multiple states and secured additional licensees, which we will announce in due course. As I told you back in September, the market is split into operators of 3 tiers and of various sizes, and we continue to be in discussions with all 3 tiers. We are in advanced discussion stages with a Tier 1 operator and progressing discussions with several tier tools 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. 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 have opened new facilities in Michigan and New Jersey, which I will tell you more about later. With online sports, we are penetrating the market with selected few strategic operators. We will also be offering our SaaS product in the U.S., and this will allow us to capture the opportunity with each and every U.S. operator. We are focused on traditional B2B deals similar to in our other markets. We are also in talks on select structured agreements following our success in Latin America and Europe. We also continue talks with many potential strategic partners in order to extend the distribution of Playtech products and technology. To reiterate what I have told you before about the U.S. strategy, we have been laying the foundations to deliver future growth. When it comes to licensing, investment and having the right people on the ground, we have the building blocks in place now. Turning to Slide 19. I want to talk you through our progress in the U.S. in 2021. When I said we are accelerating, I really mean it. It takes time to get licenses and sign the initial customers as with any market, but we are starting to accelerate more and more quickly. In 2021, we launched with Parx Casino in Michigan, and I will tell you more about this deal later. We are making progress with our strategic partnerships with IGT, NOVOMATIC and Scientific Games as well as other operators we secured and will announce this in due course. 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. For Live Casino, I will tell you more about our new Live facilities on the next slide. As I told you last year, our aim was to have over 100 employees in the U.S. team by December, and we have those employees in place and working towards our ambitions. We are in 5 states now with more licenses on the way. We are in continuing talks to extend our reach and working on our pipeline of deals and potential structured agreements. Moving to Slide 20. As I mentioned earlier, I'm very proud to announce that we have opened our amazing new Live Casino facilities in Michigan and New Jersey, featuring some of our best games, including Blackjack, Roulette and Baccarat. We have another Live Casino on its way in Pennsylvania as part of our multistate Live Casino strategy. I'm very excited about this business in the U.S., and I can't wait to tell you more in the near future. Looking at Slide 21. Last year, I told you about our exciting multistate multiproduct deal with the Greenwood companies that own and operate the Parx Casino, which is the leading casino and racetrack operator in Pennsylvania. With this deal, we are penetrating with the Greenwood companies in Michigan, New Jersey, Pennsylvania and Indiana. As I told you in September, we already launched in Michigan in H1, and we have integrated a third-party sports product into our IMS platform. We have also now launched with Live Casino in Michigan, launched online casino in [indiscernible] New Jersey; and migrated Parx to Playtech's online casino and PAM in Pennsylvania. The launch of Live Casino in New Jersey is also imminent. The deal highlights the demand for a superior offering in the U.S. particularly our lead -- industry-leading IMS platform and player account management. I will keep saying it, we are making real progress in the U.S. now and this is just the beginning for Playtech across the full product suite. You will be seeing a lot more from us in the near future. Moving over to Slide 22. As we have told you in recent times, our focus in Latin America remains on structured agreements. Caliente in Mexico continues to go from strength to strength and became our outright #1 customer globally in 2021. The growth in this business is amazing and momentum is continuing into 2022. Wplay in Colombia has been accelerating since its migration to Playtech software in late 2020 and saw significant growth in 2021, which continues into 2022. This business, I have no doubt, will be a significant contributor to our revenues going forward. Our structured agreement with Tenlot and the Red Cross brings exclusivity in Costa Rica, and we are operating under the only license available there. During 2021, we launched in Costa Rica and also launched our structured agreement in Panama with Onjoc, where we had the first-to-market advantage. Looking ahead, we are focused on executing these opportunities to drive growth in the region. We have also soft launched with our exciting new structured agreement with Galera.bet in Brazil. As with others, the Galera.bet agreement includes the customary software license agreement as well as an option over a significant noncontrolling equity stake in the operation. To remind you about why this is such an exciting agreement for us, Galera.bet is the official sponsor of 3 major football clubs in Brazil, including Corinthians and the business has a long-term agreement, including exclusive rights with them. It is also the official TV show partner of 1 of the most popular TV channels in Brazil. 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. Construction of the Peru facility is progressing well, and we will update you again very soon. In August 2020, I set a medium-term target of EUR 100 million annualized revenues from the region. With the strong performances from Caliente and Wplay alone, we already surpassed this target in 2021. And for that, I'm very proud of the team. Moving to Slide 23. For those of you that don't know it, Holland Casino is the state-owned operator in the Netherlands with 14 casinos. The Netherlands online market regulated and launched on October 1, 2021. In time for this, we launched our exciting new strategic agreement with Holland Casino in the race for market share in the Netherlands. We are providing a full turnkey offering, including our IMS platform, all products and services such as marketing advice and CRM services. Holland Casino already launched with Playtech's technology and products, including with a new Live Casino facility, which we built next to a Holland Casino site. I'm very happy to tell you that this partnership is progressing extremely well, and it gives us a significant opportunity going forward and in recent months, became already a top 10 customer. Turning to Slide 24 and our overall Live Casino operation. Our revenue was over EUR 100 million in 2021 and growth is strong with an EBITDA margin of over 35%. There is a significant room for margin expansion as we scale this business, and I'm excited about the growth opportunity ahead. We have been investing heavily in Live Casino to meet the increased demand. We have over 250 tables in operation compared with only 135 at the start of 2019. As I mentioned already, our new studios in Michigan, New Jersey and the Netherlands with Holland Casino, are up and running as well as our studio in Switzerland with Swiss casinos. We have a facility in Pennsylvania, which is in progress, along with Peru that I told you is under construction. This 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 Playtech continue to take market share in regulated markets in the future. Moving on to Slide 25 and our SaaS offering. We initiated this process in order to ensure we could access and serve the estimated 1,000 untapped brands that we didn't work with back in 2019, mostly as they didn't have the scale or business model to use our IMS platform or other product offering. Since we adopted our technology to launch this offering, we have signed over 250 brands, and we continue to add more. To put it into perspective, we added over 100 of those new brands in 2021 alone. Our SaaS revenues nearly doubled in 2021, and we are gaining momentum. This business is high margin, and I believe it will start to make a material contribution in the future. Turning to Slide 26 and Snaitech. When COVID-19 impacted the retail part of Snaitech in 2020 and the first half of 2021 and Italy was in lockdowns, 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 Snaitech deliver 45% growth in online revenue in 2021, which helped drive 54% growth in online EBITDA. Snai was again the #1 sports betting brand in Italy in 2021. We have seen retail reopened since the second half of 2021, and it is going in the direction of pre-pandemic activity. But at the same time, we are seeing online activity remaining at high levels despite retail reopening because the pandemic has simply accelerated the inevitable shift to online. When we bought Snaitech, the Italian market was only 10% online. It was 27% online in 2021 and is forecasted to remain under-penetrated at around 20% in 2022. Even as retail continues to normalize, so we continue to have an exciting growth opportunity ahead in both online and retail as it continues to recover from pandemic headwinds. To put it into perspective, despite the acceleration of the shift to online in Italy, online penetration was still less than half that of the U.K. in 2021. In the second half of 2021, Snaitech's EBITDA was still 2/3 online despite the reopening of retail. Given the under-penetrated market, the online 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 led by online. Snai had an amazing start to 2022. 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 amazing business will continue to go from strength to strength. Turning to Slide 27 and our near-term deliverables for 2022. The U.S. remains the top priority for us, and we will 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. We have launched our Live studios and we will drive traffic towards this. We will continue to take the next key steps with Parx Casino and others, and I'm excited to tell you about the deals with well-known brands that we are close to announce. In Latin America, we will continue executing on our structured agreements to drive growth. We have ambitious plans and delivery schedules ahead and we will make a big push to launch fully the exciting new deal with Galera.bet in Brazil. Thirdly, we will keep driving growth in our Live Casino business and further extend our B2B reach. We will again sign another 50 new brands. We keep challenging the team to do this, and every 6 months, they continue to deliver. We will keep pushing hard with this offering. And as I said earlier, this will become a more material part of the B2B business in the future. Also in B2B, we are further extending our reach within recently regulated markets across Europe, Africa and Canada. For example, in Ontario, where we will be launching with more than 10 licensees when the market launches in April. We have also signed a comprehensive software and services agreements with NorthStar in Canada as we announced in detail recently. I will update you on how this is progressing in the near future. For Snaitech, we will build on the excellent momentum into 2022. And we are fully confident in Fabio and his management team to largely maintain the online growth whilst also supporting the strong return of retail. Finally, we will continue to execute on our sustainable success strategy overseen by the new committee. Thank you very much. Andy and I will now take any questions.

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

I've got 3, if that's okay. The first is on the U.S. acceleration. So you put these building blocks in place, but I think it's fair to say, currently, your partners are relatively small in the U.S. Can you talk about how you see revenue progression in the U.S.? And perhaps you could touch on what difference do you think counterplay would make if that transaction were to proceed around this back? Second will -- on Live Casino, you're at 250 tables now. Can you talk about where capacity might get to by the end of this year and how we should think about growth in that business? And then finally, on the distribution agreement with Scientific Games in particular, could you talk about what that is achieving? Is that just distributing your slot games to their network? I understand the U.S. angle of that, but there's obviously a global agreement you see it more broadly. So can you talk about -- is that a reciprocal agreement? What was the strategic rationale behind making it?

Okay. Ed, I'll do -- I'll just do the numbers part of question on the U.S., and I'll let Mor do the rest of them. I mean, I think it's fair to say that, as you say, we all put the building blocks in place. And it's clearly going to be, at some point, a very, very big ramp-up in the numbers. But I think it's fair to say that's not going to be for a couple of years. The way I would see going is this year, revenues will be perhaps approaching double digit, maybe they -- may be a bit higher, but that kind of level, where we'll be rolling it a loss at an EBITDA level. And I think I've always stressed in the past that -- we don't have to invest massive, massive, massive ahead of the curve. But clearly, when investments in the U.S. would be a good thing because it would mean it was customer-driven. So frankly, we will invest wherever is necessary, but it's certainly not going to be sort of the EUR 50 million, EUR 100 million well ahead of the curve. I think looking into next year, I think you will see a bit of lot of revenues, but I think we're still probably going to be -- I would hope we're probably on going to be about breakeven. And I say we hope because the revenues will come through, but it will -- I would hope that we're going to be investing more and more so that we're still, frankly, not making that much at an EBITDA level. My gut feel, and look, I think it is early days, but I think once you get to 2024 and beyond, that's where you certainly see the very, very, very big ramp up in both revenues and EBITDA.

Yes. And on the U.S., just to further elaborate, obviously, when I refer to the building blocks and laying the foundation, you have to understand that. Obviously, it's very hard to convince people to come or join the Playtech portfolio and become a partner of Playtech before we basically have the infrastructure on the ground before the Live Casino facilities are set up. The conversations are ongoing. There is real appetite. Some of them, by the way, are already secured waiting for to be launched. But once we now set up our presence in the U.S. in terms of the team, in terms of the infrastructure in the relevant states, in terms of the Live Casino facilities, we believe that we will see an acceleration in our plans and we will see a lot more demand for our products. This will include, obviously, casino, Live Casino, our SaaS platform that is being deployed and set up currently in the U.S. Once all of that is set up, once we integrate it to existing platforms that exist in the U.S., which we have done already in some parts, I believe -- I strongly believe you will see us accelerating in the U.S. And I think that people do acknowledge the fact that the variety of choices currently in the U.S. -- that exists currently in the U.S., is very limited. The choices or the variety that they have is very limited, and they want to extend. They want to give their customers a broader -- or a better and broader offering for them to use. And this is why we believe that now that we put the foundations once. And we put it all in the -- and we have it available in the U.S., you will see us accelerating there. On Caliente, we believe that Caliente is a very significant opportunity in the U.S. Just to put it into perspective, 60 million Hispanic or Spanish speakers in the U.S. market. 80% of them will not read English sites, 2 million Caliente shirts being sold in the U.S. annually. And a lot of them follow the football leagues outside of the U.S. or in Mexico and other markets where the Caliente brand is available. So we do believe that actually it's a significant opportunity for us. The GDP of the Spanish speakers in the U.S. is bigger than the GDP in Mexico, just to put it into perspective. So no doubt -- this is an extremely exciting opportunity for us. On Live Casino, and by the way, I should mention that Caliente already processes or transacts in American sports, a lot of that and therefore, have the expertise -- the knowledge expertise and capabilities to extend into different states, including sports and casino. On Live, I don't want to -- I think that it's too early to suggest what the number of tables would look like. I think the track record speaks in itself, 135 in 2019, 250. We have the capacity, as we indicated now, as we indicated during the call, we set up a facility for Swiss Casinos. We set up a Live Casino studio in Holland Casino. We are extending into Peru. We opened 2 Live Casino facilities in the U.S. We are in the process of extending further in Pennsylvania and will have soon a third Live Casino facility. And last but not least, we are taking a lot of market share in regulated markets. Our focus is only on regulated markets, and we are taking market share in regulated markets, and we see increased demand from existing customers, European customers that operate in -- across Europe that would like to actually extend the reach together with Playtech and actually push our products in a significant way. So obviously, it can grow by 50, 100, but if necessary, it can grow by 150. We are ready for that as we did so far in the last couple of years. On Scientific Games, the agreement is a global distribution agreement. We integrate and distribute their slots and their products across our portfolio, across our customers' portfolio. Remember that in most parts, we are the platform, we access the platform. And therefore, it was important for them that Playtech will use its platform to distribute the Scientific Games. And at the same time, obviously, we will do the same where they access the platform, including the U.S. and where we will be able to distribute both our casino, Live Casino and other iGaming products. So a very lucrative and important relationship for us.

The next question comes from Kiranjot Grewal from Bank of America.

A couple of questions from me. Firstly, inflation is going up. With your franchise model, you seem to be pretty safeguarded, but wondering if there's any risk that some of your franchisees might come under pressure. So have you seen any franchisees [indiscernible] or raising the issue? The second question is Live Casino in the U.S. Are you seeing any issues with labor shortages and how that supply has been tight? And then the last question is on Live Casino again. I mean, what would you say is your edge on Live Casino? We know there's a couple of major operators already out there that are doing well. Why would have B2C choose Playtech over others? Is it simply a matter of the price you're offering?

Kiranjot, I apologize, the line broke, could you repeat your middle question, please?

Just Live Casino in the U.S., are you seeing any labor shortages or are you able to get the dealers that you need?

It's Andy. Just on your first question, when you talked about franchisees model, [indiscernible] specific to Italy?

Yes. Yes. Sorry. Italy.

It's nothing that I picked up so far. I mean I talk to the team several times a week. It's not something that's particularly featured for the sake of completeness, I'll come back to you on that. But I think the answer is no, it's not something we're particularly noticing at the moment.

Yes. On the labor shortage, there is no shortage. And actually, I think that, as I indicated during the call earlier, obviously, we grew our workforce to from a very, very small team of 5 to 10 to more than 100 over the course of 2021. And I think that it serves as a good indication that actually we managed to grow. A lot of those, by the way, are for the Live Casino studios that we have in -- specifically in Michigan as well as New Jersey. We are in the process of recruiting by far more for both those studios as well as our new Live Casino facility in Pennsylvania that is underway. So in short, the answer is that we don't see any shortage in labor. And it is available and we continuously recruit, we continue to recruit a lot more people as we speak. On the Live Casino, I think that people choose Playtech. First, I will indicate that there are only a limited number of providers out there. It requires a lot of expertise. It's by far more complicated than developing a slot game, even maybe sports to some extent because it includes operating a Live Casino facility that is regulated and being overseen by regulators and you need to operate it in certain -- using certain methodologies. And setting up the methodologies as well as the Live Casino facility itself is a complicated matter, especially when it is then need to be integrated with obviously a graphical engine that is being broadcasted as a combination to the operators. The reason Playtech is being chosen is, in simple terms, the quality of the product, the variety of products we provide, our customers, our focus on a variety of choices for the operators so they can offer it to their consumers, to the end-user consumers. And it includes not only the traditional Blackjack, Roulette and Baccarat games that existed 10 years ago, Today, it is by far more sophisticated. It includes augmented reality and virtual reality, it includes certain 3D elements to it. It includes, obviously, certain new formats, gaming show formats. So I would say in short, it is the quality of products and the variety of products that we provide or variety of Live Casino games that we provide to our customers. On the pricing, I can tell you that we are not trying. Our price is in line, and we are very competitive -- However, we are very competitive.

Just to add to that, Kiranjot, I'm not sure that we have had and the best day to Riga several years ago now to when we first took the facility. I don't think you ran at the time. But I'm sure if you would like to see yourself because it's a pretty impressive place. I'm sure if you fancy trip out to Riga, I'm sure Chris will be very happy to go with you. And obviously, that goes through anyone else as well. We're always very, very [ proud for our ] studio.

Our next question is from Ivor Jones at Peel Hunt.

Could you talk about the Asia revenue and profit line? I think the output of the way you've presented revenue and costs is EBITDA from Asia halved in the second half versus the first half. Can you just go back over what the changes were to the model and how we should think about '22 and beyond from revenue, but also how you think about contribution? Secondly, back to Live Casino, when you got on the slide, it's a 35% margin on EUR 100 million of revenue. You've cut the costs in different ways. Are you saying that Live made EUR 35 million of contribution in 2021? Or is that sort of indicative margin at some point out in the future? And can you talk about how much of Live is from Asia to that end up double counting? And lastly, you said that SaaS revenue doubled. Did you say what it doubled to? And how should we think about the -- I know all of the customers must contribute different amounts of revenue, but how should we think about the revenue from the more mature customers within that EUR 250 million so we can think about what SaaS revenue might become?

Okay. I think sort of first of those are for me. By the way, if anyone that didn't see the headlight on Ivor's note today, even by my standards it was a joy. That is the best one ever. Ivor, So in terms -- let's do number 2 first, just in terms of the line. Yes, the revenue was actually a bit over EUR 100 million. And actually, it was -- that 35% margin was this year. It was actually a tad higher than that as well. So I think the actual EBITDA -- the actual revenue was over EUR 100 million and the actual EBITDA was over EUR 40 million but that was a current year margin.

That's accounting for all the costs you're taking out in the slides, Andy, things like cost of tables attributed to third-party clients and development costs in the U.S. You're putting all the live-related costs into the Live cost bucket to get to EUR 40 million.

I mean I think we'll have to take this offline with you. It was a debate whether to put that number. And the reason being is because obviously, we don't split the external reports, we don't split anything out by product. But, however, internally, we do -- we obviously cut the cost base in different ways. And because the Live team is a team in itself, we actually give them specific targets and it's on a product basis. So actually, to your question, is there some double counting there? Absolutely, yes. I mean you should be very careful of model it the way we report it. However, probably your next follow-up question would be, really, if you're going to start with doing that, "why don't you report Live separately so we can see it." Actually, we might at some point in the future. We haven't historically because frankly hasn't been big enough, but I could absolutely understand your confusion when we give numbers that frankly do show double counted. So I would suggest anyone that's interested that we take it offline because I think it could confuse people given the fact we don't report Live separately, what happens to give the number separate in the script. So apologize. We try to be helpful, but I can understand the confusion. Just back to Asia, the revenue and cost. So this was a change that was made at the start of H2 last year. Essentially, as you know, we always used to have one main distributor who -- the way the model works effectively. They enter [indiscernible], they had certain costs like, for example, third parties, some additional third party content in addition to ours. What we did is we changed the model because we want to take more than one distributor. In fact, we brought in a couple more because I think given the competitiveness of the market that was necessary. And also as part of that to give us more flexibility, so we contracted directly with some of the third party in terms of third party content which effectively increased our revenue, increase our costs. So EBITDA all being equal and been absolutely the same. However, the reason it wasn't the same is for 2 reasons. One, because revenue actually fell because the market was falling. And then secondly, the reason that the cost base looks -- and results looks poor in H2 is because we took a provision, which obviously gets put through, can go back and spread it also we get put through December. Because when we looked at some of the cash collection, we took a very, very prudent view to -- in particular, one customer who we were nervous by getting the cash from -- also in terms of the business model, it was very much COVID related because, as you know, the region is struggling. So I think the answer is it's a long answer either. But optically, it doesn't look particularly healthy, but that winds its way through. So actually, as of now, the results will look very clean. And what you should see hopefully, is the cost base now stabilized with revenue ideally growing from here. But I think I'll just point hand over to Mor just talk a little bit about the dynamics of Asia right now. Apologies for the long answer, but hopefully that was helpful.

So are you saying that if I knock out the provision, I should look at the EBITDA run rate in the first half as the sustainable run rate?

Well this is why I said all things being equal because you should knock out the provision in terms of the cost base unfortunately and revenue actually did fall from the first half to the second half as well. So the second half we got the double whammy. It had fall in revenue and a provision that went through the effects of COVID the whole year. That's why it looks so bad. What you probably should do to look at a run rate is say the revenue in H2, but then take the cost base in H2, adding back EUR 10 million provision essentially. Mor, do you want to talk about the dynamics in Asia? I covered it, but if you want to just talk very briefly about it.

Actually, it remains the same. Obviously, China remains challenging. However, we are extending into other territories and making good progress in other territories, compensating for the declines we saw in recent years in -- or last year in China. And we hope to continue seeing a stability going forward.

And I think Mor, there was a question about the SaaS business and the future revenue potential from it.

Yes. So I'm not -- we haven't indicated the margin profile and the level of revenues but it's already a solid double-digit number with a very high margin. As we indicated was the purpose, the all purpose of the SaaS platform and our focus on increasing the cash conversion. And we expect, obviously, it takes a little bit of time. It takes 6 to 12 months for the brands to divert traffic from other suppliers and from other games towards the Playtech offering. But the trend is consisting -- is consistent amongst the brands and we definitely see good progress there. And we expect it to double -- nearly doubled in 2021, and we expect it to continue to be the case in the trend going forward.

Can it be EUR 10 million of EBITDA contribution this year?

I think that's -- it's -- that's stretching it, I think, Ivor. I think it might be -- I'm not going to get an exact number. It's not going to be EUR 10 million, it might be EUR 10 million. It's probably going to be slightly less than that. But I think the point is it is that it's announced. It's 1 of those ramps up and today, I wouldn't want to say any easy win. But frankly, there's sort of lot of maintenance in terms of it's not the full IMS, et cetera. And actually, that is a nice number that just builds over time and should hope we are reasonably sticky. but I would get overly carried away with the actual number either.

Okay. So it's not -- although it doubled, it's not moving the dial at the group EBITDA level?

No, it's not. It's a nice back pocket one, but it's nothing to shout about.

Our next question comes from Simon Davies from Deutsche Bank.

Three from me on Snaitech, please. Firstly, can you give us a rough split in the online business between betting and iGaming. And what happened to your sports margin in 2021 and roughly what expected range do you see in online sports margin going forward? Secondly, on the retail business, what's your current run rate relative to the pre-pandemic levels? I mean in the U.K., we're seeing a return to about 95% of -- are you seeing similar experience there? And finally, can you talk a bit about the competitive environment we've had changes at your 2 biggest competitors in recent months. Is that benefiting the business in terms of creating disruption elsewhere?

Sorry, I missed the 1 -- can you just ask what I'll say again? I missed the exact detail. What did you say, Simon?

The first one, in terms of the split in sports and iGaming and the gross win margin you're seeing on the sports side of the business.

It's -- okay. Look, it's -- I'll take that off line, if you don't mind. It's not great, we actually give it up will go fully -- what I would say, however, Simon that there was undoubtedly a benefit, it's quite interesting in the base. It's what I have with the team a lot. There was undoubtedly a benefit in H2 from sporting results. The module is better than we modeled. That said, it's -- there is an argue firstly, it wasn't a massively material benefit. It was -- it helps. We're talking sort of a few millions over H2, perhaps slightly more. But what I would say is that there is a stronger base as well to well extend is structural or not because, frankly, the because of [indiscernible] we've actually been ahead of the margin that we budget and 8 months is a quite long period. But I wouldn't want you to get -- it is a nice little -- once again, it's not a little boost, but it is not the biggest driver by any means. The driver is not as favorable [ to sporting ] results. But look, take it offline with Chris. And if you can give us a little bit more color on the edges. We won't tell you any models. But I don't think there is much more we can give, Simon, because it's a -- as you know, we don't split it like that. On U.K. Sports, I think the number you gave -- 90-plus percent is about right, 90%, 95%, 5% to 10% below. Nearly back there, not quite. And in Italy retail -- and Italy retail is also the same. In terms of the U.K. retail, we are 5% to 10% behind. However, specifically on Italy, I wouldn't want you just to take our [ 5% to 10% ], that if I said to say that's what it could be running that. I mean, just -- and apologies for the slightly long answer. Snai is absolutely flat at the moment, and the numbers are unbelievable. I would want to think that the -- if we talk back another [ 5%, 10% ], you simply add that on. First, there may be an element of capitalization. And secondly, role when you sit at a high-level view, and the numbers are so good, I just want to put them in high [indiscernible] believe them.

On the disruption, Simon, I think that instead of thinking about disruption, I think that people should focus on the interest that started in the Italy, 3 years after we bought the Snaitech business, the highlight that Italy gets. And obviously, it only reiterates the recent transactions only reiterate the importance and the significant opportunity that Italy presents. Obviously, it's very hard to calculate what happens as well in other businesses and impact on the overall growth. What I can tell you that we are on a mission. This business is now an online-led business. I indicated that in 2021, 2/3 of the EBITDA contribution was made by online -- and while it was only -- retail was only open for half a year, we still expect, going forward, as I indicated 6 months ago, that actually the online contribution will be at around, if not more than 50%. So this is becoming a truly online-led business. No doubt that acquisitions and combinations of businesses that are consolidated, create some diversion of attention to internal restructuring, which should support the view that actually we simply need to focus on the growth of our online business as well as continue pushing ahead with retail, and potentially it can be beneficial for us.

Thanks, Simon. Operator, I think we have time for 1 final question.

Of course. Our last question comes from Richard Stuber from Numis.

Just 3 for me, please. One on Caliente, one on Snaitech and one on Sports B2C. On Caliente, could you just remind us of the revenue-linked service fee, which would forfeit if you exercise the call option. The second 1 on Snaitech, could you just remind us again of any sort of cost synergies or shared services between Snaitech and your core B2B business. So i.e., sort of Snaitech still very much a stand-alone business? And the third one on the Sports B2C, I think it was EUR 11.4 million loss this year. Would you expect it to break even this year?

Okay. So I'd like to take all of those. And by the way, Richard, I don't know if you're aware, but I think you called on a video call very late long night. I assume that was an accident [indiscernible] answer in it. So in terms of Caliente, so we would lose shared profit -- that was just short of EUR 50 million this year, which would probably be about the same -- last year, which was probably the same this year. That's actually the gross number. There's a bit of cost that comes out of that, maybe about just another 10% or so. So you're looking at mid-40s that you lose. In terms of cost synergies with Snai, very, very little, if any, really, I think you remember at the time when we did the -- when we announced the deal back in 2018, I put a synergy number, which quite a lot with [indiscernible], et cetera, which were probably already through that anyway now. It's not really material number at all. I think in terms of the synergies, it is negligible. As Sports B2C, I mean, by way of background, I think everyone knows that each business has suffered because of the COVID. But I think it's also suffers from not being managed correctly. It's now the leadership of Fabio and his team. It was when it's about -- it's about EUR 10 million. I would expect it to break even next year at some point. The Snai team will kill me, they haven't committed to that. If it's the back end of next year, fine, but I would be very disappointed if they didn't get it through breakeven at some point next year. Do I think that means they will be breakeven for the year? I don't think there'll be any miles up, but they may not -- it may still be slightly loss-making, but frankly, I think the aim for me is getting it to breakeven, which I would hope that happens next year.

Thanks, everyone. I think that was our final question, and thanks, everyone, for joining, and I'm sure we'll speak all very soon.

This concludes today's conference call. Thank you all very much for joining. You may now disconnect your lines.