Playtech’s revenue growth overshadowed by ongoing Caliplay dispute

Leading online gaming player Playtech has reported a 7p percent increase in its annual revenue for the fiscal year 2023, reaching €1.71 billion. This growth was accompanied by a 9 percent rise in adjusted EBITDA to €432.3 million, reflecting a solid performance across both its B2B and B2C operations. However, the year was not without its challenges.

The B2B division, which saw an 8 percent year-on-year increase in revenue to €684.1 million and a 14 percent rise in adjusted EBITDA to €182 million, is currently embroiled in a legal dispute with Caliplay, a major client based in Mexico. Caliplay has been a significant contributor to Playtech’s growth, particularly in Latin America. However, the company has allegedly failed to pay B2B license and service fees dating back to mid-2023, resulting in an outstanding amount of €86.5 million.

Despite this, Playtech’s CFO, Chris McGinnis, remains optimistic, stating during an earnings call that the full outstanding amount has been recognized within the total revenue and adjusted EBITDA for the year, as it is highly probable that this will be collected in a subsequent period. However, the delay in payment has led to a material increase in debtors for 2023 and a net debt position of €283 million at the end of the year.

B2C Division surpasses €1 billion

On the B2C front, Playtech reported a revenue of €1.04 billion, marking a 5 percent increase from FY 2022 and the first time annual B2C revenue has exceeded the €1bn mark. Adjusted EBITDA for the division reached €250 million, a 6 percent increase over FY 2022. The majority of this revenue was accounted for by Snaitech, despite being impacted by customer-friendly sporting results in H2 2023.

Playtech remains optimistic about the prospects for B2C and is actively seeking to accelerate the division’s growth through targeted M&A and by optimizing HAPPYBET’s online offering. In 2023, Playtech attempted multiple acquisitions, including SKS365 and 888.

Despite the ongoing dispute with Caliplay, analysts have reacted positively to Playtech’s performance. Peel Hunt analyst Ivor Jones believes that Playtech can tolerate prolonged litigation and that it would not be consistent with Caliplay’s behaviour or its broader commercial interests to refuse to pay.

Overall FY 2023 was a year of both growth and challenges for Playtech. Despite the ongoing challenges and dispute with Caliplay, the company has demonstrated resilience and continues to seek opportunities for expansion and growth.

Legal tangle with Caliplay

The dispute between Playtech and Caliplay (known as Caliente Interactive), a Mexican gambling site, has been a long-standing issue.?The conflict began when Caliplay, a significant client of Playtech, allegedly refused to pay for its services.?The disagreement escalated when Caliplay launched legal proceedings in the Civil Court of Mexico against Playtech.?Caliplay sought to annul its legal relationship with Playtech due to contractual disputes.

The point of contention was whether Caliplay retains the option to redeem an additional services fee’ component of its strategic agreement on JV terms.?As of June 30, 2022, the fee amounted to €34.4 million. Playtech claims the option to redeem the fee has expired, while Caliplay insists the option should still be available.

Despite the ongoing dispute, Playtech remains optimistic about a resolution and continues to include the outstanding amount in its revenue and profit, as it believes it is highly probable that the money will be collected through the courts.?However, the outcome of the dispute remains uncertain.