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01/11 03:09
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The earnings call highlights strong growth potential in Interactive and Virtual Sports segments, supported by strategic initiatives in key markets like Brazil and North America. The sale of the holiday parks business is expected to improve margins and focus on high-growth areas. Despite some lack of detail in the Q&A, the overall sentiment is positive due to projected EBITDA margin improvements and strategic focus on growth areas.
Adjusted EBITDA (Q3 2025) $32.3 million, well ahead of consensus and last year. Reasons for change include strong performance in Interactive and Gaming segments, stabilization in Virtual Sports, and operational improvements.
Trailing 12-month Adjusted EBITDA $110 million, significantly higher than the previous year. Reasons for change include growth in Interactive segment, sale of holiday parks, and operational reengineering.
Interactive Segment Adjusted EBITDA Growth More than 40% year-over-year growth for the ninth consecutive quarter. Reasons for change include strong performance of seasonal games, market share gains in the U.K. and North America, and overall portfolio strength.
Virtual Sports Segment Performance Stabilized in Q3 2025 and expected to grow year-over-year in Q4. Reasons for change include initiatives in Brazil and Turkey and increased customer counts.
Holiday Parks Business Sale Proceeds used to improve net leverage and shift to higher adjusted EBITDA margins, lower CapEx, and reduced headcount by close to 40%. Reasons for change include strategic focus on higher-margin businesses.
Trailing 12-month Revenue $310 million. Reasons for change include growth in digital business and market share gains.
Adjusted EBITDA Margin 35% for trailing 12 months, with a projection to grow by 10 percentage points to 45% by 2027. Reasons for change include increased digital mix, sale of holiday parks, and operational reengineering.
Hybrid Dealer: Won the award at G2E for innovative product of the year. It is being rolled out across the customer base and has shown success with both Tier 1 and Tier 2 customers. The next phase will focus on proprietary player-favorite content.
Interactive Segment: Achieved more than 40% year-over-year adjusted EBITDA growth for the ninth consecutive quarter. October was the single largest revenue month in its history, driven by seasonal games and strong portfolio performance.
North America Expansion: Significant growth in the Interactive business and momentum in the North American VLT business. The success of the Vantage cabinet in the William Hill estate and refreshed terminals in the Greek estate are contributing to growth.
iGaming States: Positioning for potential growth as additional iGaming states come online. This is seen as a transformational opportunity for the business.
Holiday Parks Sale: Closed the sale on November 7, leading to higher adjusted EBITDA margins, lower CapEx, and a 40% reduction in headcount. Proceeds will improve net leverage.
Operational Reengineering: Focused on reducing capital intensity and improving cash flow. Expected to contribute to a 1,000 basis point increase in adjusted EBITDA margin by 2027.
Digital Business Focus: Shift towards a higher-margin, scalable digital business. Digital mix expected to reach 60% by 2027.
U.K. Gaming Tax Changes: Proactively planning for potential tax changes in the U.K. gaming industry, leveraging past experience to mitigate impacts.
Potential tax changes in the U.K. gaming industry: The upcoming U.K. budget announcement may introduce tax changes in the gaming industry, including a potential increase in remote gaming duty. This could impact the company's financial performance and operations.
Potential shop closures in the U.K.: There is a risk of betting shop closures, particularly lower-performing ones, which could affect revenue streams. However, the company has strategies to mitigate this risk by redirecting play to nearby shops.
Impact of taxation in Brazil on Virtual segment: The Virtual segment's year-over-year performance has been negatively impacted by taxation introduced in January in Brazil. This continues to affect the company's financial results.
Economic uncertainties and FX rate fluctuations: The company's financial performance is sensitive to changes in foreign exchange rates, which could impact revenue and profitability.
Operational reengineering risks: The company is undergoing operational reengineering, which involves significant changes such as headcount reduction and strategy shifts. These changes carry execution risks that could impact operations and financial outcomes.
Dependence on regulatory developments in iGaming: The company's growth strategy heavily relies on the expansion of iGaming states in the U.S. Regulatory delays or unfavorable decisions could hinder growth opportunities.
Revenue Growth: The company projects high single-digit adjusted EBITDA growth, with a 1,000 basis point increase in adjusted EBITDA margin by 2027, driven by increased digital mix, the sale of holiday parks, and operational reengineering.
Digital Business Expansion: The digital mix is expected to reach 60% by 2027, with significant scalability and lower capital intensity driving margin expansion and free cash flow growth.
iGaming Market Opportunity: The company is optimistic about the expansion of iGaming states in the U.S., which could be transformational for the business. They plan to increase game deliveries through added capacity and a new interactive studio.
Hybrid Dealer Product: The Hybrid Dealer product is expected to contribute meaningfully in 2026 and beyond, complementing the broader interactive market and enhancing the company's portfolio.
Gaming Segment Growth: The company anticipates continued growth in the U.K., Greece, and North America gaming markets, supported by new cabinets, refreshed terminals, and server-based gaming tools.
Operational Efficiency: Headcount is projected to decline by nearly 40%, with operational reengineering expected to take effect in Q1 2026, contributing to margin expansion and cost efficiency.
Free Cash Flow and Leverage: Free cash flow conversion is expected to reach 30% of EBITDA, with net leverage declining to 2 by 2027.
U.K. Gaming Tax Impact: The company is proactively planning for potential increased U.K. gaming taxes, with confidence in mitigating any impact through operational adjustments and market opportunities.
Share Buyback Plan: The Board has reauthorized a $25 million share buyback plan as part of the company's plans going forward.
The earnings call highlights strong growth potential in Interactive and Virtual Sports segments, supported by strategic initiatives in key markets like Brazil and North America. The sale of the holiday parks business is expected to improve margins and focus on high-growth areas. Despite some lack of detail in the Q&A, the overall sentiment is positive due to projected EBITDA margin improvements and strategic focus on growth areas.
The earnings call highlights strong financial performance with a 15% increase in EBITDA and improved margins, driven by growth in the interactive segment. Despite some challenges, such as delays in product launches affecting Q3 expectations, management remains optimistic about future growth, particularly in Brazil and new product innovations. Positive feedback on new products like Vantage cabinets and strategic market expansions further support a positive outlook. Shareholder return strategies, like potential share repurchases, also contribute to a positive sentiment. The Q&A session reinforced management's confidence, despite some vague responses regarding capital deployment.
The earnings call presents a mixed picture: strong financial metrics like significant EBITDA and revenue growth, and high recurring revenue provide stability. However, challenges like competitive pressures, supply chain issues, and uncertainties in iGaming legislation pose risks. The lack of share buyback or dividend programs and unclear management responses in the Q&A add to the uncertainty. Overall, these factors balance each other out, leading to a neutral sentiment.
The earnings call indicates strong financial performance with significant EBITDA growth, especially in the Interactive Business. Challenges in Virtual Sports are stabilizing, and the Brazil market is promising. While there are supply chain issues, the company's resilient structure and high margins are reassuring. The lack of share buybacks or dividends is a slight negative, but overall, the positive financial metrics and optimistic guidance suggest a likely stock price increase in the short term.
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