888 revenue growth continues in 2021 ahead of William Hill acquisition

| By Daniel O'Boyle
Revenue for online gaming operator 888 Holdings was up 15.4% to $980.1m, as the business prepares to acquire the non-US assets of William Hill.
Itai Pazner

888 chief executive Itai Pazner (pictured) said the growth, which comes on top of 51.6% revenue growth in 2020, means the scale of the business has “truly transformed” since the end of 2019, with revenue now close to double the amount recorded that year.

“2021 was a very successful year for 888 as we continued to position the group to become a global leader in online betting and gaming,” he said. “It was another record year from a financial perspective, and we have truly transformed the scale of the business over the past two years. 

“This step-change in scale has come from a clear market focus on regulated markets, which now make up three quarters of revenue, and where we are seeing really positive market share trends.”

B2C operations made up almost all of 888’s revenue, with takings from this segment bringing in $941.9m, up 15.7%, compared to $38.2m from B2B technology, which was up 7.7%.

Breaking down B2C earnings further, gaming was by far the largest driver of revenue, bringing in $814.5m, up 17.7%, compared to $127.4m for betting, which was 4.3% more than 2020’s betting total.

Looking at overall revenue geographically instead, the UK made up 40% of 888’s total, as takings from the country was up 17.0% to $388.9m. 

The operator noted that this UK growth itself came on top of 63% growth from 2019 to 2020. However, most of this UK revenue came in the first half of the year, as a combination of retail reopening and increased responsible gambling measures impacted revenue in H2.

Italian revenue was up 37.1% to $118.3m, while the rest of Europe, the Middle East and Africa brought in $333.5m, up 4%.

Breaking these other markets down further, earnings were impacted by the operator’s withdrawal from the Netherlands when it launched its online gambling market, as well as the impact of Germany’s Fourth State Treaty on Gambling and accompanying measures.

“The group believes Germany represents an attractive growth opportunity going forward under

the new regulatory regime and continues to invest to grow its brand presence there,” the business said. “We plan to apply for a licence in the Netherlands and are hopeful we can relaunch there on a regulated basis during H2 2022.”

Revenue from the Americas grew by 33.7% to $125.6m, while revenue from the rest of the world declined by 8.9% to $13.8m. Of this total, $22.0m came from the US. The business recently received a licence for Ontario’s igaming market which will launch on 4 April.

“We believe the Canada market represents an attractive long-term growth opportunity for the group, where 888 has an established brand presence and can exploit its sources of competitive advantage,” it said.

After paying $184.0m in gaming taxes and $149.1m in costs of sales gross profit came to $647.0m, which was 15.0% more than in 2020.

Marketing costs, however, grew by 29.3%, while operating expenses grew by 2.8% to $175.5m.

This meant that 888’s adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) came to $165.0m, 6.0% more than in 2020.

Share-based benefit costs declined to $8.4m, though the business also incurred $9.4m of foreign exchange losses after no such losses in 2020.

Exceptional costs came to $24.0m, less than a third of 2020’s exceptional costs. This was mostly made up of legal and regulatory costs related to the purchase of William Hill’s non-US assets, with other exceptional costs including deferred gaming duties and restructuring costs. Exceptional costs in 2020 had mostly been due to impairment of intangible assets.

The business also incurred $36.3m worth of depreciation and amortisation costs, up 10.2%, leading to an operating profit of $87.0m. This was up 165.1% compared to 2020.

After finance-related income and expenses of $5.4m, 888’s pre-tax profit was $81.3m, triple the total recorded in 2020.

Despite the higher earnings, tax was actually lower in 2020, meaning profit came to $68.9m, which was more than six times the profit the operator made a year earlier.

During the year, 888 agreed to acquire the non-US assets of William Hill, after Caesars had bought that business with the intent to dispose all but its US operations.

This deal, 888 said, would almost triple the size of the business when it closes in Q2 of this year, suggesting combined revenue of more than $2.5bn.

888 also announced a deal with US media brand Sports Illustrated, allowing it to launch an SI-branded sportsbook in that country, which it intends to expand to more states in 2022.

The operator also disposed of its bingo business in 2021.

“Given this strong financial and operational performance, the board remains confident that, with 888’s advanced technology, products and diversification across markets, the group is well-positioned to deliver long-term sustainable growth for all its stakeholders into the future,” Pazner said.

Last week, the business received a £9.4m fine from the GB Gambling Commission after it uncovered a number of social responsibility and anti-money laundering failings. Many of these failings were linked to the fact the business had set its deposit threshold for financial checks for most customers at £40,000.

Pazner addressed this fine on 888’s earnings call, saying the business regrets the failings and had worked to ensure they would not happen again.

“This is something that I would say is something that we’re not proud of as a company,” he said. “It’s not a happy moment for us in the history of 888 because we do see ourselves as a responsible operator that takes customer safety and adhering to the highest standards extremely seriously.

“We recognise that we had some policies at the time that didn’t work as they should have and we deeply regret those. But we have worked to quickly fix those as fast as we could.”