Strategic agreement with Caliplay

Playtech is pleased to announce it has reached agreement on the terms of its strategic agreement with Tecnologia en Entretenimiento Caliplay, S.A.P.I. de C.V. ("Caliplay"), a subsidiary of Corporación Caliente, S.A. de C.V. ("Caliente").

Under the amended terms, Playtech will:

• Hold a 30.8% equity interest in Caliente Interactive, Inc. ("Cali Interactive"), which will be the new holding company of Caliplay (the "Caliplay Group"), incorporated in the United States
• Enter into a revised eight-year B2B software licence and services agreement
• Receive from Cali Interactive an additional US$140m paid in cash, phased over a four-year period

In addition, Caliplay has resumed paying the Playtech Group its software and services fees with more than €150 million (amounting to more than 80%) of the unpaid fees due from Caliplay to the Group having now been received. The balance has been paid into escrow and is to be released either on the closing of the revised arrangements (expected in Q1 2025) or by the end of 2025 at the latest.

The revised arrangements are conditional upon Mexican antitrust approval and closing is expected to take place in Q1 2025. There is an agreed standstill of all current legal proceedings between Caliente, Caliplay and Playtech, and those proceedings will be dismissed in full once the revised arrangements come into effect.

Caliplay trading update

Playtech has now received updated information on Caliplay's financial performance and confirms that Caliplay has continued to perform strongly in the first half of 2024.

Mor Weizer, CEO of Playtech, said:

"During the past nine years, we have worked closely with Caliplay to create a successful and rapidly growing digital business in Mexico. The revised arrangements mark the beginning of an exciting new chapter that will build on the impressive progress to date, with a view to driving significant further growth for Cali Interactive in the future.

"The agreement with Caliente and Caliplay underlines the attractiveness of Playtech's leading proprietary technology. With a strong position in Mexico and exposure to other fast-growing markets in the Americas and Europe, we remain well-placed to deliver strong growth in our B2B business in the coming years."

Emilio Hank, Chairman of Caliplay, said:

"We are delighted to finalise this renewed agreement which shows the inherent strength of the strategic relationship between Caliplay and Playtech. We are focused on growing Caliplay, leveraging our core strengths and Playtech's leading technology to broaden our geographical footprint, as we continue in our mission to give the best gaming experiences to our customers in Mexico and beyond."

The person responsible for releasing this announcement is Sandeep Gandhi (Head of Investor Relations).

Cali Interactive will be the new holding company incorporated in the United States which will own Caliplay. Upon the revised arrangements coming into effect, Playtech will have a 30.8% shareholding in Cali Interactive. Playtech will have certain customary shareholder rights, including the right to appoint a Director to the Board of Cali Interactive for so long as Playtech's equity interest is at least 15% of Cali Interactive. Subject to available cash and applicable law, Playtech and all other Cali Interactive stockholders will receive dividends, at least quarterly, pursuant to an agreed dividend policy.

Software and services agreements - Mexico

The software and services arrangements under the original strategic agreement, which ran until 2034, will be replaced by revised agreements between the Playtech Group and the Caliplay Group for its existing Mexican business.

Revised B2B software licence and services agreements will be entered into between the Playtech Group and the Caliplay Group for an eight-year period to 31 December 2032, which will include exclusivity and/or prominence commitments from the Caliplay Group for the software products which the Playtech Group currently provides (excluding sports) for varying periods of up to five years.

Further, and in consideration of the Playtech Group affording the Caliplay Group more flexible terms (including as regards exclusivity) than under the current software and services arrangements, Cali Interactive has agreed to pay the Playtech Group additional fees of US$140 million phased over a four-year period with US$12 million due to be received shortly following closing, and the balance to be paid in 16 equal quarterly instalments of US$8 million.

The Caliplay Group has also agreed to provide certain capped revenue protections to Playtech for a five-year period until 31 December 2029 in the event of a migration away from certain software products of the Playtech Group. To the extent that Playtech has otherwise received certain minimum returns (whether through B2B software fees or dividends as a 30.8% shareholder) in a relevant year, these revenue protections shall not apply.

The Playtech Group will no longer receive the additional B2B services fee and will cease to be obliged to provide certain services to which those fees relate but will continue to make available other customary B2B ancillary services to the Caliplay Group, the majority of which will continue to be charged on a cost plus basis as is the case currently. These services are expected to be relatively limited in scope.

Financial implications

The revised agreement with Caliplay sets a strong foundation for the medium and long-term growth of the business, and for the cash flows which are expected to be generated for Playtech. However, the overall impact of the revised strategic agreement is likely to result in total cash flows received by Playtech in 2025 being lower than under the terms of the current agreement. Based on our assumptions for Caliplay's ongoing operations, as well as around the potential quantum and timing of dividend payments from Cali Interactive, Playtech anticipates that total cash flow relating to Caliplay is likely to be approximately €30 million - €40 million lower for 2025, versus 2024 on a normalised basis.

While the accounting treatment for certain of Playtech's receipts from the revised agreement is broadly agreed, some items are still being finalised and so will be communicated in due course and once settled. Playtech plans to update its previous medium-term B2B Adjusted EBITDA target (€200-250 million) at that time, to take account of the cash flows which will be received (including through dividends) under the revised strategic agreement with Caliplay.

Conditions and closing

The revised arrangements are subject to COFECE, the Mexican anti-trust authority's approval. This is expected to take up to approximately six months and closing is currently expected in Q1 2025.