An announcement of Q3 2022 earnings by 888 Holdings today saw a 7% decline to £449 million ($509.4 million) as compared to the same period last year — with total Q3 online revenue suffering a steeper 10% decline to £325 million ($367 million).
The gaming operator, which owns online sports betting and retail brands 888sport, William Hill, Mr. Green, and SI Sportsbook, was hit by falling UK Q3 online YoY revenue of £171 million ($193 million), a 13% drop that the company attributed to the impact of more stringent UK player safety measures and the closure of its Netherlands operations.
Online revenue that excludes the UK and the Netherlands did, however, remain flat YoY.
The group's flagship 888 brand saw a more modest 5% decline in revenue. William Hill, whose non-U.S. assets were acquired from Caesars, reported flat retail earnings — compared to a steep UK online earnings fall of 14% as compared to a 12% drop in its international online revenue.
According to the company's statement accompanying the release of its Q3 earnings report, 888 expects to see improvement in the final quarter of 2022.
"The Group has made strong early progress with realizing synergies, creating a more efficient operating cost base during the period, and helping to deliver an improved Adjusted EBITDA margin in Q3 2022 versus H1 2022, with further improvement expected in Q4, with the primary focus of the business on integration, execution and deleverage."
The company expects Q4 revenue to exceed that posted in Q3 and be more in line with fourth-quarter results from 2021, "despite the changing macroeconomic environment and ongoing pressure on UK revenues from long-term focused enhanced safer gambling measures."
New lower-spending, more recreational player base business model
Trying to put a positive spin on these otherwise disappointing results in an era of legal sports betting, 888 CEO Itai Pazner believes that the future is somewhat brighter. He cited the positive impact of synergies following its acquisition of William Hill's UK operations from Caesars, which is a critical element of its gradual embrace of a "new target operating model."
Ever since 888 completed its £1.95 billion purchase of William Hill’s non-US assets in July, the company has been working hard at restructuring its operations to create a more streamlined, integrated gaming unit.
"Having completed our transformational combination with William Hill, I am pleased to report that during Q3 our teams continued to make rapid progress in integrating these two market-leading and highly complementary businesses," said Pazner. "We are changing the mix of our business to a lower spending, more recreational player base that gives us confidence in the long-term potential for our UK business."
Potential gains de-leveraged global group
The UK-based gaming giant also indicated that it is also looking towards limiting its substantial interest payments on its debt by means of a hedging strategy that will keep approximately 35% of debt servicing costs fixed, rather than risk exposure to rising interest rates in the current inflationary environment.
Pazner stated that 888's future strategy will accordingly be geared towards "integration, execution, and de-leveraging" in order to harness the potential gains from its expanded gaming operations.
"We are building a stronger group that will leverage our leading technologies and portfolio of world-class brands to create a leading global betting and gaming company," said Pazner. "With clear plans to grow market share and profitability in some of the most attractive markets in the world."
