Although net profit was up in its Q3 report published last Friday, Intralot’s €135m issuance of new shares highlights its exposure to outstanding bond obligations.
According to Intralot’s Q3 report, it lacks the cash resources to cover for the majority of the debt.
Bond obligations and raising of share capital
The maturity date of the company’s outstanding bonds, with an initial nominal value of €500m and currently €229.57m, is 15 September 2024.
In its statement, the company acknowledges that its existing cash resources, which are sufficient to cover the short-term working capital needs of the group, would not be adequate to cover the bond obligation.  
Intralot, therefore, completed a new rights issuance of shares totalling €135m on 30 October. These started trading on the Athens Stock Exchange (ATHEX) on 8 November. 
Commenting on the company’s outlook, Intralot chairman and CEO, Sokratis P Kokkalis, said: “9M2023 results demonstrate Intralot’s new strengths returning to net profits, strong EBITDA growth and cash flow generation, hence fulfilling all the goals we have set out.

“We have recently completed an important share capital increase via rights issues of €135m that attracted wide support, demonstrating that Intralot represents a very attractive investment case.

“I would like to thank all the investors who participated and trusted our vision and capability to deliver even stronger results in the future.”

Q3 earnings
As per its earnings report, Intralot posted a €21.7m (7.2%) consolidated turnover decrease compared with the previous year. In figures, this went from €301.7m in 2022, down to €280.0m in September 2023.
The company’s gross gaming revenue (GGR) accounted for a €5.6m (2.2% gain). However, this failed to offset its overall reduction in consolidated turnover.

Intralot turnover impacted by Malta and Argentina
Breaking down the numbers, a large proportion of the company’s turnover decrease was driven by absence of revenue following the expiration of its Malta licence in July 2022. This accounted for a a GGR revenue loss of €43.9m.
Lower GGR revenue in Argentina also accounted for a €5.3m (13.8%) reduction. This was further affected by the adverse impact of FX currency conversion.

In total, Intralot’s licence expiration in Malta and its higher payout ratio in Argentina (63.0% year-on-year for wagers from licensed operations) did not manage to absorb the increased top line contribution of operations in Turkey and the US, along with its expansion in Taiwan.

Excluding the impact from the discontinuation of its Malta licence, underlying consolidated turnover would have increased by 8.6%.
Breakdown by vertical
Broken down by vertical, lottery games remained Intralot’s largest contributor to group turnover with a share of 56.8%.

This was followed by sports betting, with a share of 19.0%, technology contracts with 12.3%, and video lottery terminals (VLT) monitoring, at 11.8%.
Intralot’s Turkey dependency grows
Intralot’s B2B (management) earnings remained a strong performer, totalling a €16.6m (46.9%) increase for the vertical.
This was driven by strong momentum of its Turkish operations (€16.0m or 77.1%), out of the total €16.6m increase, with its state-affiliated partner brand Bilyoner, greatly increasing its performance due to growth in the online market.
According to Intralot, Turkey’s sports betting market expanded “close to” 1.9x year-on-year.
Performance in Euro terms, however, was partially mitigated by the headwinds in the Turkish lira (60.6% Euro appreciation versus a year ago).
Earnings further abroad
Elsewhere, the company also netted far stronger US performance via its gaming vertical. This saw increased turnover of €4.6m or (4.1% year-on-year), for its numerical, ilottery and instant games.

Croatia was also a strong performer, with a €3.5m increase (64.2%) due to local market growth.
Higher turnover €3.1m (6.3%), was also secured for its Rest of World operations, driven by its new lottery contract in Taiwan.

Rebound in quarterly revenue for Intralot
Despite a net consolidated turnover loss year-on year, on a quarterly basis (1 July 2023 – 30 September 2023), the company secured €104.8m in consolidated revenue.

This was 8.1% higher than during the same period in Q3 of 2022, and a €7.8m increase compared to Q2 of 2023.
Intralot attributes this to a favourable increase in year-on-year sales. This was via its operations in Turkey (Bilyoner), and Croatia, as well as its new contract in Taiwan.

The company’s sales surplus in Q3 of 2023 was also partially offset by under-performance in Argentina.

Operating expenses and EBITDA
Total operating expenses ended higher at €6.3m (or 8.9%) in 9M23 (€76.5m vs €70.2m). This was attributed to rising expenses in the US and Turkey to support top line growth.
On a quarterly basis, Intralot’s operating expenses posted an increase of €8.8m (or 42.6%) in Q3 of 2023 (€29.6m vs €20.8m in Q3 of 2022).

EBITDA increased to €101.0m in 9M23, posting an increase of 14.7% (or €13.0m) compared to 9M22.
Strong EBITDA growth was attributed to its growth regions of Turkey, the US, Croatia and Taiwan.
EBITDA improvement was in part counterbalanced by increased operating expenses and the impact from its Malta licence termination.

On a yearly basis, EBITDA margin on sales improved to 36.1%, from 29.2% in 9M22 (a 6.9% increase).
On a quarterly basis, EBITDA increased by €5.2m (or 15.9%), while EBITDA margin on sales was up 2.4%.

Cash flow
Operating cash flow in 9M23 netted a considerable increase of €29.9m – now totalling €97.6m, compared to €67.7m in 9M22.
Key contributors to this were higher recorded EBITDA year-on-year and a “favourable working movement”.
CapEx in 9M23 was €22.2m, higher by €7.0m compared to 9M22, with US projects consuming most of its CapEx needs.