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Good day, and welcome to the 888 Third Quarter Trading Update Webcast and Conference Call. At this time, I would like to turn the conference over to Itai Pazner, CEO. Please go ahead.
Thank you, and good morning to everyone, and thanks for dialing in today for this conference call on our Q3 trading update that we released this morning. I'm Itai Pazner, the CEO of 888, and I'm joined by our CFO, Yariv Dafna. On today's call, Yariv will run through the financial update, and then I'll provide a brief high-level update on the business and our strong strategic progress during this quarter, including a quick recap on the exciting William Hill transaction that we announced last month. We'll then open up for some questions. I'll now hand over to Yariv. Yariv, we can't hear you.
Thanks, Itai, and good morning, everyone. I'm pleased to report another positive trading update this morning with revenue growing in Q3 by 7% to $230 million. Our B2C revenue were up 7% to $220 million, and our B2B revenue were up 4% to $10 million. The performance was in line with board expectations with a solid performance across all business lines. There are some specific factors to consider in relation to Q3 performance. Firstly, Q3 2020 was a very strong comparable period following the significant step-up in volume during 2020 and the fact that sporting calendar was very condensed a sporting event were catching up in Q3 2020 from the disruption earlier in the year. Secondly, most of our imported market have seen significant easing of lockdown restriction with people now spending more time and money on physical retail and leisure rather than just on digital entertainment. And finally, we have consistently flagged that during 2021, we expect $70 million to $100 million of regulatory and compliance headwinds, which was weighted more towards the second half of the year and this obviously impact our year-on-year growth. While there are a lot of different dynamics here, the underlying performance was good with mid-single-digit revenue growth on a year-on-year basis despite the very tough comps. From a geographic perspective, our growth was again mainly driven by regulated market with revenue growth of 11%. We saw continued positive year-on-year growth in the U.K. and Spain, albeit at moderated rates and continued strong progress in Italy, Romania and Portugal. Moving back now to the outlook. As I already said, our Q3 performance was in line with board expectations and consistent with the update we gave with our interim results, which remind you was mid-single-digit revenue growth. Looking into Q4, we faced very strong comps with prior year revenue boosted by both the lockdown and high win margin. In addition to that, at the end of September, we took a decision to stop operation in the Netherlands, which has contributed around 3% of our revenue. Having said all that, even without Netherlands in Q4, our expectation for the full year remain positive and unchanged. With that, I will hand over back to Itai to talk on our strategic progress.
Thanks, Yariv. I'll just add a few strategic highlights from a bigger picture perspective, and then we'll go to the questions. I don't think it's an exaggeration to say that the third quarter of 2021 was the most important quarter in 888's history from a strategic perspective. We have a really clear strategy to create long-term shareholder value based around 5 pillars, and we made huge progress with this during the quarter. Firstly, regulated market growth. We continue to see strong growth trends in our key regulated markets like the U.K., Italy and Spain, and we are confident that we will continue to grow share in these markets. During the quarter, we announced a transformative acquisition of William Hill's non-U.S. business, which will further boost our position in these key markets. The acquisition will also give us a route towards top 3 position across the most attractive regulated markets. Secondly, our growth plans are underpinned by our product leadership strategy. We are in a really strong product cycle with industry-leading casino and poker products, and our in-house Sportsbook platform is rapidly becoming a top-tier product. During the quarter, we continue to roll out more casino content, further improve our personalization and promotions and rolled out our in-house Sportsbook into Germany with the 888's Sport brand and into the U.S. with our SI Sportsbook brand. Thirdly, is our data-driven investments, where we use our in-house technology to drive the most effective real-time decisions in order to optimize our marketing spend, delivering superior returns on our investments. As we continue to build out our brand portfolio and execute our product leadership plan, this opens up more routes to deploy our efficient and effective marketing. Firstly, our expansion into the U.S. During the third quarter, we launched SI Sportsbook into Colorado. We are looking forward to rolling out across more states in the coming months, the U.S. presents a great opportunity for us and with our scalable, efficient in-house technology and a very powerful SI brand we have a great combination to compete effectively and profitably in the market. Fifth is our M&A strategy, and I was delighted to announce the transformative acquisition of William Hill's non-U.S. assets in the period. Strategically, the acquisition is extremely compelling. It combines several powerful brands and product platforms to create a regulated market leader with top positions across some of the most attractive markets globally. Financially, we expect the acquisition will deliver strong returns and more than 50% enhancements to our earnings per share. Most importantly, we will massively enhance our management and employee capabilities. I'm extremely excited to be welcoming some great talent from across the William Hill of business. The complementary combination will create a really powerful and large business across both gaming and sports betting, underpinned by its scale, technology, talent and brands, the enlarged business will be really well placed to deliver a superior customer experience and drive continued growth. So just to summarize, Q3 '21 was a real landmark period for 888. We are really executing against our plan using our assets and capabilities to build a world-leading product-led online betting and gaming business. The acquisition of William Hill will further enhance our position, giving us a portfolio of incredible brands and further reinforce our plans to provide world-class safe and entertainment betting and gaming to customers across the world. With that, we'll be now happy to take some of your questions.
[Operator Instructions] We will now take a question from David Brohan from Goodbody.
I have 3, if that's okay. Firstly, on betting on kind of win margins in the quarter. Can you give any kind of sense either in absolute terms or you kind of year-on-year comparisons, what was margin like in the quarter? And secondly, on the Netherlands, how quickly do you see revenue rebuilding in post-relaunch there? And is there any risk that it drags into FY '23 numbers? Any update you can give for either on kind of timing of the William Hill deal or timing of replacing.
Can you repeat just the third question?
It's the William Hill progress. Okay. So I will start with regard to the win margin. So the win margin was similar this Q3 versus last year. So this is not really coming from a margin. It's really a matter of the volume. But again, we need to consider that Q3 last year was very abnormal. There was a lot of sporting events moving from H1 into Q3. And therefore, the right way to look at that is the 9 months. So 9 months over 9 months, we are still 40% up on the Sport. And even if you look at the quarter as a stand-alone versus Q3 '19, for instance, you will see that the Sport was 21% up. With regard to the Netherlands, so we are expecting to launch next year after getting the license. And obviously, there will be some process to ramp up again in this market. And we are suggesting that there will be an impact on our performance next year with regard to Netherlands, but it's almost a onetime because we don't expect an impact on 2023 as this was already in the forecast under the regulated assumption. With regard to William Hill, we just only comment that process is going well as expected, and we are -- nothing has changed in terms of the schedule. We cannot comment on the trading of William Hill. But in terms of all the processes to bring this transaction to closing, everything is on track.
[Operator Instructions] We will now take the next question from Simon Davies from Deutsche Bank.
Just a few from me. Can you give us an update on Germany and what you're seeing in the German market and your expectations in terms of the speed of recovery in your business there. Second, you talk about this range of $70 million to $100 million of regulatory headwinds. Where do you think you're going to end up at the end of the year and presumably given the Netherlands hit, you're more likely to be at the upper end of that range? And lastly, you talk in terms of the Netherlands of certain mitigations bringing down the cost impact of the regulatory changes there. Can you give us some color around what those mitigations are and how much they might amount to?
So Itai, do you want to start maybe in Germany and then I take the regulatory headwind in Netherlands.
Yes, sure. So thanks, Simon. So in Germany, basically, the way that we saw the business there is almost through the relaunch of the new regulatory product is almost kind of a reset of the market. We reported on the impact that the new regulations had on gaming. There was further impact after we relaunched the sports betting business. But we see this as a very attractive market going forward because -- simply because it's going to be a large-scale regulated sports betting lead market that also provides gaming. So this is more about a medium- to long-term opportunity rather than a short-term one and we're now working on building our presence and our product into the market.
Okay. So Simon, with regard to the $70 million to $100 million, so we will be in this range. Netherlands, of course, would be absorbed into this $70 million to $100 million. So the Q4 impact is within this range. There is a good chance that we will be more on the higher end of the range rather than on the lower side. And just maybe to complete what Itai just mentioned, Germany was also considered as part of the $70 million to $100 million regulatory headwinds. Now with regard to the Netherlands, so basically, we will launch next year. And the direct EBITDA impact is slightly higher. However, when we are talking about mitigation, we are looking on our current trading and how we see the next year with Netherlands under the new regime, and this suggests that we are short with $10 million. So there are a few other markets that are compensating some of the impact of the Netherlands, the direct impact.
So you've been review your marketing budgets in other markets to see where you can reduce the overall impact on group profit?
Correct.
We will now take our next question from Richard Stuber from Numis Securities.
Just 1 question for me, please. I guess since you announced the William Hill acquisition in September, have you made any sort of tactical changes then you'll complete the deal early next year. So for example, or less focused on pushing ahead with your sports betting platform. Is there anything around some tactical changes between September now?
Thanks, Richard. We haven't made any tactical changes. We are working on -- intensively on integration plan that will start next year. Our focus is from our perspective and also from William Hill's perspective to continue business as usual, performing on both sides and delivering further strong results like we both delivered this year.
Right. Okay. So you haven't sort of overemphasize any particular brands in any markets at the moment, knowing you'll have the William Hill and Mr Green brand. So as you say, it's just business as usual so far.
Business absolutely as usual.
As there are no further questions over the phone. I'd like to turn the call back to Scott for questions over the Webex.
Thanks for that, Cecilia. And we've got 1 question from the webcast, we've 2 -- sorry, Itai you in covered, my apologies, it's there. We've got no further questions from the webcast. So if I could pass it back to you, Itai, for closing remarks.
Yes. So thank you very much, everyone, for joining us today. As we said earlier, we're really pleased with the continued progress that we made in Q3 and we are on track for our full year plans. We look forward to the future and our combination with William Hill next year will transform our business and accelerate our plans to create a global leader and we look forward to sharing more on this early next year. In the meantime, if you have any further questions, please do get in touch with us. Thank you very much, everyone.