Mor Weizer - CEO Ron Hoffman - CFO

Vaughan Lewis - Morgan Stanley Simon Davies - Canaccord Tal Grant - UBS Gavin Kelleher - Goodbody Capital Markets Ed Birkin - Credit Suisse Richard Stuber - Nomura Alistair Ross - Investec

Good morning everybody and thank you for joining us on this call to review Playtech’s Third Quarter 2015 performance. I am Mor Weizer, Chief Executive Officer of Playtech and with me is Ron Hoffman, our Chief Financial Officer. I will [Audio Gap].

Everyone. I am delighted to say that Q3 saw a strong performance for both our gaming division and from our financial division through Markets Limited. I am particularly happy to report that for the first time ever we have seen more revenues from regulated markets in the quarter than from unregulated markets. Total revenues were up 47% on a reported basis driven by strong underlying performance as well as benefiting from foreign exchange movements and from the inclusion of Markets which was acquired in April this year. After excluding acquisitions and after adding back the impact of the UK POC tax, revenues were up 24% on Q3 2014 and 17% after these adjustments on a constant currency basis. Mobile revenues saw a standout performance accounting for 23% of all software revenues, up from 17% in the same quarter last year, driven by continued strong growth in mobile casino revenues, mobile bingo and sports. Regulated revenue accounted for 41% of gaming revenues in the quarter, up from 35% in Q3 last year, driven by the continuing transition from European.com revenues to revenues from regulated markets. Following the first full quarter inclusion from Markets, total regulated revenues accounted for over half of Group revenues in the quarter. Turning now to look at the product verticals in more detail. Casino, our largest vertical, was up 21% in the quarter contributing to half of gaming growth. Almost half of this growth came from mobile with a particularly strong performance coming from new business including Sky, bingo and Caliente together with strong growth in Asia. Services revenue grew 21% driven by an increasing white label revenues as well as good growth from licensees such as Caliente and Sky. Sports grew by 25% with the vast majority of the growth coming from new customers, and increasing mobile revenues and with favorable sports results in the quarter. Land based revenues almost tripled with a strong performance from both Videobet, boosted by approximately €2 million from the sale of 450 machines to RAY, the Finnish slot monopoly, and from Aristocrat Lotteries which was acquired in October 2014. Bingo grew 15% in the quarter, which compares favorably to the sector which has seen single digit growth with mobile being a key driver more than doubling in the period. As expected, poker declined by 25% in the quarter. As we mentioned at the time of the interim results in August, iPoker the world's largest poker network, has reverted to a stronger single tier to allow licensees and players to benefit from the merging from merging the two tier liquidity pools. The financial division continues to report strongly, as expected, with pro forma revenue growth of 36% versus Q3 2014, driven by customer acquisition and market volatility. There were over 26,000 active CFD customers in the quarter, up 21% in the same period in 2014 with first time depositors for CFDs of almost 10,000, up 19%. This strong momentum also continued into the fourth quarter. With that, I'll now hand back to Mor.

Many thanks, Ron. Before taking your questions I would like to look at some of the operational factors that have contributed to another record quarter. Playtech has continued to be operationally busy during the third quarter executing against our stated strategy. Our market leading omni channel offering ensures that Playtech is positioned to take advantage of opportunities across the globe with many discussions already underway in the UK, other parts of Europe, and elsewhere. Our commitment to our existing licensees is one of the most important elements of our strategy, and it is evident that many companies in our industry face increasing competition with less firepower due to changes in tax regimes. As a result, Playtech is highly focused on ensuring that we provide a framework and specific tools that will allow our customers to differentiate and position themselves to gain market share from other competitors. We also invest heavily into business intelligence and data driven tools that will allow our customers to extract more value from their existing business immediately improving the revenues generated, and increasing profitability as well as providing a better, more personalized experience to players. We continue to deploy more content on different channels with a strong focus on mobile, including the conversion of existing games that were originally offered only on web to HTML5, as well as new games developed using NGN technology supporting both web and mobile. Our ability to deploy our leading games on web and mobile simultaneously is becoming ever increasingly important given the equal importance of both channels to operators who are reluctant to advertise games that are not supported in both channels. Live presents a significant opportunity to Playtech given the very positive momentum our customers are experiencing and the fact that the Live Casino technology now supports a better than ever live streaming through web and mobile bringing the experience of players closer to reality. We recently launched our new and improved live casino product, and feedback so far is extremely positive. Live casino will play a key role in our customers' future success. And we will put more and more efforts into this in the coming quarters. I am delighted to announce that Playtech has built on the successes of last year's inaugural eGaming Review Italy Awards, and won not just one but two trophies at this year's ceremony held in Rome a few weeks ago. Not only did we win Software Supplier of the Year and Mobile Software Supplier of the Year, two of our major licensees Sisal and GazzaBet also won Casino Operator and Rising Start of the Year Awards respectively. This reinforces the message that we are the only supplier in Italy to offer every regulated product available. This is something none of our competitors can claim. The judging panel awarded these prestigious awards due to our considerable success in Italy in the last 12 months, as well as since the market regulated in 2007 with the country firmly establishing itself as one of Europe's most mature gaming jurisdictions. Turning to the acquisition of Plus500, although we obviously cannot go into specifics as to our discussions with the FCA, as we previously announced we are hopeful that the acquisition should be completed by the end of November 2015. Regarding other trade, we are formerly challenging the CBI's decision with respect to our acquisition. Having taken advice we cannot go into the reasons for the CBI's decision, but we are working with our legal advisors with a view to resolving this matter to our satisfaction as soon as possible. We will update the market in due course on major developments and would expect a resolution over the next few months, hopefully within Q4. Looking forward, our effort into the further development of our products including omni channel, sports, mobile and live casino, combined with new markets heading toward regulation across Europe and elsewhere, has translated into very positive momentum for our business. Accordingly, our pipeline is building up strongly with some agreements already secured and others underway with a long lead of potential new customers and the potential to extend existing relationships into new product verticals. Turning now to current trading. The strong performance we have seen throughout 2015 has continued into the fourth quarter. Average daily revenue in the gaming division for the first 27 days of Q4 2015 is up 14%. In the 19 trading days to 27, October 2015, the financial division saw both active CFD customers and FTDs for CFD up over 20% against the same period in 2014. Given the strength of our business and the momentum that we are enjoying, including a very strong pipeline, we have confidence for the remainder of 2015 and beyond. With that, we would be pleased now to take any questions, and so I'll hand over to the operator.

[Operator Instructions]. And the first question today comes from Vaughan Lewis from Morgan Stanley. Vaughan, please go ahead.

Hi. Morning. How much of the services gaming crisis is coming from the new white label agreements? And can you comment on margins at all for the gaming business for H2, what we might expect? Second one on, what's the current cash balance? And are you still looking for deals? And then thirdly just back on the gaming business, are there any stats you can give us on the BIT tools so the licensees that are using those how they're performing relative to the ones that aren't? Thanks.

Yes, hi Vaughan how are you? With respect to the services obviously the services were boosted by both the white label growth together with continued growth coming from other licensees including Sky, including Caliente which was quite strong. I would say that there is growth coming from services, but we are not talking about dramatic growth. It's quite similar, by the way, in size to what we've indicated in Q2 with slightly further growth coming from that. We definitely see positive momentum. But services is growing regardless of the white label growth and on top of it. With respect to the margin for gaming altogether, I don't think it's appropriate now for Q3 to talk about margins. But as we've indicated, given the fact that we believe that the profitability on white label will improve over time, whether that's going to be we talked about an 18 months period until we get into the relevant size and scale, but in general, this will obviously help improve the margin from the first half. And while it's too early to talk about the second half altogether, I do believe that there will be an improvement. On cash balances right now we have obviously we have the very high balance because we are definitely preparing ourselves for the completion of both the Plus500 transaction and the Ava Trade transaction. Given that we are holding significant balances, and we do have continued appetite and continue to look for additional acquisitions definitely further on in the gaming space, we are not stopping ourselves. Right now the cash balance is around €950 million, approximately. And again this is predominantly to prepare ourselves for the completion of these transactions.

Yes on the BIT I will say that only around 10% of our customers take the product. But again, not necessarily all of the products. They are focused on various elements of our BIT technology. Obviously, we are focused on the larger licensees. We see a strong appetite to take and extend the relationship. And with every deployment we see a high single digit growth to mid-double digit growth, which is very, very encouraging. We are extending we are extending the offering to various both vertically and horizontally meaning, both for the product verticals as well as the channels that we use, and horizontally to other channels to ensure that we have a full offering that will include Playtech products and other third party products across the piece for the benefit of our customers. I will say that we see, as I said, a strong appetite to take more and more of these tools because people do understand, and I referred to that in the call earlier, that obviously a lot of our companies it's very evident that they are under pressure given the structural changes in certain markets. And extracting more value out of the existing business is becoming increasingly important for them, not least because it comes with no marketing costs associated for that. So I would say the it's a continuous effort by Playtech that we extend to more products and more channels. And definitely we expect to deploy a lot of these elements in the coming quarters in order to support the organic growth of existing licensees.

Very clear. Thank you.

The next question comes from Simon Davies from Canaccord. Simon, please go ahead.

Yes, morning. A few from me. Firstly on mobile. Obviously a big step up in mobile penetration in the period. Do you have any internal targets in terms of where you think mobile penetration can get to and is there any reason why it can't get to the 50% plus levels that we've seen in sports? Secondly on omni channel. Can you update us on where you are in terms of customer rollout for Ladbrokes and Caliente and talk a bit about the pipelines of potential future contracts? And finally can you just update on the growth rates you are seeing in Asia? You're focusing on the level of growth in regulated markets, but are we still seeing similar rates of growth in Asia, which is predominantly unregulated obviously?

Yes, of course. With respect to the mobile penetration, obviously we see positive momentum. This is again still driven by the UK. There is definitely a significant upside in going forward in further penetration of mobile on the casino and gaming side of the business. That's definitely the case. And further to that, I would say that we are very much focused on UK. But the trend continues outside of the UK as well which means that we will see further penetration in other European markets. I think it will start with other European markets. That I mean Italy and Spain and other markets as well, which are still very much less mature from a mobile penetration perspective from what we see in the UK. So there is definitely a lot of potential going forward with further growth coming from the penetration of mobile. And we have been quite vocal in being the having the biggest offering on mobile altogether in the market. And we have accelerated that and boosted that in the last 12 to 18 months where we believe we have the best offering out there. Therefore, we believe we are positioned well to grab more of the market share on the back of that. Whether that can get to the point where it has the same penetration percentage as what we see on sports it's too early to say that. We do believe that it's possible and achievable. We see the trends. As you can see, we see this acceleration and therefore we are quite confident that it can be achieved, but it's quite early to state that. On omni channel I would say that we believe that obviously certain, I would say that, we would see certain things that will I believe will become increasingly important in the coming quarters for our customers. Those will obviously include the ability to differentiate through content. There were a lot of comments and statements around that before. We are putting a lot of effort into that. It's the ability to provide data, or use data in order to extract more value from existing businesses. And obviously omni channel. Omni channel we believe will play a key role. It is very evident that there is an overlap between retail and online players in terms of demographics. Happy to say, very happy to say that Playtech is uniquely positioned in this respect with regards to omni-channel with certain contracts already secured, for example, with Coral we are looking forward to extend the offering and we believe that there is still a lot of potential for them. You indicated and rightfully so Ladbrokes and Caliente, those are, at least Caliente is already secured. Ladbrokes is something that they indicated to us that we need to finalize the last bits and pieces. But we definitely started the work, working closely with them. First very encouraging signs and we will roll it out between the end of this year and the first half of next year. So definitely we see some very encouraging signs that we believe we will be able to enjoy, with Caliente again, once we will deploy our omni-channel it's just a matter of time, immediately it will create incremental revenue streams. And there are other opportunities in omni-channel that are already secured. Obviously we can't name those due to sensitivities because those are migrations from competitors of Playtech and some other conversations to do with omni-channel that are coming to fruition as we speak across various markets, both in the UK and elsewhere, in Europe and elsewhere I would say. We are the natural choice when it comes to omni-channel, and I would like to reiterate the fact that not only it leads to incremental revenue streams and profit streams for the Company, we stick to other trends. We basically see with every omni-channel customer that it comes always with gaming products. This is part of the essence of having an omni-channel solution, a very comprehensive solution. And not only we enjoy the fact that we see that we get revenues from the omni-channel itself and the gaming products, it drives traffic into the site from retail to online, and obviously this leads to incremental organic growth for the customers that we again enjoy. As for Asia, as we indicated during the interim presentation, some of our customers had to adjust or answer to the changing dynamics, but at the end of the day, we don't see any change in Asia. We indicated that to the market. And it still performed strongly and continues to grow. And we definitely expect that these trends will continue going forward.

The growth in Asia was definitely very much in line with the overall growth of the business. Altogether we are talking about north of 25% growth from a nominal perspective on that market specifically. So definitely strong growth, and we see continued potential for that to continue. That's basically it.

Your next question comes from Tal Grant from UBS. Tal, please go ahead.

Hi. Good morning. Congratulations on the good quarter. Just wondering, I know you said you can't say much on Plus500, but could you just explain, they seem to be authorized now by the FCA and obviously you've got your -- you've bought another small company and that was approved. So just wondering what exactly is going on. What are they -- can you just explain a little bit more about what's going on there?

Yes, sure. At this point there isn't -- what we are going through right now with the FCA is a change of control process. The fact that we already hold the license doesn't meant that we don't need to be approved from a change of control perspective with respect to the Plus500 business specifically. Naturally, Plus has their own -- had their own regulatory issues that were -- that happened earlier this year. I think one of the main areas which is quite natural for the FCA to make sure that they feel comfortable that these issues will not happen when they are under the Playtech umbrella, and that we will be a responsible broker and that we understand the points and the issues that were raised by the FCA on the back of the regulatory issues with Plus. I think that's a natural thing, because the process that has been going on for a while now and we are having a healthy dialogue with the regulator on the back of that. So we are waiting for that process to complete.

Okay. But I mean for [Epsilon], was the process much different? I'm just trying to understand why that was so easy and this is proving so hard if the FCA has now authorized Plus500 to continue trading.

Yes, the Epsilon change of control process was exactly the same. From a Playtech perspective, the same set of information was provided to them. Naturally, there is a big difference with Plus and Epsilon. First of all, on the back of the size of these businesses and secondly, the high profile of that transaction. And the fact that they had already identified regulatory issues that they wanted to make sure naturally that we accommodate those. And that when that business will be under Playtech that these issues will not resurface again. Therefore, I would say that we get a slightly different set of questions with respect to how the future will look like. It's not just about submitting a business plan and thank you very much that looks fine. It's about submitting a business plan and answering specific questions which are to address certain points which were identified back then or earlier this year in May with respect to the Plus business.

Okay. And can I just ask a couple of questions about the business you do have. First of all on the TradeFX side, I just noticed that new players was down in Q3. Any reason for that? Also just wondering on user acquisition costs. Has that changed dramatically from the $500 per player we've seen in previous quarters? And then separately on the gaming business, just wondering how much of an effect Spanish slots regulation had, or is that should we still expect a big tailwind from that going forward?

Yes, with respect to the first time depositor, the new customers that we on board in Q3, naturally Q3 is, from a seasonality perspective, it's the slowest quarter of the year. We are talking about the summer days. It was the same last year as well. The fact that we had certain there was a lot of market volatility drove a lot of the existing customers to head to get more and more active customers during that period given the volatility in the market, and that definitely drove revenues forward as well. But from an FDD perspective, from an on boarding new customers perspective, that's very much aligned to what we saw last year. We are still talking about 19% growth compared to Q3 2014. So you see the same trends that we saw exactly like last year on the same basis. And with respect to the Spanish slots I still think its early days. We do see some growth. Obviously it's incremental, but it's still early days. We believe it will become bigger as time goes by. I think more and more customers are now pushing that from a marketing perspective. And it's all upside for us from here on out.

Great. Thank you. Just one thing. The first time depositors last year I think that actually was a step up in Q3 from Q2, but maybe my numbers are wrong but thank you.

The next question comes from Gavin Kelleher from Goodbody Capital Markets. Gavin, please go ahead.

Morning, guys. Just a follow up on Vaughan's question on margins. Could you just confirm, do you believe margins in H2 for the core gaming business will be an improvement on H1? And just to remind us, when you guided that the 18 that these white label contracts will take about 18 months to kind of mature and stop being in investment phase. When should we think they actually when did they actually start? Is it September 2014?

Yes, of course. Hi Gavin. With respect to the margin, the answer is that again it's probably not appropriate during Q3 to talk about margins for the second half. With that being said, given the fact that we see improved profitability coming from the white label arrangement which was suppressing margin in H1 where we invested heavily into that part of the business in order to get better scale and position, we given the fact that we do see improved profitability, our expectation is that the margin for the second half will be improved. It's slightly too early to indicate how much that would eventually be. And again we do have to wait for Q4 as well, but we definitely see a positive momentum. It's going in the right direction and we believe the margin will improve. Specifically with respect to white label, it started in September 2014, so right at the end basically of Q3 last year. But it's really started from a very, very low base with basically one customer and only evolved with a few more customers when Trinity Mirror joined only later on that year. And we believe it obviously wasn't back then it didn't have the relevant scale in size in order to enjoy the synergies and the fact that we can support this type of business from one set of infrastructure. It will take around we talked about 18 months back when we looked at the first half numbers. Really, we kicked off the white label, we boosted that around the second quarter of 2015. We believe that it will get that it can potentially get to the right scale position somewhere close to the end of the second quarter in 2016.

Okay. And just to remind us, what sort of margin do you expect on that? Is it more like 20% or 40%?

It's more like 20%. It will be closer to a margin of an operator rather than a margin of a B2 billion provider given the way that it's accounted for. And the fact that we record the top line as an operator it will be closer to an operator margin.

Perfect. Just on the land based side, 2 million came through from the 450 machines to RAY. Is there anything like that in Q4, or is there any other big contracts you're looking at in land base? How should we think about land base growing into Q4 and into 2016 please?

As we indicated in the past, the sales cycle of machines is longer. I don't think this is a one off obviously. This is why it was important for us to indicate that. Definitely, as, RAY has 19,000 machines, so there is a lot of potential there and elsewhere. The idea is to increase the number of machines and have an ongoing recurring revenue generated out of that. Obviously, we also enjoy the one offs, but this is not the-the intention is to basically have a very clear program as part of which we increase the number of machines and spread the machines out there in various relevant markets. So I can't, I don't I think that it will be wrong to think about this one-off every quarter. We will now have to focus on the 450 machines, although the first, there are very positive signs already quite in an early stage. And the idea is to extend the number of machines over time over the next few quarters. Just to emphasize, obviously just as the background for the sale of these machines to RAY was on the back of the successful case testing phase, I will call it, that they had with us, basically putting our technology against others in that market. And given the successful and the outperformance of our games and technology with RAY, they have decided to expand and take more their stage with our technology in our games. And that was the backup for that. And obviously, they do that in a very managed and controlled way. So this was part of that process. There is a significant opportunity going forward as well on that.

Sorry, just maybe if I ask it another way. Was the RAY contract, is that the only kind of, inverted commas, one-off machine contract this year? I think you've got about 23 million in land-based. Just forecasting that business for next year, what should our base be if we exclude one-offs like the RAY deal this year?

It's not the only one. We do have other customers who are doing the same. We did the same early on this year with Mecca. But -- and we are talking to others as well, you know, to extend that. There are further opportunities. The growth doesn't just come from data from the RAY sale of machines. It also came organically from the growth of the profitability and the top line generated by the [bigger bit] technology and from further growth in the Aristocrat Lotteries as well.

Yes, I will say, Gavin, taking a longer term view, medium, longer term view of that and I refer to the strategy around retail, first, we are not very -- I mean, I think we are the most well-established supplier in the UK both in terms of pokies as well as the technology behind machine terminals in bingo halls. We definitely see a lot of opportunities there. The feedback that we have from the people experiencing our technology is that it's by far the most sophisticated and advanced that exists in the market. RAY is just another example of that. We have now through Aristocrat Lotteries another opportunity to further established also in Italy and other markets in Scandinavia, where they already have certain existing contracts. Some machines are being tested through Aristocrat Lotteries in Spain. I think that it's -- in retail it's all about building the scale and establishing ourselves in each and every jurisdiction. Each and every jurisdiction is a little bit different. But we are definitely very much focused on that and every -- with every test we put a lot of effort into each and every test, and it's paying dividends for us. The latest is obviously the standard contract, or the extension of the number of machines in Finland. And definitely we will see more of that. Again, our business is not selling machines. Our business is the technology that comes with the machines, or the technology that we can implement with almost each and every -- within each and every terminal that exists out there. I will -- last I will say that we recently appointed Ian Chuter, who used to be very involved with William Hill retail operations before we took over certain parts, or the digital business. And then after that he moved to and became the COO for Betfair. We recently appointed him as a Senior Adviser to Board and management. Given his expertise, he will focus and assist us on building up our sports and retail operations. And we definitely think that he will make a huge contribution to our future success going forward, as I said, partly with a strong focus on retail.

Your next question comes from Ed Birkin from Credit Suisse.

Hi, morning. Firstly, could you just give us what incremental white label contribution versus revenues, in Q3, please?

Yes, it's around the same number that we had in Q2, slightly higher than that. We talk about €10.5 million approximately.

Okay. And then up on versus last year was, you say is pretty minimal, in Q3 last year?

Yes, it started in September, so it was around €2 million or so.

Okay. And then just secondly, on Epsilon, what is it, exactly because when I look at it, the only trading name that appears to be functional is Markets.com? So what exactly has it given you?

Epsilon is a financial broker, CFD broker in the same way that Plus is, in the same way that our own regulated entity in [indiscernible] It was basically inactive and we bought that and activated our own Markets.com brand under that. And that's active and running, which means that we can pretty much on board customers to market.com onto our own FCA license.

Okay. So it's effectively a license that you've bought, is that the way to look at it?

Yes. It's a company that didn't have any activity prices. We bought that only on the back of the license. The whole purpose was for us to have an FCA license that we can on board customers to, and the purpose of that was to on board that on to our own market.com brand.

Okay. And then on the Ava Trade, do you need if things don't go well with the CBI, could you use your FCA license to just take that business anyway?

Potentially, we can structure the business the transaction in another way. This is definitely not the way that we think of it. We believe that we can obviously have a strong case, and that there is no need to change the structure of the transaction and that it will get to completion.

Okay. And then finally, just in your regulated revenue side of things, what portion of Asian revenues do you class as regulated because I know when we asked last year you said that Asian revenues weren't regulated? Then but at the interims you said that some of the Asian revenues were regulated. So just to clarify where you stand on that?

Yes. We had the revenues in the quarter coming from IDS, coming from certain activities that IDS did with IGS did with local Asian operators, which is fully regulated. Other than that, the online part of the business remains unregulated.

Yes, maybe just to basically clarify that, we define all the online gaming revenues that we generate except for currently two as unregulated. We are not trying to suggest otherwise. And the operators that operate throughout Asia operate under licenses either from Gibraltar, Malta or, for example, the Philippines. But given the fact that it's Asian facing, we consider that unregulated. The two exceptions are the IGS contractors we have in Asia. That's done on a local in a local regulated way, and certain remote activity, which is land based in essence, and certain remote gaming activities that again are done locally in the Philippines under a government license with one of the bingo operators where they also have casino terminals within the bingo halls that they have. So other than that, we define it's very clear for us. We define it regulated, is always locally regulated by the local government. All the rest is considered unregulated.

Okay, great. Very clear. Thank you very much.

The next question comes from Richard Stuber from Nomura. Richard, please go ahead.

Yes, hi. Good morning. Just a couple of questions. The first one is going back to the regulated questions, and this is asking the question another way. So there's about 17 million increase in revenues from regulated markets this quarter. Any indication of how much of it, how much of that is incremental from the UK or from Italy? And if you could break it up that way, just to see which are the largest growing regulated markets. And a second question is regarding the cash balances. I think you said that 950 million you've got at the moment for the acquisitions. Post those acquisitions, how much flow to margin do you think you will need to keep back in order to run these businesses? Thanks.

Yes. Hi, Richard. With respect to your first question, we don't specifically strip out any specific country, as. But what I can tell you is that definitely Europe obviously has been the center of attention when it comes to regulated markets. And obviously, with a strong focus on the UK market, given the addition of Sky and given the significant growth coming from Ladbrokes and other UK markets. But that was definitely not the only ones. We have growth in Italy coming from the Gazzettadello Sport. We have growth in Spain from the addition of slow games. And we have growth naturally with Caliente in Mexico as well, which is all fully regulated. So I would say the biggest growth are a combination of all of these jurisdictions.

Thank you.

On your second question, on the cash balances, just for me to clarify, you were asking about what margin of balances we need to maintain in order to run these businesses?

Exactly, yes. So what margins you might have to put up with foreign brokers to offset your liabilities with potential with customers?

Yes, obviously, when we talk about these regulated businesses in the financial vertical, there is a requirement for certain capital adequacy, so the minimal level of capital that needs to be available at a regulated entity level to support the regulatory requirements. We have that in place today. We talk about around a number of around 20 million. We believe the addition of Ava and of Ava and Plus500 together will increase that to approximately 50 million or 50 million plus. So not a number that we can't live with, and definitely we have those funds available. And it's anyway separated from the customers. The 950 million that we talk about is excluding any cash which is on account of customers, of end customers. So that's only available cash.

Very clear. Thank you.

The next question comes from Ivan Johnson from [Pfizer]. Ivan, please go ahead.

Good morning, guys. So following up on a previous question, when you're on boarding clients to FX Trade or markets.com, are you using your FCA license or the SISIC license? Or is it work -- does it work like FCA for UK clients only?

Yes, the FCA license was only recently activated, so naturally, most of the activities we have, we on-board onto the SISIC license currently. And on top of that, we have an SSB license and a South African license as well. So, we on-board local customers to that license as well. The plan for the future, which is right now being established, is to -- it's to be in a position where UK customers are being on boarded under the FCA, where the remainder of the customers are on boarded onto the SISIC license.

Okay. And when you mentioned that you're looking for more acquisitions in the gaming space, what about trading? Or are you going to wait until the resolution of Ava and Plus500 first?

There are definitely significant opportunities on the CFD side, on the trading side of the business. This is not to say that we don't see a lot of opportunities. Actually, we have a few of those on our table. With that being said, I think we have a lot on our table already, with respect to the completion of Plus and Ava, and we are quite focused on that. Following the completion of these transactions we will definitely look for additional relevant transactions. Just to say in addition to that, I mean we won't just go ahead and aggregate more and more CFD businesses just because we are a natural aggregator in the space. We will look to find unique businesses with some unique capabilities and assets, which complements our business and not just to buy here's another business that we can grow and buy the EBITDA line item.

Thank you. So, just another question related to financials again. What is your marketing strategy? Are you refocusing your customer on boarding through tied agents or via more direct marketing approach, as used to be in the past with Markets.com, which maybe isn't the worry that the Central Bank of Ireland had, may be direct marketing, cold calling?

No, actually the other way round. We believe that we are much more focused on direct activity, meaning activity where we control the way that the customers are being on-boarded. We control everything which is being said to the customer, to the end customer, rather than through in some cases introducing brokers. We believe that regulators actually are quite keen when they look into regulated entities to make sure that they have the full control over how these customers are being approached, and full control over the marketing materials that they've been addressed, and how aggressive they are being addressed by these introducing brokers. We see ourselves as a very responsible broker. Naturally, our view is that we need to control the way that customers are being approached, and we have -- I mean, we have our own processes in place to make sure that the customer understands the product, the customer is educated in what is CFD trading and how you trade on that, and even educated on certain trading strategies in some cases. And we make sure that the customer understands the risks associated with that process. And this is obviously on top, on the fact that we make sure we have all relevant KYC information about the customer and that we adhere to each and every requirement from an AML and KYC perspective under each regulated license.

All right. In this relation, there was a SISIC regulation that kind of forbid marketing like direct marketing, call centers from abroad of the country. Have you been closing call centers outside of Cyprus and moving them onto the [Ireland]?

No. This is not about -- sorry, this is about controlling, meaning as a Group, controlling sort of the marketing materials that are being addressed, and making sure that these are being approved. That's all marketing materials are being approved by the executives within the regulated entity. This is not to say that the regulated entity can't use external service providers to do some of the marketing activities. But everything has to be approved by the relevant compliance officers in order to confirm that they're happy with the way that the banners are being designed and drafted, and the way that certain. Even when we talk about CRM activities, we talk about specific scripts that need to be confirmed and approved by the compliance officer to make sure that nothing is said which is advice to the customer, that we don't aggressively push the customers to trade, but actually, he's the only one who can make that decision. We only support him from a technological perspective and from a process perspective and nothing more. Every single sentence that is being said by a representative of markets to our customers is being drafted and approved in advance by our compliance team, which is under the local regulated entity.

Your next question comes from Alistair Ross from Investec. Alistair, please go ahead.

Morning, guys. Just two from me. Firstly, can you give us a geo split, so rest of world, Europe, and basically -- and Asia, sorry, and can you also give us a reason for the decreased growth from Q3 to Q4? Normally there is a ramp-up in growth just due to seasonality. This year we're seeing flat sort of numbers if you compare constant currency, excluding acquisitions.

Of course. First of all, on the geo split, Asia was 33%, Europe 56%, and the rest of the world we talk about 11%. Now that was obviously an improvement on the back of the addition of Markets, of the Markets business. Given the fact that north of 60% of the revenue for the financial division are from within the EU, therefore, we see less concentration around the Asian market. On the gaming standalone perspective, just to give a full picture on that, we're pretty much given to where we were before. We talk about a 37% in Asia coming from the gaming sector alone with 55% coming from Europe. That's on the geo space. With respect to the growth rates in the current trading in Q4, we definitely, when you compare that, you need to compare the fact that we had the white label starting on in September last year, and therefore, when we looked at Q3 versus Q3, we talk about three months, three, four months of white label activity compared to only one. When we look to October, we talk about the fourth quarter, the strongest quarter of the year in 2014, whereby the white label activity was already in full force throughout the entire quarter compared to what we have now. So I do think that this is a very strong growth for Q4 on a very strong quarter to begin with.

And just a follow up question on your first comment. Just using the splits that you gave me, it seems like growth out of Asia looks like it's approximately 34%, and that compares to growth in Q2 of about 49%. Can you just give us a little bit of an explanation as to the slowdown there?

Yes. We don't think it's a slowdown. We talk about very big numbers to begin with. We don't see that as a slowdown. Actually, it's not 34%, it's slightly less, but we can go over the mathematics afterwards. Again, as we said, we don't see that as a slowdown in the market. We see the numbers going up. Naturally, as Mor indicated earlier in the call, there were some customers actually changing the way that they operate in the market which had some impact on the financial impact on their performance in that market, given the fact that they were more focused on regulated markets as well, and diverting some of the activities to regulated market and changing some of the on boarding processes that they have. But on top of that, and other than that, we see the KPIs growing. We don't see the we are not concerned about any indicators that there is a slowdown in Asia. It's actually the contrary.

[Operator Instructions]. We have a follow up question from Vaughan Lewis from Morgan Stanley. Vaughan, please go ahead.

Just one quick follow up one. Some of your larger licensees have talked about developing their own IMS and own bonus engine. Do you think that will work and what are your views on that? Thanks.

Yes. As I said earlier, people are looking it's all a result of the fact that people need to differentiate because of the ever increasing competition in the market. I think that it's quite evident that even they refer to in sourcing their technology eventually focused on differentiation through front end, may be around sports, mobile sports for the business and we definitely think that this is the way forward. People need to differentiate themselves and we are answering the needs of our customers, and I referred to that earlier on in the call. Playtech is very much determined to provide our customers with front end, very flexible front end capabilities, so they can differentiate. There were one or two one or two actually, customers of Playtech that refer to the fact that they have a very solid games section in their site, that in all cases with no exception to date does not have any capability, betting capability. I think that it will be quite naive to think that people can replicate what Playtech invested into in the last 15 or 16 years of operations in order to replace when they have their own games call it, or games platform introducing certain, and it's a very solid part of the business. I do believe that they can and maybe even should introduce certain tools to support their organic growth, because obviously they need to extract more value. We are determined. We actually were in Cyprus earlier this week and discussed exactly that. We have the technology to provide our customers with by far more sophisticated, more advanced games platform that exist in the market that no other company can offer, that can already provide them with kind of a very, very simple and intuitive games platform that will allow them to integrate other games and enjoy a lot of the benefits of the IMS. So we monitor carefully these statements. We definitely monitor these changes or these statements carefully and we will answer those, and actually we see that there is a real opportunity for Playtech. Instead of people trying to introduce a bonus system that we believe will be very, very limited when compared to Playtech, if we will be able to introduce something that will be very, very solid with a lot of the capabilities that people enjoy from the IMS elsewhere in their business, I think that we will turn it into an opportunity and we don't see that as a real risk to our business.

We have another follow up question from Ed Birkin from Credit Suisse. Ed, please go ahead.

Hi. Good morning. Just on the unregulated ex-Asia revenues, for quite a few quarters they've been declining as you say operators are looking to refocus on regulated markets. Do we expect this to just slow down or stop at some point? Or should we expect panning forwards another one, two years, this is going to continue?

I think the transition is quite obvious. I think when we look at the market and see more and more jurisdictions going into regulation, including Portugal right now and Netherlands will start being regulated and now Switzerland are regulating and more and more companies countries are looking into regulation, Sweden, I think it's only natural that this transition will continue. Definitely in Europe, we talked about that for one such a transition takes time to complete. Whether that will slow down eventually, the answer is yes. I don't think it's the case for 2016.I still think for 2016 when we see more and more markets regulating, that this transition will continue, where certain operators will start to invest less into regulated markets. Obviously, some of them will remain. I think the situation in Germany, for example, is still out there. It's still up in the air. Although we see good indications, we believe that it will take some time and potentially in the next two years, nothing will happen. And, therefore, that will be a market that others will -- that a lot of operators will still target. But we see the trends going into regulations, and therefore we believe that this transition will continue in 2016 and potentially beyond that. At some point it will slow down when we see more of the bigger jurisdictions already becoming fully regulated.

Okay. So perhaps I could ask you a slightly different way. If you look at your revenues from unregulated market outside of Asia, unregulated markets this quarter, and you look at the same markets last year, so not taking into account ones which have regulated, are those revenues declining or growing?

The answer is they are declining, given the fact that operators are investing more and more marketing spend into regulated markets. It doesn't mean -- it doesn't only -- sorry, let me just clarify. I'm not just talking about the same market moving from unregulated to regulate and therefore we see a natural transition that it was a minute before unregulated and now it's regulated. We're talking about a situation where certain operators look at a jurisdiction. They don't see sort of the bright dot com future in that jurisdiction and they start to establish themselves in regulated markets. Whether this is the same specific market or not, it's a different question. But most of them will invest into other regulated markets. [indiscernible], for example, is one example of that, right? They've taken certain budgets from dot com in unregulated revenues, then they start investing more and more into regulated revenue stream, and we see that with more and more customers.

Okay. And so if this is happening outside of Asia, would you expect it to then to start to happen in Asia and therefore that growth rate decline?

In Asia, the situation is quite early days. My own perception is I think Asia will eventually follow whatever is happening right now in Europe, and I think it's only a matter of time until the Asian market will become regulated. We already see the early signs. Singapore has been regulated. Philippines is fully regulated. Other markets are talking about that and referring to regulations in the future. So I think it's a matter of timing and not if, but when. But it's still early days to come up with any projections of when that would happen.

Ed, I think, at the end of the day I think that there is a very, very clear trend in the industry. Certain markets are regulated and people invest heavily into these markets. Certain markets are unregulated, but it's very clear that they will be regulated. Take for example Romania, take for example various other parts of Europe, where you see -- Sweden, for example, and various other markets where people do believe that in the foreseeable future, next 18 to 24 months, the market will become regulated. And it makes sense for them to continue pushing in the market in order to move the unregulated business into a regulated business using all their contacts in the market. Certain markets are less certain, I mean, the regulatory environment is such that it's less certain that it will be -- that it will regulate. But given the fact that the market is there, if you look at the whole target market that our customers approach, it's quite fragmented. And it gives them the opportunity to basically when they discuss their budgets to take money that they generate in or that they invested in terms of marketing into the unregulated market and divert it elsewhere into markets where it's regulated and into markets where they believe regulations will follow. And this is a trend that will kick off their industry. I mean, various other very successful companies, they have done this extremely successfully, and well done for them. But this is something that is definitely the trend that we see elsewhere. Regardless, I think that we should not lose sight of the fact that there are more than 15 countries regulating as we speak. And the future growth of Playtech will come from our customers that take money from various markets or increase their budgets in these markets that have either become regulated or already regulated, and the local gaming companies that will almost by definition will have an online gaming arm as soon as regulations permit. So I would say that unlike our customers or operators, where they have to who have to decide what portion of the budget goes where, we always have the ability to increase or grow our business by supporting the penetration efforts into regulated markets. And on top of that, sign up with local gaming companies that would like to have an online gaming arm. And guess what, we are the natural choice for these companies, given the only channel I talked about earlier. You look at the market, it's almost by definition now or not by definition, but reality shows the track record and basically reality shows that in each and every market the people, or the companies operate or they dominate, not dominate may be the wrong word, but the companies that are very significant are the local operators. The William Hill, Ladbrokes, Gala, Coral, Paddy Power of the UK. Snai, Caesar, Lottomatica in Italy, various local companies in Spain, PMU and SDJ in France. The trend is very, very clear, and this is how we intend to grow our business. This transition is very positive for us.

No, I understand that. I suppose my question is, there seems to have been quite clearly for markets which are unregulated where the outlook doesn't look particularly positive, there seems to have been a move away from investment from your licensees, which is shown in the numbers. And I suppose there's this question of will this move across to Asia where there's a couple of markets you've talked about with regulation have been ones which haven't allowed foreign operators. So if regulation goes along those lines, obviously you're in a position where you can take advantage of local operators going online. But before that, it would seem that if your licensees follow what they're doing in Europe unregulated, then the natural progression would be to look at Asia. And if they think it's going to regulate like Singapore, the Philippines and they'd reduce investment there, and whether we should therefore be bringing down our growth rates for those markets going forward, as we increase our growth rates for the regulated markets.

Or else they have a strategy, as part of which they do believe that the market that they're operating in Asia will regulate, which is the case. Or else, they basically think basically what happens in Asia is that they balance that with investment into regulated markets. Reality shows that a lot of our customers do believe that in Asia the status quo will remain in the foreseeable future with an upside with a very clear upside opportunity to turn their business into a regulated format in various jurisdictions. And anywhere we'd say that we are in a position to enjoy that, given the fact that we can service, and we can come with our technology and service local operators as well as foreign operators that maybe want to establish themselves locally in the same way that we did that with Italy, and the same that we did that with the Spanish market. I don't see a difference with that. For us, it's all upside. It would be an amazing opportunity. Remember, the market itself inherently will grow and organically will grow and will open up to more and more of the buy chain and we can support a variety of those in these markets.

Okay. Great. Thank you.

Hi, Sandy. Can we just have one last question, please?

Yes. We have one more question from Tal Grant from UBS. Tal, please go ahead.

Hi, guys. Just one last question on TradeFX. Obviously it's very early days. We're just wondering what measures you have taken, if any, and how effective have they been, if at all, with regard to churn in TradeFX? Anything you've done that's been helpful in reducing churn there?

Yes, this is I think we're looking at this a bit wrong. I think people look at this as if it's an online business, like any other e-commerce business, where you drive traffic through generic marketing channels, generic marketing channels like Google and Facebook and other media. And naturally, when it comes to these types of businesses, you see similar characteristics of churn in other financial characteristics as you see even on gambling, right? On the gaming side of the business, it's the same 80/20 rule. It's the same relevant churn rate that certain customers come in, they trade. You have the split between different types of traders. You have some of them will be regular traders that will keep on trading throughout the year. Others will be irregular traders that will come and go during certain events. So you will see someone basically trading through let's say the news around Greece looking to potentially leaving the EU, and suddenly they have a view on what that how's that going to influence the euro or any other market and they trade around that. And then market volatility is then again quiet, and they wait for the next opportunity where they suddenly believe that they have the insight and understanding of what's going to happen from a macroeconomic perspective and they trade on the back of that as well. The churn is something that is quite natural to online driven businesses, in the same way that you see that on gaming. This is just the nature of that type of business, and the same goes for the 80/20 rule, meaning 80% of the revenues are generated by 20% of the customers, in the same way that we see that in other e-commerce businesses, including gaming.

Thank you very much, everyone. I appreciate the call and if there are any other additional questions, we're happy to answer those separately on one-on-one calls with Andy and myself.

Thank you very much. Have a great day.