Stride Gaming — FY2017 Earnings Presentation
28 slides from Stride Gaming's earnings presentation, Nov 21, 2017
Slide 1: 2017 Financial Results
21 NOVEMBER 2017 2017 FINANCIAL RESULTS 1
Slide 2: Disclaimer
DISCLAIMER The information contained in this confidential document (“Presentation”) has been prepared by Stride Gaming PLC (the “Company”). It has not been fully verified and is subject to material updating, revision and further amendment. This Presentation has not been approved by an authorised per
Slide 3: Agenda
AGENDA INTRODUCTION 1 Snapshot Significant progress against objectives 2017 highlights 2 STRATEGIC & OPERATIONAL REVIEW Online gaming market overview Regulation Vision and growth strategy 1. Focus on our core 2. Diversify product offering 3. New markets Passion Gaming Investment in proprietary platf
Slide 4: Stride Gaming PLC - A Snapshot
STRIDE GAMING PLC - A SNAPSHOT Rapidly growing Proprietary Investment in Operate only in Clear growth Profitable, highly online gaming gaming platform talent regulated and/or strategy and cash generative, operator legalised proven model dividend paying markets 4
Slide 5: Significant Progress Against Our Objectives
SIGNIFICANT PROGRESS AGAINST OUR OBJECTIVES Significant Investment Integration Expansion Compliant growth in in growth of into B2B with RMG acquisitions regulation 30% YoY RMG growth New content and sites Realising synergies Stride Together Responsible Gaming 3rd largest online UK Predictive analyti
Slide 6: 2017 Highlights – Our KPIs
2017 HIGHLIGHTS – OUR KPIs REVENUE Adj. EBITDA Adj. EPS DIVIDEND 18% 24% 29% 7% 2017: £89.9m 2016: £76.4m 2017: £20.2m 2016: £16.4m 2017: 27.5p 2016: 21.3p 2017: 2.7p 2016: 2.5p DEPOSITS YIELD PER PLAYER FUNDED PLAYERS MOBILE/TOUCH REVENUE 26% 29% 10% 18% 2017: £147m 2016: £117m 2017: £147 2016: £11
Slide 7: Strategic & Operational Review
STRATEGIC & OPERATIONAL REVIEW 7
Slide 8: Online Gaming Market Overview
ONLINE GAMING MARKET OVERVIEW UK ONLINE BINGO-LED MARKET SHARE • UK remains the world’s largest real-money bingo market – mobile continues to drive growth Estimated market size = £600m* • Stride operates >140 sites – approximately one in four brands in the UK • UK online casino market is 3x larger t
Slide 9: Regulation
REGULATION IMPACT Stride’s scale and proprietary technology support FOCUS Point of Consumption Tax 2 (POCT2) potential market share opportunities FOCUS Advertising Standards Authority (game visuals, day IMPACT Stride’s investment is focused on digital marketing time TV advertising) FOCUS Responsible
Slide 10: Our Vision and Growth Strategy
OUR VISION AND GROWTH STRATEGY TO BE A LEADING ONLINE GAMING OPERATOR 1 2 3 FOCUS ON OUR DIVERSIFY NEW CORE PRODUCT OFFERING MARKETS Continue to build scale Enter into new verticals Extend brands and and grow market share in such as lottery style products to new attractive VALUE FOR both the UK bing
Slide 11: Focus on Our Core – Organic growth drivers
1 FOCUS ON OUR CORE – Organic growth drivers Unique content Multi-brand Increased Efficient Technology and monetisation INCREASED strategy Marketing spend people and engagement PROFITABILITY Business Intelligence 11
Slide 12: Focus on Our Core – Realising synergies in acquired businesses
FOCUS ON OUR CORE – Realising synergies in acquired 1 businesses 40% Distribution costs Yield per player £250 35% 30% £200 25% £150 20% 15% £100 10% £50 5% 0% £0 H116 H216 H117 H217 H116 H216 H117 H217 8ball Tarco Stride Reduction in distribution costs due to enhanced Rise in yield per player is dri
Slide 13: Focus on Our Core – Realising synergies in acquired businesses
FOCUS ON OUR CORE – Realising synergies in acquired 1 businesses REVENUE GROSS PROFIT MARGIN Adj. EBITDA TARCO 10% 4% 62% from 32% to 36% REVENUE GROSS PROFIT MARGIN Adj. EBITDA 8BALL 26% 8% 101% from 33% to 41% Highly successful acquisitions already delivering earnings enhancing synergies 13
Slide 14: Diversify Product Offering
2 DIVERSIFY PRODUCT OFFERING • Launched 29 new sites • Developed and launched 17 new proprietary slots and instant win games • Entered B2B vertical via Stride Together • Signed JV with Aspers Group • Entry into Rummy market through strategic investment in Passion Gaming (post period end) 14
Slide 15: New Markets
3 NEW MARKETS • Diversification opportunities supported by scale, infrastructure and platform • Appraise attractive, growing, regulated markets • Pan European focus with global opportunities Current markets In process 15
Slide 16: Strategic investment in Passion Gaming
Strategic investment in Passion Gaming About Passion Investment details Investment of $3.75m for a 51% stake including full New entrant to the online Rummy market in India where ownership of intellectual property gambling is legalised No earn out or cash delivered to shareholders Excellent managemen
Slide 17: Investment in Proprietary Platform
INVESTMENT IN PROPRIETARY PLATFORM Integrated business Innovative content intelligence Highly scalable, robust payment Multi-brand processing and back office Diversification into new INVESTMENT IN Disaster recovery solutions verticals TECHNOLOGY B2B Cyber security Entry into new markets Fully compli
Slide 18: Investment in Our Team
INVESTMENT IN OUR TEAM Headcount increased by 51 to 370 Continued investment in working environment Appointed CTO and heads of CRM, Product, Streamlined onboarding and Development and Business Analytics employee communication Increased Retention and Marketing talent Corporate social responsibility o
Slide 19: Financial Review
FINANCIAL REVIEW 19
Slide 20: 2017 Financial Highlights
2017 FINANCIAL HIGHLIGHTS +18% 100 £89.9m 90 £76.4m 80 FY 2016 FY 2017 £m 70 60 50 40 +24% +29% 30 £20.2m £18.5m £16.4m +7% 20 £14.3m 10 2.7p 2.5p 0 Revenue (NGR) Adj EBITDA Adj earnings Dividend 20
Slide 21: Income Statement
INCOME STATEMENT £'000 Audited Pro-forma Change FY2017 FY2016 Net Gaming Revenue (NGR) 89,923 76,430 18% Cost of Sale (POCT) 11,621 9,054 28% 12.9% 11.8% Distribution cost 15,948 16,719 -5% 18% 22% Marketing costs 22,659 17,600 29% 25% 23% Gross Profit 39,694 33,058 20% 44% 43% Administrative expens
Slide 22: Revenue
REVENUE Revenue bridge Revenue split 100,000 16% 90,000 8,108 9% 80,000 70,000 37% 33,186 60,000 39% £000 50,000 89,923 54% 37% 40,000 30,000 48,628 20,000 10,000 0 Proprietary Platform Non proprietary Social gaming Total Proprietary platform Non proprietary platform Social gaming platform 22
Slide 23: Cost Structure
COST STRUCTURE • Cost / Revenue ratio at 77% (2016: Pro-forma 79%) • Increased cost only in Marketing +2% and POCT +0.9% • Reduced Distribution -4% and administration costs ratio kept stable FY2016 EBITDA margin : 21% FY2017 EBITDA margin : 23% 80% 70% 12% 12.9% 60% 22% 18% POCT 50% Cost revenue rat
Slide 24: Income Statement
INCOME STATEMENT £'000 Audited Pro-forma Change FY 2017 FY 2016 Adjusted EBITDA 20,248 16,366 24% (1) Contingent remuneration Adj EBITDA margins 23% 21% Related to the 8ball and Infiapps Share-based payments earnouts. £5m in cash and £9m in 1,759 1,912 shares paid in Sep 17 Acquisition costs - 1,090
Slide 25: Cash Flow
CASH FLOW £’000 Audited Pro-Forma FY17 FY16 Cash generated from operations* 16,804 12,436 Cash conversion 83% 76% High cash conversation Net cash from Investment activities Working capital - net movement of (679) (849) acquired working capital (8ball/Tarco in Purchases of Intangibles, PPE August 201
Slide 26: Balance Sheet
BALANCE SHEET £'000 Audited Audited Solid working capital position FY17 FY16 Non- Current assets Cash position Property plant and 661 662 Strong gross cash position £26.1m that equipment includes player liability of £2.5m Intangible assets 57,756 73,566 Other Non current assets 2,693 4,443 Intangibl
Slide 27: Outlook
OUTLOOK Continue to Deliver growth B2B launch Strategic Confident of invest in team opportunities in offers new investment in further growth and proprietary core UK RMG growth Passion Gaming and achieving technology market – organic opportunities – new market market and acquisition and product expec
Slide 28: Q&A Thank You
Q&A THANK YOU 28