Playtech Plc · LSE:PTEC
Playtech — H1 2010 Earnings Presentation
56 slides from Playtech's earnings presentation, August 2010
Slide 1: Interim Results: Six Months Ending 30 June 2010
INTERIM RESULTS SIX MONTHS ENDING 30 JUNE 2010
Slide 2: Agenda
INTERIM RESULTS AGENDA • Introduction: Roger Withers, Chairman • Financial Review: Shuki Barak, CFO • Operational & Strategic Review: Mor Weizer, CEO • Questions and Answers TM & © 2010 MARVEL.. © 2005 FOX
Slide 3: Overview
INTRODUCTION OVERVIEW • Gross income up 31%: €87.9m • Adjusted EBITDA up 19.6%: €54.2m • Adjusted EPS up 10.6%: 19.9 € cents • Interim dividend 9.4 € cents per share • Strategic positioning supports robust business model • Positive outlook underpinned by new licensees and regulated market networks
Slide 4: H1 Corporate Actions
INTRODUCTION H1 CORPORATE ACTIONS • Acquisitions & strategic partnerships deliver immediate impact • Board code compliant: 2 additional non-executive directors • CFO search in later stages • Investor day: demonstration of operational & technical capabilities
Slide 5: Financial Review
FINANCIAL REVIEW
Slide 6: Financial Highlights (in € millions)
FINANCIAL REVIEW FINANCIAL HIGHLIGHTS (IN € MILLIONS) 90 €87.9 80 €72.9 €70.4 70 €66.9 €58.1 60 €56.7 €54.2 50 €48.4 €45.3 40 30 Gross Income Total Revenue Adjusted EBITDA H1-09 H2-09 H1-10
Slide 7: Gross Income (in € millions)
FINANCIAL REVIEW GROSS INCOME (IN € MILLIONS) €87.9 90 €87.9 Gross Income 80 €70.4 €66.9 €72.9 €70.4 Vs Vs 70 €66.9 H1 ‘09 H2 ‘09 H1 ‘10 €87.9 +31% +25% €58.1 60 €56.7 €54.2 50 €48.4 €45.3 40 30 Gross Income Gross Income Total Revenue Adjusted EBITDA H1-09 H2-09 H1-10 H1-09 H2-09 H1-10
Slide 8: Gross Income Growth H1 '10 vs H1 '09
FINANCIAL REVIEW GROSS INCOME GROWTH H1 ’10 vs H1 ’09 (in € millions) 90.0 €87.9 WH SOP +7.1% 80.0 Existing licensees +5.6% 70.0 €66.9 New Business +18.6% 60.0 WHO Share of profit 50.0 Other 40.0 Bingo 30.0 Poker 20.0 Casino 10.0 H1-09 H1-10
Slide 9: Gross Income Growth (in € millions)
FINANCIAL REVIEW GROSS INCOME GROWTH (in € millions) 100.0 €87.9 90.0 80.0 17% WHO Share €66.9 €70.4 of profit 4% 70.0 5% 60.0 Other 18% 50.0 Bingo 40.0 30.0 Poker 56% 20.0 10.0 Casino - H1-09 H2-09 H1-10
Slide 10: Total Revenue (in € millions)
FINANCIAL REVIEW TOTAL REVENUE (IN € MILLIONS) 90 €87.9 €72.9 Casino Revenues Total Revenue 80 H1 H2 H1 ‘09 ‘09 ‘10 €56.7 €58.1 €72.9 €70.4 Vs Vs 70 €37.6 €66.9 €39.2 €49.1 H1 ‘09 H2 ‘09 Vs H1 ‘10 €72.9 +29% +25% H1 ‘10 +31% +25% €58.1 60 €56.7 Poker Revenues €54.2 H1 H2 H1 50 ‘09 ‘09 ‘10 €48.4 €17.
Slide 11: Influence of Acquisitions on Results
FINANCIAL REVIEW INFLUENCE OF ACQUISITIONS ON RESULTS 80.0 75.0 €72.9 70.0 VF Bingo €7.3 VF Casino 65.0 €2.9 GTS Casino 60.0 55.0 €54.2 50.0 45.0 40.0 35.0 30.0 Revenues H1-10 Adjusted EBIDTA H1-10
Slide 12: Key Licensees
FINANCIAL REVIEW KEY LICENSEES • The increase in diversification was enhanced with the addition of the GTS and VF licensees • As local regulated markets grow, the diversity will continue, eliminating smaller, less economic licensees Increased diversity = Decreased risk H1 2009 H1 2010 Top 2 licensee
Slide 13: WHO: Reminder of Accounting
FINANCIAL REVIEW WHO: REMINDER OF ACCOUNTING • WHO share of profit after tax: 29% (from Aug-09 onwards) • Blended tax rate: average c.1.2% • Identical figures to WH minority: £12.9m = €15m H1 2010 WH online EBIT £ 45 Tax £ 0.5 WH online profit £ 44.5 29% PT income from associate (£) £ 12.9 PT income
Slide 14: Gross Income by Product (in € millions)
FINANCIAL REVIEW GROSS INCOME BY PRODUCT (IN € MILLIONS) 100.0 €87.9 90.0 WHO Share of profit 80.0 €70.4 Other €66.9 70.0 €59.9 Bingo 60.0 €51.6 50.0 Poker €37.8 40.0 Casino €27.9 30.0 20.0 10.0 H1-07 H2-07 H1-08 H2-08 H1-09 H2-09 H1-10
Slide 15: Adjusted EBITDA (in € millions)
FINANCIAL REVIEW ADJUSTED EBITDA (IN € MILLIONS) 90 €87.9 Adjusted EBITDA €54.2 Adjusted EBITDA 80 Margin €72.9 €70.4 Vs Vs Out 70 of Gross Income €66.9 €48.4 H1 ‘09 H2 ‘09 €45.3 H1 ‘10 €54.2 +20% +12% H1 ‘09 H2 ‘09 H1 ‘10 €58.1 60 €56.7 68% 69% 62% €54.2 50 €48.4 €45.3 40 As indicated, margin dec
Slide 16: Analysis of Costs & Expenses
FINANCIAL REVIEW ANALYSIS OF COSTS & EXPENSES Operating Expenses H1 2010 Adjusted operating expenses excl' Dep&Amor €10.2 , 23% Adjustable operating expenses including €33.7 , 77% Dep&Amor
Slide 17: Analysis of Costs & Expenses
FINANCIAL REVIEW ANALYSIS OF COSTS & EXPENSES Operating Expenses H1 2010 (€33.7m= 100%) (excl’ Dep&Amor) Employee related costs €18.8 , 55.8% Other operational costs Admin & office costs Traveling, Exhibitions & €5.9, 17.5% Marketing Revenue Driven costs €2.4, 7.3% €2.8 , 8.3% €3.8, 11.2%
Slide 18: Analysis of Costs & Expenses
FINANCIAL REVIEW ANALYSIS OF COSTS & EXPENSES Operating Expenses H1 2010 (€33.7m= 100%) (excl’ Dep&Amor) Employee related costs €18.8 , 55.8% Revenue-driven costs: Other operational costs H1 H2 H1 2009 2009 2010 Admin & office costs Total Revenue 56.7 58.1 72.9 Revenue Driven Costs 1.8 2.3 Traveling
Slide 19: Analysis of Costs & Expenses
FINANCIAL REVIEW ANALYSIS OF COSTS & EXPENSES Operating Expenses H1 2010 (€27.8m= 100%) (excl’ Dep&Amor & Revenue driven cost) Employee related costs €18.8 , 67.6% Other operational costs Admin & office costs Traveling, Exhibitions & Marketing Revenue Driven costs €2.4, 8.8% €2.8 , 10.0% €3.8, 13.5%
Slide 20: Analysis of Costs & Expenses
FINANCIAL REVIEW ANALYSIS OF COSTS & EXPENSES H1 2009 H2 2009 H1 2010 Adjusted Operational Expenses w/o Revenue Driven costs 19.8 19.7 27.8 Employee related costs 12.5 12.8 18.8 % out of Adjusted Operational Expenses w/o Revenue Driven costs 63.3% 65.1% 67.6% The increase in H1 ‘10 is due to VF and
Slide 21: Cash Flow
FINANCIAL REVIEW CASH FLOW • Playtech continues to be highly cash generative • Net cash provided from operating activities including cash received from WHO – €60.8m • Cash used in investing activities: • Sportech – €11m • Virtue Fusion - €26m (net of cash acquired) • Cash used in financing activitie
Slide 22: Balance Sheet
FINANCIAL REVIEW BALANCE SHEET • Robust balance sheet • Cash balance of €60m at 30 June 2010 • Increase of intangible assets due to VF acquisition of €36.1m • Investment in WH Online: • Total investment as of 30 June 2010 - €165.6m • Deferred consideration of €16.2m, to be paid in December 2010 (*)
Slide 23: Operational and Strategic Review
OPERATIONAL AND STRATEGIC REVIEW
Slide 24: Agenda
OPERATIONAL AND STRATEGIC REVIEW AGENDA: • H1 Highlights • Strategic Actions: Update • Industry Dynamics • Current Trading & Outlook • Outlook: Visibility of Earnings
Slide 25: Product Highlights
H1 HIGHLIGHTS PRODUCT HIGHLIGHTS Casino Poker • 30+ new download games • Revamp of table: resizable functionality and graphical • 35+ new flash games improvements • Casino personalisation • New Game type: Razz engine • ECOOP tournaments - 14 • VIP management tools main events with over • New tournam
Slide 26: Product Highlights
H1 HIGHLIGHTS PRODUCT HIGHLIGHTS • Bingo • Video streaming within the client for a live caller or TV show to be screened • Release of two new branded bingo games (Britain’s Got Talent Bingo and Blockbusters Bingo) • Launch of first bingo network for Italian Regulated Market • Sports Betting • New be
Slide 27: Key Licensees
H1 HIGHLIGHTS KEY LICENSEES H1 2010 H2 2009 H1 2009 Top 2 licensees 33% 39% 39% Top 5 licensees 49% 56% 57% Top 10 licensees 64% 73% 76% Top 15 licensees 74% 82% 85% Licensees > €2m revenue 8 8 8 Licensees > €0.5m revenue 29 22 20
Slide 28: Ongoing Innovation
H1 HIGHLIGHTS ONGOING INNOVATION • Web/flash development focus • Casino: lobby personalisation • IMS: responsible gaming module • Bingo: social networking • TV: casino VIP tools • Mobile: iPad package
Slide 29: Strategic Actions: Acquisitions
STRATEGIC RECENT ACTIONS: PRODUCT UPDATE HIGHLIGHTS ACQUISITIONS: • Acquisitions have immediately delivered scale & breadth to Playtech platform: rapid integration Virtue Fusion • Virtue Fusion enjoying strong revenue growth: expect ROI in excess of 15% • Launch of new branded games: e.g. ‘Britain’s
Slide 30: Strategic Actions: Partnership
STRATEGIC RECENT ACTIONS: PRODUCT UPDATE HIGHLIGHTS PARTNERSHIP: Core agreement (Jan 10) • Upgrading of 13,500 FOBT terminals in UK & 4,500 additional terminals world-wide: £5.25m pa • Major shop trials progressing well • On target for substantial H2 roll-out Ladbrokes (Aug 10) TM & © 2010 MGM. ALL
Slide 31: Strategic Alliances
STRATEGIC RECENT ACTIONS: PRODUCT UPDATE HIGHLIGHTS STRATEGIC ALLIANCES: • Business operational, key personnel hires underway • Relationship building: focus on US lotteries • Bespoke lottery product suite developed Sportech/SGR • US regulatory approval exercise ongoing • Bingo sites migrating
Slide 32: Current Trading and Outlook
Slide 33: Industry Dynamics
CURRENT TRADING & OUTLOOK INDUSTRY DYNAMICS • Regulating markets dominates attention • Momentum across Europe, US • Growth in local market size offset by increased tax burden • Ring-fenced markets favour strong local brands • Attracting wide range of new entrants • Operators’ business models changin
Slide 34: Our Strategic Positioning
CURRENT TRADING & OUTLOOK OUR STRATEGIC POSITIONING • Pure play B2B strategy highly robust • Economies of scale remain across markets • Maintain operational gearing capability • Partnering with well-established local operators • Seeking a broad range of products & services • Comprehensive product ca
Slide 35: Regulated Markets in H1
CURRENT TRADING & OUTLOOK REGULATED MARKETS IN H1 • Estonia: launched Q1 with regional leader, Olympic • Italy: major market presence in poker & bingo • Finland: won contract for state monopoly, RAY • France: launched poker network • Ongoing work in Serbia & Philippines
Slide 36: Current Trading
CURRENT TRADING & OUTLOOK CURRENT TRADING Like for like Absolute basis basis (excluding France) Q3-10 vs. Q3-09 +30% +12% Q3-10 vs. Q2-10 -6% -16% • Seasonal effect magnified by World Cup & France casino closure • August performance: all products performing positively • Launch of Betfair flash casin
Slide 37: Visibility of Future Earnings: H2 2010
OUTLOOK VISIBILITY OF FUTURE EARNINGS: H2 2010 Incremental revenue streams: • Betfair flash casino: Q3 migration • RAY: early Q4 launch • Italian bingo network: launched Q3 • France poker network: launched Q3
Slide 38: Visibility of Future Earnings: 2011
OUTLOOK VISIBILITY OF FUTURE EARNINGS: 2011 • Italian cash poker: beginning of year • Italian casino: likely to follow cash poker • France development of poker network • Casino Gran Madrid: H1 launch • Videobet: >15,000 machines: by end H1
Slide 39: Playtech
playtech
Slide 40: Appendix
Slide 41: Adjusted EBITDA
APPENDIX ADJUSTED EBITDA H1 ‘09 H2 ‘09 H1 ‘10 €’000 €’000 €’000 Operating profit 27,561 28,888 28,989 Amortization 2,754 3,652 6,382 Depreciation 1,092 1,280 1,423 EBITDA 31,407 33,820 36,793 Share of Profit of associates before amortization of intangibles 10,286 12,248 15,013 Change in FV of availa
Slide 42: Adjusted Net Profit
APPENDIX ADJUSTED NET PROFIT H1 ‘09 H2 ‘09 H1 ‘10 €’000 €’000 €’000 Net profit 32,387 37,063 36,958 Amortization of investment in WH Online 5,257 5,256 4,922 Change in FV of available for sale investment (CYF & ALOG) 72 327 (231) Discounting of deferred consideration 202 277 358 Amortization on acqu
Slide 43: Cash Flow
APPENDIX CASH FLOW H1 ‘09 H2 ‘09 H1 ‘10 €’000 €’000 €’000 Net profit 32,387 37,124 36,958 Depreciation, Amortization 3,846 4,932 7,806 Employees Stock Options Expenses 3,525 1,625 1,825 Change in FV of available for sale investments 72 327 (231) Income from associate (10,286) (12,248) (15,013) Amort
Slide 44: Balance Sheet
APPENDIX BALANCE SHEET As of As of As of 30 June 2009 31 Dec 2010 30 June 2010 €’000 €’000 €’000 Cash and Cash Equivalents 48,725 58,700 59,997 Receivables 14,562 17,113 16,738 Investments (CYF, ALOG & Sportech) 4,815 5,513 11,997 Investment in WH and other equity associates 175,643 170,366 165,617
Slide 45: Depreciation & Amortisation
APPENDIX DEPRECIATION & AMORTISATION • Depreciation • In line with business growth, still immaterial • Capex additional growth only on dedicated investments for regulated markets • Amortisation • Software costs & other intangibles – €2.8m • Amortisation on acquisitions/investments: • Tribeca - €1.6m
Slide 46: WHO Recap: Royalty vs. SOP
APPENDIX WHO RECAP: ROYALTY vs. SOP • WHO JV consists of WH online and assets of PTEC’s former licensee • Casino and poker operations of WHO enjoy a preferred royalty rate • PTEC gets in return: • Enlarged combined casino and poker operations • Exposure to WHO Playtech William Hill sports book opera
Slide 47: EPS & Adjusted EPS
APPENDIX EPS & ADJUSTED EPS 25.0 19.9 20.0 18.0 Adjustments to EPS Euro cents per share 4.6 4.4 15.0 EPS 10.0 15.3 13.6 5.0 - H1-09 H1-10
Slide 48: Gross Income Growth H1 '10 vs H2 '09
APPENDIX GROSS INCOME GROWTH H1 ’10 vs H2 ’09 (in € millions) 90.0 €87.9 WH SOP +3.9% 80.0 Existing licensees +4.7% €70.4 70.0 New Business +16.3% 60.0 WHO Share of profit 50.0 Other 40.0 Bingo 30.0 Poker 20.0 Casino 10.0 H2-09 H1-10
Slide 49: Summary of Income Statement
APPENDIX SUMMARY OF INCOME STATEMENT: H1 2009 H2 2009 H1 2010 €’000 €’000 €’000 Revenues 56,654 58,121 72,892 PROFIT FOR THE YEAR Adjusted operating expenses (21,650) (21,989) (33,738) (excl’ Dep&Amor) Depreciation & Amortization (2,249) (3,247) (4,241) Adjusted profit Amortization on acquisitio
Slide 50: Summary of Income Statement
APPENDIX SUMMARY OF INCOME STATEMENT: H1 2009 H2 2009 H1 2010 €’000 €’000 €’000 PROFIT FOR THE YEAR Revenues In order to better reflect underlying 56,654 business, 58,121 72,892 PTEC Adjusted operating adjusts for the following: expenses (21,650) (21,989) (33,738) (excl’ Dep&Amor) Includes WHO sha
Slide 51: Summary of Income Statement
APPENDIX SUMMARY OF INCOME STATEMENT: H1 2009 H2 2009 H1 2010 €’000 €’000 €’000 Revenues 56,654 58,121 72,892 Profit for the year Adjusted operating expenses (21,650) (21,989) (33,738) (excl’ Dep&Amor) Depreciation & Amortization (2,249) (3,247) (4,241) Adjusted profit Operating profit 32,755 32
Slide 52: Summary of Income Statement
APPENDIX SUMMARY OF INCOME STATEMENT: H1 2009 H2 2009 H1 2010 €’000 €’000 €’000 Revenues 56,654 58,121 72,892 Profit for the year Adjusted operating expenses (21,650) (21,989) (33,738) (excl’ Dep&Amor) Adjusted profit Operating profit 35,004 36,132 39,154 Share of WHO profit 10,286 12,248 15,013
Slide 53: Gross Income Excl. VF & GTS
APPENDIX GROSS INCOME (IN € MILLIONS) €87.9 90 €87.9 €77.7 Gross Income 80 €70.4 Excl. VF & GTS €66.9 €70.1 €72.9 €70.4 €66.9 Vs Vs 70 €66.9 H1 ‘09 H2 ‘09 H1 ‘10 €77.7 +16% +11% €58.1 60 €56.7 €54.2 50 €48.4 €45.3 40 30 Gross Income Gross Income Total Revenue Adjusted EBITDA H1-09 H2-09 H1-10 H1-09
Slide 54: Total Revenue Excl. VF & GTS
APPENDIX TOTAL REVENUE (IN € MILLIONS) 90 VF & GTS €87.9 Excl €72.9 Casino Revenues Total Revenue 80 H1 H2 H1 €62.7 Excl VF & GTS ‘09 ‘09 ‘10 €56.7 €58.1 €72.9 €70.4 Vs Vs 70 €37.6 €66.9 €38.9 €44.1 €56.7 €57.8 H1 ‘09 H2 ‘09 Vs +17 H1 ‘10 €62.7 +11% +8% H1 ‘10 % +13% €58.1 60 €56.7 Poker Revenues €5
Slide 55: Adjusted EBITDA Excl. VF & GTS
APPENDIX ADJUSTED EBITDA (IN € MILLIONS) 90 €87.9 Adjusted EBITDA Margin 80 Excl. VF & GTS €54.2 Adjusted EBITDA Excl. VF & GTS €72.9 €50.5 €70.4 Vs Vs Out 70 of Gross Income €66.9 €48.4 H1 ‘09 H2 ‘09 €45.3 €48.3 H1 ‘10 €54.2 +20% +12% H1 ‘09 H2 ‘09 H1 ‘10 €58.1 60 €45.3 €56.7 68% 69% 62% €54.2 50 €
Slide 56: Thank You
YOU eplaytech