Evoke Plc · LSE:EVOK
Evoke — 888 Holdings — FY2019 Earnings Presentation
43 slides from Evoke's earnings presentation, Apr 15, 2020
Slide 1: Results for the Year Ended 31 December 2019
RESULTS FOR THE YEAR ENDED 31 DECEMBER 2019 1
Slide 2: Agenda
AGENDA Brian Mattingley | Introduction Itai Pazner | 2019 Highlights Aviad Kobrine | Financial Review Itai Pazner | Operational Review Q&A 2
Slide 3: Itai Pazner, CEO | 2019 Highlights
ITAI PAZNER, CEO | 2019 HIGHLIGHTS 3
Slide 4: Operating under COVID-19
OPERATING UNDER COVID-19 ☉ We have adjusted our operations to the new COVID-19 reality and local guidelines ☉ The safety and health of our 8sters was set as a top priority ☉ All employees in our 9 global sites are now Working From Home ☉ This was possible in a very short time frame due to a well pre
Slide 5: 2019 Highlights
2019 HIGHLIGHTS ☉ Good progress throughout the year with double digit revenue growth at constant currency ☉ Continued focus on compliance and launched ‘Safer, Better, Together’ responsible gaming strategy ☉ Record new customer acquisition – more than 1million FTDs coupled with consistent marking eff
Slide 6: Aviad Kobrine, CFO | Financial Review
AVIAD KOBRINE, CFO | FINANCIAL REVIEW 6
Slide 7: 2019 Financial Highlights
2019 FINANCIAL HIGHLIGHTS ⦿ Revenue up 10% at constant currency driven by further progress in regulated markets ⦿ Revenue increase led by Casino and Sport up 17% and 19% respectively at constant currency ⦿ UK growth continues to be driven by recreational players with casino revenue generated by VIPs
Slide 8: Group Revenue
GROUP REVENUE ⦿ Group revenue up 6% to $560m (2018: $530m); up 10% at constant currency ⦿ Growth is driven by Casino, Sport, new markets, healthy acquisition and regulated progress ⦿ Poker stabilisation as of H2 2018, with H2 2019 7% higher YoY ⦿ B2B impacted by transfer of acquired businesses from
Slide 9: Group Revenue
GROUP REVENUE ⦿ 2003-2019 CAGR at 15% reflecting strong long-term growth track record ⦿ Group revenue up 10% at constant currency led by Casino and Sport ⦿ Regulated markets revenue increase 22% at constant currency Group Revenue 2003-2019 FX 580 Historical VAT Release 540 560 542 521 530 455 462 40
Slide 10: Group Performance
GROUP PERFORMANCE ⦿ Double digit like for like revenue increase across our growth verticals – Casino & Sport ⦿ Healthy customer acquisition, up 22% against strong prior year performance which included the FIFA World Cup ⦿ Casino stand out growth with new customer acquisition up 43%, active players u
Slide 11: Group Performance
GROUP PERFORMANCE ⦿ Double digit like for like revenue increase across our growth verticals – Casino & Sport ⦿ Healthy customer acquisition, up 22% against strong prior year performance which included the FIFA World Cup ⦿ Casino stand out growth with new customer acquisition up 43%, active players u
Slide 12: Geographical Segmentation
GEOGRAPHICAL SEGMENTATION ⦿ Regulated and taxed markets comprise a record 74% of Group revenue ⦿ Revenue from regulated markets up 22% at constant currency ⦿ Driven by growth in UK, Sweden, Portugal and Italy now representing 9% of Group revenue Geographic Segmentation 2010 – 2019 FY 2019 (FY 2018)
Slide 13: Casino B2C Revenue
CASINO B2C REVENUE ⦿ Casino revenue up 13% to $359m (2018: $318m) reflecting a 17% increase at constant currency and a 10Y CAGR of 12% ⦿ Orbit product progress and innovation together with successful execution of marketing strategy drive growth ⦿ Revenue growth driven by new content served by propri
Slide 14: Sport B2C Revenue
SPORT B2C REVENUE ⦿ Revenue up 12% to $90m (2018: $80m), up 19% at constant currency despite prior year strong comparative including the FIFA World Cup ⦿ A CAGR of 46% since 2013 platform change ⦿ Revenue increase led by regulated markets with UK and Italy Sport players deposits up 32% and 30% respe
Slide 15: Poker B2C Revenue
POKER B2C REVENUE ⦿ Revenue down 13% to $43m (2018: $49m); H2 2019 up 7% YoY reflecting stablisation as of mid 2018 ⦿ This outcome is driven by payments restrictions in certain markets and the impact of pooled liquidity between Spain and France (888 currently does not operate in France) ⦿ Cross-sell
Slide 16: Bingo B2C Revenue
BINGO B2C REVENUE ⦿ Revenue up 19% to $38m (2018: $32m); up 24% at constant currency; down 3% pro-forma ⦿ New customer acquisition up 23% (up 10% pro-forma) Bingo B2C Revenue 2019 vs. 2018 $m % 38 24% 32 19% 2018 2019 Nominal Constant FX 16
Slide 17: Marketing
MARKETING ⦿ Stable marketing ratio at 29% (2018: 29%) despite higher marketing investment in absolute terms ⦿ Very encouraging 22% increase in new customer acquisition ⦿ Effective overall CPA decrease year over year, reflecting efficiencies Marketing Cost FY 2019 vs. FY 2018 $m Marketing Costs % Mar
Slide 18: Growth in Regulated Markets – Gaming Duties
GROWTH IN REGULATED MARKETS – GAMING DUTIES ⦿ Increase in gaming duties driven by higher rates and 888’s increase in regulated revenue Gaming Duties Bridge 2018 to 2019 100 4.0 90 6.4 4.8 80 10.6 70 60 96 50 40 70 30 20 10 Gaming Duty UK POC3 UK Organic - Italy Other Gaming Duty 2018 Increase Revenu
Slide 19: Adjusted EBITDA and Margin
ADJUSTED EBITDA AND MARGIN ⦿ US$26 million additional gaming duties impact ⦿ Adjusted EBITDA at $86m (2018: $107m) and $92m at constant currency ⦿ Adjusted EBITDA margin at 15% (2018: 20%) Adjusted EBITDA 2019 vs. 2018 $m Adjusted EBITDA % Adjusted EBITDA margin 107.1 20.2% 85.6 15.3% FY 2018 FY 201
Slide 20: EBITDA Bridge
EBITDA BRIDGE ⦿ Positive underlying performance ⦿ Gaming duty reflect POC3 impact in the UK as well as tax updates in Italy, Romania and Spain EBITDA Components FY 2019 110 Increase Decrease 10.4 100 8.6 90 6.2 10.8 7.1 80 107.1 70 91.8 85.6 60 50 40 EBITDA Gaming Duty M&A’s & Other Markets impact O
Slide 21: Itai Pazner, CEO | Operational Review
ITAI PAZNER, CEO | OPERATIONAL REVIEW 21
Slide 22: Business Momentum
BUSINESS MOMENTUM ⦿ Deposits are the engine behind the Group’s growth prospects ⦿ Healthy growth driven by regulated markets has continued during 2019 ⦿ The positive trend has continued into the first quarter of 2020 so far Deposits Trend 2010 – 2020 350% Regulated Markets Non-Regulated Markets 300%
Slide 23: Casino Regulated Markets Engine
CASINO REGULATED MARKETS ENGINE ⦿ Regulated markets lead growth with high acquisition trend across brands supported by Orbit and 888’s marketing strategy ⦿ Italy new customers up 69% despite marketing restrictions since mid 2018 ⦿ Sweden new customers up 73% reflecting the Group’s successful launch
Slide 24: Effective Marketing
EFFECTIVE MARKETING ⦿ Influx of new customers recruited accompanied by increased efficiencies ⦿ Record-breaking FTDs –surpassing the 1M threshold, driven by regulated markets ⦿ Constant improvements in CPA, by focusing on the right blend of channels by product and market B2C FTD’s & Effective CPA Tr
Slide 25: Safer Gaming
SAFER GAMING Affordability Enhanced Smarter & Safer Seamless KYC Safer Tools Gambling Capabilities Tools Usage UP 28%! Safer Gambling Earlier 888 Culture – “TOO MUCH Customer Detection on Safer Better IS TOO Interactions Customer Together MUCH” UP 16%! Behavior Campaign 25
Slide 26: UK Success
UK SUCCESS ⦿ Recreational player focus; Best in breed customer experience ⦿ Compliance and safer gaming at the forefront of our operations ⦿ Enhanced Orbit Casino capabilities and evolving 888sport product ⦿ Effective marketing, R&D and analytics UK Revenue and VIP’s Share UK B2C Revenue 40% 888Casi
Slide 27: Regulated Continental Europe
REGULATED CONTINENTAL EUROPE Continental Regulated Progress (Bets EUR) ⦿ 20% increase outside of UK ⦿ Expansion in established regulated markets 2000% ⦿ New regulated markets launched ⦿ Future regulated markets provide future oppurtunities 1500% Bets 1000% 500% 0% 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4
Slide 28: US – Poised for Growth
US – POISED FOR GROWTH ⦿ Consistent three-pronged strategic approach: ⦿ Organic growth in New Jersey and additional states ⦿ Strategic initiatives, including developing US partnerships ⦿ Continue to push WSOP and Harrahs with Caesars in NJ, NV and additional states ⦿ Organic: ⦿ Focused on product en
Slide 29: Product Centricity
PRODUCT CENTRICITY ⦿ An organisational and cultural focus – product is our advantage ⦿ Newly formed product group, building a long-term product vision ⦿ Building blocks include AI, personalisation, marketing tools, RG, UX and many more ⦿ Orbit as a benchmark and resounding success story ⦿ Tools and
Slide 30: The Road Towards Personalisation
THE ROAD TOWARDS PERSONALISATION ADVANCED OFFERED ROBUST CONTENT SINCE TESTING PERSONALISATION FIRST LOGIN ENVIRONMENT 30
Slide 31: Casino Leadership
CASINO LEADERSHIP 464 22 13 DAILY JP ENHANCED CRM NEW GAMES NEW PREMIUM NEW GAME PROVIDERS NEW PROPRIETARY IN-HOUSE GAMES & 3RD PARTY CAPABILITIES 31
Slide 32: The New 888sport
THE NEW 888SPORT ⦿ Strong growth continued ⦿ “Upfor8” prediction game is making a difference in customer acquisition & CRM ⦿ New “Spectate“ platform integration progressing as planned ⦿ 888sport.se successfully relaunched ⦿ Dublin site established as the new 888sport hub ⦿ A big Casino like emphasis
Slide 33: Bingo Progress in 2019
BINGO PROGRESS IN 2019 NEW NEW 179 7 7 CLIENT 52-5 BINGO NEW GAMES NEW PREMIUM NEW PROVIDERS SNOW WHITE BINGO ROULETTE IN-HOUSE GAMES 33
Slide 34: Poker in Motion
POKER IN MOTION ⦿ Poker is an important vertical in 888’s proposition and Group remains confident in its value ⦿ Clear stablisation trend as of mid 2018 ⦿ Poker8 development program will be a big product overhaul with many ‘Orbit inspired’ features planned ⦿ Strong position in Italy and Portugal ⦿ P
Slide 35: Summary and Into 2020
SUMMARY AND INTO 2020 ⦿ Back to growth across several key markets and products ⦿ Milestone FTD achievement fuel in our engine ⦿ Product focus and operational discipline delivering results ⦿ Casino and Sport leading growth, stabilising Poker and Bingo ⦿ Looking forward to a new era in 888sport ⦿ Safe
Slide 36: Q&A
Q&A 36
Slide 37: Appendix
888 Appendix
Slide 38: Profit and Loss Account
1 PROFIT AND LOSS ACCOUNT $US Millions FY 2019 FY 2018 ⦿ Figures shown before the impact of IFRS 16 up to Adj. Revenue 560.3 540.6 EBITDA 2 VAT accrual release - 10.7 ⦿ Higher gaming duties of $25.6m impact adjusted EBITDA Revenue (excluding VAT accrual release) 560.3 529.9 margin 3 Operating expens
Slide 39: Balance Sheet
BALANCE SHEET $US Millions 2019 2018 Non-current assets Goodwill and other Intangible assets 240.4 200.3 ⦿ Strong balance sheet with low leverage Right-of-use assets 33.3 - Property, plant and equipment 13.0 11.0 ⦿ Ample liquid resources Other non-current assets 3.4 2.2 Investments 0.9 1.1 Current a
Slide 40: Cash Flow
CASH FLOW $US Millions Period Ended 31 December 2019 2018 Profit before income tax 45.3 108.7 ⦿ 95% of Adjusted EBITDA translated into cash Adjustments 40.2 19.5 Changes in working capital 2.6 (58.7) Exceptional items - (11.1) VAT accrual release - (10.7) Income tax paid (6.5) (5.6) Net cash from op
Slide 41: B2C Revenue
B2C REVENUE ⦿ B2C Revenue up 11% to $531m (2018: $479m), a 15% increase at constant currency ⦿ Growth engines remains regulated markets, up 22% at constant currency ⦿ B2C deposits increased 20% while active players increased 19% ( 15% proforma) B2C Revenue 2009-2019 FX Historical VAT Release 550 490
Slide 42: Cost Structure
COST STRUCTURE ⦿ Total costs at 84.6% of revenue* (2018: 79.8%) driven primarily by higher gaming duties ⦿ Higher gaming duties result from the Group’s regulated markets focus coupled with higher gaming duties rates in the UK, Italy and Romania ⦿ Admin cost increases are the result of non-recurring
Slide 43: Bingo B2C Performance
BINGO B2C PERFORMANCE ⦿ Pleasing results since the beginning of the year supported by successful campaigns for leading B2C brands New Customers Trend 888Ladies Costa 300% 400% 350% 250% 300% 200% 250% 150% 200% 150% 100% 100% 50% 50% 0% 0% 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 4