Evoke Plc · LSE:EVOK
Evoke — 888 Holdings — H1 2010 Earnings Presentation
56 slides from Evoke's earnings presentation, Aug 31, 2010
Slide 1: Results for the Six Months Ended 30 June 2010
Results for the Six Months Ended 30 June 2010 31 August 2010 0
Slide 2: Agenda
Agenda Gigi Levy Introduction Aviad Kobrine Financial Review Gigi Levy Operating Review Regulation Gigi Levy & Summary and Q&A Aviad Kobrine
Slide 3: Highlights
Highlights † Total Operating Income up 10% to $130m Total Operating Income B2C up 18% to $110m Total Operating Income B2B down 18% to $20m (9% up on a pro-forma basis † †) Total Operating Income B2C Casino up 6% to $59m Total Operating Income B2C Bingo up 363% to $24m Total Operating Inc
Slide 4: Financial Review
Financial Review
Slide 5: Profit and loss account
Profit and loss account $m H1 2010 H1 2009 % Change Total Operating Income 130.2 117.9 10% Operating expenses1,4 45.8 41.6 Research and development expenses4 13.2 11.9 Selling and marketing expenses 47.5 35.3 Administrative expenses2,4 11.2 8.6 EBITDA1,2,4 12.6 20.6 (39%) Depreciation, Amortization
Slide 6: Total Operating Income
Total Operating Income H1 10 - Total Operating Income up 10% to $130m (H1 09: $118m) Total Operating Income 2007 – H1 2010 160 140 120 129 130 118 100 127 135 $m 80 120 60 97 40 20 0 H1 07 H2 07 H1 08 H2 08 H1 09 H2 09 H1 10 5
Slide 7: Geographic segmentation TOI
Geographic segmentation TOI UK up 44%, Europe (ex UK) down 5%, UK by far largest market with 47% Increase in UK share driven be acquisition of Wink Bingo Geographic segmentation, TOI H1 09 and H1 10 H1 09 H1 09 H1 10 9% 70 9% 36% 60 45% 50 61 $m 40 53 51 30 43 H1 10 20 6% 8% 47% 10 39% 11 8 11 1
Slide 8: Total Operating Income B2C
Total Operating Income B2C H1 10 - Total Operating Income up 18% to $110m (H1 09: $94m) Total Operating Income B2C 2007 – H1 2010 120 100 110 102 94 80 106 $m 118 60 107 95 40 20 0 H1 07 H2 07 H1 08 H2 08 H1 09 H2 09 H1 10 7
Slide 9: Total Operating Income B2B
Total Operating Income B2B H1 10 Total Operating Income up 9% to $27m (H1 09: $24m) on a pro- forma basis H1 10 Total Operating Income down 18% to $20m (H1 09: $24m) Total Operating Income B2B 2007 – H1 2010 30 25 27 7 20 24 22 20 $m 15 17 10 13 5 2 0 H1 07 H2 07 H1 08 H2 08 H1 09 H2 09 H1 10 B2
Slide 10: TOI B2C by Product
TOI B2C by Product Casino up 6%, Bingo up 363%, Poker down 25%, Emerging offering up 25% Bingo growth driven by Wink Bingo acquisition, Emerging Offering growth is driven by 888Sport and Live Dealer Total Operating Income B2C H1 09 and H110 H1 09 H1 10 60 59 50 56 40 $m 30 20 26 23 20 10 6 8 5 0
Slide 11: TOI Bingo B2C
TOI Bingo B2C H1 10 TOI up 363% to $23m (H1 09: $5m) Bingo growth driven by the acquisition of Wink Bingo TOI Bingo B2C 2008 – H1 2010 25 20 $m 15 23 10 11 5 8 0 FY08 FY09 H1 10 10
Slide 12: TOI Emerging offering B2C
TOI Emerging offering B2C H1 10 TOI Emerging offering up 25% to $8m (H1 09: $6m) TOI B2C Emerging Offering 2008 – H1 2010 10 8 8 8 $m 6 4 6 4 2 1 0 H1 08 H2 08 H1 09 H2 09 H1 10 11
Slide 13: Costs Structure
Costs Structure Costs up to 90% from Total operating income (H1 09: 83%) Costs as % of TOI H1 09 and H1 10 90% 100% 83% 9% 80% 7% 30% 36% Admin. Expenses 60% S&M expenses 40% 10% 10% R&D Operating expenses 20% 35% 35% 0% H1 09 H1 10 *Excluding share benefit charges depreciation amortisation, FX an
Slide 14: EBITDA and EBITDA margin
EBITDA and EBITDA margin EBITDA * down 39% to $13m (H1 09: $21m) EBITDA * margin to 10% from Total Operating Income (H1 09: 17%) EBITDA* H1 09 and H1 10 EBITDA* EBITDA* margin 20% 25 17% 20 15% 21 $m 15 10% 10 13 10% 5% 5 0 0% H1 09 H1 10 H1 09 H1 10 * Excluding share benefit charges and restruc
Slide 15: Chargebacks & PSP fees - Group
Chargebacks & PSP fees - Group PSP & CB at 5.9% from TOI (H1 09: 8.5%) Optimisation and risk management efforts contributed to significant efficiency improvement PSP fees and Chargeback as % of TOI PSP CB 8.5% 10% 5.9% 8% 2.6% 6% 0.8% 4% 5.9% 5.1% 2% 0% H1 09 H1 10 14 14
Slide 16: Total Marketing Costs
Total Marketing Costs Total Marketing ratio 36% (H1 09: 30%) Total Marketing costs as % of TOI $48m 40% $35m 30% 36% 30% 20% 10% 0% H1 09 H1 10 15
Slide 17: B2C Marketing Costs
B2C Marketing Costs B2C CPA* at $166* (H1 09: $175*) B2C Marketing costs $48m 50 100% 7 15% 22% $35m 40 80% 22% 10 20% 8 30 60% $m 26% 7 12 19% 20 7 40% 10 18 20% 40% 38% 14 0 0% H1 09 H1 10 H1 09 H1 10 Affiliates Offline Online Other Affiliates Offline Online Other *CPA – excluding Bingo and revs
Slide 18: Player acquisition B2C
Player acquisition B2C B2C Total FTDs up 64% to 235K (H1 09: 143K) Player acquisition – number of FTD (000) 100 H1 09 H1 10 80 $80m 91 $67m 60 59 48 51 40 43 44 20 22 19 0 Casino Poker Bingo Sport 17
Slide 19: Poker Liquidity
Poker Liquidity Poker industry suffered a decline of -32% 888Poker liquidity changed only -25% Poker Liquidity Jul10/Jan10 Jan 10 Jul 10 Jan 10 Jul 10 35,000 1,200 -32% -25% 30,000 1,126 32,229 Avg. Ring games players 1,000 25,000 800 846 20,000 22,044 600 15,000 400 10,000 200 5,000 0 0 888Poke
Slide 20: Customer Bonuses B2C Casino and Poker
Customer Bonuses B2C Casino and Poker Keeping customer bonus efficiency optimized Customer bonuses* as % of TOI Casino Poker 25% 20% 19% 18% 15% 16% 16% 14% 10% 8% 5% 7% 6% 5% 5% 0% H1 08 H2 08 H1 09 H2 09 H1 10 * Bonus excluding converted loyalty points 19
Slide 21: Strong Real Money Registrations Growth
Strong Real Money Registrations Growth Registrations increased by 22% reaching 7.9 million at 30 June 2010 CAGR of 36% between 2003 to 2010 Real Money Registrations Q1 2003- Q2 2010 8 millions 7 6 5 4 3 2 1 0 2003 2004 2005 2006 2007 2008 2009 2010 20
Slide 22: Balance Sheet as at 30 June
Balance Sheet as at 30 June $m* 30Jun 2010 30Jun 2009 Non-current assets Intangible assets 115.3 46.5 Property, plant and equipment 21.1 19.4 Financial assets & Deferred tax 0.8 1.2 137.1 67.2 Current assets Cash and cash equivalents 65.7 102.9 Trade and other receivables 19.8 18.3 Total Assets 222.
Slide 23: Cash Flow Statement
Cash Flow Statement $m* Six month ended 30 June H1 10 H1 09 Cash flows from operating activities Profit before tax 4.3 9.8 Share benefit charges 1.9 5.1 Profit before tax and Share benefit charges 6.2 14.9 Depreciation, impairment and amortisation 5.6 3.9 Interest received (0.1) (0.4) Change in curr
Slide 24: Operational Review
OX 9 "M906 ee HOLDINGS Operational Review
Slide 25: Agenda
Agenda The regulatory landscape and the market Product innovation B2C marketing DF sales and delivery Mytopia Summary 24
Slide 26: The regulatory landscape and the market
The regulatory landscape and the market 25
Slide 27: Quick regulatory developments in the EU
Quick regulatory developments in the EU New legislation Ongoing legislative Ongoing discussions process Many additional changes: US Canada LATAM Eastern Europe Australia APAC Discussions ongoing in most major jurisdictions
Slide 28: The world is moving quicker than expected
The world is moving quicker than expected O Some changes will be great O Some will be tougher O And some may even be worse… O The future lies in regulated markets O The challenge lies in making a successful transition O Some companies will not make it
Slide 29: How do we look at companies today
How do we look at companies today What % of B2C revenues is ‘newly regulated’? 888 – circa 50% What % of B2B revenues is ‘newly regulated’? Dragonfish – over 75% What local licenses have been awarded: 888 – UK (Gibraltar), Italy, France What capabilities exist for the ‘new world? B2C
Slide 30: Our goal
Our goal Transition the business over the coming 3 years to a full ‘locally regulated’ model B2C - become one of the few leading global B2C operators in regulated markets and achieve a top tier position B2B – cement our position as a leading provider of software and services for operators in r
Slide 31: What do we need to get there
What do we need to get there Good relationship with regulators Technology: Great innovative products B2B-ready & regulatory-ready systems B2C: Strong abilities in brand building and customer acquisition in regulated markets Great local partners in each regulated market B2B: Best co
Slide 32: Product innovation
31 888: HOLDINGS Product innovation
Slide 33: Product innovation
Product innovation Ongoing focus on product innovation Increased investment in R&D despite challenging trading Major product improvements – in all product areas Significant steps forward in 3 areas: B2B readiness Regulatory readiness Payment processing for other companies Major addit
Slide 34: Number of Games
Ongoing addition of new games 180 160 140 120 Video Slot Classic Slots Number of Games Scratch card 100 Sport, Race Keno 80 Hi Lo, Dice & Arcade Poker table games 60 Card & Table Games Roulette BJ 40 20 0 Q1/2008 Q2/2008 Q3/2008 Q4/2008 Q1/2009 Q2/2009 Q3/2009 Q4/2009 Q1/2010 Q2/2010 33
Slide 35: Poker 6 – our best ever
S Lobby iy Profle “Sore _) © Poker 6 Begnrers Quick seat settnes | more Games Prometions Help $5 no lose =] bet now! ene; ayo ST Al Games My favourites Practica Play © Ey clicking Pay’ you wil be seated at a table end charged maximum buy-tn Cash game 10 Seats ives Tournament 10 Players St & Go $1+20
Slide 36: With some encouraging initial results
With some encouraging initial results
Slide 37: 3D Casino
3D Casino 36
Slide 38: Sport enhancements
Sport enhancements Improved Live Betting Widget Mobile betting Daily Video Promo Live Odds ‘Carousel’ Banner 37
Slide 39: B2C activities
B2C activities 888 com 888 888 888 888 888 casino poker sport bingo games 888 com
Slide 40: B2C in H1
B2C in H1 H1 saw increased focus on regulated markets With increased marketing, especially in the UK Overall good strategic position: Almost 50% of revenues in the UK No dependency on any other single market Most ‘regulating’ markets present growth opportunities A few focus areas: Ma
Slide 41: Major cross-platform, mass media based campaigns
Major cross-platform, mass media based campaigns With 8 different and unique ways for you to take, you simply won’t find a better chance than right here at 888poker – and that goes for everyone, from the complete poker novice to the more experienced player… Check out your 8 ways, pick your favorites
Slide 42: Expansion of Multi-branding strategy
Expansion of Multi-branding strategy
Slide 43: Differentiation through content
Differentiation through content
Slide 44: Social networking elements
Social networking elements Members | i»: cetermes> | PoKERSTARS » 282 1c Blogs at»: staFF> : CELEBRITY» ; MEMBERS » —_ ARMSTRONG BOUNCES BACK Nam aioustnferaus lectus id pharetra Nullam intercur bivendum fecisis. Utdolr odio, consequatid poris nec, intercum nan lacus. Sed herrert ultices vestioulum.
Slide 45: Initial Joint Ventures in regulated markets
Initial Joint Ventures in regulated markets A few additional deals in advanced stages Dragonfish as a source of leads
Slide 46: Dragonfish Sales and Delivery
Dragonfish Sales and Delivery
Slide 47: Focus on regulated markets
Focus on regulated markets ► More than 75% of revenues UK based ► Healthy pipeline in newly regulated markets: ► UK: a few new Bingo Networks ► France: 3 additional Poker licensees ► Italy: 3 additional major Casino licensees ► Romania: full turnkey solution for a few land-based Casino operators ► U
Slide 48: Significant potential, still not generating any revenues
Existing customers in ‘newly regulated’ markets ► Casino deals signed with bwin Italia, Gioco Digitale and Microgame S.p.A ► Provides platform to become one of largest casino providers in Italy ► A few of the current customers looking to expand their activity into the market ► Signed joint venture w
Slide 49: Focusing on profitable market segments - Bingo in the UK
Focusing on profitable market segments - Bingo in the UK ► Launch of three new standalone networks ► Rollover Bingo (Cashcade) ► Bingo Hollywood ► Sing Bingo ► Dragonfish now power over 20 standalone networks ► An agreement with MTV Networks UK & Ireland to provide bingo, marking their first step in
Slide 50: Corporate news
Corporate news ► Appointment of David Zerah as new Managing Director of Dragonfish – vast experience from the B2B TV and Media industry ► Awarded two of the most prestigious awards at the inaugural eGaming Review B2B Awards – White Label Partner of the Year and Bingo Network of the Year 49
Slide 51: Mytopia progressing quickly forward
Mytopia progressing quickly forward Revenues run rate more than doubled from the acquisition date Hundreds of thousands of active players Contracts to take major TV brands into social gaming Expected to show further growth
Slide 52: Summary
Summary Determining times ahead Many challenges – with significant prizes for the winners The direction is clear – locally regulated activities We are well positioned: products, B2C, B2B and a solid strategy Investment in R&D and marketing hurts short term EBITDA Encouraging current trad
Slide 53: Q&A
Q&A
Slide 54: Appendix
0 0° ° 99% © ee HOLDINGS Appendix
Slide 55: Appendix – KPIs
Appendix – KPIs Set out below are 888’s unaudited key performance indicators for the period Q1 2008 to Q2 2010. Comparative Results for 2010 are presented on a Pro forma Basis. Following the acquisition of Wink Bingo, commencing on 1st January 2010 the revenue generated by Wink Bingo is reported as
Slide 56: Appendix – KPIs Pro Forma
A Appendix di – KPIs KPI – Pro P F Forma US$m* 2008 2009 2010 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 B2C TOI Casino 35.8 36.3 34.8 29.6 26.7 29.2 29.4 33.4 32.8 26.5 Poker 21.9 19.7 17.4 14.5 13.7 12.5 12.5 12.9 11.6 8.0 Bingo 0.9 2.5 2.5 2.6 2.4 2.7 2.8 2.8 3.0 3.5 Emerging g g Offeringg 0.1 1.1 2.0 2.2 2.4