Playtech Plc · LSE:PTEC
Playtech — FY2010 Earnings Presentation
53 slides from Playtech's earnings presentation, March 2011
Slide 1: Annual Results: Year ending 31 December 2010
@playtech ANNUAL RESULTS Year ending 31 December 2010 Sng iani ae kt Va
Slide 2: Agenda
• Introduction: Roger Withers, Chairman • Financial Review: Shuki Barak, CFO • Review of 2010: Mor Weizer, CEO • Current Trading: Mor Weizer, CEO • Strategic Initiative: Acquisition: Mor Weizer, CEO • Questions and Answers 1
Slide 3: Solid performance across key financial metrics
• Solid performance across key financial metrics • Gross income up 26% • Adj EBITDA up 10% • Adj Net profit up 4% • Final dividend set at 9.6 € cents • Total of 19.0 € cents for the year, up 4% • Positioning for growth in regulated markets 2
Slide 4: Strategic partnerships, acquisitions and governance
• Strategic Partnerships • Scientific Games • Sportech • Acquisitions • Virtue Fusion • Intelligent Gaming (Jan 11) • PTTS Turnkey (Mar 11) • Corporate Governance • 2 experienced non-execs & Head of Compliance 3
Slide 5: UKLA Premium Listing eligibility
• UKLA has deemed Playtech to be currently ineligible for a Premium Listing • A key test is that a company must have audited accounts covering at least 75% of its business for the past three years • due in part to the rapid growth of WHO, the business contributed over 25% of Playtech’s profits in 20
Slide 6: Financial Review
FINANCIAL REVIEW
Slide 7: Gross income, total revenue, adjusted EBITDA
€173.1 170 +26.1% 150 €142.3 €137.3 130 +24.0% €111.5 €111.5 €114.8 110 +10.0% €103.1 €93.7 90 €74.7 70 50 Gross income Total revenue Adjusted EBITDA 2008 2009 2010 5
Slide 8: Adjusted EBITDA margin
€103.1 Adjusted EBITDA Margin €173.1 170 +10.0% Out of Gross Income 150 €93.7 €142.3 2009 €137.3 2010 130 Adjusted Adjusted 68.2% €111.5EBITDA 59.5% €111.5 €114.8 EBITDA Gross Gross 110 income income €103.1 €93.7 The Decrease in the 2010 margins is 90 Out of Total Revenue mainly due to acquisitions
Slide 9: Total Results
Total Results €142.3 +24% 140 13% 120 €114.8 4% +10% €103.1 100 €93.7 7% 3% 83% 80 VF 90% GTS PT Organic 60 40 Total Revenue Total Revenue Adjusted Adjusted 2009 2010 EBITDA 2009 EBITDA 2010 7
Slide 10: Excluding GTS, VF & France
Excluding GTS, VF & France 140 120 +11.9% €110.0 €98.3 100 +9.6% €84.9 VF 80 €77.5 GTS France PT Organic 60 40 Total Revenue Total Revenue Adjusted Adjusted 2009 2010 EBITDA 2009 EBITDA 2010 8
Slide 11: Gross income by product
180 €173.1 160 €137.3 WHO Share of profit 140 Other 120 €111.5 Bingo Poker 100 Casino 80 60 40 9 2008 2009 2010
Slide 12: Total Growth
180 €173.1 WH SOP Total Growth +6% +26.1% 160 Existing Licensees €137.3 140 +5.1% New Business 120 & acquisitions €111.5 +20.8% France 100 -5.8% 80 60 40 10 2008 2009 2010
Slide 13: Increased diversification of licensees
• The increase in diversification was enhanced with the addition of GTS and VF licensees • As local regulated markets grow, this diversity will continue, eliminating smaller, less economic licensees Increased diversity = Decreased risk % of total revenues 2009 2010 Top 2 licensees 39% 33% Top 5 lice
Slide 14: Operating Expenses 2010
Operating Expenses 2010 Adjustable Operating Expenses Including Dep & Amor 27.0 , 28% 70.0 , 72% Adjusted Expenses Excluding Dep & Amor 12
Slide 15: Operating Expenses 2010 (excl. Dep&Amor)
Operating Expenses 2010 €70.0m = 100% (excl’ Dep&Amor) Employee Related Costs Admin & Office Costs 39.6 , 57% Travelling, Exhibitions & Marketing Costs Other Operational Costs 12.6 , 18% 7.8 , 11% 5.4 , 8% 4.6 , 6% Revenue Driven Costs 13
Slide 16: Revenue Driven Costs
Revenue Driven Costs Employee Related 2009 2010 Costs Total Revenue 114.8 142.3 Admin & Office Costs 39.6 Revenue Driven , 56% Costs 4.1 12.6 % out of Revenue 3.6% 8.9% Traveling, Exhibitions & Marketing As expected the Revenue Driven Costs increased due toCosts Virtue Fusion and GTS Other The proje
Slide 17: Operating Expenses excl. revenue driven costs
Operating Expenses 2010 €57.4m = 100% (excl’ Dep&Amor & Revenue driven costs) Employee Related Costs 39.6 , 69% Admin & Office Costs Travelling, Exhibitions & Marketing Costs 7.8 , 14% 5.4 , 9% 4.6 , 8% Other Operational Costs 15
Slide 18: Employee Related Costs
Employee Related Costs Employee Related Costs 39.6 , 69% Admin & Office Costs Travelling, Exhibitions & Marketing 2009 Costs 2010 Adjusted Operating 12.6 , Expenses 18% w/o Revenue Driven Costs 39.5 57.4 7.8 , 14% Employee Related Costs 5.6 , 9% 4.6 , 8% Other 25.4Operational 39.6 % out of Adjusted
Slide 19: Admin & Office Costs
Admin & Office Costs 2009 2010 Adjusted Operating Expenses w/o Revenue Driven Costs Employee 39.5 Related 57.4 Costs Admin & Office Costs 5.7 7.8 39.6 , 69% % out of Adjusted Operating Expenses w/o Revenue Driven Costs 14.5% 13.6% 27.0 , 28% The projection for FY 2011 is 12.5% - 13.5% out of Adjuste
Slide 20: Travelling, Exhibitions & Marketing Costs
Travelling, Exhibitions & Marketing Costs 2009 2010 Adjusted Operating Expenses w/o Revenue Driven Costs 39.5 Employee 57.4 Related Costs Travelling, Exhibitions & Marketing Costs 4.4 4.6 % out of Adjusted Operating Expenses w/o Revenue Driven Costs 11.2% 8.0% 39.6 , 69% 27.0for The projection , 28%
Slide 21: Other Operational Costs
Other Operational Costs 2009 2010 Adjusted Operating Expenses w/o Revenue Driven Costs 39.5 Employee 57.4 Related Costs Other Operational Costs 4.0 5.4 % out of Adjusted Operating Expenses w/o Revenue Driven Costs 10.0% 9.4% 39.6 , 69% 27.0 The projection for, 28% Admin FY 2011 is 9.5% - 10.5% out o
Slide 22: Cash generation
PTEC continues to be highly cash generative with very high conversation rate from adjusted EBITDA Net cash provided from operating activities including cash received from WHO – €103.3m Cash Used in investing activities: • Sportech – €11.3m • Virtue Fusion - €26.1m Cash used in financing activities –
Slide 23: Robust balance sheet
Robust balance sheet Cash balance of €68.5m at 31 December 2010 Total Balance Sheet assets - €384.1m Main Assets & Investments VF - €36.6m GTS - €20.4m Tribeca - €23.9m Investment in WH Online - €162.2m Other investments - €11.3m (*) Full summary the balance sheet statement detailed in the appendix
Slide 24: Review of 2010
REVIEW OF 2010
Slide 25: Casino content and new games
• Over 70 new casino games, move to monthly roll-out • 5 new branded titles/ 10 games • Made up 3 of 6 top slots by revenue in H2 • Keeps the portfolio fresh & players interested • Enhanced Flash capability broadens access/ exposure on sites • Complementary third-party content • Cross-platform becom
Slide 26: Product developments across casino, bingo, poker
• Casino: open platform & third-party • Bingo: international, branded, PT side games • Poker: mobile apps and lobby enhancements • Emerging: Sports betting product; Lottery games pack • Responsible gaming tools; payment systems • Cross-platform developments • Mobile app launches • Videobet: UK roll-
Slide 27: New licensees and products
• Over 15 new licensees, 19 new products • Major names reflect Playtech’s appeal amongst Tier 1s • RAY, Betfair, Codere, Unibet • Product infill strategy: Tain, bet365 • Licensees >€1 m: two thirds have 2 or more Playtech products • Cross-platform gaining real traction: • e.g. Buongiorno 24
Slide 28: Strategic partnerships
• Scientific Games: • Sciplay gaining traction and profile • Global Draw: Videobet roll-out over halfway • Sportech: • Positioning for the US with SGR • William Hill Online: • Strong operational performance in its 2nd year • Cash dividend growth • Partnerships offer flexibility and deeper penetratio
Slide 29: Videobet UK roll-out
• Dominant software provider in UK market: great shop window • Roll-out now over 11,000 machines: over 300+ daily • Expect to be substantially complete end Q2: 20,000 machines • Cash box constant • Operators already looking for new features 12000 10000 8000 6000 # of Sites 4000 # of Terminals 2000 0
Slide 30: Videobet future opportunities and financial metrics
• Future opportunities • Financial metrics • UK pub market • Both daily fee/ revenue share models • Central & South America • 2011 is breakeven year • Europe: Nordic, Italy, Germany • Full roll-out/ new markets drive margins Market Positioning Games – core expertise TARGET Videobet International man
Slide 31: Slide 31
Slide 32: Videobet milestones
VB roll-out over launched launched launched signs halfway signs gaming launched gets US approvals acquisition terminals for SGR 28
Slide 33: Current Trading
• Like-for-like growth – over 8% • Daily average revenues first nine weeks vs. 2010 • Excluding impact of France closure • Excluding GTS & VF acquisitions • Daily average vs. Q4/10: over 1.0% ahead 29
Slide 34: Strategic Initiatives
STRATEGIC INITIATIVES ee td rs
Slide 35: Regulated markets progress
• 4 new regulated markets/regulated products • New markets: Estonia, Finland, France • New product: Italian bingo Q2 10, casino expected H1 2011 • Playtech launched in all new segments • Regulated market income • 46% of gross income(1) • 40% from total revenues • Expected to expand on the back of ad
Slide 36: Regulated market strategy
• Targeting operators in newly-regulating markets • Partnering with well-established operators • Proactively leveraging unique cross-platform capabilities • Scale and breadth across all products and networks • Strategic partnerships: global reach and leverage • Maintaining flexibility & opportunism
Slide 37: Acquisition structure
• Asset deal, not exercise of 2006 call options • Businesses have changed since 2006, additional assets/relationships included in regulated markets • Capabilities and expertise focused on newly regulating markets • Removes concerns over inherited liabilities • Non-interest bearing deferred considera
Slide 38: Rationale for turnkey solutions
• Strong and increasing demand for full turnkey solutions in regulated markets • Positions Playtech for major opportunities in newly-regulated markets: tenders are already underway • Turnkey solutions: e.g. Spain, Germany • Software & certain ancillary services: US, Greece, Germany • Licensees incre
Slide 39: Acquired businesses overview
• 4 divisions providing range of important ancillary B2B services • Marketing • Operations • Payment Advisory • Network Management • 850+ staff, principally based in Bulgaria & Philippines • All licensees use Playtech’s software • Revenues: H2 2010 annualised run rate €81.4m • EBITDA: Current run-ra
Slide 40: Divisions, services and clients
Division Revenues Services Clients (fee structure) € million H2 run % rate Marketing Services Affiliate management, media buying, 5 licensees including Imperial, Snai, 57.2 70 search engine optimisation and market- Mansion, Serbian Lottery (Revenue share) leading CRM capabilities: VIP mgmt Operation
Slide 41: Consideration terms
• €140m minimum consideration • Payments of €20-25m in 6 month intervals • No interest charge payable on outstanding balance: • Implies NPV of less than €130m for initial consideration • No PTEC financing requirement expected, out of free cash flow • Total consideration capped at €280m, based on 7x
Slide 42: Financial impact of acquisition
• Expected to be earnings enhancing immediately • C.13% plus enhancing 2012 and beyond – before adjustment(1) and synergies • Group EBITDA margins expected to be c.50% • No disruption to current earnings and cash flow profile • Operational synergies identified and yet to be factored in • Net assets
Slide 43: Q&A
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Slide 45: Adjusted EBITDA reconciliation
2009 2010 €’000 €’000 Operating profit 56,449 45,309 Amortisation 6,406 13,674 Depreciation 2,372 3,416 EBITDA 65,227 62,399 Share of Profit of associates before amortisation of intangibles 22,534 30,792 Change in FV of available for sale investment (CYF, ALOG & SPO) 399 2,223 Professional expenses
Slide 46: Adjusted net profit reconciliation
2009 2010 €’000 €’000 Net profit 69,511 64,670 Amortisation of investment in WH Online 10,513 8,266 Change in FV of available for sale investment (CYF, ALOG & SPO) 399 2,223 Discounting of deferred consideration 418 736 Amortization on acquisitions 3,282 7,516 Employee stock option expenses 5,150 5,
Slide 47: Cash flow summary
2009 2010 €’000 €’000 Net profit 69,511 64,670 Depreciation, Amortisation 8,778 17,090 Employees Stock Options Expenses 5,150 5,855 Change in FV of available for sale investments 399 2,223 Income from associate (22,534) (30,792) Amortisation of intangibles in associate 10,513 8,266 Net change in Ass
Slide 48: Balance sheet summary
As of As of 31 Dec 2009 31 Dec 2010 €’000 €’000 Cash and Cash Equivalents 58,700 68,519 Receivables 16,443 22,749 Investments (CYF, ALOG & Sportech) 5,513 10,932 Investment in WH and other equity associates 170,366 162,583 Intangible assets 65,459 100,384 Fixed Assets & other non current Assets 10,7
Slide 49: Depreciation and amortisation
• Depreciation • In line with business growth, still immaterial • Capex additional growth only on dedicated investments for regulated markets • Amortisation • Development costs (internally generated) – €4.7m • Amortisation on acquisitions/investments: • Tribeca - €3.2m • WHO - €8.3m • GTS - €1.4m •
Slide 50: Summary of income statement
SUMMARY OF INCOME STATEMENT: 2009 2010 €’000 €’000 Revenues 114,775 142,294 PROFIT FOR THE YEAR Adjusted operating expenses (43,639) (70,015) (excl’ Dep&Amor) Depreciation & Amortisation (5,496) (9,574) Amortisation on acquisitions (3,282) (7,516) ADJUSTED PROFIT Other adjustable operating expen
Slide 51: Summary of income statement
SUMMARY OF INCOME STATEMENT: 2009 2010 €’000 €’000 Revenues 114,775 142,294 PROFIT FOR THE YEAR Adjusted operating expenses (43,639) (70,015) (excl’ Dep&Amor) Depreciation & Amortisation (5,496) (9,574) ADJUSTED PROFIT Operating profit 65,640 62,705 Share of WHO profit 22,534 30,792 ADJUSTED E
Slide 52: Summary of income statement
SUMMARY OF INCOME STATEMENT: 2009 2010 €’000 €’000 Revenues 114,775 142,294 PROFIT FOR THE YEAR Adjusted operating expenses (43,639) (70,015) (excl’ Dep&Amor) ADJUSTED PROFIT Operating profit 71,136 72,279 Share of WHO profit 22,534 30,792 ADJUSTED EBITDA Adjusted EBITDA 93,670 103,071 (*) Bre
Slide 53: Adjustments to EPS
40.0 38.5 37.3 35.0 8.3 11.8 30.0 25.0 Adjustments to EPS EPS 20.0 29.0 26.7 15.0 10.0 2009 2010 46