Evoke Plc · LSE:EVOK
Evoke — 888 Holdings — FY2018 Earnings Presentation
41 slides from Evoke's earnings presentation, Mar 12, 2019
Slide 1: Results for the Year Ended 31 December 2018
RESULTS FOR THE YEAR ENDED 31 DECEMBER 2018 1
Slide 2: Agenda
AGENDA Brian Mattingley | Introduction Itai Pazner | Overview Aviad Kobrine | Financial Review Itai Pazner | Operational Highlights Q&A 2
Slide 3: Itai Pazner, CEO | Overview
888 ITAl PAZNER, CEO | OVERVIEW
Slide 4: Consistent Progress
CONSISTENT PROGRESS ☉ Record EBITDA achieved ☉ Executing on our strategy ☉ Three successful acquisitions during recent months - strategic & bolt-on ☉ Continued product innovation with launch of new Casino and AI products ☉ Improving trends in the UK market ☉ Market diversification through new market
Slide 5: Aviad Kobrine, CFO | Financial Review
AVIAD KOBRINE, CFO | FINANCIAL REVIEW 5
Slide 6: 2018 Financial Highlights
2018 FINANCIAL HIGHLIGHTS ⦿ Revenue down 2% to $530m, primarily due to UK regulatory headwinds and challenging Poker ⦿ Revenue (ex. UK) up 6% with Casino and Sport up 17% and 18% respectively ⦿ Revenue from regulated markets (ex. UK) increased 14% ⦿ Spain and Italy revenue increased 15% with Spain s
Slide 7: Profit and Loss Account
1 PROFIT AND LOSS ACCOUNT $m FY 2018 FY 2017 % change Revenue 540.6 541.8 0% 2 VAT accrual release 10.7 0.0 Revenue (excluding VAT accrual release) 529.9 541.8 -2% 3 Operating expenses 137.8 138.8 Gaming duties 69.9 75.2 Research and development expenses 32.8 35.4 Selling and marketing expenses 155.
Slide 8: Group Revenue
GROUP REVENUE ⦿ Group revenue down 2% to $530m (2017: $542m). Reported revenue at $541m ⦿ Growth drivers remain Sport, Casino and continental European regulated markets ⦿ Long term growth track record with a CAGR of 16% since 2003 Revenue 2018 vs. 2017 $US millions FY 2018 FY 2017 ⦿ Group revenue in
Slide 9: B2C Deposit Trend
B2C DEPOSIT TREND ⦿ Engine is resilient and working well despite external challenges ⦿ Regulated markets continue to drive positive trends ⦿ UK decline is offset by double digit progress in continental European regulated markets ⦿ Improved UK performance in H2 Deposits Trend 2010 - 2019 250% Non-Reg
Slide 10: Our Engine – Like for Like Comparison
OUR ENGINE – LIKE FOR LIKE COMPARISON ⦿ Revenue outside of UK and disrupted markets* up 8% with new customer acquisition up 12% ⦿ Overall customer acquisition increased 7% driven by Sport and Casino ⦿ Customer acquisition in UK increased 7%, reflecting the Group’s refocused “mass markets” customer a
Slide 11: B2C UK Recovery
B2C UK RECOVERY ⦿ Deposits in the UK market recover from H2 18 ⦿ Casino UK deposits during H2 2018 are 24% higher than H2 2017 ⦿ Revenue progress during the last two quarters of the years - turnaround B2C UK Progress UK Quarterly Sequential Revenue Change New Customer Acquisition 7% 12% 7% 42% Rest
Slide 12: Geographical Segmentation
GEOGRAPHICAL SEGMENTATION ⦿ EMEA (ex. UK) representing 56% of revenue with Spain representing 13% of revenue ⦿ Regulated and taxed markets representing 70% of revenue ⦿ UK share reduced to 32% as a result of successful diversification strategy, re-deployment of marketing investment and tighter regul
Slide 13: Revenue Casino B2C
REVENUE CASINO B2C ⦿ Revenue up 8% to $318m (2017: $294m) ⦿ B2C Casino revenue up 17% ex. UK and up 20% when adjusted for disrupted markets* ⦿ Launch of Orbit, 888’s new cutting edge web-based Casino front end (late May), with very strong KPI’s so far ⦿ Casino growth is driven by direct acquisition
Slide 14: Revenue Sport B2C
REVENUE SPORT B2C ⦿ Revenue up 6% to $80m (2017: $75m) and up 18% ex. UK ⦿ Consistent growth with 42% revenue CAGR since 2008 ⦿ Strong FIFA World Cup partly offset by several big horse racing wins ⦿ Newly acquired Sport platform will enhance product differentiation and position 888 for continued gro
Slide 15: Revenue Bingo & Poker B2C
REVENUE BINGO & POKER B2C ⦿ Revenue from poker declined 37% to $49m (2017: $78m) ⦿ Poker remains an important acquisition channel with 25% of new players recruited via Poker gateway. Poker revenue does not reflect the impact of cross sell to other verticals ⦿ Bingo revenue decreased 17% to $32m (201
Slide 16: Marketing Cost
MARKETING COST ⦿ Decreased marketing spend in absolute terms, increased customer acquisition reflects efficiency of spend ⦿ Marketing ratio down to 29% (2017: 30%) ⦿ Increased focus and spend in continental European regulated markets Marketing Cost 2018 vs. 2017 $m Marketing Costs % Marketing Costs
Slide 17: Marketing Cost
MARKETING COST ⦿ Continued investment in developing continental European regulated markets ⦿ 37% increase in marketing spend in continental European regulated markets year on year ⦿ Marketing ratio increased by 7% in regulated markets (ex. UK) Marketing Cost 2018 vs. 2017 Marketing Costs for Contine
Slide 18: Cost Structure
COST STRUCTURE ⦿ Continued healthy operational gearing trend with total costs at 79.8% of revenue* (2017: 81.4%) ⦿ Lower marketing ratio – a reflection of cost control, targeted and effective investment ⦿ Lower gaming duties ratio mainly due to reduced tax rate in Spain Cost as a % of Total Revenue
Slide 19: Adjusted EBITDA and Margin
ADJUSTED EBITDA AND MARGIN ⦿ Improved Adjusted EBITDA and margin, despite headwinds ⦿ Adjusted EBITDA up 6% to $107m (2017: $101m) ⦿ Adjusted EBITDA margin at 20.2% (2017: 18.6%) Adjusted EBITDA 2018 vs. 2017 % $m Adjusted EBITDA Adjusted EBITDA margin 100.0 20.0% 90.0 100.7 107.1 20.2% 80.0 18.6% 7
Slide 20: Balance Sheet
BALANCE SHEET $m 31-Dec-18 31-Dec-17 Non-current assets Goodwill and other Intangible assets 200.3 159.8 Property, plant and equipment 11.0 9.0 Other non-current assets 2.2 2.3 Investments 1.1 1.3 214.6 172.4 Current assets Cash and cash equivalents 133.0 179.6 Trade and other receivables 33.0 44.2
Slide 21: Cash Flow
CASH FLOW $m Period Ended 31 December FY 2018 FY 2017 Cash flows from operating activities Profit before income tax 108.7 18.8 Gain from remeasurment of precviously held equity interest in joint ventures (9.3) 0.0 Share benefit charges 8.9 8.5 Depreciation and amortisation 20.3 19.3 Change in curren
Slide 22: Itai Pazner, CEO | Operational Review
ITAI PAZNER, CEO | OPERATIONAL REVIEW 22
Slide 23: Strategic Overview
STRATEGIC OVERVIEW ⦿ M&A ⦿ PRODUCT AND MARKETING INNOVATION ⦿ RESPONSIBLE GAMING AND COMPLIANCE ⦿ REGIONAL EXPANSION 23
Slide 24: M&A
M&A ☉ Dual strategy in play: ☉ Seeking value-enhancing opportunities, alongside transformational ones ☉ M&A pillars include: ☉ P&L accretive (Mandalay, £18m) ☉ Market footprint (AAPN, $28m) ☉ Product enhancing (BetBright, £15m) 24
Slide 25: Introducing the New 888sport
INTRODUCING THE NEW 888SPORT ⦿ A proprietary, modern, scalable sport platform built by BETBRIGHT team ⦿ Seasoned product, trading and risk management team ⦿ Introducing additional “Sport DNA” into 888 ⦿ Dublin HQ to be integrated into the 888 group ⦿ Sport product, technology and operations to be in
Slide 26: Product & Marketing Innovation
PRODUCT & MARKETING INNOVATION ⦿ Owning our product roadmap (new Sport platform) ⦿ Focus on new product capabilities - AI & personalisation ⦿ Player journey and experience (UX) ⦿ Constantly innovating our marketing efforts - delivering results (SEO, Attribution, Social) ⦿ FireStarter – harnessing 88
Slide 27: No. 1 Search Results – SEO Power
No. 1 SEARCH RESULTS – SEO POWER 27
Slide 28: 888Casino - The Next Generation
888CASINO - THE NEXT GENERATION 28
Slide 29: Product Innovation "Orbit" Launch
PRODUCT INNOVATION “ORBIT” LAUNCH ⦿ Launched end of May with gradual roll-out, now available in 90% of markets ⦿ Further markets and additional features planned during 2019 ⦿ Enables proprietary developed AI mechanisms including personalised game recommendations ORBIT PERFORMANCE Number of FTDs Incr
Slide 30: Growing 888sport
GROWING 888sport ⦿ Heading to become a $100m vertical for 888 ⦿ Already our second biggest product vertical SPORT New AI 30
Slide 31: Poker
POKER 8 ⦿ New product enhancements to bolster competitive edge and differentiate the product proposition ⦿ New Poker 8 gradual deployment – ‘PKO’ format and all-new UX ⦿ Aiming to bolster liquidity through forthcoming EU shared network ⦿ Remains a strong acquisition gateway ⦿ Launched in Sweden, Por
Slide 32: Bingo Platform
BINGO PLATFORM ⦿ Proactive compliance measures in the UK market ⦿ Average active days and deposits per player increased for funded players on the Dragonfish Bingo platform Bingo Platform Retention (GBP) 180% 180% Active Days Per Player* Deposit Per Player* 160% 160% 140% 140% 120% 120% 100% 100% 80%
Slide 33: Unique Innovation Programme
UNIQUE INNOVATION PROGRAMME 160 PARTICIPANTS 6 MENTORS 130 AWESOME IDEAS 35 TEAMS PASSED 7 MADE IT TO THE FINAL 3 WINNING TEAMS
Slide 34: Responsible Gaming & Compliance
RESPONSIBLE GAMING & COMPLIANCE Fairness Responsible Gaming Utilising AI – The tools Observer RESPONSIBLE Dedicated trained GAMING Underage detection team of experts Affordability KYC Proactive approach and collaboration 34
Slide 35: Regulated Markets – Track Record
REGULATED MARKETS – TRACK RECORD ⦿ Robust growth continues to be driven by comprehensive product offering ⦿ Poker launched in Italy in Q1, stronger summer seasonality and a strong winter season Deposit Trend 2014 - 2019 Spain Italy 800% 700% 600% 500% 400% 300% 200% 100% 0% 1 2 3 4 5 6 7 8 9 10 11 1
Slide 36: Regulated Markets - Opportunity
REGULATED MARKETS - OPPORTUNITY Regulation expected in 2020 Market estimated Recently launched Market estimated at $391M** at $710M* Market estimated at $1,365M** Market estimated at $7.1B*** 888sport, US Poker shared Market estimated liquidity and Live Casino product at $112M** launched New Jersey
Slide 37: UK - Positive Trends
UK - POSITIVE TRENDS ⦿ A recreational “mass market” strategy in place ⦿ After a long process of product enhancements and marketing refocus, we see positive trends which have continued into 2019 ⦿ In Casino, where ‘Orbit’ was launched, new customers during H2 increased by 60%, with deposits up by 16%
Slide 38: The US
THE US ⦿ AAPN acquisition enables 888 to pursue various opportunities and initiatives ⦿ New Jersey full product suite; Casino, Poker and now 888Sport ⦿ B2C & B2B agenda powering WSOP poker and Harrah’s, NJ ⦿ Utilising our global platform and front end ⦿ Over 30 states in various stages of online gam
Slide 39: Itai Pazner, CEO | Summary & Outlook
ITAI PAZNER, CEO | SUMMARY & OUTLOOK 39
Slide 40: Summary & Outlook
SUMMARY & OUTLOOK ⦿ Record EBITDA despite various headwinds ⦿ Two new markets launched in 2019 ⦿ Product development focus with Orbit launched in Casino; Sport, Poker & Bingo enhancements being launched ⦿ Post BetBright acquisition 888 now has proprietary technology across all four product verticals
Slide 41: Q&A
Q&A 41