Evoke Plc · LSE:EVOK
Evoke — 888 Holdings — FY2006 Earnings Presentation
70 slides from Evoke's earnings presentation, Apr 30, 2007
Slide 1: Results for the year ended 31 December 2006
Results for the year ended 31 December 2006 30 April 2007
Slide 2: Agenda
Agenda Gigi Levy • Introduction Aviad Kobrine • Financial Review • Quarter 1 2007 KPIs Gigi Levy • Operating Review • Bingo Acquisition • Regulation • Current Trading • Summary and Q&A 1
Slide 3: Financial Review
Financial Review 30 April 2007
Slide 4: Profit and loss account - Group
Profit and loss account - Group 2006 2005 % Change $m $m Net Gaming Revenue 289.9 271.0 7% Operating expenses 77.5 73.0 6% Research and development expenses 19.4 11.3 71% Selling and marketing expenses 84.3 100.0 (16)% Administrative expenses* 23.1 20.1 15% Operating profit* 85.6 ***66.7 28% Finance
Slide 5: Profit and loss account - Continuing Operations
Profit and loss account - Continuing Operations 2006 2005 % Change $m $m Net Gaming Revenue 157.0 123.0 28% Operating expenses 49.4 43.3 14% Research and development expenses 19.4 11.3 71% Selling and marketing expenses 51.0 54.9 (7)% Administrative expenses* 19.8 17.0 17% Operating profit* **17.3 (
Slide 6: Quarterly NGR – Continuing Operations
Quarterly NGR – Continuing Operations • NGR in 2006 up 28% to $157.0m (2005: $123.0m) • Quarterly CAGR of 7% from Q1 2005 to Q4 2006 Quarterly NGR Q1 2004- Q4 2006 50 40 $m 30 20 10 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2005 2006 5
Slide 7: Geographic Segmentation NGR – Continuing Operations
Geographic Segmentation NGR – Continuing Operations • Strong growth: UK 31%, Europe (ex UK): 21%, Americas (ex US): 47%, ROW: 20% • Similar geographical mix in 2005 and 2006 Geographic segmentation, NGR 2005 & 2006 NGR by Region 2005 NGR by Region NGR by Region 2006 6
Slide 8: NGR by Product and Region – Continuing Operations
NGR by Product and Region – Continuing Operations • Strong Poker NGR growth - up 81% to $68.2m (2005: $37.8m) • Poker: Europe (ex UK): 317%, UK: 48%, Americas (ex US): 74%, ROW: 88% • Casino NGR increased 4% to $88.8m (2005: $85.2m). 2005 & 2006 NGR by Product by Region Poker NGR By Region 2005-2006
Slide 9: Operating Costs - Continuing Operations
Operating Costs - Continuing Operations • Operating expenses reduced to 31.5% of NGR (2005: 35.2%) Operating Costs as % of NGR 8
Slide 10: PSP & Chargeback Costs - Continuing 2006 vs. Discontinued 06
PSP & Chargeback Costs - Continuing 2006 vs. Discontinued 2006 • Chargebacks/returned e-cheques: Continuing 1.6% of NGR ($2.5m), Discontinued 11.6% of NGR ($15.5m) • PSP Commissions: Continuing 5.8% of NGR ($9.1m), Discontinued 4.4% of NGR ($5.8m) PSP and Chargeback/Returned e-cheques cost as % of 2
Slide 11: Marketing Costs - Continuing Operations
Marketing Costs - Continuing Operations • In 2006 Marketing costs represent 32.5% of NGR (2005: 44.7%) Marketing costs as % of NGR Other 50% 0.5% RevShare 6.2% 1.4% CPA 4.2% 38.0% 25% 26.9% 0% FY'2005 FY'2006 10
Slide 12: Marketing Costs - Continuing Operations
Marketing Costs - Continuing Operations • Slight reduction in Marketing costs in continuing business by 7.1% to $51.0m (2005: $54.9m), from online/affiliates to off-line • 2006 FTDs 263,346 • 2006 CPA stable at $185* (excluding rev share) $m 3.4% 5.9% 60 1.86 100% 3.03 50 29.2% 23.4% 16.03 11.94 80%
Slide 13: Customer Bonuses – Continuing Operations
Customer Bonuses– Continuing Operations • Increased bonus efficiency • Poker bonuses reduced to 11% in 2006 from 16% in 2005 • Casino bonuses reduced to 31% in 2006 from 37% in 2005 Customer bonuses as % of NGR Casino Poker 40% 30% 37% 31% 20% 10% 16% 11% 0% 2005 2006 12
Slide 14: Balance sheet as at 31 December 2006
Balance sheet as at 31December 2006 2006 2005 $m $m Non-current assets Property, plant and equipment 13.0 8.3 Intangible assets --- --- Deferred tax 0.6 0.4 13.6 8.7 Current assets Cash and cash equivalents 114.4 62.2 Trade and other receivables 9.7 15.0 Amounts due from related parties --- 1.6 *124
Slide 15: Cash flow statement
Cash flow statement Year to 31 December 2006 2005 $m $m Cash flows from operating activities Profit before tax 77.6 50.2 Share benefit charges 8.8 17.2 Profit before tax and Share benefit charges 86.4 67.4 Depreciation, impairment and amortisation 3.8 3.6 Interest received (4.9) (0.7) Change in curr
Slide 16: Strong Real Money Registrations Growth – Continuing Operations
Strong Real Money Registrations Growth – Continuing Operations • Registrations increased 35% reaching 3.58 million at year end 2006 • CAGR of 10.1% between Q1 2002 to Q4 2006 Real Money Registrations Q1 2002- Q4 2006 millions 4 3 2 1 0 2002 2003 2004 2005 2006 15
Slide 17: Poker Retention – Continuing Operations
Poker Retention – Continuing Operations • Growing core of dedicated long term customers • 45% of rake* in Q4 2006 from customers joining Q4 2005 or earlier Poker rake* by year of customers’ recruitment 4Q06 25 3Q06 2Q06 20 1Q06 15 4Q05 $m 3Q05 10 2Q05 1Q05 5 2004 2003 0 Q1 05 Q2 05 Q3 05 Q4 05 Q1 06
Slide 18: Poker Retention – Continuing Operations
Poker Retention – Continuing Operations • Based on rake* from active customers in January 2005 and 2006 • January 2006 actives still contribute 46% of Month 1 NGR in Month 12 Poker Revenue* Retention % 100% 2006 2005 80% 60% 40% 20% 0% 1 2 3 4 5 6 7 8 9 10 11 12 Months * Poker rake includes tourname
Slide 19: Casino Retention – Continuing Operations
Casino Retention – Continuing Operations • Strong core of long term dedicated customers - “stickyness” • 53% of revenue* in Q4 2006 from customers joining Q4 2005 or earlier Casino revenue* by year of customers’ recruitment 25 4Q06 20 3Q06 2Q06 15 1Q06 4Q05 $m 3Q05 10 2Q05 1Q05 2004 5 97-03 0 Q1 05
Slide 20: Casino Retention – Continuing Operations
Casino Retention – Continuing Operations • Based on revenue* from active customers in January 2005 and 2006 • January 2006 actives still contribute 38% of Month 1 NGR in Month 12 Casino net deposit* by year of customers’ recruitment Casino Revenue Retention % 100% 2006 2005 80% 60% 40% 20% 0% 1 2 3
Slide 21: Quarter 1 KPIs
38383%... THE WORLD‘S NO.1 ONLINE CASINO & POKER ROOM | Quarter 1 KPIs 30 April 2007
Slide 22: Quarter KPIs – New Reporting
Quarter 1 KPIs – New Reporting • In January 2007 Blackjack was introduced into Poker • Further convergence into our unified offering underway • Adjustment to the KPIs is necessary to avoid distortion between games • NGR from any Casino game - irrespective of platform is counted as Casino • Customers
Slide 23: Combined KPIs – Continuing Operations
Combined KPIs – Continuing Operations • NGR in Q1 2007 up to $46.9m • 16% increase compared to Q4 2006 and 19% increase compared to Q1 2006 • Quarterly CAGR of 7.9% from Q1 2005 to Q1 2007 Combined Quarterly NGR Q1 2005 – Q1 2007 50 40 $m 30 20 10 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 2005 2006 2007 22
Slide 24: Combined KPIs – Continuing Operations
Combined KPIs – Continuing Operations • Combined active customers in Q1 2007 at 205,907 • 9% increase from Q4 2006 Combined active customers Q1 2005 – Q1 2007 250,000 200,000 150,000 100,000 50,000 0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 2005 2006 2007 23
Slide 25: Combined KPIs – Continuing Operations
Combined KPIs – Continuing Operations • Q1 2007 NGR per active customer is $228 • 6% increase compared to Q4 2006 and 9% increase compared to Q1 2006 Quarterly NGR per active customer Q1 2005 – Q1 2007 250 $ 200 150 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 2005 2006 2007 24
Slide 26: Casino KPIs – Continuing Operations
Casino KPIs – Continuing Operations • Casino NGR for Q1 2007 is $26.0m • 17% increase from Q4 2006 and 21% from Q1 2006 Casino Quarterly NGR Q1 2005 – Q1 2007 30 20 $m 10 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 2005 2006 2007 25
Slide 27: Casino KPIs – Continuing Operations
Casino KPIs – Continuing Operations • Casino active customers for Q1 2007 of 70,769 • 71% increase from Q4 2006 as a result of revised KPI Casino active customers Q1 2005 – Q1 2007 80,000 60,000 40,000 20,000 0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 2005 2006 2007 26
Slide 28: Casino KPIs – Continuing Operations
Casino KPIs – Continuing Operations • Q1 2007 NGR per active customer is $367 • A one-off shift as a result of revised KPI Quarterly NGR per active customer Q1 2005 – Q1 2007 600 400 $ 200 0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 2005 2006 2007 27
Slide 29: Poker KPIs – Continuing Operations
Poker KPIs – Continuing Operations • Poker NGR for Q1 2007 is $20.9m • 14% increase from Q4 2006 and 17% from Q1 2006 Poker Quarterly NGR Q1 2005 – Q1 2007 30 20 $m 10 0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 2005 2006 2007 28
Slide 30: Poker KPIs – Continuing Operations
Poker KPIs – Continuing Operations • Poker active customers for Q1 2007 of 168,066 • 14% increase from Q4 2006 and 25% from Q1 2006 Poker active customers Q1 2005 – Q1 2007 200,000 160,000 120,000 80,000 40,000 0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 2005 2006 2007 29
Slide 31: Poker KPIs – Continuing Operations
Poker KPIs – Continuing Operations • Poker Q1 2007 NGR per active customer is $124 • No change from Q4 2006 Quarterly NGR per active customer Q1 2005 – Q1 2007 150 100 $ 50 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 2005 2006 2007 30
Slide 32: Operating Review
Operating Review 30 April 2007
Slide 33: The cornerstones of our strategy
The cornerstones of our strategy • Thinking Global while acting Local • Enhanced, innovative offering • State of the art integrated marketing • Customer intimacy • Market leading customer service • Focused, efficient and effective organization • Employer of choice 32
Slide 34: Thinking Global while Acting Local
Thinking Global while Acting Local • Reasoning: • A Global Brand means thinking Global; however… • The right Customer Experience must have a local flavor • Geographic expansion requires local marketing and product focus • 2006 achievements: • New regional organizational structure implemented • Local
Slide 35: 2006 sample localization
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Slide 36: 2007 focus - More localization
2007 focus - More localization • From localizing games to adding local games • Our offering is currently already very localized: • Currently missing more ‘local’ games which are relevant for specific markets • In 2007 we will add a few local games in key markets • Such games can include Pachinko, lo
Slide 37: Enhanced & Innovative Offering
Enhanced & Innovative Offering • Reasoning: • Providing a unique Customer Experience to improve acquisition and retention • Maximize our share of customers’ spend by providing all gaming needs • 2006 achievements: • Improved our existing offering: • New ‘Poker Uplift’ version (released Q1 07) • Adde
Slide 38: New games
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Slide 39: 2007 focus - Unified Offering
2007 focus - Unified Offering • From different games to a single multi-dimensional gaming environment • Already in progress with BJ in Poker • Next step - additional 19 casino games and Backgammon in Poker (Q1 07) • Late Q2, all games in the Unified client • Different customers will get a different
Slide 40: Current Unified Offering Client Lobby
Current Unified Offering Client Lobby UK 39
Slide 41: 2007 focus - Entertainment focus
2007 focus - Entertainment focus • From just gaming to additional forms of entertainment • Adding video and audio players to the site and the client • Providing valuable content to customers for free • Using content both as an acquisition and retention tool • Leveraging content which we create and o
Slide 42: 2007 focus - Community tools
2007 focus - Community tools • From individuals playing at the same table to a community of people looking to have fun • Social networks success in recent years prove the stickiness of the community • The common offering in the industry includes only chat around poker tables • Advanced features will
Slide 43: 2007 focus – multiple platform access
2007 focus – multiple platform access • From single platform to multi platform access • Customers want to access favourite games anytime & anywhere • Concept already launched with our mobile proposition • Current directions include: • TV – in specific distribution scenarios • Airlines: • Currently l
Slide 44: State of the art Integrated Marketing
State of the art Integrated Marketing • Reasoning: • Integrated marketing is key to customer acquisition and retention • Strong marketing message is a key part of the Customer Experience • 2006 achievements: • Continued investment in our brand with a more specific focus on direct- return activities
Slide 45: 2006 achievement – UK campaigns and brand awareness
2006 achievement – UK campaigns and brand awareness Question: What online gaming and betting web sites have you seen, read or heard about? Gamblers % Casino/Card Non-Money Customers % Ladbrokes.com 39 13 WilliamHill.com 33 9 888.com 21 32 Betfair.com 21 2 Coral//eurobet.com 19 2 PaddyPower.com 15 2
Slide 46: 2006 achievement – International campaigns
2006 achievement – International campaigns 45
Slide 47: 2006 achievement – Sports Sponsorships and TV content
UK Sports Marketing – 2006 Highlights 2006 achievement – Sports Sponsorships and TV content 46
Slide 48: 2006 achievement – Our first-ever exclusive magazine 'Eight'
2006 achievement – Our first-ever exclusive magazine ‘Eight’ 47
Slide 49: 2006 achievements – initial viral marketing
Retention 2006 achievements – initial viral marketing 21clips.com www.flashones.com/888/ 48
Slide 50: 2006 achievement – improved Search Engine positions
2006 achievement – improved Search Engine positions 49
Slide 51: 2007 focus - Strategic partnerships
2007 focus - Strategic partnerships From just an operator to a provider of virtual operators • Partnerships are a shortcut to new market segments • We choose partners based on their assets: brand, retail presence, captive audience, unique proposition etc. • We offer turn-key service not available fr
Slide 52: 2007 focus - New customers' club
2007 focus - New customers’ club • From a 2-tier VIP club to a state of the art Customers Club • Current VIP club is limited mostly to VIP Casino customers • The new customer club – The Max – will cover all customers and include 4 membership tiers • Club benefits will include: • Faster points accumu
Slide 53: The Max – Customers Club
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Slide 54: Customer Intimacy
Customer Intimacy • Reasoning: • Knowing customers enables to provide the right Customer Experience • Customer intimacy helps predict who will become a Valuable Customer • 2006 achievements: • State of the art Data Warehouse implemented, enabling better analysis of customers’ behavior • Panorama OLA
Slide 55: Market Leading Customer Service
Market Leading Customer Service • Reasoning: • Critical for the Customer Experience & the trust-me factor • 2006 achievements: • Continuing with our unique SLA: • 98% of all incoming calls are answered within 25 seconds • 96% of all chat requests answered within 25 seconds • 90% of all e-mails in En
Slide 56: Focused, Efficient and Effective Organization
Focused, Efficient and Effective Organization • Reasoning: • Following the suspension of US activity, revenue and profit margins went down • 2006 achievements: • Full restructuring of our cost base • Necessary headcount reduction plan across all locations • New purchasing and budget control processe
Slide 57: Bingo Acquisition
Bingo Acquisition 30 April 2007
Slide 58: Globalcom's Market Position
Globalcom’s Market Position • The leading UK bingo network - 68 bingo sites out of 137 UK facing sites • Long lasting relationships with the leading bingo affiliates and portals • Currently operates under license form Kahnawake • 28,000 real money registered users since inception (~10,000 active the
Slide 59: Financial & Operational Highlights
Financial & Operational Highlights • Financials • Turnover of US$11.3 million* (net of bonuses granted to customers) • Net profit of US$5.6 million* • User Profile • 99% of business is UK focused, Female Predominantly (80-85%) • 35+ years old • Bingo Offering • Chat is incorporated into the Bingo ga
Slide 60: Bingo Business Model
Bingo Business Model • Network operator: • 45 super affiliates • Globalcom handles all the operation, while the skins purely do marketing • Major skins: Bingoballroom.com, UK-Bingo.net, Bingofabulous.com and Twofatladies.com • Managed Service provider: • 2 licensees: Cashcade and Thinkbingo (iTV) •
Slide 61: Bingo – network Licensees
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Slide 62: Regulation
8383s8%n THE WORLD‘S NO.1 ONLINE CASINO & POKER ROOM Regulation 30 April 2007
Slide 63: Regulation
Regulation • US: • UIGEA • WTO • Barney Frank • Europe: • Different countries take different approaches: • Many EU countries heading toward regulation • Others looking at potential prohibition • Placanica • Some development in non-EU countries • Rest of the world: • Additional countries heading towa
Slide 64: Current Trading
Current Trading 30 April 2007
Slide 65: Current Trading
Current Trading • Record turnover in March 2007 for non- US operations • NGR growth of 16% in Quarter 1 of 2007 compared to Quarter 4 of 2006 • Average daily turnover 20% higher during period 1st March to 21st April 2007 than during the last week of October 2006 • Average daily Poker rake and tourna
Slide 66: Summary
38383%... THE WORLD‘S NO.1 ONLINE CASINO & POKER ROOM | Summary 30 April 2007
Slide 67: Summary
Summary • 2006 performance good despite UIGEA • 2007 a challenging year with a good start for the year • Clear strategy • A few critical strategic shifts • World class management and employees • Dividend in line with declared policy 66
Slide 68: Q&A
8383s8%n THE WORLD‘S NO.1 ONLINE CASINO & POKER ROOM Q&A 30 April 2007
Slide 69: Appendices
8383s8%n THE WORLD‘S NO.1 ONLINE CASINO & POKER ROOM | Appendices 30 April 2007
Slide 70: Riley's Poker partnership
Riley’s Poker partnership • The first offline-online combined poker proposition • Riley’s is UK’s leading network of snooker & pool clubs (163 clubs), with 525,000 members • Partnership to develop and deliver “www.rileyspoker.com powered by 888.com” • Proposition to be available also through in-club