Evoke Plc · LSE:EVOK
Evoke — 888 Holdings — FY2014 Earnings Presentation
48 slides from Evoke's earnings presentation, Mar 24, 2015
Slide 1: Results for the Year Ended 31 December 2014
RESULTS FOR THE YEAR ENDED 31 DECEMBER 2014
Slide 2: Agenda
AGENDA Brian Mattingley | Introduction Aviad Kobrine | Financial Review Itai Frieberger | Operational Review Brian Mattingley | Summary Q&A 2
Slide 3: Summary of 2014 Results
SUMMARY OF 2014 RESULTS Revenue up 14% to $455m (2013: $401m) 1 Adjusted EBITDA up 33% to $101m (2013: $76m) 1 Adjusted EBITDA margin at 22.1% (2013: 18.9%) PBT (net of finance) $72.3m up 34% (2013: $54m) 1 Adjusted EPS 19.2c, 16% growth (2013: 16.6c) Generated $112m cash from operating
Slide 4: 2014 The Story of Growth
2014 THE STORY OF GROWTH Growth through volume How? Strong marketing and CRM Superior technology Leading mobile platform Exploited sports opportunity Continued to upgrade core products We remain a consistent out-performer 4
Slide 5: 2015 The Year Ahead
2015 THE YEAR AHEAD Challenges External fiscal policies (POC and VAT) Status of US online gaming Impact of industry consolidation Forex headwind Opportunities In-fill acquisitions New licences and regulation Spanish slots Sports in Italy We are best placed for growth 5
Slide 6: Aviad Kobrine, CFO | Financial Review
AVIAD KOBRINE, CFO | FINANCIAL REVIEW
Slide 7: Profit and Loss Account
PROFIT AND LOSS ACCOUNT 1 $m 2014 2013 % Change Revenue 454.7 400.5 14% 2,3 Operating expenses 146.1 127.8 Research and development expenses 40.7 30.7 Selling and marketing expenses 133.8 139.9 4 Administrative expenses 33.4 26.5 Adjusted EBITDA3,4 100.7 75.6 33% % of Revenues 22.1% 18.9% Depreciati
Slide 8: Group Revenue
GROUP REVENUE Revenue up 14% to $455m (2013: $401m) 20% CAGR from 2003, with a fifth consecutive year of growth Strong core products performance, led by Casino Revenue* 2003 – 2014($m) 450 455 400 401 350 376 331 300 250 262 $m 247 200 263 217 150 157 100 123 50 59 75 0 2003 2004 2005 2006 200
Slide 9: Geographical Segmentation
GEOGRAPHICAL SEGMENTATION Revenue growth in UK 23%, Europe (ex. UK) 5%, Americas 19%, ROW down 5% UK growth across products, driven by mobile success and Bingo recovery Geographic segmentation, Revenue 2013 and 2014 $m 2013 2013 2014 250 7% 12% 41% 40% 200 202 150 163 170 162 UK Europe Americas
Slide 10: Growth by Region
GROWTH BY REGION Growth across most regions UK dominance in 2014, boosted by strong mobile penetration Casino & Poker B2C Revenue Growth in 2014 vs. 2013 40% 35% 30% 35% 25% 20% 15% 10% 5% 2% 4% 0% 0% ROW Europe Americas UK (ex UK) 10
Slide 11: Revenue B2C
REVENUE B2C 2014 revenue up 11% to $391m (2013: $352m) 15% CAGR since 2010 Strong FIFA World Cup in June/July Revenue B2C 2010 – 2014 ($m) 380 391 330 352 $m 330 280 284 230 222 180 2010 2011 2012 2013 2014 11
Slide 12: Revenue B2C
REVENUE B2C Q4 14 revenue up 7% to $100m against previous record Q4 13 (Q4 13: $93m) Revenue B2C Q4 2012-2014 ($m) 100 95 100 90 $m 85 93 80 86 75 70 Q412 Q413 Q414 12
Slide 13: Revenue B2C by Product
REVENUE B2C BY PRODUCT Another strong result for Casino - leading revenue growth Bingo recovery, robust Poker, accelerating Sport Casino up 16%, Poker flat, Bingo up 7%, Emerging Offering up 22% Revenue B2C 2014 vs. 2013 ($m) 250 2013 2014 200 221 190 150 $m 100 94 94 50 44 47 24 30 0 Casino P
Slide 14: Revenue Casino B2C
REVENUE CASINO B2C 2014 revenue up 16% to $221m (2013: $190m) An outstanding year for Casino, leveraging rich offering and CRM efforts into continuous growth and higher player value Revenue Casino B2C 2010 – 2014($m) 220 200 221 180 190 $m 160 165 140 148 120 100 117 80 2010 2011 2012 2013 2014
Slide 15: Revenue Poker B2C
REVENUE POKER B2C Robust Poker performance in a mature market 2014 revenue stable at $94m (2013: $94m) Strengthened No. 2 position in global poker rankings* Revenue Poker B2C 2010 – 2014 ($m) 95 85 94 94 75 88 65 $m 55 61 45 35 38 25 2010 2011 2012 2013 2014 * Source Pokerscout.com March 2015
Slide 16: Player Value
PLAYER VALUE Increased quality of revenue across verticals Players’ value * 130% 120% 110% 100% 90% 126% % 80% 107% 70% 100% 60% 50% 40% 2013 Base 888Poker 2014 888Casino player value 2014 player value * GGR base, for all players recruited during Jan-Nov average first 3 month value 16
Slide 17: Cash from Operations
CASH FROM OPERATIONS High conversion of cash remains, 111% of Adjusted EBITDA (2013: 119%) Corporate cash net of customer deposits increased 58% to $96m (2013: $60m) Cash position 2014 vs. 2013 Cash from operations (% of adj. EBITDA) Corporate cash net of customer deposits $m % 100.0 130% 120% 9
Slide 18: Marketing Cost Ratio
MARKETING COST RATIO A decrease of marketing spend both in ratio and absolute, driven by targeted acquisition and return to cost optimisation Marketing ratios should slowly revert to historical levels over time Marketing Costs 2014 vs. 2013 Marketing Costs Marketing Costs % of Revenue $m % 140 1
Slide 19: Cost Structure
COST STRUCTURE Cost* percentage of revenue at 78% (2013: 81%) Operational gearing continues, despite US investments Cost as a % of Total Revenue 2010 - 2013 89.1 % 83.2 % 82.2 % 81.1 % 8.2% 77.9% 80% 8.3% 6.8% 6.6% 7.4% Admin. Expenses 34.9% S&M expenses 60% 30.9% 34.9% 34.9% 29.4% R&D Gaming du
Slide 20: Chargeback & PSP Fees
CHARGEBACK & PSP FEES Improved Chargeback and PSP ratios reflecting continued optimisation efforts 2014 at 5.6% of total revenue (2013: 6.3%) Chargeback & PSP fees as a % of Total Revenue 10% 9.2% CB PSP 7.6% 8% 3.7% 6.9% 6.8% 6.6% 1.8% 6.3% 1.0% 0.9% 5.6% 6% 1.1% 0.8% % 0.6% 4% 5.8% 5.6% 5.5% 5
Slide 21: Customer Incentives B2C Casino
CUSTOMER INCENTIVES B2C CASINO 2014 bonus ratio demonstrate effective CRM efforts, supporting revenue growth Customer Bonuses as % of Revenue Rev $m 35% 235 215 30% 195 25% 175 % 20% 155 $m 135 15% 115 10% 23% 21% 95 75 5% 55 0% 35 2013 2014 21
Slide 22: Customer Incentives B2C Poker
CUSTOMER INCENTIVES B2C POKER A slight increase in Bonus ratio, without eroding Revenue CRM efforts drive increase player value Customer Bonuses as % of Revenue Rev $m 25% 100 Revenue flat 0.1% 90 20% 80 % 15% 70 $m 10% 60 18% 19% 50 5% 40 0% 30 2013 2014 22
Slide 23: Adjusted EBITDA and Margin
ADJUSTED EBITDA AND MARGIN Record breaking year despite FIFA World Cup effect, US build-up focus and increasing Gaming Duties Adjusted EBITDA up 33% to $101m (2013: $76m) Adjusted EBITDA margin increased to 22% (2013: 19%) Adjusted EBITDA 2014 vs. 2013 $m Adjusted EBITDA % Adjusted EBITDA marg
Slide 24: Adjusted EBITDA Trend
ADJUSTED EBITDA TREND Adjusted EBITDA Margin expansion despite US investment 2014 Adjusted EBITDA record exceeds previous year’s strong comparable Adjusted EBITDA 2010 - 2014 130 27.0% Adj. EBITDA ratio 110 22.1% 18.9% 22.0% 17.8% 90 16.8% 101 17.0% $m % 70 10.9% 76 12.0% 50 56 67 7.0% 30 29 10
Slide 25: Adjusted EBITDA Trend
ADJUSTED EBITDA TREND Excluding gaming duties, Adjusted EBITDA at $117m (2013: $90m) Adjusted EBITDA 2010 - 2014 130 25.6% 27.0% Gaming duties burden Adj. EBITDA ratio excl. gaming duties 22.3% 110 16 20.8% 22.0% 19.0% 90 101 $m 14 17.0% % 70 11 76 11.5% 7 67 12.0% 50 56 1 7.0% 30 29 10 2.0% 2010
Slide 26: Dividend
DIVIDEND Dividend reward shareholders as per policy plus special Follows success, constantly growing – 67% higher than 2012 dividend per share DIVIDEND PER SHARE ($c) 2012-2014 $c 167% 16.0 156% 160% 14.0 140% 12.0 7.0 120% 10.0 100% 7.0 100% 8.0 2.0 80% 6.0 60% 4.0 7.0 7.0 8.0 40% 2.0 20% 0.0 0
Slide 27: Balance Sheet
BALANCE SHEET $m 31-Dec-14 31-Dec-13 Non-current assets Goodwill and other Intangible assets 157.2 155.7 Property, plant and equipment 15.5 19.1 Deferred tax & Other non-current assets 1.4 1.4 Investment in equity accounted joint ventures 0.0 3.9 174.1 180.1 Current assets Cash and cash equivalents
Slide 28: Cash Flow Statement
CASH FLOW STATEMENT $m full year Ended 31 December 2014 2013 Cash flows from operating activities Profit before income tax 67.9 53.2 Share benefit charges 1.7 5.5 Depreciation & amortisation 17.3 13.9 Change in current assets and liabilities 25.8 12.0 Other non cash adjustments 7.3 9.9 Cash generate
Slide 29: Itai Frieberger, COO | Operational Review
ITAI FRIEBERGER, COO | OPERATIONAL REVIEW
Slide 30: Casino Poker
GROUP EBITDA TOTAL $56M $67M $76M $101M 2011 2012 2013 2014 REVENUE BETS SPORT B2C $284M $330M $352M $391M 100% 187% 252% 313% 2011 2012 2013 2014 JAN 2013 DEC 2013 JUN 2014 DEC 2014 REVENUE DEPOSITS CASINO 100% 119% 126% 137% 100% 114% 118% 120% JAN 2013 JAN 2014 AUG 2014 DEC 2014 JAN 2013 FEB 2014
Slide 31: Deposit Trend
DEPOSIT TREND Based on Jan 2010 170% 150% 130% 110% 90% 70% 50% 31
Slide 32: Mobile
MOBILE Mobile is embedded into all verticals and products Not just client development: Constant alignment of back office and mobile offering New channels and functionalities for a seamless customer experience New marketing terminology, tools and methodologies 32
Slide 33: Mobile Trends in UK
MOBILE TRENDS IN UK 50% Deposits 45% Registrations FTDs 40% 35% 30% 25% 20% 15% 10% 5% 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 3 4 5 6 7 8 9 10 11 12 2012 2013 2014 *B2C Casino, Poker. Bingo, Sport 33
Slide 34: Casino and Games
CASINO AND GAMES In house studio proves to be a vital asset Over 100 games added in 2014 Development of 888-own premium content while continuing to integrate best-of-breed 3rd party content Shared jackpots across the verticals have distributed north of $38M over the past year New exclusive
Slide 35: Poker
POKER Very satisfying performance in challenging market Relentless focus on execution of recreational strategy 888Poker brand resilience Reinforced position at No. 2 in global poker rankings - the only network showing growth Full-featured, integrated casino suite proves to be a key growth an
Slide 36: Poker - Liquidity
POKER - LIQUIDITY 170% 150% 130% Weekly Liquidity Index 110% 90% 70% 50% 30% 10% Operator1 Operator2 888poker Operator3 Operator4 Operator5 Source: Pokerscout, Feb 2015 36
Slide 37: Bingo
BINGO Successful turnaround of B2C Mobile driving growth POC will impact highly fragmented UK market – 888 has good momentum New Instant Games Arena (IGA) gaining traction 37
Slide 38: Sport
SPORT SPORT BETS 500% 888.es Sport launch 450% 400% World Cup 350% 300% 250% New Sport Platform 200% 150% 100% 50% Average daily Bets 38
Slide 39: EU – Regulated Markets
EU – REGULATED MARKETS Leading position in Spain in Casino/Poker maintained exceptional achievement pre-launch of Sport offer 888Sport.es launched in August with strong results, slots is next opportunity Now with full suite of Casino, Poker and Sport products across desktop and mobile in Spain
Slide 40: Sport
SPORT Transformational year for 888Sport – stunning 82% GGR growth Excellent World Cup demonstrates strength of product Supported by successful multi-channel marketing campaigns Launch in Spain during summer, with positive early results Strong cross-sell trends to other products 2015 opp
Slide 41: 888.es Bets Trend
888.es BETS TREND 888 SPAIN TOTAL BETS GROWTH Spain Sport Launch 300% Total Bets 250% 200% Launch of 888.es 150% 100% 50% 1 3 5 7 9 11 1 3 5 7 9 11 1 3 5 7 9 11 1 3 5 7 9 11 1 3 5 7 9 11 2010 2011 2012 2013 2014 41
Slide 42: 888 is the leading iGaming provider/operator in the US market
888 is the leading iGaming provider/operator in the US market Anticipated launch of Delaware and Nevada interstate compact; strategically important Significant and unrivalled relationships and know-how of US market US opportunities remain potentially vast, most of the market has not been tap
Slide 43: USA Total Poker Liquidity
USA TOTAL POKER LIQUIDITY USA AVERAGE DAILY POKER LIQUIDITY 600 NJ shared liquidity 500 400 Average Daily Liquidity 300 200 100 0 -100 Party Borgata powered brands 888 powered brands Other Source: Pokerscout, Feb 2015 43
Slide 44: US per State & Platform
US US PER STATE & PLATFORM SPLIT PER TERRITORY INTERSTATE POKER REVENUE* Other 7% 21% Borgata-Party powered brands 39% 6% 73% 888 powered brands 54% Nevada Delaware New Jersey *B2C Casino, Poker. Bingo, Sport *GGR is for all of US regulated states, Ultimate NV is up to Q3 14 44
Slide 45: Operational Summary
OPERATIONAL SUMMARY Record year driven by exceptional growth in core business We are continuing to outperform the market Growth underpinned by market-leading technology, analytics and dynamic team Excellent momentum and focused strategy positions 888 to exploit opportunities Taking 888 to
Slide 46: Brian Mattingley, CEO | Summary
BRIAN MATTINGLEY, CEO | SUMMARY
Slide 47: Summary
SUMMARY Record year, strong cash generation External financial headwinds but strong operational momentum Poised to take advantage of greater regulatory clarity Leading technological platform World class marketing and CRM capabilities Industry leading team Future growth, organic and M&A
Slide 48: Q&A
HOLDINGS ¥ Q&A