Slide 1: Results for the Year Ended 31 December 2012
RESULTS FOR THE YEAR ENDED 31 DECEMBER 2012
Slide 2: Agenda
AGENDA Brian Mattingley | Introduction Aviad Kobrine | Financial Review Itai Frieberger | Operational Review Brian Mattingley | Summary Q&A 2
Slide 3: Brian Mattingley, CEO | Introduction
BRIAN MATTINGLEY, CEO | INTRODUCTION 3
Slide 4: Summary Results
SUMMARY RESULTS Another record year of revenue up 13% to $376m (2011: $331m) Marketing ratio 35% (2011: 31%) 1 Adjusted EBITDA up 20% to $67m (2011: $56m) 1 Adjusted EBITDA Margin increase to 17.8%, (2011: 16.8%) Corporate cash of $32m Final Dividend 4.5¢ as per policy plus one off 2¢, t
Slide 5: Strategy
STRATEGY Focus on B2C Continuous product development Local market focus Bespoke marketing solutions Innovation – remain leading edge First class CRM – conversion and retention Development of new revenue streams Newly regulating markets US opportunity Mobile “Touch” Social B2B
Slide 6: US Opportunity
US OPPORTUNITY Three part strategy: B2B, strategic alliance, joint venture Avenue JV: Launch B2C into the US market when regulated Equal partners Provide financial firepower to capture US opportunity 888 provides technology Nevada – part way through licensing process New Jersey – l
Slide 7: Focus for 2013
FOCUS FOR 2013 Continue to invigorate core product and drive revenue growth Preparation for launch in regulating US states Continued investment in mobile Strategic evaluation of Sports offering Opportunities for social Increase market share in newly regulated markets 7
Slide 8: Aviad Kobrine, CFO | Financial Review
AVIAD KOBRINE, CFO | FINANCIAL REVIEW
Slide 9: Highlights
HIGHLIGHTS Another record year of revenue up 13%, at $376m Revenue B2C up 16% to $330m Revenue Casino B2C up 12% to $165m Revenue Poker B2C up 44% to $88m Casino & Poker B2C first time depositors up 31% 1 Adjusted EBITDA up 20% to $67m 1 Adjusted EBITDA Margin increase to 17.8%, (2011:
Slide 10: Profit and Loss Account
1 PROFIT AND LOSS ACCOUNT $m 2012 2011 % Change Revenue 375.8 331.2 13% Operating expenses2,3 113.5 108.6 Gaming taxes and duties4 11.5 7.3 Research and development expenses 27.2 29.9 Selling and marketing expenses 131.2 102.3 % of Revenues 34.9% 30.9% Administrative expenses3,5,6 25.7 27.5 Adjusted
Slide 11: Revenue
REVENUE 2012- revenue up 13% to $376m (2011: $331m) 2012- highest revenue in 888 history 23% CAGR Revenue 2003 – 2012($m) 400 350 376 300 331 250 262 $m 200 247 263 217 150 157 100 123 50 59 75 0 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 11
Slide 12: Geographical Segmentation
GEOGRAPHICAL SEGMENTATION Revenue growth across all markets : UK 6%, Europe 14%, Americas 44%, ROW 23% UK represents 43% of Total Revenue in 2012 (2011: 46%) More than 50% of revenue generated from regulated markets Geographic segmentation, Total Revenue 2011 and 2012 2011 2011 2012 8% 8% 180
Slide 13: Geographical Growth per Region/Product
GEOGRAPHICAL GROWTH PER REGION/PRODUCT Casino maintains growth across all regions Poker growing faster outside of the UK with Europe generating the highest growth in absolute terms Casino & Poker B2C Total Revenue Growth in 2012 Poker Casino 100% 30% 90% 80% 92% 25% 27% 28% 70% 20% 60% 50% 15% 4
Slide 14: Revenue B2C by Product
REVENUE B2C BY PRODUCT Casino up 12%, Poker up 44%, Bingo down 4%, Emerging Offering up 16% Revenue B2C 2012 vs. 2011 ($m) 160 165 140 148 120 100 $m 80 88 60 61 54 52 40 20 22 25 0 Casino Poker Bingo Emerging Offering 14
Slide 15: B2C Casino and Poker FTDs
B2C CASINO AND POKER FTDs Casino up 37% boosted by regulated markets, Poker up 27% over strong prior year comparable B2C FTDs 2012 vs. 2011 140% 130% 137% 120% 127% 110% 100% 90% 100% 100% 80% 70% 60% 50% Casino Poker 15
Slide 16: Revenue B2C
REVENUE B2C H2 2012 Revenue up 8% to $166m (H2 2011: $153m) H2 2012 incorporates the 2012 London Olympic games Revenue B2C H1 2010 – H2 2012 ($m) 170 160 166 164 150 153 140 $m 130 131 120 110 110 111 100 90 H1 10 H2 10 H1 11 H2 11 H1 12 H2 12 16
Slide 17: Revenue Casino B2C
REVENUE CASINO B2C H2 2012 Revenue up 4% to $82m (H2 2011: $79m) H2 includes the affect of both 2012 London Olympic games and the limitation of the Spanish regulation on Casino offering Revenue Casino B2C H1 2010 – H2 2012 ($m) 85 80 82 75 83 70 79 $m 65 69 60 59 55 58 50 45 40 H1 10 H2 10 H1 11
Slide 18: Revenue Poker B2C
REVENUE POKER B2C H2 2012 Revenue up 26% to $46m (H2 2011: $37m) Poker increase is driven by successful Spanish migration and strong liquidity levels despite summer sport events Revenue Poker B2C H1 2010 – H2 2012 ($m) 45 46 40 41 35 37 $m 30 25 24 20 20 19 15 10 H1 10 H2 10 H1 11 H2 11 H1 12 H2
Slide 19: Revenue B2B
REVENUE B2B H2 2012 revenue down 3% to $23m (H2 2011: $24m) B2B continues to optimise the blend of customers and selected deals Revenue B2B H1 2010 – H2 2012 ($m) 25 24 23 20 23 23 21 15 20 $m 10 5 0 H1 10 H2 10 H1 11 H2 11 H1 12 H2 12 19
Slide 20: Adjusted EBITDA and Margin
ADJUSTED EBITDA AND MARGIN Adjusted EBITDA up 20% to $67m (2011: $56m) Adjusted EBITDA margin up to 18% (2011: 17%) Adjusted EBITDA 2012 vs. 2011 $m Adjusted EBITDA Adjusted EBITDA margin 70 18.0% 65 17.5% 60 17.0% 55 67 16.5% 17.8% 50 16.0% 45 56 15.5% 16.8% 40 15.0% 35 14.5% 30 14.0% 25 13.5%
Slide 21: Adjusted EBITDA Trend
ADJUSTED EBITDA TREND Both Adjusted EBITDA and margin on the rise Adjusted EBITDA 2010-2012 80 19.0% EBITDA Marg in 17.8% 70 18.0% 16.8% 17.0% 60 16.0% 50 67 56 15.0% $m 40 14.0% 30 13.0% 10.9% 12.0% 20 11.0% 10 10.0% 29 0 9.0% 2010 2011 2012 21
Slide 22: Marketing Cost Ratio
MARKETING COST RATIO Marketing ratio to revenue higher than 2011, given investment in regulated markets and Poker CPA* levels continue to be stable despite regulated penetration cost, with overall CPA at 2% above 2011 levels Marketing Costs 2012 vs. 2011 Marketing Costs Marketing Costs % of Reve
Slide 23: Cost Structure
COST STRUCTURE Cost* percentage down to 82% (2011: 83%) Decreasing cost ratio despite regulated investment and increasing gaming duty costs Cost as a % of Total Revenue 2012 vs. 2011 100% 83.2 % 82.2 % 2.2% 3.1% 80% 8.3% 6.8% Gaming Taxes and duties Admin. Expenses 60% 30.9% 34.9% S&M expenses R
Slide 24: Chargeback & PSP Fees
CHARGEBACK & PSP FEES Stable levels of CB & PSP continue 2012 at 6.8% of Total Revenue (2011: 6.9%) Chargebacks & PSP fees as % of Total Revenue CB PSP 9.2% 10% 7.6% 8% 6.9% 6.8% 6.6% 3.7% 1.8% 1.0% 0.9% 6% 1.1% 4% 5.8% 5.6% 5.5% 5.9% 6.0% 2% 0% 2008 2009 2010 2011 2012 24
Slide 25: Customer Incentives B2C Casino
CUSTOMER INCENTIVES B2C CASINO For yet another year, 2012 revenue growth continues to be driven by optimal use of bonuses and CRM efforts Customer Bonuses as % of Revenue % $m 35% 175 155 30% 135 25% 115 20% 95 29% 24% 75 15% 55 10% 35 Bonus Ratio% Rev $m * Including converted Loyalty points 25
Slide 26: Customer Incentives B2C Poker
CUSTOMER INCENTIVES B2C POKER Poker continues to demonstrate optimal bonus usage, greatly supporting growth The successful Spanish launch in this regulated market was supported by an optimal use of customer incentives Customer Bonuses as % of Revenue % $m 100 24% 90 22% 80 3% 70 20% Regulated 60
Slide 27: Balance Sheet
BALANCE SHEET $m 31-Dec-12 31-Dec-11 Non-current assets Intangible assets 147.7 141.9 Property, plant and equipment 18.3 17.1 Deferred tax & Other financial assets 0.6 0.6 Investment in equity accounted joint ventures 0.0 1.2 166.6 160.8 Current assets Cash and cash equivalents 81.5 75.9 Trade and o
Slide 28: Cash Flow Statement
CASH FLOW STATEMENT $m Year to 31 December 2012 2011 Cash flows from operating activities Profit(loss) before income tax 40.8 5.8 Impairment charges 2.2 20.7 Share benefit charges 1.7 2.9 Depreciation & amortisation 14.8 13.0 Change in current assets and liabilities 20.6 34.4 Other non cash adjustme
Slide 29: Itai Frieberger, COO | Operational Review
ITAI FRIEBERGER, COO | OPERATIONAL REVIEW 29
Slide 30: Overview
OVERVIEW Consistency in our performance Integrated platform delivers results Marketing Product Analytics Continued leadership in poker Capture the mobile opportunity Successful launch in regulated markets Strongly positioned to enter the US market 30
Slide 31: A Year of Record Breaking Months
A YEAR OF RECORD BREAKING MONTHS 31
Slide 32: Increased Player Value
INCREASED PLAYER VALUE Player Value since Jan 2012 110% 105% 100% 108% 107% 95% 90% 100% 85% 80% 75% 70% Jan 2012 Casino 3M vs. Jan Poker 3M Value vs. 2012 Jan 2012 32
Slide 33: Our Platform
OUR PLATFORM Constant innovation 500 developers for 15 years Shorter cycles – response time In-house games studio Technology – from a barrier to enabler 33
Slide 34: Marketing
MARKETING In-house Integrated approach Thousands of concurrent campaigns Near real time ROI assessment Automated processes 34
Slide 35: Poker: Full Tilt Launch Effect on Liquidity
POKER FULLTILT LAUNCH EFFECT ON LIQUIDITY 155% 135% 115% Weekly Liquidity Index 95% 75% 55% 35% Operator1 Operator2 888poker Operator3 Operator4 Operator5 Source: PokerScout weekly average 35
Slide 36: Mobile
MOBILE Mobile Penetration 50% 20% 45% Sport Casino Poker 18% 40% 16% 35% 14% CASINO & POKER 30% 12% 25% 10% SPORT 20% 8% 15% 6% 10% 4% 5% 2% 0% 0% 1 2 3 4 5 6 7 8 9 10 11 12 1 2012 2013 36
Slide 37: Optimising the Mobile Opportunity
OPTIMISING THE MOBILE OPPORTUNITY 37
Slide 38: Facebook Real Money
FACEBOOK REAL MONEY ’ Bingo Appy Con 1} ‘ap? Join your mates & win real cass MAGIC888 casino oe . wes FF HOLDING
Slide 39: European Markets
EUROPEAN MARKETS Italian online casino market share (December 2012) Italy Others Solid market share despite only one product 27% Offline Operators 40% Continued marketing campaigns bwin 9% 888.it WHO Introduction of slots in December 2012 - revenues Eurobet Winga 7% 5% 5% 6% almost doubled S
Slide 40: Regulated Markets - Spain
REGULATED MARKETS - SPAIN 888 Spain poker GGR growth 1000% 2012 summer Olympics 900% 800% 700% 600% Launch of 888.es 500% 400% Spain Tax regime 300% 200% 100% 0% 7 8 9 3 4 5 6 7 8 9 3 4 5 6 7 8 9 3 40
Slide 41: USA
USA RESELLER HOLDINGS a
Slide 42: Brian Mattingley, CEO | Summary
BRIAN MATTINGLEY, CEO | SUMMARY 42
Slide 43: Summary and Outlook
SUMMARY AND OUTLOOK Strong year – consistent performance Continued focus on regulated markets, with proven track record Constantly enhancing product capabilities across all verticals Introducing new social and mobile offerings Sustaining company performance - based on “can-do” culture De
Slide 44: Q&A
HOLDINGS Q&A