Evoke Plc · LSE:EVOK
Evoke — 888 Holdings — H1 2015 Earnings Presentation
50 slides from Evoke's earnings presentation, Aug 28, 2015
Slide 1: Results for the Six Months Ended 30 June 2015
RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2015
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 2015 H1 Results
SUMMARY OF 2015 H1 RESULTS 1 Revenue up 9% on a like for like basis 1 B2C revenue up 11% on a like for like basis Revenue impacted by adverse currency movement of US$20 million and US$5 million EU VAT $19.5m incremental UK POC and EU VAT impact 2 Adjusted EBITDA at $41m (H1-14: $49m) 2 A
Slide 4: Yet Another Strong Performance
YET ANOTHER STRONG PERFORMANCE Continued operational momentum with strong organic growth Excellent revenue improvements 1 Casino 13% 1 Bingo 3% Sport 81% Encouraging growth in active customers 22% Casino 4% Poker 18% Bingo 57% of revenue generated from regulated markets 43% of
Slide 5: Growth Drivers
GROWTH DRIVERS We continue with investments in: Superior technology Best in class CRM Strong iconic brands Innovative marketing campaigns All delivering: Excellent organic like for like revenue growth Continued improvement in active customers Record numbers of registered customers
Slide 6: Aviad Kobrine, CFO | Financial Review
AVIAD KOBRINE, CFO | FINANCIAL REVIEW 6
Slide 7: Profit and Loss Account
1 PROFIT AND LOSS ACCOUNT $m H1 15 H1 14 % Change Revenue (before EU VAT) 225.1 225.1 0% EU VAT 5.1 - Revenue2 220.0 225.1 -2% 3 Operating expenses 60.8 64.7 Gaming duties4 21.8 6.8 221% Research and development expenses 16.4 19.3 Selling and marketing expenses 67.1 69.6 % of Revenues 30.5% 30.9% 5
Slide 8: Group Revenue
GROUP REVENUE Revenue on a like for like basis* up 9% to $245m (H1-14: $225m) reported Revenue down 2% to $220m given new EU VAT and adverse currency movements 11.0% actual CAGR since H1-09 and 13.0% on a like for like basis* Revenue H1 2009 – H1 2015 ($m) EU VAT FX effect 260 5 240 20 220 200 2
Slide 9: Geographical Segmentation
GEOGRAPHICAL SEGMENTATION Encouraging revenue increases in core UK and European regions despite adverse currency movements seen across all reported segments Revenue increased 2% in the UK Europe (ex. UK and before VAT deduction) increased 3% Regulated territories* represents 57% of revenue (
Slide 10: Revenue B2C
REVENUE B2C Revenue B2C on a like for like basis* up 11% to $214m (H1-14: $193m) Reported Revenue down 1% to $191m 14.8% CAGR since H1-09 on a like for like basis* Strong performance led by Casino and Sport Revenue B2C H1 2009 – H1 2015 ($m) EU VAT FX effect 220 5 200 18 180 191 193 $m 160 1
Slide 11: Revenue B2C by Product
REVENUE B2C BY PRODUCT All product lines impacted by adverse currency movements On a like for like basis*, revenue increased in all products with the exception of Poker Casino up 13%, Poker down 2%, Bingo up 3%, Emerging Offering up 56% Revenue B2C H1 2015 vs. H1 2014($m) $m Revenue B2C per pr
Slide 12: Revenue Casino B2C
REVENUE CASINO B2C Another outstanding year for Casino, capitalizing on mobile investments and richer offering Casino Revenue on a like for like basis* up 13% to $121m (H1-14: $108m) reported revenue down 2% to $105m Active customer increased 22%, new customer recruitment increased 12% Revenue
Slide 13: Revenue Poker B2C
REVENUE POKER B2C Poker revenue on a like for like basis* down 2% to $47m (H1-14: $48m), reported Revenue down 6% No. 2 position in global poker rankings** maintained, outperforming market in relative liquidity Customer actives and new customer recruitment increased Revenue Poker B2C H1 2009 –
Slide 14: Revenue Emerging Offering B2C
REVENUE EMERGING OFFERING B2C Emerging offering Revenue up 41% to $18m (H1-14: $13m) despite currency headwind Results driven by the accelerating Sport offering, fueled further by successful launch in Spain last August Revenue Emerging Offering B2C H1 2009 – H1 2015 ($m) 19 18 17 15 $m 13 13 14
Slide 15: Revenue Bingo B2C
REVENUE BINGO B2C Revenue on a like for like basis* up 3% to $25m (H1-14: $24m), reported revenue down 6% Offering enhanced during the period, with shared liquidity Bingo and Casino games 42% increase in new depositors Revenue Bingo B2C H1 2009 – H1 2015 ($m) EU VAT FX effect 35 30 25 2 $m 28
Slide 16: Corporate Cash
CORPORATE CASH Cash position remains strong with corporate cash net of customer deposits 6% above H1-14 at $65m (H1-14: $61m) Cash position H1 2015 vs. H1 2014 $m 70.0 65.0 60.0 65.0 55.0 61.1 50.0 45.0 40.0 H114 H115 16
Slide 17: Marketing Cost Ratio
MARKETING COST RATIO Marketing spend efficiencies demonstrate strong return to cost optimisation capabilities Decrease in absolute terms despite considerable customer acquisition increase of 22% Marketing Costs H1 2015 vs. H1 2014 Marketing Costs Marketing Costs % of Revenue* $m % 70 69 0.7% 30.
Slide 18: Cost Structure
COST STRUCTURE Cost* percentage of revenue at 81% (H1-14: 78%) Other than the increased gaming duties burden (driven by the new UK POC tax), all other costs components have decreased in ratio, in part due to weaker ILS and cost control Cost as a % of Total Revenue H1 2014 - H1 2015 78.2 % 81.4%
Slide 19: Adjusted EBITDA and Margin
ADJUSTED EBITDA AND MARGIN Adjusted EBITDA down 17% to $41m (H1-14: $49m) Record breaking period excluding additional UK POC and EU VAT charges Adjusted EBITDA H1 2015 vs. H1 2014 $m Adjusted EBITDA % Adjusted EBITDA margin 25% 50 20% 40 49 15% 21.8% 30 41 18.6% 10% 20 5% 10 - 0% H114 H115 H114
Slide 20: EBITDA Bridge H1-14 vs. H1-15
EBITDA BRIDGE H1-14 vs. H1-15 Strong EBITDA performance mitigating $19.5m external impact of UK POC and EU VAT Before adjusting for adverse currency movements Internal vs. External effects Increase Decrease 60 5.1 11.5 50 14.4 $m 40 30 49.0 40.9 20 10 EBITDA Internal EU VAT UK POC EBITDA Actual
Slide 21: Adjusted EBITDA Trend
ADJUSTED EBITDA TREND Adjusted EBITDA impacted by UK POC tax and EU VAT Before adjusting for adverse currency movements Adjusted EBITDA H1 2010 – H1 2015 68.0 EU VAT 5 Gaming duties 58.0 22 7 48.0 $m 7 49 38.0 6 39 41 28.0 36 1 18.0 1 20 8.0 13 H110 H1 11 H1 12 H1 13 H1 14 H1 15 21
Slide 22: Interim Dividend
INTERIM DIVIDEND Dividend maintained at H1-14 level DIVIDEND PER SHARE ($c) H1 2012-H1 2015 $c 4.0 140% 140% 140% 120% 3.5 120% 100% 100% 3.0 80% 2.5 3.5 3.5 60% 3.0 40% 2.0 2.5 20% 1.5 0% H112 H113 H114 H115 Base %change over H112 22
Slide 23: Balance Sheet
BALANCE SHEET $m 30-Jun-15 30-Jun-14 Non-current assets Goodwill and other Intangible assets 159.1 156.9 Property, plant and equipment 13.7 17.6 Other non-current assets 2.2 0.7 Investments 1.7 3.4 176.7 178.6 Current assets Cash and cash equivalents 141.6 119.8 Trade and other receivables 37.2 30.8
Slide 24: Cash Flow Statement
CASH FLOW STATEMENT $m six month Ended 30 June H115 H114 Cash flows from operating activities Profit before income tax 20.0 34.0 Share benefit charges 2.4 (0.5) Depreciation & amortisation 9.4 8.6 Change in current assets and liabilities 5.7 5.9 Other non cash adjustments (2.7) 3.6 Cash generated fr
Slide 25: Itai Frieberger, COO | Operational Review
ITAI FRIEBERGER, COO | OPERATIONAL REVIEW 25
Slide 26: Group Revenue and Product KPIs
GROUP REVENUE TOTAL $186M $200M $225M $245M* H1 2012 H1 2013 H1 2014 H1 2015 DEPOSIT BETS SPORT B2C 100% 106% 117% 129% 100% 127% 201% 223% H1 2012 H1 2013 H1 2014 H1 2015 JAN 2014 JUN 2014 JAN 2015 APR 2015 DEPOSIT NEW DEPOSITORS CASINO BINGO 100% 110% 118% 121% 100% 136% 150% 174% JAN 2014 OCT 201
Slide 27: Strong Operational Momentum Despite Headwinds
Strong operational momentum despite external headwinds Meticulous planning and execution of mitigation measures – minimising impact Core expertise and focused execution of strategy driving growth Continued development of technology, product and marketing driving underlying growth 27
Slide 28: What Did We Achieve?
WHAT DID WE ACHIEVE? 28
Slide 29: Long Term Trend
LONG TERM TREND Growing in absolute deposits despite currency headwind This is the business engine – fuelling future growth B2C DEPOSIT TREND Based on Jan 2010 FX effect 190% 170% 150% 130% 110% 90% 70% 50% 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 1 2 3 4
Slide 30: B2C Acquisition
B2C ACQUISITION Increases on all fronts with overall 22% increase in first time depositors (first time depositors) Significant growth in Sport (with product gaining traction) and in Bingo where we start to enjoy POC effect on smaller operators FTD’s H1 2015 vs. H1 2014 % 180 % 160 % 169% 140 % 1
Slide 31: Casino Revenue
CASINO REVENUE Casino Revenue increased despite EU VAT and adverse currency movements A quarterly CAGR of 19% on a like for like basis* CASINO QUARTERLY GROWTH 65 60 55 63 50 54 45 53 40 47 35 41 30 36 25 27 20 15 Q210 Q211 Q212 Q213 Q214 Q215 Q215 Adj. LFL * Like for like as defined in the 2015
Slide 32: Poker
POKER 888Poker continues to outperform in a highly competitive and mature market environment Fortifying our No. 2 position in global poker rankings* LIQUIDITY 120% 100% Weekly Liquidity Index 80% 60% 40% 20% 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 2013 2014 2015 Op
Slide 33: Sport
SPORT Acceleration continues Live events increased considerably in count and in share of Bets Launch of Sport in 888.es in August 2014 SPORT BETS 550% 500% 888.es Sport launch 450% New Sport Platform 400% World Cup 350% 300% 250% 200% 150% 100% 50% 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9
Slide 34: Bingo Platform
BINGO PLATFORM Bingo recovery continues Daily bets in GBP reflect true like for like growth As of mid April, additional growth fueled by new CasinoFlex product launches Bingo platform volume 295.0 245.0 195.0 145.0 95.0 Daily Bet (GBP) Bet per Actives (GBP) 45.0 1 2 3 4 5 6 7 8 9 10 11 12 1 2
Slide 35: Mobile
MOBILE MOBILE DEPOSIT SHARE IN UK 50% Deposits Registrations 40% 30% 20% 10% 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 1 2 3 4 5 6 2012 2013 2014 2015 *B2C Casino, Poker. Bingo, Sport 35
Slide 36: How Did We Achieve It?
HOW DID WE ACHIEVE IT? 36
Slide 37: Customer Incentives B2C Casino
CUSTOMER INCENTIVES B2C CASINO H1-15 bonus ratio continues to support growth on a like-for-like basis More bonuses are granted to a more targeted audience using dedicated tools such as free play vouchers and free spins Customer Bonuses as % of Revenue* Rev $m 35.0% 135 125 30.0% 115 25.0% 105 %
Slide 38: Marketing Trend
MARKETING TREND Continued optimisation of marketing spend Ratio decline despite customer recruitment increases across products – 22% on Group level H1 2013 - H1 2015 Marketing Ratio Trend % 35.0% 0.7% 36.0% 30.9% 25.0% 29.8% 15.0% H113 H114 H115 *Like for like ratio excludes EU VAT from Revenues
Slide 39: Casino Games
CASINO GAMES Strong increase in number of in-house games being played, a direct result of in-house games renaissance NUMBER OF ACTIVE GAMES CHANGE 210% 190% 170% 150% 130% 110% 90% 70% 50% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 2011 2012 2013 2014 2015 In House 3rd party 39
Slide 40: CasinoFlex
CasinoFlex HOME SLOTS TABLE GAMES INO PROMOTIONS > JOIN THE FUN WITH UP TO £400 IN WELCOME BONUSES! es VICTORIOUS ie! oe ec EE Fd AGRIC | Eisner ‘ Sy, ae @ CE ons EO a . PLAY NOW 5 |) today yesterday month todate Zdavs 30days 60days N Group breakdown by sian TANOOW RHEE ORORAM OUT CMe GQ: TW SPH
Slide 41: Regulated Markets
REGULATED MARKETS Upcoming launch in Denmark and Romania Regulation is an opportunity for 888 US – focus on cost-efficiency continues, maintaining pole position with anticipation of new states regulating 41
Slide 42: 888.es Bets Trend
888.es BETS TREND (EURO Based) 888 SPAIN BETS GROWTH (EURO based) 250% Launch of 888.es Spain Sport Launch Spain Slots Launch 200% 150% Bets 100% 50% 0% 1 2 3 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 1 2 3 4 5 6 7 2012 2013 2014 2015 Poker Bet EUR Casino Bet EUR Sport
Slide 43: 888.it Deposit Trend
888.it DEPOSIT TREND 888 ITALY DEPOSITS (EUR) 145% 30% Approved Deposit s EUR 135% Mobile share% 25% 125% 20% 115% Mobile Deposit Share % Approved Deposit EUR 105% 15% 95% 10% 85% 5% 75% 65% 0% 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 2014 2015 43
Slide 44: 777.com
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Slide 45: Operational Summary
OPERATIONAL SUMMARY The 888 machine is working Consistent planning and delivery Meaningful opportunities ahead – new regulations and innovation Core business stability is key for non-organic growth 45
Slide 46: Brian Mattingley, CEO | Summary
BRIAN MATTINGLEY, CEO | SUMMARY 46
Slide 47: Summary of 2015 H1 Results
SUMMARY OF 2015 H1 RESULTS Continued strong performance driven by core expertise Excellent operational momentum despite external headwinds Future growth both organic and M&A Q3 trading solid on a like for like basis* with increase in deposits and customer recruitment Confident of achieving
Slide 48: Q&A
Q&A 48
Slide 49: Appendix
APPENDIX 49
Slide 50: Chargeback & PSP Fees
CHARGEBACK & PSP FEES Efficient Chargeback and PSP ratios maintained Chargeback & PSP fees as a % of Total Revenue 10% 8.5% CB PSP 7.6% 8% 7.1% 6.9% 1.7% 2.6% 6.4% 5.9% 0.9% 5.6% 5.7% 1.2% 6% 0.8% 0.8% 0.5% 0.7% % 4% 6.0% 5.9% 5.7% 6.2% 5.5% 5.1% 5.1% 5.1% 2% 0% H108 H109 H110 H111 H112 H113 H114