Evoke Plc · LSE:EVOK
Evoke — 888 Holdings — H1 2011 Earnings Presentation
51 slides from Evoke's earnings presentation, Aug 31, 2011
Slide 1: Results for the Six Months Ended 30 June 2011
Results for the Six Months Ended 30 June 2011
Slide 2: Agenda
Agenda Brian Mattingley | Introduction Aviad Kobrine | Financial Review Itai Frieberger | Operational Review Brian Mattingley | Summary and Outlook Q&A 2
Slide 3: Introduction
Introduction 3
Slide 4: Highlights
† Highlights Second highest Half-Yearly revenue ever - $154m, up 18% Casino & Poker B2C first time depositors up 43%, led by Poker Active Players Casino & Poker B2C up 77% Revenue B2C up 18% to $131m Revenue B2B up 16% to $23m B2C Customer Deposits up 20% EBITDA up 59% to $20m 1,2,3,4
Slide 5: H1 Review
H1 Review Management Change CEO departure New management structure Team has significant online gaming experience Deputy Chairman Brian Mattingley COO CFO Itai Frieberger Aviad Kobrine 5
Slide 6: H1 Review
H1 Review Management Change Approach by Ladbrokes Wink Payment reschedule announced March 2011 Strong internal cash generation Mytopia Performance has not yet met our expectations Social networks gaming could be profitable in the future Prudent accounting decision 6
Slide 7: Strategic Plan
Strategic Plan Core Products Casino, Poker, Bingo, Sport B2C or B2B partners Focus on B2C Best in class product Key assets: Back office ROI marketing/analysis CRM Corporate social responsibility Dragonfish Review all contracts Fewer but larger contracts Good pipeline 7
Slide 8: Strategic Plan
Strategic Plan Focus on Margins Driving volume Operational efficiencies Goals Over arching Strategic Importance – Regulated Markets Implementation – Italy, France Formulating – Spain Developmental – US, Germany 8
Slide 9: Financial Review
Financial Review 9
Slide 10: Profit and loss account
1 Profit and loss account H1 11 - Total Revenue up 18% to $154m (H1 10: $130m) EBITDA up 59% to $20m (H1 10: $13m), marketing efficiency $m H1 2011 H1 2010 H1'11 / H1'10 Revenue 153.8 130.2 18% Operating expenses 2,3 56.0 45.8 Research and development expenses 3 12.9 13.2 Selling and marketing e
Slide 11: B2C Average Daily Deposit Growth
B2C Average Daily Deposit Growth % Relative change base on Jan 2010 120% 115% 110% 105% 100% 95% 90% 85% 80% 75% 70% 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 2010 2011 11
Slide 12: Total Revenue
Total Revenue H1 11 - Total Revenue up 18% to $154m (H1 10: $130m) H1 11 - Second highest ever for 888 Total Revenue H1 09 – H1 11 ($m) 160 140 154 120 130 132 129 $m 100 118 80 60 40 H1 09 H2 09 H1 10 H2 10 H1 11 12
Slide 13: Geographical segmentation
Geographical segmentation Revenue growth across all markets: UK 22%, Europe 9%, Americas 15%, ROW 40% UK represent 49% of Total Revenue in H1 11 Geographic segmentation, Total Revenue H1 10 and H1 11 H1 10 80 6% 8% H1210 H111 47% 70 75 39% 60 61 50 55 UK Europe America ROW $m 51 (ex UK) (ex USA)
Slide 14: Revenue B2C
Revenue B2C H1 11 – B2C Revenue up 18% to $131m (H1 10: $110m) Revenue B2C H1 09 – H1 11 ($m) 130 110 131 $m 90 111 110 70 102 94 50 30 H1 09 H2 09 H1 10 H2 10 H1 11 14
Slide 15: Revenue B2B
Revenue B2B H1 11 – B2B Revenue up 16% to $23m (H1 10: $20m) Revenue B2B H1 10 – H1 11 ($m) 24 23 22 23 21 $m 20 21 19 20 18 17 16 15 H1 10 H2 10 H1 11 15
Slide 16: Revenue B2C by Product
Revenue B2C by Product Casino up 16%, Poker up 22%, Bingo up 17%, Emerging Offering up 28% Revenue B2C H1 10 vs. H1 11 ($m) 80 H1 10 H1 11 70 69 60 59 50 $m 40 30 28 20 24 23 20 10 10 8 0 Casino Poker Bingo Emerging Offering 16
Slide 17: 888Casino Revenue Trend
888Casino Revenue Trend 888Casino revenue growth continue since Q3 2010 Aug 2011 Daily Average up 35% over Aug 2010 888Casino Daily Revenue* 120% 110% 100% 90% $00’ 80% 70% 60% 50% 40% 30% 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 2010 2011 * Revenue defined as Casino house profit – Bonus – Oth
Slide 18: 888Poker Revenue Trend
888Poker Revenue Trend New Poker6 client launched in July 2010 Aug 2011 Daily Average up 99% compared to Aug 2010 888Poker Daily Revenue* 150% 140% 130% 120% 110% 100% 90% 80% 70% 60% 50% 40% 30% 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 2010 2011 * Revenue defined as Rake+Tour. fee + Casino in
Slide 19: Poker Industry Liquidity – Cash Games
Poker Industry Liquidity – Cash Games Jul 2011 888Poker Liquidity up 75% vs. Jan 2010 Jul 2011 Poker rest of Industry Liquidity down 43% vs. Jan 2010 Liquidity Trend Relative change % base on Jan 2010 180 Poker Industry 888Poker 160 Jan 2010 Base line % 140 120 119% 100 80 60 40 1 2 3 4 5 6 7 8
Slide 20: Cost Structure
Cost Structure Cost percentage down to 87% (H1 10: 90%) Mostly due to Sales & Marketing efficiency Cost as a % of Total Revenue H1 10 vs. H1 11 90 % 87 % 100% 9% 10% 80% Admin. Expenses S&M expenses 36% 32% 60% R&D % 40% 10% 8% Operating expenses 20% 35% 36% 0% H1 10 H1 11 * Excluding share bene
Slide 21: EBITDA and EBITDA margin
EBITDA and EBITDA margin EBITDA up 59% to $20m (H1 10: $13m) EBITDA margin up to 13% (H1 10: 10%) EBITDA H1 10 vs. H1 11 EBITDA EBITDA margin 14% 20 12% 20 13% 10% 15 8% $m 10 6% 10% 13 4% 5 2% - 0% H1 10 H1 11 H1 10 H1 11 * Excluding share benefit charges, depreciation amortisation, Forex and r
Slide 22: Chargebacks & PSP fees - Group
Chargebacks & PSP fees - Group CB & PSP at 6.9% of Total Revenue (2010: 6.6%) Same level as of 2010 Chargebacks & PSP fees as % of Total Revenue CB PSP 10% 9.2% 7.6% 8% 6.9% 3.7% 6.6% 1.8% 1.1% 1.2% 6% % 4% 5.8% 5.6% 5.5% 5.7% 2% 0% 2008 2009 2010 H111 22
Slide 23: Marketing Cost Ratio
Marketing Cost Ratio Marketing ratio to Revenue in H1 11 at 32%, 4% lower than H1 10 H1 11 B2C Casino & Poker CPA lower than H1 10 Efficiency target achieved Marketing Costs H1 10 vs. H1 11 Marketing Costs Marketing Costs % of Revenue 50 45 40 35% 35 50 48 30 $m 25 36% 20 25% 32% 15 10 5 - 15%
Slide 24: Customer Bonuses B2C Casino
1 Customer Bonuses B2C Casino Casino Revenue Growth driven by optimal use of Bonuses and CRM efforts Customer Bonuses as % of Revenue 30% 75.0 70.0 25% 65.0 20% 60.0 % 15% 55.0 $m 10% 22% 50.0 18% 45.0 5% 40.0 0% 35.0 H1 10 H1 11 Bonus Ratio% Rev $m 1 Excluding converted loyalty points 24
Slide 25: Customer Bonuses B2C Poker
1 Customer Bonuses B2C Poker Poker Revenue Growth driven by optimal use of Bonuses and CRM efforts Customer Bonuses as % of Revenue 25% 25.00 24.00 20% 23.00 22.00 15% 21.00 % 20.00 $m 10% 19.00 18.00 5% 12% 17.00 8% 16.00 0% 15.00 H1 10 H1 11 Bonus Ratio% Rev $m 1 Excluding converted loyalty poin
Slide 26: Players Value OverTime
Players Value OverTime Average revenue generated by new players during first 3 months (an indicator of life time value) increase overtime (Jul 10 = 100) 3 Month Ave. Revenue per player B2C Casino & Poker 160% 150% 888Casino 140% 130% 120% 110% 100% 90% 80% 70% 60% 7 8 9 10 11 12 1 2 3 2010 2011 13
Slide 27: Players Value Over Time
Players Value Over Time ARPU fluctuates with number of actives does not reflect underlying increase in deposits and LTV 888Casino ARPU Trend as of Q1 2010 ARPU (KPI) Revenue ARPU (Depositors only) Deposits / Unique Depositors 140% 120% 100% 80% 60% 40% Campaign Type I Campaign Type II 20% 0% 2010/
Slide 28: Balance Sheet at 30 June 2011
Balance Sheet at 30 June 2011 $m 30-Jun-11 31-Dec-10 Non-current assets Intangible assets 142.9 162.3 Property, plant and equipment 19.6 21.5 Deferred tax & Financial assets 0.9 0.8 Investment in equity accounted joint ventures 1.3 1.3 164.6 185.9 Current assets Cash and cash equivalents 60.9 61.5 T
Slide 29: Cash Flow Statement
Cash Flow Statement $m Six month ended 30 June H1 11 H1 10 Cash flows from operating activities Profit before tax (22.1) 4.3 MyTopia Goodwill Write-off 20.2 Notional interest (IAS 39) 6.9 Share benefit charges 2.1 1.9 Profit before tax and Share benefit charges 7.1 6.2 Depreciation & amortisation 7.
Slide 30: Operational Review
Operational Review 30
Slide 31: Operational highlights
Operational highlights • Investment in our core platform • B2C Launch in Italy • Targeted/Result driven marketing • Poker 6 • Dragonfish – Refocused 31 31
Slide 32: Our core platform
Our core platform Rebuilt core functionality Moved to unified offering Automated protocols Created a state of the art eCRM system Telco business practice Improvements in all key KPI’s Churn OTD Newborn deposits And more… Continues development in e-payments Banks (Spain, Italy
Slide 33: Our new poker
Our new poker Poker 6 Innovative software that addresses the needs of our target customers Very strong performance even before “Black Friday” and the closure of FullTilt Effective acquisition and CRM strategy leveraging a newly developed back-office tool Poker Room Management strategy that
Slide 34: Our casino
Our casino The back office Allowed more aggressive marketing Additional CRM functionalities Numerous new tools to support increased LTV Italy More games (new deal with Warner Brothers) Slots factory 34 34
Slide 35: Bingo
Bingo Successful migration of Wink brands to B2C Modular Bingo platform More games Side bets New Invite-a-Friend, bad beat bonus and video over chat were launched Enhanced skins - dedicated language, rooms, customized lobby, dedicated chat, promotions Mobile and tablets New networks
Slide 36: Sport
Sport Contribution as the main target Restructured the team Cross between the 888 brands Upgrade to the new platform Targeted marketing activity 36 36
Slide 37: Marketing highlights
Marketing highlights B2C Continue to dominate Casino and Poker brand exposure on Google both organic and PPC via our leading in house online marketing teams Significant increase in new customers via improved positions on industry leading affiliate sites Above the line activity in key markets 3
Slide 38: B2C Highlights
B2C Highlights POKER Leverage our strong position in the market via aggressive player acquisition in all channels Enhanced partnerships with key market leaders Improved and innovative CRM campaigns using innovative back-office tools Focus on selected markets and player segments 38 38
Slide 39: B2C Highlights
B2C Highlights CASINO CRM - focus on player segmentation and retention activities Automated protocol to support retention and LTV Increase player acquisition in key territories via new ATL Marketing campaign promoting our brand strategy- “Winning can happen any minute!” via innovative market
Slide 40: B2C Performance Highlights
B2C Performance Highlights BINGO Extracting value out of current assets (launched 3 networks last year) Cross sale between 6 bingo networks extending LTV Implementing B2C best practices and know-how to the newly acquired business: Data mining, CRM, games offers, value player management Launc
Slide 41: Dragonfish
Dragonfish Remain committed to profitable B2B Focus on core competency Casino modular, Bingo, significant opportunity in poker and casino Successful launch in Italy Focus our efforts Many opportunities out there… 42 42
Slide 42: Multiple launches in Italy
Multiple launches in Italy 43 43
Slide 43: …and more
and more HOLDINGS
Slide 44: Our business in regulated markets
Our business in regulated markets Italy Launched B2C in Italy Dragonfish launched with Bwin and Microgame Significant potential for both lines of business New deal structure with Endemol France Difficult tax structure but continue to monitor Spain A new opportunity Working on the busin
Slide 45: What’s next?
What’s next? Regulated markets - an opportunity Continue investment in our core platform New casino (Q1/12) Going mobile Create a stand alone gaming platform (GGP) Focus on our B2C marketing activities Real time events embedded in platform Dragonfish – create the right deals Maximi
Slide 46: 888 new Casino
_888 new Casino — 888 nn casino i 888: FF —s=— HOLDINGS
Slide 47: What’s next – B2C
What’s next – B2C Poker - Leveraging our new software with unique features and fresh marketing/product approach ATL campaigns - Casino, bingo and poker Roulette vouchers for casino Bingo International Sports – preparing marketing activities for 2 major sporting events in 2012 Euro and Lond
Slide 48: Summary and Outlook
Summary and Outlook 49
Slide 49: Summary and Outlook
Summary and Outlook Strong results Record activity Improving margins Restructured and renewed strategic focus Trading in second half strong to date Investment in regulated markets in H2 FY in line with market expectations 50 50
Slide 50: Q&A
Q&A Q&A 51
Slide 51: Thank You
Thank You!! ee O% 5 090 os I ——= HOLDINGS