Evoke Plc · LSE:EVOK
Evoke — 888 Holdings — H1 2017 Earnings Presentation
40 slides from Evoke's earnings presentation, Sep 5, 2017
Slide 1: Results for the Six Months Ended 30 June 2017
RESULTS FOR THE SIX MONTH ENDED 30 JUNE 2017
Slide 2: Agenda
AGENDA Itai Frieberger | Strategic Review Aviad Kobrine | Financial Review Itai Frieberger | Summary Q&A 2
Slide 3: Itai Frieberger, CEO | Strategic Review
ITAI FRIEBERGER, CEO | STRATEGIC REVIEW
Slide 4: State of the Business
STATE OF THE BUSINESS 1 Revenue up 9% at constant currency to $285m marking the 8th consecutive Like-For-Like growth half year 2 Adjusted EBITDA up 22% to $54m at constant currency Despite recent headwinds, the business is in very good health Going through a transition towards full regulatio
Slide 5: UK: License review process is behind us
UK License review process is behind us We believe it made us a better operator Features, processes and practices developed give 888 another competitive edge from a compliance perspective We accept our responsibility for the issues which led to this review, and our commitment to rectifying th
Slide 6: Worldwide Regulations
WORLDWIDE REGULATIONS Committed to our strategy of launching and growing in regulated markets Few closures over the past 12 months (AUS, CZ, PL, SL, SK) Adjusting our positions in existing established markets (such as UK and the Netherlands) 888 continues to demonstrate unrivaled diversity i
Slide 7: Operational Excellence
OPERATIONAL EXCELLENCE Delivering sustainable growth despite taking decisive and responsible measures We continue to execute on our strategy and invest in our technology and people Our marketing ratio and operational expenditure share went down We offset the impact of market closure with key
Slide 8: Product
PRODUCT Following “Blast” the “Flopomania” poker variant was launched successfully One of the first operators to launch on the Google play store, first to do so with all product verticals at once Poker EU shared liquidity discussions an interesting venture 8
Slide 9: Looking Ahead
LOOKING AHEAD We remain proactive and alert, so we can make decisions on our own terms 888 remains a unique, independent, diversified and well-built operator from a technical and human perspective We keep evaluating new markets and opportunities, through our analytical DNA This includes M&A
Slide 10: Aviad Kobrine, CFO | Financial Review
AVIAD KOBRINE, CFO | FINANCIAL REVIEW
Slide 11: 2017 Highlights
2017 HIGHLIGHTS 1 Revenue up 9% at constant currency to $285m Eight consecutive half year periods of like for like revenue growth B2C Revenue up 11% at constant currency to $255m Sport lead growth with 45% revenue increase followed by Casino which increased 11% at constant currency Resilie
Slide 12: Profit and Loss Account
1 PROFIT AND LOSS ACCOUNT % Change % Change $m H1 2017 H1 2016 at Constant Reported Currency Revenue 270.1 262.0 9% 3% 2 Operating expenses 68.9 67.5 Gaming duties 37.4 30.2 Research and development expenses 17.2 15.8 Selling and marketing expenses 85.4 90.3 % of Revenues 31.6% 34.4% 3 Administrativ
Slide 13: Deposit Trend
DEPOSIT TREND Engine is strong and growing, constant increase in deposits across the board Regulated markets are key driver behind this trend Record summer in terms of deposits Deposit Trend 2010-2017 250% Non-Reg Regulated Markets 200% 150% 100% 50% 0% 1 2 3 4 5 6 7 8 9 101112 1 2 3 4 5 6 7 8
Slide 14: Active Days
ACTIVE DAYS Continuous progress in underlying metrics Robust retention with increased average active days per player Average Active Days % vs. H1 16 130% 120% 110% 126% 116% 100% 112% 104% 90% 100% 80% 70% 60% 50% Base H1 16 Bingo B2C Sport Casino Poker 14
Slide 15: Actives
ACTIVES Activity increased across products with the exception of Poker reflecting departure from several markets Poker more than compensated for by increased value from loyal players Actives Trends % vs. H1 2016 All products (excl. Poker) Poker 120% 140% 110% 120% 100% 114% 100% 128% 126% 90% 80
Slide 16: Group Revenue
GROUP REVENUE Group revenue up 9% at constant currency, up 3% reported to $270m (H1 2016: $262m) Increase driven by Sport, Casino and regulated markets 12% half yearly CAGR since H1 2009 Revenue H1 2009 – H1 2017 300 FX Effect 15 250 270 $m 262 200 220 225 150 200 186 154 100 130 118 50 H1 09
Slide 17: Group Revenue
GROUP REVENUE Revenue in Q1 and Q2 H1 2017 increased on a reported and constant currency basis Q2 17 strong performance achieved despite Euro 2016 impact on the prior year Quarterly Revenues Q1, Q2 ($m) Q1 ($m) Q2 ($m) 140 8 140 7 136 134 120 130 120 132 112 108 100 100 114 111 103 97 94 92 80 8
Slide 18: Geographical Segmentation
GEOGRAPHICAL SEGMENTATION Europe (ex. UK) the most dominant region for the group, with 49% of revenues Regulated European markets (ex. UK) increased 23% in H1 2017, regulated and taxed markets already comprise 71% of revenues UK share is a combination of diversification strategy, currency effe
Slide 19: European Regulated Markets (ex. UK)
EUROPEAN REGULATED MARKETS (EX. UK) Stellar bet volume growth in European regulated markets (ex. UK) Bet volume up 27% (EUR) Lead by Italy and Spain Dominated by Casino volume, additionally fueled by Sport and Poker acquisition Bet Trend per Product 1400% 1200% 1000% 800% 600% 400% 200% 0% 1
Slide 20: Deposit Trend Spain & Italy
DEPOSIT TREND SPAIN & ITALY Robust growth continues driven by comprehensive product offering Deposit Trend 2010-2017 Spain Italy 400% FX Effect 400% FX Effect 350% 350% 300% 300% 250% 250% 200% 200% 150% 150% 100% 100% 50% 50% 0% 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
Slide 21: Mobile Share
MOBILE SHARE Complementary strong mobile offering – key for success Mobile Deposit and FTD Share Trend 70% 70% Deposit Deposit FTD's FTD's 60% UK 60% Worldwide 50% 50% 40% 40% 30% 30% 20% 20% 10% 10% 0% 0% 1 2 3 4 5 6 7 8 9 101112 1 2 3 4 5 6 7 8 9 101112 1 2 3 4 5 6 7 8 9 101112 1 2 3 4 5 6 7 8 9
Slide 22: Revenue B2C by Product
REVENUE B2C BY PRODUCT Casino up 11%, Sport up 45% , Poker up 1% and Bingo down 3% at constant currency Sport impressive growth despite Euro 2016 during prior year Poker increased despite exits from several markets Casino continued strong performance Revenue B2C* H1 2017 vs. H1 2016 160 H1 1
Slide 23: Revenue Casino B2C
REVENUE CASINO B2C Reported revenue up 6% to $146m (H1 2016: $137m), reflecting 11% increase at constant currency Increased acquisition and average active days per player drive revenue growth Casino is the most dominant product across our territories with both direct acquisition and cross-sell
Slide 24: Revenue Poker B2C
REVENUE POKER B2C Reported revenue up 1% to $43m (H1 2016: $42m), resilient performance despite challenging market conditions and markets exit More mobile users, attractive large tournaments and increased player value reflect recreational player focus Enhanced stickiness with average poker act
Slide 25: Recreational Poker
RECREATIONAL POKER Our fast and exciting Blast and SNAP games are attracting more and more recreational players Players love to play fast games over mobile, increasing the traditionally lower Poker mobile share ratios % of Poker Mobile by Game Type 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10
Slide 26: Revenue Sport B2C
REVENUE SPORT B2C Reported revenue up 35% to $34m (H1 2016: $25m), reflecting 45% increase at constant currency Achieved despite strong comparative period featuring Euro 2016 Success is fueled by expanded offering (including the utilisation of in-play events) and increased penetration across r
Slide 27: Sport Active Players
SPORT ACTIVE PLAYERS Healthy, steadily increasing Sport active players Growth from last year’s strong comparison which included the Euro 2016 peak Actives Trend 950% Euro 2016 850% 750% 650% 550% 450% 350% 250% 150% 50% 1 2 3 4 5 6 7 8 9 101112 1 2 3 4 5 6 7 8 9 101112 1 2 3 4 5 6 7 8 9 101112 1
Slide 28: Revenue Bingo B2C
REVENUE BINGO B2C Reported revenue down 15% to $20m (H1 2016: $23m), highly impacted by currency, down 3% at constant currency Depositing players value increased, boosted by wink slot attraction Bingo is in the process of optimising its costs structure, with an emphasis on bonus levels and bin
Slide 29: Bingo Platform
BINGO PLATFORM Many optimisation tools introduced over the platform Bonus per player decreasing with a special emphasis on H1 2017 – in preparation for tax on bonuses in UK in H2 Actions taken did not effect player value but did reduce bonus hunters and associated acquisition figures New pla
Slide 30: Casino Flex Platform
CASINO FLEX PLATFORM Increased content over our Casino Flex platform including live casino, new 3rd party vendors and internally developed games Content drives additional volumes and new partners Five new brands added during H1 2017 with more than 30 brands currently operating over the platfor
Slide 31: Marketing Cost
MARKETING COST Marketing ratio is down to 31.6% (H1 2016: 34.4%) Marketing efficiencies and cost control with both absolute and relative marketing decreases alongside increased revenues Marketing Cost H1 2017 vs. H1 2016 $m Marketing Costs % Marketing Costs % of Revenue 95 35.0% 90 85 34.4% 31.6
Slide 32: Cost Structure
COST STRUCTURE Continued operational gearing Return to lower marketing levels – a result of more regulated markets in the post penetration stage Balancing increased gaming duties with cost savings More operational savings to come following cost optimisation process in place as of July 2017 C
Slide 33: Adjusted EBITDA and Margin
ADJUSTED EBITDA AND MARGIN Improved Adjusted EBITDA and margins Adjusted EBITDA up 8% to $48m (H1 2016: $44m), and up 22% at constant currency to $54m Adjusted EBITDA margin at 17.6% (H1 2016: 16.8%), representing 18.9% at constant currency Adjusted EBITDA H1 2017 vs. H1 2016 Adjusted EBITDA %
Slide 34: Cash
CASH Healthy cash position from operating activities Cash generated from operating activity at 92% of Adjusted EBITDA Cash net of customer liabilities up 26% Cash Position H1 2017 vs. H1 2016 $m Cash net of Customers Liability % Net Cash from Operating Activity % of Adj EBITDA 100% 80.0 90% 80
Slide 35: Dividend
DIVIDEND Increased in Interim Dividend 60% increase in Interim Dividend per share since H1 2012 Dividend Per Share ($c) H1 2012 – H1 2017 60% 4.5 60% 52% $c 4.0 50% 40% 40% 4.0 40% 3.5 3.8 20% 30% 3.0 3.5 20% 3.5 2.5 3.0 10% 2.5 2.0 0% H1 12 H1 13 H1 14 H1 15 H1 16 H1 17 Dividend per Share % cha
Slide 36: Balance Sheet
BALANCE SHEET $m 30-Jun-17 30-Jun-16 Non-current assets Goodwill and other Intangible assets 159.6 159.3 Property, plant and equipment 8.1 8.9 Other non-current assets 2.0 2.0 Investments 1.5 1.5 171.2 171.7 Current assets Cash and cash equivalents 153.0 143.0 Trade and other receivables 41.0 38.2 T
Slide 37: Cash Flow
CASH FLOW $m Period Ended 30 June H1 2017 H1 2016 Cash flows from operating activities (Loss) Profit before income tax (17.3) 27.8 Share benefit charges 4.1 3.2 Depreciation and amortisation 9.3 9.7 Change in current assets and liabilities 50.6 (17.6) Interest Income (0.3) (0.3) Cash generated from
Slide 38: Itai Frieberger, CEO | Summary
ITAI FRIEBERGER, CEO | SUMMARY
Slide 39: Summary
SUMMARY Healthy underlying performance despite exit from several markets and currency headwinds Strong progress in Casino, Sport and regulated markets in continental Europe Resolution of UKGC process leaves us in a great position going forward Pursue organic growth but remain open to M&A C
Slide 40: Q&A
HOLDINGS Q&A