Evoke Plc · LSE:EVOK
Evoke — 888 Holdings — H1 2014 Earnings Presentation
50 slides from Evoke's earnings presentation, Aug 27, 2014
Slide 1: Results for the Six Months Ended 30 June 2014
RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 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 Results – H1 2014
SUMMARY OF RESULTS – H1 2014 Another set of record results Revenue up 13% to $225m 1 Adjusted EBITDA up 27% to $49m PBT (net of finance) $36.5m up 25% Generated $47m cash an increase of 22% on H1 2013 Corporate Cash net of customer liabilities at half year $60m up 50% on H1 2013 Interi
Slide 4: Growth Across All Key Products
GROWTH ACROSS ALL KEY PRODUCTS UK Mobile revenue doubled – now 29% of UK revenue Sport revenue increased by 102% Poker continues to buck negative industry trends, growing 3% Bingo restructure is delivering with 9% growth Casino delivered 14% revenue growth Maintained our market share in
Slide 5: Growth Drivers in H2
GROWTH DRIVERS IN H2 New In-House and 3rd party content in Casino Increased content on Mobile Further off-line marketing in Sport and geographical spread Slots regulated in Spain Launch of Spanish sportsbook Mobile launched in Italy US opportunities 5
Slide 6: Aviad Kobrine, CFO | Financial Review
AVIAD KOBRINE, CFO | FINANCIAL REVIEW 6
Slide 7: Profit and Loss Account
PROFIT AND LOSS ACCOUNT 1 $m H1 14 H1 13 Revenue 225.1 200.1 13% 2 Operating expenses 71.5 61.3 Research and development expenses 19.3 15.2 Selling and marketing expenses 69.6 72.1 3 Administrative expenses 15.7 12.8 3 Adjusted EBITDA 49.0 38.6 27% % of Revenues 21.8% 19.3% Depreciation and Amortisa
Slide 8: Revenue
REVENUE H1 2014 - revenue up 13% to $225m (H1 13: $200m) Another record period Strong core products performance, in part driven by enhanced mobile offering Revenue H1 09 – H1 14($m) 230 225 210 190 200 200 186 189 170 177 $m 150 154 130 129 130 132 110 118 90 H1 09 H2 09 H1 10 H2 10 H1 11 H2 1
Slide 9: Geographical Segmentation
GEOGRAPHICAL SEGMENTATION Revenue growth in UK 22%, Europe (ex. UK) 4%, Americas 28%, ROW down 17% UK growth driven Casino, by mobile success and Bingo turnaround Geographic segmentation, Total Revenue H1 13 and H1 14 $m H1 2013 H1 13 H1 14 8% 120 11% 41% 40% 100 101 80 83 83 80 UK Europe Americ
Slide 10: Geographical Growth by Region/Product
GEOGRAPHICAL GROWTH BY REGION/PRODUCT Strong growth in the UK, boosted by Mobile penetration Revenue in both Casino and Poker increased across all regions Casino & Poker B2C Revenue Growth in H1 14 vs. H1 13 Casino Poker 40% 9% 8% 35% 37% 7% 7% 30% 6% 25% 5% 20% 6% 4% 15% 3% 10% 2% 3% 5% 8% 8% 1
Slide 11: Revenue B2C by Product
REVENUE B2C BY PRODUCT Strong Casino performance lead revenue growth Bingo turnaround Casino up 14%, Poker up 3%, Bingo up 9%, Emerging Offering down 6% Revenue B2C H1 14 vs. H1 13 ($m) 120 H1 13 H1 14 100 108 94 80 $m 60 40 47 48 20 24 22 14 13 0 Casino Poker Bingo Emerging Offering 11
Slide 12: Revenue B2C
REVENUE B2C H1 14 revenue up 9% to $193m (H1 13: $177m) 7% CAGR Strong H1 despite June FIFA World Cup Revenue B2C H1 10 – H1 14 ($m) 190 193 170 175 177 166 164 $m 150 153 130 131 110 110 111 90 H1 10 H2 10 H1 11 H2 11 H1 12 H2 12 H1 13 H2 13 H1 14 12
Slide 13: Revenue Casino B2C
REVENUE CASINO B2C H1 2014 revenue up 14% to $108m (H1 13: $94m) Casino strong revenue growth continued to be driven by rich offering across platforms, effective marketing and CRM, driving player value higher Revenue Casino B2C H1 10 – H1 14 ($m) 110 108 100 90 96 94 $m 80 83 82 79 70 60 69 59 5
Slide 14: Revenue Poker B2C
REVENUE POKER B2C H1 2014 revenue up 3% to $48m (H1 13: $47m) Maintaining our No. 2 position in global poker rankings* Delivering revenue growth in a mature market Revenue Poker B2C H1 10 – H1 14 ($m) 50 45 48 47 47 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 12
Slide 15: Players' Value
PLAYERS’ VALUE Stable Poker value Continued increase in Casino value Demonstrates quality of revenue Players’ Value * 140% 130% 120% 110% 100% 134% 90% % 80% 102% 70% 60% 100% 50% 40% Q1 13 Base 888Poker Q1 888Casino Q1 14 players 14 players Value Value * GGR base, for all players recruited in
Slide 16: Cash from Operations
CASH FROM OPERATIONS High conversion of cash continues, 95% of Adjusted EBITDA (H1 13: 99%) Corporate cash net of customers deposits increased 50% to $60m (H1 13: $40m) Cash position H1 14 vs. H1 13 Cash from operations (% of adj. EBITDA) Corporate cash net of customers $m % 65.0 100% 90% 60.0 8
Slide 17: Marketing Cost Ratio
MARKETING COST RATIO Marketing spend decreased in absolute and in ratio, will gravitate to historical levels over time Rigid return on investment guidelines maintained, revenue driven by effective CRM Marketing Costs H1 14 vs. H1 13 Marketing Costs Marketing Costs % of Revenue $m 75 40.0% 70 65
Slide 18: Cost Structure
COST STRUCTURE Cost* percentage of revenue at 78% (H1 13: 81%) R&D increase Operational gearing continues, despite US focus Cost as a % of Total Revenue H1 14 vs. H1 13 80.7 % 78.2 % 80% 6.4% 7.0% Admin. Expenses 60% S&M expenses 36.0% 30.9% R&D 40% 7.6% 8.6% Operating expenses 20% 30.7% 31.8%
Slide 19: Customer Incentives B2C Casino
CUSTOMER INCENTIVES B2C CASINO H1 14 bonus ratio continues to demonstrate optimal CRM efforts, supporting revenue growth Customer Bonuses as % of Revenue Rev $m 35% 115 30% 105 95 25% 85 20% % 75 $m 15% 65 25% 21% 10% 55 5% 45 0% 35 H1 13 H1 14 19
Slide 20: Customer Incentives B2C Poker
CUSTOMER INCENTIVES B2C POKER Bonus ratio is maintained in Poker while revenue growth continues Underlined by optimal CRM work Customer Bonuses as % of Revenue Rev $m 25% 50 48 20% 46 44 15% 42 % $m 40 10% 38 18% 18% 36 5% 34 32 0% 30 H1 13 H1 14 20
Slide 21: Adjusted EBITDA and Margin
ADJUSTED EBITDA AND MARGIN Adjusted EBITDA up 27% to $49m (H1 13: $39m) Adjusted EBITDA margin increased to 21.8% despite FIFA World Cup effect and US build-up focus Adjusted EBITDA H1 14 vs. H1 13 $m Adjusted EBITDA Adjusted EBITDA margin 50 22.0% 21.0% 45 49 20.0% 21.8% 40 19.0% 18.0% 35 39 17
Slide 22: Adjusted EBITDA Trend
ADJUSTED EBITDA TREND Adjusted EBITDA Margin expansion despite US focus H1 14 Adjusted EBITDA exceeds previous year strong comparable Adjusted EBITDA H1 2014 21.8% 55 Adj. EBITDA ratio 22.0% 19.3% 19.3% 20.0% 45 49 18.0% $m 35 16.0% 39 25 13.0% 36 14.0% 12.0% 15 9.6% 20 10.0% 13 5 8.0% H110 H1 1
Slide 23: Balance Sheet
BALANCE SHEET $m 30-Jun-14 30-Jun-13 Non-current assets Intangible assets 156.9 149.8 Property, plant and equipment 17.6 17.3 Deferred tax & Other financial assets 0.9 0.2 Investment in equity accounted joint ventures 3.2 0.4 178.6 167.7 Current assets Cash and cash equivalents 118.7 89.3 Trade and
Slide 24: Cash Flow Statement
CASH FLOW STATEMENT $m six month Ended 30 June H1 14 H1 13 Cash flows from operating activities Profit before income tax 34.0 35.5 Share benefit charges (0.5) 2.5 Depreciation & amortisation 8.6 6.8 Change in current assets and liabilities 5.9 (2.2) Other non cash adjustments 3.6 (2.4) Cash generate
Slide 25: Itai Frieberger, COO | Operational Review
ITAI FRIEBERGER, COO | OPERATIONAL REVIEW 25
Slide 26: Group Revenue and Product KPIs
GROUP REVENUE TOTAL $154M $186M $200M $225M H1 2011 H1 2012 H1 2013 H1 2014 DEPOSIT BETS SPORT B2C 100% 112% 120% 125% 100% 165% 198% 228% JUN 2013 OCT 2013 JAN 2014 MAY 2014 JUN 2013 DEC 2013 MAR 2014 JUN 2014 REVENUE DEPOSITS CASINO 100% 113% 118% 126% 100% 116% 122% 126% JUN 2013 OCT 2013 JAN 201
Slide 27: Deposit Trend
DEPOSIT TREND B2C DEPOSITS 2010 – 2014 % Based on Jan 2010 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 5 6 7 8 9 10 11 12 1 2 3 4 5 6 2010 2011 2012 2013 2014 *Jan 2010 as base = 100% **Daily average Deposits 27
Slide 28: Mobile
MOBILE True “Mobile First” organization Mobile is our state of mind Embedded across all verticals and business units Up to 50% of certain metrics 28
Slide 29: Mobile Deposit in UK
MOBILE DEPOSIT IN UK Mobile Deposit Share in UK 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 2012 2013 2014 *B2C Casino, Poker. Bingo, Sport 29
Slide 30: Mobile Customer Recruitment in UK
MOBILE CUSTOMER RECRUITMENT IN UK Mobile Registrations / FTD’s Share in UK 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 2012 2013 2014 *B2C Casino, Poker. Bingo, Sport 30
Slide 31: Casino
CASINO Strong half year revenue growth Automatic Promotions leveraging 888’s superior technology and driving LTV We are a casino-DNA company and platform Unique in the space: we’re not just serving games 31
Slide 32: Cross Platform Content
CROSS PLATFORM CONTENT Genie jackpot was hit TWICE in H1 $4 million paid - good acquisition and retention streak Casino is embedded into every vertical (in Poker, Sport, Bingo) and business process 32
Slide 33: Casino: In House vs. Third Party Games Played
CASINO IN HOUSE VS. THIRD PARTY GAMES PLAYED 220% 200% 180% 160% 140% 120% 100% 80% 60% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 2011 2012 2013 2014 In House Third Party 33
Slide 34: Global Poker
GLOBAL POKER Bucking industry trends in a challenging market Continued relentless execution of stated poker strategy, focusing on recreational players The 888 platform and technology are showing their resilience 34
Slide 35: Poker Liquidity Trend
POKER Maintaining number 2 position in the global poker rankings* Poker liquidity impacted by June / July 2014 FIFA World Cup POKER LIQUIDITY TREND CHANGE SINCE JUNE 2012 150% 130% 110% Weekly Liquidity Index 90% 70% 50% 30% 10% Source: Pokerscout, Jul 2014 35 Operator1 Operator2 888poker Operat
Slide 36: Sport
HOLDINGS
Slide 37: Sport
SPORT SPORT BETS 300% World Cup 250% 200% New Sport Platform 150% 100% 50% 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 2012 2013 2014 Average daily Bets 37
Slide 38: Sport in Spain
SPORT IN SPAIN Sport Casino Poker Movii sport.es ICLAR nis SESION a 7 pe ~~) ; ° % . -¢ rd : ‘ fe oe we : PARA APOSTAR } — P Peep y GRATIS ~ 4 ( 3 — ‘ "4 APUESTA AHORA de APUESTA = ff. Be SIN RIESGO a) sean ita nuestras Apuesta cuando quieras y cee ae — jivas cuotas y donde quieras desde nuestras pr
Slide 39: Bingo
BINGO Delivered on our plans POC ready B2C turnaround completed Key B2B accounts retained Mobile driven growth 39
Slide 40: Bingo
BINGO Turnaround continues Regular seasonal behavior in activity, yet with growing volumes – better CRM Bingo platform volume Daily Bets ($) 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 Overall Bingo platform volume 40
Slide 41: Point of Consumption
POINT OF CONSUMPTION POC ready by end of September 888 regulation knowhow in action Approaching it with momentum 41
Slide 42: EU – Regulated Markets
EU – REGULATED MARKETS Steady market share in Spain 888Sport.es launched on August 15th New mobile and slots anticipated to drive growth 888.it single product, mobile launched NetEnt games deployed 42
Slide 43: 888.es Poker Gross Gaming Revenue
888.es POKER GROSS GAMING REVENUE 350% 888 Spain Poker GGR Growth 300% 250% Launch of 888.es 200% Spain Tax regime 150% 100% 50% 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 2011 2012 2013 2014 43
Slide 44: The US Market
THE US MARKET PASSED CONSIDERED/ 44 CONSIDERING
Slide 45: The US Market - Our Competitive Edge
THE US MARKET - OUR COMPETITIVE EDGE INTERSTATE SHARED LIQUIDITY * Soon to be launched. 45
Slide 46: Untapped NJ Market
UNTAPPED NJ MARKET PLAYERS AND INTENDERS Online poker intenders 19% Online poker players 3% Online casino intenders 55% 19% Online casino players Neither players or intenders 4% Source: Harris Interactive poll, May 2014 46
Slide 47: Operational Summary
OPERATIONAL SUMMARY Core business is growing We continue to deliver We remain focused on our business goals Industry expert professionals Focused strategy continues to deliver 47
Slide 48: Brian Mattingley, CEO | Summary
BRIAN MATTINGLEY, CEO | SUMMARY 48
Slide 49: Summary
SUMMARY Excellent half year results driven by growth across core products We have delivered on our plans Solid core markets with real growth potential Expanding European regulation Growth prospects in US Resilient and cash generative business, quality of earnings Experienced management
Slide 50: Q&A
Q&A 50