Playtech Plc · LSE:PTEC
Playtech — FY2009 Earnings Presentation
63 slides from Playtech's earnings presentation, 2010
Slide 1: Annual Results - Year Ending 31 December 2009
Slide 2: Agenda
ANNUAL RESULTS YEAR ENDING 31 DECEMBER 2009 AGENDA • Introduction: Roger Withers, Chairman • Financial Review: Shuki Barak, CFO • Operational & Strategic Review: Mor Weizer, CEO • Current Trading and Outlook: Mor Weizer, CEO • Questions and Answers
Slide 3: Introduction: Overview
ANNUAL RESULTS YEAR ENDING 31 DECEMBER 2009 INTRODUCTION: OVERVIEW • Solid performance across all products and geographies • Gross income up 23% • Adj EBITDA up 25% • Adj Net profit up 14% • Final dividend set at 9.4 € cents • Total of 18.3 € cents for the year, up 20% • Industry enjoying strong gro
Slide 4: Introduction: 2009 Milestones
ANNUAL RESULTS YEAR ENDING 31 DECEMBER 2009 INTRODUCTION: 2009 MILESTONES • JVs - enhances global credibility & depth of expertise • Acquisitions - strengthens product portfolio & capabilities • World Lottery Association – membership recognises industry position • Corporate governance - clear progre
Slide 5: FINANCIAL REVIEW
FINANCIAL REVIEW
Slide 6: Financial Highlights (in € millions)
FINANCIAL REVIEW FINANCIAL HIGHLIGHTS (IN € MILLIONS) 140.0 137.3 120.0 114.8 111.5 111.5 100.0 93.7 89.6 78.6 80.0 74.7 60.0 40.0 Gross income Total revenue Adjusted EBITDA Adjusted net profit 2008 2009
Slide 7: Gross Income by Product (in € millions)
FINANCIAL REVIEW GROSS INCOME BY PRODUCT (IN € MILLIONS) 80.0 €70.4 70.0 €66.9 €59.9 60.0 €51.6 WHO Share of 50.0 profit Other 40.0 €37.8 Poker €27.9 30.0 Casino 20.0 10.0 H1-07 H2-07 H1-08 H2-08 H1-09 H2-09
Slide 8: WHO Recap: Royalty vs. SOP
FINANCIAL REVIEW WHO RECAP: ROYALTY vs. SOP • WHO JV consists of WH online and assets of PTEC’s former licensee • Casino and poker operations of WHO enjoy a preferred royalty rate • PTEC gets in return: • Enlarged combined casino and poker operations • Exposure to WHO Playtech William Hill sports bo
Slide 9: WHO: Ongoing Accounting
FINANCIAL REVIEW WHO: ONGOING ACCOUNTING • PTEC reports Euro equivalent of £ income • WHO share of profit after tax: 29% (from Aug-09 onwards) • Blended tax rate: average c.10% • Identical figures to WH minority: £20.1m = €22.5m FY 2009 (m) WH online EBIT £ 71.9 Tax £ (5.9) WH online profit £ 66.0 (
Slide 10: Income Growth – Like for Like (in € millions)
FINANCIAL REVIEW Income Growth – Like for Like (in € millions) 160.0 • +0.7% from existing licensees 140.0 • +7.7% from new licensees 16% 120.0 WHO income from 3% associate 100.0 Other 25% 80.0 Poker 60.0 Casino 56% 40.0 20.0 - Year 2008 Year 2009 2008 excl 2009 excl WHO/former WHO/former customer c
Slide 11: Key Licensees
FINANCIAL REVIEW KEY LICENSEES • 2 top licensees generated €44m in revenues FY09 (39% in revenues FY2009) • Continued to increase diversification • Will continue as local regulated markets grow • Also move away from smaller, less economic licensees FY 2009 FY 2008 Top 2 licensees 39% 45% Top 5 licen
Slide 12: Financial Review: Summary of Income Statement
FINANCIAL REVIEW SUMMARY OF INCOME STATEMENT: FY 2009 FY 2008 €’000 €’000 Revenues 114,775 111,450 PROFIT FOR THE YEAR Adjusted operating expenses (excl’ Dep&Amor) (43,639) (36,738) Depreciation & Amortization (5,496) (2,739) Amortization on acquisitions (3,282) (3,173) Adjusted profit Other adjusta
Slide 13: Financial Review: Summary of Income Statement
FINANCIAL REVIEW SUMMARY OF INCOME STATEMENT: FY 2009 FY 2008 €’000 €’000 Revenues 114,775 111,450 PROFIT FOR THE YEAR In order to better reflect underlying Adjusted operating expensesPTEC business, (excl’ Dep&Amor) (43,639) adjusts for (36,738) the following: Depreciation & Amortization (5,496) (2,
Slide 14: Financial Review: Adjusted Profit
FINANCIAL REVIEW SUMMARY OF INCOME STATEMENT: FY 2009 FY 2008 €’000 €’000 Revenues 114,775 111,450 Profit for the year Adjusted operating expenses (excl’ Dep&Amor) (43,639) (36,738) Depreciation & Amortization (5,496) (2,739) ADJUSTED PROFIT Operating profit 65,640 71,973 Share of WHO profit 22,534
Slide 15: Financial Review: Adjusted EBITDA
FINANCIAL REVIEW SUMMARY OF INCOME STATEMENT: FY 2009 FY 2008 €’000 €’000 Revenues 114,775 111,450 Profit for the year Adjusted operating expenses (excl’ Dep&Amor) (43,639) (36,738) Adjusted profit Operating profit 71,136 74,712 Share of WHO profit 22,534 - ADJUSTED EBITDA Profit for the year 93,670
Slide 16: Margin Analysis
FINANCIAL REVIEW MARGIN ANALYSIS FY 2009 FY 2008 €’000 €’000 Revenues 114,775 111,450 Adjusted EBITDA 93,670 74,712 Adjusted EBITDA margin % 82% 67% • Y-o-Y increase in adj EBITDA/Total revenues margin reflects WHO transaction • WHO SOP not included in revenue line, but is in adj EBITDA
Slide 17: Margin Analysis
FINANCIAL REVIEW MARGIN ANALYSIS FY 2009 FY 2008 €’000 €’000 Revenues 114,775 111,450 Gross Income 137,309 111,450 Adjusted EBITDA 93,670 74,712 Adjusted EBITDA margin % 82% 67% Adjusted EBITDA margin % of Gross Income 68% 67% • Adjusted EBITDA /Gross Income margin provides better clarity • WHO SOP
Slide 18: Margin Analysis
FINANCIAL REVIEW MARGIN ANALYSIS FY 2009 FY 2008 €’000 €’000 Revenues 114,775 111,450 Gross Income 137,309 111,450 Adjusted EBITDA 93,670 74,712 Adjusted EBITDA margin % 82% 67% Adjusted EBITDA margin % of Gross Income 68% 67% • Expected to decrease due to GTS & VF acquisitions, and further expenses
Slide 19: Analysis of Costs & Expenses
FINANCIAL REVIEW ANALYSIS OF COSTS & EXPENSES Operating Expenses FY2009 Adjusted operating €14.7m expenses excl’ Dep&Amor €43.6m adjustable operating expenses + Dep&Amor
Slide 20: Analysis of Costs & Expenses
FINANCIAL REVIEW ANALYSIS OF COSTS & EXPENSES Adjusted Operating expenses FY2009 (€43.6m = 100%) (excl’ Dep&Amor) €25.4, 58% Employee related costs 14.7 , 25% Reseller & Game Rights Traveling, Exhibitions & Marketing €4.8, 11% Admin & Office Costs Other operational costs €5.7, 13% adjustable operati
Slide 21: Analysis of Costs & Expenses: Revenue-driven costs
FINANCIAL REVIEW ANALYSIS OF COSTS & EXPENSES Revenue-driven costs (€m): FY2009 FY2008 Total Revenue 114.8 111.5 Reseller Reseller & Game Patent 3.3 2.9 % out of Revenue 2.8% 2.6% % of revenues expected to grow post acquisition of the GTS and VF businesses and due to the increased branded games offe
Slide 22: Analysis of Costs & Expenses: Operational business costs
FINANCIAL REVIEW ANALYSIS OF COSTS & EXPENSES Operational business costs (€m): FY2009 FY2008 Adjusted Operational Expenses 43.6 36.7 Employee related costs 25.4 19.0 % out of Adjusted Operational Expenses 58.3% 51.6% Growth due to a combination of increased number of employees and periodic salary ra
Slide 23: Analysis of Costs & Expenses: Operational business costs
FINANCIAL REVIEW ANALYSIS OF COSTS & EXPENSES Operational business costs (€m): FY2009 FY2008 Adjusted Operational Expenses 43.6 36.7 Admin & office costs 5.7 4.9 % out of Adjusted Operational Expenses 13.1% 13.3% Fairly static in 2010, with a one-time impact of GTS and VF businesses Other Operationa
Slide 24: Cash Flow
FINANCIAL REVIEW CASH FLOW • PTEC continues to be highly cash generative • Net cash provided from operating activities including cash received from WHO – €89.1m • Conversion from adjusted EBITDA – 95% • Cash on investing activities: • GTS acquisition - €11.3m • Rest equally split - software-capex •
Slide 25: Balance Sheet
FINANCIAL REVIEW BALANCE SHEET • Robust balance sheet • Cash balance of €58.7m at 31 December 2009 • Increase of intangible assets due to GTS acquisition of €16.8m • Investment in WHO: • Total investment as of 31 Dec 2009 - €170.4m • Deferred consideration of €13.6m, to be paid in December 2010 • Vi
Slide 26: Dividend
FINANCIAL REVIEW DIVIDEND 20.0 18.0 16.0 Euro cents per share 14.0 12.0 10.0 18.3 8.0 15.2 6.0 4.0 2.0 0.0 2008 2009 • Increase in dividend per share higher than increase in adjusted EPS • Expected total dividend on behalf of 2009 – €44m
Slide 27: Ongoing Reporting
FINANCIAL REVIEW ONGOING REPORTING • How will the following be disclosed in future accounts: Product segments - Will be presented based on materiality of each of the products. Following the acquisition of VF, Bingo revenues expected to be reported separately. SciPlay JV - JV revenues not presented s
Slide 28: Operational & Strategic Review
OPERATIONAL & STRATEGIC REVIEW 7 y | a ’ % ~ 4 @playtech
Slide 29: Agenda
OPERATIONAL AND STRATEGIC REVIEW AGENDA: • Market Environment • 2009 Developments • Strategic Positioning • Current trading
Slide 30: Market Environment
OPERATIONAL AND STRATEGIC REVIEW MARKET ENVIRONMENT 2009 Experience • Demonstrated resilience in challenging economic climate Industry themes • New types of licensees: regulators welcome newcomers • Government sponsored lotteries/ state owned • Licensees working in locally regulated markets • Media
Slide 31: Recent Product Highlights
RECENT PRODUCT HIGHLIGHTS
Slide 32: Recent Product Highlights: Casino
RECENT PRODUCT HIGHLIGHTS CASINO • Launch of 6 new casino licensees • William Hill, Sega, Netplay, Olympic, Lutrija Releases: • Launch of the European live facility in Riga • 4 downloads (56 games) • 2 flash (<35 games) • 8 branded slots: Gladiator, Hulk etc. • Launch of the first branded games • Li
Slide 33: Recent Product Highlights: Poker
RECENT PRODUCT HIGHLIGHTS POKER • Still the world’s largest independent online poker network • Full client revamp with new lobby and new table • Launched in December 2009, rolling out into 2010 • 4 new games launched: 3 Asian poker variations and Razz • Multicurrency feature • Poker product launched
Slide 34: Recent Product Highlights: Italy
RECENT PRODUCT HIGHLIGHTS ITALY Market environment • Example of successful regulatory market opening • €3.3bn market is 5 times the size of Oct ’08 • local entrants plus operators coming onshore • retail sport betting, lottery, offshore operators • 2010 opportunities: bingo, poker cash tables, casin
Slide 35: Recent Product Highlights: Bingo
RECENT PRODUCT HIGHLIGHTS BINGO • Virtue Fusion acquisition delivers step change in network capability • Launch of Bingoland.it for Italian market: • Italian-facing client design and Italian chat moderators
Slide 36: Recent Product Highlights: Sports Betting
RECENT PRODUCT HIGHLIGHTS SPORTS BETTING • Launch of Playtech Sports Betting platform version 2.0 in November: • Greatly expanded range of sports and bet types • Powerful new trading tools for managing risk and market pricing • Enhanced live betting support • Launch of Titanbet (www.titanbet.com) in
Slide 37: Recent Product Highlights: Mobile & Live
RECENT PRODUCT HIGHLIGHTS MOBILE & LIVE Mobile • 3 top performing games launched as Mobile Web Apps • Instant play, no download • Supporting platforms incl. iPhone/iPod Touch, Android etc • ‘Casino Packs’: customizable game bundles for one-time download • Fully integrated to the IMS & Jackpots Live
Slide 38: Recent Product Highlights: Videobet
RECENT PRODUCT HIGHLIGHTS VIDEOBET • 2009: Fundamental change in positioning & market profile Global Draw agreement (Jan 10) • 13,500 FOBT terminals due for conversion, more UK potential • Fixed £5.25m p.a. contract; revenue share on any additional • Gala Coral reconfirmed 4 yr, 6,500 terminal contr
Slide 39: Internal Structure
INTERNAL STRUCTURE • 2009 actions focused on scaling for growth • Restructured into products-driven development centres • Simplified workflow management • Headcount expansion through acquisition
Slide 40: WH Online
WH ONLINE • Transaction successfully completed on 30 December 2008 • All integration milestones achieved in 2009 • Product launches: Poker, Casino (March 09, Oct 09) • Strong operational performance • Net revenue +8% • New customers +28% • Unique active players +31% • Current trading reported in WH
Slide 41: Strategic Positioning
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Slide 42: Profile: Unique Market Position
STRATEGIC POSITIONING PROFILE: UNIQUE MARKET POSITION • Largest & leading pure-play B2B provider • Unique offering: one set of fully integrated products • IMS operator platform: achieves better player yields • Comprehensive product portfolio, unique/best of breed • Casino, poker, bingo, soft and ski
Slide 43: Profile: Competitive Advantage
STRATEGIC POSITIONING PROFILE: COMPETITIVE ADVANTAGE • Superior technology platform, cross-platform capability • Videobet, Live, TV, open platform, integrated mobile • Industry leading player management tools through IMS • Designed to integrate into 3rd party systems • Largest casino & casual games
Slide 44: Positioning: Ongoing Progress
STRATEGIC POSITIONING POSITIONING: ONGOING PROGRESS • Organic growth: - tools for maximising player yields - cross selling onto additional products - licensees entering new markets - leading way into regulated jurisdictions • Prospective licensees: - upgrading from other providers - new entrants see
Slide 45: Opportunities: Regulated Markets
STRATEGIC POSITIONING OPPORTUNITIES: REGULATED MARKETS • Identifying opportunities: global experience & local knowledge • Right product portfolio: softer games & liquid networks • Leverage off partnerships: Scientific, SGR/Sportech • Key credentials: WLA, Italy, Serbia, Estonia, Spain .... Europe •
Slide 46: Licensees: Prospective
STRATEGIC POSITIONING LICENSEES: PROSPECTIVE • Growing acceptance of online gaming as mainstream entertainment • A number of entrants focusing purely on locally regulated markets • Coming from increasingly diverse backgrounds – State lottery, land-based, online, media, entertainment State-owned Land
Slide 47: Opportunities: Partnership: SciPlay – The B2G Market
STRATEGIC POSITIONING OPPORTUNITIES: PARTNERSHIP: SCIPLAY – THE B2G MARKET The partner: Scientific Games • 2nd largest lottery operator worldwide • 32 of 41 US states that allow gaming, 60 international contracts • 40 yrs of “B2G” expertise in compliance-heavy responsible gaming • Delivering fully c
Slide 48: Opportunities: Partnership: SGR/Sportech
STRATEGIC POSITIONING OPPORTUNITIES: PARTNERSHIP: SGR/SPORTECH The partner: SG Racing (with Sportech) • Pari-mutuel horse racing operator, venue management • Only permissible online gambling currently in US states • Market: commercial/quasi-governmental operators, both international & US • Opportuni
Slide 49: Opportunities: Acquisition: GTS
STRATEGIC POSITIONING OPPORTUNITIES: ACQUISITION: GTS GTS (Dec 09, €10m initial) • Market leading technology platform & games developer • Strong links with major sports book operators new to Playtech • Open architecture platform offers potential for localising content • Combination delivers library
Slide 50: Opportunities: Acquisition: Virtue Fusion
STRATEGIC POSITIONING OPPORTUNITIES: ACQUISITION: VIRTUE FUSION Virtue Fusion (Feb 10, £29m initial) • Leading bingo supplier: Largest network - 7,000 peak concurrent players • In line with our strategy to focus on best of breed technology and pure B2B • 20 high profile licensees: • Mecca, Ladbrokes
Slide 51: Corporate Developments
STRATEGIC POSITIONING CORPORATE DEVELOPMENTS • Achieved • Board restructure: code compliant • Appointments of experienced Co. Sec & IR • Replacement CFO: search well underway • Investor Day planned for Q2
Slide 52: Current Trading and Outlook
CURRENT TRADING AND OUTLOOK
Slide 53: Momentum into 2010
CURRENT TRADING & OUTLOOK MOMENTUM INTO 2010 WHO Betfair GTS integration GTS Sportech signed completed acquisition SciPlay JV investment NetPlay TV WLA Global Draw Virtue signed associate agreement Fusion membership acquisition
Slide 54: Current Trading & Outlook
CURRENT TRADING & OUTLOOK • Expected Q1/10 revenue growth– over 18% • Daily average vs Q4/ 09 • Like -for -like growth – over 8% • Daily average revenues • Excluding VF acquisition • All products are performing in line with or ahead of budget • Investments in 2009 – scaling for growth
Slide 55: Q&A
Slide 56: Appendix
APPENDIX
Slide 57: Licensees Diverse Mix
APPENDIX LICENSEES DIVERSE MIX State-owned Land-based operator Dot.com Entertainment brand Casino, Dedicated Media/ Sub-category Lottery Betting Sportsbook Entertainment Bingo operator Telecom Wm Hill, CGM, Casino Tropez, Paddy Power, Virgin, Example Serbian lottery SEGA Gala, SNAI Mecca Titan Poker
Slide 58: Adjusted EBITDA 2009 vs. 2008
APPENDIX ADJUSTED EBITDA 2009 VS. 2008 2009 2008 €’000 €’000 Operating profit 56,449 47,977 Depreciation 2,372 1,678 Amortization 6,406 4,234 EBITDA 65,227 53,889 Decline in FV of available for sale investment (CYF & ALOG) 399 16,698 Professional expenses on post year end acquisition 360 - Share of
Slide 59: Adjusted Net Profit
APPENDIX ADJUSTED NET PROFIT 2009 2008 €’000 €’000 Net profit 69,450 40, 691 Decline in FV of available for sale investment (CYF & ALOG) 399 16,698 Amortisation of investments (Tribeca, WH Online, GTS) 13,795 3,173 Exchange rate differences on William Hill transaction - 13,126 Professional expenses
Slide 60: Cash Flow
APPENDIX CASH FLOW 2009 2008 €’000 €’000 Net profit 69,511 40,691 Depreciation, Amortization 8,778 5,912 Employees Stock Options Expenses 5,150 4,125 Decline in FV and loss on disposal of available for sale investments 399 16,698 Income from associate (22,534) - Amortization of intangibles in associ
Slide 61: Balance Sheet
APPENDIX BALANCE SHEET 2009 2008 €’000 €’000 Cash and Cash Equivalents 58,700 31,558 receivables 17,113 12,884 Investments (CYF & ALOG) 5,513 4,887 Investment in WH Online 170,366 181,072 Intangible assets 65,459 43,082 Fixed Assets & other non current Assets 10,704 6,163 Total Assets 327,855 279,64
Slide 62: Depreciation & Amortisation
APPENDIX DEPRECIATION & AMORTISATION • Depreciation • In line with business growth, still immaterial • Capex additional growth only on dedicated investments for regulated markets • Amortisation • Software costs & other intangibles – €3.1m, expected to grow in line with business growth • Amortisation
Slide 63: EPS & Adjusted EPS
APPENDIX EPS & ADJUSTED EPS 40.0 37.4 34.5 35.0 8.4 Euro cents per share 30.0 25.0 16.6 20.0 15.0 29.0 10.0 17.9 5.0 - 2008 2009 EPS Adjustments to EPS