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RESULTS FOR THE SIX MONTHS ENDED
30 JUNE 2014
AGENDA
Brian Mattingley | Introduction
Aviad Kobrine | Financial Review
Itai Frieberger | Operational Review
Brian Mattingley | Summary
Q&A
2
SUMMARY OF RESULTS – H1 2014
Another set of record results
Revenue up 13% to $225m
Adjusted EBITDA1 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
Interim Dividend of 3.5c per share an increase of 17%
Current trading remains strong in line with revised expectations
3
1 As defined in the 2014 Half-yearly Report.
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 Spain and meaningful presence in Italy
B2B revenue increased by 40%
Successful launch in US
Current trading well ahead of previous year
4
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
AVIAD KOBRINE, CFO | FINANCIAL REVIEW
6
PROFIT AND LOSS ACCOUNT 1
1 Totals may not sum due to rounding. 2 Excluding depreciation of US$4.5 million (H1 13: US$4.1million) and amortisation of US$4.1 million (H1 13: US$2.7 million). 3 Excluding share benefit credit of US$0.5 million (H1 13: charges of US$2.5 million) 4 As defined in note 4 to the financial statement
$m H1 14 H1 13
Revenue 225.1 200.1 13%
Operating expenses2 71.5 61.3
Research and development expenses 19.3 15.2
Selling and marketing expenses 69.6 72.1
Administrative expenses3
15.7 12.8
Adjusted EBITDA3
49.0 38.6 27%
% of Revenues 21.8% 19.3%
Depreciation and Amortisation 8.6 6.8
Share benefit charges and other (0.5) 1.1
Share of Joint ventures loss 4.4 1.5
Profit Before Tax and Finance 36.5 29.2 25%
Finance (F/X and others) 2.5 (6.3)
Profit Before Tax 34.0 35.5
Taxation 3.6 3.4
Profit after tax 30.4 32.1
Adjusted EPS4
9.7 ¢ 9.9 ¢
7
90
110
130
150
170
190
210
230
H1 09 H2 09 H1 10 H2 10 H1 11 H2 11 H1 12 H2 12 H1 13 H2 13 H1 14
118
129 130 132
154
177
186 189200 200
225
REVENUE
Revenue H1 09 – H1 14($m)
$m
8
H1 2014 - revenue up 13% to $225m (H1 13: $200m)
Another record period
Strong core products performance, in part driven by enhanced mobile offering
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
H1 2013
H1 2014
$m
0
20
40
60
80
100
120
UK Europe
(ex UK)
Americas ROW
83 80
22 15
101
83
28
13
H1 13 H1 14
41%
40%
11%8%
UK Europe
(ex UK)
Americas ROW
45%
37%
13% 6%
UK Europe
(ex UK)
Americas ROW
9
GEOGRAPHICAL GROWTH BY REGION/PRODUCT Strong growth in the UK, boosted by Mobile penetration
Revenue in both Casino and Poker increased across all regions
Casino & Poker B2C Revenue Growth in H1 14 vs. H1 13
0%
5%
10%
15%
20%
25%
30%
35%
40%
UK ROW Americas Europe
(ex UK)
37%
8% 8%2%
0%
1%
2%
3%
4%
5%
6%
7%
8%
9%
UK ROW Americas Europe
(ex UK)
7%
6%
3%1%
Casino Poker
10
0
20
40
60
80
100
120
Casino Poker Bingo Emerging Offering
94
47
22 14
108
48
24
13
H1 13 H1 14
Revenue B2C H1 14 vs. H1 13 ($m)
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%
$m
11
90
110
130
150
170
190
H1 10 H2 10 H1 11 H2 11 H1 12 H2 12 H1 13 H2 13 H1 14
110 111
131
153
164 166
177 175
193
Revenue B2C H1 10 – H1 14 ($m)
REVENUE B2C H1 14 revenue up 9% to $193m (H1 13: $177m)
7% CAGR
Strong H1 despite June FIFA World Cup
$m
12
Revenue Casino B2C H1 10 – H1 14 ($m)
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
$m
40
50
60
70
80
90
100
110
H1 10 H2 10 H1 11 H2 11 H1 12 H2 12 H1 13 H2 13 H1 14
59 58
69
79 83 82
94 96
108
13
Revenue Poker B2C H1 10 – H1 14 ($m)
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
$m
* Source Pokerscout.com July 2014
10
15
20
25
30
35
40
45
50
H1 10 H2 10 H1 11 H2 11 H1 12 H2 12 H1 13 H2 13 H1 14
20 19
24
37
41
46 47 4748
14
Players’ Value *
PLAYERS’ VALUE Stable Poker value
Continued increase in Casino value
Demonstrates quality of revenue
%
15
* GGR base, for all players recruited in Q1 average first 3 month value
40%
50%
60%
70%
80%
90%
100%
110%
120%
130%
140%
Q1 13 Base 888Poker Q114 players
Value
888Casino Q114 players
Value
100%
102%
134%
CASH FROM OPERATIONS
Cash position H1 14 vs. H1 13
Cash from operations (% of adj. EBITDA) Corporate cash net of customers
$m
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
H1 13 H1 14
99% 95%
15.0
20.0
25.0
30.0
35.0
40.0
45.0
50.0
55.0
60.0
65.0
H1 13 H1 14
40.0
60.0
%
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)
16
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
30
35
40
45
50
55
60
65
70
75
H1 13 H1 14
72 70
0.0%
10.0%
20.0%
30.0%
40.0%
H1 13 H1 14
36.0%30.9%
17
0%
20%
40%
60%
80%
H1 13 H1 14
30.7% 31.8%
7.6% 8.6%
36.0% 30.9%
6.4% 7.0% Admin. Expenses
S&M expenses
R&D
Operating expenses
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
* Excluding share benefit charges, depreciation, amortisation
80.7 % 78.2 %
18
25% 21%
35
45
55
65
75
85
95
105
115
0%
5%
10%
15%
20%
25%
30%
35%
H1 13 H1 14
Rev $m
Customer Bonuses as % of Revenue
CUSTOMER INCENTIVES B2C CASINO H1 14 bonus ratio continues to demonstrate optimal CRM efforts, supporting revenue growth
% $m
19
18% 18%
30
32
34
36
38
40
42
44
46
48
50
0%
5%
10%
15%
20%
25%
H1 13 H1 14
Rev $m
CUSTOMER INCENTIVES B2C POKER Bonus ratio is maintained in Poker while revenue growth continues
Underlined by optimal CRM work
Customer Bonuses as % of Revenue
% $m
20
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
Adjusted EBITDA Adjusted EBITDA margin $m
20
25
30
35
40
45
50
H1 13 H1 14
39
49
13.0%
14.0%
15.0%
16.0%
17.0%
18.0%
19.0%
20.0%
21.0%
22.0%
H1 13 H1 14
19.3%
21.8%
21
ADJUSTED EBITDA TREND Adjusted EBITDA Margin expansion despite US focus
H1 14 Adjusted EBITDA exceeds previous year strong comparable
Adjusted EBITDA H1 2014
$m
13
20
36
39
49
9.6%
13.0%
19.3% 19.3%
21.8%
8.0%
10.0%
12.0%
14.0%
16.0%
18.0%
20.0%
22.0%
5
15
25
35
45
55
H110 H1 11 H1 12 H1 13 H1 14
Adj. EBITDA ratio
22
BALANCE SHEET
* Rounded
$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 other receivables 30.8 30.8
Short term investments 1.1 3.6
Total Assets 329.2 291.4
Equity
Share capital and share premium 4.4 4.0
Retained earnings and reserves 166.4 155.8
Total equity attributable to equity holders 170.8 159.8
Liabilities
Current liabilities
Trade and other payables 97.2 80.1
Customer deposits 58.7 49.3
Contingent consideration 0.2 0.6
Non-current liabilities
Cash settled liability 2.3 1.6
Total equity and liabilities 329.2 291.4
23
CASH FLOW STATEMENT
* Rounded
$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 generated from operations 51.6 40.2
Income tax paid (4.9) (1.9)
Net cash generated from operating activities 46.7 38.3
Acquisitions (0.1) (0.6)
Purchase of property, plant and equipment (3.0) (3.0)
Internally generated intangible assets (4.1) (4.7)
Other investment activity 1.7 (0.1)
Net cash used in Investing Activities (5.5) (8.4)
Issue of shares 0.3 0.7
Dividends paid (38.6) (22.8)
Net increase in cash and cash equivalents 2.9 7.8
Cash and cash equivalents - beginning of period 115.8 81.5
Cash and cash equivalents - end of period 118.7 89.3
24
ITAI FRIEBERGER, COO | OPERATIONAL REVIEW
25
TO
TA
L
B2
C
PO
KE
R
SP
OR
T DEPOSIT
REVENUE
GROUP REVENUE
DEPOSITS
BIN
GO
C
AS
INO
$154M H1 2011
$186M H1 2012
$200M H1 2013
$225M H1 2014
ACTIVE PLAYERS
BETS
100% JUN 2013
112% OCT 2013
120% JAN 2014
125% MAY 2014
100% JUN 2013
165% DEC 2013
198% MAR 2014
228% JUN 2014
100% JUN 2013
116% NOV 2013
122% FEB 2014
100% JUN 2013
107% NOV 2013
117% DEC 2013
124% APR 2014
126% MAY 2014
100% JUN 2013
113% OCT 2013
118% JAN 2014
126% MAY 2014
DEPOSIT
100% JUN 2013
106% OCT 2013
116% MAR 2014
125% MAY 2014 26
50%
70%
90%
110%
130%
150%
170%
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
Based on Jan 2010%
*Jan 2010 as base = 100%
**Daily average Deposits
DEPOSIT TREND
27
B2C DEPOSITS 2010 – 2014
28
MOBILE
True “Mobile First” organization
Mobile is our state of mind
Embedded across all verticals and
business units
Up to 50% of certain metrics
MOBILE DEPOSIT IN UK
*B2C Casino, Poker. Bingo, Sport
Mobile Deposit Share in UK
0%
5%
10%
15%
20%
25%
30%
35%
40%
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
29
*B2C Casino, Poker. Bingo, Sport
Mobile Registrations / FTD’s Share in UK
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
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
Registrations FTDs
MOBILE CUSTOMER RECRUITMENT IN UK
30
31
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
32
CROSS PLATFORM CONTENT
Genie jackpot was hit TWICE in H1
$4 million paid - good acquisition and
retention streak
Casino is embedded into every vertical
(in Poker, Sport, Bingo) and business
process
CASINO
33
IN HOUSE VS. THIRD PARTY GAMES PLAYED
60%
80%
100%
120%
140%
160%
180%
200%
220%
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2
2011 2012 2013 2014
In House Third Party
GLOBAL POKER
34
Bucking industry trends in a
challenging market
Continued relentless execution of
stated poker strategy, focusing on
recreational players
The 888 platform and technology are
showing their resilience
POKER Maintaining number 2 position in the global poker rankings*
Poker liquidity impacted by June / July 2014 FIFA World Cup
Source: Pokerscout, Jul 2014
35
10%
30%
50%
70%
90%
110%
130%
150%
We
ekly
Liq
uid
ity I
nd
ex
Operator1 Operator2 888poker Operator3 Operator4 Operator5
POKER LIQUIDITY TREND CHANGE SINCE JUNE 2012
36
SPORT
50%
100%
150%
200%
250%
300%
1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6
2012 2013 2014
SPORT
New Sport Platform
Average daily Bets
SPORT BETS
37
World Cup
38
SPORT IN SPAIN
BINGO
Delivered on our plans
POC ready
B2C turnaround completed
Key B2B accounts retained
Mobile driven growth
39
BINGO
Turnaround continues
Regular seasonal behavior in activity, yet with growing volumes – better CRM
Overall Bingo platform volume
Bingo platform volume
1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6
2012 2013 2014
Daily Bets ($)
40
POINT OF CONSUMPTION
41
POC ready by end of September
888 regulation knowhow in action
Approaching it with momentum
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
43
888.es POKER GROSS GAMING REVENUE
0%
50%
100%
150%
200%
250%
300%
350%
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
888 Spain Poker GGR Growth
Spain Tax regime
Launch of 888.es
PASSED
CONSIDERED/
CONSIDERING
THE US MARKET
44
THE US MARKET - OUR COMPETITIVE EDGE
INTERSTATE SHARED
LIQUIDITY
45
* Soon to be launched.
UNTAPPED NJ MARKET
46
19%
3%
19%
4%
55%
Online poker intenders
Online poker players
Online casino intenders
Online casino players
Neither players or intenders
PLAYERS AND INTENDERS
Source: Harris Interactive poll, May 2014
OPERATIONAL SUMMARY
47
Core business is growing
We continue to deliver
We remain focused on our business
goals
Industry expert professionals
Focused strategy continues to deliver
BRIAN MATTINGLEY, CEO | SUMMARY
48
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 team
Confident with full year expectations
Board changes - continuity of management
Thank you to our retiring Chairman
49
Q&A
50