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Results for the
Six Months Ended
30 June 2011
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Agenda
Brian Mattingley | Introduction
Aviad Kobrine | Financial Review
Itai Frieberger | Operational Review
Brian Mattingley | Summary and Outlook
Q&A
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Introduction
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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%
EBITDA1,2,3,4 up 59% to $20m
EBITDA margin up to 13%
Cash at period end $61m
†
† All figures in this presentation are extracted from 888’s financial statements as published where available.
Totals may not sum due to rounding. All comparisons on a Half Yearly basis. 1 Excluding restructuring costs. 2 Excluding exchange loss /gain. 3 Excluding share benefit charges. 4 Excluding Mytopia Goodwill write-off.
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H1 Review
Management Change
CEO departure
New management structure
Team has significant online gaming experience
Deputy Chairman Brian Mattingley
COO Itai Frieberger
CFO Aviad Kobrine
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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
H1 Review
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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
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Focus on Margins
Driving volume
Operational efficiencies
Goals
Over arching Strategic Importance – Regulated Markets
Implementation – Italy, France
Formulating – Spain
Developmental – US, Germany
Strategic Plan
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Financial Review
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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
1 Rounded 2 Excluding depreciation & amortisation 3 Excluding restructuring costs 4 Excluding exchange loss /gain
5 Excluding share benefit charges 6 Excluding Mytopia Goodwill Write-off 7 Interest (2011) paid at $0.7m, $7.5m represent non-cash items
$m H1 2011 H1 2010 H1'11 / H1'10
Revenue 153.8 130.2 18%
Operating expenses2,3
56.0 45.8
Research and development expenses 3
12.9 13.2
Selling and marketing expenses 49.9 47.5
Administrative expenses3,4,5,6
15.1 11.2
EBITDA3,4,5,6
20.0 12.6 59%
Depreciation & Amortization (7.1) (5.6)
Interest , F/X, other7
(8.2) 1.5
Profit before tax3,5,6
4.6 8.4
Taxation (1.2) (1.6)
Profit after tax3,5,6
3.5 6.8
Basic Earning per Share3,5,6
1.0 ¢ 2.0¢
1
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B2C Average Daily Deposit Growth
70%
75%
80%
85%
90%
95%
100%
105%
110%
115%
120%
1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6
2010 2011
% Relative change base on Jan 2010
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Total Revenue
H1 11 - Total Revenue up 18% to $154m (H1 10: $130m)
H1 11 - Second highest ever for 888
40
60
80
100
120
140
160
H1 09 H2 09 H1 10 H2 10 H1 11
118
129 130 132
154
Total Revenue H1 09 – H1 11 ($m)
$m
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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
$m
0
10
20
30
40
50
60
70
80
UK Europe … America… ROW
61
51
8 11
75
55
9 15
H1210 H11147%
39%
6% 8%
UK Europe (ex UK)
America(ex USA)
ROW
H1 10
49%36%
6% 10%
UK Europe (ex UK)
America(ex USA)
ROW
H1 11
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Revenue B2C H1 11 – B2C Revenue up 18% to $131m (H1 10: $110m)
$m
14
Revenue B2C
30
50
70
90
110
130
H1 09 H2 09 H1 10 H2 10 H1 11
94 102
110 111
131
Revenue B2C H1 09 – H1 11 ($m)
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Revenue B2B H1 11 – B2B Revenue up 16% to $23m (H1 10: $20m)
Revenue B2B H1 10 – H1 11 ($m)
$m
15
16
17
18
19
20
21
22
23
24
H1 10 H2 10 H1 11
20 21
23
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Revenue B2C by Product
Casino up 16%, Poker up 22%, Bingo up 17%, Emerging Offering up 28%
Revenue B2C H1 10 vs. H1 11 ($m)
$m
0
10
20
30
40
50
60
70
80
Casino Poker Bingo Emerging Offering
59
20 23
8
69
24 28
10
H1 10 H1 11
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888Casino Revenue Trend 888Casino revenue growth continue since Q3 2010
Aug 2011 Daily Average up 35% over Aug 2010
888Casino Daily Revenue*
* Revenue defined as Casino house profit – Bonus – Other adj.
30%
40%
50%
60%
70%
80%
90%
100%
110%
120%
1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8
2010 2011
$00’
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888Poker Revenue Trend New Poker6 client launched in July 2010
Aug 2011 Daily Average up 99% compared to Aug 2010
888Poker Daily Revenue*
* Revenue defined as Rake+Tour. fee + Casino in poker house profit – Bonus - Other adj.
30%
40%
50%
60%
70%
80%
90%
100%
110%
120%
130%
140%
150%
1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8
2010 2011
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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
40
60
80
100
120
140
160
180
1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7
2010 2011
Jan
20
10
Bas
e li
ne
%
Liquidity Trend Relative change % base on Jan 2010
Poker Industry 888Poker
Source: 888 estimates based on publicly available information.
119%
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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
%
0%
20%
40%
60%
80%
100%
H1 10 H1 11
35% 36%
10% 8%
36% 32%
9% 10%Admin. Expenses
S&M expenses
R&D
Operating expenses
90 %
* Excluding share benefit charges, depreciation amortisation, Forex and restructuring and goodwill write-off
87 %
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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
$m
-
5
10
15
20
H1 10 H1 11
13
20
0%
2%
4%
6%
8%
10%
12%
14%
H1 10 H1 11
10%
13%
EBITDA EBITDA margin
* Excluding share benefit charges, depreciation amortisation, Forex and restructuring and goodwill write-off
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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
%
0%
2%
4%
6%
8%
10%
2008 2009 2010 H111
5.8% 5.6% 5.5% 5.7%
1.8%3.7%
1.1% 1.2%
CB PSP
9.2%
6.9% 6.6%
7.6%
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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
$m
Marketing Costs Marketing Costs % of Revenue
-
5
10
15
20
25
30
35
40
45
50
H1 10 H1 11
48 50
15%
25%
35%
H1 10 H1 11
36%32%
* Excluding Revshare components
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Customer Bonuses B2C Casino
Casino Revenue Growth driven by optimal use of Bonuses and CRM efforts
1 Excluding converted loyalty points
% $m
18%22%
35.0
40.0
45.0
50.0
55.0
60.0
65.0
70.0
75.0
0%
5%
10%
15%
20%
25%
30%
H1 10 H1 11
Bonus Ratio% Rev $m
Customer Bonuses as % of Revenue
1
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Customer Bonuses B2C Poker
Poker Revenue Growth driven by optimal use of Bonuses and CRM efforts
1
8%12%
15.00
16.00
17.00
18.00
19.00
20.00
21.00
22.00
23.00
24.00
25.00
0%
5%
10%
15%
20%
25%
H1 10 H1 11
Bonus Ratio% Rev $m
Customer Bonuses as % of Revenue
1 Excluding converted loyalty points
% $m
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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
60%
70%
80%
90%
100%
110%
120%
130%
140%
150%
160%
7 8 9 10 11 12 1 2 3
2010 2011
888Casino
60%
70%
80%
90%
100%
110%
120%
130%
7 8 9 10 11 12 1 2 3
2010 2011
888Poker
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0%
20%
40%
60%
80%
100%
120%
140%
2010/Q1 2010/Q2 2010/Q3 2010/Q4 2011/Q1 2011/Q2
ARPU (KPI) Revenue ARPU (Depositors only) Deposits / Unique Depositors
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
Campaign Type II Campaign Type I
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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
Trade and other receivables 22.9 24.3
Total Assets 248.3 271.8
Equity
Share capital 3.2 3.2
Retained earnings and reserves 92.4 113.7
Total equity attributable to equity holders 95.6 117.0
Liabilities
Current liabilities
Trade and other payables 58.6 37.8
Customer deposits 41.0 34.7
Contingent consideration 53.1 78.0
Non-current liabilities
Contingent consideration - 4.2
Total equity and liabilities 248.3 271.8
* Rounded
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* Rounded
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 7.1 5.6
Interest and share of post tax profit in the JV (0.1) (0.1)
Change in current assets and liabilities 29.0 1.6
Cash generated from operating activities 43.2 13.3
Tax paid (2.0) (1.9)
Net cash generated from operating activities 41.2 11.4
Acquisitions of MyTopia & Wink (36.0) (12.3)
Purchase of property, plant and equipment (2.8) (4.2)
Rest of Investing Activity (3.0) (2.8)
Net cash used in Investing Activities (41.8) (19.3)
Dividends paid and share buy-back - (13.9)
Net increase (decrease) in cash and cash equivalents (0.7) (21.8)
Cash and cash equivalents - beginning of year 61.5 87.5
Cash and cash equivalents - end of period 60.9 65.7
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Operational Review
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• Investment in our core platform
• B2C Launch in Italy
• Targeted/Result driven marketing
• Poker 6
• Dragonfish – Refocused
Operational highlights
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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)
MFT’s
Tools
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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 is
aligned with the marketing strategy
Ongoing optimisation using state-of-the-art
analytic tools
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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
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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 and skins - BingoCity, Bingo Street,
Brits Bingo
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Sport
Contribution as the main target
Restructured the team
Cross between the 888 brands
Upgrade to the new platform
Targeted marketing activity
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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
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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
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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 marketing
campaigns
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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
Launched a new network - Bingo Street
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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…
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Multiple launches in Italy
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…and more
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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 business and technical setup
UK
We have the right tools
Actions are being taken to mitigate risk
US
A blue ocean…
Nevada suitability
Many opportunities
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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
Maximise our US opportunity
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888 new Casino
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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 London Olympics
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Summary and Outlook
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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
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Q&A
Q&A
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