Presenters GUSTAF HAGMAN VIKTOR FRITZÉN. Group CEO and Co-founder

Transcription

1 Q4 2017

2 Presenters GUSTAF HAGMAN Group CEO and Co-founder VIKTOR FRITZÉN Group CFO 2

3 The Leo Passion Leading the way into the mobile future 3

4 The growth company LeoVegas A fantastic company culture Strategy Expansions strategy Expand in regulated markets and markets that are soon be regulated and to carry out strategic and complementary acquisitions Product Strategy GameTech Effective marketing To be the most innovative and creative company in the gaming industry 4

5 Agenda Acquisition of IPS (Rocket X) Quarterly report highlights Business update Business KPIs Financials Financial Targets Summary Q&A 5

6 Acquisition IPS and associated assets Rocket X" 6

7 Rocket X During the past two years we have searched for companies that fit in with our overall expansion strategy, which is to grow in regulated markets and markets soon-to-be regulated Rocket X Rocket X in Q4 17 Why Rocket X 85 employees Office in Newcastle Assets will be transferred unto LeoVegas licenses Casino and Bingo Bede Platform Revenues: GBP 11.7 m YoY growth 49% Adjusted EBITDA of EUR 3.8 m. 1 UK accounted for 96% of revenue 73% of revenues generated from Mobile devices Strengthen our position in the UK Local multibrand strategy to complement the global brands LeoVegas and Royal Panda Efficient marketing strategy independent from affiliates Great team Cultural fit Inline with our expansion strategy 1 EBITDA is adjusted for a platform agreement in which EBITDA for Q has been recalculated as if the agreement that LeoVegas has for the platform from the closing date of the acquisition applied for the entire Q IPS has conducted limited white label business that has contributed to sales for 2017, but which has had a neutral effect on EBITDA. This business is not included in the transaction. Some minor cost items in the month of December have been estimated 7

8 Rocket X Purchase price and completion Financing GBP 65m (EUR 73.5m at exchange rate 1.13 GBP/ EUR) No earn-out The transaction is subject to certain closing conditions, and is scheduled to close late in the first quarter of 2018 Will utilize excess cash at hand and the remainder will be drawn from the debt facility LeoVegas secured in Q4 8

9 Setting the stage for German expansion Licenses New ambassadors Agreement to acquire all of the shares in the Maltese company World of Sportsbetting Ltd, Purchase price of 2.6 MEUR Sports betting and casino licenses in the state of Schleswig-Holstein An approved application for a sports betting license in Hesse, under the Interstate Treaty on Gambling In line with LeoVegas expansion strategy, focus on regulated markets What does this mean? With the application for a sports betting license in Hesse able to to freely market the sports betting offering throughout Germany Additional opportunities within marketing and improved and more attractive payment solutions Able to apply the licenses in Schleswig-Holstein for Royal Panda Strong profiles in the Sports community Lothar Matthäus Football legend Stefan Kretzschmar is a former handball star This will strengthen LeoVegas position and continued high growth in Germany 9

10 Full year 2017 Highlights 10

11 Full year 2017 Revenue: 217MEUR Growth: +53 % Adjusted EBITDA: 27.9 MEUR Team: +201Employees Total: 566 Adjusted EBITDA: 12.9 % 11

12 Awards in 2017 and beginning of

13 Quarterly report Highlights and events 13

14 Revenue since launch MEUR Q4 17 growth Y-Y 65% Q4 17 growth excl. acquisitions Y-Y (organic growth) 48% 40.0 Q4 17 growth excl. acquisitions and closed markets (Australia, Czechia, Slovakia) Y-Y 82%

15 Q Highlights Mobile deposits: 69 % Growth: +65 % Organic growth: 48% NDCs All time high in value generated Revenue: 67.8 MEUR MEUR Adjusted EBITDA: 7.1 MEUR 10.5 % margin 15

16 Current Trading Start of Q1 NGR January MEUR an increased of 76 % compared to January last year 72 % excluding acquisitions and closed markets 16

17 Business update 17

18 Listed on Nasdaq Stockholm, Main market Listing changed to Nasdaq Stockholm on February 5 Unicorn status: Valuation of one billion USD Proposed dividend of SEK 1.20 (1.00) per share, amounting to approximately SEK 120 million (EUR 12.2 million) 18

19 Business update Expansion in Canada - free to play site - LeoVegas.net At LeoVegas.net casino games are offered to try and play for free Swedish hockey legend Mats Sundin to serve as an ambassador Credible and popular profile, which provides great opportunities from a marketing perspective Executive management Caroline Palm Chief Human Resources officer (CHRO) new role Jarl Modén - permanent Chief Product Officer (CPO) Both part of executive management 19

20 Product innovations Apple Pay launched in UK, more markets to come, only available in regulated markets Using state-of-the-art technology, launching facial recognition for log-ins and approval of payments using Apple Pay Improved live streaming offering in the Nordic markets with 10,000 live broadcast sport events LeoVegas has worked intensively and closely with a number of game developers to come up with innovative and exclusive games LeoVegas Originals Authentic Gaming Exciting news with an agreement with Foxwoods Casino, USA's largest casino venue. For the first time, it is possible for European players to play Live Casino, online streaming directly from a casino in the United States 20

21 Royal Panda Royal Panda contributed with 5.6 MEUR in Q4 which is a lower figure compared to Royal Pandas Q3 revenue This is because Royal Panda is only included for two months in Q4 and that Royal Panda closed a number of markets for similar reasons as LeoVegas closed Czech Republic and Australia This is according to plan and adjusted for these markets, Royal Panda grew 57 percent in Q4 Royal Panda has had a strong opening to 2018 with 3.8 MEUR of NGR in January Revenue Nov-Dec: 5.6 MEUR Revenue: Like for like growth in Q4 17: % MEUR January 2018 NGR 3.8 MEUR Revenue: Q4 17 % of Group revenue: 8.3% 5.6 MEUR 15.4% January 2018 % of Group revenue: 21

22 Regulated revenues LeoVegas strategy is to enter regulated markets and markets that are soon to be regulated Regulated revenues in Q4 17 were 29% of total Q % of NGR from regulated markets UK 17% Italy 3% Denmark 9% 71% 22

23 Business KPI s 23

24 Q4 17 drivers Q3 17 back-drop Q MEUR in marketing +30% 29.5 MEUR in marketing Royal Panda 2.3 MEUR NDCs 32% Q-Q growth Royal Panda added 10% pnts NDCs in Q3 17 Royal Panda added 7% pnts Deposits 16% Q-Q growth Revenue 22% Q-Q growth Royal Panda added 10% pnts Acquisition of Royal Panda RDCs 18% Q-Q growth Royal Panda added 9% pnts 24

25 Customer base Depositing customers, new and returning COMMENTS New depositing customers (NDCs) Returning depositing customers (RDCs) +32% +18% New depositing customers (NDCs) increased 32% sequentially NDCs grew 22% sequentially excluding the acquisition of Royal Panda The growth in NDCs is very broad-based with nearly all markets seeing material increases Returning Depositing Customers (RDCs) growth was 18% sequentially RDC growth excluding Royal Panda was 9% RDC growth excluding Royal Panda and Australia (which was shut down on September 10) was 15% sequentially The strong RDC growth figure is mainly driven by the strong NDC development in Q Q Q Q Q Q Q Q Q Q4 25

26 Average spend per customer Deposits EUR per depositing customer NGR EUR per depositing customer COMMENTS Deposits per depositing customer Propotion of RDCs in the depositing customer base 60% 50% 40% 30% 20% 10% NGR per depositing customer As the proportion of RDCs in the mix has a material effect on the average deposit per depositing customer it can be seen how the proportion of RDCs correlates with average deposit per depositing customer In Q4 17 there was a large increase in NDCs, which means its proportion of the depositing customer base was larger, which in turn decreased the average deposit per depositing customer Average deposit per depositing customer decreased with the proportion of RDCs, as the average deposit per RDC was stable from Q3 17-0% - Average NGR per depositing customer decreased slightly less as hold increased slightly 26

27 Marketing and customer acquisition cost Marketing spend and NDCs indexed to Q3 17 in relation to marketing per NDCs Marketing Indexed to Q3'17 NDCs Indexed to Q3'17 Marketing / NDC (CAC) 29.5 MEUR MEUR % +30% +32% COMMENTS Marketing spend increased by 30% from Q3 17 to 29.5 MEUR in Q4 17, which is the highest level in LeoVegas history NDCs increased by 32% in the same period The Customer Acquisition Cost (CAC), illustrated in the chart as marketing in relation to NDCs, in Q4 17 decreased 1% compared to Q3 17 The growth in NDCs is very broad-based across countries ROI in Q4 17 has continued the strength from Q3 17 resulting in the best quarter ever in value generation from new customers 2017-Q Q4 27

28 Deposits Deposits MEUR and Q-Q growth in deposits % Deposits MEUR by region COMMENTS Deposits Q-Q growth rate in deposits 30% 25% 20% 15% 10% 5% 0% Sweden Other Nordics UK Rest of Europe Rest of World In Q4 17 deposits grew 62% Y- Y, excluding the acquisition of Royal Panda deposit growth was 52% On a sequential basis deposits increased 16%, and excluding Royal Panda 9% Growth rates per regions, numbers in brackets are excluding Royal Panda: Sweden 35% (34%) Other Nordics 131% (129%) UK 94% (55%) Rest of Europe 104% (88%) Rest of World -45% (-51%) Deposits increased by 85.5 MEUR (71.9) from Q4 16 to Q4 17 of which the regions accounted for (numbers in brackets are excluding Royal Panda): Sweden 21.2 MEUR (20.5) Other Nordics 29.2 MEUR (28.9) UK 20.1 MEUR (11.7) Rest of Europe 21.1 MEUR (17.8) Rest of World -6.2 MEUR (-7.1) 28

29 Regional split Rest of Europe 19% United Kingdom 18% Rest of Europe 17% United Kingdom 14% Deposits 2017-Q4 Rest of World 3% Other Nordics 23% Sweden 37% Deposits 2017-Q3 Rest of World 6% Other Nordics 22% Sweden 41% Rest of Europe 22% United Kingdom 17% Rest of Europe 18% United Kingdom 12% NGR 2017-Q4 Rest of World 6% Sweden 33% Other Nordics 22% NGR 2017-Q3 Rest of World 10% Other Nordics 23% Sweden 37% COMMENTS UK has seen the largest increase in share of both deposits and NGR due to the acquisition of Royal Panda, but supported by one of the strongest quarters in the UK organically Rest of Europe had a large increase also due to Royal Panda and also strong underlying growth Other Nordics remained stable as growth was strong at LeoVegas and the addition from Royal Panda was small Sweden grew at a healthy pace, but decreased it share of total as other markets grew faster in percentage terms Rest of World decreased as Australia was shut down on September 10 29

30 NGR by country and region NGR split all reported countries and geographies Q Rest of Europe 18% Rest of World 6% Sweden 33% COMMENTS In addition to the geographical regions that LeoVegas reports, some countries are sometimes reported for specific reasons In Q4 LeoVegas has reported, in addition to the regions, the NGR from the regulated markets Italy and Denmark Italy 3% UK 17% Norway & Finland 13% Denmark 9% 30

31 Game margin and Hold Game margin % and Hold in % COMMENTS 3.90% 3.85% 3.80% 37.0% 35.0% Game margin is defined as the winnings LeoVegas has divided by the total amount of bets, i.e. what percentage LeoVegas on average wins on a bet Hold is defined as NGR divided by deposits 3.75% 3.70% 3.65% 3.60% 3.55% 3.50% 3.45% 3.40% Game margin % Hold % 2015-Q Q Q Q Q Q Q Q Q Q Q Q4 33.0% 31.0% 29.0% 27.0% 25.0% Game margin and Hold are correlated with each other, and periods with lower margin are often associated with lower Hold Game margin in Q4 17 was very close to its historical average However, hold in Q4 17 increased to 30.2%, which is driven by the consolidation of Royal Panda The hold at Royal Panda for the period November- October was 39.8% Hold excluding Royal Panda saw a small increase to 29.6% 31

32 Mobile share of deposits 75% 70% 65% Deposits through mobile devices as a % of total deposits Mobile deposits as a % of total COMMENTS Deposits from mobile devices decreased mainly due to the consolidation of Royal Panda that has a slightly lower mobile usage than LeoVegas Mobile devices accounted for 69% of deposits in the quarter Deposits from mobile devices grew 66% year on year, while the same for desktop grew 52% 60% 55% 50% 2015-Q Q Q Q Q Q Q Q Q Q Q Q4 32

33 FINANCIALS 33

34 P&L per quarter adjusted Q Q P&L MEUR adjusted* Q Q Q Q Q Q Cost of sales Personnel costs net of capitalised development costs Operating expenses including other income Marketing expenses EBITDA Q % 80% 60% 40% 20% 0% -20% 21.6% 23.2% 50.9% 42.3% 60.4% P&L ratios adjusted* *Adjusted for listing-related expenses in Q4 15, Q1 16, Q1 17-Q4 17 and expenses related to acquisitions in Q3 17-Q % 11.8% 6.7% Q % 9.9% 13.5% Q % 11.9% 11.7% Q % 21.7% 22.5% 22.6% 23.7% 26.0% 26.9% 10.4% 9.5% 11.7% 12.4% 8.5% 9.8% 7.1% 7.6% 36.1% 36.2% 24.7% 24.2% Q Q % 9.7% 9.7% 42.9% 41.9% 40.7% 43.4% 14.0% 12.4% 15.1% Q Q Q % 10.5% Q Cost of sales Personnel costs net of capitalised development costs Operating expenses including other income Marketing expenses EBITDA COMMENTS In Q4 17 adjusted EBITDA was 7.1 MEUR, a margin of 10.5% Cost of sales as a percentage of revenue increased mainly due to higher gaming taxes in Denmark and the UK Personnel expenses as a percentage of revenue came back to a more normalised level following vacation pay in Q3 that decreased the ratio Operating expenses (excluding costs related to acquisitions and listing) were stable in relation to revenue Marketing in relation to revenue increased to the highest level of 2017, in line with what was communicated last report 34

35 From Adjusted EBITDA to Net Income Items in EBITDA affecting comparability Q4 17 P&L from Adjusted EBITDA to Net Income, MEUR Non-cash items relating to accounting for acquisition of Royal Panda Net income excluding noncash acquisition related items COMMENTS Due to the acquisition of Royal Panda several new items have appeared in the P&L In Q4 17 there were in total 4.0 MEUR of non-cash items consisting of increased amortisation, 3.0 MEUR, and discounting of the earn-out, 1.0 MEUR Adding these items back to Net Income would give a Net Income of 5.5 MEUR with a margin of 8.1% The 5.5 MEUR figure would be comparable to Net Income in previous periods when these non-cash acquisition related items were not part of the P&L 35

36 Marketing spend and margin Adjusted EBIT margin % Adjusted EBIT margin % 30.0% 25.0% 20.0% 15.0% 10.0% 5.0% 0.0% -5.0% -10.0% -15.0% 16.0% 14.0% 12.0% 10.0% 8.0% 6.0% 4.0% 2.0% Marketing to revenue % (negative scale) and Adjusted* EBITDA margin %, quarterly Adjusted EBITDA margin % Marketing expenses % of revenues Q1'14 Q2'14 Q3'14 Q4'14 Q1'15 Q2'15 Q3'15 Q4'15 Q1'16 Q2'16 Q3'16 Q4'16 Q1'17 Q2'17 Q3'17 Q4'17 Adjusted EBITDA margin % Marketing expenses % of revenues 10.5% EBITDA margin Marketing to revenue % (negative scale) and Adjusted* EBITDA margin %, annually 12.9% EBITDA margin -30.0% -35.0% -40.0% -45.0% -50.0% -55.0% -60.0% -65.0% -40.0% -42.0% -44.0% -46.0% -48.0% -50.0% -52.0% -54.0% -56.0% Marketing expense, % of revenues, negative scale Marketing expense, % of revenues, negative scale COMMENTS The marketing to revenue ratio is the key determinant of the profit margin development at LeoVegas The marketing to revenue ratio in Q4 17 was 43.4%, which is the highest level in six quarters although the ratio has been rather stable throughout 2017 LeoVegas margins have been, and can likely continue to be, volatile between quarters, but will average out at levels that are consistent with LeoVegas long term financial target to have a, EBITDA margin of around 15% The marketing to revenue ratio in Q1 18 is expected to be slightly lower than the average for % % *Adjusted for listing-related expenses in Q4 15, Q1 16, Q1 17-Q4 17 and expenses related to acquisitions in Q3 17-Q

37 Balance sheet Property, plant and equipment, 2.0 Current assets, 14.8 Assets MEUR 31 December 2017 Equity and liabilities MEUR 31 December 2017 Intangible assets, 14.8 Intangible assets, 62.5 Goodwill, 44.6 Cash and cash equivalents, 52.8 Current assets, Property, 22.3 plant and equipment, 2.9 Cash and cash equivalents, 66.6 Balance sheet total 185 MEUR Assets MEUR 30 September 2017 Equity and liabilities MEUR 30 September 2017 Balance sheet total 98 MEUR Bank loan, 20.0 Other liabilities, 6.8 Player liability, 4.8 Earn-out related liabilities, 50.0 Player liability, 7.1 Payables and accruals, 32.7 Equity, 58.9 Other liabilities, 3.3 Equity, 57.4 Payables and accruals, 42.1 COMMENTS Following the acquisition of the Royal Panda Group, the balance sheet has seen a significant change The balance sheet total is now at 185 MEUR up from 98 MEUR at the end of Q3 17 On the asset side the main change is intangible assets and goodwill which mainly relate to the acquisition of Royal Panda On the equity and liabilities side there are two main changes, which are the bank loan of 20 MEUR and earnout related liabilities The earn-out related liabilities include 10 MEUR in deferred payment which was part of the base purchase price for Royal Panda and also includes 4 MEUR related to the acquisition of Casino Grounds Overall working capital related items have increased due to the consolidation of Royal Panda 37

38 Cash flow Cash flow MEUR Q COMMENTS Cash and cash equivalents at beginning of period 6.1 EBITDA Cash flow from operating activities 8.0 MEUR Adjustments for non-cash items Change in working capital Cash flow from investing activities excluding acquisitions -1.6 MEUR Total decrease in cash 13.9 MEUR Investments in tangible assets Investments in intangible assets 20.0 Loan financing Investment in subsidiaries 0.1 Other movements 52.8 Cash and cash equivalents at end of period Cash decreased by 13.9 MEUR in the quarter Excluding all acquisition related movements cash would have increased by 6.5 MEUR in the quarter Cash flow from operating activities increased by 8.0 MEUR driven by the EBITDA result and changes in working capital Investing cash flow before acquisition related investing was of -1.6 MEUR was equally driven by investments in intangible and tangible assets and similar to the previous quarter The acquisition of Royal Panda Group resulted in a net outflow of 40.3 MEUR which is a combination of the initial purchase price of 50 MEUR (which excludes the deferred payment of 10 MEUR), net of cash in the Royal Panda Group 38

39 Financial Targets 39

40 Financial targets LeoVegas long-term financial targets: Long-term organic growth above online gaming market Long-term at least 15% EBITDA margin assuming 100% regulated markets LeoVegas dividend policy is to distribute a minimum of 50% of net profit over time 40

41 Summary 41

42 Summary Revenue growth of 65% and an adjusted EBITDA of 7.1 MEUR a 10.5% margin Underlying growth at LeoVegas at 82% Acquisition of Royal Panda, Casino Grounds and Rocket X 100m debt financing January NGR of 24.8 MEUR 76% growth Nasdaq, Stockholm Main market Proposed dividend of 1.20 SEK per share 42

43 Q&A 43

44 APPENDIX 44

45 Constant Currency Revenue MEUR Revenue in constant currency Currency movement Reported Revenue COMMENTS Revenue in constant currency would have been 68.4 MEUR The movement in the SEK was the most material and was about half of the total negative effect 45

46 Regulated and soon to be regulated markets for LeoVegas Markets where LeoVegas has a gaming license Markets LeoVegas pays gaming taxes or VAT but without license* Soon to be regulated markets where LeoVegas has presence Country Tax structure Country Tax structure Country Expectation Malta 0.5% on Sports turnover and 1.5 KEUR per license Ireland 23% VAT on Casino Sweden 18% on GGR expected Q1 19 UK 15% on GGR Germany 19% VAT The Netherlands 29% on GGR expected Q3 19 Denmark 20% on GGR Austria 40% tax on GGR Ireland Sports 1% on Turnover Italy *No local license regime is in place Casino 20% and Sports 22% on GGR 46

47 Potential dynamic effects in the Swedish market after regulation Effects when market regulates Positive and negative effects assessed against probability of occurring Market size Marketing clutter More channels Competition Supply chain Bonus costs may increase may decrease as competitors scale back marketing to protect margins in marketing open up changes as small companies leave, but large UK operators could enter absorbs its share of the gaming tax just as in the UK market may decrease as competitors scale back to protect margins 100 Positive / Negative Impact Market size increase Decrease in marketing clutter Decrease in bonus costs Supply chain absorbtion of tax Increase or decrease in competition Marketing channels open up Changing competetive position of Svenska Spel Svenska Spel will change its competitive position 10 0 Probability 47

48 Hypothetical EBITDA impact in Sweden with 18% tax on GGR Percentage point impact on EBITDA margin Gaming tax 18% 3 Example of potential EBITDA impact in market with 18% tax on GGR Tax on Market size bonuses increase (not included in EBITDA) 2 3 Marketing channels open up 1 Decrease in Decrease in marketing bonus costs clutter 1 1 Increase or decrease in competition 3 Supply chain absorbtion of tax 10 Impact on Decrease in EBITDA marketing before changes in marketing spend COMMENTS This is a hypothetical example of the EBITDA for LeoVegas in the Swedish market if an 18% gaming tax on GGR is implemented Tax of 18% on GGR means that bonus rounds get taxed at 18% as well, this adds ca. 3% points to the tax impact There are several positive factors from regulation that mitigate the negative effects on EBITDA from the tax An increased market size has the potential to have a very large impact on the absolute EBITDA level even though margins will be lower We expect that roughly half of the tax will naturally be offset and half will impact profitability assuming that marketing investments are not scaled back Decreases in marketing can further improve the EBITDA margin, if that is the right choice for the business at that point 48

49 4 MAIN KPIS QUARTERLY NDCs (last quarter ) RDCs (last quarter ) NDCs RDCs Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q4 Deposits 224.6M (last quarter 193.1M) NGR 67.9M (last quarter 55.2) Deposits NGR Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q4 49