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

Transcription

1 Q2 2018

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 Strong company culture Strategy Expansions strategy Expand in regulated markets and markets that are soon be regulated, new product categories 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 Quarterly report highlights Responsible Gaming & Sustainability Business update Business KPIs Financial targets Financials Summary Q&A 5

6 Quarterly report Highlights and events 6

7 Revenue since launch MEUR Q2 18 growth Y-Y 76% Q2 18 growth excl. acquisitions Y-Y (organic growth) Q2 18 growth excl. acquisitions and closed markets (Australia) Y-Y 27% 38%

8 Q Highlights Mobile deposits: 69 % Growth: +76 % Organic growth: 27% Underlying organic growth 38% NDCs Growth: 84% Revenue: 87.4 MEUR MEUR EBITDA: 15.0 MEUR 17.2 % margin 8

9 Product mix and locally regulated NGR Casino Classic 77% of GGR LiveCasino 15% of GGR Sport 8% of GGR Locally regulated NGR: 39% 9

10 Responsible Gaming & Sustainablility 10

11 Responsible Gaming Being data driven is key Algorithms to detect unsound player behaviour Building the next generations responsible gaming system based on machine learning Sustainable business 11

12 Sustainability and key projects Key projects delivered before World Cup Revenue March 4.0 MEUR New Front-end platform GDPR Compliance primarily in the UK Long term and sustainable growth Revenue: Revenue: MEUR MEUR 12

13 Business update 13

14 Market comments Sweden Italy Welcoming Sweden as a regulated market more opportunities open up Application 1 st of August 2018 Law to be implemented 1 January 2019 UK One of the largest gaming market in Europe Successful migration to our proprietary technology platform Rhino The coalition government in Italy has proposed a ban on all gambling advertising very uncertain outcome Harder to work with affiliates because of the harsher compliance requirements from the UKGC The affiliates also need to adapt to the requirements New approval structure for affiliates has meant we ve added more affiliates in Q3 so far Discussions with the UKGC how LeoVegas Mobile gaming Group can improve further 14

15 World Cup fun facts Cash Turnover Mobile: 80% +72% Compared to a normal football month Margin 12.8% Most popular bet: Full time winner PreMatch 64% 15

16 Executive management Strengthening the Executive management and increased focus on LeoSafePlay and sustainability Viktor Fritzén Senior advisor Stefan Nelson New CFO Louise Nylén Deputy CEO Richard Woodbridge New COO Marcus Nylén - COO until Richard joins - after that solely focus on LeoVegas expansion Rikard Ljungman Leave his position as CCO and focus only on responsible gaming and LeoSafePLay 16

17 Royal Panda and Rocket X Revenue Q MEUR EBITDA Q MEUR 30.0 % margin Revenue Q MEUR Revenue: EBITDA Q MEUR 2.4 MEUR 21.8 % margin 17

18 Current Trading Start of Q3 NGR July MEUR an increased of 45 % compared to July last year 18

19 Financial targets 2020 Revenue MEUR EBITDA 600?? 600? 100? H H

20 Business KPI s 20

21 Q2 18 drivers Q1 18 back-drop Q MEUR in marketing +1% 30.5 MEUR in marketing NDCs -8% Q-Q growth Excluding RX: -17% NDCs Excluding RX: 1% Deposits 7% Q-Q growth Revenue 13% Q-Q growth Excluding RX: 4% Acquisition of Rocket X RDCs 13% Q-Q growth Excluding RX: 9% 21

22 Customer base Depositing customers, new and returning (per platform/brand) COMMENTS Rocket X NDCs Royal Panda NDCs LeoVegas NDCs Rocket X RDCs Royal Panda RDCs LeoVegas RDCs New depositing customers (NDCs) decreased 8% Q-Q following the all time high in Q The NDC base remains broad-based across geographies, although the UK is more significant following the consolidation of Royal Panda and Rocket X Returning Depositing Customers (RDCs) growth was 13% sequentially RDC growth excluding the effect of consolidation of Rocket X was 9%, which is a strong Q-Q development Q Q Q Q Q Q Q Q Q2 22

23 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% NGR per depositing customer Average deposit per depositing customer in Q2 18 increased slightly from Q1 18 mainly due to a higher proportion of the customer base being RDCs, as RDCs on average have a higher spend Average NGR per depositing customer increased more than average deposit per depositing customer due to the consolidation of Rocket X that have higher hold % % % - 23

24 Marketing and customer acquisition cost Customer Acquisition Cost (CAC) EUR Marketing spend MEUR CAC EUR Marketing spend and Customer Acquisition Cost 30.5 MEUR Marketing cost MEUR COMMENTS Marketing spend increased by 1% from Q1 18 to 30.5 MEUR in Q2 18, which is the highest level in LeoVegas history, but is driven by the consolidation of Rocket X since marketing at LeoVegas and Royal Panda decreased slightly Q-Q NDCs decreased by 8% in the same period The Customer Acquisition Cost (CAC) saw a slight increase Q-Q but was still at the second lowest level in six quarters Compared to the same period last year, marketing increased by 47% while the CAC decreased by 20% ROI in Q2 18 was high, continuing the trend over the last quarters - Q2'16 Q3'16 Q4'16 Q1'17 Q2'17 Q3'17 Q4'17 Q1'18 Q2'18-24

25 Regulated NGR 39% of total NGR by country and region NGR split all reported countries and geographies Q Rest of World 9% Sweden 24% COMMENTS Following the consolidation of Rocket X, the UK is now the largest contributor of NGR in the LeoVegas Group at 28% of total NGR from locally regulated markets was 39% of total Rest of Europe 18% Italy 3% Norway & Finland 10% Denmark 8% UK 28% 25

26 Game margin and Hold Game margin % 3.90% 3.85% 3.80% 3.75% 3.70% 3.65% 3.60% 3.55% 3.50% 3.45% 3.40% 4.80% 4.60% 4.40% 4.20% 4.00% 3.80% 3.60% 3.40% 3.20% 3.00% Game margin % and Hold in % Game margin % Hold % Margin per platform LeoVegas margin Royal Panda margin Rocket X margin 37% 35% 33% 31% 29% 27% 25% Hold % 4.00% 3.80% 3.60% 3.40% 3.20% 4.00% 3.50% 3.00% 2.50% 2.00% 12.00% 10.00% 8.00% 6.00% 4.00% 2.00% 0.00% 3.29% 2.83% Margin Casino Classic 3.69% 3.70% 3.66% 3.71% 3.66% 3.71% 3.70% 3.44% 8.73% 7.49% Margin Live Casino 2.42% 2.61% Margin Sports book 1.56% 6.83% 6.76% Casino Classic margin 3.89% 3.21% 3.11% 2.89% 2.77% 2.91% Live Casino margin 9.54% 9.51% 6.79% 7.75% Sports book margin COMMENTS Game margin is defined as house winnings divided by the total amount of bets, i.e. what percentage the LeoVegas Group on average wins on a bet Hold is defined as NGR divided by deposits Game margin and Hold are correlated with each other, and periods with lower margin are often associated with lower Hold Game margin in Q2 18 saw a quite large increase driven by the consolidation of Rocket X, that have a higher margin on average, the high margin in the Sports book and a high margin in Casino Classic at LeoVegas Hold in Q2 18 increased to 32.6%, which is driven by the consolidations of Rocket X as Hold at the LeoVegas brand only increased marginally from Q

27 FINANCIALS 27

28 Record EPS Adjusted* EPS EUR EUR 0.13 SEK 1.40 COMMENTS Adjusted EPS reached an all time high in the quarter following the strong EBITDA margin Adjusted EPS was EUR 0.13 or SEK 1.40 Adjusted earnings per share reflect the Group s underlying earnings capacity, as items affecting comparability related to acquisitions, the listings, one-time provisions and gains are excluded In Q2 18 only non-cash items related to acquisitions are adjusted for Q2'16 Q3'16 Q4'16 Q1'17 Q2'17 Q3'17 Q4'17 Q1'18 Q2' *Adjusted for listing-related expenses in Q1 17-Q1 18, expenses related to acquisitions in Q3 17-Q1 18, UK fine and gain on sale of asset in Q1 18 and items relating to acquisitions including amortizations and discounting effects that are both non-cash, for details see page 21 in the quarterly report 28

29 P&L per quarter adjusted Q P&L MEUR adjusted* Q 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% 23.9% 11.9% 11.7% 60.4% -7.9% Q % 7.6% 36.1% 36.2% 24.7% 24.2% P&L ratios adjusted* 21.7% 22.5% 22.6% 23.7% 26.0% 26.9% 28.0% 27.2% 10.4% 9.5% 11.7% 12.4% 8.5% 9.8% 9.8% 10.1% 42.9% 41.9% 40.7% 43.4% 39.0% 34.9% 14.0% 12.4% 15.1% 10.5% 11.6% COMMENTS *Adjusted for listing-related expenses in Q4 15, Q1 16, Q1 17-Q1 18, expenses related to acquisitions in Q3 17-Q1 18, provision for fine in the UK and gain on sale of asset Q Q % Q % Q % Q % Q % 10.6% Q Cost of sales Personnel costs net of capitalised development costs Operating expenses including other income Marketing expenses EBITDA 17.2% Q In Q2 18 EBITDA was 15.0 MEUR, a margin of 17.2% Cost of sales as a percentage of revenue decreased slightly due to slightly lower cost of sales as gaming taxes saw a slight increase Personnel expenses as a percentage of revenue was stable with a slight increase at LeoVegas offset by lower levels at Royal Panda and Rocket X Adjusted* operating expenses decreased in relation to revenue due to the Group kickoff in Q1 18, excluding the kickoff, operating expenses would have been rather stable Marketing in relation to revenue decreased to 34.9% due to lower marketing spend in absolute terms at LeoVegas and Royal Panda in Q2 18 compared to Q

30 EBITDA per business unit % margin 9.1 EBITDA Q MEUR COMMENTS The LeoVegas platform/brand was 71.7% of revenue in Q2 18 and 60.4% of EBITDA Royal Panda was 15.3% of revenue and 26.8% of EBITDA on the back of a 30.0% EBITDA margin in the quarter Rocket X contributed with 12.5% of revenue and 15.9% of adjusted EBITDA % margin % margin LeoVegas Royal Panda Rocket X LeoVentures -0.5 *Adjusted for listing-related expenses in Q4 15, Q1 16, Q1 17-Q1 18, expenses related to acquisitions in Q3 17-Q1 18, provision for fine in the UK and gain on sale of asset 30

31 Marketing spend and margin Adjusted EBITDA margin % 30.0% 25.0% 20.0% 15.0% 10.0% 5.0% 0.0% -5.0% -10.0% -15.0% Adjusted EBIT margin % 16.0% 14.0% 12.0% 10.0% 8.0% 6.0% 4.0% 2.0% 0.0% Marketing to revenue % (negative scale) and Adjusted* EBITDA margin %, quarterly Adjusted EBITDA margin % Marketing expenses % of revenues Q2'16 Q3'16 Q4'16 Q1'17 Q2'17 Q3'17 Q4'17 Q1'18 Q2'18 Adjusted EBITDA margin % Marketing expenses % of revenues % adjusted EBITDA margin Marketing to revenue % (negative scale) and Adjusted* EBITDA margin %, annually 12.9% adjusted 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% -58.0% Marketing expense, % of revenues, negative scale Marketing expense, % of revenues, negative scale COMMENTS *Adjusted for listing-related expenses in Q4 15, Q1 16, Q1 17-Q1 18, expenses related to acquisitions in Q3 17-Q1 18, provision for fine in the UK and gain on sale of asset The marketing to revenue ratio is the key determinant of the profit margin development at LeoVegas The marketing to revenue ratio in Q2 18 was 34.9%, 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 an EBITDA margin of around 15% The marketing to revenue ratio in Q3 18 is expected to be similar to that in Q2 18 LeoVegas will act opportunistically with marketing as opportunities present themselves 31

32 From Adjusted EBITDA to Net Income Q2 18 P&L from EBITDA to Net income, MEUR COMMENTS MEUR in non-cash items related to acquisitions affecting comparability that are excluded in adjusted profit measures Adjusted Net Income 12.9 Adjusted measures are presented in order to provide a more fundamental picture of the performance of the Group Net income was 6.6 MEUR, which includes several items affecting comparability and some significant large noncash items In the adjusted measure the non-cash items relating to the acquisitions that are removed total 6.2 MEUR Adjusted Net Income was 12.9 MEUR, corresponding to a margin of 14.8% EBITDA D&A Adjusted EBIT Amortisation for acquisitions (non-cash) EBIT Financial expenses Discounting of earn-out (noncash) Tax Net income 32

33 Balance sheet Intangible assets related to acquisitions, 69.3 Intangible assets related to acquisitions, 72.0 Assets MEUR 30 June 2018 Equity and liabilities MEUR 30 June 2018 Balance sheet Cash and Earn-out cash total 268 MEUR related equivalents, Current liabilities, 49.4 assets, Goodwill, Assets MEUR 31 March 2018 Equity and liabilities MEUR 31 March 2018 Goodwill, Cash and cash equivalents, Deferred tax assets, 1.5 Property, plant and equipment, 3.9 Intangible assets, Current assets, 31.5 Balance sheet total 267 MEUR Deferred tax assets, 1.5 Property, plant and equipment, 3.7 Intangible assets, 12.4 Earn-out related liabilities, 39.2 Bank loan, 84.8 Other liabilities, 17.7 Bank loan, 94.8 Other liabilities, 8.1 Equity, 63.5 Equity, 64.8 Player liability, 11.7 Player liability, 10.7 Payables and accruals, 48.7 Payables and accruals, 50.3 COMMENTS The balance sheet at the end of Q2 18 is overall very similar to that at the end of Q1 18 Following the acquisition of the Royal Panda Group and the assets behind Rocket X, the balance sheet has seen significant changes over the last few quarter The balance sheet total is now at 268 MEUR up from 98 MEUR at the end of Q3 17 On the asset side the main change is intangible assets and goodwill On the equity and liabilities side there are two main changes, which are the bank loan of 95 MEUR and earnout related liabilities Overall working capital related items have increased due to the consolidation of Royal Panda and Rocket X 33

34 Cash flow Cash flow MEUR Q COMMENTS 44.4 Cash flow from operating activities 15.9 MEUR Total increase in cash 5.0 MEUR Cash increased by 5.0 MEUR in the quarter Cash flow from operating activities increased by 15.9 MEUR driven mainly by the EBITDA result The increase in loan financing of 10 MEUR was offset by the deferred payment for the acquisition of Royal Panda The dividend paid during the quarter reduced cash by 11.7 MEUR Cash at the end of the quarter was 49.4 MEUR 34

35 Summary 35

36 Summary Revenue growth of 76% and an EBITDA of 15.0 MEUR a 17.2% margin Organic underlying growth at 38% Acquisitions develop according to plan with strong margins Key projects and sustainability Italian business migrated to Rhino July NGR of 26.4 MEUR 45% growth Trending towards our financial targets 36

37 Q&A 37

38 APPENDIX 38

39 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 Q1 19 UK 15% on GGR Germany 19% VAT on Casino, 5% on sports turnover The Netherlands 29% on GGR expected 2020 Denmark 20% on GGR Austria 40% tax on GGR Ireland Sports 1% on Turnover The image cannot be displayed. Your computer may not have enough memory to open the image, or the image may have been corrupted. Italy Restart your computer, and then open the file again. If the red x still appears, you may have to delete the image and then insert it again. *No local license regime is in place Casino 20% and Sports 22% on GGR 39

40 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 40

41 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 41

42 Mobile share of deposits 75% 70% Deposits through mobile devices as a % of total deposits Mobile deposits as a % of total COMMENTS Deposits from mobile devices has been rather stable for the last few quarters Deposits from mobile devices in Q2 18 was 69% 65% 60% 55% 50% 2016-Q Q Q Q Q Q Q Q Q1 42

43 NGR and Deposits per platform Deposits per platform Q MEUR Rocket X 9% NGR per platform Q MEUR Rocket X 13% COMMENTS The LeoVegas brand was 80% of deposits in Q2 18 but 72% of NGR, which is due to higher overall higher hold at Royal Panda and Rocket X Royal Panda 11% Royal Panda 15% LeoVegas 80% LeoVegas 72% 43

44 GGR per product type GGR Live Casino 15% GGR per product type Q GGR Sports book 8% COMMENTS Sports book was 8% of GGR in Q2 18, which is an increase of 1 percentage point and was supported by the Football World Cup Live Casino was 15% of GGR, which is the same as in Q1 18 Casino Classic was 77% of GGR The reason the split by product type is shown as GGR (Gross Gaming Revenue) instead of NGR (Net Gaming Revenue) is due to that bonuses in casino cannot be separated between Classic and Live GGR Casino Classic 77% 44

45 Deposits Deposits MEUR and Q-Q growth in deposits % Deposits MEUR by region COMMENTS Rocket X Deposits Royal Panda Deposits LeoVegas Deposits Q-Q growth in Deposits 30% 25% 20% 15% 10% Sweden Other Nordics UK Rest of Europe Rest of World In Q2 18 deposits grew 59% Y- Y, excluding the acquisitions of Royal Panda and Rocket X deposit growth was 26% On a sequential basis deposits increased 7% Growth rates per regions: Sweden 19% Other Nordics 57% UK 175% Rest of Europe 62% Rest of World 29% Deposits increased by 98.3 MEUR from Q2 17 to Q2 18 of which the regions accounted for: Sweden 12.9 MEUR Other Nordics 19.4 MEUR UK 44.8 MEUR Rest of Europe 18.3 MEUR Rest of World 3.0 MEUR 50 5% 10-0% - 45

46 4 MAIN KPIS QUARTERLY NDCs (last quarter ) RDCs (last quarter ) NDCs RDCs 2012-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 Q Q Q Q Q2 Deposits 266.3M (last quarter 247.5M) NGR 86.8M (last quarter 76.0) Deposits NGR 2012-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 Q Q Q Q Q2 46