2014
Half Year Results
Norbert Teufelberger
Key points
H1 2014
• Solid performance in nationally regulated/taxed markets
• Poker remains challenging
• Growth in mobile/touch
• Cost savings on-track
• Progress on non-core disposals
Outlook 2014/15
• Fundamental changes underway to:
Drive revenue growth
Improve speed of decision-making and execution
Deliver further cost savings
2014 H1 – the numbers
Revenue
€317.1m
(7%)
Clean EBITDA
€46.4m
(24%)
• Solid performance in nationally regulated/ taxed markets
• Loss of €11.9m of revenue from Greece • Challenging poker markets in Europe
• Lower revenue and absence of domain sales • Operating losses of €7.3m in New Jersey
• FIFA World Cup marketing campaigns • On-going losses from new business areas
Half year dividend
1.89p
+5%
• Strong underlying cashflow conversion • Balance sheet remains strong
• Disposals should release further value
Loss after tax
€94.0m
n/a
• €94.7m non-cash write down of intangibles • Almost entirely poker-related
Martin Weigold
Summary financials
Six months ended 30 June (€m) 2013 2014 Change
Total revenue 342.5 317.1 (7%)
Cost of sales (44.1) (47.2) (7%)
Gross profit 298.4 269.9 (10%)
Clean EBITDA* 60.7 46.4 (24%)
Depreciation and amortisation, (47.9) (41.4) 14%
Share-based payments, M&A and reorganisation costs (13.1) (9.8) 25%
Exchange losses (4.0) (0.9) 78%
Impairments - (94.7) n/a
Retroactive taxes and associated charges (0.6) - n/a
Loss from operating activities (4.9) (100.4) n/a
Loss after tax (11.6) (94.0) n/a
* EBITDA adjusted for exchange differences, reorganisation expenses, income or expenses that relate to exceptional items, and non-cash charges relating to impairments and share-based payments
2014 H1 total revenue mix by product
34.7% 40.2% 32.8% 32.6% 18.7% 13.9% 8.1% 8.4% 5.7% 4.9% 0 50 100 150 200 250 300 350 400 H1 2013 H1 2014 €m Other revenue Bingo PokerCasino & games Sports betting
2014 H1 net revenue by country
26% 11% 8% 6% 5% 2% 1% 1% 18% 5% 16% Germany United Kingdom Italy France Spain Belgium US Denmark Other EU Other Americas RoWTaxed and/or nationally regulated revenue
140 150 160 170 180 190 200 210€m Regulated/taxed markets revenue bridge - H1 14 v H1 13
Sports betting
Key points
• Strong growth in regulated markets, mitigated by loss of Greece
• Increased share of GGR on mobile/touch
• Solid FIFA World Cup performance
2014/15 outlook
Growth in core markets mobile product roll-out new product features
B2B opportunities
New regulations (Nl, Bg, Ru)
No major tournament in 2015 €80m €90m €100m €110m €120m €130m €140m
Sports betting revenue bridge H1 13 - H1 14
FIFA World Cup 2014
685k Unique active players €19.3m Hold €155m Turnover 12.5% Average gross win marginThe final score 2014
138k New real money players 350 Live bets offered during every game 147k Average number of daily customers 6,000 Peak volume of bets per minute
Casino & games
Key points
• Growth in regulated markets offset by impact of declines in poker
• Other markets held back by ‘volume to value’ shift and loss of Greece
• Increased cross-sell from sports
• Maiden contribution from New Jersey
2014/15 outlook
New games – mobile/desktop
Spanish slots, new markets?
? Amaya/Stars impact unclear
Continued poker decline
Note figures are subject to rounding
€80m €90m €100m €110m €120m
Poker
Key points
• Market declines: Italy (-25%), France (-9%) and Spain (-2%)
• Improving player numbers but lower value per customer
• Maintained #1 network in NJ
• New features, tournaments gaining traction
2014/15 outlook
Expansion on mobile
Consolidate position in NJ
Pooled liquidity (France, Italy)
Challenging markets in EU
? Amaya/Stars impact unclear
Further US openings unlikely until 2015 at the earliest
€20m €30m €40m €50m €60m €70m
Poker revenue bridge H1 13 - H1 14
Bingo
Key points
• Market leading positions maintained despite tough conditions in Italy and UK
• Italy -16% in H1 14
• Strong growth for Foxy on mobile
• Encouraging progress on bwin
• Spain remains small
2014/15 outlook
Further evolution of UK offer on mobile and tablet
Sharing of UK liquidity
Expansion of Foxy franchise
POC tax in UK – Dec 14
€20m €21m €22m €23m €24m €25m €26m €27m €28m €29m €30m
Bingo revenue bridge H1 13 - H1 14
Clean EBITDA distribution expenses
As a % of total revenue
20.2% 18.2% 22.1% 7.3% 5.5% 4.6% 4.3% 4.3% 4.4% 0.7% 1.2% 0.7% 3.1% 3.9% 4.7% 0 25 50 75 100 125 150 H1 2012 H1 2013 H1 2014 €m Webhosting and technical services Customer bad debts Third-party content Affiliates Customer acquisition and retention 33.1% 36.5% 35.6%Clean EBITDA admin expenses
As a % of total revenue
5.5% 4.6% 4.3% 15.6% 20.4% 17.6% 3.5% 3.5% 3.8% 8.3% 7.8% 8.3% 0 25 50 75 100 125 150 H1 2012 H1 2013 H1 2014 €m Other overheads Outsourced services Staff costs Transaction fees 36.3% 34.0% 32.9%Consolidated Clean EBITDA bridge
0 10 20 30 40 50 60 70€m Clean EBITDA bridge - H1 14 v H1 13
Cashflow bridge Dec 2013 to Jun 2014
Note figures are subject to rounding
0 20 40 60 80 100 120 €m
Current trading and outlook
Average net daily revenue -
Total 10 weeks to 25 August 2014 Vs same period in 2013 % change Vs Q2 14 % change Total €1,433,000 (4%) (7%) Sports betting €580,300 8% (13%)
Casino & games €541,300 (3%) 1%
Poker €177,500 (32%) (12%)
Bingo €133,900 0% (4%)
Average net daily revenue – nationally regulated/taxed markets 10 weeks to 25 August 2014 Vs same period in 2013 % change Vs Q2 14 % change Total €745,700 2% (11%) Sports betting €406,600 11% (14%)
Casino & games €130,900 7% (7%)
Poker €76,300 (29%) (15%)
Norbert Teufelberger
Our priorities
• A fundamental change to improve execution of our strategy
• Delivery of B2C growth in nationally regulated and/or taxed markets
Leverage our strong brands
Increase mobile/touch footprint
Product evolution and development
Improve digital marketing
• Sustain B2C revenue streams from dotcom markets and grow B2B
• Ensure future value can be maximised through
Sale of non-core assets
Release of value from Kalixa
Fundamental change required
• Right strategy post-merger…BUT market constraints and operational challenges held back financial performance:
“...all-in-one global operator” Single operator - Multiple brands - Sports, Poker, Casino and Bingo
- Proprietary software Complex matrix structure of operator and
technology
8
bn EUR Potential market size 4 dimensions Brand Geography Product Function• Diverse geographic footprint means we remain sub-scale in several markets
• Poker markets challenging and PokerStars dominates
• Business complexity has led to duplication of responsibilities and costs
• Technology integration and new market entries have delayed new products and impacted customer experience
Volume of change + lack of resources =
Worse than expected
Near-term objectives
• Focus our ambitions
• Core B2C brands in key markets
• Streamline operations to address new reality
• Mobile channel is key
• Simplify decision flows and processes, reduce complexity
• Ensure options for future value creation are unlocked
Speed-up and improve execution
Drive revenue growth
Align business along key disciplines
Europe US B2B Sports betting Casino & games Poker Bingo Studios B2C New business“WHA
T w
e
deliver”
Cus
tomer
exp
erience
B2C operations - label focused
Europe US B2B Sports betting Casino & games Poker BingoStudios New business
B2B
Europe US Sports betting Casino & games Poker BingoStudios New business
B2B B2C
Technology delivery
Sports betting Casino & games Poker Bingo New business Studios“HOW w
e
deliver”
platf
orm,
game
services
Comp
li
anc
e, C
RM
B2C B2BNew business
B2B Sports betting Casino & games Poker BingoStudios New business
Strategy at work
B2C
• Grow revenue in sustainable markets
Leverage brand strength, driven by sports betting
Improve cross-sell dynamics
Mobile and touch
Product evolution and development
Digital marketing and CRM
B2B growth
B2C – grow revenue in sustainable markets
+14% +7% -25% -4% 78.3 89.1 0 20 40 60 80 100 H1 2013 H1 2014 Sports bettingRegulated and/or taxed
25.8 27.6
0 20 40 60 80
H1 2013 H1 2014
Casino & games
Regulated and/or taxed
26.3 19.6 0 20 40 60 80 H1 2013 H1 2014 Poker
Regulated and/or taxed
27.0 26.0 0 20 40 60 80 H1 2013 H1 2014 Bingo
Regulated and/or taxed
€m
B2C growth – leverage brand strength
24% 0% 10% 20% 30% Sports betting 10% 7% 6% 0% 10% 20% 30% Casino 20% 14% 0% 10% 20% 30% 40% Poker• Survey of 1,200 active online gamblers on where they play
• Countries included Belgium, France, Germany, Italy, Netherlands, Spain, UK
• Results weighted by total population • Source: TNS Info Research, August 2014
B2C growth - driven by sports betting
43% 0% 10% 20% 30% 40% 50% Germany 25% 9% 0% 10% 20% 30% 40% Italy 49% 0% 10% 20% 30% 40% 50% 60% Spain 20% 0% 10% 20% 30% 40% 50% BelgiumB2C growth – improve cross-sell dynamics
0% 10% 20% 30% 40% 50% 60% 70% 80% H1 13 H2 13 H1 14% Casino customers from Sports*
bwin.com bwin.be bwin.es
% of active bwin customers who played on sports and then played on casino/poker by label
0% 10% 20% 30% 40% 50% 60% 70% 80% H1 13 H2 13 H1 14
% Poker customers from Sports*
B2C growth - mobile and touch
KPIs
• Increase mobile footprint in core markets
• 50% of GGR by Dec 15
• Despite regulatory complexity, good progress on expanding our mobile footprint • % of GGR in H1 • Sports – 33% (H1 13: 17%) • Casino – 8% (H1 13: 4%) • Poker – 5% (H1 13: 1%) • Bingo – 21%(H1 13: 2%) 0 2 4 6 8 10 12 14 16 18 J F M A M J J A S O N D J F M A M J € m 2013-14 GGR on mobile/touch Bingo Poker
Casino & games Sports betting
B2C growth - product evolution
Mobile/touch
• Sports – MS2+ on .com, .be and .es • Casino – dedicated app – iOS and
Android
• Poker – roll-out applications in France
and Italy
• Bingo – add more games
Desktop and platform
• Sports – New combination bet offer
plus content-rich features
• Casino - new lobby and additional games
B2C growth - digital marketing and CRM
Objectives
• Increase customer loyalty/ satisfaction
• Increase cross-sell intra label • Improve knowledge of customer
behaviour/preferences
• Reduce player attrition and costs
Platform
• Move to a single customer view across all channels
Mobile
• Deployment of third-party systems
• Urban Airship
B2B growth
Europe
• Fortuna – Eastern Europe
• PMU - France
• Danske Spil - Denmark
US
• Boyd Gaming/Borgata
• MGM
New business update
Kalixa
• Active discussion on strategic partnership
• PXP integration on-track
• Advisers appointed to consider strategic options
Other
• Betbull
• Further disposals expected over the coming months
• Surplus cash to be returned to shareholders
Summary - our priorities
• A fundamental change to improve execution of our
strategy
• Delivery of B2C growth in nationally regulated and/or
taxed markets
• Sustain B2C revenue streams from dotcom markets and
grow B2B
• Unlock value from business units
Philip Yea
Chairman
Philip Yea
Initial observations
Opportunities
● Attractive industry● Positive long-term drivers
● Management ownership
● Strong brands
● Technology
● Strong partnerships
● Value from new business areas
Challenges
● Increasing market complexity
Uncertainty created by rapid shift from dotcom to nationally regulated markets Introduction of national gaming taxes Lack of enforcement against ‘black
market’ operators
Explosion of mobile and social platforms Increasingly sophisticated and demanding
consumers
● Merger integration not complete
France/Italy migration Technical debt
● Complex management structure
● Shifting competitive landscape
Agenda for change
• Understand and take on shareholder concerns
Board composition
Review of strategic options
Operational delivery
• Address shift in risks and opportunities
• Support steps to simplify organisation structure
Increased internal ownership
Improved and faster decision-making
Significant cost savings