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Executives

Brian Mattingley – CEO

Aviad Kobrine – CFO

Itai Frieberger – COO

Analysts

Ivor Jones – Numis

Nick Batram – Peel Hunt

Michael Campbell – Daniel Steward & Co

888 Holdings Plc (OTCPK:EIHDF) Q1 2013 Key Performance Indicators and Interim Management Statement Call April 23, 2013 5:30 AM ET

Operator

Good morning and welcome to the 888 Holdings Q1 2013 KPIs and Interim Management Statement Conference Call. At this time, I would now hand the call over to Mr. Brian Mattingley, Chief Executive of 888 Holdings. Please go ahead sir.

Brian Mattingley

Thank you very much Cindy and good morning everybody and thank you all for joining us on this call. As ever, I’m joined by my Aviad Kobrine, CFO and Chief Operating Officer Mr. Itai Frieberger. I will open with a few brief comments before opening up the call to any questions you may have.

These are an excellent set of results and we have notched up yet another record with revenue for the quarter at $103 million, a 9% increase year-on-year driven by both poker and casino.

Casino has performed very strongly revenue is up 8% quarter on quarter and 13% year on year. With Casino 50, paying dividends and boosted further by the launch of Slots in Italy in December last year. Poker revenues are also up, they’re up by 15% year-on-year and this was as a result of a number of very successful winter marketing campaigns.

There has been much contradictory statements regarding the sports specking sector of late, but we at 888 have experienced a healthy trading position which together with our social gaming business has contributed to record levels of revenue in the emerging market sector. We are also pleased to say that Bingo revenues have broken the recent trend, and despite the maturity market is good to see that our marketing activities can still generate growth.

Quarter two, has begun in line with our expectations for this year. While we are of course coming up against some increasingly tough year-on-year comparisons, daily outreach revenue during the first 20 days of April was still 3% above April 2012.

We believe that our targeted market is amongst the very best in the business. I will continue to drive customer acquisitions and get a rise in deposits. With over 100,000 customers added over the last quarter, we have a record number of players playing on our sides. We’re very pleased with where we currently are with our business.

Thank you ladies and gentlemen. And I will now hand you back to the operator, who will run the Q&A session. Thank you very much.

Question-and-Answer Session

Operator

Thank you, sir. (Operator Instructions). We will take our first question from Ivor Jones from Numis. Please go ahead.

Ivor Jones – Numis

Good morning and could you just talk first about the effective currency on revenue growth please?

Brian Mattingley

Certainly, I’ll turn it to Aviad.

Aviad Kobrine

Yes, Ivor, as I mentioned that the year end, the decline of the pound versus the dollar meant that without changing consumer behavior in terms of their – as they deposit in betting patterns, we will see less revenue recognized in dollars. At the time of the year end results, we estimated that at the rates presenting at the time, which hasn’t changed dramatically, the impact of EBITDA could be determines $3 million over the year. However, given that we have largely hedged our net exposure between the euro to dollar and the pound to dollar, the economic impact on the bottom line should be very small.

Ivor Jones – Numis

Can you just talk about the effect on them – the reported revenue growth?

Aviad Kobrine

I think it has probably impacted revenue growth slightly negatively by a couple of percent roughly.

Ivor Jones – Numis

Okay, thank you. And then can you go on and talk about the contribution from mobile you talked about it, the time of the results that you were launching lots of product, what effect is that having on, where revenue is coming from, please?

Brian Mattingley

Okay. As we mentioned and the trend has continued, mobile is growing very, very significantly across all our product ranges. It means that in terms of new customer recruitment, we are seeing a very significant uptake to double digit of STPs which signified that future revenue wouldn’t increase dramatically from that segment. At the moment revenue for mobile is somewhere between 5% and 10% of group revenue and that is growing very, very fast indeed.

Ivor Jones – Numis

And is there anything you could say about the last time value of the customers that sign up for a mobile, and now you’ve got more often than they’ve been around for longer? Is this a good trend or a bad trend?

Brian Mattingley

Sure. Although it’s in early days, we can see indication is number one is the revenue for model is cumulative, it’s additional revenue. It doesn’t cannibalize our existing customer base. Second of all, we see that last time value is slightly lower than our core PC, however the CPA is also lower and therefore the return on our investment is actually very significant.

Itai Frieberger

Ivor, this is Itai, if I may. Since the thing, in our last presentation, we have added somewhere and I think all of our offering has been changed and improved in the last few months. And that just comes in the two plan to continue going forward potentially for the next year.

The offering that we have today in mobile is ticking up with the offering that we have on PC. And I think this is then the challenge of the upside as we have – in understanding how to cross between mobile and PC platform if we acquire flares on mobile and then cross them over to the PC and by versatile using the PC is the mobile is there, retention to for PC players. So, I think these are the things that we deal with them right now, increasing the – improving our offering on mobile and understanding the impact of optimizing the way that we see our end – the word that we acquire over mobile platform.

Ivor Jones – Numis

Okay. That’s helpful, thank you. And in relation to slots in Italy, I don’t want to misinterpret the growth in casino revenue. Has that contributed a kind of one-time spend up in the first quarter and is the run-rate now much lower or is – it’s still building or is it leased or very important part of the total?

Itai Frieberger

It’s always, always will be a very important part of our casino revenue, I think we’re aware. And what we have seen is, a, there was an initial step but we are seeing that business still continue to grow.

Ivor Jones – Numis

If you’re reporting casino 13%, if you took Italy out of that altogether. I’m not asking you for a very precise number, I just want to know that that number wouldn’t be 2% without Italy?

Brian Mattingley

No, no, no.

Itai Frieberger

Absolutely not. That is not the case at all. We would still see double digit growth without Italy in there.

Ivor Jones – Numis

Okay. And last one Brian, could you just say what you said about Bingo again, because I thought you said something about pleasing to see growth, I didn’t quite reconcile that?

Brian Mattingley

Well, we’re – in quarter-on-quarter, we have seen a 3% growth in the Bingo revenues. And if you look back, I think we have seen over the last five quarters a continuing decline in revenues from 13.6 in Quarter One 2012 down to 11.8 in Q4. For the first time we’ve seen that – so we’ve now gone back, where our $11.9 million nearly $12 million. And we feel that particular problem has been stand – and our marketing campaigns are now working. And we should hopefully see that the Bingo revenue starts to see growth again.

Ivor Jones – Numis

But that’s not the result of particularly expensive CPAs for example or over investment in marketing?

Brian Mattingley

Not over investment in marketing, I think we have – we have invested more in marketing than we have in the past. But it has not been at the expense of excellent returns on investment.

Ivor Jones – Numis

Great. Thank you very much. That’s it from me. Thank you.

Brian Mattingley

Thank you.

Operator

We will now take our next question from Nick Batram from Peel Hunt. Please go ahead.

Nick Batram – Peel Hunt

Good morning guys, couple of questions. First of all, that wasn’t a terrific amount of growth in the net cash during Q1, and I think some of this is – most of this is due to working capital. It’s just simply sort of reverse of the positive impact that we saw the end of last year. And if so, can you quantify that and what we’ve not been looking for, for the next quarter?

And secondly in sports now Blue Square has been disposed of, where are you in terms of finding an alternative supplier?

Aviad Kobrine

Hi, Nick. I’ll take the first question about cash. If you look at the net corporate cash at the year-end, which was £81.5 million take-way customers’ liability for £49.5 million, we’ll get a net result of £32 million. It did release the equivalent number £89 million takeaway £50 million, you end up with corporate cash of £39 million. So that is an addition of £7 million and in addition you need to take into consideration that during the period we paid the year-end employees bonuses to the tune of about £8 million. So, if you add the £7 million and the £8 million you get to about £15 million of cash generation during the period. So, really nothing strange or unusual there.

Brian Mattingley

And also going on to our sports offer, I think we’ve always stated in these calls that we recognized that sports was probably somewhat more for us. We are all aware that Rancheria disposed of Blue Square. We are appraising the market. We have got very close to signing contracts with different provider. That provider has a different agenda to that of Blue Square will enable us to cover all sports, all products in a much different spectrum or countries and territories.

So for example in Spain, we operate with our sports book in Italy. We operate without a sports book because of the constraints of Blue Square that will not be the case. We have not as yet finally signed the contract. That is imminent and soon as we have got confidence on, we will announce that to the market.

Nick Batram – Peel Hunt

Did it suggest that you will be putting a much more weight behind the sports. But, then are you simply get around the sports in the other territories as you do very much in the UK?

Brian Mattingley

We recognized, I think that we are not a big player in sports market. And, we would never ever be able to enjoy a bigger market share all the time that we didn’t have before Array Sports available for us. Now we have, we believe that there are opportunities for us to become a more serious player, albeit that it would be rather foolish of us to state that we would be in the lead with Kohl, Ladbrokes, William Hill, Bet365. But yes, we see that there are marked opportunities and we will take this marked opportunities, and particularly moving our business into territories where the sports market is the market which actually predominantly rules the online business, and porker and casinos are if you like a reference point off of the main market. So, yes we will definitely be looking at trying to get into Spain and Italy.

Nick Batram – Peel Hunt

Thanks. And just one more question, sorry. On B2B, where are we now? Is it the U.S. is the main focus that’s going to carry that B2B business forward? Or are you still pitching for new B2B clients outside of the U.S.?

Brian Mattingley

Yeah. We are still looking at various parties who have expressed of interest in terms of B2B. But, I think as we have stated quite clearly when we articulate our regional strategy, we only want to get embed with people who are similar – and expanding to us in the similar business. I think, to us, who believe where they will invest as well as drive their business in B2B. In terms of the U.S. You’re quite right that’s where significant opportunity exists both for AAPN and also within the business that they’ll like to see – in terms of the business that they’ll like to see on WMS.

Nick Batram – Peel Hunt

Thank you.

Operator

(Operator Instructions) We will take our next question from Michael Campbell from Daniel Stewart & Co. Please go ahead.

Michael Campbell – Daniel Steward & Co

Good morning, James. Just two for me. And, on the B2C Poker side of things were up 17%. Is there any particular markets we’re seeing sort of more growth than others, say China, Italy? And then, the second one is, just on the emerging offering vertical. You haven’t been spread out sports and games and social games?

Itai Frieberger

I can take the first one on Poker. This is Itai. We’ll see growth throughout the year, although you just mentioned Italy. In Italy, we do not offer poker in Italy. We offer only casino. We do consider looking in Italy from a poker perspective. But this is now a market which we operate only a poker – sorry, only casino. When we look at pokers out, we see great performance.

We see a lot of activity there. We see a lot of CRM activity that they’re generating traditional revenue. This is something that we see – we think, in every territory that we’re operating, I think, today the product that we have is very comparing, it is very good. The marketing we have is very strong and the connection between the two work very nicely for us. And when I look at the rest of the industry, I know there are different stats in different areas that you can measure, we are very happy with our performance. We’re very happy with our focus from a liquidity perspective and from a revenue perspective.

Michael Campbell – Daniel Steward & Co

Ok. So, the growth, the growth, 17% growth, is there any particular market that stands out or is that crossed...?

Brian Mattingley

It’s across the board, everything it works in.

Michael Campbell – Daniel Steward & Co

Thank you.

Brian Mattingley

And asking about the emerging offering, we don’t break it down. I’ll you an idea, largely this revenue from social gaming and from sport are very similar inside.

Michael Campbell – Daniel Steward & Co

Okay. Thank you. That’s okay.

Operator

As there are no further questions in the queue that will conclude today’s Q&A session. I would now like to turn the call back to Mr. Mattingley for any additional or closing remarks.

Brian Mattingley

Once again, ladies and gentlemen, thank you very much for giving up the time today to come to the call. As I think you can see from the figures and also from commentary made today, we’re delighted with the performance of the business. The business is fit, well and ready to take home the challenges of the next three quarters and look for future growth. Thank you very much in deed for your time and we’ll speak to you again later. Thank you. Good bye.

Operator

That will conclude today’s conference call. Ladies and gentlemen, thank you for your participation. You may now disconnect.

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