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RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2016

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Page 1: 30 JUNE 2016 - Investis Digitalhtml.investis.com/8/888Holdings/pdf/2016-half-year...RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2016 2 AGENDA Itai Frieberger | Our H1 2016 Aviad Kobrine

RESULTS FOR THE SIX MONTHS ENDED

30 JUNE 2016

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2

AGENDA

Itai Frieberger | Our H1 2016

Aviad Kobrine | Financial Review

Itai Frieberger | Operational Review & Summary

Q&A

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3

Exceptional growth in casino and sport

Regulated markets represent a majority of revenues and growing faster than .com

Euro 2016 was the first 888sport main event – performed very well

Business is well diversified across major gaming verticals, markets and platforms

H1 2016 marks seven half years of LFL growth

OUR H1 2016

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AVIAD KOBRINE, CFO | FINANCIAL REVIEW

4

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5

2016 H1 HIGHLIGHTS

Revenue H1 2016, up 19%

B2C Revenue up 21%

Casino and Sport leads growth:

Casino Revenue up 31%

Sport Revenue up 63%

Five consecutive quarters of revenue growth with record performances in Q1 and Q2 2016

Revenue from regulated markets – fastest growing segment, up 29%

Regulated markets represent 63% of group Revenue, in-line with strategy

Adjusted EBITDA1

up 8% to $44m (H1 2015: $41m), up 16% at constant currency2

Newly introduced gaming duties

Profit after tax up 40% to $22m (H1 2015: $15.7m)

Basic EPS1

at 6.1c (H1 2015: 4.4c), up 39%

Interim Dividend of 3.8c per share (H1 2015: 3.5c)

1 As defined in H1 2016 interim report.

2 See footnote 2 to the financial summary of H1 2016 interim report.

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6

PROFIT AND LOSS ACCOUNT 1

1 Totals in this presentation may not sum due to rounding. 2 Excluding depreciation of $3.9 million (H1 2015: $4.5 million) and amortisation of $5.8 million (H1 2015: $4.9 million). 3 Excludes retroactive duties and associated charges of $2.7m (H1 2015: $3.5m)4 Excluding share benefit charges of $3.2 million (H1 2015: $2.4 million) 5 As defined in H1 2016 Interim report

$m H1 2016 H1 2015 % Change

Revenue 262.0 220.0 19%

Operating expenses2 67.5 60.8

Gaming duties3 30.2 21.8

Research and development expenses 15.8 16.4

Selling and marketing expenses 90.3 67.1

Administrative expenses4

14.1 13.0

Adjusted EBITDA3,4

44.1 40.9 8%

Depreciation and Amortisation 9.7 9.4

Share benefit charges, finance and other 3.9 1.0

Exceptional acquisition costs & retroactive gaming duty 2.7 10.5

Profit Before Tax 27.8 20.0 39%

Taxation 5.8 4.3

Profit After Tax 22.0 15.7 40%

Basic EPS5

6.1 ¢ 4.4 ¢ 39%

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100

120

140

160

180

200

220

240

260

280

H1 09 H1 10 H1 11 H1 12 H1 13 H1 14 H1 15 H1 16

118

130

154

186

200

225 220

262

GROUP REVENUE

7

Revenue H1 2009 – H1 2016 ($m)

Revenue up 19% to $262m (H1 2015: $220m), driven by Casino, Sport and regulated markets

Impressive 14% half yearly CAGR since H1 2009

Like for like* growth at 22%, adjusting for lower Sterling**

$m

*Life-for-like: Adjusting H1 2016 figures to H1 2015 average exchange rates per month

**Sterling dropped as of mid-February when referendum was announced in UK, intensified further as of June 23rd when the decision to exit the EU was set

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GROUP REVENUE

8

Quarterly Revenue Q1, Q2 ($m)

Outstanding quarterly increases despite adverse currency headwind

Q1 ($m) Q2 ($m)

45

55

65

75

85

95

105

115

125

135

Q210 Q211 Q212 Q213 Q214 Q215 Q216

61

79

92

97

111 112

132

45

55

65

75

85

95

105

115

125

135

Q110 Q111 Q112 Q113 Q114 Q115 Q116

69 75

94

103 114

108

130

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49% 51%44% 45%

42% 40% 37%

51% 49%56% 55% 58% 60% 63%

15%

25%

35%

45%

55%

65%

75%

85%

95%

H1 2013 H2 2013 H1 2014 H2 2014 H1 2015 H2 2015 H1 2016

Non-Regulated Regulated

Regulated markets* represents 63% of Revenue, consistently increasing over time per our strategy to

expand in regulated markets

UK and Europe (excl. UK) represent 87% of Revenue

UK up 18% and Europe (excl. UK) up 32%

GEOGRAPHICAL SEGMENTATION

9

Geographic Segmentation H1 2013 - H1 2016

H1 2015

H1 2016

$m

* UK, Spain, Italy, USA (non Social), Denmark, Romania and Ireland Sport

47%37%

11% 5%

UK Europe

(ex UK)

Americas ROW

46%41%

9% 4%

UK Europe

(ex UK)

Americas ROW

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80

100

120

140

160

180

200

220

240

H1 09 H1 10 H1 11 H1 12 H1 13 H1 14 H1 15 H1 16

89 106

125

159

171

191

190

230

Revenue B2C H1 2009 – H1 2016 ($m)

Revenue up 21% to $230m (H1 2015: $190m)

Strong performance led yet again by Casino and Sport

Regulated markets continue strong growth

14.5% half yearly CAGR since H1 2009

REVENUE B2C

10

$m

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40

60

80

100

120

140

H1 09 H1 10 H1 11 H1 12 H1 13 H1 14 H1 15 H1 16

56 59

69

83

94

108 105

137

Revenue Casino B2C H1 2009 – H1 2016 ($m)

Casino up 31% to $137m (H1 2015: $105m)

Growth is driven by enhanced offering, multi platform and outstanding CRM

Further contributors to the success included 777 brand launch, continued momentum of Slots in Spain and

additional new volume in Denmark

REVENUE CASINO B2C

11

$m

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Revenue Sport B2C H1 2009 – H1 2016 ($m)

Stellar Sport progress, already 10% of Group Revenue, up 63% to $25m (H1 2015: $15m)

Revenue increase is a result of our strategic focus and marketing investment

New customer recruitment up 82%

REVENUE SPORT B2C

12

$m

0

5

10

15

20

25

H1 09 H1 10 H1 11 H1 12 H1 13 H1 14 H1 15 H1 16

2 3 3 3 4

8

15

25

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Revenue Poker B2C H1 2016 vs. H1 2015 ($m)

No. 2 position in global poker rankings*, outperformed market in relative liquidity

Increased focus on Poker schedule optimisations, cross-selling to other products and exciting big tournaments

Poker Revenue down only 6% to $42m (H1 2015: $45m) despite challenging market and adverse currency

movement

REVENUE POKER B2C

13

* Source Pokerscout.com July 2016

0

5

10

15

20

25

30

35

40

45

50

H1 15 H1 16

45

42

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Revenue Bingo B2C H1 2016 vs. H1 2015 ($m)

Revenue up 2% to $23m (H1 2015: $23m)

Optimisation efforts and further instant games content supported Bingo progress

Adjusting for currency we see Bingo turnaround continues with H1 2016 9% higher than parallel period

REVENUE BINGO B2C

14

$m

10

12

14

16

18

20

22

24

H1 15 H1 16

22.6

23.1

1.5

FX24.6

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Increased marketing supports revenue growth, with 22% new player increase, and 19% Revenue increase

Marketing increase is driven mostly by Sport strategic investment and Casino growth

Investment is expected to drive further volume throughout the rest of the year

MARKETING COST

15

Marketing Cost H1 2016 vs. H1 2015

Marketing Costs Marketing Costs % of Revenue

$m %

-

10

20

30

40

50

60

70

80

90

100

H1 2015 H1 2016

67

90

0.0%

10.0%

20.0%

30.0%

40.0%

H1 2015 H1 2016

30.5%

34.4%

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0%

20%

40%

60%

80%

H1 2015 H1 2016

27.6% 25.7%

7.4% 6.0%

30.5% 34.4%

5.9% 5.4%

9.9% 11.5%Gaming duties

Admin. Expenses

S&M expenses

R&D

Operating expenses

COST STRUCTURE

16

Cost as a % of Total Revenue H1 2016 vs. H1 2015 *

* Excluding share benefit charges, depreciation and amortisation, retroactive gaming duties and exceptional M&A costs

83.2%

Cost ratio to Revenue at 83% (H1 2015: 81%)

Lower operational cost

Increased ratio only in growth generating components (Marketing and Gaming duties)

81.4%

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ADJUSTED EBITDA AND MARGIN Adjusted EBITDA up 8% to $44m (H1 2015: $41m)

Newly introduced gaming duties adverse impact

Adjusted EBITDA up 16% at constant currency*, with margin at constant FX 17.6%

Adjusted EBITDA H1 2016 vs. H1 2015

Adjusted EBITDA Adjusted EBITDA margin$m %

17

25

30

35

40

45

H1 2015 H1 2016

41

44

3

0%

5%

10%

15%

20%

25%

H1 2015 H1 2016

18.6% 16.8%

* See footnote 2 to the financial summary of H1 2016 interim report.

.

.

47

17.6%

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High dividend payout ratio continues

3.8c per share interim divided

52% increase compared to H1 2012

DIVIDEND

18

DIVIDEND PER SHARE ($c) H1 2012 – H1 2016

$c

2.5

3.0

3.53.5

3.820%

40%40%

52%

0%

10%

20%

30%

40%

50%

2.0

2.2

2.4

2.6

2.8

3.0

3.2

3.4

3.6

3.8

4.0

H112 H113 H114 H115 H116

Dividend per Share % change over H1 12

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BALANCE SHEET

19

$m 30-Jun-16 30-Jun-15

Non-current assets

Goodwill and other Intangible assets 159.3 159.1

Property, plant and equipment 8.9 13.7

Other non-current assets 2.0 2.2

Investments 1.5 1.7

171.7 176.7

Current assets

Cash and cash equivalents 143.0 141.6

Trade and other receivables 38.2 37.2

Total Assets 352.9 355.5

Equity

Share capital and share premium 6.3 4.9

Retained earnings and reserves 139.2 155.4

Total equity attributable to equity holders 145.5 160.3

Liabilities

Current liabilities

Trade and other payables 126.8 116.6

Customer deposits 78.6 76.6

Non-current liabilities

Deffered tax liabilities2.0 2.0

Total equity and liabilities 352.9 355.5

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20

CASH FLOW STATEMENT

$m Period Ended 30 June H1 2016 H1 2015

Cash flows from operating activities

Profit before income tax 27.8 20.0

Share benefit charges 3.2 2.4

Depreciation and amortisation 9.7 9.4

Change in current assets and liabilities (17.6) 5.7

Other non cash adjustments (0.3) (2.7)

Cash generated from operations 22.8 34.8

Income tax paid (7.3) (4.1)

Net cash generated from operating activities 15.5 30.7

Purchase of property, plant and equipment (1.6) (2.8)

Internally generated intangible assets (5.9) (4.7)

Acquisition of intangible assets (1.9) (2.0)

Investment 0.3 (1.3)

Net cash used in Investing Activities (9.1) (10.8)

Issue of shares 0.9 0.4

Dividends paid (43.0) (41.0)

Net decrease in cash and cash equivalents (35.7) (20.7)

Cash and cash equivalents - beginning of period 178.6 163.1

Effects of currency translation 0.1 (0.8)

Cash and cash equivalents - end of period 143.0 141.6

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ITAI FRIEBERGER, CEO | OPERATIONAL REVIEW

21

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$267MH1 2016*

22

B2C | NEW DEPOSITORS

CASINO | BET

TOTAL | GROUP REVENUE

$200MH1 2013

CASINO | ACTIVES

SPORT | BETS

145%FEB 2016

100%JAN 2015

117%AUG 2015

137%DEC 2015

191%JUN 2016

100%JAN 2015

124%AUG 2015

131%NOV 2015

138%JUN 2016

SPAIN | DEPOSIT

$225MH1 2014

$225MH1 2015*

100%JUL 2015

125%OCT 2015

148%APR 2016

100%JAN 2015

139%DEC 2015

145%FEB 2016

163%JUN 2016

* Revenue before deduction of VAT

ITALY | NEW DEPOSITORS

100%JAN 2015

107%DEC 2015

182%FEB 2016

259%JUN 2016

113%AUG 2015

128%NOV 2015

136%JUN 2016

100%JAN 2015

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THE ONLINE BUSINESS CYCLE

23

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ACQUISITION Constant traffic optimisation continues, only profitable acquisition channels pursued

First Time Depositors H1 2014 – H1 2016

24

* H1 14 as base

.

.

40%

60%

80%

100%

120%

140%

H1 14 H1 15 H1 16

100%

122%

148%

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50%

70%

90%

110%

130%

150%

170%

190%

210%

230%

250%

1 2 3 4 5 6 7 8 9 1011

12 1 2 3 4 5 6 7 8 9 1011

12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 910 11 12

1 2 3 4 5 6 7 8 910 11 12

1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6

2010 2011 2012 2013 2014 2015 2016

Based on Jan 2010

FX effect

FUELING FUTURE GROWTH

B2C DEPOSIT TREND

* FX takes Jan 2015 – June 2016 Deposits at the average 2014 rates

25

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ACTIVES Increased activity supports growth and retention efforts

Actives H1 2014 - H1 2016

26

* H1 14 as base

.

.

40%

50%

60%

70%

80%

90%

100%

110%

120%

130%

H1 14 H1 15 H1 16

100%

111%

121%

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100

120

140

160

180

200

220

240

260

280

H1 09 H1 10 H1 11 H1 12 H1 13 H1 14 H1 15 H1 16

118

130

154

186

200

225 220

262

REVENUE TREND

27

Revenue H1 2009 – H1 2016 ($m)

$m

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CASINO

28

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CASINO CONTENT

29

52%

59%

48%

41%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

H1 2015 H1 2016

In-house 3rd party

In House developed content continue to dominate our VS arena

Unique internally developed content continues to dominate our growing Casino platform

Offered alongside well known content, thus enabling a unique and rich experience that is constantly updated

Data presented is per Gross Profit ratios

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UK Mobile Share B2C H2 2012 – H1 2016

MOBILE SHARE

30

UK Mobile Revenue Share UK Mobile Deposit Share

0%

10%

20%

30%

40%

50%

H2'12 H1'13 H2'13 H1'14 H2'14 H1'15 H2'15 H1'16

5%11%

19%

29%

37%

43%

50%

56%

0%

10%

20%

30%

40%

50%

H2'12 H1'13 H2'13 H1'14 H2'14 H1'15 H2'15 H1'16

4%

11%

20%

33%

40%

44%

50%

55%

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POKER REINVENTED

31

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POKER

32

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33

UK

ROMANIA

DENMARK

IRELAND

SPAIN

GIBRALTAR

ITALY

REGULATED MARKETS

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888.ES GGR TREND (Euro Based)

34

Launch of 888.es Spain Sport Launch Spain Slots Launch

0%

50%

100%

150%

200%

250%

300%

350%

400%

1 2 3 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6

2012 2013 2014 2015 2016

Bets

Poker Bet EUR Casino Bet EUR Sport Bet EUR

Revenue growth fueled by increased offerings and content

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888.It BET TREND (Euro Based)

35

0%

50%

100%

150%

200%

250%

1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6

2014 2015 2016Casino Bet EUR Sport Bet EUR

Sport launch driving additional volume

Italy Mobile Launch

Italy Sport Launch

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SPORT

36

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SPORT BETS

Sport bets continue to rise

37

Based on average daily Bets

50%

150%

250%

350%

450%

550%

650%

750%

850%

950%

1050%

1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6

2012 2013 2014 2015 2016

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EURO 2016

38

Euro 2016 football event drives uplift

Bets Margin Revenue Football Bets perEvent

23%

55%

91%100.2%

FTDs 24%

Actives 21%

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INNOVATION

39

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Bingo Bet Trend GBP 2012 – 2016

BINGO PLATFORM

40

1 2 3 4 5 6 7 8 9 101112 1 2 3 4 5 6 7 8 9 101112 1 2 3 4 5 6 7 8 9 101112 1 2 3 4 5 6 7 8 9 101112 1 2 3 4 5 6

2012 2013 2014 2015 2016

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CASINO FLEX

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-

2

4

6

8

10

12

14

16

18

20

1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6

2014 2015 2016

-

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

Daily Deposits (GBP)

# of brands

41

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Positive trends across a healthy business

Organic growth remains our #1 priority

Continued investment in platform and content is paying off (again)

Existing regulation adaptations alongside new regulated markets

M&A represents incremental value opportunity

Strong current trading, remain confident of meeting expectations

SUMMARY

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Q&A

43