Evoke Pharma, Inc. Price & Performance (EVOK)

I am pleased to say that following a robust start to the year, we are with our annual revenue growth guidance of 5% to 9%. We're likely to be a touch below this in Q1 for a number of reasons. Firstly, short term impact of new customer journeys as part of additional safer gambling measures introduced at the end of Q4 in UK online. But these have been mitigated with the implementation of improved products and customer experience, which will reduce the impact going forward. Secondly, the prior year had elevated marketing and promotional activity, Thirdly, strong margins in Q4 and racing cancellation in January have impacted volumes into Q1, And finally, last year had one extra day, which is worth one percentage point for the quarter. The exciting product pipeline, the improvements in retail, the full implementation of the customer value CVP for William Hill, and our ever improving capabilities around data and personalization are all driving our confidence in being in the 5% to 9% range for the full year. Importantly, though, we continue to evidence the step change in profitability and expect the Q1 adjusted EBITDA to be £18,000,000 to £28,000,000 higher than last year. With LTM EBITDA expected to increase to around $330,000,000 to GBP $340,000,000 at the end of Q1 twenty twenty five.

This should step up again through the year as we deliver our plans with an expected margin of at least 20%, which supports an expected significant step down in leverage this year. I'll now hand back to Per to provide some more detail on our strategic progress last year and the plans for this year. Thanks, Sean. Turning to Slide 14, with a quick reminder of we're going to deliver the value creation plan and our strategy to execute on this. Detailed strategic framework is in the appendix but this slide summarizes what it means across the key areas of what we will do, how we do it, and where we will do it. Over the following slides, we'll bring each of these to life a bit more. But I just want to start by reiterating again This has been a complete reset of the business. We have built a clear and compelling strategy We have built an almost completely new team who are highly motivated and incentivized to deliver this plan. We have a new modus operandi in ways of working across the business. We know where to invest in our core markets, and we know how to invest and how to win customers in these markets.

The strategy is working while there is, of course, lots still to do we will not rest until this business is performing a wage should and can do. But I'm really pleased with the progress we have made here. Turning to Slide 15, And while Sean has traveled a lot to this already, I wanted to start with the evidence of what we are doing. I'm delighted to say that we returned the business to growth during 2024 and our strategy really has been beginning to pay off. With H2 twenty twenty four delivering year on year revenue growth of 8% and adjusted EBITDA growth of 29%. As Sean outlined, the shape and mix of our business is very different today compared to just three years ago. With a significant increase in the quality and sustainability of our revenues. Our core markets enjoy leading market positions, powered by our world class brands. These strong market positions support our plans for 5% to 9% annual revenue growth in the coming years. In terms of profitability, the decisive actions we took last year to improve performance have had a positive impact. In particular, on the cost side, and as you see here, we delivered a significant improvement in margin in the second half to levels this business has not seen for years.

With a significantly higher regulated revenue mix as well. This focus on profitable growth delivered a significant deleveraging in the second half As Sean mentioned on current trading, with the last twelve months EBITDA having improved again they're already bringing leverage down so far in 2025, and we remain laser focused on bringing leverage down quickly and consistently to our new target of under 3.5 times by 2027. Turning to Slide 16, and to focus on the first of our core competitive advantages, operational excellence driven by data insights and automation. This slide has just a few highlights from the developments during the year. We've hired a truly world class AI intelligent automation team who have significant experience in delivering large scale transformation and we are investing in the right tools. We've had some quick wins across customer operations and trading, building on a lot of good automation work that was already happening but there's significantly more to go for in 2025 and beyond. Early evidence of our improved use of data insights can be seen in our more efficient use of bonuses and free bets, They become much better at segmenting our core customers which together with improved products, and customer asset management, has enabled us to drive better personalization and ensure we are spending on the right customers.

This has also helped drive a substantial increase in ARPU being up 6% for the year, and 27% in Q4, although Q4 clearly benefited from sporting results. Turning to Slide 17. Our second competitive advantage being invested into is our winning culture. We rebranded the group as Evoke, a critical step to bring together our business into one company focused on execution of our strategy. We have an almost entirely new executive team bringing in leading talent experience from inside the sector and outside, as well as strengthening the wider leadership community. We have radically restructured and reshaped the operating model. Removing layers and broadening spans of controls. Getting our people across the business close to the customer and speeding up decision making. We make sure we support the colleagues through such a large transformation including significantly expanding the well-being support we offer, including fund sessions, with coaches across a wide range of topics, We still have more to do in this area, but it's pleasing to see the improvements in employee NPS across the second half of the year from plus four to plus 10 as they really embed the new strategy. Turning to Slide 18. Our third competitive advantage we're investing behind is our leading distinct brands.

We have relaunched Mr Green as the most distinctive casino brand in the market. We are repositioning William Hill have just launched our new visual identity in March, ahead of the Sheltonham Festival. And we have begun the detailed work on August now as well, which will launch in 2025. All of this work is designed to develop and deliver a clear and consistent customer value proposition, giving customers a reason to choose us to stay as a loyal customer. We're becoming much more sophisticated in our segmentation We are striving for infinite personalization to become the brand of choice in all our core markets. On the product side, we fundamentally overhauled in entire product and tech function and development pipeline. This is enabling good speed to market with new features, with some particular highlights for the year in the new BetBuilder product and impact sub feature both of which are resonating really well with customers and we are the only operator offering impact sub features in retail. Also, in retail, we began the rollout of our new gaming cabinets with 5,000 installs now complete. And positive early signs with accelerating growth performance and market share gains in Q1. We continue to progress the move towards a single platform with William Hill's trading engine now integrated into the eighty day platform, All MR Greenland markets now migrated onto the eighty day platform and Section eight can be rolled out onto William Hill and Mr Green.

We have loads of exciting products to come in 2025 as well, alongside the continued drive to simplify the UX and improve ease of use. I hope you were all using the William Hill app at Cheltenham If you were, you would have seen our new improved horse racing pages as just another example of this. Turning to Slide 19. Alongside our investments in capabilities and competitive advantages, we've been highly disciplined about investing where we can deliver best returns for our shareholders. Which is our five core markets, The UK, Italy Spain, Romania and Denmark. As you can see on the slide, we have really strong positions here, And in the markets where we are outside the podium positions, are really close to the top three position, other than in Italy there is a bigger gap given the significant consolidation that's happened there the recent years. However, we are a top three online casino operator in Italy. These are all large, attractive and growing with high barriers to entry. Our strong positions here and our clear market focus helps us to deliver our 5% to 9% revenue growth target and builds us a more focused and more profitable business.

Finally, on Slide 20, with our conclusions before taking your questions. 2024 was a full transformation and reset We started to see the impact of this with the business return to growth after two years of declining revenue. As well as improving short term trading trends we have been investing heavily behind our strategy. Focusing our resource in our core markets and investing in our long term capabilities. We are well placed to deliver our commitments with 5% to 9% revenue growth and at least a 20% EBITDA margin in 2025, leading to material deleveraging. Finally, just before we hand over to Q and A, I wanted to take a moment to say that on behalf of the Board and the whole team at Evoke, I would like to thank Warren Lewis Chief Strategy Officer who will leave the business in the summer of twenty twenty five following a smooth transition of responsibilities. All has played a very important role in many aspects of the business over the past four years, including helping to deliver the transformational acquisition of William Hill, assuming the role of interim CFO prior to Sean's arrival. Playing a critical role in developing our value creation plan and deliver the value added M and A such as the acquisition of Winner, and the development of the group's eight eighty eight Africa joint venture.

With the business return to growth and the group's value creation plan in place, Vaughn has decided the time is right to seek new opportunities, and that we wish him every success in the future. With that, I would say thank you for your continued support and we are now ready to take your questions.

Ladies and gentlemen, on your telephone keypad. And first up, we have Estelle Weingrad from JPMorgan. Please go ahead. Your line is open. Hi, good morning. Thanks for taking my questions. The first one, can I ask on the building blocks to get to your 5% to 9% NGR growth this year? And more specifically on how you see this evolve sequentially? So Q1 is low single digit. Q4 comp this year are also quite challenging. So just to understand better the pace. Also, mean, just to come back to to Q1, I mean, some of your peers have flagged a relatively stronger start to the year in The UK. And we understand that Cheltenham was relatively operator friendly overall. So I would like again to understand a bit better what's happening here in for Q1 here for you. Then just the last question would just be to understand a bit better the additional investment triggering your leverage target to be postponed by a year to 2027. Just trying to understand a better what this will consist in. Thank you very much.

Thanks, Estelle. Let me take the second question first. So explanation of Q1, and then I'll go into the building blocks for rest of the year and the additional investments after that. So Q1, we had we had the short term impact of SAFECT gambling measures. As the first impact. So we looking at customer journeys, and we introduced particularly some aspects around customer safety. Over Q4 and Q1 this year. I think the second thing was prior year, as we talked about before, had elevated marketing and bonusing.

Now we've discussed many times before the fact that we didn't didn't particularly achieve the return on investment that we expected on that. But it did drive some revenue growth then. So we were lapping that The first thing we had was bookie friendly results in Q4 'twenty four, so customer wallets were a bit empty coming into Q1. The full thing we had was racing cancellations. So there were a number of racing cancellations. Basically, there wasn't really any racing a couple of weeks in January. And then the last thing was there was one day less in Q1, and we think that that's roughly one percentage point of growth when you look at it on a quarterly basis. It is important at this point to point out that we did have extremely good EBITDA growth. So our EBITDA LTM we saw was up to $330,000,000 to $340,000,000 expect it to be $330,000,000 to $340,000,000 by the end of Q1. So look, just turning to your second question, what are building blocks that we expect to get us back on track for the rest of the year? The first thing to say is we've got improvements in product. I mean, had an exciting product roadmap.

Last year, we delivered BET Builder amongst a number of other product as well. Which will drive growth last year. We've got a great product roadmap going forward with exciting new features coming in. We've got improvements in retail. So we committed get our new gaming machines. Rolled out before the end of Q1. We actually did it before Cheltenham. And that's been driving good performance in retail. Amongst other things actually, which we'll probably talk about later. We've got a full year of William Hill brand CVP So whereas in the past, we've been a bit haphazard in our very unified message going forward, all guided by the CVP, which gaining traction. And then probably the most important of them all, we've got customer lifecycle management capability improving coming in improvements coming in over the course. The course of the year and towards the end of last year. Turning to the investment. Question on why leverage has been moved out by a year. I think there's two major aspects here. And focusing in on 2025 as a good example. We've moved our CapEx up to 100,000,000 to £110,000,000 The things that are driving that, firstly, we're investing in our retail estate.

That includes refurbishment amongst other things. We're investing in AI and the other strategic initiatives. And we're investing in product in the online business. So those things are driving CapEx up.

And then I think there's additionally you know, additional exceptionals We announced that we're aiming at 15,000,000 to $25,000,000 efficiencies over the course of this year. And of course, that's got an additional CTA cost to achieve associated with it.

That additional CapEx and those additional exceptionals pushing out our target to be under 3,500,000,000.0 to the end of twenty twenty seven.

Okay. Thank you very much. And just about the how should we look at the sort of sequential acceleration of the NGR growth in the next quarter? Just sequentially because of this is like the Eurocom, then the Q4 last year was very strong. So I guess Q2 and Q3 should be the February driving the performance.

Yes. I think when you look at the comps, keep Q4 growing at 12% is a is a difficult comp. But having said that, all of the initiatives that I talked about that are driving our confidence in the 5% to 9% growth all accumulate during the year. So customer lifecycle management is a cumulative thing as we bring in new customer lifecycle management initiatives they accumulate over the course of the year. We're not scared of the comp that we've got in Q4. But equally, you're quite right Q2 and Q3 are easier comps.

Great. Thank you very much. Thank you. There appears to be no further questions from the call at the moment. So I'd like to hand over to you, Tilley, to take questions via the webcast. Thank you. So we've got a few questions. From Eivol from Peel Hunt.

First question, is retail growing in Q1 twenty twenty five? As well as taking market share?

So Ivo, thanks for that question. So I'm very encouraged with what I am seeing and what we are seeing when it comes to retail. To start with, we have stepped up the leadership behind the hugely important retail channel for William Hill in The UK. We have a new Managing Director that started in September. And he has all identified some great short term improvements and actually already started the upon them with much more in the pipeline. To be very clear, it's all about becoming competitive again It's absolutely clear that over the years, William Hill, on the high street, has fallen behind both when it comes to gaming machines, but also the in store experience from a customer perspective So we have planned significant further improvements to the customer offering during 2025 be it in terms of increased digitalization improved self-service betting terminals product experience, additional TV content as well as, as was alluded to by Sean, very selective, no store refurbishment program Important is also to highlight the new gaming machines that has been completed in terms of the rollout by before Cheltenham, 5,000 new new fantastic machines has been rolled out before Cheltenham. And we do see early very early, very positive customer response to the new stepped up proposition.

And we see that in terms of now improved in terms of revenue, and we are also taking share now as we speak in the gaming segment in retail. So I think it's fair to say that we are resetting, the retail channel. I'm very proud of what we are doing, and very important part of our omnichannel approach.

Thanks.

Next question from Ivor is net debt EBITDA will not be at 3.5 times at the end of f y twenty six. What will it be, and how big a shift is this?

So thanks, Eva. So just a reminder of where we've been. At half one 'twenty four, we were at 6.7 times. At the end of 'twenty four, we're at 5.7 times. With the expected EBITDA LTM that I saw that I mentioned just now to Q1, I'm expecting Q1 to be 5.4 or even 5.3 times. So we're on a very strong delevering trajectory. I think I also said in the presentation that I expect leverage to be under 5% by the end of twenty twenty five. And we've also said under 3.5 by the end of twenty twenty seven. And you could expect, either, for it to be a reasonably straight line between that data point at the end of 'twenty five and the data point at the end of 'twenty seven.

Thank you.

Ivo's next question is you have told us the revenue from noncore What is the contribution as a proportion of the total?

So thanks again, Nigel. So we don't we haven't sent out any information on this this year, but we have done in the past. And it would be fair to say that contribution contribution percentage from noncore largely reflects revenue percentage from noncore noncore. So it would be a rule of thumb to just follow the revenue percentage from non core.

Thanks. Last one from Evoke is [indiscernible] under accrual of f y 23 gaming duty benefit reported FY '24 results?

Well, no. So the point here is that we we had a good look at [indiscernible] We realized that we'd under accrued. We put a prior year adjustment in for the prior year. Of course, having realized that, we made sure that the both the accounting and the cash for 'twenty four was correct. Thank you. Next question comes from Richard from Deutsche Numis. Current trading. Additional safer gambling measures introduced. Does that include £5 maximum online stake across your brands is that to come later in the year? So So the additional safer gambling measures that we introduced in Q4 and through Q1 just basically part of the way that we do business. We're continually looking at our player safety, and we look at it through the CL, the customer life cycle management lens. So that's what I was referring to there. Doesn't include the change to slot limits, which we're expecting in May. But it would be fair to say that we have some time ago adopted the limits that were expected to be introduced in May. That is us, really a non event. We don't really expect any impact on the business from that.

And just to add in terms of when it comes to the additional safer gaming measures that we introduced, as Sean said, it is an integral part of how we are designing, executing upon, as we say, cycle management, I. E, the customer journey. And as we are becoming more sophisticated, for example, when we're looking at the market, of harms that are giving us indication of the potential harm related to gaming. We are obviously becoming much more personalized in a way we are interacting with each of the customers along the journey. And this is an example of that, that when we look at the Marks of Harms, how we're now becoming more sophisticated how to act on the behavior metrics that are landing when we look at the data. And then how we're then introducing those interactions with the customers across the journey. It's fair to say that we address that and have done that on a continuous basis. Looking at the product roadmap we had, we have a few more coming in, in Q4. We clearly have learned in terms of some of the friction we identified based on customer feedback, But to be very clear, those feedback from the customer that are highly valuable we are addressing as we speak, and that is also what Sean was alluding to in terms of the Q2 and onwards.

The product features, the channel features coming in, is addressing how to ensure further customer non friction experience when it comes to the journeys.

Thank you. Now the question from Richard is, what do you expect sports net revenue margin in first quarter twenty five versus first quarter twenty four?

Well, so there is a an inbuilt slide increase from year to year, which comes from both customer mix and product mix. But other than that ongoing trend, we haven't made any other public announcements about that.

And if I can just add to that, I mean, because we are addressing some underlying fundamentals when it comes to the composition of the the expected margin over time It was in terms of the balancing of the customer mix. That's number one. The way we are we have stepped up in 2024, we'll continue to do so when it comes to a great product offering towards multiples. So for example, now the better builder, as an example. The way we promote those great products, which also integrating higher margin over time. And so and I think finally, but not least, is that we have stepped up the leadership when it comes to the way we trade, the way we manage the sports book. So by further improving the sports book trading and risk management capabilities as we're done with new leadership, of course, foresee to have a continued good effect on the way we are managing the book. Thank you.

And then last one from Richard is is there an update on other potential asset sales or exit of optimized markets, e g SIS?

So one of the features of the 24 cash flow was that we delayed the sale of the asset in The U. S. So we're expecting that to happen sometime over the course of 2025. We always look at our optimized assets for potential value added sales. But we're certainly not looking actively looking for buyers of assets at the moment. It's definitely opportunistic, and it needs to be a fabulous return for us.

Thank you.

Next question comes from James Wecroft from Jefferies. And he's asking it looks like you were back into market share gains in UK online gaming during q four. Please, can you remind us of the product improvements you've made to sports to accelerate growth through 2025.

Yes. Thanks, James. So the key ones that we talked about through through last year were both PetBuilder which was a product which we had on our [indiscernible] Business, but we'd called it something else and actually renamed it that builder and we actually gave it a much better customer experience. And then the other was ImpactSub. Which means that if you've got a bet builder type bet that your bet builder type bet continues if your player is substituted.

So and those two went down extremely well with that. Customers and also continue to drive revenue in the sports book.

Yes. And if you just can add to that. I mean, we are double down when it comes to the front end. And when it comes to the customer experience, we look at in terms of racing and football. They have new pages. In terms of racing, for example, I do hope, as I said in the presentation, that you use the William Hill app new grade pages when it comes to racing. And the feedback from the customer has been extremely positive. So that is just a few examples of what we have done, but we have a very exciting pipeline. Pipeline for 25 to go.

Thank you. Got a follow-up question from Ivor. Sean said that net debt target was being out because of exceptionals to reduce costs and to invest in retail refurbishments, and AI in f y '25. Why do these not pay off in f y '26? And if they only pay off in FY '27, why is the target not lower than 3.5 times in f y '27?

So you're right, Ivy. That's why I said we've got the addition investment in exceptionals, but we've also got the investment in CapEx, which goes across retail and also the online business. They do have good payoff, but we're expecting to continue to invest in those through fiscal twenty twenty six as well. And when you do the math that comes '27, 3.5 times. I can go through the detail with you offline.

Thank you. Next question comes from Yulia from Algebras. You had a stronger h two performance. Do you believe this is sustainable growth? Or a result of sporting event tailwinds? If you believe this to be sustainable, can you outline why?

Yeah. Sure. So thanks thanks for the question. So we were quite clear or we have been quite clear in announcements previously that we did see good sporting results in Q4. But you'll also remember that we had the opposite effect in Q3, so particularly September. We had some pretty dreadful results, and that had quite fundamental impact on the business. If you look at those in the round, in the whole for the half, they are largely neutral. So I would argue reasonably strongly that sporting results didn't impact our half two in the on the aggregate really at all. And therefore, yes, I think that the growth that we've driven in half two is sustainable. It is it's product led as well, which is absolutely critical.

And if I just may add to that, if we look at the transformation that we are undergoing and with two lenses, I would say. The first one is the short term trading turnaround that I truly believe that you can see now that we are back to the three quarters of consecutive growth. So strategy in the short term is indeed working. But also when we look at is this profitable growth sustainable, want to say that we are absolutely adamant, obsessed about in the current trading. We call it in the business as usual. But of course then, as mentioned, we are investing into incremental value levers to drive incremental profitable growth. And I just want to state that again, that if you look at the way and what we invest into the customer value proposition across the brands, way we are now stepping up the customer lifecycle management, becoming much more automated, much more insights driven, the way we are actually going to strengthen the leadership across the board, across all jurisdictions, the way we are stepping up now, the product and tech foundation, both online and retail, as well as how we're introducing now AI across the board Question is, again, is this the sustainable profit growth?

Absolutely, it is. And that is why we're absolutely adamant to deliver the value creation plan and guidance we have.

Thank you. Another one from Julia. Can you comment on the trend of your declining sportsbook stakes and increasing sportsbook margins?

Well, so once again, if we look at the stakes and the margin again, so we have a fundamental shift again as we said, when it comes to the customer mix we go for core high value, so value before volume. So we have the customer mix balancing that is more sustainable now than before, that course, will have an impact on the stakes and it has an impact on stake. But once again, when we look at the sports book margin, and I mentioned that before, some important fundamentals that we are introducing. Now on the back of a more sustainable customer mix, we have those fantastic multiple focus, multiple led product features, so like PathBuilder. We have promotions now that are focused again on those, I will call it, multiple focus led sportsbook promotions. And the way we are then also addressing the customized second in the combination of the product offering, customer mix of course, is helping us to build further fundamentals in terms of the predictability of the sportsbook margin going forward. And finally, not least, need to reiterate that again. I talked about the improved capability, the leadership and also the tool set that we are investing behind.

The way we are managing the book, the trading. We have new leadership. The way we are dealing with the sports book management, including risk management, is a step up from where we have been before. So that will further inject further support to the sportsbook model going forward. Thank you.

I believe we've got a question on the conference call. So I'll hand back over quickly.

Thank you, Tilley. Yes, we have a question from Richard. Stuber from Deutsche Numis. Please go ahead. Your line is open. Sorry, my question has been answered on the conference. Thank you.

Thank you. So back to you, Tilly, for further webcast questions.

Brilliant. Thank you, Saskia. Question comes from Nigel and he's asking, you mentioned shareholder value. However, debt has increased. Since you joined the SP, it's around 30% down. When will us long standing shareholders actually see value in the SP maybe a return to dividends?

So thanks for that question. So 24, you're quite right. We had a cash outflow That was very much driven by the cost of the transformation of the business. You can see that evidence through the exceptional, which you can see on the on the cash flow slide. Think looking forward to 2025 and perhaps Per, after I talked 'twenty five can talk about the longer term value creation that we're we're planning, but '25 from a financial perspective we're absolutely driving strong EBITDA growth. And we do expect do expect cash to be cash generative 20,000,000 to $30,000,000 without notwithstanding gains on working capital, And of course, if you're growing the top line, you do expect to see gains on working capital. So EBITDA growth and cash generation in 2025 will create shareholder value. I mean just to add, I mean, being a shareholder myself, and absolutely focused on together with the team to execute on the value creation plan. Now we are living and breathing value creation plan every day, which we should. And once again, the obsession we have about driving profitable revenue growth, is that every day, the way to ensure that we continue the margin expansion in terms of underlying profitability.

We also over there. And I think a testament for that should be the Q1 step change in terms of year on year underlying profitability growth. And of course, a long with that, the deleveraging that we have been talking about. I can just say that in the rest assured that being the CEO of this company is a privilege, of course, to have opportunity to be part of this value creation journey. Also as a shareholder we are absolutely adamant to deliver substantial shareholder value over the value creation plan period.

Thank you.

That concludes the webcast questions. So I'll hand over to you Per for any closing remarks.

Thanks so much. And I just want to take the opportunity to thank you everyone for your questions. And just to recap again, 2024 was indeed a transformational year. As we launched our strategy and evaluation plan And we are making great progress against this. We've been communicating today. I'm truly excited what we're doing at this point in time and also what is going to come in 2025. And I can't wait to keep you up to date on the progress throughout the year. Once again, I would like to thank you all for your continued interest in our business, and I wish you all a great day.

Thank you so much.