Company Presentation Disclaimers This document is confidential and - - PowerPoint PPT Presentation

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Company Presentation Disclaimers This document is confidential and - - PowerPoint PPT Presentation

Company Presentation Disclaimers This document is confidential and is intended only for the use of the person(s) to whom it is presented. It may not be reproduced (in whole or in part) nor may its contents be divulged to any other person. No


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Company Presentation

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SLIDE 2

Disclaimers

This document is confidential and is intended only for the use of the person(s) to whom it is presented. It may not be reproduced (in whole or in part) nor may its contents be divulged to any other person. No part of this document may be retained or taken away following the presentation to which this document relates. This document does not constitute an offer to sell or a solicitation of an offer to buy any securities. It is an outline of matters for discussion only. No part of this presentation shall form the basis of or be relied upon in connection with any contract or commitment whatsoever. Specifically, this document does not constitute a “prospectus” within the meaning of the U.S. Securities Act of 1933, as amended. 500.com Limited (the “Company”) has filed a registration statement (including a prospectus) (File No. 333-191844) with the U.S. Securities and Exchange Commission (the “SEC”) for the securities to be

  • ffered in the United States, but the registration statement has not yet become effective. This presentation does not contain all relevant information relating to the Company or its securities, particularly with

respect to the risks and special considerations involved with an investment in the securities of the Company, and is qualified in its entirety by reference to the detailed information appearing in the prospectus included in the registration statement filed by the Company with the SEC. Any offering of securities to be made in the United States and any decision to purchase securities of the Company in the United States or anywhere else should be made solely on the basis of the information contained in the prospectus included in the registration statement filed by the Company with the SEC. Before making an investment decision, you should read the prospectus in that registration statement and other documents that the Company has filed with the SEC for more complete information about the Company and its securities. You may access these documents for free by visiting EDGAR on the SEC website at: http://www.sec.gov. The issuer has filed a registration statement (including a prospectus) with the SEC for the offering to which this communication relates. Before you invest, you should read the prospectus in that registration statement and other documents the issuer has filed with the SEC for more complete information about the issuer and this offering. You may get these documents for free by visiting EDGAR on the SEC Web site at www.sec.gov. Alternatively, the issuer, any underwriter or any dealer participating in the offering will arrange to send you the prospectus if you request it by calling toll-free 1-800-503-4611. You may not rely upon this document in evaluating the merits of participating in any transaction referred to herein. This document contains selected information and does not purport to be all-inclusive or to contain all of the information that may be relevant to your participation in any such transaction. This document does not constitute and should not be interpreted as either a recommendation or advice, including investment, financial, legal, tax or accounting advice. By attending this presentation, you acknowledge that you will be solely responsible for your own assessment of the merits of participating in any such transaction and that you will conduct your own analysis and be solely responsible for forming your own view of the potential future performance of the Company. Future results are impossible to predict. Certain statements in this presentation, and other statements that the Company may make, may contain forward-looking statements with respect to the Company’s future financial or business performance, or opinions, expectations, beliefs, intentions, estimates or strategies regarding the future, which may not be realized. These statements may be identified by the use of words like “anticipate,” “believe,” “estimate,” “expect,” “intend,” “may,” “plan,” “will,” “should,” “seek,” and similar expressions. The Company cautions that forward-looking statements reflect views and assumptions as of the date of this document and are subject to numerous risks and uncertainties, many of which are beyond the Company’s control and subject to change over time. Actual results could differ materially from those anticipated in forward-looking statements and future results could differ materially from historical performance. Given these risks, uncertainties, assumptions and other factors, you are cautioned not to place undue reliance on these forward-looking statements. The Company and its affiliates, advisers, representatives and underwriters have no obligation to and do not undertake to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. The following presentation has been prepared by the Company and has not been independently verified. No representation, warranty or undertaking, expressed or implied, is made as to, and no reliance should be placed on, the accuracy, fairness, completeness, correctness or reasonableness of the information, sources or opinions presented or contained in this document. Neither the Company nor any of its affiliates, advisers, representatives or underwriters, or any of their respective directors, officers, employees or agents, accepts any responsibility or liability whatsoever (in negligence or otherwise) for any damage or loss howsoever arising from any information presented or contained in this document, any omission, inadequacy or inaccuracy in this document, or otherwise arising in connection with this

  • presentation. The information presented or contained in this document is subject to change without notice and its accuracy is not guaranteed.

This presentation speaks as of the date hereof. Neither the delivery of this presentation nor any further discussions of the Company or any of its affiliates, shareholders, directors, employees, agents or advisors with any of the recipients of this document shall, under any circumstances, create any implication that the affairs of the Company have not changed since that date. 1

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SLIDE 3

Company Overview

Peer Comparisons Industry Overview

Key Competitive Strength

Financials

Growth Strategies

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SLIDE 4

Our business model

2

Highly Efficient Business Model

Prize Collection Service fee Purchase

100% purchase price 100% of prize Service fee 100% purchase price 100% of prize

Operation 100% online 

No logistics / No inventory  No principal risk  No counterparty risk

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SLIDE 5

Lottery games offered on our platform

* purchase amount in 1H2014 Source: Company 3

Bet on the outcome or scores of one

  • r a combination of sports matches

Basketball Soccer

Choose N numbers out of M numbers, results announced every 10 or 15 minutes Select N numbers out

  • f M numbers, results

announced daily or every 3 days

Lotto Games High Frequency Games

Sports Match Games Number Based Games

87% of total purchase amount* 13% of total purchase amount* … …

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SLIDE 6

Peer Comparisons

Company Overview Key Competitive Strength

Growth Strategies

Financials

Industry Overview

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SLIDE 7

China Lottery Market Overview

Regulatory framework and value chain

4 Source: iResearch

100

Ministry of Finance (Regulator)

50 – 69

Prize pool for lottery buyers

18 – 35

Fund for public interests Administration Cost Sales Commission Promotion Cost Ministry of Civil Affairs (Issuer) General Administration of Sports (Issuer) China Sports Lottery Administration Center China Welfare Lottery Issuance and Administration Center Lotto Instant Sports Match Instant Lotto

13 – 15

Distribution Cost Social Welfare Lottery Sports Lottery Provincial welfare lottery issuance and administration centers Provincial sports lottery administration centers

Regulatory Framework Lottery Revenue Sharing Scheme

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SLIDE 8

27.2 50.7 73.6 2010 2013 2015E

China’s Total Lottery Market China's Sports Lottery Market China's Online Sports Lottery Market

5

0.4 1.5 3.2 2010 2013E 2015E

(US$ bn) (US$ bn) (US$ bn)

Fast growing market

Source: iResearch

3.3 % 6.9 % 10.1% Penetration %

11.4 21.9 31.3 2010 2013 2015E

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SLIDE 9

176 ... 513 811 837 869 1,064 2,377 3,517 4,324 5,458 5,646 2001 … 2005 2006 2007 2008 2009 2010 2011 2012 2013 7M2014 Sports betting market size

6

Huge market potentials Growth trend resilient to economic cycles

2001 2005 2009 2014

… … …

  • Oct 2001, launch of soccer

lottery, payout ratio at 60%

  • Sep 2005, soccer lottery

payout ratio at 65%

  • Sep 2005, launch of Beijing

Single Match Lottery

  • May 2009, launch of Soccer

Match Lottery, payout ratio at 69%

  • Nov 2009, launch of

Basketball Match Lottery

  • Oct 2014, launch of Single

Match Fixed Odds, payout ratio at 73%

“It is estimated the illegal betting market size to be approximately RMB600 billion every year…” 2012, Sina News “The total amount that is illegally wagered in China is estimated to be as high as US$93 billion in 2012” 2013, Global Betting and Gaming Consultants “It is estimated the ratio of legal gambling and illegal gambling is at 1:10, then China’s illegal gambling amount is at hundreds of billions

  • f dollars…”

2014, Xinhua news

(US$ millions)

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SLIDE 10

Company Overview

Industry Overview Financials

Peer Comparisons

Growth Strategies

Key Competitive Strength

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SLIDE 11

Leading online sports lottery platform in China

Market leader with government approval

7

* Online sports lottery only, in terms of purchase amount in the first half of 2013 Source: iResearch

1H 2013

The only MOF-approved privately owned online lottery sales service provider with an operational track record

Largest Market Share in China*

MOF- Approved Online Lottery Service Provider

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SLIDE 12

How we obtain users…

8

Direct generated sales channel*

91% of total purchase amount**

3rd party sales channel

9% of total purchase amount* World Cup Betting Contest

67% participants are new users 1.46 million participants in 25 matches Average ARPU is 3.9x of overall ARPU of the same period and accounts for 60.3% of overall purchase amount

Brought in 14 million newly registered users Sociable & entertaining campaign

* Including search engine, SEO and SEM ** Purchase amount as of September, 30, 2014

Share Lotteries with Friends Advertisements

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SLIDE 13

9

Global sports match information Comprehensive lottery information 74

Lottery Products

973

Odds Sources

  • 61 provincial

lottery products

13 national

lottery products Matches from 60 countries

450,000+ soccer and basketball

matches

How we retain our users… Comprehensive lottery information services

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SLIDE 14

10

How we retain our users… Reliable and fast service

Peers are pure companies Internet

is a true company

Internet lottery

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SLIDE 15

0.74 2.16 3.23 1Q2014 2Q2014 3Q2014 127.2 22.1 20.7 221.6 79.5 36.3

191.2 140.5 34.0

0.6 0.24 0.66 1.07 0.71 1.48 1.01 0.74 2.49 0.82 1.76 2.41 0.33 0.77 1.09 1.15 2.53 3.50 1Q2014 2Q2014 3Q2014

Third party channels Direct active users

Active Users Active New Users

11 (mn)

Large and active user base

(mn)

1Q2014 2Q2014 3Q2014 3Q2014 3Q2014 1Q2014 2Q2014 1Q2014 2Q2014

(mn)

Active Users by Platforms

  • No. of users

PC Mobile App Mobile website Total purchase amount PC Mobile App Mobile website

(US$ mn)

ARPU 212.0 207.1 189.3 92.1 112.0 189.9 31.4 24.5 13.7 1Q2014 2Q2014 3Q2014 3Q2014 3Q2014 1Q2014 2Q2014 1Q2014 2Q2014

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Entrepreneurship and Strategic Vision

LAW Man San Founder, Chairman & CEO

  • Founded Shenzhen E-Sun Network Co., Ltd. in 2001
  • Pioneer in online lottery service industry in China for 10+ years
  • Executive MBA degree from Cheung Kong Graduate School of Business, Bachelor’s degree from

Wuhan University

Experienced Senior Management Team

PAN Zhengming President

  • Joined in 2011
  • Over 8 years of experience in finance and legal industries
  • JD degree from University of Columbia Law School

YU Min CFO

  • Joined in 2014
  • Over 8 years of experience in finance
  • Bachelor’s degree from University of Melbourne

ZHENG Lei COO

  • Joined in 2009
  • 10 years of experience in the IT industry
  • Bachelor’s degree from Wuhan University

TIAN Zhaofu CTO

  • Joined in 2012
  • Over 10 years of experience in information technology industry
  • MBA degree from Hong Kong University of Science and Technology

YU, Wensheng Director of International Business

  • Joined in 2013
  • Over 10 years of experience in sports and gaming industry
  • Bachelor’s degree from University of Westminster in UK

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Experienced and dedicated management team

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SLIDE 17

Financials

Industry Overview

Key Competitive Strength Growth Strategies

Peer Comparisons

Company Overview

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SLIDE 18

38.1 39.5 37.4 34.9 63.3 58.0 57.4 54.3 100.3 42.4 27.7 36.0 72.3 74.5 70.3 78.6 143.7 139.2 142.3 13.1 31.8 45.1 52.8 16.3 36.0 47.7 77.0 17.9 18.1 12.5 17.7 15.7 39.6 49.9 98.4 26.0 198.2 223.4 51.2 71.3 82.5 87.7 79.6 94.0 105.1 131.3 118.2 60.5 40.2 53.7 88.0 114.1 120.2 177 169.7 337.4 365.7 1Q2010 2Q2010 3Q2010 4Q2010 1Q2011 2Q2011 3Q2011 4Q2011 1Q2012 2Q2012 3Q2012 4Q2012 1Q2013 2Q2013 3Q2013 4Q2013 1Q2014 2Q2014 3Q2014 New customers

Quarterly Purchase Amount

Financials

Sustainable high growth

13 (US$ mn)

* Between March and November 2012, we voluntarily scaled down our business and migrated our users ** Users who made purchases in previous years

Quarterly Revenue Annual Revenues

(US$ mn) (US$ mn)

27.1 40.2 30.2 54.9 25.7 38 28 42.9 2010 2011 2012 2013 Service Fee (Gross Revenue) Net Revenue

Voluntary suspension*

**

18.5 35.7 36.8 14.5 25.2 30.6 1Q2014 2Q2014 3Q2014 Service Fee (Gross Revenue) Net Revenue

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SLIDE 19

3.4 3.1 3.2 4.2 4.4 1.0 (0.8) 0.3 0.2 1.3 2.1 4.3 5.2 13.4 13.0 44.70% 34.90% 33.60% 35.20% 37.10% 17.40% (22.50)% 4.80% 3.70% 16.30% 19.60% 27.10% 36.10% 53.28% 42.48% 1Q2011 2Q2011 3Q2011 4Q2011 1Q2012 2Q2012 3Q2012 4Q2012 1Q2013 2Q2013 3Q2013 4Q2013 1Q2014 2Q2014 3Q2014 6.3 2.2 0.7 17.5 4.5 12.2 6.5 24.30% 5.80% 2.50% 40.90% 31.59% 48.29% 21.24% 2010 2011 2012 2013 1Q2014 2Q2014 3Q2014 GAAP net income GAAP net margin 22.1 34.0 25.0 38.3 13.4 22.9 27.9 86.00% 89.50% 89.20% 89.30% 92.85% 90.95% 91.20% 2010 2011 2012 2013 1Q2014 2Q2014 3Q2014 Gross profit Gross margin

Quarterly Non-GAAP Net Income***

* Gross profit = Net revenue – Cost of service ** Between March and November 2012, we voluntarily scaled down our business and migrated our users *** Adjustments of share-based compensation

Financials

Stable gross margin and growing net margin

Stable Gross Margin*

(US$ in mn) (US$ in mn) (US$ in mn)

GAAP Net Income

14

Voluntary suspension**

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SLIDE 20

Growth Strategies

Key Competitive Strength

Financials

Peer Comparisons

Company Overview

Industry Overview

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SLIDE 21

15

Technology

Enhance infrastructure and security system to ensure reliability and better user satisfaction

Lottery purchase services

Further enhance specialized and sophisticated services

Mobile services

Focus on mobile services development

Strategic partnerships

Pursue strategic partnerships and acquisitions

Strengthen brand name

Growth strategies

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SLIDE 22

Peer Comparisons

Financials

Growth Strategies Company Overview

Industry Overview

Key Competitive Strength

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SLIDE 23

Peer Comparison – Q3 results

Gross Merchandise Volume (GMV) Non-GAAP Net Profit Market Cap 2014 Non-GAAP Net Profit Growth (US$mn) (US$mn) (US$mn) Q1 QoQ Q1 YoY Q2 QoQ Q2 YoY Q3 QoQ Q3 YoY 365.7 13.0 842 22% 2,129% 157% 476% (4.3%) 485.3% 273.0 21.0 2,620 (25%) 133% 50% 68% 18.0% 87.4% 134%* 62%* 32%* 882.6 46.3 12,870 31% 318% 14% 264% 7.7% 206.8% 41%* 28%* 7%*

16

* 500.com’s key metrics as a percentage of the comparables’ Source: Company fillings and Bloomberg as of 23 Nov 2014