FY16 Preliminary Results Presentation December 2016 Agenda Simon - - PowerPoint PPT Presentation

FY16 Preliminary Results Presentation December 2016

Agenda

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 Evolution of Key Drivers  Summary and Outlook

Simon Cooper CEO

 Financial Performance FY16

Wendy Parry CFO

 FY16 Highlights

Simon Cooper CEO

 Q and A

Profit & Loss Account – UK Segment

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 Strong growth year on year:  Revenue +12.3%  EBITDA +25.5%  Efficient increase in our market traffic share

with marketing spend excluding offline as a %

• f revenue falling to 44.7%

 Investment in place in supply function supports

increasing % of direct contracting and fixed and variable cost per booking dropped from 16.0% to 14.6% of Revenue

 EBITDA % revenue at 35.8% in FY16 up from

32.0% in FY15

FY16 EBITDA growth of 25.5% in the UK

Profit and Loss Account - International

Investment continues in Sweden to build scale and brand

 Success in international markets defined as

profitable performance within 2-3 years of launch at scale

 OTB has invested to grow its share of market

both online and offline

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Profit and Loss Account - Group

 External financing costs reduced significantly

through renegotiation of facilities post IPO

 Shareholder loan interest and amortisation

• f acquired intangibles below underlying

profit before tax

 Effective tax rate in FY15 affected by

disallowed shareholder interest

Note: Effective tax rate is based on corporation tax divided by retained earnings excluding deal fees and amortisation of intangibles

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Underlying profit before tax +47% increase YOY

Balance Sheet

 All customer monies are paid into a trust account which is

effectively a debtor to the business

 Net cash position has increased from £10.9m to £26.1m  Bank loans repaid in full out of the Group’s existing cash

balances post IPO

 Seasonal cash flow requirements are covered by a

revolving credit facility

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Cash Flow

Strong cash conversion at 90%

 The Board recommends a dividend of 2.2p per share and

thereafter intends to adopt a progressive dividend policy

 £3m of deal costs accrued in FY15 relating to the IPO

were paid in the first half of FY16

Source: Company Information

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Business Highlights

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 Focus on profitable growth drove revenue per booking up 7.5% YOY  Direct contracts achieving up to 70% of forward arrivals by month

Leverage £ Revenue

 Continued investment in technology and talent increased the pace of innovation  77% increase in smartphone bookings YOY with 96% increase YOY in visitors logging in to site

Optimise Customer Proposition

 A number of external events disrupted the overall holiday market  OTB continued to grow share of market, growing daily unique visitors to site by 12.6% YOY

Structural Market Growth & Market Share Growth

 47% YOY growth in Underlying Group PBT  Strong growth in Sweden with Norway launch planned for December 2016

Drive Operational Leverage & Expand Internationally

 Efficiencies in online marketing reduced spend as a % of revenue to 44.7% (FY15 48.6%)  Offline investment continues to increase awareness of our brand nationally

Drive Efficient Share Growth & Strengthen Brand

OTB is disrupting the retail of beach holidays through innovative technology and customer value proposition

On the Beach has the product advantages of a tour operator with the model advantages of an OTA

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Disruptive retailer of beach package holidays Cost Base Risk Margin Product Range

HIGH HIGH HIGH NARROW LOW LOW LOW BROAD

Tour Operator OTA Specialist Generalist

Market FY16

The market backdrop in FY16 was unsettled by multiple external events

 Overall short haul beach holiday volumes are resilient and online

penetration continues to increase

 Dynamic packaging offers greater value and flexibility and steals share

from traditional package

 2016 was disrupted by multiple external events

Short haul beach online versus offline (UK)

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2 3 4

• 10%
• 5%

0% 5% 10% 15% 20% 25% 2010 2011 2012 2013 2014 Traditional Package Dynamically Packaged

Traditional package versus dynamic package

2,000 4,000 6,000 8,000 10,000 12,000 14,000 16,000 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Short haul beach offline Short haul beach online

+5% +7%

On the Beach sells high margin tour operator style product with a lightweight OTA style fixed cost base

Competitive Landscape and Barriers to Success

Tour operator short haul volumes (m pax) UK Short Haul Beach Online - Estimated Market Share

FOCUS SCALE AGILITY EXPERTISE BRAND

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JET2

TUI Thomas Cook Jet2holidays Cosmos Holidays Olympic Holidays On The Beach Travel Republic Low Cost Holidays Love Holidays Easyjet Holidays Other OTA Other tour operator 1 2 3 4 5 6 7 8 9 10 2008 2009 2010 2011 2012 2013 2014 2015 2016

• 7%

Key Drivers of Growth

Innovate through investment in talent & technology

Continued investment into in-house technology extends our ability to out innovate the competition

Service management, monitoring and alerting Management information system

Technology platform Data aggregation

Basket CMS

Personalisation

CRM Services Geolocation Search Service Order Processing Manage Your Booking API app Recommendat ion engine Hotels app Flights app Deals app Backoffice App Currency App

Data acquisition

myOTB 13

Technology platform architecture

 Continued investment in our technology capability will allow us to

innovate at an increasing pace

 Team is currently 75 specialists  Evolution to an ever more agile way of working  New features building on our existing platform

• 500,000

1,000,000 1,500,000 2,000,000 2,500,000 3,000,000 3,500,000 4,000,000 4,500,000 FY15 FY16

Optimise Customer Proposition

Our ambition is to drive a fully personalised cross-device experience for all users on all devices

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Smartphone Bookings FY16 vs FY15

Revenue per booking Conversion Revenue per unique visitor

 Increases to Revenue per UV driven through multiple projects:  Device level  Log in and cross device optimisation  Real time personalisation  Off site personalisation  Traffic shaping

The features we are developing are supported by the infrastructure that has been built into the heart of our platform over a number of years

Logged in visitors FY16 vs FY15

• 20,000

40,000 60,000 80,000 100,000 120,000 FY15 FY16

+13%

Increase in mobile RPUV

Leverage Increased £ Revenue

We have scaled our supply function to achieve significant incremental net margin contribution

 Investment made in FY14 and FY15 to scale our supply function  Direct contracting hotels performs ahead of expectations  Future opportunities include:  Product: Expand product offering to address long haul and luxury

segments

 Exclusivity: See over  Investments made to technology to optimise point of sale margin

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Direct contracting - share of monthly arrivals FY14 to FY17 Revenue per product type FY15 vs FY16

Hotels (3rd party) Hotels (direct contract) Transfers (direct contract) Flights Other 0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% 70.0% 80.0% Jan 14 Mar 14 May 14 Jul 14 Sep 14 Nov 14 Jan 15 Mar 15 May 15 Jul 15 Sep 15 Nov 15 Jan 16 Mar 16 May 16 Jul 16 Sep 16 Nov 16 Jan 17 Mar 17 May 17 Jul 17

70%

Target exclusivity

Driving an increasing % of exclusivity presents a huge margin opportunity

 Independent hoteliers want to spread their distribution  B2B airlines need a distribution partner without aircraft  We can drive incremental volume and higher margin at point of sale ‒ With exclusive programme of flying ‒ By driving UK OTA rate and total exclusivity in hotels ‒ By ringfencing last room availability  Whilst maintaining a risk-free model

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3-4% 6% 10% >10%

HIGH LOW

Sales Volume and Margin Opportunity

UK OTA exclusivity UK OTA rate exclusivity Standard direct contracts – disintermediate 3rd parties Long tail 3rd party stock Total UK exclusivity

Hotels: Incremental volume / margin opportunity

Ringfenced last room availability TARGET AREA

£0.00 £0.20 £0.40 £0.60 £0.80 £1.00 £1.20 £1.40 FY12 FY13 FY14 FY15 FY16

Drive Efficient Market Share Growth

Superior customer proposition delivers increased margins and fuels market share growth

 The business has historically invested c.50% of growing revenue in

marketing to drive share

 A multi-channel strategy supported by sophisticated in house bid

modelling and attribution tool allows efficient share growth

‒ Advantage maintained through continued Investment into: ‒ Cross device attribution through login ‒ Econometric attribution of offline advertising ‒ Data management platform integration

Growing share cost effectively

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Online Marketing spend as % of Revenue 46.0% 50.7% 49.9% 48.6%

% Revenue spent on online marketing – monthly evolution

44.7%

35% 40% 45% 50% 55% 60% 65% 70% 75% Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep FY14 FY15 FY16 +£0.24 EBITDA per daily UV +£0.36 Revenue per daily UV +£0.18 Marketing cost per daily UV

Strengthen Brand

Continued investment offline has strengthened awareness of our brand

 FY16 offline campaign was fully national  Repeat purchase volume and rates continues to increase

Repeat booking volumes and % of overall business

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Repeat as % of all bookings

Prompted Brand Awareness FY13 to FY16

58% CAGR

10.4% 25.6% 18.0% 32.5%

15% 16% 18% 19% 29% 31%

0% 10% 20% 30% 40% 50% 60% Low Cost Holidays Travel Republic First Choice On the Beach Thomas Cook Thomson

First / All Mentions – Beach Holidays

First mention All mentions

37.1%

0% 10% 20% 30% 40% 50% FEB '13 APR '14 DEC '14 FEB '15 DEC '15 FEB '16 20,000 40,000 60,000 80,000 100,000 120,000 140,000 160,000 FY12 FY13 FY14 FY15 FY16

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£ Fixed / Variable Cost Per Booking

We continue to drive further operational leverage of a lightweight cost base

Drive Operational Leverage

Fixed / Variable costs as % Revenue FY12 to FY16

 OTB fixed and variable cost per booking is well below tour operator

competitors

 OTB fixed and variable costs as a % of revenue are reducing through

• perational leverage

7X OTB 8X OTB

0.00% 5.00% 10.00% 15.00% 20.00% 25.00% FY12 FY13 FY14 FY15 FY16 50 100 150 200 250 OTB TUI TC

£0.00 £0.20 £0.40 £0.60 £0.80 £1.00 £1.20 £1.40 £1.60 FY15 FY16 500000 1000000 1500000 2000000 2500000 FY15 FY16 Brand UVs Non-Brand UVs

Expand model internationally

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We remain encouraged with the improvement to KPIs being achieved in Sweden

 Sweden has the a number of characteristics which make it

attractive for our international expansion

 Driving improvement in 3 KPIs will determine success in new source

markets

 Our objective in Sweden remains to deliver a positive return within

3 years of launch

113% 14.7% 19.6%

Branded share

Traffic and brand growth in Sweden FY16 YOY Cost per UV FY16 YOY

• 20%

50%

Summary & Outlook

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We have enjoyed a strong start to the new FY and performance is in line with the Board’s expectations

 Target increasing % of direct supply and drive exclusivity  Ringfence peak season capacity in key Western Mediterranean destinations

Leverage £ Revenue

 Continue to invest in our technology talent and infrastructure to out innovate the competition

Optimise Customer Proposition

 Addressable market growth with increasing online penetration  Risk capacity in market being downsized

Structural Market Growth & Market Share Growth

 Drive significant PBT growth in the UK  Leverage capabilities to breakeven in Sweden and launch in Norway

Drive Operational Leverage & Expand Internationally

 Increased offline investment to further drive brand awareness  Auction dynamics have improved post LCTG failure

Drive Efficient Share Growth & Strengthen Brand

Appendix

200000 400000 600000 800000 1000000 1200000 1400000 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 Passenger numbers

2007 250,000 passengers First round private equity investment 2009-11 Technology team recruited, web development and support insourced, complete platform rebuild 2005-6 First version website launched, paid search visibility increased 2004 Excess charter supply Growing online penetration Simple ,

• utsourced DP

technology 2008-10 Executive and senior management team recruited – CMO, CFO, CTO End 2011 Tech and MI platforms relaunched end 2011 2013-14 Investment to launch offline advertising and scale direct contracting 2013 2nd round private equity investment 2015 Ebeach.se launched IPO 28th September 2015 2016 Drive flight and hotel exclusivity, grow offline share

Share of online short haul beach 9% 16% 17% 14% 13%

OTB history

20%

Business Model (3 year CAGR)

£ Revenue per booking Conversion Unique visitors Revenue per unique visitor OTB share of market traffic Online penetration Revenue Marketing as %

• f Revenue

EBITDA

Fixed and Variable Costs Unique visitors Marketing spend per unique visitor Short haul beach holidays dynamically packaged

OPTIMISE CUSTOMER PROPOSITION & LEVERAGE £ REVENUE DRIVE EFFICIENT SHARE GROWTH & STRENGTHEN BRAND STRUCTURAL MARKET GROWTH & MARKET SHARE GROWTH SCALE DRIVES OPERATIONAL LEVERAGE

ADDRESSABLE MARKET

+15% +7% +23% +27% 24

 OTB’s business model is centred on driving efficient growth in market share while

maintaining and improving both conversion and £ revenue per booking

 Our strategic initiatives are focused on driving the performance of all of these levers  EBITDA growth is the cumulative effect of improvements in performance of all of the

levers individually

• 5%
• 3%

Cash Flow – Flow of funds

On The Beach provides clear and comprehensive consumer protection

* £1,200 holiday for 2 people via low deposit scheme includes 2 bags and assumes a direct debit card. £4.95 fee each balance payment, so in the example it is paid three times

Trust account – funds flow for a £1,200 holiday

 The trust protects all customer payments

until after the provision of holiday services

 All customer receipts are paid into the trust

account in full before the holiday departure date

 These payments are held in the trust

account until the service is provided

 On The Beach does not therefore use

customer pre-payments to fund its business

• perations

 If booked more than 45 days in advance of

departure, customers can secure booking with a deposit which is a percentage of flight cost plus hotel deposit

Customer Pays Deposit £226.95

£550 Flights

Customer returns from holiday

£600 Hotel

Receive full balance 14 days before departure £652.95 Hotel, Bed bank and ancillary supplier paid £516.00

ATOL Trust Fund (Protected) Checkout stage Immediately after booking Holiday build up Return date CUSTOMER £1,214.85* SUPPLIER

Transfer to On the Beach

• f flight sales

value on receipt into trust from customer £226.95 Transfer to On the Beach of balance of sales value £654.95 Airline paid in full by On the Beach on booking £539.00

Booking stage

£50 Coach Transfer Receive flight balance 28 days post booking £332.95 Transfer to On the Beach

• f flight sales

value on receipt into trust from customer £332.95

OTB £MPB £159.85

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Cash Flow - Seasonality

Peak booking trading period between January and June and travelled June and August

Booked by month

 Revenue is recognised on a booked basis  The period prior to Christmas is quiet, particularly November and

December

 Traffic volumes ramp up immediately following Christmas as

customers start to research and book their holidays for the following summer period

Travelled by month

 Peak departure months are July and August

Funds Flow

• Invest in marketing and low deposits to drive bookings but

margin and cash are earned on a travelled basis

Source: Company Information

5.8% 4.3% 4.1% 15.5% 11.1% 10.4% 10.0% 9.6% 8.2% 8.1% 7.2% 5.6%

0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 14.0% 16.0% 18.0% Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep

% FY16 Booked by month

9.7% 2.4% 2.3% 1.8% 2.7% 4.8% 7.2% 12.1% 13.8% 15.1% 16.3% 11.7%

0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 14.0% 16.0% 18.0% Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep

% FY16 Travelled by month

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• £20.00
• £15.00
• £10.00
• £5.00

£0.00 £5.00 £10.00 £15.00 £20.00 £25.00 10/15 10/15 11/15 12/15 01/16 02/16 03/16 04/16 05/16 06/16 07/16 08/16 09/16

Millions

• 20.00
• 18.00
• 16.00
• 14.00
• 12.00
• 10.00
• 8.00
• 6.00
• 4.00
• 2.00

0.00 09/15 10/15 11/15 12/15 01/16 02/16 03/16 04/16 05/16 06/16 07/16 08/16 09/16

Millions

Cash Flow: Seasonality and cash profile

Facility used to fund low deposits during peak trading periods between January and June

Source: Company Information

 Annual cash cycle sees

investment into working capital as bookings are achieved in Jan

• June, with cash unwinding

from the trust as customers travel

 Facility available in FY16 was

£35m, maximum drawdown was £13.5m

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Funding of Low Deposits FY16 Bank Balance Profile FY16