Shuffle Master's presentation for the UBS/Deutsche Bank Gaming Investment Forum at G2E 2011
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Shuffle Master provides gaming products including utility products like shufflers and chippers, proprietary table games, electronic table systems, and electronic gaming machines. It sees growth opportunities from upgrading existing products, new openings globally especially in Asia, and developing new proprietary content and features. Key focuses are sustainable growth through leasing and R&D, improved execution through efficiencies and strengthening e-Tables, and strong balance sheet management.
Shuffle Master's presentation for the UBS/Deutsche Bank Gaming Investment Forum at G2E 2011
- 1. Q1 Q2 Q3 Q4 SHUFFLE MASTER, INC. 2011 gaming investment forum www.shufflemaster.com / NASDAQ: SHFL
- 2. WHO WE ARE 4 GROWTH AHEAD 10 overview FINANCIALS 17 WHY INVEST IN US 21
- 3. forward-looking statement During this presentation and the Q&A session, various remarks we make about future expectations, plans and prospects for the company constitute forward-looking statements for purposes of the safe harbor provisions under the Private Securities Litigation Reform Act of 1995. Forward-looking statements reflect and are subject to inherent known and unknown risks and uncertainties that could cause actual results to differ materially from those expressed or implied. Risk factors that could cause actual results to differ materially from expectations are included in our recent SEC filings. We will also be discussing certain financial measures such as adjusted EBITDA, which represents a non-GAAP financial measure. This presentation includes reclassifications for discontinued operations and segment realignment. 3
- 4. WHO WE ARE 4 GROWTH AHEAD 10 FINANCIALS 17 WHY INVEST IN US 21
- 5. executive team gavin linster fox, david lopez, roger snow, katie lever, lou castle, isaacs, CEO EVP & CFO EVP & COO EVP EVP & GC CSO 12 years in 30 years 13 years at 11 years at 10 years in co-founder: gaming experience SHFL; 5 in SHFL; 5 in gaming Westwood industry former CFO of senior senior industry Studios most CHRK and management management most most recently ANCPA roles including roles including recently recently served as sales and product served as GC served as VP COO of BYI product development at GCA of Studios at management Zynga 5
- 6. what we do slot machines e-Tables specialty games shufflers i-Gaming diverse suite of products to outfit the casino floor 6
- 7. four unique profit centers FY 2010 Deck Mate速 i-Shoe Auto Easy Chipper速 i-Deal速 utility products revenue - $77.4 million utility gross margin -60.8% (shufflers, chippers, shoes) gross profit -$47.0 million Progressives Side Bets Proprietary Titles proprietary table revenue - $40.4 million games PTG gross margin -80.0% (live felt games, gross profit - $32.4 million progressives, side bets) i-Table Rapid Table Master速 Vegas Star速 electronic table revenue - $42.4 million systems ETS gross margin -50.9% (fully electronic and hybrid e- gross profit - $21.6 million Tables) electronic gaming revenue - $41.1 million machines EGM gross margin -56.0% (slot machines) gross profit - $23.0 million FY 2010 annual revenue - $201.3 million totals: gross margin 61.6% gross profit - $124.0 million 7
- 8. geographic distribution of revenue canada fy 09: 5% fy 10: 4% europe fy 09: 4% fy 10: 4% asia fy 09: 6% fy 10: 9% united states fy 09: 50% fy 10: 50% australia/nz fy 09: 32% other fy 10: 30% americas fy 09: 3% fy 10: 3% 8
- 9. what sets us apart worldwide leader in shufflers & table games depth and breadth of IP portfolio o approximately 2,400 registered patents, trademarks & copyrights leading provider of e-Tables 50% of revenue is recurring 50% of revenue is international products to suit the needs of every market not reliant on the North American slot replacement cycle for growth significant FCF 9
- 10. WHO WE ARE 4 GROWTH AHEAD 10 FINANCIALS 17 WHY INVEST IN US 21
- 11. strategic focus sustainable growth o focus on leasing o increased investment in R&D o exploit online opportunities o global opportunities: Latin America and Asia o protect & preserve critical IP improved execution o margin improvement across all segments o focus on building internal efficiencies o strengthen e-Table business strong balance sheet management o continued deleveraging o evaluate buybacks o well-positioned for M&A 11
- 12. utility products growth drivers upgrade opportunities: o MD3 replacement opportunity of 7k sold MD1s and MD2s o long-term upgrade opportunities include next-generation Deck Mate and one2six shufflers; approximately 11.6k sold new openings: o Macau openings in 2012: LVS sites 5 & 6 o new openings in US in 2012: OH and NJ o Philippines openings in 2013 other: o new marketing focus and increased sales coverage o new proprietary table games and i-Table placements fuel shuffler growth o opportunities in Asia o growing appeal of table games o 19k tables that are currently hand-shuffled; opportunity for shufflers 12
- 13. proprietary table games growth drivers progressive upgrades: o installed base of 6,340 proprietary tables; nearly 800 have progressive feature (13% upgraded) new content and new features: o Blackjack Switch, MS Stud and Ultimate Texas Holdem o newly introduced cross-property progressive (o-wap) o newly introduced wireless connectivity for progressives other: o proprietary table game business has a multiplier effect: opportunity for royalty, progressive and shuffler revenue o gaining popularity in international markets o leverage content to e-Tables and i-gaming 13
- 14. e-Tables growth drivers strengthen the e-Table business new leadership global product manager improve current offerings o redesigns, upgrades, and innovative enhancements (ex: i-Table, Rapid Select) leverage IP o strong brands, proprietary content and progressives new product o innovative roulette concepts: i-Table Roulette and Vegas Star Roulette Live o over 2,500 live roulette tables in N. America targets for i-Table Roulette focused rollout of i-Table o hot new hybrid e-Table o recently announced back-of-house connectivity to IGTs player tracking system and others pending 14
- 15. slot machines growth drivers new cabinet: o Equinox cabinet launched July 2010 o record quarters in Q4 2010, and Q1, Q2 and Q3 2011 due to Equinox o margin improvement: stronger pricing and better-designed cabinet new game titles: o over 15% ship share in Australia; #1 in Queensland o hot new game titles in $0.50 and penny denoms replacements: o opportunity in Victoria in 2012 new markets: o opportunities in Asia and Latin America o sustainable, long-term business 15
- 16. i-gaming online opportunities capitalize on our IP in the online space multi-pronged approached to internet: o license existing content to regulated online markets Cantor Gamings mobile eDeck with Ultimate Texas Holdem o build and capitalize on brands o pursue legalized internet gaming opportunities o new development for online games Shuffle Interactive play-for-fun games and apps across PC and mobile platforms creates foundation for i-gaming when legalized in the US first game Ultimate Texas Holdem social media presence: player engagement and brand awareness over 1,600 likes on our Facebook pages over 960 followers on our Twitter accounts Twitter account for IR news and updates 16
- 17. WHO WE ARE 4 GROWTH AHEAD 10 FINANCIALS 17 WHY INVEST IN US 21
- 18. third quarter 2011 financials Q3 2011 Q3 2010 y-o-y actual actual increase (in millions, except per share and % amounts) total revenue $58.3 $51.5 13% recurring revenue $26.6 $24.0 11% gross margin 62.1% 61.4% 70 bps capex $5.2 $5.5 -5% adjusted ebitda $19.5 $15.5 26% earnings per share $0.17 $0.11 55% net debt $38.6 $63.9 -40% 18
- 19. total revenue $201.3 $190.0 $178.9 $179.4 (in millions) $163.0 21% 21% $112.9 $84.8 20% $58.4 38% slot machines e-Tables proprietary table games utility products 19
- 20. gross margin 75% 70% 65% lease & sales 60% 55% 50% 45% 40% 35% 30% 25% 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 2009 2010 2011 all products lease sales 85% by product segment 75% 65% 55% 45% 35% 25% 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 2009 2010 2011 all products utility table games e-Tables slot machines 20
- 21. WHO WE ARE 4 GROWTH AHEAD 10 FINANCIALS 17 WHY INVEST IN US 21
- 22. growing recurring revenue $27 $26.6 $26.1 $25.4 $25 $24.7 $24.0 (in millions) $23.4 $23 $22.4 eleven $22.1 consecutive $21.0 quarters of recurring $20.3 $20.5 $21 $20.3 revenue $19.2 $20.2 growth $18.8 $19 $17 22
- 23. long-term earnings potential :: growth :: :: margin :: cash flow :: improvement :: upgrade opportunity for invest in lease both shufflers and slot grow lease base business: capex machines new market openings supply chain invest in R&D new content for table improvements games, e-Tables and slot debt pay-down machines content licensing new product innovation international evaluate buybacks expense management opportunities internet gaming and accretive M&A online opportunities execution & delivery key investment considerations :: market leader :: diversified product portfolio :: high-margin business :: growing recurring revenue :: executive level strength & stability :: high barriers to entry :: positioned for global gaming growth 23
- 24. shuffle master delivers more at G2E booth #1241 equinox cabinet i-Table Roulette i-Table with new side bets shuffle interactive md3 vegas star roulette live new premium specialty titles & progressives questions & answers 24