Shuffle Master's presentation for the UBS/Deutsche Bank Gaming Investment Forum at G2E 2011
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Transcript of Shuffle Master's presentation for the UBS/Deutsche Bank Gaming Investment Forum at G2E 2011
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www.shufflemaster.com / NASDAQ: SHFL
2011 gaming investment forum
SHUFFLE MASTER, INC.
Q1 Q3 Q4Q2
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WHO WE ARE 4
GROWTH AHEAD 10
FINANCIALS 17
WHY INVEST IN US 21
overview
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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
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WHO WE ARE 4
GROWTH AHEAD 10
FINANCIALS 17
WHY INVEST IN US 21
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executive team
gavinisaacs, CEO
linster fox, EVP & CFO
david lopez,EVP & COO
roger snow,EVP
katie lever,EVP & GC
lou castle,CSO
♦ 12 years in gaming industry
♦ mostrecently served as COO of BYI
♦ 30 years experience
♦ former CFO of CHRK and ANCPA
♦ 13 years at SHFL; 5 in seniormanagement roles including sales and product management
♦ 11 years at SHFL; 5 in senior management roles including product development
♦ 10 years in gaming industry
♦ most recently served as GC at GCA
♦ co-founder: Westwood Studios
♦ most recently served as VP of Studios at Zynga
5
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6diverse suite of products to outfit the casino floor
i-Gaming
shufflers
specialty games
slot machines
e-Tables
what we do
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four unique profit centers
Vegas Star®
electronic gaming
machines “EGM”(slot machines)
utility products
“utility”(shufflers, chippers, shoes)
Deck Mate® i-Shoe Auto™ Easy Chipper® i-Deal®
electronic table
systems “ETS”(fully electronic and hybrid e-
Tables)
i-Table™ Rapid Table Master®
proprietary table
games “PTG”(live felt games,
progressives, side bets)
Progressives Side Bets
revenue - $41.1 milliongross margin -56.0%
gross profit - $23.0 million
revenue - $77.4 milliongross margin -60.8%
gross profit -$47.0 million
revenue - $42.4 milliongross margin -50.9%
gross profit - $21.6 million
revenue - $40.4 milliongross margin -80.0%
gross profit - $32.4 million
Proprietary Titles
FY 2010 annual revenue - $201.3 milliontotals: gross margin – 61.6%
gross profit - $124.0 million
7
FY 2010
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geographic distribution of revenue
canada
fy „09: 5%
fy „10: 4%
united states
fy „09: 50%
fy ‟10: 50%
europe
fy „09: 4%
fy ‟10: 4%
australia/nz
fy „09: 32%
fy ‟10: 30%other
americas
fy „09: 3%
fy ‟10: 3%
asia
fy „09: 6%
fy „10: 9%
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what sets us apart
♦ worldwide leader in shufflers & table games
♦ depth and breadth of IP portfolioo 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
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WHO WE ARE 4
GROWTH AHEAD 10
FINANCIALS 17
WHY INVEST IN US 21
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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
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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
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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 Hold’em
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
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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 IGT’s player tracking system and others pending
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slot machines
♦ 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
growth drivers
15
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i-gamingonline opportunities
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♦ capitalize on our IP in the online space
♦ multi-pronged approached to internet:
o license existing content to regulated online markets
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 Hold’em
• 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
Cantor Gaming’s mobile eDeckwith Ultimate Texas Hold’em
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WHO WE ARE 4
GROWTH AHEAD 10
FINANCIALS 17
WHY INVEST IN US 21
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third quarter 2011 financials
18
Q3 2011
actual
Q3 2010
actual
y-o-y
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%
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total revenue
slot machines e-Tables proprietary table games utility products
(in
mill
ion
s)
21%
21%
20%
38%
$112.9
$178.9
$163.0
$190.0$179.4
$58.4
$84.8
$201.3
19
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gross margin
lea
se &
sa
les
by p
rod
uc
t se
gm
en
t
25%
35%
45%
55%
65%
75%
85%
1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q
all products utility table games e-Tables slot machines
2009 2010 2011
25%
30%
35%
40%
45%
50%
55%
60%
65%
70%
75%
1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q
all products lease sales2009 2010 2011
20
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WHO WE ARE 4
GROWTH AHEAD 10
FINANCIALS 17
WHY INVEST IN US 21
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growing recurring revenue
$18.8
$19.2
$20.3
$20.2
$20.3 $20.5
$21.0
$22.1
$22.4
$23.4
$24.0
$24.7
$25.4
$26.1
$26.6
$17
$19
$21
$23
$25
$27
(in
mil
lio
ns
)
elevenconsecutive
quarters of
recurring
revenue
growth
22
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long-term earnings potential
:: growth ::
• upgrade opportunity for both shufflers and slot machines
• new market openings• new content for table
games, e-Tables and slot machines
• new product innovation• international
opportunities• internet gaming and
online opportunities• execution & delivery
:: cash flow ::
• invest in lease business: capex
• invest in R&D
• debt pay-down
• evaluate buybacks
• accretive M&A
:: margin
improvement ::
• grow lease base
• supply chain improvements
• content licensing
• expense management
23
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
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questions & answers24
i-Table Roulette
equinox cabinet
i-Table with new side bets
vegas star roulette live
shuffle interactive
new premium specialty titles & progressives
md3
shuffle master “delivers more” at G2E – booth #1241