SHFL 2013 Analyst Day Presentation

7/28/2019 SHFL 2013 Analyst Day Presentation

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SHFL entertainment!2013 INVESTOR DAY


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During this presentation and the Q&A session, various remarks including certain ofthose set forth on slide 22 and that are not purely historical, constitute forward-lookingstatements for purposes of the safe harbor provisions under the Private SecuritiesLitigation Reform Act of 1995. Our beliefs, expectations, forecasts, objectives, plans,prospects and strategies for the Company, including, without limitation, those

concerning expected operating results, revenues and earnings are not guarantees of

future performance and are subject to risks and uncertainties that could cause actualresults to differ materially from results expressed or implied by the forward-lookingstatements. Additional information on risk factors that could potentially affect theCompanys financial results may be found in documents filed by the Company with theSEC, including the Companys current reports on Form 8-K, quarterly reports on Form

10-Q and its latest annual report on Form 10-K and are based on information availableto us on the date hereof. We do not intend, and assume no obligation, to update any

forward-looking statements. Readers are cautioned not to place undue reliance onforward-looking statements, which speak only as of the date hereof. We will also be

discussing certain financial measures such as Free Cash Flow and adjusted EBITDA,which represent non-GAAP financial measure. !!

FORWARD-LOOKING STATEMENT

2


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AGENDA Company Overview!

1H Financial Update!

Americas Update!

Australia & Asia Update!

Product Innovation!

iGaming!

Why Invest!


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what we do

Proprietary Table Games, Side Bets, & Progressives

Electronic Gaming Machines

Utility Products

Electronic Table Systems


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EXECUTIVE TEAM MEMBERS

Gavin Isaacs Linster Fox Roger Snow Katie Lever Lou Castle Adrian Halpenny Deron Hunberger

Chief ExecutiveOfficer

Chief FinancialOfficer

Chief ProductOfficer

Executive VP &General Counsel

Chief StrategyOfficer

President of SHFLAustralasia

Senior VP ofSales

14 years ingaming

industry Most recently

served asCOO of BYI

32 years ofexperience

Former CFOof CHRK and

ANCPA

13 years atSHFL; 5 in

seniormanagement

roles includingproductdevelopment

12 years ingaming

industry Most recently

served as GCat GCA

Co-founder ofWestwood

Studios Most recently

served as VPof Studios atZynga

8 years ingaming

industry Former GM of

SRX global(contractmnfg.)

23 years ingaming

industry Previously with

Konami andAristocrat

with us today!


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OTHER SHFL TEAM MEMBERS

Colin Helsen John Hemberger Brandon Knowles Peter Wilkins

GM UtilityProducts

GM ProprietaryTable Games

GM ElectronicTable Systems

GM ElectronicGaming

Machines

with us today!

Peter

Kimo Akiona Julia Boguslawski John Strickland Jiro Kawakami Dan Taylor

Sr. VP &Corporate

Controller

VP - InvestorRelations &

Corp. Comm.

VP - Marketing InvestorRelations Analyst

Media RelationsManager

Jiro


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GEOGRAPHIC DISTRIBUTION OF REVENUE

7

canadaQ2 YTD 2013: 3%Q2 YTD 2012: 3%

united statesQ2 YTD 2013: 45%Q2 YTD 2012: 45%

europeQ2 YTD 2013: 5%Q2 YTD 2012: 3%

australia/nzQ2 YTD 2013: 31%Q2 YTD 2012: 36%

other americasQ2 YTD 2013: 2%Q2 YTD 2012: 2%

asiaQ2 YTD 2013: 14%Q2 YTD 2012: 11%

Offices in: Las Vegas, NV / Eden Prairie, MN / Austria / Australia / Macau / Mexico / Gibraltar / Singapore / Argentina / China !


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1H 2013actual

1H 2012actual

y-o-ychange

(in millions, except per share and % amounts)

total revenue $136.2 $122.1 12%

recurring revenue $62.5 $56.8 10%

gross margin 64.6% 64.1% 50 bps

capex $13.1 $15.1 -13%

adjusted ebitda $43.2 $42.0 3%

earnings per share* $0.33 $0.31 7%

net debt** $0.0 $0.3 -100%

*EPSof$0.31in1H12includesimpactofapproximately$0.03forduediligenceexpensesincurredinconnecAonwiththeterminated

OngameacquisiAon**Onpril30,2013,theCompanyscashandcashequivalentsexceededitstotaldebtby$33.0million.

FIRST HALF 2013 UPDATE

8


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RECURRING REVENUE

9

(inmillions,except%amounts)

$26.6$27.7 $27.8

$28.9$29.9

$31.5 $31.3 $31.2

46%

42%

50%

44%

47%

43%

53%

40%

0%

10%

20%

30%

40%

50%

60%

$0

$5

$10

$15

$20

$25

$30

$35

Q3'11 Q4'11 Q1'12 Q2'12 Q3'12 Q4'12 Q1'13 Q2'13

recurringrevenue recurringrevenueasapercentageoftotalrevenue


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North America!

Slot Rollout in North America!

South & Latin America!

Deron Hunsberger

Senior Vice President of Sales

AMERICAS UPDATE


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NORTH AMERICA

Market trends & customers!U.S.!

Corporate, regional, tribal!

Canada!Provincial!

Opportunities!

Shufflers

!

E-Tables!

Proprietary table games!


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SLOTS IN NORTH AMERICA: OUR APPROACH

12

Same platform as SHFL Fusion Virtual;already GLIapproved!

Selectively and carefully target markets where we can besuccessful!

Single-cabinet strategy!

Experience implementing low-cost strategy into Asia andLatAm!

Leverage ExistingAssets

Deep content library and compelling math models withproven success in competitive markets!

Management team with years of experience in the slotbusiness!

Synergies with SHFLs large service network!

SHFL already has approx. 280 various gaming and tribal

licenses in the U.S.!

Low-CostApproach

Over 1M slot machines!Underserved for sale segment accounts for approx. 85%

of the total U.S. slot market!

Replacement cycle approx. 65K+ machines per year!

Opportunity toServe the ForSale Market


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CURRENT SLOT PLACEMENTS & TRIALS IN THE U.S.

CA

69

MA

OR

8MN

8NY

112

californiasold units: 8trial units: 61

oregonsold units: 2trial units: 6

minnesotatrial units: 8

new yorkparticipation units: 112

currentmarkets

trialmarkets

targetedmarkets

NV

NMOK

IA

LA

FL

CT


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NEXT STEPS

Align investments with momentum! 14 more titles planned by end of FY13! Focused team!

o 2 new heads: Sales and Product Management!o Team dedicated to converting AUS/Asia content to

comply with U.S. requirements!

Leverage content studio in China!o Big Red Lanterndeveloped in China; straight to US!

Consideration of local content studio to ensurelong-term success!

Current Titles ReleasedHIGH-DENOMINATION (+ $0.25) STAND-ALONE PROGRESSIVES STANDARD


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SOUTH & LATIN AMERICA

mexico90,000 units

argentina40,000 units

peru70,000 units

colombia

70,000 units

chile12,000 units

uruguay5,000 units

panama15,000 units

*SHFLinternalesAmatesbasedoninformaAonfromregulators,gamingpublicaAons,andcasinooperators

=SHFLpresence

Slot Market Size by Country*!


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SOUTH & LATIN AMERICA

Market trends & dynamics! Growing economies!

o Mexico!o Argentina!o Peru, Chile, Colombia, Uruguay!

Global customers!

!

Opportunities! EGMs!

o AUS-style content has historically performed well!

Utility Products!

ETS in Mexico!

!

Our strategy! Building infrastructure!

o Mexico and Argentina offices!

Establishing relationships!o

Key distributors!

Building team!


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AUSTRALIA&ASIAU

PDATE

AdrianHalpenny

Presidentof

SHFLAustralasi

a

Timeline

New Games

AUS & NZ

Asia


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WHAT SETS US APART

Innovative math models!

Cutting-edge hardware!Entertaining content!

People! Strategic recruiting process for

game designers and engineers!Effective process!


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AUSTRALIA & NEW ZEALAND

EGMs!Strong game performance!

Regional content!

As of Q2, 18% ship share across market!oMixed strength in jurisdictions!

ETS!

#1 in market (3,800 installs)!

Introduced Fusioninto market in September2012!


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ASIA

Investment in product expertise! Strengthened distributor network! Performance in all product segments!

Utility expansion!oOver 600 shufflers sold into Asia as of 1H 13!

Slots momentum!oDuo Fu Duo Cai top performer in Macau!

PTG steady, but positioning!oDragon Bonusopportunity!

ETS!oSignificant footprint outside of Macau!oTable Master Fusionlaunched at G2E Asia

2013!


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PRODUCT INNOVATION

Utility Products!

Proprietary Table Games (PTG) !

Electronic Table Systems (ETS)!

Roger Snow

Chief Product Officer


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UTILITY GROWTH DRIVERS

Replacements! MD3for blackjack and baccarat! DeckMate 2for poker!

o2,000 leased; 2,500 targeted from sold base!

Approximately 30K shufflers in use ! 21k sold shufflers and 8,100 leased shufflers!

Worldwide shuffler penetration! 66% on 47k card tables!

o58% in 2011!

New openings! Approximately 6,500 new card tables worldwide over the next 3

years!

!


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26

!

3-year recurring revenue CAGR: 12% !

Leasing remains Company priority!

Replacements represent biggest opportunity

to grow leases!Marketing and pricing strategies in place !

Shortened timetable for next-generationproducts (7 yrs vs +11 yrs)!

New shuffler concepts!

GROWING THE SHUFFLER LEASE BASE


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SHUFFLER INNOVATION

DeckMate 2!

Poker! Launched2013!

Replaced the DeckMate;launched in 2002!

MD3!

Blackjack, baccarat! Launched2012!

Replaced the MD1 & MD2;launched in 1993 & 2003respectively!

iDeal!

Single-deck specialty! Launched2007!

Replaced the ACE;launched in 1998!

one2six!

Continuous blackjack, face-upbaccarat, single-deck specialty!

Launched2001!

Updated in 2009; nextupdate to include optical

card recognition!

SHFL-Flex!

Pay by the shuffle; new shufflertechnology enables leasingopportunities on underutilizedtables!

Target:mid 2014!

New innovation!

B il l in g Co mp li a nc e S e r vi c e E TC E TC

SMI IT Administration

iGaming

ServiceProvider(Cloud)

Cellular Modem


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Progressive/add-on upgrades:!

Approximately 25% of our PTG base has beenupgraded!

Cross-property progressive (O-WAP)!

Nexus Commandhardware and Game

Manager 2software!

New content and new features:!

House Money, Free Bet, Fire Bet, MS Stud! Value adds: 6 Card Bonusfor Three Card

Poker, Deluxefor blackjack side bets, Three

Card Bonusfor MS Stud! Growing the market:!

Approx. 30% of tables are proprietary!

Gaining popularity in intl markets!

PTG GROWTH DRIVERS

the wine cellar


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the wine cellar

Brand accumulation through development or acquisition! Explore creative ways to extend patent life and/or refresh games!


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ETS INNOVATIONFusion Hybrid

Fusion Auto

Table Master FusionFusion Live

Fusion Virtual

Enhanced, revitalized and rebranded Fusionproducts!

Greater synergies and efficiencies!

o All share common platform!

o Various configurations: Hybrid, Virtual, Live, Table Master!


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ETS GROWTH DRIVERSFUSION Hybrid FUSION Virtual

!!

!!

Upgrade legacy installed base,predominantly in Australia !

Player acceptance in Asia! New ways to play: Multigame,

Concurrent!

Upgrade legacy installed base,predominantly in Australia!

Electronic-only markets! New ways to play: Multigame,

Concurrent!

TableMaster FUSION i-Table!

!

!

!!

!

!

!

Upgrade opportunities in U.S.! Low-denom alternative to live tables! Electronic-only markets!

International markets!o Spain!o UK!

o Mexico!


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IGAMING

Lou Castle

Chief Strategy Officer

The Market!

Opportunities!

Our Approach!


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NOW LIVE ON GAMEACCOUNT NETWORK


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sports betting!52%!

bingo!7%!

other!1%!

poker!

14%!

other!1%!

table

games!

9%!

slots!13%!

live

tables!

3%!

casinogames!26%!

$28 billion online gambling market as of 2012!GLOBAL ONLINE GAMBLING MARKET*

*Source:H2GamblingCapital,March2013


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IGAMING OPPORTUNITY

35

Real Money Gambling (RMG) Free-To-Play

2 core avenues for growth

Online and mobile versions of our games! Offered in legal, regulated, for-money markets!

Europe! NJ (casino games), NV & DE (online poker)! Asia!

Online and mobile versions of our games(playshfl.com)!

No requirement to pay for play! Web-embeddable games! Stand-alone game apps! Part of social casino apps!

How it works

High-margin, recurring revenue:! Participation arrangements with online

operators ! Licensing our content!

Casino games profitable part of RMG! Europes online market 11 in 2011*!

Acceleration of leveling-up! Option to buy additional chips!

Value to operators! Acquisition of new customers! Engagement of current customers!

Build brand exposure!

*Source:H2GamblingCapital,February2012


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WHY INVEST

What Sets Us Apart!

Uses of Cash!

Latest IR Resources !

Gavin Isaacs

Chief Executive Officer


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WHAT SETS US APART

38

Leader in shufflers and table games!

Reputable, proven, growing company with a healthy balance sheet!Over 3,000 customers located on six continents!Growth in Asia!

Worldwide MarketLeadership

Over 2,600 registered and pending patents, trademarks & copyrights!Ability to leverage content over multiple businesses and regions!Many of gamings most well known brands!

Robust Suite ofContent and Depth

of IP Portfolio

Five distinct businesses!Focused on security and efficiency, as well as entertainment!Product Diversity

Regulatory approvals, licenses, strong intellectual property and research &development costs make it difficult for new participants to enter the industry!

Service infrastructure 202 worldwide service reps!

High Barriers toEntry

Approximately 50% of revenue is recurring; opportunity to grow with iGamingrevenue!

High margins 64% gross margin in FY 2012!55% of revenue international!

Strong BusinessModel

$41M cash balance as of Q2 13; $43M in free cash flow in FY 2012!Zero net debt as of Q2 13!

Flexibility to invest in growth through the core business or M&A; managereturns to shareholders!

Stellar Balance

Sheet


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USES OF CASH

Priorities:!

Invest in business!

M&A!

oCriteria: strategic, cultural, financial !

Return to shareholders!

oDividends!

oBuybacks

!


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INVESTOR RELATIONS TOOLS

For iPhone & iPad! Search for SHFL IR in the

App Store!

For non-Apple devices! Visit ir.shfl.com/m from a

mobile browser! Interactive Analyst Center!

ir.shfl.com under Quick Links!


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Q & A

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@ S H F L e n t & @ S H F L _ N e w s

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Documents

SHFL 2013 Analyst Day Presentation