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forward-looking statement During this presentation and the Q&A session, various remarks that are notpurely historical constitute forward-looking statements for purposes of the“safe harbor” provisions under the Private Securities Litigation Reform Act of1995. Our beliefs, expectations, forecasts, objectives, plans, prospects andstrategies for the company, including without limitation those concerningexpected operating results, revenues and earnings are not guarantees of futureperformance and are subject to risks and uncertainties that could cause actualresults to differ materially from results expressed or implied by the forward-looking statements. Additional information on risk factors that couldpotentially affect the Company’s financial results may be found in documentsfiled by the Company with the SEC, including the Company’s current reports onForm 8-K, quarterly reports on Form 10-Q and its latest annual report on Form10-K and are based on information available to us on the date hereof. We donot intend, and assume no obligation, to update any forward-lookingstatements. Readers are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date hereof. We will also bediscussing certain financial measures such as adjusted EBITDA, whichrepresents a non-GAAP financial measure.
This presentation includes reclassifications for discontinued operations andsegment realignment.
3
ceo opening remarks
♦ SHFL is building momentum• record net income of $9.1M • record Adjusted EBITDA of $19.5M• continuing to grow recurring revenue• R&D investment is paying off
o EGM ship share at all-time higho EGMs are a sustainable, long-term business
♦ Q3 performance driven by new products in existing markets
♦ SHFL does not rely on the North American slot replacement cycle for growth
♦ different dynamics involved in SHFL’s upgrade initiatives♦ e-Tables are in an investment phase♦ SHFL’s fundamentals are strong
4
third quarter 2011 update
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%
5
revenue & eps
6
Q1' 10 Q2' 10 Q3' 10 Q4' 10 Q1' 11 Q2' 11 Q3' 11revenue $40 $51 $52 $59 $44 $60 $58gaap eps $0.07 $0.15 $0.11 $0.10 $0.09 $0.14 $0.17
$0.00
$0.02
$0.04
$0.06
$0.08
$0.10
$0.12
$0.14
$0.16
$0.18
$30
$35
$40
$45
$50
$55
$60
revenue gaap eps
(in millions, except per share amounts)
recurring revenue
7
0%
10%
20%
30%
40%
50%
60%
70%
$20.0
$21.0
$22.0
$23.0
$24.0
$25.0
$26.0
$27.0
Q1 10 Q2 10 Q3 10 Q4 10 Q1 11 Q2 11 Q3 11
recurring revenue recurring revenue as a percentage of total revenue
(in millions)
geographic distribution of revenue
canadaytd q3 ‘11: 4%
united statesytd q3 ‘11: 48%
europeytd q3 ‘11: 4%
australia/nzytd q3 ‘11: 35%
other americasytd q3 ‘11: 2%
asiaytd q3 ‘11: 7%
8
total quarterly revenue
21%
9
$22.6
$11.0
$6.8
$18.0
$0
$10
$20
$30
$40
$50
$60
$70
Q1' 10 Q2' 10 Q3' 10 Q4' 10 Q1' 11 Q2' 11 Q3' 11
EGMETSPTGUtility
$40.3
$50.8
$58.3
$51.5
$58.6
$43.8
$59.9
(in millions)
electronic gaming machines
10
‐
200
400
600
800
1,000
1,200
Q1 '10 Q2 '10 Q3 '10 Q4 '10 Q1 '11 Q2 '11 Q3 '11
sold units during quarter
units
$0
$5
$10
$15
$20
$25
Q1 '10 Q2 '10 Q3 '10 Q4 '10 Q1 '11 Q2 '11 Q3 '11
total egm revenue
revenue(in millions)
utility
11
$0
$5
$10
$15
$20
$25
Q1 '10 Q2 '10 Q3 '10 Q4 '10 Q1 '11 Q2 '11 Q3 '11
leases sales
revenue(in millions)
-
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
9,000
Q1 '10 Q2 '10 Q3 '10 Q4 '10 Q1 '11 Q2 '11 Q3 '11lease installed base
0
100
200
300
400
500
600
700
800
Q1 '10 Q2 '10 Q3 '10 Q4 '10 Q1 '11 Q2 '11 Q3 '11
sold units during quarter
shuffler units
proprietary table games
12
$0
$2
$4
$6
$8
$10
$12
Q1 '10 Q2 '10 Q3 '10 Q4 '10 Q1 '11 Q2 '11 Q3 '11
leases sales
revenue(in millions)
4,000
4,200
4,400
4,600
4,800
5,000
5,200
5,400
5,600
Q1 '10 Q2 '10 Q3 '10 Q4 '10 Q1 '11 Q2 '11 Q3 '11lease installed base
0
10
20
30
40
50
60
Q1 '10 Q2 '10 Q3 '10 Q4 '10 Q1 '11 Q2 '11 Q3 '11sold units during quarter
units
electronic table games
13
$0
$2
$4
$6
$8
$10
$12
$14
Q1 '10 Q2 '10 Q3 '10 Q4 '10 Q1 '11 Q2 '11 Q3 '11
leases sales
revenue(in millions)
0
500
1,000
1,500
2,000
2,500
3,000
Q1 '10 Q2 '10 Q3 '10 Q4 '10 Q1 '11 Q2 '11 Q3 '11lease installed base
units
0
50
100
150
200
250
300
350
400
450
500
Q1 '10 Q2 '10 Q3 '10 Q4 '10 Q1 '11 Q2 '11 Q3 '11
sold seats during quarter
gross margin
leas
e &
sale
sby
pro
duc
t seg
men
t
14
20%
30%
40%
50%
60%
70%
80%
90%
All Products Utility PTG ETS EGM
Q2’ 11Q1’ 11Q4’ 10Q1’ 10 Q2’ 10 Q3’ 10 Q3’ 11
25%30%35%40%45%50%55%60%65%70%75%
Q1' 10 Q2' 10 Q3' 10 Q4' 10 Q1' 11 Q2' 11 Q3' 11
All Products Leases Sales
adjusted ebitda and free cash flow - trend
15
Q1' 10 Q2' 10 Q3' 10 Q4' 10 Q1' 11* Q2' 11 Q3' 11adjusted ebitda $12.7 $18.0 $15.5 $16.0 $13.5 $19.0 $19.5free cash flow $4.9 $4.6 $7.7 $11.3 ($3.5) $15.4 $14.0
($5)
$0
$5
$10
$15
$20
$0
$5
$10
$15
$20
$25
adjusted ebitda free cash flow
*
* Includes payments to acquire intellectual property assets of approximately $6.5 million
(in millions)
adjusted ebitda and free cash flow
16
reconciliation of income from continuing operations to adjusted ebitda:
2011 2010 2011 2010
net income 9.1$ 5.8$ 21.9$ 17.4$ other expense - 0.5 2.1 1.1 share-based compensation 0.7 1.5 2.2 3.3 income tax provision 3.6 2.1 7.9 6.8 depreciation and amortization 6.1 5.6 17.9 17.6
adjusted ebitda 19.5$ 15.5$ 52.0$ 46.2$
less cash paid for:products leases and held for sale (4.3)$ (3.6)$ (11.6)$ (16.7)$ purchases of property and equipment (0.7) (1.8) (2.7) (4.3) purchases of intangible property (0.1) - (6.3) (2.3) acquisition of business - - (6.5) - income taxes (0.4) (2.4) 0.9 (5.8)
free cash flow 14.0$ 7.7$ 25.8$ 17.1$
three months ended nine months endedjuly 31, july 31,
(in millions)
inventory trend
17
$0
$10
$20
$30
$40
$50
$60
$70
Q1' 10 Q2' 10 Q3' 10 Q4' 10 Q1' 11 Q2' 11 Q3' 11
raw materials work-in-progress finished goods Revenue
(in millions)
capital expenditures
18
* Includes payments to acquire intellectual property assets
$0
$2
$4
$6
$8
$10
$12
$14
$16
$18
1Q' 10 2Q' 10 3Q' 10 4Q' 10 1Q' 11* 2Q' 11 3Q' 11
leased capex intangibles / ip puchased other capex
(in millions)
coo update♦ operating highlights
♦ EGMs firing on all cylinders♦ MD2CR upgrade initiative underway
• 180 MD2CRs installed to date• target previous-generation MDs
o 7,000 sold units and 2,000 leased units• creates new recurring revenue • helps protect lease base• expand shuffler footprint
♦ enhancements to progressives• wireless• cross-property
♦ i-Table• 60 units installed on four continents• new content• back-of-house connectivity
♦ product diversity• creates a natural hedge for our businesses
19
ceo closing remarks♦ next chapter of growth:
♦ thoughtful investments in existing and emerging businesses• rightsize ETS business
o new leadershipo improving current offeringso leverage IPo focused rollout of i-Table
• Latin America and Asia expansion• i-Gaming
o licensing deals in the pipelineo server-based platform and play-for-fun appso content and infrastructure for expanded i-Gaming
♦ operational improvements and efficiencies• optimizing supply chain
♦ maintain focus on leasing• grow shuffler lease base
o upgrade initiativeso increased sales coverageo new marketing campaigno new shuffler model concepts
20
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