SHFL Q3 11 Earnings Presentation

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SHFL Q3 11 Earnings Presentation

  1. 1. Q1 Q2 Q3 Q4SHUFFLE MASTER, INC.Q3 2011 earnings callwww.shufflemaster.com / NASDAQ: SHFL
  2. 2. ceo opening remarks 4Q3 financials 5coo update 19ceo closing remarks 20
  3. 3. forward-looking statementDuring 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
  4. 4. 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 high o 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
  5. 5. third quarter 2011 update 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 bpscapex $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
  6. 6. revenue & eps $60 $0.18 (in millions, except per share amounts) $0.16 $55 $0.14 $50 $0.12 $0.10 $45 $0.08 $40 $0.06 $0.04 $35 $0.02 $30 $0.00 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 revenue gaap eps 6
  7. 7. recurring revenue$27.0 70% (in millions)$26.0 60%$25.0 50%$24.0 40%$23.0 30%$22.0 20%$21.0 10%$20.0 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 7
  8. 8. geographic distribution of revenue europe canada ytd q3 ‘11: 4% ytd q3 ‘11: 4% asia ytd q3 ‘11: 7% united states ytd q3 ‘11: 48% australia/nz ytd q3 ‘11: 35% other americas ytd q3 ‘11: 2% 8
  9. 9. total quarterly revenue$70 (in millions) $59.9$60 $58.6 $58.3 $51.5 $50.8$50 $18.0  21% $43.8 $40.3 EGM$40 $6.8 ETS$30 $11.0  PTG$20 Utility$10 $22.6  $0 Q1 10 Q2 10 Q3 10 Q4 10 Q1 11 Q2 11 Q3 11 9
  10. 10. electronic gaming machines$25 revenue  1,200 units (in millions)  1,000$20  800$15  600$10  400$5  200$0  ‐ Q1 10 Q2 10 Q3 10 Q4 10 Q1 11 Q2 11 Q3 11 Q1 10 Q2 10 Q3 10 Q4 10 Q1 11 Q2 11 Q3 11 total egm revenue sold units during quarter 10
  11. 11. utility 9,000 shuffler units$25 revenue (in millions) 8,000 7,000 6,000$20 5,000 4,000 3,000 2,000$15 1,000 - Q1 10 Q2 10 Q3 10 Q4 10 Q1 11 Q2 11 Q3 11 lease installed base$10 800 700 600 500 $5 400 300 200 $0 100 Q1 10 Q2 10 Q3 10 Q4 10 Q1 11 Q2 11 Q3 11 0 Q1 10 Q2 10 Q3 10 Q4 10 Q1 11 Q2 11 Q3 11 leases sales sold units during quarter 11
  12. 12. proprietary table games$12 revenue 5,600 units (in millions) 5,400 5,200 5,000$10 4,800 4,600 4,400$8 4,200 4,000 Q1 10 Q2 10 Q3 10 Q4 10 Q1 11 Q2 11 Q3 11$6 lease installed base 60 50$4 40 30$2 20 10$0 Q1 10 Q2 10 Q3 10 Q4 10 Q1 11 Q2 11 Q3 11 0 Q1 10 Q2 10 Q3 10 Q4 10 Q1 11 Q2 11 Q3 11 leases sales sold units during quarter 12
  13. 13. electronic table games 3,000 units revenue$14 (in millions) 2,500 2,000$12 1,500$10 1,000 500$8 0 Q1 10 Q2 10 Q3 10 Q4 10 Q1 11 Q2 11 Q3 11 lease installed base 500$6 450 400 350$4 300 250 200$2 150 100 50$0 Q1 10 Q2 10 Q3 10 Q4 10 Q1 11 Q2 11 Q3 11 0 Q1 10 Q2 10 Q3 10 Q4 10 Q1 11 Q2 11 Q3 11 leases sales sold seats during quarter 13
  14. 14. gross margin 75% 70% 65%lease & sales 60% 55% 50% 45% 40% 35% 30% 25% Q1 10 Q2 10 Q3 10 Q4 10 Q1 11 Q2 11 Q3 11 All Products Leases Sales 90% 80% by product segment 70% 60% 50% 40% 30% 20% Q1’ 10 Q2’ 10 Q3’ 10 Q4’ 10 Q1’ 11 Q2’ 11 Q3’ 11 All Products Utility PTG ETS EGM 14
  15. 15. adjusted ebitda and free cash flow - trend $25 $20 (in millions) $20 $15 $15 $10 $10 $5 $5 $0 $0 ($5) Q1 10 Q2 10 Q3 10 Q4 10 Q1 11* Q2 11 Q3 11 adjusted ebitda $12.7 $18.0 $15.5 $16.0 $13.5 $19.0 $19.5 free cash flow $4.9 $4.6 $7.7 $11.3 ($3.5)* $15.4 $14.0 adjusted ebitda free cash flow * Includes payments to acquire intellectual property assets of approximately $6.5 million 15
  16. 16. adjusted ebitda and free cash flow reconciliation of income from continuing operations to adjusted ebitda: three months ended nine months ended july 31, july 31, 2011 2010 2011 2010 (in millions) 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 16
  17. 17. inventory trend$70 (in millions)$60$50$40$30$20$10 $0 Q1 10 Q2 10 Q3 10 Q4 10 Q1 11 Q2 11 Q3 11 raw materials work-in-progress finished goods Revenue 17
  18. 18. capital expenditures $18 (in millions) $16 $14 $12 $10 $8 $6 $4 $2 $0 1Q 10 2Q 10 3Q 10 4Q 10 1Q 11* 2Q 11 3Q 11 leased capex intangibles / ip puchased other capex* Includes payments to acquire intellectual property assets 18
  19. 19. 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
  20. 20. ceo closing remarks♦ next chapter of growth: ♦ thoughtful investments in existing and emerging businesses • rightsize ETS business o new leadership o improving current offerings o leverage IP o focused rollout of i-Table • Latin America and Asia expansion • i-Gaming o licensing deals in the pipeline o server-based platform and play-for-fun apps o content and infrastructure for expanded i-Gaming ♦ operational improvements and efficiencies • optimizing supply chain ♦ maintain focus on leasing • grow shuffler lease base o upgrade initiatives o increased sales coverage o new marketing campaign o new shuffler model concepts 20
  21. 21. slot machines what we& A Q do e-Tables specialty games i-Gaming shufflersfollow us: 21
  22. 22. notes 22

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