o Capital Raising o Valuations o Financial Advisory Services 2 - - PowerPoint PPT Presentation

• SPECTRUM GAMING CAPITAL
• Strategic Partnerships
• Capital Raising
• Valuations
• Financial Advisory Services

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Robert Heller, CEO, Spectrum Gaming Capital

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Europe

• Distinct from land based
• Minimally cannibalistic
• Betting is 1/3rd of the industry
• Substantial unregulated competition
• Licenses open to all
• Constantly evolving

US

• Will complement amenitized land based
• More synergistic
• Betting – an uncertainty
• Minimal unregulated competition
• Advantage for US licensees
• State by state roll out

Country

I-Gaming Revenues (€m, 2012) Date-Licensing Regime Tax Rate Comments

Australia

1,268 2001-lottery and sports betting only 20% (No. territory-4%)

UK

3,711

• Sept. 2007-all gaming

15% Point of Consumption tax will change

• ffshore

Italy

1,275 2007- betting 2011-poker, casino S-9,3% P-2%

Germany

1,118 January 2008-lottery, sports 20% State vs. federal confusion

France

1,612 June 2010-Lottery, betting, poker S-8.5%, p-2%,Bet-14.5% Protectionist regime, inadequate liquidity in Poker

Spain

544 May 2011-all gaming 25% New market

Sweden

573 Unregulated Proposed 10% in 2013

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Source: Company Reports, H2 Gambling Capital

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Source: Company Reports, Wells Fargo, H2 Gambling Capital s-sports, p-poker, b-bingo

Location Land Based tax rate Internet tax rate UK 15% 15% Spain 25% 25% Sweden None None Italy 30% proposed S – 3.5%, B – 11%, P – 3%, Other – 20% France 0.5% (casino), 2% on slots + sliding scale regime S - 9.3%, P - 2% New Jersey 9.25% 15% Nevada 6.75% 6.75% Delaware Initial $3.75m + 10% of remainder Initial $3.75m + 10% of remainder Online and land based tax rates are fairly comparable

7 33.7% 46.1% 9.1% 11.1%

European Internet based

Betting Casinos Bingo State Lotteries

10.5% 43.9% 3.1% 42.5%

European Land Based Gaming

Betting Casinos Bingo State Lotteries Source: H2 Gambling Capital, Spectrum Gaming Capital Includes onshore and offshore I-Gaming Casino includes Poker, Casino games and skill games

Some games are better suited to the online environment than others

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Source: H2 Gambling Capital, Spectrum Gaming Capital

9.2% 26.7% 3.9% 8.0% 11.6% 40.6%

Internet Based Geographic Breakdown

Italy UK Spain Germany France Other EU

23.6% 15.3% 12.1% 13.7% 11.6% 23.7%

Land Based Geographic Breakdown

Italy UK Spain Germany France Other EU

Includes Betting, Gaming and Lottery

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Online Company Ebitda Margin Revenue/Assets Leverage 888 Holdings 18% 1.32 0.0x Betfair 19% 1.15 0.0x Bwin Party 21% 0.66 0.2x Ladbrokes 28%* 0.99 1.4x Paddy Power 26%* 1.28 0.0x Unibet 27% 0.70 0.3x BetatHome 20% 1.41 0.0x Rank Group 17%* 1.23 0.3x William Hill 27%* 0.68 1.2x Betsson Krona 31% 0.75 0.0x AVERAGE 23% 1.02 0.3x US Regional Land Based ASCA 28% 0.58 5.7x PNK 21% 0.57 5.8x ISLE 18% 0.62 6.5x PENN 24% 0.51 4.0x CZR 19% 0.31 14.5x MTGA 22% 0.62 5.4x AVERAGE 22% 0.53 7.0x Fiscal Year Ended 2012

On-line businesses have slightly higher margins, but are more profitable as they are “asset-lite.”

Source: Company filings *Online segment only

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Top 5 Top 5 Top 5 Company UK Online Company Total UK Name Revenue Name Revenue Name 2011 Name 2011 William Hill 253 Gala Coral 1,054 Betfair 184 William Hill 1,046 Bet 365 162 Ladbrokes 838 Paddy Power 135 Rank Group 525 Ladbrokes 126 Paddy Power 220

Source: Gambling Data estimates, Company reports

Some UK brands have done well embracing the internet

11 Source: Pokerhistory.eu and pokerscout.com

Poker is about liquidity and PokerStars dominates

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I-Gaming players come from a different demographic than land based players.

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Internet Player Working Young high income lower spend ($90) frequent play tech savvy Land Based Player Age 60+ Retired less educated higher spend($200) less tech savvy

Source: Pew internet post election survey, Spectrum Gaming

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Source: H2 Gambling Capital

50 100 150 200 250 300 350

Global Gaming Revenue

Land Based GGR Internet Gaming GGR

Billions (Euros)

Asian land based growth has driven global expansion.

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• 5%
• 4%
• 3%
• 2%
• 1%

0% 1% 2% 3% 4% 5% 2,000 4,000 6,000 8,000 10,000 12,000 14,000 16,000 Land Based Onshore Offshore GDP Growth

Land Based GGR continued to grow as I-Gaming took hold in the UK. Modest cannibalization since 2007.

Source: H2 Gambling Capital, International Monetary Fund

Millions (€)

Land Based GGR has not been cannibalized by I-Gaming in France. The Recession has had minimal impact.

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• 4%
• 3%
• 2%
• 1%

0% 1% 2% 3% 2,000 4,000 6,000 8,000 10,000 12,000 Land Based Onshore Offshore GDP Growth Source: H2 Gambling Capital, International Monetary Fund

Millions(€)

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• 6%
• 5%
• 4%
• 3%
• 2%
• 1%

0% 1% 2% 3% 5,000 10,000 15,000 20,000 25,000 Land Based Onshore Offshore GDP Growth

Introduction of VLT’s in 2010 has dominated the Italian Gaming story

Source: H2 Gambling Capital, International Monetary Fund

Millions(€)

Land based GGR in Sweden experienced some cannibalization during early 2000’s and modestly from 2011-2012. Recession has had little impact.

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• 6%
• 4%
• 2%

0% 2% 4% 6% 8% 500 1,000 1,500 2,000 2,500 Land Based Onshore Offshore GDP Growth Source: H2 Gambling Capital, International Monetary Fund

Millions(€)

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20 $0 $2 $4 $6 $8 $10 $12 $14 $16

Theatre Revenue Netflix Revenue

Streaming (and DVD rentals) have increased consumption of movies. Decreases in theatre tickets sold has been offset by price increases.

Billions ($)

Source: Nash Information Services, Annual reports

21 $0.00 $1.00 $2.00 $3.00 $4.00 $5.00 $6.00 $7.00 $8.00 $9.00 0.2 0.4 0.6 0.8 1 1.2 1.4 1.6 1.8 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Movie Tickets Sold Price Per Ticket

Billions

Source: Nash Information Services

Price increases offset lower ticket sales suggesting theatres are catering to fewer, more upscale customers – a similar trend in regional gaming.

22 Millions ($)

Internet retail sales have not cannibalized retail sales overall

Source: US Census Bureau, International Monetary Fund

• 4.00%
• 3.00%
• 2.00%
• 1.00%

0.00% 1.00% 2.00% 3.00% 4.00% 5.00%

• 500,000

1,000,000 1,500,000 2,000,000 2,500,000 3,000,000 3,500,000 4,000,000 4,500,000 5,000,000

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Land Based Online GDP Growth

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$0 $500 $1,000 $1,500 $2,000 $2,500 $3,000 $3,500 $4,000 $4,500

Non-internet Internet Source: Company Annual reports

Millions ($) With the advent of the online business in 2000, Williams Sonoma’s store based revenue continued to grow until the downturn of 2008. Store revenues have flattened while online continues to grow

Recession

24 $0 $2,000 $4,000 $6,000 $8,000 $10,000 $12,000 $14,000 $16,000 $18,000 Stores Direct

Millions($)

Source: Company reports

Interestingly, as Gap online came on, store based revenues declined, particularly from 2007-2011, suggesting that the economic downturn contributed, but also that the online business has cannibalized store sales.

Recession

25 $0 $5,000 $10,000 $15,000 $20,000 $25,000 Retail stores Internet Source: Company annual reports

As Nike has expanded its online brand its store sales have experienced healthy growth. Millions

26 $0 $200 $400 $600 $800 $1,000 $1,200 $1,400 Retail stores Internet Source: Company annual reports

Similar to Nike, Lululemon store sales have not been hampered by the online segment, started in 2009. Millions

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Trust

OR

Comps

• Poker is sticky
• Driven by liquidity
• Benefits from TV exposure, celebrity
• Most powerful brands may not get licensed in the US

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G CASINO MGM

Location

Coventry, UK Las Vegas, NV

Hotel Rooms

121 6852

Slots/Gaming Machines

70 2500

Tables

32 193

Restaurants and Bars

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Casino Hours

24 hrs. on weekends 24 hours

Meeting Space

Up to 6,000 people 602,000 sq. ft 29

Comparison between the largest casinos in the UK and the US

Source: Casinocity.com, grosvenorcasinos.com

Household Income Most Important rewards Less than $40K $40K-$70K $75K or more Cash Back 58% 60% 55% Merchant Rewards 14% 14% 12% Flexible Points 10% 15% 13% Airlines 7% 6% 15% Gas 6% 3% 4% Charitable Donations 5% 1% 3% Free night at the local resort casino ? ? ?

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A survey on what type of credit card rewards people prefer most, shows that experience rewards are more desired by higher income people. 15%

Source: comscore.com Data as of April 2011

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• Internet gaming connected to land based casinos may offer better public policy:
• Casinos create jobs
• Casinos create capital investment
• Casinos draw tourists from out of state
• Casinos provide a social experience
• Casinos draw from a more affluent client base
• Lottery has not moved online substantially – 42% of land based, 11% online in

Europe/UK.

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Casinos Lotteries Time to satisfaction Seconds Seconds to days Payout High Low Bet High Low Jackpots Low High Income Demographic Skews middle Skews low Player Goal Entertainment with a bonus Life changing event

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Gaming Lottery Tribal State GGR ($mm) Net Revenue GGR* Nevada 10,861

• NA

Delaware 527 514 New Jersey 3,100 1,140 California

• 1,811

6,909 Pennsylvania 3,158

• Illinois

1,639 901

• New York

1,800 4,715 921 Massachusetts

• 1,344
• Maryland

378 720

• Florida

428 1,684 2,160 Ohio 430 1,057

• Michigan

1,417 1,032 1,426 Louisiana 2,404 206 461 Indiana 2,614 323 Missouri 1,769 376 Iowa 1,467 129 115 Colorado 766 196 NA Mississippi 2,248

• NA

Source: AGA, State Gaming Commissions, Deutche Bank, Lottery annual reports

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Country Internet users as a % of population Population (mm) I Gaming spend/GDP (2012) United States 77% 314 Sweden 93% 9 .07% United Kingdom 84% 63 .11% Germany 83% 81 .03% France 80% 65 .03% Australia 68% 35 .12% Spain 67% 47 .04% Italy 58% 61 .05% Average 76% 85 .06%

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Sources: Nielsen online, ITU.int, Facebook, internetworldstats.com Data as of June 2012

I-Gaming play does not appear to correlate with overall internet usage

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We ranked states likelihood to legalize by awarding points for certain attributes Category Description Points

• I. Casino Proliferation

Greater than 9 land based casinos Less than 9 land based casinos 2 points 1 points

• II. Lottery Contribution

Greater than $1bn. Of transfers to the state Less than $1bn. Of transfers to the state 2 points 1 points

• III. Legislation

I-Gaming legislation outstanding 2 points

• IV. Freshness

Recently legalized market 1 point

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2014 2015 2016 2017 2018 2019 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Nevada California Massachusetts Florida Louisiana Iowa Delaware Pennsylvania Maryland Ohio Indiana Colorado New Jersey Illinois New York Michigan Missouri Mississippi Nevada California Massachusetts Florida Louisiana Delaware Pennsylvania Maryland Ohio Indiana New Jersey Illinois New York Michigan Missouri Nevada California Massachusetts Florida Delaware Pennsylvania Maryland Ohio New Jersey Illinois New York Michigan Nevada California Massachusetts Delaware Pennsylvania Maryland New Jersey Illinois New York Nevada California Delaware Pennsylvania New Jersey Illinois Nevada Delaware New Jersey Mature Market New Market 2nd Year Market

Assumes 3 states/year 3 year ramp-up: 50%, 75%, 100%

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$66.4 $33.4 $47.1 spend per adult in US $47.1

1.4

GDP Per Capita 18 US States Euro

I-Gaming spend per adult in UK, France, Sweden, Italy (weighted avg.)

$47.1 $33.4

$51.9

1.4x 2012-2014: Growth

• f 5% annually

Source: H2 Gambling Capital, Bureau of Economic Analysis

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Low Case - $4.5Bn High Case – $14.9Bn

Not a Betting Culture

√

Affluent

√

Internet is trusted

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High Gaming Spend per capita

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Slower roll out of full scale gaming

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Synergy with land based

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Interstate compacting

√

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Adult Population(mm) 6.7 (x) Internet GGR Per Adult 52 $ (=) I Gaming Revenue($mm) 348 $ (x) Land Based Websites % 50% (=) Land Based Websites GGR($mm) 174 $ (x) Comps Percentage 25% (=) Total Comps Awarded by LB website($mm) 43 $ (x) % of comps used for experience 33% (=) Land Based Comps($mm) 14 $ (x) Multiplier for Gaming at LB 3.3 (=) I-Gaming Contribution to Land Based Revenue ($mm) 47 $

I-Gaming revenue of ~ $350 million in two to three years plus net positive land based impact. Independent I-Gaming website GGR - $174 Casino Share (5%-10% of GGR) = $9 - $17mm Gaming Revenue Equivalent (Based on 10% - 20% margins in AC) - $50 - $150mm

Total I-Gaming Equivalent GGR Impact to LB - $100 - $200mm (less cannibalization)

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Company TMC ($B) # of US states (1-3 pts.) Initial States (NV/NJ/DE) (1 pt. each) Next States (CA/IL/PA) (1 pt. each) Actions (1-2 pts.) Next 12 States (1-2 pts.)

CZR

$2.8 13 2 1 Implementing in NV, NJ 7

PENN

$4.1 19 1 1 No public action 9

MGM

$8.7 6 2 1 Bwin.Party partnership, 50% Borgata 1

BYD

$1.3 8 2 Ø Implementing in NJ 4

ISLE

$.3 7

• 1

No public action 5

PNK

$1.4 9 1 Ø No public action 6

WYNN

$14.3 1 1 Ø Applied for NJ license Ø

LVS

$46.9 2 1 1 Publicly opposed Ø

MNTG

$.1 5 Ø 1 No public action 3 Source: Yahoo.com/finance

46 Company # of US states (1-3 points) NV/NJ/DE (1 pt. each) CA/IL/PA (1 pt. each) Actions (1-2 pts) Next 12 states (1-2 pts.)

Station Casinos

1 2 Ø Implemented in NV, Taj Mahal partnership Ø

Tropicana

5 2 Ø Gamesys partnership in NJ 2

Golden Nugget

3 2 Ø Bally’s partnership 1

Mohegan

3 1 1 Partnership with PokerStars via Resorts AC stake Ø

Affinity

4 1 Ø No public disclosure 3

Cannery

1 1 1 No public disclosure Ø

Foxwoods

1

• Ø

Partnered with GameAccount Network Ø Source: Company websites

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Betting Limits, Self exclusion policies

Hacking Under Age Technological Failure Washington Restrictions Credit Cards Problems

• SPECTRUM GAMING CAPITAL
• Strategic Partnerships
• Capital Raising
• Valuations
• Financial Advisory Services

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