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

 SPECTRUM GAMING CAPITAL o Strategic Partnerships o Capital Raising o Valuations o Financial Advisory Services 2

Robert Heller, CEO, Spectrum Gaming Capital 3

Europe US  Distinct from land based  Will complement amenitized land based  Minimally cannibalistic  More synergistic  Betting is 1/3 rd of the industry  Betting – an uncertainty  Substantial unregulated competition  Minimal unregulated competition  Licenses open to all  Advantage for US licensees  Constantly evolving  State by state roll out 4

I-Gaming Date-Licensing Regime Tax Rate Comments Country Revenues ( € m, 2012) 1,268 2001-lottery and sports 20% (No. territory-4%) Australia betting only 3,711 Sept. 2007-all gaming 15% Point of UK Consumption tax will change offshore 1,275 2007- betting S-9,3% P-2% Italy 2011-poker, casino 1,118 January 2008-lottery, 20% State vs. federal Germany sports confusion 1,612 June 2010-Lottery, S-8.5%, p-2%,Bet-14.5% Protectionist France betting, poker regime, inadequate liquidity in Poker 544 May 2011-all gaming 25% New market Spain 573 Unregulated Proposed 10% in 2013 Sweden Source: Company Reports, H2 Gambling Capital 5

Online and land based tax rates are fairly comparable Location Land Based tax rate Internet tax rate UK 15% 15% Spain 25% 25% Sweden None None S – 3.5%, B – 11%, P – Italy 30% proposed 3%, Other – 20% France 0.5% (casino), 2% on slots S - 9.3%, P - 2% + sliding scale regime New Jersey 9.25% 15% Nevada 6.75% 6.75% Delaware Initial $3.75m + 10% of Initial $3.75m + 10% of remainder remainder Source: Company Reports, Wells Fargo, H2 Gambling Capital s-sports, p-poker, b-bingo 6

Some games are better suited to the online environment than others European Internet based European Land Based Gaming 11.1% 10.5% Betting 9.1% 33.7% Betting 42.5% Casinos Casinos Bingo Bingo 43.9% 46.1% State State Lotteries Lotteries 3.1% Source: H2 Gambling Capital, Spectrum Gaming Capital Includes onshore and offshore I-Gaming Casino includes Poker, Casino games and skill games 7

Includes Betting, Gaming and Lottery Land Based Geographic Breakdown Internet Based Geographic Breakdown Italy 9.2% Italy UK UK 23.7% 23.6% Spain Spain 40.6% Germany 26.7% Germany France France 11.6% 15.3% Other EU Other EU 13.7% 8.0% 12.1% 11.6% 3.9% Source: H2 Gambling Capital, Spectrum Gaming Capital 8

On-line businesses have slightly higher margins, but are more profitable as they are “asset - lite.” Fiscal Year Ended 2012 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 Source: Company filings *Online segment only 9

Some UK brands have done well embracing the internet 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 10

Poker is about liquidity and PokerStars dominates 11 Source: Pokerhistory.eu and pokerscout.com

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I-Gaming players come from a different demographic than land based players. Internet Player Land Based Player Working Age 60+ Young Retired high income less educated lower spend ($90) higher spend($200) frequent play less tech savvy tech savvy Source: Pew internet post election survey, Spectrum Gaming 13

Asian land based growth has driven global expansion. Global Gaming Revenue 350 300 Billions (Euros) 250 200 150 100 50 0 Land Based GGR Internet Gaming GGR Source: H2 Gambling Capital 14

Land Based GGR continued to grow as I-Gaming took hold in the UK. Modest cannibalization since 2007. 16,000 5% 4% 14,000 3% 12,000 2% Millions ( € ) 10,000 1% 8,000 0% -1% 6,000 -2% 4,000 -3% 2,000 -4% 0 -5% Land Based Onshore Offshore GDP Growth Source: H2 Gambling Capital, International Monetary Fund 15

Land Based GGR has not been cannibalized by I-Gaming in France. The Recession has had minimal impact. 12,000 3% 2% 10,000 Millions( € ) 1% 8,000 0% 6,000 -1% 4,000 -2% 2,000 -3% 0 -4% Land Based Onshore Offshore GDP Growth Source: H2 Gambling Capital, International Monetary Fund 16

Introduction of VLT’s in 2010 has dominated the Italian Gaming story 25,000 3% 2% 20,000 1% Millions( € ) 0% 15,000 -1% -2% 10,000 -3% -4% 5,000 -5% 0 -6% Land Based Onshore Offshore GDP Growth Source: H2 Gambling Capital, International Monetary Fund 17

Land based GGR in Sweden experienced some cannibalization during early 2000’s and modestly from 2011-2012. Recession has had little impact. 2,500 8% 6% 2,000 4% Millions( € ) 1,500 2% 0% 1,000 -2% 500 -4% 0 -6% Land Based Onshore Offshore GDP Growth Source: H2 Gambling Capital, International Monetary Fund 18

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Streaming (and DVD rentals) have increased consumption of movies. Decreases in theatre tickets sold has been offset by price increases. $16 $14 $12 Billions ($) $10 $8 $6 $4 $2 $0 Theatre Revenue Netflix Revenue 20 Source: Nash Information Services, Annual reports

1.8 $9.00 1.6 $8.00 1.4 $7.00 Billions 1.2 $6.00 1 $5.00 0.8 $4.00 0.6 $3.00 0.4 $2.00 0.2 $1.00 0 $0.00 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Movie Tickets Sold Price Per Ticket Price increases offset lower ticket sales suggesting theatres are catering to fewer, more upscale customers – a similar trend in regional gaming. Source: Nash Information Services 21

Internet retail sales have not cannibalized retail sales overall 5,000,000 5.00% 4,500,000 4.00% 4,000,000 3.00% Millions ($) 3,500,000 2.00% 3,000,000 1.00% 2,500,000 0.00% 2,000,000 -1.00% 1,500,000 -2.00% 1,000,000 -3.00% 500,000 - -4.00% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Land Based Online GDP Growth Source: US Census Bureau, International Monetary Fund 22

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 $4,500 Millions ($) $4,000 Recession $3,500 $3,000 $2,500 $2,000 $1,500 $1,000 $500 $0 Non-internet Internet Source: Company Annual reports 23

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. $18,000 $16,000 Millions($) Recession $14,000 $12,000 $10,000 $8,000 $6,000 $4,000 $2,000 $0 Stores Direct Source: Company reports 24

As Nike has expanded its online brand its store sales have experienced healthy growth. $25,000 $20,000 Millions $15,000 $10,000 $5,000 $0 Retail stores Internet Source: Company annual reports 25

Similar to Nike, Lululemon store sales have not been hampered by the online segment, started in 2009. $1,400 $1,200 $1,000 Millions $800 $600 $400 $200 $0 Retail stores Internet Source: Company annual reports 26

Comps Trust OR 27

 Poker is sticky  Driven by liquidity  Benefits from TV exposure, celebrity  Most powerful brands may not get licensed in the US 28

Comparison between the largest casinos in the UK and the US G CASINO MGM Location Coventry, UK Las Vegas, NV Hotel Rooms 121 6852 Slots/Gaming 70 2500 Machines Tables 32 193 Restaurants 6 23 and Bars Casino Hours 24 hrs. on 24 hours weekends Meeting Space Up to 6,000 people 602,000 sq. ft Source: Casinocity.com, grosvenorcasinos.com 29

A survey on what type of credit card rewards people prefer most, shows that experience rewards are more desired by higher income people. 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% 15% Gas 6% 3% 4% Charitable Donations 5% 1% 3% Free night at the local ? ? ? resort casino Source: comscore.com Data as of April 2011 30

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 Internet gaming connected to land based casinos may offer better public policy: o Casinos create jobs o Casinos create capital investment o Casinos draw tourists from out of state o Casinos provide a social experience o Casinos draw from a more affluent client base  Lottery has not moved online substantially – 42% of land based, 11% online in Europe/UK. 32

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 33