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Bettor Gaming Inc. Executive Summary November 4, 2014 CONFIDENTIAL 1 Bettor Gaming
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Bettor Gaming Inc. Executive Summary
November 4, 2014
CONFIDENTIAL
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Bettor Gaming
Disclaimer & ConfidentialityAll information in this document is provided for general information and discussion purposes only.
This document does not constitute an offer to sell or solicitation of an offer to buy securities.
This document includes "forward-‐looking statements and projections."
All such statements and projections within this document, other than statements of historical fact, including Bettor Gaming respective strategies, plans, objectives and expectations, are all forward-‐looking statements and
projections.
Although Bettor Gaming Inc. believes that the projections reflected in this document are reasonable at this time, it can give no assurance that these projections will prove to have been correct.
This document is confidential and contains proprietary information and intellectual property of Bettor Gaming Inc.
Neither this document nor any of the information contained herein may be reproduced or disclosed under any circumstances without the express written permission of Bettor Gaming Inc.
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Bettor Gaming
Agenda
Prepare: Slide 4……………….The Concept Slide 5……………….The Problem Slide 6……………….The Solution Slide 7……………….The Team
Attack: Slides 8-‐9……….….Market Opportunity Slide 10…………..…Revenue Models Slides 11-‐12……….The Competition Slides 13-‐14……….Implementation Strategy
Profit: Slide 15………….….Company Projections Slides 16-‐17……….Valuation Slide 18………….….Next Steps
Slide 19………….….Contact
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Glossary: ADW -‐ “Advanced Deposit Wagering”, i.e. online horse
racing sites that feature real-‐money wagering. DAUs -‐ Daily Average Users; gamers that play a particular
game or app on a daily basis. Handicapping -‐ Process of selecting winners from a field of
horses; analyzing stats on horses, jockeys, & trainers. High Volume Players -‐ Horseplayers who wager in excess of
100k per month or $1 million per year. Horseplayers -‐ Those who wager on horses, either online at
the track or otherwise. MAUs -‐ Monthly Average Users; gamers that play a
particular game or app on a monthly basis. Pari-‐Mutuel Pooling -‐ All bets of a particular type are
placed together in a pool; taxes and the house’s take are removed, and payoff odds are calculated by sharing the pool among all winning bets.
Social Casino Gaming -‐ Play-‐for-‐fun apps that recreate slot machines, casino games, card & poker tables, as well as play-‐money sports betting.
Bettor Gaming
The ConceptBettor Gaming Inc. is a gaming platform that integrates a proprietary, “play-‐for-‐fun”, horse racing social game
(HorseFlash) with a licensed, “play-‐for-‐cash”, real-‐money horse race wagering website (WinPlaceShow.co).
HorseFlash will introduce gamers to the sport of real LIVE horse racing in a “no stress” virtual bankroll environment, similar to playing with fake chips in free online poker rooms (Zynga Poker, PartyPoker); The game will earn revenue through in-‐app purchases and feature integrated promotions for the WinPlaceShow.co website.
WinPlaceShow.co is a web app with an industry leading Mobile-‐to-‐Desktop user experience, unlike any currently found on existing real-‐money horse wagering websites (TVG, TwinSpires, Xpressbet). Additional jackpot pools, referral bonus multipliers and “blind race replay” functions will help create defensible long-‐term competitive advantages.
The Bettor Gaming management team is made up of veteran leaders from the North American Thoroughbred racing industry. This includes the former CEO and CFO of Youbet.com, who grew online wagering from $30 million to $900 million per year; in 2009, Churchill Downs Inc. acquired Youbet.com for $126 million.
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Bettor Gaming
The Problem
Bettor Gaming
Horse racing represents 90% of all legal online gambling in the United States. While most people generally know what horse racing is, few are knowledgeable about specific wager types (Win, Place, Show, exactas, trifectas, pick 4’s) or the particulars of handicapping a field of horses (“picking the winners”).
“Social casino” apps (play-‐for-‐fun casino & card games) are one of the most lucrative revenue categories in both the iOS and Android app stores. The space is crowded and dominated by emulated Vegas-‐style slot apps and online poker games (with in-‐app purchases for chips); few, if any applicable, apps exist in the Horse Racing vertical.
The betting results for poker and casino games are determined by a random number generator, while the results of every horse race is determined by a LIVE man-‐and-‐beast spectacle. This demands a more sophisticated technology solution to recreate the LIVE racing experience on mobile and desktop gaming platforms.
The three major horse wagering sites (TVG, TwinSpires and Xpressbet) account for 70% of all online horse betting in the United States. None of these sites currently offer a truly viable mobile solution and instead rely heavily on their Desktop websites as the expected primary user experience.
Handicapping horses requires analysis of eye-‐straining stat sheets (see below). Reading and annotating stat lines on a mobile device is very difficult; traditionally, online horseplayers print out forms and mark them up in pen.
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The pairing of the play-‐for-‐fun HorseFlash game with the play-‐for-‐cash WinPlaceShow.co web app will delineate Bettor Gaming from other competitors in the Horse Racing, Social Casino, and Online Gambling industries.
Revenues from in-‐app purchases within the play-‐money HorseFlash game will create a diversified revenue stream for Bettor Gaming beyond real-‐money wagering alone, and create a category-‐defining app in the wide open Horse Racing vertical of the social casino gaming category.
The Company believes there is significant opportunity to convert social casino gaming players from play-‐money HorseFlash gamers into real-‐moneyWinPlaceShow.co horseplayers.
Best Speed on Turf:
7 Lil Juliana
Big Note (IRE)9
Gal Has to Like It1Top 3 Horses by “Speed on Turf”
Scroll to see ranking of the remaining field
Customizable player weighting ‘sliders’
The Solution
Updated selection results
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Paddock Reports™ are a powerful proprietary tool designed to help quickly pick winning
horses on mobile phone and tablet browsers.
Bettor Gaming
The TeamChuck Champion -‐ CEO of Youbet.com, driving annual ADW wagering from $30 million to $900 million; Senior Executive
at media companies including Chicago-‐Sun Times, Philadelphia Inquirer and Daily News.
Gary Sproule -‐ CFO, COO and CEO of Youbet.com; Executive Officer at UNOCAL; CFO at Disney Interactive Studios; Completed over $10 billion debt and equity transactions; Created significant value in turnaround & startup situations; Extensive interactive game and mobile content experience.
Greg Bauer -‐ Designer and concept developer of the HorseFlash social game; Import / export logistics and transportation sales; National TV distribution and series development for Travel Channel, National Geographic and
Discovery Networks.
Strategic Partners
Hardave Gill -‐ President and founder of Post Time Technologies and Post Time Productions; Developed and operated RaceReplays.com; Considered a leading developer of technology-‐based products and services for the racing industry.
Horsemen’s Associations -‐ Local state and national groups representing the interests of the principal owners, trainers, and breeders of the race horses themselves (“the athletes”).
AmWest Entertainment-‐ Key strategic partner that will provide a turnkey online horse wagering solution to Bettor Gaming by providing the following products and services:
‣ Multi-‐jurisdictional gambling licenses for online race wagering.
‣ Racetrack simulcast agreements with LIVE and on-‐demand video content for 130+ U.S. and 50+ international racetracks.
‣ Racetrack settlement services.
‣ Access to 3rd party data feeds for APIs for statistical race data, live odds updates and race result wager payouts.
‣ Backend tote board integrations and services.
‣ Call Center (live phone tellers and customer support).7
Bettor Gaming
Horse racing is a sport with 200 million racing fans worldwide and global wagering of over $85 billion per year.
Advance Deposit Wagering is a legalized form of Pari-‐Mutuel Horse Racing Wagering by which a customer sets up an account with a licensed ADW provider, pre-‐funds his account, and places wagers through the ADW into the host track’s Pari-‐Mutuel Pools, and receives the same odds and wager payouts as posted at the host track.
Total ADW wagering has grown at a CAGR of 11% for the last 10 years, and McKinsey has forecasted that at the current rates of growth, ADWs will account for 40% of Total U.S. Thoroughbred wagering by 2020.
Market Opportunity
U.S. Thoroughbred Wagers Placed (Billion $)
$0
$4
$8
$12
$16
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Online ADW Wagering On-Track, Satellite, OTB Wagering
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Bettor Gaming
Online Gambling
‣ 50 million online gamblers worldwide
‣ $35 billion in revenue worldwide
‣ Regulated
‣ Key Drivers‣ New customers‣ Increased monthly spend‣ Increased customer retention
Social Casino Gaming
‣ 173 million social casino gamers worldwide
‣ $2.4 billion in revenue worldwide
‣ Unregulated
‣ Key Drivers‣ New downloads‣ Increased MAU/DAU spend‣ Increased conversion to real-money play
Market Opportunity
Based on a recent Morgan Stanley research report, Social Casino Gaming grew 25% year over year vs. Traditional Gaming at 7% and Real-‐Money Gaming at 6%.
Morgan Stanley research indicates that social gaming is the first funnel for real-‐money play.
Evidence suggests that conversion rates from play-‐for-‐fun to play-‐for-‐cash wagering are as high as 10%; those players that convert to real-‐money wager $350 per month.
The global mobile games market is projected to grow 27.3% annually through 2016 and reach $23.9 billion.
Bettor Gaming Inc.
‣ Real-money website paired with a play-money social casino game
‣ 210,000 WinPlaceShow.co customers by Y3
‣ 160,000 HorseFlash MAUs by Y3
‣ Key Drivers‣ Increased conversions to real-money play‣ Increased player spend‣ Long-term customer retention
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Bettor Gaming
HorseFlash generates revenue through paid downloads and in-‐app purchases. ‣ Download Fees: One time $.99 download fee. ‣ In-‐App Purchases: Bankroll Credits; $.99 per unit. ‣ In-‐App Purchases: Handicapping Reports; $.99 per unit.
App stores and desktop gaming platforms charge a 30% fee on all download and in-‐app purchases made through their platforms.
WinPlaceShow.co generates gross revenues of 21% on all wagers processed, and net revenues of 5% after all Fees are paid to tracks, horsemen and AmWest.
In addition, both HorseFlash and WinPlaceShow.co will generate e-‐commerce, advertising and sponsorship revenues.
Revenue Models
HorseFlash Gross RevenuesMillion $
$0
$3
$5
$8
$10
Y1 Y2 Y3 Y4 Y5
WinPlaceShow.co Gross RevenuesMillion $
$0
$13
$25
$38
$50
Y1 Y2 Y3 Y4 Y5
Horse Betting $1 Yield Calculation
Takeout
Host Fees
Source Market Fee
Tote / Other Fees
AmWest Fee
21.0%
-‐4.0%
-‐7.0%
-‐1.0%
-‐4.0%
Yield 5.0%
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Bettor Gaming
The Competition -‐ WinPlaceShow.co
The largest ADW websites by 2013 wagering totals: Churchill Downs Inc. dba TwinSpires.com ($995 million); BetFair-‐TVG ($739 million); Xpressbet ($533 million); AmWest Entertainment ($76 million).
Cable TV racing channel, TVG, is experiencing 25% y-‐o-‐y growth in Q2 2014 wagering totals. TVG currently offers the only dedicated downloadable play-‐for-‐cash app; wagers are processed through an in-‐app web browser and not through the app store. TVG also recentlybegan offering 10 hours of free online streaming to horseplayers, with the ability to earn extra viewing hours through player wagering.
Xpressbet offers a compelling, yet incomplete, mobile solution: • Mobile website can be accessed directly from browsers, as opposed to having to
download a separate app (TVG). • The URL for the mobile site is separate from the primary xpressbet.com domain. • Mobile site lacks the ability to download important handicapping stats, and forces
players to reroute to the Desktop version in order to access stat information. • Xpressbet mobile site lacks any distinguishable attempts at social media features,
such as chat rooms, player polls, return bonuses, blind race replays, or easily viewable ‘probables’ tables.
Daily Fantasy Sports (DFS) are a fast-‐growing segment of the online gambling market. In September 2014, a capital syndicate made a $41 million investment in DraftKings.com.
Popular poker brands, like Full Tilt Poker, PokerStars, and Party Poker, have large usersbases and decades-‐long retention rates that date back to the early 2000’s. Many of today’s professional and casual play-‐for-‐cash poker players first learned the game of Texas Hold’em in the play-‐for-‐fun poker rooms on these brand name sites.
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Bettor Gaming
The Competition -‐ HorseFlash
There are currently no apps available on the U.S. market that allow gamers to wager play-‐money on actual LIVE horse races. Available horse racing apps are primarily made up of utility apps for handicapping horses or completely fake racing games where players breed, train and race their own avatar horse against CPU horses in virtual races.
The size, growth and real-‐money upside potential for successful social casino games have made them a hot target for acquisition by larger companies with established brick-‐and-‐mortar casino properties (Caesars Entertainment, MGM Resorts) or brand-‐name slots and gambling technologies (Bally Technologies, IGT, WMS Gaming).
CASE STUDY: “Bingo Bash” Acquired by GSN for $160 Million
While Poker and Slots are the two largest social casino verticals by revenue, Bash Gaming saw a strategic opportunity in 2011 to create a social casino game that focused on the relatively ignored Bingo vertical.
The game tackled technology challenges early on by designing multiplayer technologies that could scale to millions of users, and by coding the game to an HTML5 architecture that could be modified to work on native Android and iOS apps, as well as Desktop platforms, in all major gaming and app markets around the world.
Within three years, Bingo Bash had become the largest bingo game across all international app stores and gaming portals, with an estimated 4.4 million MAUs at the time of its $160 million acquisition by GSN in February 2014.
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Bettor Gaming
Implementation Strategy
Through a low cost turnkey ADW partnership with AmWest Entertainment, Bettor Gaming can quickly enter the ADW market with the rapid deployment of WinPlaceShow.co.
The Company will leverage relationships with the highly-‐targeted memberships of a number of state and national Horsemen’s Associations, while Post Time Technologies will provide a database of 300,000 qualified horseplayers.
Both HorseFlash and WinPlaceShow.co will be developed by software teams already familiar with the AmWest tote board APIs and backend wagering architecture. The game will meet the cross-‐platform specifications of international iOS and Android app stores, as well as Desktop gaming portals, like Facebook and Yahoo! Games.
HorseFlash will compile an extensive database of interested horse racing fans, with key metrics related to demographics, location, user retention, engagement, spending habits and customer acquisition costs.
Begin Possible Y4 Exit Event
End of Y3 Company Valuation
Monthly EBITDA Breakeven
Cumulative EBITDA Breakeven
Begin WPS.co UX/UI Development
WPS.co Beta Release
50,000Release 25,000Total HF MAUs
WPS.co Users
237,000
25,000 50,000 75,000Release 200,000 578,000
HF to WPS.co Conversions 10,000 50,000 100,000 154,000
Monthly EBITDA
($50,000) $25,000 $100,000 $250,000 $500,000 $1,000,000 $1,659,000
75,000 100,000
100,000
150,000
300,000
125,000
200,000
400,000
WPS.co Hard Release HF PublicRelease
HF MinorIteration Update Major New
Game Release
Months 1-6 Months 7-12 Months 13-18 Months 19-24
Major New Game Release
Begin HF Development Ramp up Database CRM
Ramp up Referral & Affiliate Marketing Programs
Minor Website and Game Upgrades
Year 4Year 3 Year 5
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Bettor Gaming
Implementation Strategy
Marketing
Marketing
Horsemen’s Association Databases
Social Media & Content Creation
Online Poker, Casinos & Card Clubs
Industry Conferences & Consumer Exhibitions
Marketing
High Volume Player Relationships
Track Sponsorships, Events & Tournaments
Post Time Technologies Player Database
Affiliate & Referral Marketing Programs
SEO, Paid Search & Mobile Advertising
Bettor GamingInc.
NewCustomers
HorseFlashSocial Game
“Customer Engine”WinPlaceShow.co
The ADW“Cash Engine”
Cross- Promotion
New Customers New Customers
Exclusive Contributions from the
Bettor Gaming Team
RevenueRevenue
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Bettor Gaming
WinPlaceShow.co EBITDAMillion $
-$4
$0
$4
$8
$12
$16
Y1 Y2 Y3 Y4 Y5
HorseFlash EBITDAMillion $
-$1
$0
$1
$2
$3
$4
Y1 Y2 Y3 Y4 Y5
Company ProjectionsFunding of $545,000 (which includes $50,000 working capital) is required to build, launch and commercialize both
WinPlaceShow.co and HorseFlash over a two phase deployment.
Projected consolidated EBITDA in the fifth year of operations is $15.6 million.
The Bettor Gaming business model is highly leveraged and scalable, with projected monthly breakeven in 8 months and cumulative breakeven in 17 months.
Bettor Gaming has an implied Pre-‐Money Valuation of $4.4 million based on two Pre-‐Revenue Valuation Methodologies.
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Bettor Gaming
ValuationThe Company has used two methodologies for the valuation of Bettor Systems, with the first methodology using a
Multiple of EBITDA to determine the Company Enterprise Value, and the second methodology using Market Comparable Transactions to determine the Company Enterprise Value.
Because Bettor Systems is a pre-‐revenue startup Company, significant discounting (risk adjustment) has been made to the respective estimated Enterprise Values for each methodology.
Based on this analysis, Management believes that the Pre-‐Money Valuation for Bettor Systems is $4,354,000.
Assumptions Used for Both Valuation Methodologies: Investor requires exit / liquidation event beginning in Year 4. Investor requires 40% IRR on their investment. Investment is $545,000.
Methodology 1 -‐ Multiple of EBITDA
Year 3 EBITDA = $5,369,000 (Source: Five Year Financial Plan). Multiple of 5X is applied to Year EBITDA to estimate Enterprise Value = $26,846,000. Risk Adjustment Rate for Pre-‐Revenue Start Up companies = 50%. Risk Adjusted Enterprise Value = $13,423,000. Post-‐Money Valuation based on 40% IRR required by Investor = $4,899,000. Pre-‐Money Valuation based on $545,000 Investment = $4,354,000.
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Bettor Gaming
Valuation
Methodology 2 -‐ Comparable Market Transactions
Enterprise Value based on comparable market transactions summarized below = $49,000,000. Risk Adjustment Rate for Pre-‐Revenue Start Up companies = 73%. Risk Adjusted Enterprise Value = $13,423,000. Post-‐Money Valuation based on 40% IRR required by Investor = $4,899,000. Pre-‐Money Valuation based on $545,000 Investment = $4,354,000.
ADW Market Transactions Purchase Multiple
Target Acquirer Date LTM Handle Price of HandleEbet Sportstech 2012 $106,000,000 $12,600,000 8.4
Television Game Network Betfair 2009 $511,000,000 $50,000,000 10.2Youbet.com Churchill Downs 2009 $438,000,000 $128,800,000 3.4
Brisnet Churchill Downs 2007 $175,000,000 $80,000,000 2.2 Weighted Average Multiple of Handle $1,230,000,000 $271,400,000 4.5Implied Valuation - WinPlaceShow.co $184,000,000 $40,888,889 4.5
Online Gaming Market Transactions: Purchase Cost
Target Acquirer Date MAUs Price Per MAUDragonplay Bally 2014 3,100,000 $100,000,000 $32
Pacific Interactive Caesars 2014 2,800,000 $90,000,000 $32Bash Gaming GSN 2014 4,400,000 $160,000,000 $36
Bingo Blitz Caesars 2013 3,100,000 $45,000,000 $15Double Down IGT 2012 4,700,000 $500,000,000 $106
Playticka Caesars 2011 2,900,000 $175,000,000 $60 Weighted Average Cost Per MAU 21,000,000 $1,070,000,000 $51Implied Valuation – HorseFlash 160,000 $8,152,000 $51
Implied Valuation - Bettor Gaming Inc. $49,040,889 17
Bettor Gaming
1. Follow up on any questions and additional data requests.
2. Reach agreement on the Company Valuation.
3. Reach agreement on the Use of Funds.
4. Reach agreement on the Investment Structure.
5. Reach agreement on Pro-‐Forma Cap Table.
6. Complete due diligence.
7. Draft all agreements.
8. Execute all agreements.
9. Fund.
Next Steps
Additional Available Resources: Bettor Gaming -‐ Executive Business Summary Bettor Gaming -‐ Consolidated 5-‐Year Financial Plan Market Research Report -‐ Horse Racing/Online Gambling/Social Gaming HorseFlash wireframe mockup WinPlaceShow.co design templates
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Bettor Gaming
