Q4-2015 Conference Call

 FINAL TRANSCRIPT INNOVA Gaming Group Inc. 2015 Fourth Quarter and Year-­‐End 2015 Financial Results Conference Call Event Date/Time: March 15, 2016 — 11:00 a.m. E.T. Length: 49 minutes "Though CNW Group has used commercially reasonable efforts to produce this transcript, it does not represent or warrant that this transcript is error-­free. CNW Group will not be responsible for any direct, indirect, incidental, special, consequential, loss of profits or other damages or liabilities which may arise out of or result from any use made of this transcript or any error contained therein." « Bien que CNW Telbec ait fait tous les efforts possibles pour produire cet audioscript, la société ne peut affirmer ou garantir qu’il ne contient aucune erreur. CNW Telbec ne peut être tenue responsable de pertes ou profits, responsabilités ou dommages causés par ou découlant directement, indirectement, accidentellement ou corrélativement à l’utilisation de ce texte ou toute erreur qu’il contiendrait. » 1 FINAL TRANSCRIPT March 15, 2016 — 11:00 a.m. E.T. INNOVA Gaming Group Inc. 2015 Fourth Quarter and Year-­End 2015 Financial Results Conference Call CORPORATE PARTICIPANTS Jonathan Ross INNOVA Gaming Group Inc. — Investor Relations Rick Weil INNOVA Gaming Group Inc. — Chairman and Chief Executive Officer Steve Koo INNOVA Gaming Group Inc. — Chief Financial Officer CONFERENCE CALL PARTICIPANTS Robert Young Canaccord Genuity — Analyst Ralph Garcea Cantor Fitzgerald — Analyst Eyal Ofir Dundee Capital — Analyst Matthew Gan Cormark Securities — Analyst Maher Yaghi Desjardins Capital — Analyst "Though CNW Group has used commercially reasonable efforts to produce this transcript, it does not represent or warrant that this transcript is error-­free. CNW Group will not be responsible for any direct, indirect, incidental, special, consequential, loss of profits or other damages or liabilities which may arise out of or result from any use made of this transcript or any error contained therein." « Bien que CNW Telbec ait fait tous les efforts possibles pour produire cet audioscript, la société ne peut affirmer ou garantir qu’il ne contient aucune erreur. CNW Telbec ne peut être tenue responsable de pertes ou profits, responsabilités ou dommages causés par ou découlant directement, indirectement, accidentellement ou corrélativement à l’utilisation de ce texte ou toute erreur qu’il contiendrait. » 2 FINAL TRANSCRIPT March 15, 2016 — 11:00 a.m. E.T. INNOVA Gaming Group Inc. 2015 Fourth Quarter and Year-­End 2015 Financial Results Conference Call PRESENTATION Operator Hi, everyone. Welcome to INNOVA Gaming Group's 2015 fourth quarter and year-­‐end 2015 financial results conference call. As a reminder, this conference call is being recorded on Tuesday, March 15, 2016. At this time, all participants are in a listen-­‐only mode. Following the presentation, we will conduct a question-­‐and-­‐answer session. Instructions will be provided at that time for research analysts to queue up for questions. If anyone has any difficulty hearing the conference, please press *, followed by the 0 for Operator assistance at any time. I will now turn the call over to Jonathan Ross, Head of Investor Relations for INNOVA Gaming Group. Please go ahead, Mr. Ross. Jonathan Ross — Investor Relations, INNOVA Gaming Group Inc. Thanks, Lindsay (phon). Good morning, everyone, and thanks for joining us today. INNOVA Gaming Group's fourth quarter and year-­‐end 2015 financial results were released this morning. The press release, financial statements, and MD&A are available on SEDAR, as well as on our website, innovagaminggroup.com. Before I pass the call over to Rick and Steve, we would like to remind listeners that portions of today's discussion, including those that express management's expectations or estimates of our "Though CNW Group has used commercially reasonable efforts to produce this transcript, it does not represent or warrant that this transcript is error-­free. CNW Group will not be responsible for any direct, indirect, incidental, special, consequential, loss of profits or other damages or liabilities which may arise out of or result from any use made of this transcript or any error contained therein." « Bien que CNW Telbec ait fait tous les efforts possibles pour produire cet audioscript, la société ne peut affirmer ou garantir qu’il ne contient aucune erreur. CNW Telbec ne peut être tenue responsable de pertes ou profits, responsabilités ou dommages causés par ou découlant directement, indirectement, accidentellement ou corrélativement à l’utilisation de ce texte ou toute erreur qu’il contiendrait. » 3 FINAL TRANSCRIPT March 15, 2016 — 11:00 a.m. E.T. INNOVA Gaming Group Inc. 2015 Fourth Quarter and Year-­End 2015 Financial Results Conference Call future performance or future events; including with respect to the deployment of additional machines and terminals; including in new jurisdictions; continuing increased demand for our products; continued improvement of our product and product features; and the creation of higher sales volumes and ongoing revenue constitute forward-­‐looking statements within the meaning of applicable securities laws. Forward-­‐looking statements are necessarily based on a number of estimates and assumptions that while considered reasonable by management at this time, are inherently subject to significant business; economic; regulatory; and competitive uncertainties and contingency that could cause actual results or events to differ materially from those expressed or implied in such statements, including without limitation, certain risk factors discussed in greater detail in the Risk Factor section of our Management Discussion and Analysis of financial condition and results of operations, and in certain of our other filings with Canadian securities regulators, which are available on SEDAR at www.sedar.com. Investors are cautioned not to put undue reliance on forward-­‐looking statements. The forward-­‐looking statements contained herein reflect INNOVA’s current views with respect to future events, and except as required by law, INNOVA does not intend and undertakes no obligation to update any forward-­‐looking statements to reflect in particular new information or future events or otherwise. "Though CNW Group has used commercially reasonable efforts to produce this transcript, it does not represent or warrant that this transcript is error-­free. CNW Group will not be responsible for any direct, indirect, incidental, special, consequential, loss of profits or other damages or liabilities which may arise out of or result from any use made of this transcript or any error contained therein." « Bien que CNW Telbec ait fait tous les efforts possibles pour produire cet audioscript, la société ne peut affirmer ou garantir qu’il ne contient aucune erreur. CNW Telbec ne peut être tenue responsable de pertes ou profits, responsabilités ou dommages causés par ou découlant directement, indirectement, accidentellement ou corrélativement à l’utilisation de ce texte ou toute erreur qu’il contiendrait. » 4 FINAL TRANSCRIPT March 15, 2016 — 11:00 a.m. E.T. INNOVA Gaming Group Inc. 2015 Fourth Quarter and Year-­End 2015 Financial Results Conference Call Portions of today's discussion will also make reference to certain non-­‐IFRS measures, such as EBITDA and adjusted EBITDA. These metrics are not recognized measures under IFRS, do not have standardized meaning prescribed by IFRS, and are, therefore, unlikely to be comparable to similar measures presented by other companies. For more details about these non-­‐IFRS measures, as well as a reconciliation of these measures to the most directly comparable IFRS measure, please refer to our Management's Discussion and Analysis of financial condition and results of operation for the year ended December 31, 2015. Finally, references made today to our, we, us, INNOVA and/or the Company refers as the context requires to INNOVA Gaming Group and its subsidiaries, including its main operating subsidiary, Diamond Game. I will now pass the call over to Rick Weil, Chairman and Chief Executive Officer of INNOVA Gaming. Rick Weil — Chairman and Chief Executive Officer, INNOVA Gaming Group Inc. Thanks, Jon. Good morning, everyone, and thank you for participating on today's call. I'm joined on the call today by Steve Koo, Chief Financial Officer of INNOVA Gaming Group. I am very pleased with the progress we made in 2015. We met or exceeded all of the objectives that we had set for the Company at the time of our IPO just 10 months ago, established a strong base of recurring revenue, and are on our way to a solid 2016. "Though CNW Group has used commercially reasonable efforts to produce this transcript, it does not represent or warrant that this transcript is error-­free. CNW Group will not be responsible for any direct, indirect, incidental, special, consequential, loss of profits or other damages or liabilities which may arise out of or result from any use made of this transcript or any error contained therein." « Bien que CNW Telbec ait fait tous les efforts possibles pour produire cet audioscript, la société ne peut affirmer ou garantir qu’il ne contient aucune erreur. CNW Telbec ne peut être tenue responsable de pertes ou profits, responsabilités ou dommages causés par ou découlant directement, indirectement, accidentellement ou corrélativement à l’utilisation de ce texte ou toute erreur qu’il contiendrait. » 5 FINAL TRANSCRIPT March 15, 2016 — 11:00 a.m. E.T. INNOVA Gaming Group Inc. 2015 Fourth Quarter and Year-­End 2015 Financial Results Conference Call The addressable market for Diamond Game's LT-­‐3 terminals is large, and in our view, industry trends are pointing in the right direction, with additional regulation in the charity gaming sector driving demand for new solutions. We are actively engaged with lotteries and gaming authorities in several jurisdictions in the US and Canada to demonstrate how Diamond Game's LT-­‐3 solution can complement their existing strategies, driving revenue to governments and charities, while providing an entertaining experience for the local or regional market lottery player. I'd like to turn the call over to Steve now to walk us through the financials, and then I will discuss some of the opportunities we are working on. Steve Koo — Chief Financial Officer, INNOVA Gaming Group Inc. Thanks, Rick, and good morning, everyone. Before I walk through the numbers, I just want to point out that INNOVA’s financial statements are presented in US dollars and the results discussed during this call are in US dollars. Total revenue for Q4 2015 was 5.8 million, 29.1 percent higher than the 4.5 million of total revenue in Q4 2014. This result was driven primarily by growth in revenue related to our LT-­‐3 business, offset by declines in AGP contribution year over year. Diamond Game made a strategic decision at the beginning of 2015 in connection with our IPO to focus on the LT-­‐3 business at the expense of the legacy AGP business. "Though CNW Group has used commercially reasonable efforts to produce this transcript, it does not represent or warrant that this transcript is error-­free. CNW Group will not be responsible for any direct, indirect, incidental, special, consequential, loss of profits or other damages or liabilities which may arise out of or result from any use made of this transcript or any error contained therein." « Bien que CNW Telbec ait fait tous les efforts possibles pour produire cet audioscript, la société ne peut affirmer ou garantir qu’il ne contient aucune erreur. CNW Telbec ne peut être tenue responsable de pertes ou profits, responsabilités ou dommages causés par ou découlant directement, indirectement, accidentellement ou corrélativement à l’utilisation de ce texte ou toute erreur qu’il contiendrait. » 6 FINAL TRANSCRIPT March 15, 2016 — 11:00 a.m. E.T. INNOVA Gaming Group Inc. 2015 Fourth Quarter and Year-­End 2015 Financial Results Conference Call Total revenue for the year was 21.2 million, which is 14.6 higher than the 18.5 million of total revenue in 2014. Our LT-­‐3 business generated solid growth in 2015, up 30 percent for the year ended 2015. The AGP side of the business was impacted by the loss of units in a number of jurisdictions, most notably Texas, as well as the decline in average revenue per unit, or ARPU, compared to 2014. LT-­‐3 revenue accounted for 87.1 percent of overall revenue in Q4 2015 compared to 80 percent in Q4 of 2014. The shift was a result of both growth in LT-­‐3 win-­‐per-­‐unit for terminals already in the field, as well as additional deployments coming online, albeit at a lower initial win-­‐per-­‐unit. We continue to focus the majority of our efforts on growing LT-­‐3 installs, and expect AGP revenue to continue to decline as a percentage of overall revenue moving forward. Recurring revenue was roughly 95 percent of total revenue for 2015. Before talking more about our core LT-­‐3 business, I want to discuss how the withdrawal of AGP units in Texas, which we announced in January, will impact 2016 financials. In 2015, Speaking Rock accounted for 2 million of total revenue. As we stated at the time of announcement, we have an EBITDA support agreement with Amaya Inc., which we expect will mitigate any lost EBITDA from these units. Our expectations is that net to us this development will only be revenue-­‐related. It is our belief that there will be minimal impact on profitability. "Though CNW Group has used commercially reasonable efforts to produce this transcript, it does not represent or warrant that this transcript is error-­free. CNW Group will not be responsible for any direct, indirect, incidental, special, consequential, loss of profits or other damages or liabilities which may arise out of or result from any use made of this transcript or any error contained therein." « Bien que CNW Telbec ait fait tous les efforts possibles pour produire cet audioscript, la société ne peut affirmer ou garantir qu’il ne contient aucune erreur. CNW Telbec ne peut être tenue responsable de pertes ou profits, responsabilités ou dommages causés par ou découlant directement, indirectement, accidentellement ou corrélativement à l’utilisation de ce texte ou toute erreur qu’il contiendrait. » 7 FINAL TRANSCRIPT March 15, 2016 — 11:00 a.m. E.T. INNOVA Gaming Group Inc. 2015 Fourth Quarter and Year-­End 2015 Financial Results Conference Call We installed 148 new LT-­‐3 machines during Q4, bringing our total machines installed at the end of the year to 1,877. As of today, we have 1,904 LT-­‐3s in the field. Gross profit in Q4 was 5.4 million, or 93.9 percent of sales. This compares to 4.2 million, or 94.1 percent of sales in Q4 2014. On a full year basis, gross profit was 19.7 million, or 92.9 percent of sales compared to 16 million, or 86.6 percent of sales in 2014. The increase in gross margin on a full year basis was driven by a combination of factors, including the strategic decision to focus on our core LT-­‐3 business, and a substantial reduction in the cost our paper tickers realized through the transition from water-­‐based ink to a UV ink, and a migration from a large two-­‐ply break-­‐open ticket produced by a third party for Ontario to a smaller, more cost efficient single-­‐ply bar code ticket produced in-­‐house. As we mentioned last quarter, 2015 also reflects the full benefit of the investment made in late 2014 to upgrade the printing press imagers, which has improved printing efficiencies and costs across all LT-­‐3 markets. Selling expenses were up 0.1 million in Q4 and 0.2 million for the full year, primarily due to incremental investments in our selling infrastructure and team as we look to continue to grow our installed LT-­‐3 base. G&A expenses in Q4 2015 were higher than Q4 2014 by 2.3 million. The largest two drivers there were a 0.6 million stock-­‐based compensation expense and 500,000 higher depreciation and amortization. Public company costs and higher salaries and wages also contributed to the increase. "Though CNW Group has used commercially reasonable efforts to produce this transcript, it does not represent or warrant that this transcript is error-­free. CNW Group will not be responsible for any direct, indirect, incidental, special, consequential, loss of profits or other damages or liabilities which may arise out of or result from any use made of this transcript or any error contained therein." « Bien que CNW Telbec ait fait tous les efforts possibles pour produire cet audioscript, la société ne peut affirmer ou garantir qu’il ne contient aucune erreur. CNW Telbec ne peut être tenue responsable de pertes ou profits, responsabilités ou dommages causés par ou découlant directement, indirectement, accidentellement ou corrélativement à l’utilisation de ce texte ou toute erreur qu’il contiendrait. » 8 FINAL TRANSCRIPT March 15, 2016 — 11:00 a.m. E.T. INNOVA Gaming Group Inc. 2015 Fourth Quarter and Year-­End 2015 Financial Results Conference Call We completed our IPO in May 2015 and bolstered the senior management team with key hires to facilitate the implementation of our growth strategies. As a result of these factors, adjusted EBITDA was just under 1 million in Q4 2015 compared to 1.3 million in the prior period. Adjusted EBITDA for the full year was 4.6 million compared to 3.9 million in 2014. Average revenue per unit on our network of LT-­‐3 terminals was approximately $30 in 2015. We are modelling $29 of average revenue per unit to Diamond Game for 2016 across our LT-­‐3 network. While a portion of the portfolio is seasoned, we continue to deploy new units, which take approximately four to six months to ramp to full win-­‐per-­‐unit. With that, I'll turn it back over to Rick. Rick Weil Thanks, Steve. As I mentioned in my introduction, in 2015 we delivered against all the goals we set at the time of the IPO last May. At INNOVA, we established the infrastructure and management team necessary to build a substantial organization with a focus on the lottery and charitable gaming markets. We have made key additions to the Diamond Game management team to prepare the Company for future growth, and working together, we have delivered a strong performance in 2015. Our goal was to deploy on average of 25 to 30 LT-­‐3s per month for 2015, or between 300 and 360 total LT-­‐3 terminals. We actually delivered 502 for the full year. Revenue from the LT-­‐3 business increased 30 percent year over year. "Though CNW Group has used commercially reasonable efforts to produce this transcript, it does not represent or warrant that this transcript is error-­free. CNW Group will not be responsible for any direct, indirect, incidental, special, consequential, loss of profits or other damages or liabilities which may arise out of or result from any use made of this transcript or any error contained therein." « Bien que CNW Telbec ait fait tous les efforts possibles pour produire cet audioscript, la société ne peut affirmer ou garantir qu’il ne contient aucune erreur. CNW Telbec ne peut être tenue responsable de pertes ou profits, responsabilités ou dommages causés par ou découlant directement, indirectement, accidentellement ou corrélativement à l’utilisation de ce texte ou toute erreur qu’il contiendrait. » 9 FINAL TRANSCRIPT March 15, 2016 — 11:00 a.m. E.T. INNOVA Gaming Group Inc. 2015 Fourth Quarter and Year-­End 2015 Financial Results Conference Call We targeted product approval of the LT-­‐3 in one additional jurisdiction in 2015 and succeeded by gaining acceptance in New Hampshire. We expect to begin deploying units there later this year, as the New Hampshire Lottery now oversees the state's racing and charitable gaming operations. We also succeeded in introducing the LT-­‐3 into new nontraditional venues, and in the latter part of Q4 we started deploying in liquor-­‐by-­‐the-­‐drink locations in Missouri. As we have mentioned previously, we believe bars and taverns are a significant potential opportunity for the LT-­‐3 in the future. We introduced new features for the LT-­‐3 in 2015. In both Ontario and Maryland we introduced progressive and multi-­‐denomination features. On average, the LT-­‐3s that receive the added features are performing substantially better on a win-­‐per-­‐unit basis than the terminals without these features, which are already performing better than our expectation. I'll provide you with a quick update on deployments before turning to 2016, and then over to your questions. In Missouri, we are continuing to deploy units into both veteran and fraternal halls and liquor-­‐by-­‐the-­‐drink locations. In addition to the 36 terminals recently deployed in fraternal locations, we recently deployed roughly 90 terminals at 45 liquor-­‐by-­‐the-­‐drink locations, and these LT-­‐3s are performing very well. The Missouri Lottery is facing some resistance to the LT-­‐3 from incumbent gaming operators in the form of a legal action against the state challenging the legality of the dispenser and legislative "Though CNW Group has used commercially reasonable efforts to produce this transcript, it does not represent or warrant that this transcript is error-­free. CNW Group will not be responsible for any direct, indirect, incidental, special, consequential, loss of profits or other damages or liabilities which may arise out of or result from any use made of this transcript or any error contained therein." « Bien que CNW Telbec ait fait tous les efforts possibles pour produire cet audioscript, la société ne peut affirmer ou garantir qu’il ne contient aucune erreur. CNW Telbec ne peut être tenue responsable de pertes ou profits, responsabilités ou dommages causés par ou découlant directement, indirectement, accidentellement ou corrélativement à l’utilisation de ce texte ou toute erreur qu’il contiendrait. » 10 FINAL TRANSCRIPT March 15, 2016 — 11:00 a.m. E.T. INNOVA Gaming Group Inc. 2015 Fourth Quarter and Year-­End 2015 Financial Results Conference Call efforts to limit the scope of deployments. Recently we intervened in the action alongside the Missouri Attorney General's office opposing the petition filed by the Missouri Gaming Association and filed a motion to dismiss. Despite the case, we plan to continue deployments, and still hope to install approximately 100 additional machines by the end of the third quarter. We not expect that this action will hinder our short-­‐ to mid-­‐term potential in Missouri. Selling it to state and provincial lotteries and gaming commissions is a political process that takes time, and we typically expect some opposition from third parties operating in other gaming sectors within the jurisdiction. In the end, we are confident that the court of Missouri will confirm the legality of our dispenser. It is worth noting that we have successfully overcome other challenges with respect to the legality of our dispensers in other jurisdictions. We are working with all of our other customers to grow deployments through 2016 as well. For Diamond Game, the sales process takes time because it operates in highly regulated markets. In each jurisdiction there can be various legal, regulatory, and political hurdles to overcome, but these barriers to entry are also a large part of the Company's competitive advantage, and the recurring nature of a substantial portion of our revenue demonstrates this. For 2016, we are focused on driving both top and bottom line results. For the LT-­‐3 business it is our goal to, number 1, maintain the same level of recurring revenue we generated in 2015, "Though CNW Group has used commercially reasonable efforts to produce this transcript, it does not represent or warrant that this transcript is error-­free. CNW Group will not be responsible for any direct, indirect, incidental, special, consequential, loss of profits or other damages or liabilities which may arise out of or result from any use made of this transcript or any error contained therein." « Bien que CNW Telbec ait fait tous les efforts possibles pour produire cet audioscript, la société ne peut affirmer ou garantir qu’il ne contient aucune erreur. CNW Telbec ne peut être tenue responsable de pertes ou profits, responsabilités ou dommages causés par ou découlant directement, indirectement, accidentellement ou corrélativement à l’utilisation de ce texte ou toute erreur qu’il contiendrait. » 11 FINAL TRANSCRIPT March 15, 2016 — 11:00 a.m. E.T. INNOVA Gaming Group Inc. 2015 Fourth Quarter and Year-­End 2015 Financial Results Conference Call roughly 95 percent; two, deploy between 300 and 360 additional LT-­‐3 terminals into the field; three, have our products approved in one new jurisdiction; and lastly, number four, grow the bottom line by leveraging our expense structure. We expect the recurring portion of our business to carry through to 2016 without any material change. For our existing network of terminals we are focused on maintaining existing deployments, as well as win-­‐per-­‐unit. For growth, we will look to both approval of our products in one new jurisdiction and additional deployments in currently approved markets. We believe that based on the moderate penetration of LT-­‐3 terminals in existing jurisdictions, it may actually be possible to deploy more than 360 units in 2016. In addition to unit and top line growth in our LT-­‐3 business, we are focused on generating further operating efficiencies and maintaining expense control. Our target is to keep our operating expense structure relatively stable in existing jurisdictions while driving greater sales volume in order to grow EBITDA. The nature of our deployments and the system we put in place mean that there’s a large portion of early stage fixed cost. However, when we install incremental machines the revenue generally flows at a higher margin. "Though CNW Group has used commercially reasonable efforts to produce this transcript, it does not represent or warrant that this transcript is error-­free. CNW Group will not be responsible for any direct, indirect, incidental, special, consequential, loss of profits or other damages or liabilities which may arise out of or result from any use made of this transcript or any error contained therein." « Bien que CNW Telbec ait fait tous les efforts possibles pour produire cet audioscript, la société ne peut affirmer ou garantir qu’il ne contient aucune erreur. CNW Telbec ne peut être tenue responsable de pertes ou profits, responsabilités ou dommages causés par ou découlant directement, indirectement, accidentellement ou corrélativement à l’utilisation de ce texte ou toute erreur qu’il contiendrait. » 12 FINAL TRANSCRIPT March 15, 2016 — 11:00 a.m. E.T. INNOVA Gaming Group Inc. 2015 Fourth Quarter and Year-­End 2015 Financial Results Conference Call In our view, the demand for lotteries and local nontraditional venues for lottery and charitable games solutions is only getting stronger. With the LT-­‐3, Diamond Game is the only player that has an entertaining instant-­‐ticket vending experience that has been proven on a wide scale in several jurisdictions. Stepping back for a moment, at the INNOVA level our vision is to acquire, initiate, and build world-­‐class gaming companies with a focus on lottery and charitable gaming. Diamond Game continues to be highly successful, but we see opportunity even beyond Diamond Game in this market for financially strong companies like ours to do creative deals. It is our goal to do at least one strategic deal in 2016 to lever our management expertise and platform to get into other gaming sectors. We are also looking at a select group of actionable transactions that would complement and grow our lottery and charitable gaming presence while leveraging the strength of our experienced management team, and feel that this is an opportune time to be a buyer. I am very excited about what the next 12 months will bring for INNOVA and am proud of our team for delivering such a strong 2015. At this point, I'd like to ask the Operator to open the line for questions, and thank you very much. Q&A "Though CNW Group has used commercially reasonable efforts to produce this transcript, it does not represent or warrant that this transcript is error-­free. CNW Group will not be responsible for any direct, indirect, incidental, special, consequential, loss of profits or other damages or liabilities which may arise out of or result from any use made of this transcript or any error contained therein." « Bien que CNW Telbec ait fait tous les efforts possibles pour produire cet audioscript, la société ne peut affirmer ou garantir qu’il ne contient aucune erreur. CNW Telbec ne peut être tenue responsable de pertes ou profits, responsabilités ou dommages causés par ou découlant directement, indirectement, accidentellement ou corrélativement à l’utilisation de ce texte ou toute erreur qu’il contiendrait. » 13 FINAL TRANSCRIPT March 15, 2016 — 11:00 a.m. E.T. INNOVA Gaming Group Inc. 2015 Fourth Quarter and Year-­End 2015 Financial Results Conference Call Operator And at this time, ladies and gentlemen, if you would like to ask a question, please press *, then the number 1 on your telephone keypad. We'll pause for just a moment to compile the Q&A roster. And our first question from the line of Robert Young with Canaccord Genuity. Your line is now open. Robert Young — Canaccord Genuity Hi. Good morning. I was hoping to start off with a question on the revenue per day. I think Steve said that expected it to be $29 in 2016, which is a slight decline from the 30 in 2015. Can you talk about the factor—is that the ramp of new units? Continued strong growth at the front end and slower ramp up of those new units? Or is there another factor to think about there? Steve Koo No, that's the blended rate that we're using for the full year. So that takes into account the ramp-­‐up of the units and, as you noted, it's 29. I think in reality it will be between 29 and 30. We’re basically holding steady. But that takes into account the ramp-­‐up of new units going into 2016. Robert Young Okay. Steve Koo "Though CNW Group has used commercially reasonable efforts to produce this transcript, it does not represent or warrant that this transcript is error-­free. CNW Group will not be responsible for any direct, indirect, incidental, special, consequential, loss of profits or other damages or liabilities which may arise out of or result from any use made of this transcript or any error contained therein." « Bien que CNW Telbec ait fait tous les efforts possibles pour produire cet audioscript, la société ne peut affirmer ou garantir qu’il ne contient aucune erreur. CNW Telbec ne peut être tenue responsable de pertes ou profits, responsabilités ou dommages causés par ou découlant directement, indirectement, accidentellement ou corrélativement à l’utilisation de ce texte ou toute erreur qu’il contiendrait. » 14 FINAL TRANSCRIPT March 15, 2016 — 11:00 a.m. E.T. INNOVA Gaming Group Inc. 2015 Fourth Quarter and Year-­End 2015 Financial Results Conference Call So there's nothing additional impacting that. Robert Young Okay. Great. And then you said 300 to 360, which is that's the same as the—roughly the same as the 25 to 30 units you've talked about in the past; maybe a little bit higher at the bottom end of that range. Could you talk about the seasonality of that deployment? It looks like in Q1 just where the units are right now it looks like Q1 is a slightly slower quarter. So if you could just talk about the seasonality of those deployments? Steve Koo Yeah. Q1 is slightly slower, but as we've maintained, we're comfortable with the 25 to 30 on average. And again, there's some lumpiness that happens quarter over quarter, but as you noted, where we are right now in Q1 is a little bit slower than the sort of the average we're maintaining per month. But I would expect it to correct over the course of the year. Robert Young Okay. And then if I think of that unit deployment you talked a little bit about on the call, was that driven primarily by Ontario and Missouri? I think Maryland is declining; I would expect New Hampshire to be a small contributor at the beginning. So are you expecting Ontario and Missouri to drive most of that? Rick Weil "Though CNW Group has used commercially reasonable efforts to produce this transcript, it does not represent or warrant that this transcript is error-­free. CNW Group will not be responsible for any direct, indirect, incidental, special, consequential, loss of profits or other damages or liabilities which may arise out of or result from any use made of this transcript or any error contained therein." « Bien que CNW Telbec ait fait tous les efforts possibles pour produire cet audioscript, la société ne peut affirmer ou garantir qu’il ne contient aucune erreur. CNW Telbec ne peut être tenue responsable de pertes ou profits, responsabilités ou dommages causés par ou découlant directement, indirectement, accidentellement ou corrélativement à l’utilisation de ce texte ou toute erreur qu’il contiendrait. » 15 FINAL TRANSCRIPT March 15, 2016 — 11:00 a.m. E.T. INNOVA Gaming Group Inc. 2015 Fourth Quarter and Year-­End 2015 Financial Results Conference Call Well, you've got Ontario and Missouri; we're expecting to be able to add more terminals in Quebec. We're optimistic about our developments in Michigan. So we see all that, all of our customers, being able to—I think you're right in the case of Maryland. That's a little bit slow, given that we've almost sort of got those saturated, but I think there's even a little bit of room there. And then, as you mentioned, New Hampshire for sure. Robert Young Okay. And then if I—a couple questions on the expense structure. G&A was up; how should we be modelling that going forward? There's some year-­‐end costs, I assume, in there. Should we expect it to come down in Q1? And then if you could just talk about the cost of the litigation you were talking about in the monologue and the lobbying expense inside of that line item as well, that'd be helpful? Steve Koo Yeah. So for—as I think about 2016, our goal was to hold our selling and G&A costs combined at a constant level to 2015, but recall in the 2015 numbers that you see there are a few onetime items. So if you look at the financials just on the face of it it looks like about 20.5 million of selling and G&A expense combined. You back out the D&A of that, which is about 2.6 million, so you get to about 17.9 million of expenses for selling and G&A. In that 17.9 million there's about 900 of IPO costs that are onetime; I would characterize those as onetime in nature. "Though CNW Group has used commercially reasonable efforts to produce this transcript, it does not represent or warrant that this transcript is error-­free. CNW Group will not be responsible for any direct, indirect, incidental, special, consequential, loss of profits or other damages or liabilities which may arise out of or result from any use made of this transcript or any error contained therein." « Bien que CNW Telbec ait fait tous les efforts possibles pour produire cet audioscript, la société ne peut affirmer ou garantir qu’il ne contient aucune erreur. CNW Telbec ne peut être tenue responsable de pertes ou profits, responsabilités ou dommages causés par ou découlant directement, indirectement, accidentellement ou corrélativement à l’utilisation de ce texte ou toute erreur qu’il contiendrait. » 16 FINAL TRANSCRIPT March 15, 2016 — 11:00 a.m. E.T. INNOVA Gaming Group Inc. 2015 Fourth Quarter and Year-­End 2015 Financial Results Conference Call Recall there's an IPO bonus that we paid at the close of the IPO that Amaya helped fund. That was 1.1 million. That's also in that number. And then there was some bad debt expense in there that, again, I don't expect to recur. So if you back out those three items then what I would call sort of adjusted selling and G&A for 2015 is about $15.5 million. And I think that's about the level we're going to hold 2016 to. So if you're in terms of modelling it that's really our goal. I think the mix between G&A and selling, I actually expect us to do a little bit better on the G&A side, but we are investing a little bit more on the selling side in terms of promotion and lobbyists. And I think Rick can speak a little bit to the lobbying efforts that we're doing. Rick Weil Sure. Sure. Just quickly on that, Robert, we work, as you know, quite diligently in the jurisdictions where we currently are and in addition to jurisdictions where we aren't yet with lobbyist, lawyers, and whatever on the ground. That's built in to our budget and our model. So we're prepared for this type of that thing. And we've got a good team that deals with it, but I don't envision that it's going to impact the numbers because we've already planned in all of our jurisdictions to be prepared to work on lobbying and whatever. Robert Young "Though CNW Group has used commercially reasonable efforts to produce this transcript, it does not represent or warrant that this transcript is error-­free. CNW Group will not be responsible for any direct, indirect, incidental, special, consequential, loss of profits or other damages or liabilities which may arise out of or result from any use made of this transcript or any error contained therein." « Bien que CNW Telbec ait fait tous les efforts possibles pour produire cet audioscript, la société ne peut affirmer ou garantir qu’il ne contient aucune erreur. CNW Telbec ne peut être tenue responsable de pertes ou profits, responsabilités ou dommages causés par ou découlant directement, indirectement, accidentellement ou corrélativement à l’utilisation de ce texte ou toute erreur qu’il contiendrait. » 17 FINAL TRANSCRIPT March 15, 2016 — 11:00 a.m. E.T. INNOVA Gaming Group Inc. 2015 Fourth Quarter and Year-­End 2015 Financial Results Conference Call Okay. And this legal challenge you were talking about in the prepared remarks, do you consider that something like a regular piece of running the business? Is there anything abnormal about that? And like is there any additional expense you're expecting out of that in 2016? Rick Weil Yeah. In term of expense, no, because as I said, we've sort budget and planned for it. We're not surprised. We see this fairly regularly. We've defended the legality of the dispenser in the past and have come out on top. It's something that we have to watch very closely. We know that this is something that we face in our jurisdictions where we are or where we want to go. And so we're doing everything we can alongside with the Lottery to defend this particular case, and we'll do whatever we need to do. But in the meantime we're still deploying. Robert Young Right. Okay. Great. I'll pass the line. Thanks a lot for answering my questions. Rick Weil No problem. Thanks, Robert. Operator Your next question comes from the line of Ralph Garcea with Cantor Fitzgerald. Your line is now open. Ralph Garcea — Cantor Fitzgerald "Though CNW Group has used commercially reasonable efforts to produce this transcript, it does not represent or warrant that this transcript is error-­free. CNW Group will not be responsible for any direct, indirect, incidental, special, consequential, loss of profits or other damages or liabilities which may arise out of or result from any use made of this transcript or any error contained therein." « Bien que CNW Telbec ait fait tous les efforts possibles pour produire cet audioscript, la société ne peut affirmer ou garantir qu’il ne contient aucune erreur. CNW Telbec ne peut être tenue responsable de pertes ou profits, responsabilités ou dommages causés par ou découlant directement, indirectement, accidentellement ou corrélativement à l’utilisation de ce texte ou toute erreur qu’il contiendrait. » 18 FINAL TRANSCRIPT March 15, 2016 — 11:00 a.m. E.T. INNOVA Gaming Group Inc. 2015 Fourth Quarter and Year-­End 2015 Financial Results Conference Call Good morning, gentlemen. Rick Weil Good morning, Ralph. Ralph Garcea I guess first on the LT-­‐3 ARPU, I mean in the outlying years for like the 2017 to say 2018/'19, I mean does it continue at a slight decline year over year? Or as you add new features can you keep it flat at 29? Or do you see it jump again back to $30 or above? Steve Koo Yeah. I think our expectation is as we continue to add new features and as machines continue to mature on the market we can hold the—we can at least at a minimum hold the 29 to 30. I'm actually hopeful that we can grow it above 30. Ralph Garcea And do you get a share? I mean as you roll out some of the progressives in Ontario and you do that in some of the US sites how does that impact the ARPU again? Steve Koo In Ontario, recall the portion of our revenue we receive on a unit basis is fixed fee, but we do make money on the ticket sales. So as the progressives increase win-­‐per-­‐unit we capture some of that increased win-­‐per-­‐unit through our ticket sales. "Though CNW Group has used commercially reasonable efforts to produce this transcript, it does not represent or warrant that this transcript is error-­free. CNW Group will not be responsible for any direct, indirect, incidental, special, consequential, loss of profits or other damages or liabilities which may arise out of or result from any use made of this transcript or any error contained therein." « Bien que CNW Telbec ait fait tous les efforts possibles pour produire cet audioscript, la société ne peut affirmer ou garantir qu’il ne contient aucune erreur. CNW Telbec ne peut être tenue responsable de pertes ou profits, responsabilités ou dommages causés par ou découlant directement, indirectement, accidentellement ou corrélativement à l’utilisation de ce texte ou toute erreur qu’il contiendrait. » 19 FINAL TRANSCRIPT March 15, 2016 — 11:00 a.m. E.T. INNOVA Gaming Group Inc. 2015 Fourth Quarter and Year-­End 2015 Financial Results Conference Call In other jurisdictions where we're on straight revenue share as win-­‐per-­‐unit increases we obviously from a progressive, for example, we'll capture more of that revenue share as well. Ralph Garcea Thank you. And what was the AGP number for 2015? And where do you see that going on the ARPU side? Steve Koo 2015 AGP? Hang on a second. Rick Weil Hey, Ralph, while Steve's looking up that number, I just want to comment you make a good point about on the LT-­‐3s maintaining the win-­‐per-­‐unit. And doing things like the features and all that helps us maintain the 29 to 30, but we're also looking at some new content and other features that we'll start to introduce later this year with the expectation that we could actually start to move the win up. But we've only had our machines out not that long, and the lotteries want to make sure that everything's working fine before they add more features or change game content. But nonetheless, we're working on a lot of things to affect that and grow that number. Ralph Garcea Okay. Steve Koo "Though CNW Group has used commercially reasonable efforts to produce this transcript, it does not represent or warrant that this transcript is error-­free. CNW Group will not be responsible for any direct, indirect, incidental, special, consequential, loss of profits or other damages or liabilities which may arise out of or result from any use made of this transcript or any error contained therein." « Bien que CNW Telbec ait fait tous les efforts possibles pour produire cet audioscript, la société ne peut affirmer ou garantir qu’il ne contient aucune erreur. CNW Telbec ne peut être tenue responsable de pertes ou profits, responsabilités ou dommages causés par ou découlant directement, indirectement, accidentellement ou corrélativement à l’utilisation de ce texte ou toute erreur qu’il contiendrait. » 20 FINAL TRANSCRIPT March 15, 2016 — 11:00 a.m. E.T. INNOVA Gaming Group Inc. 2015 Fourth Quarter and Year-­End 2015 Financial Results Conference Call Yeah. So just getting back to your question, ARPU for the year on the AGP side ended up at about $13. Ralph Garcea And you see that sort of declining modestly also through '16? Steve Koo Yeah. I mean it's tougher on the AGP side. I think our goal there is just to hold where we are sort of minus obviously the stuff we disclose around Texas. I think the remaining base obviously we're still trying to maintain that and hopefully grow that. But as we've sort of mentioned previously, our strategic focus is on the LT-­‐3, but certainly as we develop new games, et cetera, for the LT-­‐3 that we can utilize on the AGP side we're doing that too to help bolster our performance there. Ralph Garcea Okay. And then just on the M&A side, I mean are you looking for regional players that have relationships with states that you're not in? Are you looking for technology? Or I mean what sort of characteristics are you looking at from a target perspective? Rick Weil Well, it's probably a little bit of both, Ralph. Some of the companies that we're talking to are doing business with some of our customers and some not. What we are really trying to find is "Though CNW Group has used commercially reasonable efforts to produce this transcript, it does not represent or warrant that this transcript is error-­free. CNW Group will not be responsible for any direct, indirect, incidental, special, consequential, loss of profits or other damages or liabilities which may arise out of or result from any use made of this transcript or any error contained therein." « Bien que CNW Telbec ait fait tous les efforts possibles pour produire cet audioscript, la société ne peut affirmer ou garantir qu’il ne contient aucune erreur. CNW Telbec ne peut être tenue responsable de pertes ou profits, responsabilités ou dommages causés par ou découlant directement, indirectement, accidentellement ou corrélativement à l’utilisation de ce texte ou toute erreur qu’il contiendrait. » 21 FINAL TRANSCRIPT March 15, 2016 — 11:00 a.m. E.T. INNOVA Gaming Group Inc. 2015 Fourth Quarter and Year-­End 2015 Financial Results Conference Call something that fits nicely alongside of us to expand our business within the sector, lottery and gaming, and perhaps even a different geography. Ralph Garcea Okay. Thank you. Rick Weil Thanks, Ralph. Operator And your next question comes from the line of Eyal Ofir with Dundee Capital. Your line is now open. Eyal Ofir — Dundee Capital Thanks. Thanks for taking my question, guys. Rick Weil Sure. Eyal Ofir Just on the—I guess two things. Number one, the dynamic of the pilot in Quebec, how's that going? And it seems like it's kind of the first quarter where it's fully moving forward, but how long do you guys expect this to continue before they make a decision on going full (unintelligible). Rick Weil Well, we—sure. Well, Quebec, they actually extended the pilot for another year. "Though CNW Group has used commercially reasonable efforts to produce this transcript, it does not represent or warrant that this transcript is error-­free. CNW Group will not be responsible for any direct, indirect, incidental, special, consequential, loss of profits or other damages or liabilities which may arise out of or result from any use made of this transcript or any error contained therein." « Bien que CNW Telbec ait fait tous les efforts possibles pour produire cet audioscript, la société ne peut affirmer ou garantir qu’il ne contient aucune erreur. CNW Telbec ne peut être tenue responsable de pertes ou profits, responsabilités ou dommages causés par ou découlant directement, indirectement, accidentellement ou corrélativement à l’utilisation de ce texte ou toute erreur qu’il contiendrait. » 22 FINAL TRANSCRIPT March 15, 2016 — 11:00 a.m. E.T. INNOVA Gaming Group Inc. 2015 Fourth Quarter and Year-­End 2015 Financial Results Conference Call Eyal Ofir Okay. Rick Weil So we've got another year to go. As you know, we ended up—we started the pilot in four locations. And two of the locations they had VLTs and two of the locations they didn't. We were sort of prepared for what outcome would be, but the Lottery wanted to test it, and indeed the two locations that didn't have VLTs did considerably better. We've since redeployed the machines out of the location with the VLTs, put them in the two other locations, and all of those machines now are doing well and are running at the average. So we're looking at conversations with Loto-­‐Québec to find new locations to do the same thing with. Eyal Ofir Okay. So it sounds like it's going to take time still in terms of getting some form of larger deployment happening? Rick Weil Yeah. Yes. I think that's true in Quebec. Eyal Ofir Okay. And then in New Hampshire you mentioned that Lottery is also overseeing the racing industry. So is there an opportunity if you guys deployed the machines within some of the racing venues as well? "Though CNW Group has used commercially reasonable efforts to produce this transcript, it does not represent or warrant that this transcript is error-­free. CNW Group will not be responsible for any direct, indirect, incidental, special, consequential, loss of profits or other damages or liabilities which may arise out of or result from any use made of this transcript or any error contained therein." « Bien que CNW Telbec ait fait tous les efforts possibles pour produire cet audioscript, la société ne peut affirmer ou garantir qu’il ne contient aucune erreur. CNW Telbec ne peut être tenue responsable de pertes ou profits, responsabilités ou dommages causés par ou découlant directement, indirectement, accidentellement ou corrélativement à l’utilisation de ce texte ou toute erreur qu’il contiendrait. » 23 FINAL TRANSCRIPT March 15, 2016 — 11:00 a.m. E.T. INNOVA Gaming Group Inc. 2015 Fourth Quarter and Year-­End 2015 Financial Results Conference Call Rick Weil Well, there aren't a whole lot of racing venues left in New Hampshire. I think more importantly they took over racing and charitable gaming, so there may be—I'm not sure—like I say, there may be some OTBs or whatever. But the opportunity or sort of the real advantage to the Lottery taking over the racing and charitable gaming is that the whole charitable gaming sector in New Hampshire now falls under the control of the Lottery. And that's something that we really like because the lotteries have a very different view about how charitable gaming should operate. And in conversations that we've had with the director there, he's very interested in our type of solution because it's a little bit more controlled, more accountable, so that's the real opportunity. But we still have the opportunity as well in New Hampshire to deploy within the existing distribution, and we're talking to some distributors about doing that as well. Eyal Ofir Okay. And should we expect some announcements about the distribution agreements? Or is that going to just come out along with quarters as we deploy? Rick Weil We should be able to once we get something signed up be able to announce that. Eyal Ofir "Though CNW Group has used commercially reasonable efforts to produce this transcript, it does not represent or warrant that this transcript is error-­free. CNW Group will not be responsible for any direct, indirect, incidental, special, consequential, loss of profits or other damages or liabilities which may arise out of or result from any use made of this transcript or any error contained therein." « Bien que CNW Telbec ait fait tous les efforts possibles pour produire cet audioscript, la société ne peut affirmer ou garantir qu’il ne contient aucune erreur. CNW Telbec ne peut être tenue responsable de pertes ou profits, responsabilités ou dommages causés par ou découlant directement, indirectement, accidentellement ou corrélativement à l’utilisation de ce texte ou toute erreur qu’il contiendrait. » 24 FINAL TRANSCRIPT March 15, 2016 — 11:00 a.m. E.T. INNOVA Gaming Group Inc. 2015 Fourth Quarter and Year-­End 2015 Financial Results Conference Call Okay. And then before I pass the line, just you keep on saying you're pretty optimistic about the Michigan opportunity. Can you give us a little bit more of the dynamic in Michigan and what is the opportunity there from... Rick Weil Well, I think generally my optimism is that the pilot is doing well, the machines are performing well, and we've had numerous conversations. I can't really sort of comment any more than that because until the Lottery decides they want to sign a pilot and an extension and add more machines, I can't really say more than that, other than I know that they're pleased with the performance. And we're at a stage where if you look at the typical cycle of our machines in the past where we've installed a small group of machines and did a pilot, extended the pilot, and then moved into a bigger deployment, Michigan is now at the stage where we would hope we could move ourselves into something more significant. But other than that, I can't actually say more other than we're feeling good about the way the machines are performing. Eyal Ofir Okay. And you mentioned your goal is to enter at least one new jurisdiction. Rick Weil Yeah. "Though CNW Group has used commercially reasonable efforts to produce this transcript, it does not represent or warrant that this transcript is error-­free. CNW Group will not be responsible for any direct, indirect, incidental, special, consequential, loss of profits or other damages or liabilities which may arise out of or result from any use made of this transcript or any error contained therein." « Bien que CNW Telbec ait fait tous les efforts possibles pour produire cet audioscript, la société ne peut affirmer ou garantir qu’il ne contient aucune erreur. CNW Telbec ne peut être tenue responsable de pertes ou profits, responsabilités ou dommages causés par ou découlant directement, indirectement, accidentellement ou corrélativement à l’utilisation de ce texte ou toute erreur qu’il contiendrait. » 25 FINAL TRANSCRIPT March 15, 2016 — 11:00 a.m. E.T. INNOVA Gaming Group Inc. 2015 Fourth Quarter and Year-­End 2015 Financial Results Conference Call Eyal Ofir Is there any two or three finalists that you're thinking could potentially happen this year? We won’t hold you up to it, just potential states that you guys are working on that maybe... Rick Weil Yeah. I would prefer—most of our conversations are very confidential and we're under nondisclosures when we talk to the lotteries about some of this stuff. Eyal Ofir Okay. Rick Weil When someone puts out a bid obviously we can talk about it. I can tell, as I’ve told you before, that we've got six or seven jurisdictions in both US and Canada that we’re very aggressive and been working very hard on on the ground. So the goal is to turn one of those, as I said before, over this year. Eyal Ofir Okay. And in terms of that process as well, I'm assuming that like you probably need to have—I’m assuming you're pitching directly to the lotteries, but do you need any regulatory changes to happen? Or is it just primarily just getting them to agree... Rick Weil "Though CNW Group has used commercially reasonable efforts to produce this transcript, it does not represent or warrant that this transcript is error-­free. CNW Group will not be responsible for any direct, indirect, incidental, special, consequential, loss of profits or other damages or liabilities which may arise out of or result from any use made of this transcript or any error contained therein." « Bien que CNW Telbec ait fait tous les efforts possibles pour produire cet audioscript, la société ne peut affirmer ou garantir qu’il ne contient aucune erreur. CNW Telbec ne peut être tenue responsable de pertes ou profits, responsabilités ou dommages causés par ou découlant directement, indirectement, accidentellement ou corrélativement à l’utilisation de ce texte ou toute erreur qu’il contiendrait. » 26 FINAL TRANSCRIPT March 15, 2016 — 11:00 a.m. E.T. INNOVA Gaming Group Inc. 2015 Fourth Quarter and Year-­End 2015 Financial Results Conference Call That's a good question. It's really state by state, so some states that we're talking to there's no legal or regulatory issue; our machine could be deployed. In other jurisdictions there may be a small regulatory change, but from a legal point of view our machine would be permissible. And so we're talking in each one of these cases dealing with whatever sort of the obstacle would be. In most cases where there is a regulatory change it doesn’t require—it's not that big a deal to change it, but it's not simple and it takes time. And we have to work with the appropriate people on the ground to make sure that everybody's, a, comfortable with it and, b, that it can actually get done. Eyal Ofir Mm-­‐hmm. Rick Weil So again, everyone's different: from nothing to a little more complicated. Eyal Ofir And of the six or seven state jurisdictions, are any of them—do not allow casinos right now? Rick Weil Well, I think in every jurisdiction—I don't know if you're trying to trick me into an answer there—but almost every jurisdiction that we're in has some form of gaming, whether it's tribal or private or whatever, most of them, but not all of them. Not all of the states that we're talking to or looking at have... "Though CNW Group has used commercially reasonable efforts to produce this transcript, it does not represent or warrant that this transcript is error-­free. CNW Group will not be responsible for any direct, indirect, incidental, special, consequential, loss of profits or other damages or liabilities which may arise out of or result from any use made of this transcript or any error contained therein." « Bien que CNW Telbec ait fait tous les efforts possibles pour produire cet audioscript, la société ne peut affirmer ou garantir qu’il ne contient aucune erreur. CNW Telbec ne peut être tenue responsable de pertes ou profits, responsabilités ou dommages causés par ou découlant directement, indirectement, accidentellement ou corrélativement à l’utilisation de ce texte ou toute erreur qu’il contiendrait. » 27 FINAL TRANSCRIPT March 15, 2016 — 11:00 a.m. E.T. INNOVA Gaming Group Inc. 2015 Fourth Quarter and Year-­End 2015 Financial Results Conference Call Eyal Ofir Yeah. I just know that some of the states don't allow or don't have regulations around actual gambling, but the lotteries are obviously legal there. So trying to… Rick Weil Yeah. Eyal Ofir Just figure out if maybe there’s an angle to deploy these machines in those type of states where the state itself could become more aggressive because there is no local casinos, but these obviously can generate a pretty good return on win-­‐per-­‐unit. Rick Weil Yup. I don't necessarily have an issue with if there's casinos. I mean the flip side of having casino and gaming means that the state is a little bit more progressive with respect to gaming jurisdictions where there isn't any. I appreciate your point. But on the other hand, it's a little more difficult to do anything to expand possibly. So there really isn't—we just got to stay on top of all of it, which is what we're doing, and being sure that we work with all of the parties that are involved so they understand what our program is. That's the key in my view… Eyal Ofir Mm-­‐hmm. "Though CNW Group has used commercially reasonable efforts to produce this transcript, it does not represent or warrant that this transcript is error-­free. CNW Group will not be responsible for any direct, indirect, incidental, special, consequential, loss of profits or other damages or liabilities which may arise out of or result from any use made of this transcript or any error contained therein." « Bien que CNW Telbec ait fait tous les efforts possibles pour produire cet audioscript, la société ne peut affirmer ou garantir qu’il ne contient aucune erreur. CNW Telbec ne peut être tenue responsable de pertes ou profits, responsabilités ou dommages causés par ou découlant directement, indirectement, accidentellement ou corrélativement à l’utilisation de ce texte ou toute erreur qu’il contiendrait. » 28 FINAL TRANSCRIPT March 15, 2016 — 11:00 a.m. E.T. INNOVA Gaming Group Inc. 2015 Fourth Quarter and Year-­End 2015 Financial Results Conference Call Rick Weil To moving this forward is that everybody understands; you get a little push back; you work with them; and at the end there's room for everybody. Eyal Ofir Okay. And before I pass the line, just one last question for me; just on expansion-­‐wise, is there any opportunities for international expansion beyond North America? And have you started the process in any jurisdiction? Rick Weil Yeah. I mean I believe that there is. We have our hands pretty full with North America right now, but we are having conversations in several international jurisdictions that are reviewing and looking at our product, and quite frankly, I think at some point we could see that. Eyal Ofir Okay. Thank you. I'll pass the line. Rick Weil Great. Stephan Koo Great. Thanks, Eyal. Operator Again, if anybody would like to ask a question, please press *, 1 on your telephone keypad. "Though CNW Group has used commercially reasonable efforts to produce this transcript, it does not represent or warrant that this transcript is error-­free. CNW Group will not be responsible for any direct, indirect, incidental, special, consequential, loss of profits or other damages or liabilities which may arise out of or result from any use made of this transcript or any error contained therein." « Bien que CNW Telbec ait fait tous les efforts possibles pour produire cet audioscript, la société ne peut affirmer ou garantir qu’il ne contient aucune erreur. CNW Telbec ne peut être tenue responsable de pertes ou profits, responsabilités ou dommages causés par ou découlant directement, indirectement, accidentellement ou corrélativement à l’utilisation de ce texte ou toute erreur qu’il contiendrait. » 29 FINAL TRANSCRIPT March 15, 2016 — 11:00 a.m. E.T. INNOVA Gaming Group Inc. 2015 Fourth Quarter and Year-­End 2015 Financial Results Conference Call Your next question comes from Matthew Gan from Cormark Securities. Your line is open. Matthew Gan — Cormark Securities Hi. Good morning. Just a question on your priority of cash; I was just wondering if you can maybe speak to eventually using a portion of cash for share buybacks? Rick Weil That's a very good point, and we've looked very closely at that. We've talked about it with our Board, and it's something that we're definitely considering. We're really looking at a number of different things to do with the cash. Certainly, doing a buyback is something that we're seriously considering. There are other things that we're trying to look at. I mentioned earlier about opportunities to do some creative deals, and therefore at this moment we're evaluating all of that very seriously, and expect that in the not too distant future hopefully we can sort of use some of that cash in ways that are good for the Company, whether it's a buyback or an acquisition. Matthew Gan Okay. And then I guess moving on to your Ontario locations and Missouri locations with the added features. I was wondering if you can give us some colour on the extent of the ARPU lift in some of these areas, maybe some numbers; if you can provide that? Rick Weil Are you talking about it like in Ontario and Maryland where we put in the new features? "Though CNW Group has used commercially reasonable efforts to produce this transcript, it does not represent or warrant that this transcript is error-­free. CNW Group will not be responsible for any direct, indirect, incidental, special, consequential, loss of profits or other damages or liabilities which may arise out of or result from any use made of this transcript or any error contained therein." « Bien que CNW Telbec ait fait tous les efforts possibles pour produire cet audioscript, la société ne peut affirmer ou garantir qu’il ne contient aucune erreur. CNW Telbec ne peut être tenue responsable de pertes ou profits, responsabilités ou dommages causés par ou découlant directement, indirectement, accidentellement ou corrélativement à l’utilisation de ce texte ou toute erreur qu’il contiendrait. » 30 FINAL TRANSCRIPT March 15, 2016 — 11:00 a.m. E.T. INNOVA Gaming Group Inc. 2015 Fourth Quarter and Year-­End 2015 Financial Results Conference Call Matthew Gan Yeah. Yeah. Progressives and the new features and—relative to what they were earning before you put in the new features? Steve Koo Yeah. So the ARPU, as I mentioned previously when you look at Ontario, the win-­‐per-­‐unit is up with the addition of the features. Our ARPU is incrementally higher as well as we get a share of the ticket sales generated by those. And in Maryland with the launch of some of the new features we've also seen a market improvement in our win-­‐per-­‐unit, and the ARPU there is also up. Matthew Gan Okay. Okay. And then in terms of your 189 AGPs removed this quarter, how much of that was in relation to Blue Stone? Was any of it? Or was none of it? Steve Koo That was related to Blue Stone. Matthew Gan That was all Blue Stone. Okay. Steve Koo Yeah. Matthew Gan "Though CNW Group has used commercially reasonable efforts to produce this transcript, it does not represent or warrant that this transcript is error-­free. CNW Group will not be responsible for any direct, indirect, incidental, special, consequential, loss of profits or other damages or liabilities which may arise out of or result from any use made of this transcript or any error contained therein." « Bien que CNW Telbec ait fait tous les efforts possibles pour produire cet audioscript, la société ne peut affirmer ou garantir qu’il ne contient aucune erreur. CNW Telbec ne peut être tenue responsable de pertes ou profits, responsabilités ou dommages causés par ou découlant directement, indirectement, accidentellement ou corrélativement à l’utilisation de ce texte ou toute erreur qu’il contiendrait. » 31 FINAL TRANSCRIPT March 15, 2016 — 11:00 a.m. E.T. INNOVA Gaming Group Inc. 2015 Fourth Quarter and Year-­End 2015 Financial Results Conference Call Okay. Okay. That's all for me. Thanks. Rick Weil Thanks, Matthew. Operator Your next question comes from Maher Yaghi from Desjardin Capital. Your line is open. Maher Yaghi — Desjardins Capital Thank you for taking my question. Good morning, guys. Rick Weil Good morning, Maher. Maher Yaghi I wanted to ask you on your outlook for the AGPs in 2016, you provided some initial view on LT-­‐3s; we understand there’s probably going to be many machines that will be pulled out due to the contract dispute there in Texas, but can you talk a little bit about your outlook for the year, including those machines that will be pulled out? Steve Koo Yeah. So our expectation is, as I mentioned, if you look at our total revenue for the year from AGP was about 3.1 million. Maher Yaghi Right. "Though CNW Group has used commercially reasonable efforts to produce this transcript, it does not represent or warrant that this transcript is error-­free. CNW Group will not be responsible for any direct, indirect, incidental, special, consequential, loss of profits or other damages or liabilities which may arise out of or result from any use made of this transcript or any error contained therein." « Bien que CNW Telbec ait fait tous les efforts possibles pour produire cet audioscript, la société ne peut affirmer ou garantir qu’il ne contient aucune erreur. CNW Telbec ne peut être tenue responsable de pertes ou profits, responsabilités ou dommages causés par ou découlant directement, indirectement, accidentellement ou corrélativement à l’utilisation de ce texte ou toute erreur qu’il contiendrait. » 32 FINAL TRANSCRIPT March 15, 2016 — 11:00 a.m. E.T. INNOVA Gaming Group Inc. 2015 Fourth Quarter and Year-­End 2015 Financial Results Conference Call Steve Koo A few million of that was related to Texas. And so I think with the remaining units that are out there our forecast is to hold steady. And I think it's a quarter-­‐by-­‐quarter battle on the AGP side. As we've mentioned previously, it's a very competitive space. I think where we can add units we'll add units, and we expect we'll lose units in some locations and we'll be able to deploy additional units in others. But I'm hopeful and I'm encouraged by some of the progress we've made that we’ll at least be able to hold the existing base, minus the Texas numbers, constant. Maher Yaghi Okay. And you mentioned that this is only a revenue—it will affect only revenues. How will you account for the compensation that you will get from Amaya to help you offset that? How is the accounting going to work? Steve Koo Yeah. We definitely won't be showing the EBITDA support agreement. It won't show up as revenue to us. I expect we'll show it in below the line as—I'll confirm with our accounting group—but I assume we would treat it something like an insurance—like how you would treat an insurance settlement, et cetera. So it would be in sort of nonrevenue lines. It would be sort of in our G&A or below G&A. Maher Yaghi "Though CNW Group has used commercially reasonable efforts to produce this transcript, it does not represent or warrant that this transcript is error-­free. CNW Group will not be responsible for any direct, indirect, incidental, special, consequential, loss of profits or other damages or liabilities which may arise out of or result from any use made of this transcript or any error contained therein." « Bien que CNW Telbec ait fait tous les efforts possibles pour produire cet audioscript, la société ne peut affirmer ou garantir qu’il ne contient aucune erreur. CNW Telbec ne peut être tenue responsable de pertes ou profits, responsabilités ou dommages causés par ou découlant directement, indirectement, accidentellement ou corrélativement à l’utilisation de ce texte ou toute erreur qu’il contiendrait. » 33 FINAL TRANSCRIPT March 15, 2016 — 11:00 a.m. E.T. INNOVA Gaming Group Inc. 2015 Fourth Quarter and Year-­End 2015 Financial Results Conference Call Okay. As an offset to G&A? Or... Steve Koo Exactly, as an offset. Maher Yaghi Okay. Okay. And then in terms of your LT-­‐3 forecast, the 300 to 360, now are these assumed only signed contracts and expected deployments of machines? Or does it include any new jurisdictions that we have not been told of yet? Steve Koo For the most part it's only the jurisdictions we're in. We have a little of—I think a little bit of that we expect from New Hampshire, but that number doesn't include some of the new jurisdictional opportunities that Rick has been speaking about. Maher Yaghi Okay. And Rick talked about the Michigan opportunity. Does it include any kind of increased deployment in Michigan? Steve Koo Yes. We are factoring some deployments in Michigan. Maher Yaghi A more broader scope-­‐type contract than a pilot program? Rick Weil "Though CNW Group has used commercially reasonable efforts to produce this transcript, it does not represent or warrant that this transcript is error-­free. CNW Group will not be responsible for any direct, indirect, incidental, special, consequential, loss of profits or other damages or liabilities which may arise out of or result from any use made of this transcript or any error contained therein." « Bien que CNW Telbec ait fait tous les efforts possibles pour produire cet audioscript, la société ne peut affirmer ou garantir qu’il ne contient aucune erreur. CNW Telbec ne peut être tenue responsable de pertes ou profits, responsabilités ou dommages causés par ou découlant directement, indirectement, accidentellement ou corrélativement à l’utilisation de ce texte ou toute erreur qu’il contiendrait. » 34 FINAL TRANSCRIPT March 15, 2016 — 11:00 a.m. E.T. INNOVA Gaming Group Inc. 2015 Fourth Quarter and Year-­End 2015 Financial Results Conference Call Yeah. I mean when we look at 2016, and I made a comment on my—during my introduction about the possibility of exceeding the number, and I'm not suggesting that we will, but when we look across our current customers, as Steve said, when you go into the year you try to forecast with these lotteries or whatever how they're going to roll out machines. And it never ends up being exactly what you think. And sort of the two you think that were going to be, let's say, the higher ones… Maher Yaghi Mm-­‐hmm. Rick Weil End up being kind of the middle and the one you don't expect, but we're pretty comfortable when we look across that and when we look at them that the being able to maintain that 25 to 30 is the right sort of average out. And so that's sort of how we do it. But to answer your question, Maher, what isn't in there for sure when we plan it is shipping machines into a new jurisdiction because the way these things go, the time cycle, is that if we can get a new jurisdiction sort of on board this year, the reality is we won't have the contract signed and all the sort of the pieces done so that we would start shipping probably till very late this year, but more than likely next year. Maher Yaghi Right. And it would be only a pilot probably than… "Though CNW Group has used commercially reasonable efforts to produce this transcript, it does not represent or warrant that this transcript is error-­free. CNW Group will not be responsible for any direct, indirect, incidental, special, consequential, loss of profits or other damages or liabilities which may arise out of or result from any use made of this transcript or any error contained therein." « Bien que CNW Telbec ait fait tous les efforts possibles pour produire cet audioscript, la société ne peut affirmer ou garantir qu’il ne contient aucune erreur. CNW Telbec ne peut être tenue responsable de pertes ou profits, responsabilités ou dommages causés par ou découlant directement, indirectement, accidentellement ou corrélativement à l’utilisation de ce texte ou toute erreur qu’il contiendrait. » 35 FINAL TRANSCRIPT March 15, 2016 — 11:00 a.m. E.T. INNOVA Gaming Group Inc. 2015 Fourth Quarter and Year-­End 2015 Financial Results Conference Call Rick Weil That’s correct. Maher Yaghi Something big. Rick Weil That’s correct. Maher Yaghi Okay. And on the Missouri, when should we see a resolution on that dossier? Are we expecting some kind of formal finish line to be achieved this year? Or it could drag on… Rick Weil Well, we can’t—the court systems are unpredictable. I would think we’ve been—typically they’ve told us it depends on how things progress, but it’s probably a nine-­‐month process till the case gets through the courts. Maher Yaghi Mm-­‐hmm. Some initial judgment on this? Rick Weil Yeah. On the legality of the… Maher Yaghi Right. "Though CNW Group has used commercially reasonable efforts to produce this transcript, it does not represent or warrant that this transcript is error-­free. CNW Group will not be responsible for any direct, indirect, incidental, special, consequential, loss of profits or other damages or liabilities which may arise out of or result from any use made of this transcript or any error contained therein." « Bien que CNW Telbec ait fait tous les efforts possibles pour produire cet audioscript, la société ne peut affirmer ou garantir qu’il ne contient aucune erreur. CNW Telbec ne peut être tenue responsable de pertes ou profits, responsabilités ou dommages causés par ou découlant directement, indirectement, accidentellement ou corrélativement à l’utilisation de ce texte ou toute erreur qu’il contiendrait. » 36 FINAL TRANSCRIPT March 15, 2016 — 11:00 a.m. E.T. INNOVA Gaming Group Inc. 2015 Fourth Quarter and Year-­End 2015 Financial Results Conference Call Rick Weil Thing. That’s correct. Maher Yaghi Right. But I guess you’re on the side of the government on this, right? So I mean the gaming… Rick Weil Well, of course we are. Maher Yaghi Yeah. So it’s basically a citizen-­‐type view that this is not legal; that it’s trying to overtake what the government is trying to push into into the liquor-­‐by-­‐the-­‐drink-­‐type deployment, right? Rick Weil Yeah. I mean we, as does the Lottery believe, that the dispenser is legal, and so the Lottery signed a contract with us to do the pilot and we deployed the machines. And so our position is they are legal. Maher Yaghi Mm-­‐hmm. Rick Weil We’ll find out as the case progresses how or what the view will be of the other side and see where it goes. But yeah, as you say, we’re on the government’s side sitting along with the Lottery. Maher Yaghi "Though CNW Group has used commercially reasonable efforts to produce this transcript, it does not represent or warrant that this transcript is error-­free. CNW Group will not be responsible for any direct, indirect, incidental, special, consequential, loss of profits or other damages or liabilities which may arise out of or result from any use made of this transcript or any error contained therein." « Bien que CNW Telbec ait fait tous les efforts possibles pour produire cet audioscript, la société ne peut affirmer ou garantir qu’il ne contient aucune erreur. CNW Telbec ne peut être tenue responsable de pertes ou profits, responsabilités ou dommages causés par ou découlant directement, indirectement, accidentellement ou corrélativement à l’utilisation de ce texte ou toute erreur qu’il contiendrait. » 37 FINAL TRANSCRIPT March 15, 2016 — 11:00 a.m. E.T. INNOVA Gaming Group Inc. 2015 Fourth Quarter and Year-­End 2015 Financial Results Conference Call Mm-­‐hmm. Okay. And just on the use of cash, can you—because you talked a few—about different ways to use the cash that the Company is generating; you talked about doing transactions; you talked about other forms of returning cash to shareholders. Can you maybe talk a little bit about your priorities? How you prioritize the use of cash? Steve Koo Yeah. I think certainly our main priority is to drive shareholder value. I think as we look at acquisitions we’re very careful, and Rick and I have been down this path before, to make sure any acquisition we pursue, whether from a valuation perspective or from a strategic perspective, we think will increase shareholder value. I think not to be flippant about it, or sort of trite about it, but certainly increasing shareholder value is the absolute sort of priority for the use of that cash. And I think share buybacks, as Rick mentioned, and other opportunities to return cash to shareholders is also in that list in terms of how we create value. I certainly think through M&A and our experience in M&A there could be a lot of opportunities there to really sort of amplify the potential of this company as opposed to simply repurchasing shares, which at this level none of us are happy at. And we think there’s an opportunity there, but again, everything is on the table and we’re looking at it all very closely. Maher Yaghi "Though CNW Group has used commercially reasonable efforts to produce this transcript, it does not represent or warrant that this transcript is error-­free. CNW Group will not be responsible for any direct, indirect, incidental, special, consequential, loss of profits or other damages or liabilities which may arise out of or result from any use made of this transcript or any error contained therein." « Bien que CNW Telbec ait fait tous les efforts possibles pour produire cet audioscript, la société ne peut affirmer ou garantir qu’il ne contient aucune erreur. CNW Telbec ne peut être tenue responsable de pertes ou profits, responsabilités ou dommages causés par ou découlant directement, indirectement, accidentellement ou corrélativement à l’utilisation de ce texte ou toute erreur qu’il contiendrait. » 38 FINAL TRANSCRIPT March 15, 2016 — 11:00 a.m. E.T. INNOVA Gaming Group Inc. 2015 Fourth Quarter and Year-­End 2015 Financial Results Conference Call Okay. But it’s fair to say that you’ll—the share repurchase or any of that kind of use of cash will wait to see if a transaction or an M&A combination or some form of new direction could be established first and then look at if that doesn’t work then you can look at returning cash through a buyback? Is that how we should think about this? Steve Koo Well, yeah, I think that’s fair. I mean we certainly we wouldn’t want to embark on a big share buyback and use a lot of that dry powder we have, and then turn around and see a really good M&A opportunity that we could have executed with some of that cash and sort of regret passing that opportunity. But again, I think it’s all happening real-­‐time here, so we’re looking at stuff all simultaneously, and it’s certainly not something where we’re saying, look, let’s just keep just chasing down the M&A and not think about a share buyback until we’ve completely exhausted all the M&A opportunities because that never really happens. M&A is always fluid and things are always happening, so you have to be constantly evaluating what you think is happening in the marketplace as opposed to the use of your cash at that point in time Maher Yaghi Okay. Okay. Great. Thank you, guys. Have a nice day. Rick Weil "Though CNW Group has used commercially reasonable efforts to produce this transcript, it does not represent or warrant that this transcript is error-­free. CNW Group will not be responsible for any direct, indirect, incidental, special, consequential, loss of profits or other damages or liabilities which may arise out of or result from any use made of this transcript or any error contained therein." « Bien que CNW Telbec ait fait tous les efforts possibles pour produire cet audioscript, la société ne peut affirmer ou garantir qu’il ne contient aucune erreur. CNW Telbec ne peut être tenue responsable de pertes ou profits, responsabilités ou dommages causés par ou découlant directement, indirectement, accidentellement ou corrélativement à l’utilisation de ce texte ou toute erreur qu’il contiendrait. » 39 FINAL TRANSCRIPT March 15, 2016 — 11:00 a.m. E.T. INNOVA Gaming Group Inc. 2015 Fourth Quarter and Year-­End 2015 Financial Results Conference Call Yeah. Thanks. Steve Koo Yeah. Thanks. Rick Weil You too, Maher. Operator At this time, I have no further questions in queue. I turn the call back over to Jonathon Ross for closing remarks. Jonathon Ross Thanks a lot, Lindsay. Thanks, everyone, for participating on the call today, and obviously we appreciate your questions and continued support of INNOVA. Feel free to reach out and contact any of us with further questions. Thanks a lot. Richard Weil Thank you. Operator Thank you, everyone. This concludes today’s conference call. You may now disconnect. ***** "Though CNW Group has used commercially reasonable efforts to produce this transcript, it does not represent or warrant that this transcript is error-­free. CNW Group will not be responsible for any direct, indirect, incidental, special, consequential, loss of profits or other damages or liabilities which may arise out of or result from any use made of this transcript or any error contained therein." « Bien que CNW Telbec ait fait tous les efforts possibles pour produire cet audioscript, la société ne peut affirmer ou garantir qu’il ne contient aucune erreur. CNW Telbec ne peut être tenue responsable de pertes ou profits, responsabilités ou dommages causés par ou découlant directement, indirectement, accidentellement ou corrélativement à l’utilisation de ce texte ou toute erreur qu’il contiendrait. » 40