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In preparation for IGT's FY Q4 2010 earnings release this afternoon, we've put together some forward looking commentary from the company's FY Q3 and subsequent conferences.

Post Earning Conference Commentary

  • “As we mentioned back in November, when we laid out guidance for the current fiscal year, we anticipate replacement sales ranging anywhere from flat in 2010 to slightly up, and that’s really what predicated the range in our guidance.”
  • “So at the low end of your guidance you’re assuming a flat replacement environment and at the high end you’re assuming up 10%?”
    • A: “Right, correct”
  • “I think on the operating expense line, I think as where we sit today, we’re probably comfortable at the level of operating expenses, but if things should stay protracted for a longer period then I think we have to take a harder look at  what we need to make some structural changes in how we operate the business.”
  • “You’ve seen us in the area of R&D really stick to holding that number right around 200 million year. The big difference that’s going on there is how we’re spending those R&D dollars. I think today much more focus, lot of analysis going into every dollar that’s deployed in R&D so that we make sure that we’re managing the ultimate returns of products, so killing products sooner in the development lifecycle.”
  • “We’re going to continue to take costs out of the margin through consolidation of product lines, reduction of the number of products we support where there isn’t incremental value being derived from offering, let’s say, 11 cabinets versus what you could accomplish with, say, 6 or 7.”
  • “We probably have another year or so before we’re on a – what I’ll say a standardized platform.”
  • “I think American Idol has been out there now about 60 days. I think the indicators on it are that it’s a pretty successful game, so we’ll see how well it does as it gets out into broader deployment. It’s been on an exclusive with, I believe, 9 of the MGM properties for the first 60 days, but we’re encouraged”
  • “I mean we’re always looking for opportunities to grow the installed base.”
  • “So we have a promotion running right now that entitles the customers to some additional discounts above their normal discounts as dictated by the volume of business they do with us. And that really is for them to commit to product between now and the end of the calendar year. And then we have some others that will be introduced as part of G2E”
  • “We’re going to run out of pre-payable debt here before too long. And so one of the things we’re looking at right now is what, if anything, maybe we should do with some of our long-term debt. So stay tuned. It’s still unclear. We’ll, early part of next year, be sitting down with our bank group to redo our credit facility, which goes current in June of ‘11.”
  • “I think the more likely area for us is really in the online space or things that could be complementary to our business, when you think about technologies that maybe we can incorporate into the products, either online or in the core business.”

 

4Q2010 Earnings Call Commentary

  • “Moving into 2011, we may see SG&A stay about flat on a total dollar basis when compared to the full year 2010 as we invest in the people and processes necessary to take advantage of the expected industry turnaround and new business opportunities.”
  • “We expect R&D to be about flat to up slightly for fiscal 2011.”
  • “We will plan to further reduce our reliance on the North American replacement cycle by taking advantage of our diverse global revenue sources.”
  • “We expect to begin to see improvement in our Gaming Operations yield. We believe we have the most exciting titles both on the floor and in our pipeline and I cannot wait for the world to see some of the best games IGT has ever introduced at G2E this year.”
  • “We are planning for increased adoption of our improved systems products and heightened returns on our vast intellectual property portfolio.”
  • “We will continue to find ways to drive our improving profitability and margins even higher.”
  • “We are planning to accelerate our growth in the online and mobile business.”
  • “For the current fiscal year 2011, we offer GAAP earnings guidance of $0.77 to $0.87 per share.”
    • Guidance includes: “Very little if any for Illinois; and I want to say about 1500 units for Italy.”
    • “At the higher end, we’d assume we see some improvement in replacement activity."
  • “2 cents of potential upside depending on the timing of some software recognition at ARIA I think it was. Did that 2 cents happen in this quarter or was that not recognized in the September quarter just yet?”
    • A: “It was not…It will more than likely happen in FY 11.”
  • “I think another thing that’s worth noting, Joe, when you look at the international business in the quarter, not only were the units that we recognized up from the expectation, but the ASPs were up pretty significantly, so $3,000 year-on-year and $1,200 sequentially, so we’re finding that the health of the business in the international marketplace is really holding up”
    • “We hope it’s not a one-time thing, one of the opportunities that IGT has is it has a broad portfolio of markets to sell within and a broad portfolio of products to sell.”
  • “I would expect for the next couple of years that we would expect outsized growth in our international marketplaces. I think it’s a combination of jurisdictional expansion and an ability for us to take some share in markets where perhaps we haven’t been as aggressive as we have in North America. So I would expect to see the international business closing the gap a bit on the U.S. business, if you will, I would say in 11 and 12.”
  • “This year’s fourth quarter had fair amount of MLD carry-over from the dynamics promotion that ended the end of June, i.e. people had to have their orders in. Some of those orders came in in Q4. That’s really what explains the lower ASP.”
  • Game ops margin guidance: “I think 58 to 60% is the right kind of range”
  • “Do you have any intentions of … trying to take out the convert?”
    • A:  Actually studying all that right now... Because at the rate we’re generating cash we won’t have any pre-payable debt before too much longer, so a lot of analysis being done at this time around that.”