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We are expecting an in-line quarter and guidance.

F2Q Details:

We are projecting revenues of $475MM and EPS of $0.19 when IGT reports its F2Q11 results on April 21st, $10MM and 1 penny below street estimates.

We have factored in company guidance that F2Q will have the lowest margins in FY11, with 3Q and 4Q getting better sequentially but not exceeding 1Q margin levels, into our numbers.  

We estimate that IGT will report $208MM of product sales at 48.8% gross margins.

  • Domestic product revenues of $124MM and gross margin of $63MM (50.5%)
    • Domestic box sales of $70MM: 4.9k domestic unit sales - comprised of 4,200 replacements and 700 new units at an ASP of $14,250
      • IGT has recently started a new promotion similar to Dynamix (although we have no details on it at the moment) which should keep reported ASP’s at depressed levels for the remainder of the year.  Excluding promotional activity, our understanding is that the IGT has modestly increased pricing (1-2%)
      • New NA shipments should include shipments to Ocean Downs (43% share), Trump, and recognition of some of Gun Lake units (45% share)
    • Domestic non-box sales of $55MM, up 10% YoY
  • International product revenues of $84MM and gross margins of $40MM (46.5%)
    • $62MM of box sales: 5.3k international unit sales at an ASP of $11.7­k
      • Unit sales should include shipments to Galaxy Macau and some Italian shipments.  The first of roughly 1,500 Italian for sale shipments started last quarter and should continue through FY2011.
    • Non-box sales of $22MM
    • The company is now thinking that international unit shipments will be in the 22,000 range for the year. They realize that the Street could use some help in modeling international shipments and are working on better disclosure/guidance going forward.

Gaming operations revenue of $267.5MM at 61.5% gross margins

  • We expect the install base to increase by 100 units to 56,800 and average win per day to increase 1.4% YoY to $52.4
  • The Italian CIRSA units (~1,500) will be participation units but we don’t have them starting to come in until F1Q12
  • IGT will get 36% of Acqueduct units coming online in 4Q11
  • The company expects gaming operations yields to increase throughout the rest of the year and to see the install base up modestly as well.  Although they did caution that international growth which has been relatively strong for them could put a hamper on yield growth
  • Expect gross margins for FY11 to be ~62%

Other assumptions:

  • SG&A of $82MM (should come down sequentially given the absence of G2E expenses)
  • D&A: $20MM
  • R&D: $52.5MM
  • Net interest expense: $20MM