The Street should've known about the ugly slot sales and share loss. After today, we'll get more positive as the Sell Side gets more negative.


"We anticipate revenues and profit margins strengthening throughout the year and we remain on track to meet our fiscal year 2012 operating goals."

- Patti Hart, CEO of IGT




  • Continue to benefit from the improvements that they have made in their gaming operations business.  Continue to make placements in MegaJackpots and see higher yields.
  • Expect to gain momentum throughout the new year in NA sales due to more openings and a pickup in replacements
  • Inventory increase was due to a ramp up in production of new units in anticipation of new openings coming in the next few quarters
  • Anticipate coming back to their normal share buyback plan in the coming quarters
  • Double Down
    • Adds new distribution of their game content through Facebook
    • Will be in the gaming operations business with the rest of their interactive division
    • Will increase disclosure of interactive in the coming quarters
  • This quarter, they saw the largest sequential increase in their MegaJackpots install base in four years
    • Anticipate average revenue per day to increase for the remainder of 2012
  • Received sizable orders in Macau, Panama, and Argentina
  • Anticipate units and revenues to be up double digits for international for the rest of the year
  • Think that Cloud will be adding to their systems revenue early next year
  • Anticipating improving NA volume and pricing over the next few quarters.  Ship share is improving. 
  • While we are off to an "expected measured start," we remain on track for the year
  • Their reiterated guidance doesn't include any impact from the Double Down acquistion



  • Return of capital to shareholders?
    • Their plan is to buy back $100MM/year of stock.  They were restricted for most of the quarter due to the Double Down acquisition.
  • Gaming operations
    • Lower yields sequentially was driven by normal seasonality.  Expect a lift in the coming quarters with September being the strongest.
  • Expect that they will give more visibility of Double Down when they consolidate the business in April
  • Continue to have confidence that they will maintain and grow share over the coming quarters. They will grow with the market. 45-50% for new openings ship share (driven by their poker platform) and mid 30's for replacement share.
    • Part of the shortfall they saw in the quarter was the recognition of Cosmo last year
    • Last year they had 27% share of NA replacements and expect to be 30% this year
      • If that's true, then every supplier will miss the quarter because that would imply a very large YoY increase
  • They are comfortable based on their backlog and customer feedback that their for sale units will increase
  • Macau's sales were to LVS's Sands Cotai Central. All of the uptick in Asia Pacific was due to the order in Macau. Their market share is still low - sub 20%.
  • March replacement units will be 'headed North" from December - question of how far North and how fast
    • Expect a nice step up in the March quarter, then a steady increase in the June with the best quarter in September
  • Expect more convergence in technology in the gaming space. Their core business is being redefined as a result. Game content development is and will continue to be their core business.
  • They saw weakness generally in the NA replacement market in December
  • Margins in gaming operations
    • All about impact of interest rate on jackpot expenses
  • Assumptions for Double Down DCF approach
    • More aggressive discount rate but high growth rates
    • Paid a higher multiple too
    • Think that they got a good deal compared to the comps - aka Zygna
    • Transaction was evaluated assuming no I-poker in the US
  • R&D: they have been very focused on R&D efficiency
  • SG&A was up primarily due to purchase of the Entraction platform - although they lost a lot of revenue in jurisdictions that they didn't want to serve
  • R&D is flat at about $200MM and the split of it among their products is due to the needs of the businesses each quarter
  • Which new openings did they ship to this quarter?
    • Miami Jai Lai
    • Northern Edge Navajo casino in NM
    • Sands Cotai Central
    • Panama, Argentina, Uruguay
    • Small increase to Europe YoY
  • Gross Margin on product sales
    • Universal Slant has lower margins despite higher pricing because it's a new product for them
    • Lower parts and conversion sales which are higher margin
    • Last year IGT benefited from a significant sale into Mexico in a 90% margin range 
      • Sold low price depreciated units into that market
  • Think that they will come in below $200MM for R&D for the year. 



  • EPS outlook of $0.93 to $1.03 was reiterated
  • Gaming Operations revenues of $265MM, gross margin of 61% and 55.6k install base
    • Increase in install base due to Resorts World NYC units and international lease operations in Latin America (CAGE)
    • Revenue growth due to interactive, NA Megajackpots, and international lease operations
  • Product sales of $181MM and gross margin of 51%
    • Increase in NA ASP due to higher mix of Universal Slant and G23 MLD sales
    • International ASP increase due to lower mix of Mexican units and "due to the prior year's conversion of lower-priced Mexico lease units to for-sale units."
    • Lower gross profit "primarily due to lower North America machine, part, and conversion sales" and lower margins primarily from product mix
  • Higher SG&A due to Entraction acquisition
  • "During the first quarter, the company repurchased 0.3 million shares of common stock at an average price of $16.74 per share for a total cost of $4 million."

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