IGT 1Q 2012 REPORT CARD

In an effort to evaluate performance and as a follow up to our YouTube, we compare how the quarter measured up to previous management commentary and guidance.

 

 

OVERALL:  BETTER - IGT's quarter was strong and while gaming ops margins and international unit sales didn't live up to management's previous outlook, domestic unit shipments, international and domestic ASPs, and gaming ops placements more than made up the difference.

 

Here is the report card evaluating actual results against management's previous assertions. 

  • FY 2012 OUTLOOK
    • BETTER:  Raised guidance for adjusted earnings from continuing operations to $0.98 to $1.04 per share from $0.93-$1.03 previously, due to the Double Downs performance and better outlook on NA replacement market and international growth.
  • GAMING OPERATIONS MARGINS
    • SLIGHTLY WORSE:  Gross margins were lower by 3% YoY and 1% QoQ due to higher depreciation and inclusion of interactive segment, even through IGT had indicated previously that it would improve throughout the remainder of fiscal 2012.  However, revenues and gross profit were better than estimates due to a higher number of placements.
  • NORTH AMERICA PRODUCT SALES
    • From Q4 call:  "We are anticipating improving volumes and gross margin from our North American product sales over the course of 2012."
    • MUCH BETTER:  Units shipped increased 26% YoY, primarily due to a 32% increase in North America replacement units.  IGT recognized a lion's share of the Revel units and nothing for Ohio.
  • INTERNATIONAL GROWTH
    • WORSE:  IGT had mentioned of mid-teens growth for their international business.  Units shipped grew 5.6% while revenues grew 11%.  However, 600 units were deferred.
  • REPLACEMENT OUTLOOK
    • From Q4 call: "We feel like it's headed north....And I think the way to think about it in terms of unit flow in total, on a consolidated basis is, a nice step up in the March quarter, and then kind of consistent in the June quarter."
    • BETTER:  Replacements were much better and IGT's language was more confident than previous call commentary.
  • MARKET SHARE
    • SAME:  They still believe they have a mid-30s replacement share. 
  • CLOUD ROLLOUT
    • SAME:  The first cloud trials are up and running across Europe.  Very focused on converting trials to commercial. US opportunity will be in late 2013-2014.  
  • STOCK BUYBACK
    • SAME:  Repurchased $46MM in 2nd quarter.  Over the past 4 quarters, IGT has repurchased $100MM of stock, in-line with its fiscal goal.