Takeaway: Continue to like prospects over the near and intermediate term due to strong EPS growth, better capital allocation, and cheap valuation




"Our robust first quarter results.... provide a great start toward what we expect will be our fourth consecutive year of double digit growth in adjusted earnings per share from continuing operations"


- Patti Hart, CEO of IGT 



  • Gaming operations:  remains challenged for a variety of reasons.  However, focus on profitability is bearing fruit. 
    • Continue to focus on managing this business for cash flow and profitability
    • That said they are encouraged by the performance of some of their recent releases
    • Developed a new rapid progressive that they will launch next month
    • They are launching more direct marketing programs for MegaJackpots
  • Product sales:  confident that they will continue to gain share
    • Takes the Cake and Dolly Parton very popular
  • Interactive:  impacted by the closure of their international poker network
    • Are now able to launch IGT titles to the online casino in a very efficient fashion. Still expect the DD acquistion to be GAAP accretive by 2014
  • Customer sentiment is improving towards IGT's products


  • What was the CA number shipped in the Q? 1,600 units.  Expectation for CA remain consistent with what they have previously disclosed.
  • Domestic replacement market is continuing to bump along as they expected.  They remain cautiously optimistic on overall replacements and their ability to take more share.
  • High-Five's recent success in the social gaming space?  Not concerned about them in the social gaming space, despite their ability to make good games.
  • Gaming operations yield performance?  Still possible to get to flat YoY yields by YE but are monitoring that.  Their approach to gaming operations is a fulcrum approach: Doing a lot to market direct to consumers on their social gaming platform. They will not chase yield through inefficient capital allocations. Will not use capital to drive yield. 
  • Size of the ASP decline in NA: really primarily VLT driven, but they also had lower MLDs as a % of total shipments in the quarter which were particularly high last year. Expect margins to be comparable to prior year in non-box sales.  Less discounting in the quarter on boxes also helped margins.
  • Game operations margins were improved due to lower jackpot expense and lower D&A
    • There is more room for D&A to continue to go lower and help margins.  However, they are also working hard on licensing fees to contribute to margins.
  • Ship share in December?  Pretty confident that it remained in the high 30's.
  • Success metrics of their game operations: time of games in the field, churn in their install base, yields, measure effectiveness of direct to customer marketing.  MegaJackpots have been traditionally a hit driven business. 
  • Is the $30MM of capex for game operations sustainable? They will put more capital to work if they find appropriate opportunities. They still expect to be at or below last year's capex number.
  • Reason that the acquisition related costs were down was because they re-marked their expenses at year end. They don't do as comprehensive of a review each quarter. Retention and amortization is static throughout the year but retention payment will likely go up throughout the course of the year. 
  • Discounts in NA for game sales were down materially in the quarter. The environment remains very competitive as it has been over the last year.
  • They aren't updating guidance because it's just too early in the year and there is no extraordinary reason to raise or lower guidance right now. There is a lot of timing in play in some of the sizable orders. International markets are still struggling. Also, underlying trends in gross gaming revenues for the market as a whole are also fluctuating.
  • Operating expense increase YoY is almost all attributable to the investments they are making in the Interactive business
  • Outlook for international? Continue to invest in that business. The market is difficult to predict. They are still looking for slight growth in the year. 



  • EPS outlook of $1.20 to $1.30 unchanged
  • Gaming operations: 
    • YoY revenues fell due to lower MegaJackpots and was partially offset by higher lease operations
      • Install base: 56,800 (+2% YoY)
      • Yield: $46.80 (-7% YoY)
    • Gross margins improved 200bps "primarily due to an increase mix of lower-yielding higher-margin lease operations games and lower jackpot expenses"
  • Product Sales:
    • Revenues "increased 30% to $235 million in the first quarter, due to increased North America machine sales related to Canadian and Illinois VLT customers, as well as increased non-machine intellectual property licensing fees"
      • 7,200 units recognized and 6,800 shipped (5,100 replacement) 
    • "North America gross margin increased... largely due to increased non-machine revenues, which included $5 million of royalty settlement fees."
    • The YoY drop in ASPs in NA was "mainly due to an unfavorable pricing mix related to increased VLT sales."
  • Interactive: DoubleDown sales were better than expected while IGTi was weaker
    • DoubleDown: Revenues of $41.3MM and gross margin of 60%
      • DAU: 1,462MM; Booking per DAU: $0.31
    • IGTi: $11.6MM of revenues at a 51% gross margin

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