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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: BYI blew away consensus on the back of record systems revenue which they promise will continue to deliver.  A lower tax rate also helped overcome some one time SG&A costs and FX losses. BYI's new re-upped buyback and ABS program also showed confidence in the company's outlook




  • SAME:  Strong initial performances from recent premium and WAP product launches, including Hot Shot Progressive, Cash Wizard Tiki Magic, and Pawn Stars.  NASCAR WAP debuted last week.  WAP yield was higher in March, relative to January/February.  BYI expects a pickup in WAP sales in the coming quarters.
  • PREVIOUSLY:  With respect to games operations… NASCAR is one of the most anticipated games that should be coming out in the next few months. The Hot Shot Dual Wheel… is an internal brand. We recently introduced a WAP game with a dual wheel, a big cabinet. That has just hit the floors, very small sample size, not statistically significant, but very, very good start… Pawn Stars on the premium segment, we know the reports have been very good from casinos. So overall we feel very good about our product momentum.


  • BETTER:  BYI bought $31 million of stock in F3Q and authorized a new $300 million stock buyback program.  BYI is entering into an accelerated share buyback agreement with JP Morgan today under which it will purchase up to $150 million worth of stock under the new share repurchase program.  BYI will receive 2.5 million shares by the end of April.
  • PREVIOUSLY:  We typically in our guidance assume somewhere in the $15 million to $20 million per quarter buyback. 


  • SAME:  788 VLTs were shipped in F3Q.
  • PREVIOUSLY:  During the quarter, we announced an agreement to provide 650 VLTs to WCLC Canada and expect to begin shipping the initial tranche during the March quarter. With respect to the Atlantic Lottery… somewhere around 1,200 to 1,300 of those shipped, so the remainder of those will likely come into this fiscal year


  • SAME:   International units sales continued to suffer this quarter, but BYI was steadfast that sales should improve as some new products get launched in the coming quarters
  • PREVIOUSLY:  International Games sales have been a disappointment once again… We have multiple product development initiatives currently underway focused on these international markets… We remain confident such efforts will pay off with improved International Games sales in the future.


  • BETTER:  Systems revenue ($71MM) was a quarterly record.  2/3rds of revenue came from existing customers.  Margins will remain 'in the 70s, +/- a couple of % points.'  Systems outlook for FY2014 is even better.
  • PREVIOUSLY:  On the Systems front, we expect fiscal 2013 to be our best year ever with increasingly visible backlog strength for the quarters ahead.


    TODAY’S S&P 500 SET-UP – April 25, 2013

    As we look at today's setup for the S&P 500, the range is 31 points or 0.94% downside to 1564 and 1.03% upside to 1595.                 










    • YIELD CURVE: 1.48 from 1.48
    • VIX VIX closed at 13.61 1 day percent change of 0.96%

    MACRO DATA POINTS (Bloomberg Estimates):

    • 8:30am: Init Jobless Claims, April 20, est. 350k (prior 352k)
    • 8:30am: Cont Claims, April 13, est. 3.060m (prior 3.068m)
    • 9:45am: Bloomberg Consumer Comfort, April 21 (prior -29.2)
    • 10am: Freddie Mac mortgage rates
    • 10:30am: EIA natural-gas storage change
    • 11am: Kansas City Fed Manf. Acti, April, est. -1 (prior -5)
    • 1pm: U.S. to sell $29b 7Y notes


      • Senate may hold final vote on legislation allowing states to collect taxes on out-of-state sellers, including online and catalog retailers
      • 8:30am: House Nuclear Cleanup Caucus briefing on Energy Dept’s 2013 cleanup program
      • 10am: Senate Health, Education and Labor Cmte votes on nomination of Thomas Perez for Labor sec
      • 10am: House Armed Svcs Cmte hears from Army Sec. John McHugh and Army Chief of Staff Raymond Odierno on the Army budget request
      • 2:30pm: Treasury Sec. Jack Lew will hold open session of FSOC to vote on annual report; Fed Chairman Ben Bernanke, CFPB Dir. Richard Cordray, CFTC Chairman Gary Gensler, FDIC Chairman Martin Gruenberg, SEC Chairman Mary Jo White, others to attend
      • 2:30pm: House Ways and Means panel hears from acting IRS Commissioner Steve Miller on 2013 tax filing season


    • Boeing 787 battery tests didn’t ensure against fire, NTSB says
    • Samsung says demand for new Galaxy S4 more than anticipated
    • Lockheed may win orders for up to 71 F-35s, Pentagon says
    • Twitter said to plan bolstering user security after AP hacking
    • Netflix will raise capital as needed to fund original programs
    • Fiat said to target N.Y. primary listing in Italy retreat
    • Verizon may bid $100b for Verizon Wireless: Reuters
    • U.K. avoids triple-dip recession as economy expands 0.3%
    • Spain jobless rate breaches 27% as recession crimps economy
    • Lansdowne exits Prudential short after “meaningful” losses
    • Criteo said to name JPMorgan for its U.S. IPO


      • Potash Corp of Saskatchewan (POT CN) 6am, $0.60
      • Colfax (CFX) 6am, $0.24
      • Ball (BLL) 6am, $0.65
      • Helmerich & Payne (HP) 6am, $1.29
      • Stanley Black & Decker (SWK) 6am, $0.96
      • Precision Drilling (PD CN) 6am, C$0.29
      • Patterson-UTI Energy (PTEN) 6am, $0.36
      • Diamond Offshore Drilling (DO) 6am, $1.16
      • United Therapeutics (UTHR) 6am, $1.46
      • Time Warner Cable (TWC) 6am, $1.37
      • Alamos Gold (AGI CN) 6am, $0.20
      • NorthWestern (NWE) 6am, $0.94
      • Proto Labs (PRLB) 6am, $0.31
      • LPL Financial Holdings (LPLA) 6am, $0.55
      • Dunkin’ Brands (DNKN) 6am, $0.29
      • Cash America International (CSH) 6am, $1.36
      • Chart Industries (GTLS) 6am, $0.66
      • Southwest Airlines (LUV) 6:30am, $0.02
      • Alexion Pharmaceuticals (ALXN) 6:30am, $0.60
      • Bunge (BG) 6:30am, $0.91
      • RR Donnelley (RRD) 6:30am, $0.33
      • PulteGroup (PHM) 6:30am, $0.15
      • Carter’s (CRI) 6:30am, $0.69
      • World Acceptance (WRLD) 6:30am, $3.06
      • WABCO Holdings (WBC) 6:30am, $1.07
      • Colgate-Palmolive (CL) 7am, $1.32
      • Altria Group (MO) 7am, $0.53
      • Raytheon (RTN) 7am, $1.28
      • AmerisourceBergen (ABC) 7am, $0.88
      • DST Systems (DST) 7am, $1.08
      • CONSOL Energy (CNX) 7am, $0.21
      • Zimmer Holdings (ZMH) 7am, $1.40
      • Dana Holding (DAN) 7am, $0.42
      • First American Financial (FAF) 7am, $0.42
      • Bemis (BMS) 7am, $0.54
      • Boston Scientific (BSX) 7am, $0.09
      • Dow Chemical (DOW) 7am, $0.61
      • Entergy (ETR) 7am, $0.83
      • EQT (EQT) 7am, $0.53
      • Harley-Davidson (HOG) 7am, $0.99
      • Hershey (HSY) 7am, $1.04
      • Sigma-Aldrich (SIAL) 7am, $1.00
      • Biogen Idec (BIIB) 7am, $1.63
      • Old Dominion Freight Line (ODFL) 7am, $0.42
      • Colonial Properties Trust (CLP) 7am, $0.34
      • AMETEK (AME) 7am, $0.51
      • L-3 Communications (LLL) 7am, $1.93
      • Linn Energy (LINE) 7am, $0.24
      • Lear (LEA) 7am, $1.10
      • Nielsen Holdings (NLSN) 7am, $0.36
      • EQT Midstream Partners (EQM) 7am, $0.48
      • LinnCo LLC (LNCO) 7am, $0.32
      • Lancaster Colony (LANC) 7:05am, $0.80
      • Mack-Cali Realty (CLI) 7:10am, $0.64
      • Noble Energy (NBL) 7:24am, $1.25
      • Bristol-Myers Squibb (BMY) 7:30am, $0.42
      • Dominion Resources (D) 7:30am, $0.89
      • Domtar (UFS) 7:30am, $1.46
      • 3M (MMM) 7:30am, $1.65
      • Cameron International (CAM) 7:30am, $0.75
      • CMS Energy (CMS) 7:30am, $0.51
      • Coca-Cola Enterprises (CCE) 7:30am, $0.38
      • Occidental Petroleum (OXY) 7:30am, $1.54
      • Parker Hannifin (PH) 7:30am, $1.67
      • SCANA (SCG) 7:30am, $1.04
      • Celgene (CELG) 7:30am, $1.35
      • Level 3 Communications (LVLT) 7:30am, $(0.17)
      • Graphic Packaging Holding (GPK) 7:30am, $0.08
      • JetBlue Airways (JBLU) 7:30am, $0.10
      • LKQ (LKQ) 7:30am, $0.29
      • Hercules Offshore (HERO) 7:30am, $(0.04)
      • United Continental (UAL) 7:30am, $(1.09)
      • Mead Johnson Nutrition (MJN) 7:30am, $0.86
      • Revlon (REV) 7:30am, $0.26
      • EMCOR Group (EME) 7:30am, $0.44
      • Brunswick (BC) 7:35am, $0.63
      • United Parcel Service (UPS) 7:45am, $1.01
      • AltaGas (ALA CN) 7:45am, C$0.53
      • United Bankshares (UBSI) 7:50am, $0.43
      • Landstar System (LSTR) 7:50am, $0.57
      • Avnet (AVT) 8am, $0.87
      • Trimas (TRS) 8am, $0.41
      • Meredith (MDP) 8am, $0.68
      • ConocoPhillips (COP) 8am, $1.42
      • Imperial Oil (IMO CN) 8am, C$0.95
      • BorgWarner (BWA) 8am, $1.24
      • Rayonier (RYN) 8am, $0.60
      • KKR (KKR) 8am, $0.80
      • Cabela’s (CAB) 8am, $0.59
      • SunCoke Energy (SXC) 8am, $0.05
      • Marriott Vacations Worldwide (VAC) 8am, $0.44
      • Alaska Air Group (ALK) 8am, $0.56
      • Carpenter Technology (CRS) 8am, $0.74
      • Kennametal (KMT) 8am, $0.71
      • Brink’s (BCO) 8am, $0.31
      • Life Time Fitness (LTM) 8am, $0.65
      • Exxon Mobil (XOM) 8:04am, $2.05
      • Belo (BLC) 8:30am, $0.15
      • Deluxe (DLX) 8:30am, $0.87
      • GATX (GMT) 8:30am, $0.70
      • Valassis Communications (VCI) 8:30am, $0.73
      • New York Times (NYT) 8:30am, $0.04
      • Royal Caribbean Cruises  (RCL) 8:30am, $0.19
      • Sun Communities (SUI) 8:30am, $0.91
      • PVR Partners  (PVR) 8:30am, $0.06
      • Reliance Steel & Aluminum (RS) 8:50am, $1.14
      • Old Republic International (ORI) 9am, $(0.04)
      • Safeway (SWY) 9am, $0.35
      • Realty Income (O) 9:15am, $0.58
      • InterDigital (IDCC) Bef-mkt, $(0.19)
      • Tessera Technologies (TSRA) Bef-mkt, $(0.63)
      • Shoppers Drug Mart (SC CN) Bef-mkt, C$0.59
      • Baidu (BIDU) 4pm, $6.52
      • Cirrus Logic (CRUS) 4pm, $0.58
      • Maxim Integrated Products (MXIM) 4pm, $0.41
      • ResMed (RMD) 4pm, $0.56
      • Columbia Sportswear (COLM) 4pm, $0.14
      • TFS Financial (TFSL) 4pm, $0.02
      • CBRE Group (CBG) 4pm, $0.17
      • VCA Antech (WOOF) 4pm, $0.37
      • Clearwire (CLWR) 4pm, $(0.27)
      • Freescale Semiconductor  (FSL) 4pm, $(0.10)
      • Chubb (CB) 4pm, $1.74
      • Cincinnati Financial (CINF) 4pm, $0.67
      • Deckers Outdoor (DECK) 4pm, $(0.10)
      • Simpson Manufacturing (SSD) 4pm, $0.18
      • Principal Financial (PFG) 4pm, $0.74
      • Informatica (INFA) 4pm, $0.31
      • Amazon.com (AMZN) 4pm, $0.10
      • NETGEAR (NTGR) 4pm, $0.52
      • Molina Healthcare (MOH) 4pm, $0.25
      • Expedia (EXPE) 4pm, $0.23
      • Hittite Microwave (HITT) 4pm, $0.56
      • Microsemi (MSCC) 4pm, $0.40
      • BioMarin Pharmaceutical (BMRN) 4pm, $(0.31)
      • Cerner (CERN) 4:01pm, $0.63
      • Coinstar (CSTR) 4:01pm, $0.86
      • National Instruments (NATI) 4:01pm, $0.19
      • Pebblebrook Hotel Trust (PEB) 4:01pm, $0.17
      • Federated Investors (FII) 4:02pm, $0.42
      • Wynn Resorts (WYNN) 4:02pm, $1.55
      • Starbucks (SBUX) 4:03pm, $0.48
      • VeriSign (VRSN) 4:05pm, $0.54
      • PerkinElmer (PKI) 4:05pm, $0.48
      • Leggett & Platt (LEG) 4:05pm, $0.38
      • Superior Energy Services (SPN) 4:05pm, $0.40
      • PMC-Sierra (PMCS) 4:05pm, $0.08
      • Ingram Micro (IM) 4:05pm, $0.43
      • Theravance (THRX) 4:05pm, $(0.38)
      • Dolby Laboratories (DLB) 4:05pm, $0.71
      • Axis Capital Holdings  (AXS) 4:05pm, $1.19
      • NetSuite (N) 4:05pm, $0.03
      • QLIK Technologies (QLIK) 4:05pm, $(0.12)
      • Republic Services (RSG) 4:05pm, $0.41
      • KBR (KBR) 4:10pm, $0.47
      • KLA-Tencor (KLAC) 4:15pm, $0.86
      • Altera (ALTR) 4:15pm, $0.33
      • MICROS Systems (MCRS) 4:15pm, $0.61
      • SVB Financial Group (SIVB) 4:15pm, $0.88
      • Synaptics (SYNA) 4:15pm, $0.57
      • Validus Holdings (VR) 4:15pm, $1.42
      • International Game Technology (IGT) 4:15pm, $0.30
      • Eastman Chemical (EMN) 4:30pm, $1.57
      • HealthSouth (HLS) 4:30pm, $0.40
      • Skyworks Solutions (SWKS) 4:30pm, $0.47
      • West (WSTC) 4:45pm, no est.
      • Reinsurance Group of America (RGA) 5pm, $1.61
      • Hancock Holding (HBHC) 5pm, $0.60
      • Agnico-Eagle Mines (AEM CN) 5pm, $0.31
      • Taubman Centers (TCO) 5pm, $0.85
      • Aptargroup (ATR) 5pm, $0.66
      • West Fraser Timber (WFT CN) 5pm, C$2.15
      • Universal Health Services (UHS) 5:01pm, $1.17
      • Minerals Technologies (MTX) 5:01pm, $0.51
      • Range Resources (RRC) 5:15pm, $0.30
      • First Industrial Realty Trust (FR) 7:50pm, $0.26
      • Olin (OLN) Aft-mkt, $0.46
      • Key Energy Services (KEG) Aft-mkt, $0.04
      • Washington REIT (WRE) Aft-mkt, $0.46
      • Iberiabank (IBKC) Aft-mkt, $0.68 


    • Gold Advances to 10-Day High as Central Banks Join Other Buyers
    • Gold Rout for Central Banks Buying Most Since 1964: Commodities
    • WTI Trades Near Two-Week High; Discount to Brent Shrinks to $10
    • U.S. Mint Sales of Gold Coins at Three-Year High on Prices
    • Shanghai Copper Trade Jumps as Bear Market Brings Volatility
    • Soybeans Rebound on Speculation China Is Buying U.S. Supplies
    • Texas University Fund Sold $375 Million in Gold-Bar Holdings
    • Palm Oil Climbs a Third Day as Rising Exports May Trim Reserves
    • No End to Power Rout as Carbon Market Vote Fails: Energy Markets
    • Olam to Cut Spending, Sell Assets After Muddy Waters Attack
    • Gold Seen Plunging to $1,300 on Bear Flag: Technical Analysis
    • Oil’s Big Five Squeezed by Crude Drop as Spending Soars: Energy
    • Asia Copper Premiums Set to Gain on China Buying, Warehouse Fees
    • Russia, Kazakhstan Boost Gold Reserves for Sixth Straight Month






















    The Hedgeye Macro Team












    Record systems sales and low tax rate drive a record breaking quarter

    “This record quarter continues to mark a historic period of sustained operating improvement and success which is shaping up to meaningfully continue for the foreseeable future”


    -  Ramesh Srinivasan, the Company’s President and Chief Executive Officer




    • Unfavorable FX loss of $0.03
    • 4,098 units were sold in NA, of 2,842 were replacement units
    • Domestic ASP's would have been up if you strip out the impact of the lower priced VLT and VGT units sold in the quarter
    • 42% of international units went to lower priced jurisdications, compared with 17% last year
    • Cash connection linked units were 1,413 units as of the Q end - up 53 units QoQ
    • 68-73% is their expected range for Game Ops margins
    • Systems:  Driven by go lives in Phillipines, SA, NZ, and US.  Expect hardware and software revenues in every Q from Canada and SA in every quarter for the foreseeable future.  However, this quarter did not have any Canadian install revenue in there and only one SA casino went live. 
    • Expect their income tax rate will be 36.5% for 4Q
    • Raised an additional $400MM of incremental capital (bank debt), at a more favorable pricing grid, no limitation of restricted payments and buybacks provided leverage is below 2.75x.
    • Purchased an additional $6MM of stock since the quarter closed under a 10b-5 program
    • Will received 2.5MM shares at the end of April under their Accelerated Buyback Program
    • FCF increased to a record $67.5 million, allowing them to paydown nearly $65MM of debt this quarter and reducing their leverage to 1.5x
    • The release schedule of new WAP product coming out will help to continue to grow their footprint. They are pleased with the initial release of their NASCAR game. Once the soft launch is complete, the rollout should progress rapidly.  Pace of WAP growth should pick up over the next few quarters.
    • Will also preview some new excited WAP products at G2E this year
    • The improvement of their gaming operations content is due to increased studios development capacity
    • Continue to invest more in player research
    • Have every reason to be bullish about their games
    • Some of the game content that they have been working on to target international regions will be released in the coming quarters and should help them grow their international sales
    • Systems revenues should continue to set records and FY14 should be even better
    • Added 10,000 systems slot connections to their family this quarter
    • Their systems applications work on high speed and regular networks. They are one of the few systems providers to offer products for existing floors that aren't wired for high speed internet.
    • Interactive is one of their most underappreciated businesses. Have over 90 casinos using their interactive solutions. BYI's i-gaming platform continues to be a leading choice for their customers.
    • Extensive core systems base is a huge strategic advantage
    • Their operating leverage should continue to improve
    • They are continuing to look for tuck in acquisitions
    • International revenues were 18% of total revenues this quarter and they have a big opportunity to grow 
    • Will give FY14 guidance on their 4Q call in August



    • For game sales they have a bunch of products scheduled to hit the market from May-July in new markets that they don't normally participate in
    • While they have steady flow of game ops content coming out, they are not locked into anything and can adjust releases to demand
    • Bad debt is about 9.1MM compared to 8.2MM for the comparable 9M sales period last year. Still less than 1% of sales.
    • NASCAR is the most anticipated WAP game out there right now. Initial returns that they have seen over this past week are very positive. Expectations for placements are along the lines of MJ & Grease if not better.
    • Average order size for game sales have gone up a touch
    • Pricing would have been similar to what they have reported the last few Q's if you exclude the VLTs and VGTs. They remain disciplined. 
    • Replacements sales account for only 10-12% of their profits
    • Will have the 1.6-1.7MM reduction in shares before the end of April - accounts for 3 cents of earnings
    • Got hit by about 3 cents of FX this quarter. In SG&A they were hit with 2.5-3 cents of one time items. 
    • $3.35-3.45 guidance... that's the tightest guidance range that they have given going into Q4.  Variability has to do with how NASCAR flows and their yields in general.  Variation around replacement sales and IL.
    • About 2/3rds of revenues in systems came from recurring customers. Systems has been building towards this pace. 
    • Yields on game operations did trend up in March, however they haven't seen as much movement in their yields because they have the latest and greatest products. Their products are yielding around $100/day.
    • Think that using an ASR to pull in 7% of their market cap is pretty efficient. 
    • If you back out Canadian VLTs, how are replacements trending?  One operator did a large video poker purchase which may have taken some capital out of the market. 
    • They are very happy with their competitive position today.  No comment on WMS.
    • Follow ups to MJ & Grease are in the works. Feedback on Pawn Stars is between good and very good.
    • MGAM's products are only linked to their games.  BYI's tournament product is a systems product that can work across the floor.
    • Canada shipments will continue throughout 2014 and maybe 2015.  
    • International customers are waiting for new content from BYI. 
    • In Q4, hardware should be a little lower next quarter and software a little higher in Systems



    • "The Company increased its fiscal 2013 guidance for Diluted EPS to a range of $3.35 to $3.45. This guidance assumes an effective tax rate of approximately 36% for the full fiscal year."
    • “Our recent premium and WAP product launches...have returned strong initial performances in many different locations... We are also preparing to release an impressive array of new for-sale game titles developed by our game studios and third-party development partners. The spate of major global systems installations and significant upgrades, the latter at the rate of more than one per week, continue to bring a new operational and marketing dimension to many casino floors, while providing a solid strategic base for crucial future integration with our mobile andiGaming platform initiatives.”
    • "During the third quarter, we purchased 641,000 shares of common stock for $31 million at $48.79 per share. The new $300 million share repurchase program and accelerated share buyback announced today continue to demonstrate the confidence and visibility we have into our long-term growth trajectory. Including the announced $150 million accelerated share buyback, Bally will have purchased more than $1 billion of its common stock since November 2007.”
    • Gaming equipment: New gaming devices: 4,923 at an ASP of $16,051
      • Revenues increased... driven by higher domestic replacement sales, including the shipment of 788 Canadian VLTs, as well as by the shipment of 656 units into the Illinois VGT market
      • ASP of new gaming devices decreased ...primarily as a result of a higher mix of lower-ASP VLT and VGT units sold in the quarter and lower-ASP units sold in certain international markets.
      • International shipments were 17% of total new unit sales
      • Gross margin increased... due to continued cost reductions on the Pro Series™ line of cabinets and sales mix.
    • Gaming operations: 
      • Revenues increased ...to a quarterly record ....driven primarily by a 73% growth in the installed base of WAP games.
      • Gross margin decreased...primarily due to higher jackpot expense.
    • Systems: 
      • Maintenance revenue was $23MM
      • Gross margin increased... primarily as a result of the change in mix of products. Specifically, hardware sales were 36% of systems revenues, and software and service sales were 32%, as compared to 36% for hardware and 30% for software and services in the same period last year.

    investing ideas

    Risk Managed Long Term Investing for Pros

    Hedgeye CEO Keith McCullough handpicks the “best of the best” long and short ideas delivered to him by our team of over 30 research analysts across myriad sectors.


    Today we bought ConAgra Foods (CAG) at $35.67 a share at 1:37 PM EDT in our Real-Time Alerts. Buying back one of Hedgeye Consumer Staples Sector Head Rob Campagnino's Top 3 Ideas, primarily because it's on sale. Rob's thesis hasn't changed (see our weekly Investing Ideas notes) and TRADE and TREND lines of support remain intact. 



    Bullish TRADE: S&P 500 Levels, Refreshed

    This note was originally published April 23, 2013 at 10:47 in Macro

    POSITION: 10 LONGS, 5 SHORTS @Hedgeye


    Below 1557 (TRADE bearish); above 1557, back to TRADE, TREND, and TAIL bullish. We call that a Bullish Formation.


    If you want to get all beared up about something, short Bearish Formations (like Commodities or Mining Stocks).


    Across our core risk management durations, here are the lines that matter to me most:

    1. Immediate-term TRADE resistance = 1603
    2. Immediate-term TRADE support = 1557
    3. Intermediate-term TREND support = 1520

    In other words, I got longer (gross and net) as we crossed and confirmed 1557. Can we snap that again? Sure. And there aren’t any rules against selling on that again either. But remember, that’s all immediate-term talk.


    From an intermediate (TREND) perspective, both the US economy (Consumption Growth) and the SP500 continue to look bullish.


    If the SP500 tests 1603, the VIX will probably have a 10-handle. At least that’s what my model is telling me.


    Prepare for what most consider improbable, when it becomes more probable.



    Keith R. McCullough
    Chief Executive Officer


    Bullish TRADE: S&P 500 Levels, Refreshed - SPX


    In preparation for IGT's F2Q 2013 earnings release tomorrow, we’ve put together the recent pertinent forward looking company commentary.




    • "On the gaming ops side… the biggest driver of gaming ops yield for us is improvement in gross gaming revenue, which we haven't had a lot of good news in that area lately… We're going to float very closely to gross gaming revenues. We are over-indexed in Nevada and in Native American, because that's where our wide area progressive concentration is and that is the highest yielding product for us…  We're expecting a bit of a lift up in our yield, I think, on a going forward basis, expect to see kind of flat yields year-over-year when you think about it on an annual basis."
    • "What we're really focused on as a company is looking at the gaming operations assets and making sure we're generating the maximum amount of cash from those assets that we can generate for shareholders."
    • "I think we're in steady state actually right now. When we look out over the next couple of years, we think that the game ops capital is kind of at a fixed number for us in our planning.  The real money wagering part of the business… we feel very good about that business.  Last week, we launched in Mexico. There's only two online gaming license that were granted in Mexico. We also launched in British Columbia, ten days ago, with our real-money wagering. Feel very good about how that is going early."
    • [DoubleDown] "We see daily active and monthly active users above our expectations, the projections that we had for the company when we acquired it, the revenue per daily user, the churn rates, the conversion rates, everything that we looked at in the business…  I think the most important thing that we expected is when we acquired DoubleDown they were running at about $0.18 a day in revenue per user. They're now at $0.31 per day. We've launched four of our traditional titles that you would see in casinos and those games outperform anything else in the slot content world. So we feel very good about it, top to bottom. We feel good about the margins. We feel good about the track we're on to make it GAAP accretive in 2014 and we're still committed to that." 
    • "I would say the couple of areas that we feel stress in the business that capital could solve, one is in the talent area. As you move into social gaming and online gaming, the whole war for talent really heats up in that area, particularly on the mobile front. And it's not unusual to do kind of an acqui-hire, where you go and you buy the studio as opposed to hiring people one at a time. So we always have our eyes open for those things."
    • "We have $600 million left on our authorization for repurchasing shares. We have that kind of a window of two to four years, depending upon the valuation of the stock."
    • [WMS Deal] "So I would say that we haven't seen a lot of movement yet. I do think that it will create more rational pricing in the marketplace than what we have been experiencing for the last year, which, I think, is a good thing. There are a lot of laws in the VLT market around your ability to be both the machine and the system supplier and so those areas where Sci Games is the system supplier they're going to have some issues there with their ability to provide boxes, which we think is a good situation for us, where we have an opportunity to take market share."


    • "Our consolidated average sales price was down, but this was largely a reflection of the higher mix of video lottery terminal sales and a lower percentage of multi-layer display units sold."
    • "We expect to leverage our strong revenue growth this year into even higher operating income and earnings per share growth through responsible cost controls and increasingly efficient research and development expenditures, which can now be leveraged to benefit both our land based and online products alike."
    • "We expect to resume normal open market repurchases during the remainder of 2013."
    • "The domestic replacement market is kind of continuing to bump along… we would say cautiously optimistic with overall replacement, but increasingly optimistic with our opportunity to take more than our fair share of what comes in the market."
    • "On the margin side, the uptick in Product Sales margin was really attributable to non-box, in particular intellectual property contributions in the quarter. So we would expect margins to be more comparable to prior year excluding that one-time effect."

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