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Margins drive a small beat. Not enough confidence in FQ4 - you can fit the Fed balance sheet in the guidance range


  • NA Machine sales outperformed; continue to capture Canadian VLT market share.
  • DoubleDown recently surpassed Zynga Poker as the top grossing social casino app on Facebook
    • Had the highest grossing social casino app on the iPad
  • 39% increase in NA replacement unit shipments; confident maintained leading ship share in past quarter
  • 4% increase in international sales due to lower mix of used machines sales.  Despite ongoing challenges in certain regions, there is still significant potential.
  • Gaming Ops:  
    • GGR trends were lower  
    • Installed base flat with some mix shift away from megaJackpots into leased operations
    • Positive interest rates have a favorable impact on margins and jackpot expenses
    • Initiatives: Increasing megaJackpot team, introducing game changers
  • DoubleDown monetizing at awesome rates; mobile revenues up 41% sequentially.  DoubleDown will be GAAP accretive in F1Q 2014.
  • Repurchases 345,000 shares ($6MM); suspended stock buyback in the quarter due to 'technical reasons' - IGT was probably involved in bidding for WMS and SHFL

Q & A

  • Product Sales:  2Q Canadian VLT units: 3,300; Illinois VGT units: 1,300
  • 2014 opportunities:  Oregon and some other new states 
  • DoubleDown:  As they enter international markets, bookings rate may be pressured but it didn't materialize in F3Q
  • Wide range of F4Q guidance:  some lumpiness in timing of international orders for F4Q
  • Stock buyback restrictions in Q?  Refuse to elaborate.  $520MM in stock available; continue to target using that authorization over next 2-4 years.
  • Leverage:  a little underleveraged at the moment
  • Will not comment on whether they continue to be restricted in the stock buyback program
  • Will look at opportunities to expand installed base but will not chase yield
  • GGR trends:  calendar 2H 2013 - haven't seen much change in operators' comments in terms of budget volume. 
  • Last major shipment to Canada will conclude next quarter.  Expect FQ4 will be less robust than FQ3.
  • Would not say that 1,300 a quarter in Illinois is a good run rate because last quarter, IGT saw a significant contraction in demand.
  • GGR is having most significant pressure on yield #s. Nothing significant has changed in this part of the business.
  • Canadian/Illinois VLT units mainly drove down ASPs; there was some mix shift out of MLD product which is a higher priced product.
  • Online New Jersey:  waiting for the operators to start up; purely in a B-to-B model with a revenue share model
  • Upgraded DoubleDown poker product and done well with tournaments.
  • International market monetizes at a lower rate than domestic market but will try to convert players at the same level in domestic market.  The launch of new languages will be a tailwind.
  • Mobile growth has been fantastic.  IGT has spent equal time commitment on desktop and mobile platforms. 
  • MegaJackpot G2E lineup will be exciting and diverse e.g. bonus features, new maps, new display format.
  • International:  optimistic on seeing the 6% growth in ASP and growth in installed base
  • South America could be a great opportunity if they can solve the structural issues of getting a product there
  • Asia:  early games have been a success
  • Europe: growing the slowest among the international opportunities;  'very spotty' and depends on the country and product type.  VLTs seem to be growing a bit faster than the traditional casino business. Remain bullish on the international markets.