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Conference call didn't provide much comfort.  2014/2015 headwinds remain

"We are extremely pleased to report our fiscal year 2013 financial results. We continue to drive significant revenue and earnings per share growth through the successful execution of our strategy and disciplined approach to capital allocation.  Our goal, as always, is to maximize our returns to shareholders through targeted share repurchases, consistent dividends and robust earnings growth." 

- Patti Hart, CEO of IGT


  • Systems revenues were up 39% YoY for the year
  • Excited about the momentum in game sales
  • 2014 product line up created a lot of interest at G2E
  • Expect modest growth in product sales in 2014, excluding Canada and IL.  Anticipate stable gross margins as higher ASPs offset lower non-machine revenue.
  • Increased cash flow through lower capital expenditures in gaming operations
  • Install base was partly down due to a conversion to sale of lease games
  • 2014 Gaming operations: expect margins, yields, capital expenditures and install base to be in line with 2013 results
  • 4Q  results in DD: temporary delays and some disruptions with the rollout of OIS 7. Despite this, DD was still the top grossing app in August.  October was also a record month for them as they rolled out a new Monopoly game.  They expect that the acquisition will be GAAP accretive by 1Q14.
  • IGTi: expect modest growth as they continue to launch casino style wagering in the US
  • Expect SG&A in 2014 to return to a normalized range of 19-20% of revenue and R&D to return to 10-11% of revenue
  • Argentina was also a 1 cent impact per share
  • Expect to take out the convertible notes due in May with R/C capacity and the proceeds of their notes issuance
  • 2014: weighted average share count of 250-255MM
  • Remain focused on disciplined capital investment
  • It's all about content for them, expanding and managing their distribution network, and maximizing value by generating cash flow and returning cash flow


  • 1,500 Canadian units shipped this Q and about the same in IL
  • Expect modest growth in the game sales market excluding IL & Canada for 2014
  • On a mix adjusted basis, ASPs were relatively flat.  Not seeing any unusual promotional activities.
  • Lost 1-2 cents in SG&A which was one time, lost a penny in bad debt and lost a penny on FX. 
  • Gaming operations install base: Some leased units converted to sales. Had some closures in the Mexican market. Pleased with the QoQ increase in yields.
  • They shipped about 2/3rds of the Video Poker units to CZR. The shipment to CZR was the first major replacement of video poker that they have seen in a while. This will pressure ASPs.
  • Going forward they expect margins to return to more normal levels in 2014 in product sales. Feel like the CZR replacement of their video poker machines will be a catalyst for more replacement of the VP install base
  • Guidance includes share reduction as a result of the ASR
  • International yields were up
    • I'm sure as a result of the conversion of the leased units to sales and the closure of the Mexican locations
  • September was a 1 month anomaly where they had to adjust for temporary delays in payment processing on Facebook. October was a very good indication of that rebound - record bookings, record new and revised players, and launched their most successful game. 
  • Expect to see flat to slightly (1-2%) increase in US GGR. 
  • Think that the year will be back end weighted
  • Feel like they are in process of becoming a much bigger/strategic phase of DD's life
  • Facebook platform revenue down slightly, but mobile was up 11%
  • Saw growth in their European real wagering 
  • Monetization is lower in Europe, as expected. It hasn't materially impacted their overall results, though. 
  • Most of the lease conversions are opportunistic. It's very hard to predict since it's contingent on customer liquidity.