Our takeaways from the IGT Investor Day




  • Focus of presentation was on the online side of the business and on making mature business segments more profitable
  • Use DoubleDown to test content earlier on in the development cycle which should help them increase the number of hits that come onto the slot floor
  • Interstate jackpot - approved in NV but nowhere else so far.  It will be a state-by-state approval process.  It will take some time before they get any benefit from this. Interstate jackpot are already allowed between tribal gaming facilities.

 Patti S. Hart (CEO)

  • Patti's stock is vesting this week and she's not selling
  • Claim that they are the system of choice for new openings.  Not sure that that is true.
  • Focusing on equity accretion and returning money to shareholders is a priority.  Targeting a 2% dividend yield.
  • When they think about growth, they think share gains - not just new jurisdictions and finding new players
  • Claim that NA ship share was 40% in 2013, 36% in 2012, 32% in 2011, and 29% in 2010
  • Mentioned Novamatica as a top 4 global competitor
  • Should wrap up $200MM buyback by year end
  • They picked some select metrics to compare themselves to:  S&P 500, of course, for a favorable comparison
  • 3-5 year growth projection
    • +15% growth in online and social (mobile is where the growth is)
    • Real money gaming:  +10% (Canada, NJ, DE, Italy Spain)
    • International:  +7-9% (Philippines, Macau, Greece, Italy, Japan, Brazil) 
    • North America: +1-3%
  • Greece:  thinks that it could be like Canada / Illinois for them. Spending a lot of time there.
  • Really focused on growing their international share where they are under represented.  Was just in Panama.
  • Focused on harvesting the NA business for cash. (MA, NY, MD, TX, FL) 
  • Strategy:  Content focus and distributing across distribution platforms (i.e. multi channel content distribution (mobile)) and finally maximizing shareholder value. 

Eric Tom (VP Global Sales) with customer panel

  •  Tribal casinos are 1/3 of their customer base
  • Guest panel:
    • Rhonda Garvey:  VP of BcLC egaming
    • Matt Harkness:  COO of Four Winds Casino
    • Brian Hoeffner:  VP of Gaming at Casino del Sol.
    • Rob Miller (Miller Companies - also founder of gaming capital group, Oklahoma Financing); he's now the top operator in IL
    • Mohegan Sun COO : Ray Pineault
  • What needs to happen to accelerate replacement?
    • Economic improvement
    • Competition
    • Discount bundling helps
    • Proof of ROI
  • Thoughts on IGT's competition and how it's been impacting ASPs
    • Likes competition and the lower ASP.  Buying from small customers is always a little risky from a content standpoint.
    • More competition means more innovation and more pricing competition. Worried about longevity of small manufacturer machines and fresh content. Like being able to keep games on the floor longer with more conversions.
  • Thoughts on the amount of licensed brands to choose from
    • No such thing as too much choice
    • Like being able to swap out titles on the fly as performance wanes- especially if the slot manufacturers want to keep floor share
  • Thoughts on the next big trend in gaming
    • Mobile gaming and not just from a gaming standpoint but also from an account mgmt program and rewards program
    • Mobile wallet vs the current system of transferring money.  Lots of cost savings for operators if this happens.
  • Licensed and leased products vs owned
    • Looked at the net profit. Participation must perform at least 1.25-1.3x that of an owned game.
    • IRR based decision
  • What influences their buying decisions?
    • Sales force relationship and helping them navigate the product available
    • Knowing that they are buying a machine that a supplier can support for 7-10 years
  • Biggest competitive threat
    • In IL, they need to worry about BYI.  Lots of small players have failed. Spielo is a distant 4th. WMS is ok too.
    • BYI is a formidable competitor for them
  • What timeframe and metric do they evaluate their games on?
    • Net win but also looked at coin in and min / max bet, hold % etc to tweak those behind the scenes metric Usually takes about 3 months to evaluate a machine.
    • In IL, machines need to perform at a higher average bet since they have limited machines per location and limited hours of play.  Loves IGT minimum bet dynamics.
  • Player demographics for online
    • Challenged in getting a younger player and how to get that casual player.  Also using online as a theatre for the land-based casino.  For younger players, content is everything.  Velocity of change needs to be rapid. Having north of 30% growth in their online biz this year. Not seeing any cannibalization. Familiarity of content online also helps them in Iand casinos.
  • Feel like online will help grow the gaming market vs cannibalize it.  Players are already playing on illegal sites. Online social site are a customer acquisition strategy for them.
  • (BCLC) - Trying to have a common CRM/rewards program:  feel like when they have a player online and offline, that they can drive an incremental 20% from players.
  • Casinos differentiate themselves through superior guest service 


  • Gaming operations  
    • Recognize that this business is under duress.  Partly offset revenue losses with better margins and reduced capex dramatically over the last 3 years.  If you look at gross margin less capex, their modified FCF has grown.
    • They are really encouraged by their new products this year.  Unlockable content on games - think that this is a real opp to reduce costs and increase box longevity.  Power bucks jackpots- more frequent jackpots.  They can now do interstate jackpots for the first time and on/off line jackpots.  
    • Continue to focus on content for localized markets, i.e. locally attuned content. 
  • Online gaming
    • Social gaming can help them test games before going into market in land-based casinos. 
    • They have 1.7MM users.
    • NJ update:  9 sites have launched, 50k registered to play.  IGT's approach to NJ is like a cable channel for them.  20 slot games available; nearly 5MM wagers placed; IGT content viewed as superior to others;  So far in NJ, there are 3 sites that are outperforming materially.
  • Feel like it's all about eliminating friction points in gaming.  Social will let them get customer reviews earlier in the developmental cycle.
  • Now over 40% of IGTs workforce is tied to equity performance vs just a handful before.  75% of their employees now like working at IGT and would recommend working there.

Q & A

  • Think about products across silos like i-Gaming vs NA sales.  People are also really interested about play testing on Double Down. 
  • They are really bullish on international but timing is vague.  On Macau, they believe that they have a good shot of winning some systems and making slot sales.  Italy will come online in the tail end of 2014/ early 2015 (wasn't this supposed to have happened a few years ago?)
  • Player acquisition benefits on DoubleDown are a new area of business for them
  • In NJ, they will take a cut of the wagers
  • How will they make money in CA as they are legalizing online poker?  It's not really where you make money.  Rake based and no loyalty. Still thinks that CA has some hurdles to overcome.  Thinks customers want to have a poker option but want to play other games.  They will not participate in Poker-only markets. Don't think that you can really make money.
  • From a capex perspective, it will be back-ended this year with the introduction of a new cabinet.  Investors should be happy if they exceed capex because it means that they found a place to profitably invest it.  Capex will be roughly flat YoY and a little back-end weighted.
  • New market opportunities
    • Feel that Greece will be a Canadian like size opportunity in each tranch. Best guess it's a 2014/2015 event for IGT.
    • Macau: 6 new casinos are coming
    • Italy:  Step one is distributing content on their machines (60% of the install base is eligible) - daily fee model.  Will go live in June.  And the a year later, they have a chance to introduce their boxes.
  • MGM and Wynn have their systems in Macau
  • DoubleDown isn't "whale-like."  Clearly, a smaller number of the 1.7 million people that come to their site actually wager. The players by their nature are casual.  She avoided the 80/20 question.
  • DoubleDown's differentiating quality is the continuous addition of new content. Expect their competition to be stiff.
  • Interstate jackpots are a huge opportunity

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