Takeaway: Headwinds are industry and company specific, in our opinion.

IGT confirms what a lot of people already knew - guidance was way too high. 




  • NA GGR environment:  declines are broad-based and greater than anticipated
  • Continued fragmentation in the industry, primarily in North America
  • Continued structural challenges in international marketplaces
  • Had assumed in previous 2014 guidance that Argentina restrictions would not get worse; but in fact, restrictions had been tightened recently. Only a fraction of the 2,200 units will be shipped to Argentina.
  • Cost-cuts:  Will be focused on senior executives
  • Wheel of Fortune agreement with Sony:  to protect highest performer in company history; categorized as acquisition of intellectual capital ($185MM payment)
  • Powerbucks:  provides differentiation in megaJackpot area
  • Doubledown:  will grow 20% in 2014
  • IGT Systems business also doing well
  • Expect Greece/US replacement cycle to resume at some point

Q & A

  • Consumers feeling pressure
  • Gaming ops:  more sensitivity to operating environment than its competitors
  • Feels better about March
  • Cost cuts are permanent
  • Product sales disproportionately impacted by international challenges
  • No additional repurchases in 1Q
  • FCF:  bascially proportionally impacted by top-line
  • Lower guidance:  MLP pressure and NA GGR weakness.  Product sales division is more affected than gaming ops.
  • 1st priority: investment in business e.g. Wheel of Fortune/Sony
  • 2nd priority:  share buybacks/dividends
  • View shares as favorably priced 
  • DoubleDown:  largely R&D - so protected from cost cuts
  • Visibility has not changed
  • Positioned for 2015/2016 growth
  • FX headwind:  euro/argentina/australia; will take a devaluation on Argentina
  • FQ2:  simliar trends seen through the lowered guidance for the full year
  • 2014 severance charges:  $8-9MM (excluded from guidance range of $1.00-$1.10)
  • More consolidation could happen in the industry
  • Avatar product doing very well - top end of yield #s

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