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