Grim statistics on product sales and replacements
MGMT COMMENTARY
- WMS new product sales down: reflect lower GGR in many domestic gaming jurisdictions. Many customers have reduced their capital spending. Their ship share decreased modestly from Dec Q.
- Blade games continue to perform well, compared with casino average. At end of March, launched 3-reel Blade.
- WAP/premium: New Clue game; New Willy Wonka 3-reel mechanical game
- UK govt intend to increase commission tax on net win from 20% to 25%. In addition, will take effect in Oct 2014, there will be additional player restrictions. Will negatively impact UK customers.
- Soft launch: GoldFish social slots has been successful. In current quarter, expanding distribution and growing player database.
- JackpotParty: new daily record revenues in April
- Average installed base decline of 57 units: decline in non-WAP offset by growth in WAP units
- Average yield: $70.13 highest since 2010
- Average DAU: 1.3 vs 0.6 in previous year quarter
- ARPDAU from $0.26 to $0.23: change in the reporting of Facebook payment process. Impact is $6m
- Product sales: decline in replacements attributed to tough GGR and modest decline in ship share
- Offering new CPUNEXT3 system and less expensive hardware than Bluebird 2 units to customers
- Higher international lottery product sales, benefit from new lottery contracts (NorthStar NJ venture and Panama)
- Renewed 3-yr contract for French national lottery
- Awarded 6-yr instant games contract for Washington lottery
- New contract with LottoQuebec will be in Q2; will be smaller than previous contract
- Full launch instant games in Greece tomorrow.
- Instant product price-per-unit decline of $2.4: attributed to quarterly changes in launch of marketing programs and other programs.
- Lottery systems: Higher sales in international markets grew product sales.
- WMS: $157m EBITDA vs $178 EBITDA in previous year quarter
- Cost synergies: Elimination of duplicate corporate costs, lower compensation costs (reduced headcount by 4%- SG&A areas), lower employee costs, manufacturing, procurement savings, exiting interactive gaming ops in Belgium/UK and exiting certain lottery operations
- Weighed more heavily to 1st half of year
- Free cash flow: +$24m; +$60m operating cf
Q & A
- FCF: does not include sell of Sportech, cash used to buyback shares
- NJ lottery contribution: important but not material contribution
- Growing WAP footprint to generate higher yields
- Leverage target: no target to become investment grade
- Replacement cycle: server-based gaming business in UK had to get upgrades. Innovations in cabinets/softwares will drive casino performance, not really just replacing machines that have considerable wear-and-tear issues.
