Grim statistics on product sales and replacements  



  • 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.

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