ALL reported weak results, but they came in at the high end of their guidance given in April.  An intriguing 3-5 year plan was outlined.




  • Double participation share in the US
  • Improve ship share in Australia
  • Reduce volatility in Japan
  • Focus the organization on key markets while exiting the low ROI markets





Commentary on 1H09 results:

  • Revenues were down 5.3% in 1H09 vs 1H08 (would be down 20% on a constant dollar basis)
    • EBITDA of 129.4MM was down 19% (or 31% on a constant currency basis)
    • Operating profit after tax was down 38%
    • Operating cash flow was up 15.8%
  • Operating results were at the top end of their guidance in April due to better results in rest of the world - especially South America
    • North America met expectations
    • Japan was the weakest region and performed below expectations
  • North American market conditions remain challenging
    • Sold 4,264 units into North America vs 5,252 in last yrs 1H
    • Decline in unit sales was 18.8%, conversions up 18.8%
    • Systems revenue was up 9% and services revenue up 10.3%
    • Over 10k Viridian units placed
    • Ship share was improved
    • Gaming operations        
      • Expect to benefit in the second half from higher install base and successful JAWS launch
      • We saw this product at Mohegan Sun yesterday and heard good things
  • Japan units declined from 32k in 1H08 to 5k units 1H09. Overall market volumes continue to be challenged by the weak economic environment
  • Japan – absence of major game releases caused poor results – only 5,747 units sold.  Australian dollar also weakened, which increased reported results
  • Australia is a challenging market but some signs are encouraging
  • Recurring revenue was impacted by lower win per day, partially offset by mix
  • Asia Pacific was negatively affected by limited openings, tough conditions in Europe 
  • New Zealand was up 210% (profit)  
  • South Africa and South America sales decreased by 14.4% and 30.6%, respectively
  • They are outsourcing more R&D to India



  • Expect market to remain challenged
  • Pricing holding up despite low volumes
  • North America will continue to roll up JAWS and introduce new games
  • Japan will release 2 license titles
  • Will focus on Veridian rollout internationally
  • 3 to 5 year phase strategy to deliver growth - no quick fixes
    • Need to focus more on the US – participation market especially
      • Want to double their participation share over the next 5 years
    • Games that are player led, technology driver
      • “customer centric” model and more strategic approach about managing IP
      • Faster, more focused product development – more outsourcing
    • Best Games, best system
      • Focus on server based
      • Grow their presence in US systems
      • Build a stepper business
    • More strategic market focus in terms of where they want to compete
    • World Class Organization
      • Right-sizing the business, cost cutting, stream lining the organization
      • More of the team based in North America
  • Australia – need to close the gap between ship share and install base (à la IGT in the US)
  • Japan – aiming to achieve 50,000 units sales per year in the future
    • Building pipeline of license characters which have more appeal than developed characters
  • Aim to exit 30 jurisdictions that aren’t profitable so they can focus on the markets with real opportunities like Spain, Macau, Mexico, etc
  • Accordingly, bottom line priorities are
    • Double participation share in the US
    • Improve the share in Australia
    • Reduce volatility in Japan
    • Increase focus and resources on key markets while exiting low ROI markets



  • Quantify cost savings on overhead?
    • 10-15MM in costs related to implementing the strategy (due to restructuring costs)
    • Next year they expect the strategy to be break even and then, going forward, CF positive
    • Targeting the run rate they achieved 1H09 to 2H09
  • Ship share in Australia was 33%
  • Moving management and R&D to the US?
    • They have three studios in the US and are looking to add more
    • They believe they have the best math
    • US market is just too important to “export” games to the US - need to develop US centric games
    • ALL plans to keep total R&D at current level – need to invest “smarter”
  • New markets in the US? Do they want more Class 2 presence?
    • ALL has not truly competed heavily in Class 2 before but is looking at it
    • The biggest opportunity is class 3 - IL & OH
  • Jaws – install base is up by 500 net on the games ops side (900 JAWS installed)
  • How will they increase their participation share? Who will they take out per say?
    • In 6 months they increased their install base by 10%
  • Japan – how confident are they that they can manage the volatility better – timing build out of pipeline of licenses?
    • Licensed games do much better than in-house developed games
    • There is a need for at least 2 licenses per year to hit their numbers – will take a few years
  • Trying to grow the revenue line without growing the cost line by right-sizing and having better focus
    • Getting best games out/speed to market – takes 12-18 months (especially for licensed games)… so it will take some time
  • Replacement market – still see the next 6-12 months as challenging
  • In North America – why did they just have flat prices vs increases at competitors?
    • ASP has usually been higher than competitors
    • 1H09 had a large # of corporate deals (PA) that have higher than usual discounting
  • How many steppers did they ship in 1H09?
    • They launched late in the half – so only 300 units
    • They don’t yet have enough content on stepper, but a good platform.  It is a whole new segment for them
    • Discounted the steppers
  • Japan – have they procured brands already?
    • Yes – have a number of licenses that they have procured – 6 potential launches for next year – 4 are licensed, 1 is a major license
    • Need to mature licenses, buy licenses that are more nascent and then develop them over time
  • Increased use of licensing is a theme in the slot business, how to quantify the impact on margin?
    • Licensing costs are a fee per day on hardware and software
  • New Zealand 1H09 results was driven by a regulatory change – so 2H09 won’t be as good
  • Mexico strategy?
    • Class 3 is now legal, they are in the process of indentifying product for that market
  • “Can’t save your way to greatness”
  • 1,300 of the games they sold were to new sites/expansions in 1H09
  • Have a number of stepper games on trial that they hope will be converted to sales
  • They don’t see improvement in North America at this stage


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