CONF CALL
- 5% of employees (450 positions) eliminated by end of 2014
- Gaming consolidation underway in Las Vegas
- Highly confident in seeing improvement in FCF starting in 2H 2015
- Gaming ops: Average daily revenue/footprint increased 10% YoY in 2014
- Lower installed base: One single customer reduced slots by 259 in 4Q
- $18.5m not added to Attributable EBITDA -consisting of $6.2 million of impairment charges associated with the Monopoly Millionaires Club™ game (of which $5.7 million impacted cost of instant games and $0.5 impacted depreciation and amortization), $5.2 million of impairment charges related to inventory obsolescence (of which $3.1 million impacted cost of services and $2.1 million impacted cost of sales), $4.0 million write-down of certain receivables from international customers included in selling general and administrative expense and an incremental $3.1 million charge in earnings (loss) from equity investments related to the additional shortfall payment booked by the Northstar Illinois joint venture for the lottery's fiscal year ended June 30, 2014.
- No significant maturities until 2018. Paid down $18m in revolver to fund Bally acquisition.
- Currently liquidity of $538m
- FCF: priority is to pay down revolver
- 2015 Capex: $320-$350m (15-25m integration related capex)
- Spending mainly on lottery side of business
- SG&A: $85m of charges previously described; $11m restructuring expenses ($1m WMS-related)
- 7% increase revenue in UK installed base
- 4Q: 228 IL VGT units shipped
- 4Q replacement: 4,511 (848 units YoY increase)
- Maintenance revenue virtually flat
- Table revenue down $1m
- Lottery services revenue declined $5m (low performance of Powerball and MegaMillions). 2015 better start due to large Powerball in February.
- Lottery: benefited from lower OpEx and lower termination expenses
- Interactive: $3m from Bally
- Key priorities:
- 1) customers
- 2) focused on integration initiative
- 3) discipline in management of deployment of capital
Q & A
- Feedback from customers: similar budgets as last year
- Believe increased wallet share in Q4
- Leverage: Q4 included $135m of cash-based charges. Continue to invest wisely and get appropriate returns.
- 2015 Gaming: relatively flat with a slight increase in share
- 2015 Lottery: Europe doing better
- Gaming systems: long lead time. Expect some big sales. ALH rollout is very exciting - for the smaller-end market.
- NOL balance at end of 2014: will be in the 10K (will be filed on Monday)
- Cash taxes: tens of millions from foreign results
- Q4 Replacement units: Bally had a stellar performance with Wave cabinet and Shuffle products.
- Gaming ops: customers are used to operating in 'new' environment. Mixture of luck, lower gas prices, and better weather also playing impact.
- Salesforce integration: training session. So far, so good.
- Pro-forma 12mth ended: Cash based interest expense was $615m
- In purchase accounting, eliminated deferred revenues that Bally had ($27m). $5m of that $27m would have been in Dec Q. The other $22m will be impacted in 1H 2015.
- Greece (OPAP): contract being finalized now. SGMS was selected as a contractor.
- Can you get Interactive margins to 30-35%? Rolling out mobile part of interactive. Spending more there which has adversely impacted margins.
- Area of disappointment: non-WAP premium units declined in 2014. Customers had to reduce costs in that sector.
- Good performance with Wonder Woman and Flintstones
- S23 Cabinet will be launched this year and a couple of more products
- The $15-25m of integration capex is in addition to the $70-80m disclosed previously
- Low Gas price impact: instant ticket sales are up but don't know definitely if there is an impact
- Attributable EBITDA from Equity investments: $70.8m in FY 2014
- Writedown in receivables: related to Gaming business in Latin America
