• 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

Cartoon of the Day: 'Biggest Tax Cut Ever'

President Donald Trump's economic team unveiled what he called last week, "the biggest tax cut we’ve ever had.” Before you get too excited about that hang on a sec. "Trump Tax Reform ain’t gettin’ done anytime soon," Hedgeye CEO Keith McCullough wrote in today's Early Look.

read more

Neurofinance: The Psychology Behind When To Sell A Bull Market

"Most momentum investors stay invested too long, under-reacting and holding tight after truly bad news finally arrives to break the trend," writes MarketPsych's Richard Peterson.

read more

Energy Stocks: Time to Buy the Dip? | $XLE

What the heck is happening in the Energy sector (XLE)? Energy stocks have trailed the S&P 500 by a whopping 15% in 2017. Before you buy the dip, here's what you need to know.

read more

Cartoon of the Day: Hard-Headed Bears

How's this for "hard data"? So far, 107 of 497 S&P 500 companies have reported aggregate sales and earnings growth of 4.4% and 13.2% respectively.

read more

Premium insight

McCullough [Uncensored]: When People Say ‘Everyone is Bullish, That’s Bulls@#t’

“You wonder why the performance of the hedge fund indices is so horrendous,” says Hedgeye CEO Keith McCullough, “they’re all doing the same thing, after the market moves. You shouldn’t be paid for that.”

read more

SECTOR SPOTLIGHT Replay | Healthcare Analyst Tom Tobin Today at 2:30PM ET

Tune in to this edition of Sector Spotlight with Healthcare analyst Tom Tobin and Healthcare Policy analyst Emily Evans.

read more

Ouchy!! Wall Street Consensus Hit By Epic Short Squeeze

In the latest example of what not to do with your portfolio, we have Wall Street consensus positioning...

read more

Cartoon of the Day: Bulls Leading the People

Investors rejoiced as centrist Emmanuel Macron edged out far-right Marine Le Pen in France's election day voting. European equities were up as much as 4.7% on the news.

read more

McCullough: ‘This Crazy Stat Drives Stock Market Bears Nuts’

If you’re short the stock market today, and your boss asks why is the Nasdaq at an all-time high, here’s the only honest answer: So far, Nasdaq company earnings are up 46% year-over-year.

read more

Who's Right? The Stock Market or the Bond Market?

"As I see it, bonds look like they have further to fall, while stocks look tenuous at these levels," writes Peter Atwater, founder of Financial Insyghts.

read more

Poll of the Day: If You Could Have Lunch with One Fed Chair...

What do you think? Cast your vote. Let us know.

read more

Are Millennials Actually Lazy, Narcissists? An Interview with Neil Howe (Part 2)

An interview with Neil Howe on why Boomers and Xers get it all wrong.

read more