• It's Here!

    Etf Pro

    Get the big financial market moves right, bullish or bearish with Hedgeye’s ETF Pro.

  • It's Coming...

    MARKET EDGES

    Identify global risks and opportunities with essential macro intel using Hedgeye’s Market Edges.

Takeaway: GTECH results a snoozer but management was reluctant to discuss IGT's awful performance.

CONF CALL

  • Will not talk about IGT standalone results. IGT's results are for informational purposes only.
  • Italy unfavorable sports betting by 10% points (which was in-line with industry average). This will normalize over time.
  • North America:  Same-store benefited from jackpot and instant ticket segments
  • IGT's (Stand-alone) March quarter not indicative of its future
  • Confident synergies remain on track
    • Have consolidated production/maintenance...closing plants in Vegas and Canada
  • FX did not have a meaningful impact on operating income 
  • Americas:  Instants ticket sales (Double-digit increases in California and North America)
  • MegaMillions declined in 1Q
  • Gaming shipments declined due to hard comps boosted by Canada last year
  • International: instant ticket sales led by UK growth
  • Expect Greek VLTs revenues in 2H 2015
  • Italy:  machine gaming revenues impacted by Stability Law implementation. Excluding that rule, revs would have been flat.
  • 2Q results will be on a consolidated entity basis and reported in US$

Q & A

  • IGT results below expectations
  • IGT: Reduction in receivables have improved its profitability
  • Will provide some guidance at end of Q2. Expect 2H 2015 will have better performance, particularly on IGT's product sales with the introduction of new products
  • Leverage target at closing:  4.5-4.9x ; longer-term, will be at 4x or below 4x
  • Synergies:  on time and on target
  • IGT: conversion of units in Mexico impacted results.  Weaker period in industry due to less newer openings.  
  • Installed base count will be more balanced as a combined entity
  • Pro forma balance sheet shouldn't change much when translated to US GAAP.
  • Italian Lottery contract: waiting for issue of tender. Expect 1st installment by end of year.
  • IGT:  conversion of 1,000 units in Maryland which fully explain the ASP difference. 
  • GTECH:  no units were converted
  • IGT/GTECH Oregon units: 300 IGT units. Basically concluded.
  • Cost of debt:  5.25%-5.50% (depending on currency and product)
  • Debt:  50% in euros, 50% in dollars
  • 2015 Maintenance capex: US$150-$170m
  • 2015 growth capex:  some capex related to VLT Greece
  • Do you need to borrow additional funds?  It depends.
  • IGT:  have some visibility in the new openings (mainly Massachusetts)
  • GTECH Italian taxes paid:  paid 40% ($38m).  Finalizing contracts and resolution before next payment is due. GTECH will only pay their portion of the 60% ($5m euros).
  • IGT product sales will improve in US and international going forward. Spielo leading the charge. 
  • IGT product sales in 1Q 2014 not in 1Q 2015:  1,000 units in Illinois
  • Synergies:  will execute 65% by 1Q 2016
  • Property sales: different mix sold resulted in lower intellectual property fees.  Inventory write down.