ALL 4Q09 CONF CALL: "NOTES"
- Only six months into their operational turnaround
- Faced challenging trading conditions across all jurisdictions – many openings delayed or canceled
- Saw stronger y-o-y results in Australia & North America in 4Q09 and also held market share.
- Grew install base in North American gaming operations in the 4Q09
- Estimated that the NA market shrank 30%, Australian market was flat, and Japan market as a whole was down 30%
- Price mix was adversely affected by discounting on Indian Dreaming following its revocation in Australia and by product and customer mix in North America
- Partially mitigated by recognition of a product license by an Australian customer
- No 2H09 dividend will be paid, however, they will revert to a payout ratio of 50-70% in 2010
- North America:
- Sold 8,262 units, down 23.8%
- Sold 7,723 conversion kits down 11.1%
- Price decreased 2.9% to $14,675
- Claim that they grew their ship share, albeit in a smaller market
- While the Veridian RFX stepper cabinet has performed well in the field they only sold a few hundred units as they are still developing a game title library
- Gaming operations installed base increased to 6,409 (17.4%) but was partly offset by an 8.1% decrease in win per day to $42.12 (principally reflecting reduced operator revenues)
- Australia:
- Sold 5,292 units, up 37.3%
- Sold 11,636 conversion kits down 13.5%
- Price increased 3.8% to $17,241 (driven by increased Veridian mix)
- Ship share improved 4.2% y-o-y driven by new titles and 3-year licensing model
- Japan:
- Units sold declined to 29,760 or 48.2% (57.4k in 2008) due to the launch of only one major license title vs. two in 2008
- Rest of World:
- Units sold decreased 35.9% to 6,123
- However, they held share.
- New Zealand benefited from regulatory reform
- Maintained 55-60% share in Macau but rest of Asia declined with the closure of the Cambodia club market
- Results in Europe & South Africa declined as a result of lower operators revenues and budgets
- South America declined due to fewer expansions. They also established a presence in Mexico and sold units there this quarter
- Still plan to double their market share (by value) of North American gaming operations over the next 5 years
- Increased investment in games development, stepper and systems businesses
- Building a new stepper business, so it will take some time. Need to build up library
- Australian business is continuing to undergo significant change
- Focusing on getting closer to customers and their needs
- Increasing focus of Japan business
- Put in place a 3 year product pipeline
- Subsidiary is making a strategic acquisition
- Goal is to make this segment more predictable and have more consistent releases of titles
- Expect to release only 1 key license title
- Exited over 40 non-core jurisdictions and have outlined criteria and processes before entering new markets
- Verve cabinet will be released on the US shortly
- Reduced headcount by 7% (roughly 140 FTEs)
- Outlook expectations for 2010:
- North America: expect a slight improvement in the replacement cycle but that will be more than offset by lower openings and expansions. ALL will continue to focus on their strategy of growing their gaming operations install base through new title releases
- Australia: Expect market shipments to be flat but for competition to increase.
- Japan: Expect the market to be flat. Will continue to streamline their operations and integrate their acquisition
- Worried about the higher AU Dollar
- Does not expect broader growth in their key rest of world markets until 2011
- 2010 will continue to be impacted by macro factors
Q&A
- Even without the upfront payment of the license fee, revenues would have been up in Australia
- NA Pricing – saw some discounting in 2H09, but also some impact of bigger orders in the 2H which warranted volume discounting
- Expect to see price increases going forward and less price discounting
- Participation - very happy with their result. Win per day declined simply due to the fact that their operators experienced a 7% decline in their win per day.
- Very pleased with their market share – especially in 4Q09
- US - how much visibility on forward orders?
- Very little visibility
- 90% of their unit sales were to jurisdictions outside of Nevada
- 3 year licensing model in Australia – they record it as a sale with a deferred component
- Won’t be able to consistently release key titles in Japan every 6 months for 2-3 years. Need to acquire more licenses and build the studios
- Supply chain benefits are due to the fact that they are selling more Veridians – so there’s some scale benefit in procurement
- Verve is going to be for participation only – it will not become the replacement for Veridian though- its only meant to be a premium niche participation cabinet
- Illinois – don’t expect to see any shipments until 2011
- NA split for 2010 between replacement/expansion: replacements to be a little better than 45,000 (think that 45,000 shipped in 2009- we’re lower than that). Expansion & new shipments in 2009 were roughly 23,000 and expect 15-17k in 2010
- Japan?
- Don't want to comment too much on their acquisition. Need to increase their success at getting through the approval process bottleneck. So this acquisition just buys them a few more slots to lessen the bottleneck - otherwise it's not that material
- Italian opportunity in 2010
- Are working with Cogetech - expect to have a material presence in the market
- Italy will allow them to increase their VLT shipments and make money off of their ACE platform
- Australia becoming much more competitive on what will they do to keep their market share
- Just need to produce better product
- Participation in the US?
- Don't think that its becoming a bigger % of the market. Their focus is simply to increase market share
- Singapore - very good share in Singapore ... reflects their dominance in Macau ... although Macau share isn't quite as high as that in Singapore
- US total install base (May? 6 games - 85,000?) & opportunity to replace that... unclear - they will still support that platform for 2-3 years and perhaps longer on a reduced basis
- Can't see that Australia will allow the use of full US like games anytime soon. However, they will partake in any regulatory modifications... right now it's just New South Wales. It's very early stage to see how the market and players will react to WMS's games
- ALL is also moving a lot of their lower level tech and systems work to India (following BYI best practices)
- Total stepper sales were 400 in 2009. Only have 10 for sale titles at the moment, and are working very hard at growing that library. Are also launching Kentucky Derby linked progressive participation title in March. They are working on several participation stepper titles are well
- Brazil? Not expecting to see any legislative activity until 2Q2010, and if it's passed, then earliest timing of shipments is 4Q2010
- Current participation share (of coin in) is mid-single digits. The 950 install increase is a net increase- they put in 1,200 new Jaws games alone.
