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"Our third quarter results reflect meaningful progress at IGT . Despite challenges in the broader marketplace, we continue to manage our business to increasing levels of efficiencies.  Our efforts have resulted in the generation of significant cash flow for reinvestment into the business in areas that create innovative and customer centric products and services."

- CEO Patti Hart. 


  • Gaming operations:
    • 58-61% guidance for 4Q2010 margins
    • $51.68 blended daily yield
    • $10-$15 on lower yielding units and international units to over $100 on mega jackpot units
    • 83% of install base's yields are based on variable fees
  • Reduced material costs and increase of non-machine products contributed to better gross margins for product sales
  • Product sales in NA:
    • Replacements: 3,200
    • Sequential decline was due to lower shipments to Canada partly offset by higher shipments to Washington
    • Non-machine revenue was up due to higher system revenue and the Dynamix package
    • ASP decline was due to the Dynamix package - since the conversion revenue is recognized in non-box revenue
    • 55% of shipments were MLD's
  • International product sales:
    • Benefiting from FX, MBS and higher Mexico sales
    • Higher gross margins due to higher mix of non-box sales and lower material costs
  • 50-52% margin guidance for product sales next quarter
  • Lower SG&A was due to lower professional fees, expect $85-90MM run rate in the 4Q. Bad debt was flat to the prior year quarter
  • R&D in the low $50MM range for 4Q
  • Total D&A was $59MM, decline was due to lower D&A on the domestic Mega Jackpots - expect it to remain flat in 4Q2010
  • The interest expense included a $4MM financing charge
  • Convert added $7MM of non-cash interest in the Q, non-cash interest of $30MM or $0.06 is estimated for FY2010
  • Tax rate excluding discrete items was 39%.  Expect 37-39% tax rate going forward
  • Had $1.2BN of R/C capacity, $270MM O/S balance
  • For debt covenants, their bank leverage ratio was 2.5x at June 30, 2010
  • Their converts and warrants weren't dilutive to their share count this quarter
  • Generated $192MM of FCF YTD
  • $61MM of capex this quarter  and is expected to trend at $60-65MM in the 4th Q
  • Generation of FCF remains their highest priority
  • Focusing more of their engineering efforts on application developments in their SB effort - have 14 properties with SB products
  • Strategic product initiatives
    • Gaming yields increased 1% sequentially
    • Stand alone jackpot yields up 2% sequentially
    • Sex in the City: 1,300 units installed
    • Amazing Race, Top Dollar and Super Nova Blast now have 790, 391, and 362 units deployed, respectively
    • Top 4 games (mentioned above) backlog: 1,202 games
    • 3337 game backlog for mega jackpot
    • Dynamix package - Sold 6,300 units
    • Cosmopolitan agreement: will sell them the majority of their for sales games, SB system
    • They are in various conversions on 10 SB system opportunity customers internationally
  • Ohio Lottery commission is seeking a court judgment affirming the commission's authority to install slots at racetracks
  • Illinois: implementation of the VLT program is proceeding with the awarding of the central monitoring system contract and the adoption of administrative rules. Licensing process has started.  Chicago (could be 15k machines) is still waiting to pass the necessary city council resolution to opt into the program.  Expect first shipments in early 2011.
  • MA:  Should know by July 31
  • Canada:  VLT replacement process moving slowly.  Expect the majority of the games to come online in 2012.  Of the 34,000 games in Canada, estimate 20-25k could be replaced over the next 2-3 years.
  • Italy: expect first approval for their installations in September with their first shipments in early 2011 (March)
  • Brazil:  think that the proposal can resurface next year
  • Greece:  Expect that within 1 month a proposal for VLT legislation will be submitted and final legislation by the end of this year.  Potential operational date in late 2011.  Potential for 50k VLTs & upfront license fee of Euro 10k
  • Guidance: Cautiously optimistic about customer spending levels.  Few factors might impact their 4Q results (replacement demand, interest rates, and revenue recognition accounting) range: $0.82-$0.85 guidance for 2010


  • Sustainability of cost cuts?
    • Most should be sustainable
  • NA non-box sales were very high and driven by:
    • Dynamix free conversions got allocated at fair value to non-box sales vs. ASP on game sales
    • Higher systems sales
  • How does the backlog influence the total install base?
    • 2 for 1? No, that would be aggressive.  Their goal is to replace lower yielding games with new fresh product. Goal is to maintain floor share.
  • What are their customers waiting for to order replacements?
    • A lot of their customers are waiting to see what their competition does
    • Improvement in the general environment
  • Guidance implies a $0.16-$0.19 cent quarter for 4Q? Why so low?
    • Cosmo - unclear when they can recognize that revenue given that they are supplying the system
    • Aria: revenue recognition is dependent on when they deliver some software
    • Interest rate risk for Jackpot expense
    • Harder to predict revenue recognition for non box business and that has been a driver for them
  • How are sales trending now that the Dynamix package has expired?
    • General sense that they have is that there were just less replacements in June vs. March which benefited from a large Canadian order
    • No real comment there on the post Dynamix trends
  • Early 2011 reference for Italy - meant March 2011 Q
  • 50% of the new units shipped came from 3 properties