WMS ANALYST DAY NOTES

Here are some notes from the WMS Analyst Day

 

 

General:

  • Harrah's is looking to have a facility in Vegas with all the newest products
  • Speed to market is a key advantage for WMS - makes it easier to do business with WMS.  Bluebird 1 + 2 have a 2 week lead time for delivery; xD has a 6 week lead time.
  • Their sales people cover fewer accounts which allows them to cover clients more thoroughly. Recently increased salesforce by 50%.
  • In the past, customers didn't have to justify ROI of new machines; now they do. Two weeks ago, Ho-Chunk was visiting - haven't bought machines for 2.5 yrs and just ordered machines from WMS.
  • xD took 18 months from conception to market.  They are spending a lot of time to continuously improve their supply chain. Goal is to reach 60% gross margin and 30% operating margin.  60/40 product sales vs participation - once replacement ramps - running at 30% capacity for manufacturing.  Combine that with continued product improvements.
  • xD should get to BB2 gross margins or better by 4Q2011.  xD margins were weaker at launch - multiple new suppliers and new product (not BB1 evolution) - so there is some ramp time. Beginning to see some improvement already in the Sept quarter; should continue through 4Q. Will show QoQ improvement. They shipped a decent # of units this Q.

Strategy & Development:

  • Lean Sigma: started in manufacturing and now headed into product development
  • Strategy Deployment:- focusing efforts and priorities on a critical few. 3-5 year strategic initiatives.

Supply Chain & why speed is so important:

  • Now that they are a bigger supplier, there are a lot more suppliers that will deal with them.
  • 85% of their inventory is replenished based on consumption; replenished within 2 hrs
  • They closed 3 outside warehouses because they consolidated their inventory so well.  Midwest is a hotbed of supplier activity. 65% of their suppliers are located within a 100 mile radius.
  • Inventory was 30% of revenues 5 yrs ago - now 4.5%
  • Goal is to get to $25mm of inventory balance - spent $18mm on chips for their BB2s recently - which they will work through.
  • Have a little bit of finished goods from Barcelona, in Waukegan, and some in Vegas (where they keep the product that comes back (participation) and repurposed).
  • Working on putting USB technology into the cabinets - i.e. simplifying what goes in the box.
  • 90% of their games are built out with only 10% to be customized
  • They doubled their manufacturing capacity without additional money or people; have industry leading supply times
  • Feel like they still have lots of room for improvement

Factory tour:

  • BB2 just looks slimmer. Can make 100 games per day per line. Track production goals hourly. Can build reels and videos on same lines now - 80 reels per hour. Have constant employee cross training.
  • xD not cannibalizing their other products.  Lots of the margin improvement will come from training their workers, redesigning, negotiating, working better with suppliers. xD also has a different finish.

Participation refurbishment:

  • Strip them down, clean them up and then repurpose them.  Will remove a lot of components for testing and cleaning (bill validator/cpu)

Supplies/receiving:

  • 5 yrs ago, it used to take days to get supplies from the dock to the factory - now it's 5 hours - goal is 2hrs
  • Cut inventory space needed in half
  • Everything is barcoded now
  • Takes them 2 days to do a physical inventory count

Inventory mgmt:

  • Inventory reduced from $72mm in June 05 to just $31mm last quarter
  • Scan out empty bin - and they get replenished
  • Super core : 90% complete - can be turned into video or reel.  80% of their customers take games that are pretty plain vanilla.  Margin on the custom games are even better. Only impacts lead times (so 4-5 weeks).

7 Tweets Summing Up What You Need to Know About Today's GDP Report

"There's a tremendous opportunity to educate people in our profession on how GDP is stated and projected," Hedgeye CEO Keith McCullough wrote today. Here's everything you need to know about today's GDP report.

read more

Cartoon of the Day: Crash Test Bear

In the past six months, U.S. stock indices are up between +12% and +18%.

read more

GOLD: A Deep Dive on What’s Next with a Top Commodities Strategist

“If you saved in gold over the past 20 to 25 years rather than any currency anywhere in the world, gold has outperformed all these currencies,” says Stefan Wieler, Vice President of Goldmoney in this edition of Real Conversations.

read more

Exact Sciences Up +24% This Week... What's Next? | $EXAS

We remain long Exact Sciences in the Hedgeye Healthcare Position Monitor.

read more

Inside the Atlanta Fed's Flawed GDP Tracker

"The Atlanta Fed’s GDPNowcast model, while useful at amalgamating investor consensus on one singular GDP estimate for any given quarter, is certainly not the end-all-be-all of forecasting U.S. GDP," writes Hedgeye Senior Macro analyst Darius Dale.

read more

Cartoon of the Day: Acrophobia

"Most people who are making a ton of money right now are focused on growth companies seeing accelerations," Hedgeye CEO Keith McCullough wrote in today's Early Look. "That’s what happens in Quad 1."

read more

People's Bank of China Spins China’s Bad-Loan Data

PBoC Deputy Governor Yi says China's non-performing loan problem has “pretty much stabilized." "Yi is spinning. China’s bad-debt problem remains serious," write Benn Steil and Emma Smith, Council on Foreign Relations.

read more

UnderArmour: 'I Am Much More Bearish Than I Was 3 Hours Ago'

“The consumer has a short memory.” Yes, Plank actually said this," writes Hedgeye Retail analyst Brian McGough. "Last time I heard such arrogance was Ron Johnson."

read more

Buffalo Wild Wings: Complacency & Lack of Leadership (by Howard Penney)

"Buffalo Wild Wings has been plagued by complacency and a continued lack of adequate leadership," writes Hedgeye Restaurants analyst Howard Penney.

read more

Todd Jordan on Las Vegas Sands Earnings

"The quarter actually beat lowered expectations. Overall, the mass segment performed well although base mass lagging is a concern," writes Hedgeye Gaming, Lodging & Leisure analyst Todd Jordan on Las Vegas Sands.

read more

An Update on Defense Spending by Lt. Gen Emo Gardner

"Congress' FY17 omnibus appropriation will fully fund the Pentagon's original budget request plus $15B of its $30B supplemental request," writes Hedgeye Potomac Defense Policy analyst Lt. Gen Emerson "Emo" Gardner USMC Ret.

read more

Got Process? Zero Hedge Sells Fear, Not Truth

Fear sells. Always has. Look no further than Zero Hedge.

read more