Brightstar Lottery PLC (BRSL) Q4 2013 Earnings Report, Transcript and Summary

Welcome to International Game Technology's Fourth Quarter and Fiscal Year 2013 Results Conference Call. [Operator Instructions] This call is being recorded. If anyone has any objections, you may disconnect at this time. I would now like to turn the call over to Kate Pearlman, Vice President of Investor Relations and Treasury. Thank you. You may begin.

Thank you. Good morning, and welcome to IGT's Fourth Quarter Fiscal Year 2013 Earnings Conference Call. Leading our call today will be Patti Hart, our Chief Executive Officer; and John Vandemore, Executive Vice President of Emerging Businesses and Chief Financial Officer. Before we begin, I'd like to remind listeners that our discussion today will contain forward-looking statements concerning matters such as our expected financial and operational performance, including our guidance for fiscal 2014; our expectations for the economy in general and the gaming industry in particular; the expected impact of the DoubleDown acquisition; our $200 million accelerated share repurchase program; and our strategic, operational and product plans. Actual results may differ materially from the results predicted, and reported results should not be considered as indicative of future performance Potential risks and uncertainties that could cause our business and financial results to differ materially from our forward-looking statements are included in our filings with the SEC, including our most recent annual report on Form 10-K and our most recent quarterly report on Form 10-Q. All information discussed on this call is as of today, November 7, 2013, and IGT does not intend and undertakes no obligation to update this information to reflect future events or circumstances. In addition, on today's call, we'll discuss certain non-GAAP financial measures. Reconciliations of these non-GAAP measures to the GAAP measures we consider most comparable can be found in today's earnings release, which is posted on IGT's Investor Relations website, igt.com/investors, and included as Exhibit 99.1 to the Form 8-K we furnished today to the SEC. We'd also like to remind you to download the IGT Investor Relations app, where you'll be able to access our earnings release and other information about the company. Finally, all references to 2014 or 2014 year refer to our fiscal 2014 -- fiscal year 2014. All references to 2013 or 2013 year refer to our fiscal year 2013. And all references to adjusted earnings per share refer to adjusted earnings per share from continuing operations. And now I will turn the call over to IGT's Chief Executive Officer, Patti Hart.

Thanks, Kate, and welcome, everyone. Earlier today, we recorded our fourth consecutive year of double-digit adjusted earnings per share growth. Our financial results demonstrate not only the soundness of our strategy, but also the effectiveness of the daily blocking and tackling that underpins the execution of that strategy. We are very pleased with the progress that we are making and are happy to be recording another outstanding year. I want to start by highlighting just a few significant achievements from our fiscal 2013. We grew total revenues 9% to over $2.3 billion. We expanded adjusted earnings per share 22% to $1.27, and we increased our ship share. We returned over $270 million to shareholders in the form of share repurchases and dividends, and we reduced pricing on our credit facility. And today, I'm delighted to announce that our board has authorized a $200 million accelerated share repurchase. This action reflects unwavering confidence in our products, our people, the cash flow strength of our business and our longer-term growth prospects. Switching gears just a bit to the fourth quarter. If you recall, last year in the same quarter, we drove our highest quarterly revenue performance in 4 years, and I'm proud to say that this year, we beat that high watermark with revenues of $632 million. We placed 13,400 units into North America, up 29%. Our systems business also did very well in the fourth quarter with revenues up 39% over the prior year quarter, driven by a number of new systems installations. G2E for us was very successful. We launched many great games, including our new James Cameron's AVATAR slot machine. This game reflects a shift in the casino entertainment experience and was recognized as Best Slot Product by Global Gaming Business. All in all, our fourth quarter rounded out a fantastic year, a year that we are all quite proud of. I want to take just a moment to reflect on our operations from 1 year ago. First, last year, we anticipated a fourth year of double-digit growth in adjusted earnings per share, which we accomplished by remaining flexible and nimble in a very challenging market, by listening to our customers and by making appropriate adjustments along the way. Second, when we spoke with you a year ago, we expected our core business to grow and it did. We enjoyed outsized ship share in the Canadian VLT market and strong participation in markets such as Illinois and Ohio. Internationally, we grew both product sales and gaming operations revenue. We increased units placed and improved our gross profit despite very challenging macroeconomic conditions. Our continued focus on product performance allowed us to post a 31% increase in global units sold to 57,200, a remarkable feat in this environment. And third, at this time last year, we were planning for our DoubleDown business to make a significant contribution in the year. In 2013, we achieved industry-leading bookings per daily active user of $0.40, and did so while increasing both our daily and monthly active users. We continued to grow social revenues at an incredible pace, 151% over last year. And it's encouraging to see that our casino partners are recognizing the value of DoubleDown to their business by embracing our partner program to expand their customer base, reach a broader demographic and drive players to their casinos. IGT is uniquely positioned to capitalize on the many new opportunities that are surfacing in our industry, from the evolution of interactive for-wager gaming in New Jersey and Delaware to the creation of more efficiency in casino operations through our many systems enhancements. I see a very exciting future for us fueled by the immense talent and dedication of our employees, whom I'd like to thank for doing their part in 2013. I'd also like to thank our partners and customers for continuing their strong, mutually beneficial relationships with IGT. Our employees, customers and partners are working to lead and transform the industry while redefining the entertainment experience, and we're doing so together. With that, I thank you for your interest in IGT, where the best ideas just keep coming from Out of the Blue. I'll now hand things over to John to share with you some of the financial details. John?

Thank you, Patti. We are very pleased with our fiscal 2013 results. We believe that these reflect our focus on reinforcing our leadership position in the core business, leveraging our premium content across the broadest distribution network in the industry and positioning the company for future growth. I'll begin with a review of product sales, which delivered fantastic performance in 2013. Revenues were up 12%. We sold 31% more units than last year. As Patti mentioned, we expanded our industry-leading ship share in the North American replacement market, capturing over 40% share in the Canadian and Illinois VLT markets. Internationally, we drove a 2% increase in revenues despite the intense political and macroeconomic headwinds. During the fourth quarter, we announced the largest video poker deal on IGT history, the sale of 7,000 video poker units on our new Advanced Video Platform to Caesars Entertainment. The new platform drives a more engaging player experience through games such as Stack'em Bonus Poker, which offers both horizontal and vertical pay lines, and Look Ahead Poker, which lets players view the next card in the deck, an advantage I know I need. IGT is evolving video poker and reinforcing our #1 position in this product category. Due to a higher percentage of lower-priced units as well as some targeted promotional activity, there was downward pressure on our average sales price in the quarter, which decreased to about $11,600. And this compressed margins slightly to 50%. We are excited about the momentum in product sales, driven by games like Sumatran Storm, Dolly Parton, Triple Red Hot 7s and Huevocartoon, which are delivering solid performance. And our 2014 product lineup created a lot of interest to G2E. Customers are intrigued by our skill-based Atari Centipede Video Reel Edge game as well as Hot Roll Double Gold, which builds on the classic Double Gold, infusing a thrilling high DynamiX experience in a mechanical reel game. We also continued to expand our market-attuned content. At G2E, we introduced Lessons of Gaucho and El Gran Festival, designed for the Latin American markets, and high-volatility games like Dragon Dance and Fire Pearl for Asian markets. And we were particularly pleased to introduce Winner's Choice at the show. This new game was born from IGT's annual innovation week just last March. This is a week when our creative talent from around the globe gathers to collaborate on ideas for the next generation of exciting products. Our ability to deliver Winner's Choice just a few months later at G2E reflects our dedication to innovation and our efforts to increase speed to market for our products In 2014, we expect modest growth in our underlying product sales business after excluding the impact in 2013 of the Canadian VLT replacement cycle. We are anticipating that gross margins will be stable as higher average sales price drive -- driven by mix shift to higher-priced units, is offset by lower non-machine revenue. Our gaming operations results were mixed in 2013 against challenging gross gaming revenue trends, which drove yields down 5% for the year. Our increased focus on driving returns served us well as gross margins rose to 62% and we increased cash flows through lower capital expenditures. In the fourth quarter, average revenue per unit increased 2% sequentially to $48.78, reflecting positive international trends, but declined 4% year-over-year on lower MegaJackpot revenues. The Installed base was down 4% sequentially, driven by a decline in MegaJackpots and lease operations' installed base, partly due to the sale conversions in the latter category. Like our customers, we are eagerly anticipating the new lineup of games, such as James Cameron's AVATAR and Jurassic Park, and leveraging our innovative enhanced game content in titles like Back to the Future and Bridesmaids. This technique will allow us to extend game popularity and longevity by unlocking new content in an already existing game. In 2014, we expect gaming operations' margins, yields and capital expenditures to be in line with 2013, and we are focused on stabilizing our installed base. We will continue to manage this business for higher returns and cash flow. In our Interactive business, we delivered an 84% increase in revenues in 2013, powered by a 151% increase in social gaming revenues at IGT's DoubleDown Casino. Gross margins improved during the year from 56% to 61% as we grew the business profitably. Turning to the fourth quarter results at DoubleDown, IGT's proven slot content and effective player marketing strategies drove a 72% year-over-year increase in revenues to $61 million. On a sequential basis, revenues were flat as we encountered some temporary display -- delays in payment processing on Facebook and some disruptions related to the rollout of Apple's iOS 7 platform. Despite this, mobile bookings grew 11% sequentially, and DoubleDown continued to rank as the #3 top-grossing app on Facebook during the quarter. DoubleDown earned its best day rankings in August when it achieved the rank of #1 top-grossing iPad app, displacing the likes of Candy Crush and Clash of Clans. We're also very pleased to report that October was a banner month at DoubleDown as we celebrated our most successful game launch ever, MONOPOLY PLUS, and delivered record results in bookings and average daily active users. Looking forward, we remain confident in DoubleDown's growth potential, fueled by continuing improvement in the customer experience, increases in mobile revenues and downloads, expanding internationally and enhancing product breadth. We expect that this transaction will be GAAP-accretive in the first quarter of 2014. In our online for-wager project -- product at IGTi, revenues increased 29% year-over-year, primarily due to an expansion of our online desktop and mobile partners and excluding the impact of our former European online poker network and a onetime VAT adjustment in the prior year. In 2014, we expect modest growth at IGTi as we continue to expand in Europe and launch online casino-style wagering in the United States. Fourth quarter adjusted operating expenses increased to 33% of revenues versus 29% a year ago, primarily due to higher advertising expenses at DoubleDown and several unusual items such as the shift in timing of G2E and investments in corporate initiatives such as the roll-up of SAP globally. We also saw an increase in our bad debt reserves, which would approximate a $0.01 impact on earnings per share. In 2014, we expect SG&A, excluding bad debt and any unusual items, to return to a normalized range of between 19% and 20% of revenues and R&D expense to be in the range of 10% to 11% of revenues. In other expenses, foreign currency losses, primarily related to our operations in Argentina, were $4.2 million in the quarter, which would also equate to a $0.01 impact on earnings per share. At quarter end, cash and short-term investments, inclusive of restricted amounts, totaled $809 million. During the quarter, we issued a $500 million 10-year bond in preparation for the refinancing of our convertible notes due in May 2014. We expect to fund the maturity with these proceeds and by drawing on our revolving credit facility. During the year, we repurchased 10.1 million shares at an average price of $18.89 per share for a total of $190 million. And today, we are pleased to announce that we have entered into a $200 million accelerated share repurchase, an indication of our ongoing commitment to robust capital returns to our shareholders and confidence in our strong cash flows. In 2014, we expect our weighted average share count to range from 250 million to 255 million shares. This year, IGT generated industry-leading operating cash flows of $463 million. Excluding the impact of $47 million in DoubleDown acquisition-related payment, 22% of our revenues were converted to operating cash flows in 2013, a robust result by any measure. We remain focused on disciplined capital deployment, prioritizing investments for growth along with capital returns to shareholders. Building on the momentum of a successful 2013, we are initiating fiscal year 2014 guidance of adjusted earnings per share from continuing operations of $1.28 to $1.38 per share. I'll now turn the call back to Patti for her closing remarks.

Thanks, John. And I think I can speak for John when I say that we both appreciate your interest in IGT and your participation in these quarterly updates. We also hope that you can see that as part of our pioneering spirit at IGT, we are always looking for fresh approaches to our industry, be it products, processes, technology or distribution, all with the goal of returning value to you, our shareholders. As we enter our new fiscal year, we do so with a maniacal focus on 3 things. First and foremost, it's all about content. Assembling, through creating and partnering, the most compelling, highest-performing game library available, serving both our operators and players. Number two, expanding and managing the broadest distribution network globally, to every region of the world and on every device with real money and virtual currency. Anywhere that gaming exists, you will find IGT. And lastly, maximizing value through the efficient operation of our business, the optimal generation of positive cash flow and a responsible and dependable return of capital to our shareholders. We will continue to execute our strategy and to adjust that strategy as opportunities arise and as the industry and business world around us evolve. We appreciate your support of IGT as we lead the industry into the next great phase of gaming, technology and entertainment. We'd like to thank you and pleased to take your questions.

[Operator Instructions] And our first question comes from Cameron McKnight with Wells Fargo.

This is Barry Jonas filling in for Cameron. Just a couple of questions. I may have missed this. For SG&A in Q4, it sounded like there were some onetime items. If we kind of normalize it, what -- how should we think about the growth in SG&A on a normalized basis?

Yes, I would think about it, Barry, as the run rate number that we gave you for the remainder -- or for 2014, which is somewhere in the range of between 19% and 20% for SG&A, and 10% to 11% for R&D. That's probably the best way to think about it going forward and as a normalized number for Q4.

Great. And then looking at product sales, in terms of -- how many Canadian units and Illinois units were recognized in the quarter?

Yes. There was about 1,500 Canadian units, and about the same in Illinois.

Great. And then just I mean, looking at next year, you're sort of expecting modest growth in product sales. If we just -- if we back out sort of the lumpier onetime and lower-cost sales, how should we think about unit growth and ASP growth next year?

Yes. I mean, I think partly that isn't determined by us, that's going to be determined by the market, so to be clear. We're reading the market, and it's changing pretty regularly. I'd say we expect modest growth income, the underlying business, excluding the continuing activity in Illinois. And obviously, you have to exclude the impact of Canada in the year.

Our next question comes from Felicia Hendrix with Barclays.

John, just back to this SG&A, you had mentioned that some of the increase there was due to some targeted promotional activity. I was wondering if you could elaborate on that and how long should we expect that to be a factor to SG&A.

Yes. So the promotional activity I spoke to is impacting the ASP in the product sales side. It's not registering in the SG&A category.

Oh, sorry. I'm sorry. Can you talk about that?

Yes, I mean, the best way to describe it is we did, obviously, enter into the largest deal we've ever done and, quite frankly, the video poker industry's ever seen in video poker. And that was one element of it. I would say on a mix adjusted basis, pricing, combined with comparable units, was relatively flat, and that's what we continue to expect.

Okay. But are you seeing any other kind of promotional activity in the industry in general?

I'd say nothing unusual as compared to what we've seen over the last 4 quarters.

Okay. I had both of the -- these, my next question and that question in my brain at the same time. So I apologize. But then on SG&A, that also used -- there were a lot of different buckets that increased SG&A in the quarter. I was just wondering if you could tell us what the biggest part was. You mentioned increased advertising expenses. Obviously, the shift in timing that usually goes away. But can you just kind of help us understand what the biggest driver in the quarter was? I know you gave us an outlook for SG&A for next year. It was helpful, but it would be helpful to parse through for this quarter.

Yes. I mean, to be honest with you, Felicia, it was a lot of little things. We had legal settlements come in. We had the effort on SAP implementation. We had G2E. I mean, the way I would really quite honestly think about SG&A and really the whole OpEx category, is we probably lost $0.01 or $0.02 in SG&A that we don't expect to continue. We probably lost $0.01 in bad debt, and we probably lost $0.01 in FX. And that's really how we think about them. When you look at the revenue results that I -- I've seen your notes all already -- I mean, we're pretty strong on the revenue line, and we feel really good about our momentum in product sales and that we're doing the things we need to do to help reinvigorate gaming operation. And the other stuff, again, I think when you return to normalized levels, you'll see that Q4 was a bit more of an aberration than anything else.

And our next question comes from Shaun Kelley with Bank of America Merrill Lynch.

So, John, you just mentioned some things you're doing on the gaming operations side. And I guess that's the one area that we haven't talked about so much. So the installed base was down 4%. It had been pretty flat for the last few quarters. Could you just talk a little bit about why you think that was down and what you're doing to address that component?

Yes. I mean, so you have to parse the installed base. I mean, there were some declines in there in the lease operations business, which came from, in part, conversions to sales. So we had some leased units that we converted to sales, so they fall out. I mean, quite honestly, we had a onetime event internationally. We had some closures in the Mexican market. We have to take those units out for a short -- until they're back live on the marketplace. So stripping those things out, I think it was just the normal wear and tear we're seeing in that business on placements. All in all, we're very pleased with the sequential uptick in yields. That was good news. We're tremendously pleased with the product that we rolled out at G2E and the response that's getting. I think we're doing everything we can, while also maintaining that disciplined approach to capital deployment, and returns, just kept -- stabilizing and return this business to where we want it to be, which certainly is north of where it clocked in for 2013.

Great. And then I guess just 2 housekeeping questions. The 250 million to 255 million shares that you referred to, just to be clear, that's -- is that diluted average shares? And then the other one would simply be the number of video poker units that you shipped to Caesars in the quarter.

Yes, so that's a fully diluted number. We try to always provide you guys a fully diluted number since that's ultimately what we're measured on. In terms of the video poker units, we're -- I'd say we're about 2/3 done, maybe a little bit more, a little bit less depending on the timing of when the machine's actually shipped from cutoff of the year end. But I consider it about 2/3 done at this point. Which just as a highlight, does mean we're going to see a little bit more of the SAP more pressure in Q1 as we roll the rest of those units out. I think the good news in the marketplace is you're going to see a lot of tremendous video poker product on the floor. And right now, it's limited to 1 operator. We think that's going to generate fantastic returns for them. And we're going to look excitedly to the reports of how that AVP product is performing, because it's great poker product. It's the first major rejuvenation of the video poker floor that we've seen. And for a component of the market that doesn't turn over very frequently, we think that spells good things for Caesars and, quite frankly, for us.

And our next question comes from Steven Wieczynski with Stifel. Steven M. Wieczynski - Stifel, Nicolaus & Co., Inc., Research Division: So, John, I guess, if you go back to the product sales, if you stripped out the sales to Caesars, is there any way to give us an idea of what margins would have looked like?

Yes. I don't have that handy, and I'm not sure we'd want to go into that much depth. What I would say is obviously, when you do something targeted like that and as sizable as that was, effectively replacing every one of their poker machines across the globe, there's going to be some impact. I think going forward, we expect product sales margins to return to a more normalized level, which you saw in the early part of the year. Steven M. Wieczynski - Stifel, Nicolaus & Co., Inc., Research Division: So that's kind of low to mid-50s, then?

Yes.

Yes, that's right. And I think it's a combination, Steve, of the mix because I think the ASP and the margin's a little lower on the product -- on the video poker product in general. So it's a little bit mix and a little bit of discounting, which we think was the right move, right? We need a catalyst. As the market leader in video poker, we need a catalyst to really drive the upgraded video poker more broadly in the marketplace. And Caesars was willing to be that catalyst. And we think that will portend very good things for us in the coming years when we think capital will continue to be a bit scarce in the marketplace and people will be very judicious about how they're applying it. Steven M. Wieczynski - Stifel, Nicolaus & Co., Inc., Research Division: Okay, got you. And then going over to the game outside of business, I think you said you're expecting yields to basically be pretty flattish for next year. And that's probably a little bit better, I think, than most investors are thinking at this point. So how do you get to that flat assumption going forward? And I know you had a sequential uptick here in the last quarter, so that's a pretty good sign.

Well, let me be clear. Our goal is to drive yields up. So don't think for a moment this as an objective of ours. Ours is to drive it up. I think -- as we think about the financial forecast, what we're looking for is stability on a sequential basis. So there will be, I think, a slight continuing drop in Q1 reflecting the annualization of decreases we've already seen hit. But what we think we've done from a product side, from a promotion side, from a marketing side, that's all aimed at driving yields back up.

And our next question comes from Robin Farley with UBS.

I just want to clarify a couple of things. The EPS guidance for next year, I assume that includes the full use of the accelerated share repurchase. And then I'm wondering if that also includes any other share repurchase after that? It looks like the accelerated share repurchase would be done like within a 3-month period. So just want to clarify what's kind of the assumption in your guidance.

Yes, the guidance we've provided today does include the impact or the estimated impact of the ASR. Obviously, the ultimate impact is only determinable at the end of the period, which we expect will last about 2, 2.5 months. And then at this point in time, that's the balance of repurchase we have factored into the guidance today. That doesn't mean we will or we will not buy above that. That's a decision our Board contemplates on a quarterly basis, and we'll obviously be reviewing it with them and they'll help us make a determination as to what's best for the remainder of the year.

So was the thought in doing an accelerated share repurchase rather than doing -- because it's similar dollar amount to what you did in 2013. Was it accelerating to take advantage of where you thought the stock price would be versus later in the year or is that -- was that a decision about what you wanted to do just in that quarter?

Yes. I mean, I think quite honestly, we believe the shares are undervalued, and we'll take advantage of that as best we can. We thought the ASR in this particular instance was the best way to take advantage of that and get a little discount in the process. So for us, it was, quite frankly, a pretty easy decision.

Okay, great. And then for my follow-up, I wanted to ask about the installed base. You mentioned there were some leases that converted sales and some Mexico closures. Is there -- can you quantify what the installed base looks like if you exclude the leases that converted to sales and the Mexican closures? And similarly, would yields have been up if you also -- if you exclude the Mexican closures, which may have been a lower yield, if you excluded that from the prior period?

Yes. I don't -- I know we don't want to get into detailed reconciliation of the installed base. I would say there still would have a decline, to be clear. I mean, it wasn't all lease-op. So completely upfront, there was still a little bit of decline. It was less than the sum total because there was a -- I already detailed about 1,000 units on the lease side that came out. Yields are a different batch. You can actually get yield reactions from a variety of different things, game performance, mix shift, GGR trends. I mean, there's a lot of different factors. I don't know the exact answer from a Mexico perspective, although I would note that our international yields were up. We feel really good about that. That's reflecting the strength of our product internationally, which certainly has a lot of runway in front of it. So we're excited about that.

And our next question comes from Carlo Santarelli with Deutsche Bank.

John, you mentioned in your remarks that you believed yields and margins and CapEx in gaming ops could be flat with fiscal '13, correct?

Yes.

Just in terms of the comment in the release with respect to MegaJackpots being down and with the -- obviously the 1,100 sequential units that were down in North America, is there anything underlying in that assumption for yields domestically or domestic slot play levels picking up? Because I would just think from a mix standpoint, it could be difficult for yields to be flat.

Oh, yes, there's a lot of things that can make yields holding flat difficult. I would say what we always try to forecast, again, is stability in the GGR side of the market, which is obviously the biggest determinant of where yields go. So to be clear, it -- we need some stability in that backdrop. And I think we can all recall the last couple of quarters haven't offered a lot of stability, in particular in the regional markets, but even in Vegas, is kind of where we've been down. I think what we look at, when we're prognosticating our yields for the year, is the strength of product lineup, recent trends, what we've seen in performance. From a margin standpoint, it's a little bit more than that, right? We have to take into account the costs to deploy, depreciation costs, jackpot costs, all of which have been trending in a very positive direction because we've been actively managing those lines as we've been under yield pressure. So I think what you're starting to see on the margin side, what we continue to expect for the year, is that all the actions we've taken to manage this business for returns over the last year as we've been facing yield decline are going to continue to stay in place. And then we've seen some encouraging sign of new play. And while that's encouraging, we again do need some GDR [ph] favorability to help us out there. And it's all that going into the mix of our projected yields for '14.

Great. And then just in terms of the color that you gave on DoubleDown in October, it sounds like the new launch has been matched with some pretty good fanfare. But as we move forward into next year, I thought you mentioned something along the lines of growth there would be moderate. Are you speaking off of a -- on a sequential basis or a year-over-year basis as obviously, the comps in the first half of the year will be relatively easier?

Yes. So I think just, Carlo, some color on kind of our DoubleDown business performance. I mean, September was kind of a 1-month anomaly. It's kind of part of being in this infrastructure business where we had to absorb a shift in payments from credits to cash at Facebook. And we had to adjust to the iOS 7 rollout. So we were probably spending more time on infrastructure than on revenue-generating activities in the month of September. And I think there were -- what we look for is how do we rebound from that, how do we absorb those adjustments and rebound? And I think October is a very good indication of that rebound. So we did have -- I mean, we enjoyed record bookings in the month of October. We had kind of record unique players. We had record revived players, which are players who have been in and left and we're reviving them back to be a player. And we launched the most successful game in the history of DoubleDown with MONOPOLY PLUS. So I mean, that's kind of what you look for when you're looking at these infrastructure businesses, you're always going to go through these blips as the infrastructure that you're using to deliver your product goes through upgrades. Which you want it to go through, right? The iOS 7 upgrade was a great upgrade, but it does cause some disruption, temporary disruption in the business. So what we wanted to share with you, which we don't normally, is a look into the months following the quarter so that you can feel good about kind of where the business is going. I think on a forward basis, John.

Yes, Carlo, sorry if I was unclear. The modest growth I was describing relates to our real money wagering online products. Our growth expectations for DoubleDown are far in excess of that. And consistent with what we've pointed as a mid-teens growth rate in the business. But the modest growth was more in line with IGTi, and for DoubleDown, we expect some of the same trajectory we've seen.

And our next question comes from Joe Greff with JPMC. Joseph Greff - JP Morgan Chase & Co, Research Division: Maybe also after the gaming ops question. John, you mentioned earlier that, I guess, the biggest determinant for you for yields is going to be levels of gross gaming revenues. So what are your underlying levels for North American gaming revenues in your fiscal '14? And if it's sort of weighted towards the back half, can you help us understand that a little bit?

Yes. So, Joe, our expectation is that we continue to see kind of flat to up slightly, and by slightly, I'm talking about 1%, 2% growth in GGR overall. Now market-by-market, that is a little bit more dynamic, I think as we've all seen. The trouble for us, and I assume the trouble you guys have as well, on the operator side, is predicting which market is going to be up in which quarter. And quite frankly, that's not something we feel particularly adept at guessing at. But for us, it's -- we're looking for stability to modest increases in gross gaming revenue. And that's enough, we think, coupled with the other efforts we put in place to get us to flat. Joseph Greff - JP Morgan Chase & Co, Research Division: And is it second half weighted then in your fiscal '14 guidance, where there's more of a recovery in the back half versus stability?

Yes. Well, yes, because I mean, in Q1 and Q2, we're going to be lapping some declines that we took in the latter half of this year. So there's going to be a little natural year-over-year. So as you think about a transition point, I would put the half the year as a point where we think we should be at flat year-over-year results. But again, keep in mind, that it's a little bit -- it's entirely -- not entirely. It's at least partly contingent upon where GGR trends go. But I would point you to the midyear as a flex point. Joseph Greff - JP Morgan Chase & Co, Research Division: Got it. And no one's asked about this, and I don’t think you guys talked about it, but earlier this week, in an 8-K filing, you got an additional set of responsibilities, John, being you had a senior resignation in your interactive business. Can you talk about how that business is being reorganized, whether or not there's going to be any disruption or has been -- has experienced any disruption?

Yes. So we are going through, I think, the natural growth of the business. Robert Melendres has been running that business for us on a global basis. He's done a great job of integrating IGT and IGT content into the DoubleDown environment. But we're entering a new chapter, in my mind, of kind of taking this business from the run rate it is to a significantly greater run rate. And we're moving, I think, Joe, from kind of exercising the assets we acquired and the assets we already owned, which was our game content library, and we're moving more, I think, into more of a strategic phase and a phase where we'll be redirecting investments from other parts of our business into DoubleDown to continue to accelerate the growth. And my view was that John has earned the right to do that, and the financial oversight is something that I think is going to be critical in the coming years. And John today also manages our strategic planning and corporate development, and I wanted to have that more closely aligned. So we don't feel -- certainly, you always miss when someone as talented as Robert leaves. We will certainly miss him. But Greg Enell and Glenn Walcott, the founders, are up there in Seattle with their head down, running the business. And we don't expect to really see any disruption from the shift. Joseph Greff - JP Morgan Chase & Co, Research Division: Got it. And just one final question, my follow-up on the ASR. In the press release, you said you will enter into an agreement. Is that signed at this point? And the reason why I asked, because obviously with the share price performing where it is today, if it's not an official agreement that you entered into, is there a way to upsize the dollar amount and would you considered doing that?

So it has been executed. I think the market's upsizing it effectively for us from a repurchase -- share repurchase standpoint. Yes, so it's fully committed at this point in time. If we were going to add to it, we would consider that over the course of time. I don't foresee that, but probably that's something we're going to watch closely.

And our next question comes from Edward Williams with BMO Capital Markets.

So a couple of questions. Looking at DoubleDown for a moment, can you give us some color as to how mobile has been performing within that business relative to Facebook? And then also, can you give us a little bit of color as to the relative differences between DoubleDown on iPhone versus iPad and what leverage you might use to kind of drive up the performance of the iPhone version of the game?

Yes, it's hard to compare versus Facebook unless you're talking about the platform. For us, I mean, our Facebook platform revenue was down slightly. I think that's pretty consistent with what you saw Facebook itself announce. Mobile continued to do great. Mobile was up 11% on the quarter, and we're very excited about the mobile opportunities. When we look at the difference between iPad and iPhone, the real difference is player experience. And I think our games benefit particularly from being on a Wi-Fi connection, which people are more inclined to have if they're on an iPad. I think that form factor just lends itself right now a little bit more towards increased play. We're highly ranked. We're in the top 5 on the iPad regularly. On the iPhone, we're a little bit lower. It's a different form factor. And I think quite frankly, we need to continue to improve our customer experience there. I would say when you look at Facebook versus mobile, the very encouraging sign for us is that we're seeing fairly equal monetization levels, not perfectly equal but fairly equal. And that's a big achievement in this industry. But I think we're all unanimously agreed that mobile is the wave of the future, and our continued penetration in mobile, which we think we have a lot of runway for, is particularly exciting. I would add to that, just in our real money wagering business in Europe, that's where we saw the growth this quarter, our mobile product and getting our mobile product out into the for-wager environments. And that was also very exciting.

Can you also just follow up -- following up a little bit, can you just give us a little bit of color as to how the international SKUs have done, so in terms of monetization of DoubleDown in other languages? How have you been monetizing those users of it?

Yes, it's been about as good as expected. The cost per installs there are lower, which is the attractive part of the international markets. The monetization, though, is also lower. And I think we have to recognize where we are. We're at square 1 in the international markets, and we need to attune our marketing program. We've got the content in the market, and as we continue to focus on that, our expectation, and I think quite frankly, the expectation of our industry, is that it will monetize better. And there's certainly a lot more new device growth in the international markets. But right now, I think it's kind of gone as expected. We've acquired users at a lower CPI, and they've monetized lower. It hasn’t had a material impact on our overall results, which is a fantastic sign for us, but it's kind of about as expected.

The next question comes from David Bain with Sterne Agee. David Bain - Sterne Agee & Leach Inc., Research Division: Great. Guys, just one question, if you can help explain the lease conversion to sale a little bit more. Was that opportunistic? Was it contemplated as a balloon sale when installed at some point? And kind of the outlook for additional conversions in FY '14 would be helpful.

Yes, I think they're very opportunistic. But keep in mind, it's ITG meeting the needs of its customers that's the opportunity, Occasionally, customers will come to us and they'll have either the budget or the desire to turn some lease units into converted sales. Obviously, we consider that carefully, and we don't consider that for every product. But there's a certain category of leased product we'll consider that. There were a couple of customers across the globe, quite honestly, that came to us and had the desire to convert some units. And that's something we were willing to do, in particular if it meets their needs. It's really hard to predict going forward, though, because it is incredibly dependent on a customer's decision to take something out of lease and put it into a sale. And that's obviously contingent upon their capital availability, which is, try as we might, very difficult for us to predict.

Well, thank you, again. John and I really appreciate your time and appreciate your interest in IGT. We look forward to seeing everyone in New York on December 12, for what I think is shaping up to be a very exciting IGT investor day. So we look forward to seeing you then. Thanks again.

Thank you. This concludes today's conference. You may disconnect at this time.