“Size matters” in manufacturing sector, says analyst

May 20, 2024 8:18 PM
Photo: IGT
  • David McKee, CDC Gaming Reports
May 20, 2024 8:18 PM
  • David McKee, CDC Gaming Reports
  • United States

Meeting with a quintet of gaming-equipment manufacturers during a recent pilgrimage to Las Vegas, Truist Securities analyst Barry Jonas came away sanguine.

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“Size matters,” he decreed of the International Game Technology/Everi Holdings merger, expected to close later this year. Jonas reported that IGT and Everi executives remained excited about the in-progress deal.

“Both management teams were cognizant that 1 + 1 historically has not equaled 3… However, both stressed this deal is not about cost synergies or saving R&D dollars. The importance of scale in slot-game and cabinet manufacturing is essential in order to maximize shots on goal,” wrote the analyst.

Jonas continued that the merged IGT/Everi plans only $75 million in synergies (deemed “conservative”). Everi’s Class II products and territories were predicted to mesh well with IGT’s Class III inventory and presence, “and the companies believe they can have success porting each other’s more successful games across different markets/classes (including international).”

IGT execs, in particular, were said to be excited about the impending merger, “given that EVRI’s fintech solutions will round out its systems portfolio. IGT believes an increasing number of new casinos want a full-service suite of products and IGT/EVRI will be a one-stop shop.” Casino leadership was said to feel similarly.

There was one cloud on IGT’s horizon, affecting its lucrative lottery business. “While management couldn’t directly comment on recent lottery trade reports that Mega Millions could increase its ticket pricing next year, “ Jonas said, “management did say that the impact to IGT from higher ticket pricing could be significant.”

Casino operators, meanwhile, were planning to keep their slot-acquisition budgets steady with last year’s, with a few spending more or even less. One area of growth was revenue-sharing games, which are expected to take up still-larger areas of casino floors.

Among the companies that met with Jonas was Walker Digital Table Systems, which makes baccarat tables for MGM Resorts International’s Macau casinos. “We believe the product is very straightforward to use and see obvious benefits to the smart tech. … The technology essentially eliminated the prospect of theft, which should raise baccarat hold for operators,” Jonas wrote.

He added that MGM felt it has a three-year advantage on the Macanese market by having been an early adopter of the technology. All other Macau casino concessionaires were reported to be stocking up on Walker Digital product — except Las Vegas Sands.

Light & Wonder was reported to be upbeat about early auguries for its Dragon’s Tail games. Management, Jonas noted, “is taking a methodical strategy in its rollout, seeking to avoid flooding slot floors with too many games out of the gate.”

The company is also exploring the VLT business and pursuing an omnichannel strategy, which included a new wrinkle. Many new Light & Wonder games are being launched digitally and going terrestrial only when all the bugs have been worked out.

Jonas also met with Gaming Arts executives.