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Executives

Cindi Buckwalter – VP, Corporate Communications and IR

Lorne Weil – Chairman and CEO

Jeff Lipkin – SVP and CFO

Scott Schweinfurth – Chief Integration Officer

Analysts

Barry Jonas – Wells Fargo

Todd Eilers – Eilers Research

Steven Wieczynski – Stifel

Ross Licero – Craig-Hallum Capital Group

Scientific Games Corporation (SGMS) Q3 2013 Earnings Call November 7, 2013 5:00 PM ET

Operator

Good evening, ladies and gentlemen, and welcome to Scientific Games Third Quarter 2013 Conference Call. At this time, all participants are in listen-only mode. A brief question-and-answer session will follow the formal presentation. (Operator Instructions) As a reminder, this conference is being recorded.

It is now my pleasure to introduce Cindi Buckwalter, Vice President of Scientific Games. Ms. Buckwalter, please begin.

Cindi Buckwalter

Thank you, operator. Welcome, and thank you all for joining us this evening. During this call, we will discuss our third quarter results followed by a question and answer period. Please refer to our earnings press release for further details.

As a reminder, this call is being simultaneously webcast and is accompanied by a slide presentation, which are both available along with our press release in the Investor Information section of our website at www.scientificgames.com. A replay of the call and the accompanying slide presentation will be archived in the Investor Information section of our website.

This conference call will contain statements that constitute forward-looking statements under the Private Securities Litigation Reform Act of 1995. These statements involve risks and uncertainties that could cause actual results to differ materially. For certain information regarding these risks and uncertainties please refer to our earnings press release, the materials relating to this call posted on our website and our filings with the SEC, including our most recent Annual Report on Form 10-K and our subsequent reports filed with the SEC.

During this conference call, we will discuss certain non-GAAP financial measures. A description of each non-GAAP financial measure and a reconciliation of each non-GAAP financial measure to the most comparable GAAP financial measure can be found in our earnings press release.

Now I’ll turn the call over to Lorne Weil, Chairman and Chief Executive Officer.

Lorne Weil

Thanks Cindi. Good morning everyone, and thank you for joining our third quarter 2013 earnings call. With me this evening is Jeff Lipkin, our CFO and we are also delighted for the first time and hopefully the first of many times to come to be joined this quarter by Scott Schweinfurth whom I think many of you know have known for some time as the CFO of WMS. And he is now the CFO of our newly formed gaming group and perhaps more importantly at least for the moment, the Chief Integration Officer of the entire company.

Scott is here to gladly answer any questions except as we noted in the press release in the last couple of days to do with the current financial performance of WMS, which we will be reporting on talking about next month.

As for the Scientific Games quarter, strong third quarter operating results in our core businesses and ongoing contract wins and extensions highlight the strength of our position worldwide, leading to third quarter attributable EBITDA of approximately $92 million, a 12% increase year-over-year. The demonstrated strength and momentum of our existing operations combined with the opportunities presented by our recently completed WMS acquisitions establishes a tremendous platform for a long-term growth for us.

I’ll briefly review some highlights across our lottery and gaming businesses and then ask Jeff to provide commentary on our financial results. Our lottery business has a solid quarter with strong instant ticket and lottery system retail sales. Our U.S. customers’ retail sales of instant tickets increased by more than 4% in the quarter, while sales of draw-based games grew nearly 8% compared to the third quarter last year.

In addition, we are launching a number of initiatives representing important incremental business including; number one, our joint-venture in New Jersey which started providing marketing and sales services to the New Jersey lottery in October 1. This marks the first time in our company’s history that we are the primary supplier of instant ticket to New Jersey. Secondly, the introduction of instant tickets to Panama under our cooperative services program where we are already just in the first two or three weeks seeing extremely strong, extremely surprising retail sales. Traditional draw-based lottery games were previously the only offering in Panama.

Thirdly, the rollout of instant tickets for LEIDSA which is the largest electronic lottery provider in the Dominican Republic and this rollout is proceeding very excellently as well. Fourthly, the execution of our concession agreement in Greece, which we expect will lead to the sale of instant tickets in the first quarter of next year. As we have previously noted, Greece is the third largest lottery in the world in terms of per capita sales and they do not at this time have instant tickets as I think you know.

And finally, just this week the launch of iGaming for the Delaware Lottery along with our partner 888, representing the first comprehensive iGaming offering in the U.S. to include poker, slots and table games. Parenthetically before I move on, while we’re on the subject of Delaware, I should note the tremendous performance of our sports betting system that is also under the ages of the Delaware Lottery.

Driven by the impact of expanding distribution beyond casinos and into lottery retailers more broadly, sales are running 40% and accelerating ahead of last year and are extremely well for the potential sports betting in lottery retail networks. I hope to have much more to say on this last subject in the future conference calls.

Lastly, these initiatives are in addition to a number of contract extensions including Florida and Missouri, where in both cases we will continue to serve as the primary instant game provider. Our licensed properties business including Properties Plus, our loyalty program, also had a strong quarter with a number of promotional games and link games helping to drive results. Additionally, we extended our Properties Plus contract with the Missouri Lottery.

In Italy, instant ticket sales appeared to further stabilize. Retail sales were up slightly year-over-year for the quarter, marking a modest improvement to the first two quarters of 2013 when we experienced year-over-year decline in sales.

Although the challenging economic conditions in Italy persist, we are cautiously optimistic. We are also cautiously optimistic regarding retail sales in China, where our sales have shown improvement in the last several weeks driven in part by the successful launch of our newest NBA ticket in China.

Regarding our operation in China, I’d like lastly to share with you that Mike Chambrello will be leaving Scientific Games at the end of this year. Mike was the original architect of our China expansion initiatives and has been instrumental in establishing our strong position in China and in growing our Asia Pacific business. Mike Conforti who currently serves as Senior Vice President of International Business Development will be taking on the role of President, Asia Pacific. Mike is a 16 year veteran of the gaming industry and has been closely involved in our Asia Pacific business since we entered China in 2008, which will help make this leadership change as seamless as possible.

Let me now move on to our U.K. based gaming business, where the highlight of the quarter is our recently announced new contract with Ladbrokes, whereby we will continue to be the sole provider of their entire 9,000 machine U.K. estate through March 2019. This is a tremendous achievement that speaks both to our preeminence and server-based gaming and foreshadows two important aspects of the synergies we anticipate realizing in the WMS integration. We expect that our server-based gaming technology and expertise will have broad applications in WMS as worldwide gaming markets and we believe that the application of WMS content to our U.K. machine base will have a significant impact on the daily cash box.

And as we have pointed out in the past, the U.K. participation model generates very high marginal returns on revenue growth.

In terms of the macro picture in the U.K. the underlying economy seems to have moved from recession into at least stability and absent the impact of extreme weather this past summer, this seems to be reflecting itself finally in a recent machine performance.

As I imagine is known to most of you on this call, we completed the acquisition of WMS on October 18 and we’re making very significant progress in implementing the integration plan that we were nearly nine months in developing. We have talked extensively in earlier conference calls of our synergy expectations and I think I can safely say at this point that our confidence and our ability to meet this expectations is extremely high.

While we believe that these synergies will produce a significant near-term step function increase in the merged companies profitability, perhaps more importantly we also believe that we have a reservoir revenue opportunities that can drive sustained growth going forward.

The three cornerstones of this growth are the depth and breadth of our technology, our extensive geographic footprint and infrastructure and our combined content creation assets. Put simply, these three vectors taken together will allow us to sell more products, to more markets with greater profitability.

The last of these three vectors, content creation, is one of the three C’s, that’s letter C like in Candi that we believe are defining the evolution of the industry going forward. The other two C’s being convergence and consolidation. Convergence as we understand it, is the disappearance of boundaries. The boundary between government and commercial gaming, the boundary between casino and lottery gaming, the boundary between online and bricks and mortar gaming.

And finally consolidation is of course the natural economic outgrowth of these other pressures. I do not believe that there is another company in our industry better positioned to deal with and exploit these dynamics in terms of organizational strength, intellectual property or well thought out strategies.

As we mentioned in the press release the other day, we will not in this call be discussing WMS’ financial results for the September quarter, but we will be doing so comprehensively by AK [ph] and perhaps conference call next month. What we can see in the meantime is that both the Blade for-sale cabinet and the Gamefield participation product continued to perform extremely well in the market.

The number of video game themes available on the Blade platform has grown from six to 24 since March and highly anticipated 3-Reel Mechanical version will be introduced early next year. Several themes on the Gamefield cabinet including the Wizard of Oz and Monopoly continued to perform at multiples of house average.

On the strength of the WMS participation business in the United States, penetration of the international opportunity for participation business is a major strategic initiatives of ours going forward.

Touching finally on the WMS interactive area. I should mention that the Williams’ Jackpot Party Social Casino is performing extraordinarily well. Currently it is the number one top grossing casino app in the Google Play Store for both tablet and mobile device platforms and among the top five grossing casino apps for the Apple iPhone and iPad and growing at a very significant rate.

And the Jackpot Party brand has almost immediately become a poster child for the convergence, cross-channel dynamic I mentioned earlier because in addition to the Jackpot Party Online Casino, we have a large installed base of the very popular, very iconic WMS proprietary Jackpot Party slot machine and just now we have introduced to excellent reception of Jackpot Party instant lottery ticket. We are very excited about the potential that these developments represent.

In conclusion, we’re pleased with the growth of our core businesses and the execution on our outlined growth initiatives. We’re also extremely excited about the broader range of worldwide opportunities we have at the intersection of Sci Games and WMS. We look forward to sharing more information with you the next time we speak.

And I’ll turn things over now to Jeff to discuss the financials.

Jeff Lipkin

Thanks, Lorne. Hello, everybody, and thanks for joining us this evening. At the beginning of the year, we communicated our thoughts regarding fiscal 2013 and our expectation that because of the timing of the growth initiatives we were pursuing, our operating results in 2013 should accelerate over the course of the year.

We are pleased with the progress we’ve made on these growth initiatives while continuing to execute on important customer contract renewals both of which have positively contributed to our financial results over the past few quarters.

Now let’s turn to our Q3 financial results which include only the result of Scientific Games since the WMS acquisition closed on October 18. Retail sales and KPIs this quarter generally reflected continued strength in Scientific Games’ core business. Total revenue for the quarter was $234.4 million as compared to $224.6 million in the prior year period led by growth in our lottery businesses.

Operating income for the quarter was $25.7 million, an increase of over 55% compared to $16.5 million in the prior year period primarily reflecting revenue growth and a profitable mix of businesses. Also operating income included a $3.2 million year-over-year increase in SG&A which was primarily due to $2.5 million spends related to the WMS acquisition that was incurred in the quarter.

Turning to our operating results. Printed Products revenue grew by $5.3 million or 4% driven in large part by an increase in revenue from our licensed properties business along with revenue growth from our cooperative services and percentage of sales customers where we are generally involved in providing instant ticket category management services.

Printed Products operating income increased nearly 30% to $39.2 million compared to $30.3 million last year. This growth was primarily due to higher and more profitable revenue mix this year and lower D&A expenses related to the closing of our Australian printing facility last year.

Lottery Systems revenue increased $7.1 million or nearly 12%. The sales revenue growth was principally due to higher international hardware and software sales while the increase in service revenue was driven by higher international revenue in two large Powerball jackpots during the quarter.

Lottery Systems operating income decreased slightly as the benefit of a higher and more profitable revenue mix was offset by an increase in depreciation and amortization relating to new hardware development and terminal deployments along with higher accounts receivable reserves and spending on growth initiatives.

Gaming revenue increased by $2.7 million primarily reflecting lower sales of gaming terminals. Service revenue declined modestly principally due to negative FX impact. Gaming operating income was $900,000 compared to a loss of $4.4 million last year, primarily due to reduction in SG&A resulting from lower accounts receivable reserves and the implementation of cost savings initiatives and a decrease in D&A reflecting a write-down of gaming terminals in the prior year period. Last year’s Q3 results were also negatively impacted by restructuring costs.

Moving down the P&L, interest expense decreased by $900,000 year-over-year, due to lower interest expense reflecting our debt refinancing in the prior year period. The write-off of $15.5 million of deferred financing costs also related to this debt refinancing. Our earnings from equity investments decreased by $2.3 million year-over-year primarily reflecting lower costs from international terminal leasing or ITL due to our increased D&A to reflect change in the estimated life of gaming terminals owned by that joint-venture.

We realized $7,000 decrease year-over-year in other income primarily due to an increase in foreign exchange transaction expenses this year. These factors resulted in a reported loss for the third quarter of $400,000 or about a penny a share.

Turning to attributable EBITDA. EBITDA from equity investments increased $1.3 million year-over-year to $20.5 million, primarily reflecting higher results from our Italian instant ticket joint-venture. Attributable EBITDA increased by $9.6 million year-over-year of 12% to $91.1 million principally driven by higher and more profitable revenue mix along with other factors I previously mentioned.

Moving onto the balance sheet. Our debt less cash at the quarter end was approximately $1.4 billion. Our liquidity stood at approximately $284 million including $210 million of availability under our revolver and cash and cash equivalents of $74 million. Subsequent to year-end, we entered into a new $2.6 billion senior secured credit facility comprised of a $300 million revolving credit facility and a $2.3 billion term loan facility.

The term loan was used in part to finance the WMS acquisition to pay-off all debt under Scientific Games and WMS’ prior credit agreements and to pay related acquisition and financing fees and expenses.

Our free cash flow for the quarter was $6.2 million negative compared to $5.1 million negative in Q3 last year, primarily due to changes in working capital usage that were timing-related and the related growth in the business along with an increase in CapEx from our printing press upgrade initiative and the purchase of gaming terminals in the U.K.

As we’ve discussed previously, we see the WMS operations creating a potential catalyst for us to monetize our significant NOLs along with other synergies we expect to help drive free cash flow growth in the coming years.

During the quarter, we received distributions from our equity investments totaling $3.7 million, $3.1 million of which are not reflected in the quarterly free cash flow number we reported. We made a $42.9 million investment in our Greece joint-venture partly out of restricted cash on our balance sheet to fund our portion of the upfront fee paid to the Greece state. We also made an additional $900,000 equity contribution in Northstar, New Jersey.

With the WMS acquisition now closed, we are executing our comprehensive integration plans, and as Lorne said, remain confident in our ability to deliver on the anticipated synergies. We look forward to keeping everyone appraised of our progresses on this front on upcoming calls.

With that, I’ll turn it over to Lorne to wrap it up.

Lorne Weil

Thanks Jeff. I don’t think I have anything to add at this point. So operator if you want to proceed to open the program to Q&A please.

Question-and-Answer Session

Operator

(Operator Instructions) Our first question will come from the line of Barry Jonas with Wells Fargo. Please proceed sir.

Barry Jonas – Wells Fargo

Can you give us some color on customary actions to WMS and the combination that you saw at G2E?

Lorne Weil

I think all the customers that we saw at G2E, most of them we had seen in most cases more than once prior to G2E and many, if not all whom we’ve seen subsequent to G2E. We’re extremely enthusiastic about the combination of the two companies and felt that the cultures were highly compatible in terms of commitment to supporting the customers and working with the customers and making the customers revenue grow, which is the business we’re all in. And felt that from a people point of view and from a technology point of view, we have significant assets to contribute to WMS.

I think they all felt very confident that we had no intention whatsoever of implementing any cost reduction programs that would even remotely compromise the integrity of the WMS quality or content development activity which at the end of the day is really what this business is all about. We reassured them that in all likelihood and indeed at this point it’s coming to pass that we would increase our commitment to things like content development.

So, I say overall we were very pleased with the customer response, but of course customers have every right to reserve their final judgment until they see our actions become translated from what our words had been. So we have every intention of doing that and assuming we do what we say we’re going to do, I think we’re in a good shape.

Barry Jonas – Wells Fargo

Great. And I think the deal closed little less than a month ago, as we think about the guided synergies that were previously given of $50 million in year one, $100 million in year two, can you give us some color or some thought about how we should think of the ramp of those synergies?

Lorne Weil

Well, I’ll let Jeff.

Jeff Lipkin

Yes, I mean we’ve been added now I think it’s actually 19 days short of three weeks, but we on day one under Scott’s guidance have started immediately executing on the plans that we’ve all worked on. And I’ll let him add on to it, but I think we feel comfortable that there will be some amount of synergies that will even be evident in the fourth quarter, but it sort of depends. There is different buckets. There are things like moving certain technologies or off-shoring certain development activities. Obviously it will take a little bit longer, but some of the procurement things that we have been working on over the last five months or some of the head count adjustments we’ll have a more immediate effect.

So I think that you can expect that we have very comprehensive plan that we’re executive towards. We have weekly calls with Scott where he reviews where we are against our target and that’s why we feel as good as we do about both the number and the phasing that we’ve previously communicated.

Scott Schweinfurth

I guess I’d add that we spent pretty much 8.5 months and we’re planning stage for the process, and I think we had multiple readouts during that effort. And in each of those readouts, the dollar amount of the cost synergies was in the same ballpark, there weren’t any significant changes. So we have pretty well defined plans. We got to day one. We closed and the next day everything functioned as was meant to be. There were no big oops relative to that and now we’re in the implementation stage of the plans.

And as Jeff was saying, there are some things that are done sooner rather than later.

And so there will be some level of cost savings here in the December quarter, but there is also some costs to be incurred to achieve some of those savings. It will be something of an offset to that and I think the intention is to provide a little bit better clarity as we go forward once we get past this initial transition stage, but right now as Lorne said in his remarks, we’re highly confident that we’re going to be able to achieve the numbers that were initially described.

Barry Jonas – Wells Fargo

Great. Thanks so much guys.

Scott Schweinfurth

Thanks, Barry.

Operator

Our next question comes from the line of Todd Eilers with Eilers Research. Please proceed.

Todd Eilers – Eilers Research

Hi guys, thanks for taking my questions. It looks like you guys had a pretty strong quarter with respect to gross margins kind of across the board for all three business segments. Wondering if you could maybe speak to that a little bit. What kind of drove that, especially in the Diversified Gaming segment. It looks like a pretty big sequential and year-over-year increase there. Obviously on the Lottery Systems side, I am sure the strong multi-state jackpot is probably helped there, but to the extent you’ve kind of talk about what’s driving that and how much that’s sustainable going forward would be helpful. Thank you.

Lorne Weil

Yes, sure. So I would say starting with Printed Products. The biggest component there would have been the mix of business heavily weighted towards MDI this quarter which has a higher margin relative to the Printed Products part of the business. On the Lottery Systems side, I think it’s a little bit of equipment sales which often has slightly higher gross profit margin and in this case they did relative to the service revenue that we had also complemented as you suggested, Todd, by the Powerball jackpot which for us has a very high incremental margin. And then on the gaming side, I think it has a little bit to do with some one-time things that happened in the prior year quarter.

So some restructuring charges that we had taken in prior year that are not there now. So that sort of impacted the prior year quarter, but is not impacting this quarter.

Todd Eilers – Eilers Research

Okay. Great. And then also had a question regarding China and Italy markets. Obviously it looks like we’re finally seeing some stabilization there, I guess more so in China. I know you guys don’t provide quarterly guidance or anything like that, but I was wondering if you might be able to provide some directional comments or just maybe some thoughts on the October trends in both markets for retail sales.

Jeff Lipkin

Yes, I think Italy is – I’ll start with Italy. Italy was a little bit easier that’s the performance that we saw was sort of what we had been anticipating which was that the market had been stabilizing. The monthly results there in the third quarter reflected summer months which are generally not the stronger months for us in terms of the Italian market. And it’s really – it is true of all of our markets that it’s really product-driven. October has started out sort of non-inconsistent with where we saw better part of the third quarter I would say, September and August at least.

And in China, I think Lorne mentioned, that we saw some improvements coming out of September into October that was attributable to the NBA game. And so we’ve seen a little pickup in fact in positive territory in those two months which I think again is directly attributable to the product that we have in the market during that month. So China continues to be a challenge for us, but we do have – and we did anticipate having probably the strongest products of the year in the market during this timeframe.

So that’s why we were in the last call excited about where we saw trends heading because we knew that the NBA game and the product support and the marketing support around the NBA game was going to be significant.

Todd Eilers – Eilers Research

Okay, great. And then just one final question on the Diversified Gaming business. I guess more so in the U.K. obviously little bit weakness there this quarter. I was wondering if – a couple of items there. Number one, I guess just wondering if you could maybe give us a sense for how some of the new games are performing that you’ve just rolled out. And then two, you mentioned that you’re starting to I guess deploy some of the WMS content or IP on some of the lottery tickets. Have you been able to get some of the WMS content on to some of the server-based gaming machines you have, and if not, when should we kind of expect to start to see some of that content out in the field?

Jeff Lipkin

All right, just on the second question first. We are working through getting some content onto the global draw network. We’re in the process of supporting some games. I think you’ll start to see that in earnings probably towards the spring next year of ‘14.

In terms of the new games, I assume you’re referring to the Coral’s rollout. I think when you look at sort of Coral’s relatively to other publicly reporting peers, you’ll see that Coral substantially outperformed the market which one could attribute to a lot of things but would certainly not inconceivable that the machine and the content are a big portion of it, as it typically is the case in the U.K. market when a new game comes out like we just introduced.

So I think it’s fair to say that when we looked at our performance of our customers, our large customers relative to the competition, I think it’s also fair to say that across the board, we outperformed during this time period, the competition both with Coral this day but also in our other large customers, other large LBO customers.

Todd Eilers – Eilers Research :Okay, great. Thanks guys.

Operator

Our next question comes from the line of Steve Wieczynski with Stifel. Please proceed.

Steven Wieczynski – Stifel

Hi, good afternoon guys. So I don’t know if Scott can answer this, but maybe you can help us draw out a bigger picture question. Obviously IGT reported that they are continuing to see a little bit of pressures in terms of ASPs and it sounds like there are some smaller competitors out there that to continue to impact opportunity to sell at higher prices. Is that something that you’re seeing at this point, Scott?

Scott Schweinfurth

Well, that’s been a very competitive market for probably at least two years now. And I think that’s going to continue given the state of the economy and the state of our customers business, but the most important thing for any manufacturer is content performance. And we’re very pleased with what we’ve seen with the launch of the Blade platform and the performance of that product line, since we’ve taken it out there. And I think with the pricing plan that we have with that, it’s fairly high value proposition for our customers and we’ve been able to ship some. So I think that demonstrates people are willing to pay for the content.

The other thing that impacts ASP is sort of the mix of the business, because certainly the Illinois VLT unit sales have a lower price to them, I believe that I heard on the call today that poker units that IGT sold had a relatively low price to them.

So that has an impact on overall ASPs, but I go to back what I started within that is, is if you have high performing product, people are willing to pay for products.

Lorne Weil

Yes. It’s Lorne. Let me just add to what Scott said, I completely agree with that. I think our view again is that this is really all about content, it’s really – it’s pointless to sell a razor really cheaply if the blades that you put in it don’t work. So if you look at the performance of actually coincidental term, the Blade cabinet it’s performing consistently 150% of house average, I mean the same is true also of the participation games and the Gamefield, except there is not a 150% in cases.

In many cases, it’s 200%, 300%, 400%, 500% but in the case of the Blade, even in the for-sale market, that level of performance compared to competing products over even a reasonable life of that product translates to several hundred thousand dollars of incremental profit for the operator.

So this is clearly not a business where at least the smart operators are going to be base their long-term strategy on how cheap they can buy the equipment for, and any more than our lottery ticket customers base their decisions on who sells the cheapest ticket because at the end of the day lotteries and casino operators are in the business of generating money, not saving and closing dimes and buying stuff.

So we’re not seeing – at least I am not seeing and I am not as close to it as Scott is, but a lot of resistance to the pricing of the Blade cabinet. As long as the Blade cabinet and other WMS products continue to perform relative to competition at the levels that they do – we don’t think that’s going to change and we don’t have any intention of competing in a business where people won’t sell in boxes on the basis of price again, because of our business model is our customers are there to growth their revenues, not to buy cheap boxes to take up space on the floor.

And we have hundreds of brilliant content developers and half a dozen studious around the world, dedicated to developing the content that drivers that performance. So it all first together in our business model. Somebody else has a different business model, where it works for them to compete on price so they can find a customer whose model of how to maximize profits is to buy cabinets at the best possible price then good luck to them but that is clearly not our strategy.

And in the days that we’ve seen over the course of the nine months that we have been intimately involved with WMS, we don’t see anything in the data – in our data to indicate that.

Steven Wieczynski – Stifel

Okay, thanks. And then I guess for you, Lorne, you talked about global drawdown I know you called out weather during the quarter. I think you said most of that was impacting the July results?

Lorne Weil

That’s correct.

Steven Wieczynski – Stifel

So can you walk me through, did you start to see a reacceleration there, August, September and maybe also what you’re seeing – what you saw in October.

Jeff Lipkin

Yes, and I think we’ve recently defined as the beginning part of the fourth quarter have seen a little bit of a rebounding. I mean I think that when you look at sort of July, August and September, I believe each of the months was down, but July was down substantially relative to August and September, and certainly what we’re seeing October. And as much as one doesn’t like to blame things on the weather, when you read about the operators, the public operators. Certainly the weather is really the number one factor that really effected foot traffic into the betting shops during that time period.

It’s also the case for us which is somewhat specific that in the same month last year we had released a new roulette game that played extraordinarily well. So we had a difficult comp at the same time that we had the weather incident in the month of July, which caused again the – probably the single biggest decline that I’ve seen in memory for a long time in the global draw business. So it is heavily weighted towards July.

Steven Wieczynski – Stifel

Okay. And then one more quick one if I could. Any – your updated thoughts for point in terms of providing guidance once the WMS deal – once we get the numbers for WMS in the last quarter and going forward?

Jeff Lipkin

Yes, it’s a great question. We’re having discussions with our board. In fact at our next board meeting, we’re going to sort of go back through how we would propose to present the combined company. And this discussion of guidance comes out periodically and I don’t want to handicap of where we think it would come out but certainly we understand the comment and whether or not we give guidance. I think it’s view that we will give plenty of good information that to the extent somebody does the work on where – and we get the KPIs that we’re available publicly you look at the those KPIs, now it seems down for several quarters, you can get very, very close to where our performance actually comes out if you both look at those KPIs and you do that work.

So that’s something that I can guarantee you that we will do, whether we go a step further and sort of tell you the answer on top of giving you the background for it or something that we’ll have to defer until our next conversation with our board if unclear and there is different points of view around guidance obviously.

Steven Wieczynski – Stifel

Okay, great. Thanks guys. I appreciate it.

Operator

(Operator Instructions) Our next question comes from the line of Mike Malouf with Craig-Hallum Capital Group. Please proceed.

Ross Licero – Craig-Hallum Capital Group

Hi, thanks. This is Ross Licero on for Mike. I had a question about the new content and the global draw business. It seems like for the last few quarters, you guys have been doing better on the cash box from the competition. Have you seen this reflected, or is the sales pipeline of new customers growing as a result?

Jeff Lipkin

The number of units are up quarter-over-quarter, which is one way of answering your question. The little different in that business is concentrated in a few large operators, so you don’t typically see as much contract changes, as Lorne mentioned, we just re-won the Ladbrokes contract for five years with 9,000 machines. So it’s obviously our most significant customer. And in fact an expanded base of units from what we have today, 9,000 being higher than what we have today. And so – but I would say that when you look at the third quarter terminals, year-over-year they were up about 1,300 or something like that.

Ross Licero – Craig-Hallum Capital Group

Okay, great. And in that Ladbrokes contract, is there going to be another refresh between now and 2019 for the machines?

Lorne Weil

No.

Ross Licero – Craig-Hallum Capital Group

Okay, great. Thanks.

Lorne Weil

Yes.

Operator

(Operator Instructions).

Lorne Weil

Okay. I guess there are no more questions. So if not, I thank you again for joining the call. I hope you are as enthusiastic about the outlook for this company as we are. Certainly, I think it’s fair to say that you can characterize the feeling in this room here as one of unbridled enthusiasm. And hopefully as we move through the next few quarters, we will see results that justify that level of enthusiasm. And until then, thanks again. Good night.

Operator

Ladies and gentlemen, that ends our presentation. Thank you for calling. Have a good day.

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