International Game Technology PLC (IGT) 2012 Q3 法說會逐字稿

Good day and welcome to the Lottomatica 2012 third quarter year-to-date results ending September 30, 2012 conference call. Today's conference is being recorded. At this time, I would like to turn the conference over to Mr. Marco Sala, CEO. Please go ahead, sir.

Good evening and thank you for joining us for Lottomatica Group's 2012 third quarter results presentation. Joining me for today's presentation is Alberto Fornaro, the CFO of Lottomatica Group, and joining us for the question-and-answer session will be Renato Ascoli, the General Manager of Lottomatica; and Jaymin Patel, CEO of GTECH.

I would like to begin with a brief overview of our third-quarter performance and some of the major developments and trends that are of importance to the Group. Alberto will give you a more detailed review of the numbers.

As you can see from today's announcement, the third quarter results benefited from our diversification strategies. Our GTECH and SPIELO subsidiaries continued to deliver solid revenue growth, which helped to compensate for lower revenues from Italian operations. We are confident that the underlying business in Italy is stable.

The third quarter results were impacted by a lower occurrence of late numbers, some unusually high sports betting payouts and increased machine gaming taxes that were enacted at the beginning of this year. Overall, revenues were comparable to the similar quarter last year. EBITDA and operating income grew by close to 4%.

I think it is important to highlight our continued investment in innovation. Despite increasing competition, machine gaming and sports betting wagers in Italy experienced growth. California, Illinois and Texas, where we have had our customer introduce new innovations, continued to perform well. Overall, GTECH same-store revenues in the US and international jurisdictions sustained their momentum.

SPIELO International is on track to become a solid contributor. That's very impressive when you consider where that organization has come from in a relatively short period of time. SPIELO has made great progress in turning around its business and in the process has become an acknowledged leader in the machine gaming industry.

Now I would like to focus on our Italian operations, where there is an encouraging story to tell. As Alberto will detail for you in his presentation, a downward trend in Lotto and Scratch & Win revenues that we experienced in the first half of the year stabilized during the third quarter, and we are encouraged by some emerging growth patterns.

Core Lotto wagers maintained fairly well when you consider that there was a very low incidence of late numbers. When compared to the same period last year, late number wagers were EUR122 million versus EUR401 million in third quarter of 2011. In line with our expectations, 10eLotto wagers increased by 10% versus the third quarter of last year, and are building on that performance into October.

As to Scratch & Win, you will recall that our expectation was that we would stabilize for the remainder of the year. That has proven to be accurate for the third quarter, and I would note that we are seeing good results for September and October, which combined were up 4% over similar period last year. Recent successful launches of new ticket, combined with other network optimization programs have helped to sustain growth of the product category.

It is also important to recognize that we continue to deploy VLTs, essentially reaching our full complement of licenses, and we increased the number of our AWP units by 14%. Players have responded well to new content offerings that we'll continue to rill out this year and next. Wagers were up 3% compared to a similar quarter last year.

Sports betting was impacted by significantly high payout that was over 90% during the third quarter. Our business is driven by statistics and probabilities and, from time to time, a quarter can experience this sort of deviation.

As you might be aware, over the past three years, payouts have averaged slightly over 80%. I would note that this was an industry phenomenon. Nevertheless, payouts have returned to normal levels for October.

As you have noted previously, Italian operation has instituted a cost reduction program that is in place for the year. To conclude my comments about the Italian operation, it is important to realize that, despite difficult economic conditions, we maintain our margins, and EBITDA was comparable the same period of last year. And we are confident that we will achieve full-year EBITDA growth in line with our expectations.

Turning now to GTECH, we enjoyed more business development success in the quarter. Contract extensions were announced in Arizona, South Dakota, Lithuania, as well as new concepts in New Zealand and Argentina. And there was more exciting news regarding our product management activity in the United States. Although it was announced after the close of third quarter, GTECH is successfully competed for and signed a 15-year integrated service agreement with the lottery in Indiana. This was a particularly significant win in that GTECH was not the incumbent vendor, and the selection committee specifically mentioned the quality and the scope of GTECH's proposed business plan as a key element in their decision to select us. I think it demonstrates the value of GTECH's leadership in the global lottery industry as more jurisdictions look to bring in commercial operators to run -- to bring in commercial operators to run their lotteries.

Under our management, the Illinois Lottery continues to perform well. In the quarter, the Illinois Lottery experienced a 16.5% growth in sales over the similar quarter last year, making it one of the best-performing lotteries in the US in the past quarter.

As to our performance under the private manager agreement, we are awaiting the completion by state of a year-end audit. The final decision by third-party neutral concerning adjustments related to claims made by GTECH concerning adverse action taken by the state was announced today. The final adjustment reduced our net income target by a total of $31.3 million over the first two years of the agreement. Adjustments under the terms of the PMA are binding on the parties. As we have stated previously, once the final accounting is completed and other pending issues are resolved, we do not expect any material impact from potential penalties net of incentives in Illinois, if any.

Other US states are considering adopting similar business models. Pennsylvania and New Jersey both have active processes underway to select a private manager for their lotteries. As with other private manager bids, the processes are conducted under strict rules of confidentiality. Submissions are due this month and next.

As previously noted, similar activities are also underway in international jurisdictions. The provincial government in Ontario, Canada has announced a process of seeking input from potential providers. As we have noted, Ireland and Greece are also seeking to privatize gaming assets. Ireland recently named an advisor to help facilitate this process, which should begin formally in the first quarter of 2013.

Now I'd like to turn to our earnings guidance. As you have seen in our announcement today, we're making excellent progress towards reaching and potentially exceeding our guidance target. In addition, we are particularly pleased that the cash flow generation has been strong and has resulted in a positive impact on our net financial position.

Now I would like to hand over call to Alberto for a detailed review of the results.

Thank you, Marco. The third quarter results confirm our view that while the profitability of our Italian operation is stable, our Lottery business worldwide is growing and providing positive contribution to the Group's profitability. As you will recall, our 2012 EBITDA guidance of EUR1 billion to EUR1.02 billion was based on a 1.35 euro/dollar exchange rate. When comparing to our guidance FX rates, our year-to-date actual EBITDA incorporates an approximately EUR10 million benefit from foreign exchange. Accordingly, we now anticipate at the current market rate, our 2012 EBITDA will be up to EUR10 million higher than guidance.

As we will discuss shortly, our cash flow generation in Italy remains healthy despite the economic slowdown while international operations have continued to perform well. Our efforts on cost management in Italy have continued, and by year end we will achieve approximately EUR15 million to EUR20 million in recurring savings versus the prior year, as opposed to the initial target of EUR10 million. These recurring savings include the network cost optimization, process re-engineering of logistics and customer care services and various the supply renegotiated costs. Year-to-date, total cost savings is approximately EUR10 million compared to the same period last year.

Revenues for the third quarter were comparable to last year at EUR740 million. At constant currency, revenues were EUR28 million lower due to the EUR53 million decline in Italy, offset by a EUR25 million increase in GTECH and SPIELO International revenues.

It is important to note the revenue performance in Italy is attributable to a number of particularly unusual events, including lower late number wagers and higher sports betting payout, which in total contributed to a year-over-year decrease in revenues of approximately EUR33 million.

EBITDA was up approximately 4% in the quarter to EUR246 million, or up 1% at constant currency. EBITDA margin grew to 33% from 32% in the same quarter last year.

Instant ticket wagers in Italy were approximately EUR2.24 billion in the third quarter of 2012, an approximate 7% decline when compared to the same period last year, as we had anticipated during the second quarter earnings call in July. As Marco mentioned earlier, ongoing efforts to diversify our instant ticket game portfolio produced good results for the months of September and October.

Lotto wagers were down 16% due to a lower incidence of late numbers. Total wagers were approximately EUR1.5 billion. Lotto late number wagers were particularly high in the third quarter last year at EUR401 million, while in the third quarter of 2012 late number wagers were well below the historical average at EUR122 million. Core Lotto and 10eLotto combined wagers were stable.

Machine gaming wagers were up 3% compared to the same period last year at approximately EUR2.9 billion. On that amount, wagers for VLT and AWPs were EUR1.8 billion and EUR1.1 billion, respectively. As of September 30, 2012, approximately 10,600 VLTs and 64,100 AWPs were in place. The average number of VLT in the quarter was approximately 10,300.

Sports betting wagers were up 12% versus the third quarter of last year. Note that betting payouts were unusually high in the third quarter at above 90% compared to the approximately 80% in the same period last year. This phenomenon can be explained by several unfavorable soccer match outcomes in September which impacted the entire market.

Interactive wagers were EUR485 million compared to EUR533 million in the third quarter of last year when there was an initial launch of new games, including Poker Cash. Based on our estimates, the entire market was softer compared to the third quarter of 2011.

Lottery revenue was down 11% to EUR183 million versus the third quarter of last year, due to lower late numbers wagers and, to a lesser extent, lower Scratch & Win wagers, as mentioned earlier. While machine gaming wagers grew by 3%, revenues were EUR156 million, down approximately EUR11 million, or 7%. Revenues are calculated as the difference between wagers less payout less machine gaming tax. The wider VLT installed base helped to offset most of the EUR35 million negative impact from the VLT tax increase. At the beginning of October, the total number of VLTs installed in the Italian market was above 45,000 compared to approximately 30,000 a year ago.

Revenue from sports betting in the quarter was EUR15 million versus EUR30 million in the third quarter of last year due to unusually high payouts, particularly of -- partially offset by higher wages. Commercial service revenue grew 1%, principally due to a higher number of transactions processed. Interactive revenues were EUR20 million.

Revenues from Italian operation in the third quarter were EUR406 million compared to EUR459 million last year, for the reasons previously mentioned. EBITDA from Italian operation was approximately 2% lower when compared to the third quarter of last year at EUR171 million. This result was impacted by the increased VLT taxation, Lotto late numbers, softer Scratch & Win sales, mostly offset by the benefits of our cost management program. When comparing the profitability with the same quarter last year, it is important to note that 2012 EBITDA includes the unusually high sports betting payout, while in 2011 it was net of the number of one-offs, including legal expenses, for a similar amount. Overall, EBITDA is stable.

On slide 12, we provide the breakdown of GTECH Lottery service revenue for the third quarter of 2012 versus the third quarter of 2011. For the first time, we tried to isolate the impact of Powerball and Mega Millions sales in the US, which are reported under multi-state same-store revenue. Service revenue for the multi-state games in the US grew by 27%. This was driven primarily by the Powerball game, which grew approximately 52% versus last year due to the introduction of the $2 ticket and favorable jackpot activity year-over-year.

Overall, GTECH US total same-store revenues in the third quarter were up over 7%. GTECH benefited from continued growth of instant ticket sales, which grew 11% year-over-year, driven by instant ticket sales in California, Illinois and Texas. We also experienced sales growth in our international jurisdiction. Same-store revenues grew by approximately 8% in the third quarter. This increased principally due to the strong performance in Colombia and the UK, as well as the continued recovery of our customer in the Czech Republic.

Revenues from GTECH Lottery and SPIELO International were EUR334 million, up from EUR282 million in the third quarter of 2011. On a constant currency basis, revenues were EUR25 million higher than the prior year, due to the GTECH Lottery same-store revenue growth and higher product sales for GTECH and SPIELO International in Europe and Canada, partially offset by GTECH recently renewed lottery contracts, in particular Texas and Poland. It is worth mentioning the impact of the new terms from the Texas Lottery contract renewal is now embedded in our revenue, and Poland will follow by the end of 2012.

SPIELO International nearly completed the rebid cycle in the Canadian market. Today, SPIELO has secured the five out of five central system awards, whereas in the past SPIELO had four out of five, and has secured the four out of five VLT contracts. The fifth award of VLT is currently in its final approval stage. The deployment of these new systems and VLTs will begin in the fourth quarter of this year and will cover a period of approximately two years with an expected 2013 spike in product sales.

EBITDA for GTECH Lottery and SPIELO international was EUR75 million, up from EUR63 million last year. EBITDA was primarily driven by the impact on revenues discussed earlier, partially offset by changing the contract portfolio mix and timing of certain costs.

Now let's look at the P&L below EBITDA for the third quarter. Depreciation and amortization expense was higher than the prior year by EUR6 million due to foreign exchange fluctuation. On a constant currency basis, depreciation and amortization was comparable. Operating income in the third quarter of 2012 was up 4% year-over-year to EUR134 million. Net interest expense was EUR38 million, down 9% versus the same period last year, principally due to lower average debt balance.

Income before tax was EUR94 million compared to EUR117 million last year. The prior year benefited from approximately EUR30 million of non-cash foreign exchange gains in euro-denominated debts. Net income attributable to the owners of the parent was EUR49 million, resulting in diluted earnings per share of EUR0.28. In the same period last year, net income attributable to the owners of the parent was EUR58 million, which resulted in diluted earnings per share of EUR0.34 including the non-cash foreign exchange gain previously mentioned. Pro forma EPS was EUR0.35, up from EUR0.29 last year. Further detail on pro forma EPS for the quarter is located in the appendix.

Now let's review the results for the first nine months of 2012. Revenue for the first nine months of 2012 were up approximately 5% to EUR2.26 billion. EBITDA was approximately 6% in the first nine months of 2012 to EUR786 million. All business segments contributed to the increase in the profitability at the EBITDA level. EBITDA margin was approximately 35%.

Now let's look at the P&L below EBITDA for the nine-month period. Operating income in the first nine months of 2012 was EUR457 million, up 8% year-over-year. Income before tax was EUR338 million, up 17%, versus the same period last year. Net income attributable to the owners of the parent grew to EUR170 million, resulting in diluted earnings per share of EUR0.99. The pro forma EPS calculation can be found in the appendix.

We had strong cash flow performance in the first nine months of this year with EUR602 million of cash from operations net of tax, providing the capacity to more than fund CapEx interest expense, dividends and minority payments. This performance is especially notable in light of the EUR96 million year-over-year increase in income tax related payments. This increase was expected and was due to timing of estimated income tax payments in Italy. Due to timing of investments, year-to-date CapEx was EUR162 million. Our fourth-quarter CapEx is anticipated to be higher than the average of our previous three quarters. However, we are confident we will be within the guidance range for the full year.

I also want to remind everyone of the EUR49.3 million accounting change in our commercial services business. This change, which resulted from the Italian banking law passed in April 2012, had no impact on the net financial position but impacted cash and cash equivalents. Our net financial position at September 30 was EUR2.62 billion versus EUR2.74 billion at the end of 2011. We remain on track to achieve our year-end guidance of EUR2.6 billion to EUR2.65 billion. In terms of liquidity, our spare capacity is EUR921 million of cash and committed undrawn lines of credit available at the end of September.

Now I would like to ask the operator to open up the lines for Q&A.

(Operator instructions) Matthew Gerard, Credit Suisse.

I have three questions, if I can. I'm sorry; I was a little late on the call, so forgive me if you have already answered these. You talked quite a bit about the cost-saving opportunity in Italy, but could you talk a little bit about the cost-saving opportunity in GTECH? And is that under consideration or is there any potential for cost cutting, perhaps looking further out to 2013?

Second question is, Marco, you've talked before about what's going to drive 2013 profits, obviously interactive in Italy perhaps being a focus for that. Interactive is struggling a bit as is, obviously, the wider market. So perhaps you could talk a little bit about whether you think you could stabilize profits in Italy in 2013, or does that require further cost saving in that market?

And then, lastly, could you talk a little bit about the timetable for outstanding PMCs in the US? I seem to remember the RFP deadline for New Jersey was November 15. Is that still the case?

And perhaps lastly, there has been some speculation that you are teaming up and some market reports that you are teaming up with a Czech financing house with respect to the OPAP at 33% stake that's for sale. Could you confirm or deny those rumors?

Yes, I think Renato will start with the first answers, and after, Alberto with the third one, then Jaymin with the second one.

Okay, let's move on with Renato, with the cost savings (multiple speakers) sorry, Jay, sorry.

So, Matthew, this is Jaymin Patel speaking. With respect to GTECH cost savings, in fact, if you look at the results for 2011, we generated approximately EUR4 million to EUR5 million of annualized cost savings, which were continued into 2012, and we have an ongoing program to generate new cost savings every year. So incremental to 2011, we have a similar program in 2012 that generates cost savings of EUR4 million to EUR5 million a year, and we expect to work on efficiencies going into the future as well.

Okay. And, sorry, just the other questions?

Okay. Regarding the question on 2013, let me say, Matthew, you understand that we usually give an overview regarding 2013 in February or March, depending on when we announce the date and present the new industrial plant. So we will comment at that time appropriately.

Regarding the interactive business, let me mention that we look at the current reduction in volumes compared to last year. Last year in the same quarter, we had a launch that is a lot of -- is a trial effect on the new games that probably impacted positively. In the fourth quarter, we are looking at the launch of some innovation, of some new games that could help us to basically revamp the interest in an area where product innovation is more critical, probably, than other segments of our business.

Matthew, could you repeat your question again, please, on New Jersey? I didn't quite understand.

Sorry; it was just more on the timetable for New Jersey. I think I seem to remember a date that's mid-November for the RFP submission for New Jersey on the timetable for PMC proposals. Just perhaps update us on any timetable you are aware of for New Jersey. And is that kind of timetable correct, I suppose?

All I can say to you is that we are interested in New Jersey. The process is continuing. Due to the fact that we are on the nondisclosure obligations, I can't be more specific than that, but we remain interested.

Okay, thank you.

I answer regarding your comment regarding over privatization. What I can say, we are evaluating the [over par] privatization. We see our expertise and experience in all business segments as potentially adding value to a financial sponsor. The only potential role we envision for ourselves is that of a minority industrial investor. These opportunity is also in a sensitive period. For now, I'm not going to comment further.

I suppose just one follow-up, then. I think Scientific Games on their conference call last night talked about the timetable for the Hellenic Lotteries tender being within the next month or so. Are you working in the same basis, presumably, as part of that consortium, that that's still something you are still very much interested in?

Under the appropriate business conditions, we are prepared to invest in Greece. As I have said previously, we will evaluate this opportunity with our usual risk-adjusted analysis of investment. And, therefore, we are continuing evaluating business plans with our partners. Submission our view, and at this time I am not going to make any further comment.

Okay, thanks very much, guys.

Vaughan Lewis, Morgan Stanley.

If we looked at page 11 with the revenue and EBITDA moves in Italy, can you explain how Lottery, for example, you've seen a EUR25 million drop in revenues but EBITDA is actually up EUR3 million? So what are the moving parts on the cost side, because the cost cuts that you've put in wouldn't seem to be enough to cover that. So there must be more going on there. And then same question with regards to machine gaming, where you've seen a sharp increase in profit, but a sharp drop in revenues.

Second one -- on machines, for 2013 I think there's another increase in tax rates for the machines. Is there more that you can do to offset that, or should we expect that that will eat into profits next year on the machine side?

And then a final one in Canada. You said that the product sales will be quite a spike up in sales in 2013. What sort of figures should we be thinking about for the spike up in sales there? And will that all be in 2013 and 2014?

Okay, let me answer your first question regarding the profitability in Italy. What is the related to the Lottery? Last year in the third quarter we had some one-off expenses that were quite substantial, particularly related to legal expenses, and it was in the region, in total, of EUR15 million. So when you basically subtract the EUR3 million in creating profitability, this EUR15 million, you get a better comparison to last year results. Also, we had this small one-off positive this year, for EUR1.5 million. So overall, this explains the difference between revenues and EBITDA, I think.

So what is related to the gaming machine? In the gaming machine, the good news regarding the profitability are particularly related to the AWP markets. In the third quarter, we were awarded a bonus for the 2011 activity, which was not linked only to our performance but to that of the entire market, and this was around EUR4 million positive. Also, we had positive impact from commercial cost timing of EUR2 million, and also we had some lower costs related to the fact that last year we had EUR2 million more. We had some expenses integrated to regulatory requirements known as contingent demands in Italy. And this year these costs are not there anymore.

Then finally, we had a EUR1 million positive impact of our cost management program in the VLT. So in total, this EUR9 million good news that are included in the profitability of the gaming machine.

I will pick up the question regarding the taxation on VLTs. It is well known that the decree, the monster called (inaudible) decree, which dates back to March this year, those converted into loss. So by now, we have no indication that the increasing 0.5 in taxation on prior will be in place in January 2013. So I would consider that in the -- in our business plan going on.

I have also to say that despite all the rumors that from time to time up here regarding the chances of further taxation, as far as we know today, no major risk is on the table and no major constraint has been posed even by recent regulation regarding VLTs, regarding any other business in Italy. So we do not see, as of today, no significant threat regarding the business time lines of 2015.

Last question was related to SPIELO. Let me say we are still working. There is another bid to go and we are evaluating the timing. It is preliminary, but what I can say is that we are going to concentrate most of the activity in 2013, where there is going to be a spike. And next quarter, I think we will see a good pickup of this activity and start showing good results for 2012.

Sorry, can I just come back on the taxation, on the VLTs? Did you say you do have the ability to offset that 0.5% increase? It seems to be EUR40 million or EUR50 million cost headwind, isn't it, in 2013?

Yes, see, we do have plans in place. As far as we know, we still have and possess a huge market share in the VLTs market notwithstanding the increase the number of the VLTs has been deployed by concessionaires. We are nowadays undertaking a huge action in replacing VLTs from lesser performing sites to better performing ones, and we deliberately decided to do this in the summer, benefiting from the seasonality which allows us to do this kind of switch when the market is normally slowing down. So what we have taken there as a decision is the same action we have been taking this year regarding betting rights. We generally use summertime in order to optimize our (inaudible).

But even more important than that, the trends we are seeing in our businesses are confirming the fact that contents are key to performance. We have a clear indication that new contents are driving the performance of the (inaudible) and the -- or the whole Lottomatica performance. This is why we think we are ready to capture the opportunity to deploy new [content] in the market 2015 and take advantage of having for a very long time steady market reaction, the customer reaction to the concept we are about to deliver. So on the whole, we are seeing that our approach can be, in a way, sufficient to offset the increase in taxation we expect to be in place in January 2015.

So you hope for flat revenues in machines next year? You hope that there's enough of that stuff to offset the tax increase?

We think we will be able to offset that.

Great, thank you.

(Operator instructions) Fabio Pavan, Mediobanca.

First question is on Scratch & Win business. Previously, you argued about better trends in September and October. I was wondering if you could share with us if the reasons stem from some new product you launched in the period, and if you believe these changing moods could last until the end of this year.

My second question is on Q4 EBITDA for Italian business -- trying to -- summing up what we already argued about. Do you believe further savings could come in the last quarter of this year? If I am right, last year you had someone, of course, already in Q4. And so all you know, considering also the changing mood in Scratch & Win, what are your expectations for the last quarter of this year for Italian business with (inaudible)?

I will start with scratch and win. As Marco said before, we combined September-October performance. We are up 4% versus last year, which is a crucial change in the trends that we've seen in the last two months. The reasons behind this performance are basically two. One, as we said, is a positive and successful launch of new products, namely all (inaudible) the EUR10 ticket, and then a Christmas concert theme launched in October has proven to be successful and well accepted in the market.

The second area where we made a lot of action is regarding retail network, where we have decided to push sales more to, let's say, position new POP materials in the stores in order to better display all the wide range of point of sale. And this has proven to be solid and effective. This is why we expect that the current trend or maybe just around the focus there will be a strong trend and will be maintained even the remainder part of the year. Again, so we think that the worst part should be behind us at the moment, and we have positive expectation through the last quarter and potentially starting on the new year.

Regarding the EBITDA?

Okay, regarding the EBITDA, let me tell the short answer is we expect to grow the EBITDA in the third quarter for Italy. Compared to last year, last year we anticipated some commercial costs. Maybe it's going to happen this year, too, on a smaller scale. Also consider that in terms of cost, we have another piece of the lag of the cost reduction program from the current 10 to the target between EUR15 million and EUR20 million that is going to happen, and this will help us, apart from the trend that we have in the market. So, again, we expect an improvement year-over-year.

Andrea Randone, Intermonte.

Just a quick question again on Italy. Today, AAMS, the regulatory body, released the figures as far as July and August. And if I am right, the net gaming revenues, the accumulated net gaming revenues for July and August in Italy were down overall 18% and 17%, so testifying that the consumption increase is somehow affecting the consumer expense also in this sector.

This is not affecting you and is affecting some other competitors exposed to other games. And in my opinion is -- I don't have -- made the calculations, but this trend is affecting the tax -- the government taxation in the sector. Can you help us in understanding why you expect the taxation in the sector will not be changed in 2013? So why you expect the government will accept to be diluted in terms of total taxation on the total gaming revenues in the sector?

Let me first comment -- Monopoli this type of data, just -- of course, we have not had sufficient time to go through it in detail. But I'm sure you are aware that what Monopoli has told us today is that they are willing to deliver data regarding the business on every two months, instead of month to month. The reason for that, specifically for the VLT business, is related to the fact that being the connection between all the concessionaires in Monopoli, very complicated, they are often in a situation where they have to recover and get back information from the concessionaires before delivering the entire month.

So there must be, in other words, a delay in providing the relevant data of each relevant month and period of time. This is why I would suggest in general from now on you consider year-to-date data as more sound in terms of interpreting the market shares and the dynamics in this sector.

As far as taxation is concerned, of course, I am not taking any position regarding what the governor will consider appropriate to do in the following months. What I am saying is just describing status quo, which says the (inaudible) law by now. Any action could be taken, but since we want to be on the safe side of the business always, we are considering an extra taxation being placed next year on. Any other decision that the government will be taking will be an upside for all of us.

We are not saying we are suggesting it to happen, but we just keep ours on the safe side.

Thank you very much.

(Operator instructions) Domenico Ghilotti, Equita.

I have a question on the sports betting payout, because you mentioned that October was back to normal level. So do you mean October at around 80%, or are you recovering a little bit the extra payout paid in Q3?

Our payout in October is about 80.5 --

Okay.

-- what we consider the overall payout. And as Alberto said before, it was 93% in the third quarter of this year, an all-time high figure, quite extraordinary to the business, to the market, and is nothing related to our companies, just an occasional run of good results for the (inaudible).

Okay, thank you.

(Operator instructions). As there are no further questions in the queue, I would like to hand back to Mr. Marco Sala, CEO, for any additional or closing remarks.

This is Alberto. Let me make the -- wrap up the final on this call. Let me reiterate that we have seen some positive trends in Italy in September and October in all of our business lines. GTECH is performing well and we have a strong pipeline of sales of SPIELO, driven by the Canadian replacement cycle. We remain confident in achieving our guidance and, given our preliminary visibility of 2013 and the trends that we are seeing, we don't see why at this moment we shouldn't continue to grow in all our business lines in next year. Thank you very much.

That will conclude today's conference call. Thank you for your participation, ladies and gentlemen. You may now disconnect.