International Game Technology PLC (IGT) 2017 Q4 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the IGT 2017 Fourth Quarter Results Call. (Operator Instructions) And as a reminder, today's conference call is being recorded. I'd now like to turn the conference over to Jim Hurley. Please go ahead.

Thank you for joining us on IGT's Fourth Quarter and Full Year Conference Call hosted by Marco Sala, our Chief Executive Officer; and Alberto Fornaro, our Chief Financial Officer. After some introductory remarks, we'll open the call for your questions.

During today's call, we'll be making some forward-looking statements within the meaning of federal securities laws. Forward-looking statements are not guarantees, and our actual results may differ materially from those expressed or implied in the forward-looking statements. The principal risks and uncertainties that could cause our results to differ materially from our current expectations are detailed in our SEC filings.

And now I'll turn the call over to Marco Sala.

Thank you, Jim, and good day, everyone. We are reporting a strong finish to 2017. We achieved many important milestones in the year, including securing the Italian Scratch & Win concession, one of our most important contracts through 2028. We also earned a 7-year extension on our California lottery contract, adopted a new business model in social gaming and introduced a record number of new gaming machine cabinets.

A strong second half performance, led by the International segment in the fourth quarter, enabled us to meet all our financial objectives for the year. In particular, we achieved the top end of our the EBITDA guidance. The diversity and scope of our business in products and geographies are the key features and drivers of our fourth quarter and full year results. We experienced robust lottery performance, improving gaming KPIs. And we continued our disciplined cost management throughout the year. An intense focus on bringing innovative content and technology to market fueled our results and will continue to be a critical driver of future results.

Turning now to the performance of our operations. Global lottery same-store revenues outside of Italy rose 6% in the fourth quarter and were up just under 1% for the year. It's important to note that this performance was on top of an average 7% annual growth for the preceding 2 years. Momentum in North American Lottery has continued with over 8% same-store revenues growth for the quarter and the increase of just under 1% for the year. This is a major accomplishment when you consider the record $1.6 billion Powerball jackpot in 2016. Some of the largest lotteries, such as California, Michigan and Texas, booked the highest increases in lottery sales in the second half of the year. This confirms our belief that there is considerable room to grow lottery sales throughout North America.

Italy lottery performance is equally noteworthy. Excluding Late Numbers, which were exceptionally high in 2016, we reached a record level of lotto wagers in 2017. Non-Late Numbers wagers grew 4% in the fourth quarter and 3% for the year on the strength of the 10eLotto game. First introduced in 2009, the 10eLotto franchise has risen at nearly 40% compounded annual rate. We have supported 10eLotto's momentum with the new features, notably the introduction of Numero ORO in 2014 and most recently with the launch of Doppio ORO in October. Player acceptance of Doppio ORO has been excellent, as they appreciate the higher frequency of wins and price values. The game represented half of total 10eLotto wagers in the fourth quarter and is driving higher average lotto bets.

Scratch & Win wagers were up over 1% in 2017, the first increase in 6 years, and up nearly 4% in the second half on strong results from the core Miliardario franchise. We reinvigorated Miliardario with improved game mechanics, payout structures, graphics. And the players have responded favorably. The Scratch & Win concession is vital to the success of the Italy segment. Receiving a renewal for 9 additional years of this large, important contract is a great achievement for us. This award without a full tender process demonstrates the great confidence the regulator has in our ability to successfully run the business. Our success in lottery in Italy is a good example to how innovation can drive meaningful growth even in a mature market.

Internationally, lottery same-store revenues were relatively stable in the fourth quarter and the full year period. The U.K. lottery is our most important International lottery contract. And we have seen a progressive sign of improvement there in the second half of the year. We expect a return to more normal low to mid-single-digit International same-store revenues growth in 2018.

We made considerable progress in gaming during 2017. We brought a greater deal of innovation to market during the year, including 6 new game cabinets. The CrystalCurve cabinet is the flagship of our new offerings. And we leveraged it for both participation and for-sale games. It has become a significant driver of our gaming KPIs. And we believe that trend should continue.

On the product sales front, we shipped over 32,000 gaming machines worldwide in 2017, including 4% growth in replacement units. The nearly 11,000 units sold in the fourth quarter was the highest amount in 2 years, including a 30% increase in total replacement units. Internationally, replacement demand was strong in Latin America. The success of our test bank process and demand for the CrystalCurve cabinet drove a double-digit increase in replacement sales to North America casino customers and higher ASPs in both the fourth quarter and second half. This marks an important inflection point for us.

We grew the global installed base for the second consecutive year. This was led by robust International expansion, especially in South Africa and Greece, and with the addition of a new video bingo business. We also stabilized the North American installed base starting in the second half of the year. Adjusted for conversions, the North American casino installed base was up sequentially in the fourth quarter of the year. We expect this positive trend to continue throughout 2018.

The improvements were supported by high level of new games we brought to market in the period, including Fort Knox, The Voice and SPHINX 4D. We are also creating excellent momentum with Harley-Davidson, The GOONIES and Wheel of Fortune MEGATOWER.

It was another strong year for systems and software sales to both lottery and gaming customers. The IGT Advantage casino management system has been selected for the industry's most high-profile new openings around the world, including the recent Resorts World Catskills and MGM Cotai casinos. We successfully replaced competing central system at the Palms Las Vegas and the Red Wind Casino in Washington state. And for VLTs, we had the largest system and software sales in Canada and Oregon during the year.

We have built on our core Central System offerings with compelling add-on products, such as Service Window, PlaySpot, Cardless Connect and the Resort Wallet. These innovative products demonstrate IGT's player-centric focus. We are looking to grow the business by both outstanding playtime and introducing a new generation to casino and lottery games. In fact, our PlaySpot mobile solution was recently named Lottery Product of the Year at the International Gaming Awards. Customer interest in this application is high. And we have had initial -- successfully initial rollouts for casino partners, such as MGM and Red Rock Resorts.

I would also like to acknowledge the contribution from Italy sports betting during the fourth quarter. It was driven by growth in wagers and that by a historically low payout. We have a full B2C sports betting offer in Italy that operates through a large network of 1,750 points of sales, complemented by a full digital offer. The rise in wagers over the last few quarters is the result of strategic investment in the business, including remodeling our retail shops, strengthening our technology platform and enhancing our interactive and live betting capabilities.

Our B2B sport betting platform has historically been used by International lottery and commercial casino customers. Today, in the U.S., we provide a sports betting platform with the retail sales for land-based casino operators and the PlaySpot, which enables our customers to activate sports betting on players' mobile devices. Both are currently being used by MGM in Nevada. In fact, IGT is the only major B2B platform supplier to be approved in Nevada, which has among the most stringent regulations. We have a lot of experience and know-how in sports betting, which is a growing area of interest and opportunity in jurisdictions around the world. We have been present in this industry for over 30 years.

Our 2017 results represent a combination of dynamics that I expect to characterize our performance for the years to come: consistent global lottery expansion, better trends in gaming and a continued focus on disciplined expense management. In 2018, we expect much of our growth to come from gaming, where we continue to raise the bar on performance metrics. In addition to better results in North America, the International segment should be an important driver of gaming growth.

CrystalCurve was only recently made available internationally. And we will soon begin selling the new CrystalDual cabinet with a larger screen that was launched at ICE a few weeks ago. And we should benefit from large Sweden VLT unit sales beginning in the fourth quarter. For lottery, collaborative initiatives with our customers around the world on new game launches, retail distribution strategies and sales and marketing efforts should drive continued growth.

Let me conclude with this perspective. In 2017, we demonstrated the diversity and the resilience of our franchise. We delivered on our commitments for the year. And in the process, we established a solid foundation for growth in 2018, in which we have great confidence.

Now I'll turn the call over to Alberto.

Thank you, Marco, and hello to all of you. Our fourth quarter financial results are summarized on Slide 8. At constant currency and scope, which adjusts for lotto upfront amortization and the sale of DoubleDown, revenue rose 3%. Growth was driven by a significant and expected contribution from our International segment, another quarter of strong global lottery performance and higher contribution from Italy sports betting.

At constant currency and scope, adjusted EBITDA grew 6% on higher revenue and lower operating expenses, driven by a reduction in both SG&A and R&D. Adjusted EPS in the period includes a $0.66 per share noncash tax impact from recent U.S. tax reform. Roughly half relates to tax expenses on unremitted foreign earnings and the rest to deferred tax assets. The reported EPS in the press release include also a substantial positive adjustment for deferred tax liabilities related to purchase accounting.

Let's now turn to our operating segments, beginning with North America Gaming & Interactive on Slide 9. At constant scope, revenue was down on lower product sales and gaming service revenue. Service revenue from terminals reflect a lower installed base compared to prior year. However, excluding conversions, mostly in Oklahoma, we saw sequentially improvement of approximately 100 units in the installed base.

Product sales faced a high comparison to the fourth quarter of 2016, which included more gaming machine shipments for new casino openings as well as the Central System sales to MGM National Harbor and the contribution from intellectual property settlements. We shipped 5,295 gaming machines compared to 5,419 units in the same period last year. Keep in mind that units for the recent Resorts World Catskills opening are not in our fourth quarter numbers. They will be included in our first quarter results.

Total replacement unit sales were up sharply, including double-digit growth in casino replacements. Additionally, overall ASP improved, highlighting customer demand for our Crystal Series cabinets and field-tested content. At constant scope, operating income largely reflects lower revenue as well as timing of the jackpot expense, which is primarily related to the timing of 2 Megabucks jackpots. We were able to partially offset this with lower operating cost.

Turning to North America Lottery on Slide 10. Total revenue rose 7%. Same-store revenue grew over 8% with strong wagers in instant ticket and draw-based games as well as multistate jackpots. Healthy instant ticket sales continue to be the largest driver of same-store growth. While core lottery trends are strong, service revenue were fairly stable due to a lower effective rate on contract extension and the exit from certain low-margin contracts. Although contract extension had a modest near-term impact on effective rates, the aggregate return on investment for extended contracts is very favorable.

Product sales vary from quarter-to-quarter. And in Q4, we had a significant benefit from lottery terminal sales and the VLT Central System sale in Canada. Operating income was up 1% as revenue growth was largely offset by higher service delivery costs and the legal fees in Illinois. Our Illinois lottery management contract extended in 2017, and we will no longer be recognizing roughly $50 million in annual reimbursable expenses as revenue. This pass-through revenue had no profit associated with that. As a reminder, the supply contract in Illinois remains in place throughout 2018.

Let's turn to our International segment on Slide 11. We always expected a strong second half and fourth quarter. And you see that reflected here across all revenue items. Revenue and operating income increased double digits at constant currency. The strength of the fourth quarter results compensated for the lower profits in the first quarter and reflects the highly variable nature of our International business. For the full year period, revenue and profits were nicely above the prior year.

Lottery same-store revenues were slightly below the prior year. Broad-based strength in EMEA and Latin America were offset by weakness in Colombia. U.K. lottery trends were stable. Gaming service revenue from terminals was up 1% at constant currency as a higher installed base was offset by lower average yields due to the geographic mix of revenues. The installed base grew to 15,543 machines from 10,453 in the fourth quarter of 2016 on unit growth in Africa, Greece VLTs and video bingo machines.

Product sales were up on lottery software sales, primarily in Europe. We shipped 5,565 gaming machines compared to 4,901 in the prior year with a 41% increase in replacement more than compensating for fewer new and expansion units. Higher unit volumes were offset by product mix with lower ASP, including the impact of larger transactions in Latin America.

Italy results are on Slide 12. At constant currency and scope, the business was essentially steady, thanks to solid underlying performance. In lotteries, machine gaming and sports betting, we mitigated the sharp drop in Late Numbers compared to prior years as well as the unfavorable impact from higher machine gaming taxes. Non-Late Numbers lotto wagers rose 4% in the fourth quarter as 10eLotto players gravitated towards our innovative, new offering, Doppio ORO. Scratch & Win wagers were up 2% on the continuous success of Miliardario and multiplier tickets.

The decline in gaming machines mainly reflects higher taxes. Recent network optimization and higher levels of online play drove sports betting wager growth of over 8% in the fourth quarter. This accounts for half of the substantial increase in revenues. The other half was the result of historically low payout, which was 10 percentage points below the prior year.

On Slide 13, we have summarized the results for the full year. At constant currency and scope, revenue was roughly in line with the prior year. In other words, we were able to make up for the combined benefits from Powerball and Late Numbers in 2016 and despite higher Italy gaming machine taxes in 2017. Growth from strong underlying lottery performance, system and software sales and sports betting offset these headwinds.

Adjusted EBITDA of $1,676,000,000 was at the high end of our outlook. Expense savings helped to mitigate a tough comparison with the high margin profile of the 2016 revenue benefits I just mentioned. Capital expenditure for maintenance and growth, excluding lotto, were $585 million for the year, within our expected range of $575 million to $625 million. Total CapEx was $698 million and included $113 million in lotto network and infrastructure upgrades.

Let's turn now to the debt and leverage profile, which you can see on Slide 14. Net debt at the end of the year was $7.3 billion, which was slightly better than our outlook, where we considered $100 million in unplanned impacts from the first Scratch & Win payment and incremental foreign exchange headwinds. Adjusted for currency, leverage was approximately 4.25x, a nice improvement from 2016.

Cash flow is shown here on Slide 15. During the year, we generated nearly $700 million in cash from operation. As you know, the Italy upfront payments of $245 million are now in cash from operating activities and were previously located in cash from investing activities. This change has no impact on free cash flow. We also had elevated cash taxes from the sale of DoubleDown.

On Slide 17, we have the outlook for 2018, which assumes an average euro-dollar exchange rate of $1.22. We currently expect adjusted EBITDA of $1.7 billion to $1.78 billion for the full year period. As a reminder, the first half of 2017 included approximately $30 million in EBITDA from DoubleDown. And there will be an incremental $20 million headwind from gaming machines in Italy, half from higher taxes in the first 4 months of 2018 and half from some new regional restrictions on AWP.

Profit should be a little bit more weighted towards the back half of the year as they were in '17. This is mainly a function of gaming product sales timing, including the large Sweden VLT sales expected in the fourth quarter. 2018 capital expenditures are planned at $575 million to $625 million. At the midpoint, this includes about $550 million related to the maintenance on existing contract and about $50 million for growth CapEx.

Maintenance CapEx is slightly above the normal trend, largely due to capital for several successful lottery wins and extensions, including California, Georgia and Florida. Additionally, the new -- the 9-year renewal of the Scratch & Win concession will require a gross cash payment of EUR 300 million in the second quarter and EUR 450 million in the fourth quarter. We are responsible for roughly EUR 500 million in total with the balance coming from minority partners.

We believe the recent change to the U.S. tax code should be a modest cash benefit in 2018. Given the complexity of the changes, we are still working through the impact on future years. As we have demonstrated over the last 2 years, our lottery and gaming operation generate a strong operating cash flow that have enabled us to consistently fund our CapEx needs. The elevated cash outlays for CapEx and upfront payment in Italy in 2018 are linked to many years of revenues and cash flow visibility for a good portion of our Italy and North American Lottery business. After 2018, the capital requirements for this operation should moderate considerably and free cash flow should accelerate and leverage should improve.

At this point, we'd like to open the call for your questions.

(Operator Instructions) And our first question comes from Barry Jonas of Bank of America.

I just had a couple of questions. First, on the North American gaming terminal side, can you please help frame how you're thinking about 2018 in the sense of market share gains versus overall market health, market growth?

Look, we do not comment on market share. But I can summarize what I just said that nearly 11,000 units we added in the last quarter, the strongest quarter in 2 years for gaming machine shipment. And that is despite significant lower new and expansion activity. Replacement were up over 30% from prior year and represent the best performance in the last 3 years. We drove it because of our new cabinets, CrystalCurve, CrystalSlant, AXXIS 23 that have been important drivers for this demand. And in addition to that, we are seeing a nice acceptance of our new video reel product among casino customers, especially in North America. So to come to the answer, our strategy is to increase our presence in the video reel segment of the market, which accounts for most of the industry replacement sales. And we are confident that the positive momentum for North America unit shipments will continue in 2018 with particular strength in the second half of the year. And this reflects the natural seasonality of our unit shipments. So all in all, I think I'm positive. We are planning growth in that part of the business, especially in the replacement side. And we are confident with what we have done in terms of cabinets and content to continue to drive our sales over 2018.

Great. So next one is on the lottery side in North America. I think the multistate lotteries have been very strong. Do you think that continues, given the recent Mega Millions rule changes? And then maybe just broadly, how should we think about the relationship between those multistate sales and then the core lottery product? Do they correlate positively? Or is there potential cannibalization?

For the time being, we didn't see major cannibalizations, since the business segments grew and that is something we see also internationally. We see a very strong instant ticket growth. But also the other draw games are doing nicely. And we will innovate our product offering to provide our customers with new, innovative products. Having said that, I think Mega Millions has performed as expected. There has been some modest cannibalization to Powerball, also in line with our expectations. Customers are still learning about the jackpot-only option, which is a differentiator between the games. So all in all, I think that also this part of the business can provide a contribution. But let me say, in general, I'm positive looking at the last 3 years on the lottery growth in North America and going forwards also internationally because I continue to see a good acceptance of innovation from the customers that help driving the sales. As I mentioned during my remarks, it's happening in Italy that is, for sure, a mature market.

Great. And then last one for me, can you maybe just talk about some of the key sensitivities in guidance between the high and the low end?

Barry, Alberto. I would say that there are 3 major factors. We have mentioned that we have a little bit of headwind in gaming machines in Italy next year that is coming from the first 4 months of the year, where in '17, we didn't have the higher taxation and in '18, we will have it, and also some restriction due to regional gaming regulation. Our ability through all the other products, including the gaming machines, to absorb that negative impact will be one of the drivers in order to bring our results toward the top of the range. The second is we have a little bit of negative impact from the extension in terms of pricing for 2018. And again, as Marco was mentioning, if the same-store sales will be more positive than what we are currently anticipating, that could drive the guidance towards the higher end. And the third one and the most important is the size of the gaming growth in 2018. So that could help us to get towards the top of the range.

And the next question comes from Chad Beynon of Macquarie.

Alberto, understanding that you did mention that you're still working through the impact from tax reform in the cash taxes, could you provide a little bit more clarity on any updates on capital allocation, given that your leverage is now at 4.2x? You secured the Scratch & Win contract for 2019. But as -- payment for 2018. But as you noted there, the CapEx should probably come down going forward and you'll be in cash harvest mode. So could you just kind of help us think about capital allocation once the payments are made for the Scratch & Win?

So we are talking about basically an outlook for 2019. Let me say, for '18, what I can say obviously with the debt going up, there will be no change in our capital allocation. So our focus is to contain the increase of the debt due to the anticipated Scratch & Win renewal as much as possible. And then again in 2019, we will see where we are, where we end up in '18, but -- and certainly, we want to continue to deleverage. Depending on where -- when we get there, what is going to be our visibility also on the tax is more in the long term, we will revisit the capital allocation and this cash. But for '18, I don't see any change.

Okay. Domestically, I think we all have a pretty good handle on what's going on with the operators here. They had a very strong second half. And that should result, in our view, in higher CapEx dollars for 2018 and beyond. Internationally, it's a little bit more difficult for us to kind of put the pieces together. And you noted a very strong second half. So could you give us any more color for 2018 on what's going on internationally and then if there's any update on Greece in Phase 2 and when that would come in for 2018?

For our outlook for the International part of the business on gaming is positive on all the jurisdictions because I think we have consistent programs throughout the different continents, given the fact that we can rely on the new cabinets and the new contents in the various geographies. We have a good programs in Australia and in Asia, where we were truly underrepresented. We started enjoying a good recovery in South America. And I think we can progress along those lines. And we are also moderately optimistic regarding EMEA. So all in all, we see that we have the opportunity to leverage off our investment in order to grow our presence throughout the various geographies. Regarding Greece, I think that what I can say is that we are progressing with the rollout of VLTs. And we had about 2,700 units installed at the end of the year. We expect the first phase rollout, which is for us 5,500 units, to be substantially completed by the end of 2018. I have to recognize that our productivity is currently lower than originally anticipated. But we are working in order to improve through the launch of our new games, our performance. And we are positive regarding the new roster of games we have to deploy in that market.

And our next question comes from Domenico Ghilotti of Equita.

My first question is on the sports betting in the sense that in the call, you were mentioning that you have a growing interest in this segment. I'm trying to understand if it is internationally, so outside of Italy, if it is B2C or just B2B, so if you can elaborate on this and if we could expect also acquisitions in order to strengthen your position in this segment. Second question is on the cost side. So in particular, you have done a lot of investments and cost on product and content development for the gaming business. How should we look at the performance and the trend in the cost for this business going forward? Are you now satisfied? So should we assume a stabilization in the cost trend for content and innovation? And last question, you were mentioning the problems, the headwinds in Italy from local rules, local constraints. How do you see the development? Are they stable? Are they deteriorating? So how do you see the situation, still deteriorating or not?

I'll start from the last one. And the last question, regarding the situation, I think we have to divide it up here what has been decided by the central government and what is going on at the local level. The first phase of government-mandated removals, which called for a 15% reduction in machine rights, was completed at the end of 2017. I mentioned it just to say that there was not material impact to us in '17 as we weren't using all our rights and removals, of course, at the end of December. Another 19% reduction in units is required by the end of April. In this case, we expect a mid-single-digit decline in AWP-related revenues in 2018. But on the other hand, we also expect that higher productivity per machine could offset the reduction in the installed base and so possibly balancing this situation. Regarding the regions, you know that in the fourth quarter, Piemonte region put a restriction on gaming machines in the generalist channel, meaning tobacconist and bars. We know that there will be some additional restriction in few additional regions by the middle of the year. And as Alberto said it, we are estimating this impact in about $10 million headwind in EBITDA in 2018, already factored in our outlook. So all in all, I do not expect a major deterioration starting from what I have just said. And that is what we are factoring. And we believe we shouldn't expect any disruption in 2018. I'll take also the question regarding sports betting. As you know, we have a good operation in Italy. This is the only market where we intend to have a B2C operation. We do not intend to have any other B2B operator -- B2C operation outside. We do not intend to make acquisitions because we feel that we have what it is needed to take opportunities internationally. We are looking, of course, with a good degree of interest on the development in the United States. Where, by the way, we are already providing a sports betting platform with the retail sales for land-based casino operators and also PlaySpot, which enables our customers to activate sports betting on the player mobile devices. And they are already existing because they are being used by MGM in Nevada. So what I want just to say is that we have the platform. We have the know-how in trading control risk management support and a know-how to manage a B2C operation. So I think we can provide our customers, both casinos and lotteries throughout the world, a good help in the case they want to enter this business segment.

Domenico, I will take the question on the cost. So let's start with R&D. We historically maintained since the merger a high level of investment in R&D because we acknowledged at the beginning that there were some gap in gaming in terms of our offering that we needed to fill. So now we have delivered a significant refresh of our cabinets and content. And therefore, in the second half of 2017, we took action to optimize the R&D. So as you have already seen some -- you have seen the impact in Q4. So we do not expect any other reduction in R&D to affect our ability to bring compelling new games and hardware to the market. But certainly, you will see some benefits of the action already taken on the full year 2018. Regarding the SG&A, I will make a comment that is related to the overall company rather than talking simply about the gaming. There has been a significant reduction in SG&A on a full year basis in 2017. Some of it, around 60% of it is due to the fact that with the divestiture of DoubleDown, we don't have any more significant amount of SG&A related to it. Some of it is purchase accounting. There were some one-offs. So again, around 60% is basically related to these 3 items. The remaining part is mostly related to action taken to reduce expenses. So at this point, we have completed all our synergies related to the SG&A and took some major action for their structural reduction. As you know, every year, we continue to look for opportunity to improve our operational efficiencies. But this will be more an ongoing and incremental basis versus a significant program that specifically address the SG&A.

Okay. Just a follow-up on the situation in Italy on the gaming machine. Do you believe that the restriction on AWPs could be exploited by VLT, so if there is a transfer of consumption and spending from one to the other because of the restrictions? Or do you disagree on this?

No, this is a very good question. We are really monitoring very closely, especially in Piemonte region, if it is happening or not. I have the expectation that it could happen. But I do not have data that, at this point in time, can clearly support it. But that is one of the key points we are very interested in exploring. And Piemonte will represent the perfect place to understand it.

(Operator Instructions) And our next question comes from Carlo Santarelli of Deutsche Bank.

On the R&D front, as you guys were just talking about it, obviously the fourth quarter run rate looks to be about $40 million on an annualized basis below where you guys were running through the first 3 quarters. So just kind of as we think about 2018 and maybe as you guys kind of contemplated your plan within the context of your $1.7 billion, $1.78 billion guidance, are you kind of thinking the 4Q is more of a stabilized go-forward run rate at present? Or was that somewhat of an anomaly?

Carlo, I think what you see in Q4 is pretty much close to the run rate. Now we can change a little bit the program during the year, depending on what happens, if we need more in certain areas or less. But it's a good approximation.

Great. And then on the gaming ops side, obviously, Alberto, given your comments around the changes in Oklahoma, the games that you guys have deployed, my sense is just given the timing of G2E, you haven't seen yet the full benefit of everything you intend to employ. Do you believe as we look out to 2018 that, given some of the puts and takes, including game performance of some of the most recent deployments that, that base could actually see some expansion over the course of the year?

Carlo, it's Marco. I think, yes, the answer is yes. I think that we should expect some improvement in our installed base. Our objective for the second half of the year was to stabilize it. We have always very, very, let me say, prudent and moderate expectation out of it. But we expect that our installed base, considering the new cabinets and the contents I spoke about during my remarks, might help us in improving our installed base in both the premium and non-premium part of the business. And Oklahoma is a good example of it.

Great. That's helpful. And then if I may, just one quick follow-up. Just from talking to some folks, it sounds like there might be a new cabinet out for 2018, maybe a little bit larger screen that's gotten some very good feedback. Is that something you guys believe could roll out in '18 on the for-sale side?

Yes. If you are referring to the cabinet we have presented at ICE, it will be presented, I think, at G2E. And I'm assuming that it will be ready to be deployed at least in the second half of the year in North America.

And our final question comes from the line of David Katz of Jefferies.

I wanted to just ask a bit more pointed question about the installed base domestically. We stayed focused on when that base starts to grow. But historically, the trend may have been that the yield on it may turn up sooner than the installed base overall. Assuming that you're rolling newer, higher-performing games in and removing older ones that roll off, before the actual base grows, the yield may go up. Is that a fair characterization of it? And how do you think about that trajectory as we compare it with what you've guided us to today?

Look, I think that given the overall machine mix, we expect yields in 2018 to be relatively consistent with what we achieved in the fourth quarter. I think WAP is doing better. We have some, let me say, challenges in the stand-alone products. So I think overall, I feel the yield has to be seen as consistent with what we achieved in the fourth quarter.

And that concludes over question-and-answer session. I'd like to turn the conference back over to Marco Sala for any closing remarks.

Thank you for -- thank you all for your questions and for your interest in IGT. We achieved a lot in 2017 and have a strong foundation to build on in 2018 and beyond. I'd like to thank the IGT team for their hard work and contribution to our accomplishments. I'm confident that the continued focus and discipline of the organization will enable us to execute our strategic objectives and deliver on our financial goals. With that, I wish you all a good day.

Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program, and you may all disconnect. Everyone, have a great day.