This summary is based on the second quarter fiscal 2007 earnings call conducted by International Game Technology (IGT) on April 19, 2007.
Key Investors Issues
- The earnings per share increased to 38 cents as against 35 cents in prior year quarter.
- Revenue from gaming operations increased to $341.1 million versus $311.2 million in last year.
- Year-to-date cash deployed back to shareholders in the form of dividends and stock buybacks totaled $449.9 million.
Second Quarter Fiscal 2007 Financial Highlights
IGT posted a solid quarter of results, bolstered by the strength and consistency of ourthe firm’s gaming operations business.
The net income included the favorable impact of insurance settlements related to Gulf Coast property damage and business interruption as well as a net benefit from the sale of a corporate asset, totaling a collective $13.5 million after tax.
Second quarter highlights include record game operations had installed base of 54,800 machines, up 10,400 from the prior year and 1,700 games sequentially. Record game operations revenue was $341 million, up 10% from the prior year, as a result of installed base growth and enhanced game performance. Non-machine revenues increased to $90 million, constituting 33% of product sales revenue.
International operating income totaled 29 million despite lower machine sales volume related to the timing of Japan sales.
- The firm also recorded record EBITDA of 277.9 million.
- Year-to-date cash flow from operations totaled $366.5 million, which was up 79% for the same period last your. The gaming operations revenue for the quarter totaled $341 million, up $30 million or 10% from the prior year peer. Revenue growth was due primarily by the 23% increase in install base.
The firm’s casino operations install base ended the quarter at 38,100 games, posting a year-over-year increase of 4,600 units.
Growth was primarily driven by incremental placements in Oklahoma, California and Florida. Sequentially casino placements increased 1,000 units primarily due to additional placements in Oklahoma and Florida.
The lease operations install base totaled 16,700 units at the end of the quarter representing growth at 5,800 units over the prior year and 700 units sequentially.
Primary growth drivers were Mexico, which added 2,400 units, and New York, which added 2,200 units. The firm also saw expansion in Delaware and Rhode Island.
The firm anticipates continued growth for its install base over the second-half of 2007, primarily in Florida, Oklahoma and Mexico. In Mexico, the firm is still on target to add another 1,000 units in the second-half to reach a total install base of 7,000 units by the fiscal year-end.
In Oklahoma, the install base stands at 8,200 games, representing 19% of the total market. The firm expects incremental class 3 placements over the next six months that will boost its share to over 25%, although some of the games in the field may convert to a for-sale model over time.
In the product arena, the firm’s MLP install base continue to perform well.
Fort Knox totaled 3,300 placements at the end of March that still generate performance results above jurisdictional averages. The firm has placed over 1,000 red-hot jackpots since its release at end of September and has an estimated backlog of 600 games. The company’s newest MLP, Soul Train, was recently released and the firm has approximately 400 units on order already. This is a nine model MLP on the Trim Line Cabinet that features enhanced graphics, sound and math. In the next six months, the firm is also looking forward to the release of its Waff and Indiana Jones MLPs that will feature the new 80 DWP wide screen cabinet and new bonus concepts.
In the area of group play or communal gains, the firm has over 120 Wheel of Fortune Super Spin stations representing over 1,100 individual units. Installed they continue to log strong performance results. In the second half of’ 2007, the firm will release Ancient Chinese Secret, where it has applied toe group play concept to a standard machine configuration that allows for multiple players to enter into a bonus round at the same time. The Indiana Jones MLP product will also incorporate the group play concept with multiple players entering into free bonus wins at the same time.
Consolidated game operations revenue per game per day average approximately $69 versus $78 in the prior year with the lower yields as a result of the growing mix of these operations in Mexico and New York.
These operation games typically occupy 100% of the venue floor, but carry fixed or lower revenue yields. The firm expects the average revenue and gross profit per game to trend at Q2 levels in the remainder of’ 2007.
