IGT Gets in the Game
Industry giant International Game Technology, acknowledging that it is operating during a challenging time for slot makers, told Wall Street on Thursday it was able to beat all second-quarter expectations. The Reno-based gaming equipment provider reported quarterly earnings of $124 million for the three-month period ending March 31, a 32 percent increase from $93.9 million for the same quarter a year ago. IGT reported earnings per share of 35 cents in the quarter, up from 26 cents per share from a year ago. Analysts surveyed by Thomson First Call had been expecting earnings of 31 cents a share in the quarter.
"Once again, IGT was able to buck the current challenging domestic slot trends and find ways to generate revenues and earnings in a tough slot environment," Goldman Sachs gaming analyst Steven Kent said in a note to investors.
Slot machine makers have experienced trying times over the past 18 months as casinos nationwide haven't shown much of an interest in newer slot machine products. Most of the major casino markets changed out older machines a few years ago for newer games with ticket in-ticket out enhancements.
IGT, as with much of the slot machine industry, is working on technological advances. Server-based gaming and downloadable gaming, products that would allow a casino to change game titles through a central server, are one to two years away from being on the casino floor.
Still, IGT has been able to sell some slot machines. The company said it sold 2,300 games to the newly opened Red Rock Resort, and 2,100 machines to the South Coast. In addition, IGT sold 600 machines to the Foxwoods casino in Connecticut, which is expanding, and 600 machines to the recently reopened Imperial Palace in Biloxi, Miss., which was closed for several months following Hurricane Katrina.
During the quarter, IGT unveiled its new Super Spin product and trimmer slot machine cabinet, both of which were placed at the Red Rock Resort. Company executives said there is now a backlog of orders for those products.
The games in which IGT shares in profits with casinos, such mega-jackpot slot machines, drove earnings much of the quarter. Revenue from gaming operations was $311.2 million, compared with $298.9 million a year ago.
Overall company revenue rose 17 percent in the quarter to $644.4 million from $551.1 million last year.
"We achieved several product successes and set a number of new financial records in the quarter despite limited visibility to new unit growth domestically," IGT Chairman and Chief Executive Officer TJ Matthews said on a conference call with analysts and investors.
"The quarter's results reflect the depth and reach of our product offerings and are focused on growing our international business, increasing the installed base and the efficiency of our game operations business and expanding the contribution from nonmachine product sales," Matthews said.
Wall Street reacted positively to IGT's news, which was announced before the opening of trading on the stock market. Company shares jumped almost 7 percent initially in trading on the New York Stock Exchange and climbed as high as 10 percent during the day.
The shares closed at $38.14, up $3.22, or 9.22 percent. More than 8 million shares were traded, quadruple the normal daily volume. The results didn't surprise gaming analysts.
"Overall, a solid quarter (for IGT)," Bear Stearns gaming analyst Joe Greff said.
Kent said IGT has found ways to turn a profit during a tough period.
"Overall, we think that this quarter and last quarter are examples of the high quality management team at IGT, and the company's product diversity that allows it to perform even during rough patches," Kent said. "While we have concerns about the volatility of nonbox revenues, we are encouraged by IGT's ability to navigate through the weak slot environment relatively safely."