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IGT Reports First Quarter Fiscal Year 2014 Results

First Quarter Highlights (compared to last year's first quarter)

- Total revenues increased 2% to $541 million

- GAAP earnings per share increased 29% to $0.31

- Adjusted earnings per share decreased 11% to $0.25

- Social gaming revenues increased 57% to $65 million and average bookings per daily active user grew 35% to $0.42

- Shipped 6,100 North America replacement units, up 20%

- Returned $226 million to shareholders in the form of share repurchases and dividends

- DoubleDown was GAAP accretive in the first quarter of 2014

 

LAS VEGASJan. 23, 2014 /PRNewswire/ -- International Game Technology (NYSE: IGT) today reported operating results for the first quarter ended December 31, 2013.

"In our fiscal first quarter we expanded revenue while maintaining strong operating income and cash flows despite market challenges," said 
Patti Hart, CEO of IGT. "We remain confident that our focus on content, distribution and maximizing shareholder value while improving efficiencies will position us for success in fiscal 2014." 

 

Consolidated Results

     
       

First Quarters Ended December 31,

2013

2012

% Change

(In millions, except per share amounts)

     

GAAP Measures

     

Revenue

$ 541.2

$ 530.3

2%

Operating income

103.7

118.4

-12%

Net income

79.2

65.3

21%

Earnings per share

$   0.31

$   0.24

29%

Net operating cash flows

$   76.1

$   94.5

-19%

       

Non-GAAP Measures 

     

Adjusted operating income

$ 123.8

$ 137.6

-10%

Adjusted net income

62.9

76.2

-17%

Adjusted earnings per share

$   0.25

$   0.28

-11%

Free cash flow (before dividends)

$   51.5

$   56.9

-9%

   

Adjusted operating income, adjusted net income, adjusted earnings per share and free cash flow are non-GAAP financial measures.  Reconciliations between GAAP and non-GAAP measures are provided at the end of this release.

                                   
  • Revenues increased 2% to $541 million, primarily driven by North America growth in social gaming and machine sales.
  • GAAP earnings per share increased 29% to $0.31.
  • Adjusted earnings per share decreased 11% to $0.25.

 

Gaming Operations

     
       

First Quarters Ended December 31,

2013

2012

% Change

(In millions, unless otherwise noted)

     

Revenue

$ 223.0

$ 242.6

-8%

Gross profit

136.2

153.1

-11%

Gross margin

61%

63%

-3%

Installed base ('000)

54.3

56.8

-4%

Yield (average revenue per unit per day - $0.00)

$ 44.99

$ 46.80

-4%

  • Revenues decreased 8% to $223 million in the first quarter primarily due to lower North America MegaJackpots® revenue.
  • Gross margin decreased to 61% from 63% compared to the prior year quarter, primarily due to lower yield.
  • Installed base decreased driven by a decline in North America MegaJackpots® and International lease operations units.
  • Average revenue per unit per day in the quarter was $44.99, down 4% over the prior year quarter primarily due to lower MegaJackpots® yields and down 8% sequentially in-line with seasonal trends.

 

Product Sales

     
       

First Quarters Ended December 31,

2013

2012

% Change

(In millions, unless otherwise noted)

     

Revenue

$ 243.6

$ 234.8

4%

Gross profit

126.9

125.6

1%

Gross margin

52%

53%

-3%

Machine units recognized ('000)

12.8

10.7

20%

Machine average sales price ('000)

$   13.2

$   14.8

-11%

  • Revenues increased 4% to $244 million in the first quarter, due to increased North America machine sales largely related to video poker sales.
  • Gross margin decreased to 52% from 53%, as the first quarter of 2013 benefited from a $5.0 millionroyalty settlement fee.
  • Average machine sales prices declined to $13,200 in the first quarter primarily due to a higher mix of video poker unit sales to Caesar's Entertainment, as well as some foreign currency pressures.

 

Interactive

     
       

First Quarters Ended December 31,

2013

2012

% Change

(In millions, unless otherwise noted)

     

Revenue

$ 74.6

$ 52.9

41%

    Social gaming

64.8

41.3

57%

    IGTi

9.8

11.6

-16%

       

Gross Margin

63%

58%

9%

    Social gaming

62%

60%

3%

    IGTi

64%

51%

25%

       

DoubleDown average user statistics*

     

    DAU (Daily active users) ('000)

1,716

1,462

17%

    MAU (Monthly active users) ('000)

6,198

4,931

26%

    Bookings per DAU ($0.00)

$ 0.42

$ 0.31

35%

       

*as a single application with multiple games, active users equal unique users

  • Social gaming revenues increased 57% to $65 million in the first quarter compared to the prior year quarter and increased 6% sequentially, primarily driven by an increase in both average DAU and bookings per DAU.
  • Average DAU were 1.7 million, an increase of 17% over the prior year quarter.
  • Average MAU were 6.2 million, an increase of 26% compared to the prior year quarter.
  • Average bookings per DAU was $0.42, an increase of 35% over the same quarter last year.
  • DoubleDown was GAAP accretive in the first quarter of 2014.

 

Operating Expenses

     
       

First Quarters Ended December 31,

2013

2012

% Change

(In millions, unless otherwise noted)

     

Operating Expenses

     

Selling, general & administrative

$ 117.8

$ 100.2

18%

Research & development

60.3

54.4

11%

Depreciation & amortization

16.7

19.0

-12%

Contingent acquisition-related costs

11.3

17.5

-35%

Total operating expenses

$ 206.1

$ 191.1

8%

       

Adjusted Operating Expenses

     

    Total

$ 189.3

$ 169.2

12%

       

Adjusted operating expenses is a non-GAAP financial measure.  Reconciliations between GAAP and non-GAAP measures are provided at the end of this release.

  • Adjusted first quarter operating expenses increased over the prior year quarter primarily due to higher advertising at DoubleDown and higher R&D expenses.
  • Adjusted operating expenses were 35% of revenues for the first quarter compared to 32% of revenues in the prior year quarter.

 

Balance Sheet and Capital Deployment

         
 

 December 31, 

 

 September 30, 

   
 

2013

 

2013

 

% Change

(In millions, unless otherwise noted)

         

Cash and equivalents (including restricted amounts)

$               648.0

 

$                 809.1

 

-20%

Working capital

117.9

 

267.5

 

-56%

Contractual debt obligations

2,150.0

 

2,150.0

 

0%

 

  • During the first quarter, the company received 8.2 million shares related to the previously announced accelerated share repurchase (ASR).  The total number of shares repurchased by IGT under the ASR through the completion date of January 22, 2014 was 11.6 million, at a discounted average price of$17.22 per share, representing approximately 5% of the total shares outstanding when the program commenced.
  • During the quarter, the company announced its fifth consecutive quarterly cash dividend increase, up 57% compared to the same quarter last year. 
  • During the first quarter, the company returned $226 million in the form of dividends and share repurchases to its shareholders.

Other
References to per share amounts in this release are based on weighted average diluted shares of common stock outstanding, unless otherwise specified.

Outlook
Given declining gross gaming revenue trends, we anticipate that the lower end of our previously announced guidance range is more likely, with potential further downside risk.  We are in the process of implementing a number of measures, including cost reductions, to mitigate this risk.

GAAP earnings per share from continuing operations for fiscal year 2014 will include acquisition-related expenses, primarily related to DoubleDown, severance costs, and certain discrete tax items or benefits, the amount of which is not determinable at this time.  The company may also recognize other items that are not currently determinable, but may be significant. For this reason, the company is unable to provide estimates for full-year GAAP earnings per share from continuing operations at this time.

Earnings Conference Call
As previously announced on January 9, 2014, IGT will host a conference call to discuss its first quarter fiscal year 2014 earnings results on Thursday, January 23, 2014, at 2:00 p.m. PST. The access numbers are as follows:

Domestic callers dial +1 877-891-6979, passcode IGT 

International callers dial +1 773-756-4700, passcode IGT

The conference call will also be broadcast live over the Internet. A link to the webcast is available at the IGT website: http://www.igt.com/investors.  The call will be archived until Thursday, February 6, 2014 athttp://www.igt.com/investors, for those interested parties that are unable to participate during the live webcast.

A taped replay of the conference call will be available after the conference call. This replay will run throughThursday, February 6, 2014.  The access numbers are as follows:

Domestic callers dial +1 866-513-4385

International callers dial +1 203-369-1984

Q1 FY 2014 Excel file

Q1 FY 2014 PDF of this press release

IGT Resources:

About IGT
International Game Technology (NYSE: IGT) is a global leader in casino gaming entertainment and continues to transform the industry by translating casino player experiences to social, mobile and interactive environments for markets around the world. IGT's acquisition of DoubleDown Interactive provides engaging social casino style entertainment to more than 6 million players monthly. More information about IGT is available at IGT.com or connect with IGT at @IGTNews or facebook.com/IGT. Anyone can play at the DoubleDown Casino by visiting  http://apps.facebook.com/doubledowncasino or doubledowncasino.com