INTERNATIONAL GAME TECHNOLOGY LAS VEGAS, Jan. 27, 2015 /PRNewswire/ -- International Game Technology (NYSE: IGT) today reported operating results for the first quarter ended December 31, 2014.
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"Our continued focus on profitability has resulted in strong gross margins this quarter, including improvements in gaming operations gross margins," said Patti Hart, IGT Chief Executive Officer. "While market challenges remain in the land-based casino business, our DoubleDown social casino generated a double-digit increase in both revenue and average daily active users in the quarter."
Consolidated Results
First Quarters Ended December 31, 2014 2013 %
Change
--- ------
(In millions, except per share
amounts)
GAAP Measures
Revenue $450.6 $541.2 -17%
Operating income 63.5 103.7 -39%
Net income 35.0 79.2 -56%
Earnings per share $0.14 $0.31 -55%
Net operating cash flows $102.9 $76.1 35%
Non-GAAP Measures (1)
Adjusted operating income $85.4 $123.8 -31%
Adjusted net income 47.7 62.9 -24%
Adjusted earnings per share $0.19 $0.25 -24%
Free cash flow (before dividends) $78.3 $51.5 52%
(1) 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.
-- Total revenue decreased 17% to $451 million, primarily driven by
declines in product sales, partially offset by an increase in social
gaming revenue.
-- GAAP net income and EPS in the prior-year quarter were also favorably
impacted by a $30 million audit settlement with the IRS related to prior
tax years.
-- Operating cash flow increased by $27 million as improvements in certain
working capital metrics offset the decline in net income.
-- First quarter results included an extra week due to the Company's
52/53-week fiscal year, where fiscal 2015 will contain 53 weeks versus
the normal 52 weeks in fiscal 2014. Therefore the current year quarter
was 14 weeks in length from September 28, 2014 to January 3, 2015, as
compared to 13 weeks in the prior year quarter.
-- The extra week of operations during the quarter contributed
approximately $22 million in revenue and $2 million in operating income.
Gaming Operations
First Quarters Ended December
31, 2014 2013 Change
----------------------------- ---- ---- ------
(In millions, unless otherwise
noted)
Revenue $211.1 $223.0 -5%
Gross profit 131.3 136.2 -4%
Gross margin 62% 61% 1 pp
Installed base ('000) 45.4 54.3 -16%
Yield (average revenue per
unit per day -$0.00) $46.36 $44.99 3%
-- First quarter revenue decreased 5% to $211 million primarily due to
installed base declines, partially offset by improved yield.
-- Gross margin increased to 62% compared to the prior-year quarter,
primarily due to improved yield.
-- Installed base decreased 16% driven largely by declines in
International, primarily due to lease operation unit conversions in the
prior year, and declines in North America MegaJackpots® ("MJP"), most
significantly in the standalone category.
-- Average revenue per unit per day in the first quarter was $46.36, up 3%
over the prior year quarter, largely driven by higher North America MJP
WAP yields.
Product Sales
First Quarters Ended December
31, 2014 2013 Change
----------------------------- ---- ---- ------
(In millions, unless otherwise
noted)
Revenue $148.0 $243.6 -39%
Gross profit 71.0 126.9 -44%
Gross margin 48% 52% -4 pp
Machine units recognized
('000) 5.8 12.8 -55%
Machine average sales price
('000) $13.9 $13.2 5%
-- Revenue decreased 39% to $148 million in the first quarter, primarily
due to lower machine unit volume, as the prior year quarter benefited
from 2,800 video poker units under a large contract and 825 additional
Illinois VLT units.
-- Gross margin decreased to 48% from 52% primarily due to lower
manufacturing productivity associated with reduced volumes.
-- Average machine sales prices increased 5% to $13,900 in the first
quarter primarily due to a more favorable product mix.
Interactive
First Quarters Ended December 31, 2014 2013 Change
--------------------------------- ---- ---- ------
(In millions, unless otherwise
noted)
Revenue $91.5 $74.6 23%
Social gaming 79.4 64.8 23%
IGTi 12.1 9.8 23%
Gross Margin 61% 63% -2 pp
DoubleDown average user statistics
(1)
DAU (Daily active users) ('000) 1,910 1,716 11%
MAU (Monthly active users) ('000) 5,212 6,198 -16%
Bookings per DAU ($0.00) $0.43 $0.42 2%
(1) as a single application with
multiple games, active users
equal unique users
-- Social gaming revenue in the first quarter increased 23% to $79 million
compared to the prior year quarter, driven by increases in both average
DAU and bookings per DAU. Mobile revenue comprised 39% of total bookings
in the first quarter and increased 68% compared to the prior year
period.
-- Average DAU were 1.9 million, an increase of 11% over the prior year
quarter due to improved content and enhanced player retention and
engagement strategies.
-- Average MAU were 5.2 million, a decrease of 16% compared to the prior
year quarter, primarily due to increased marketing efforts to procure
higher-quality players.
-- Average bookings per DAU in the first quarter were $0.43, an increase of
2% over the same quarter last year.
Operating Expenses
First Quarters Ended December 31, 2014 2013 %
Change
--- ------
(In millions)
Selling, general & administrative $108.5 $117.8 -8%
Research & development 57.3 60.3 -5%
Depreciation & amortization 13.7 16.7 -18%
Contingent acquisition-related
costs 2.5 11.3 -78%
Impairment, restructuring, and
merger-related 12.9 - *
---- --- ---
Total operating expenses $194.9 $206.1 -5%
------ ------ ---
Adjusted Operating Expenses (1) $176.4 $189.3 -7%
(1) 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 operating expenses decreased 7% to $176 million, primarily due
to cost savings initiatives resulting from the March 2014 business
realignment.
-- GAAP operating expenses decreased 5% to $195 million, primarily due to
the cost savings initiatives mentioned above, as well as lower
contingent acquisition-related costs, partially offset by merger-related
costs of $13.9 million.
-- The extra week of operations during the quarter contributed
approximately $12 million in operating expenses.
Balance Sheet and Capital Deployment
(In
millions) December 31, 2014 September 30, 2014 % Change
----------------- ------------------ --------
Cash
and
equivalents
(including
restricted
amounts) $267.6 $314.4 -15%
Working
capital 657.5 676.3 -3%
Contractual
debt
obligations 1,750.0 1,825.0 -4%
-- Operating cash flow was $103 million in the first quarter on net income
of $35 million.
-- Contractual debt obligations decreased $75 million due to partial
repayment of the company's revolving credit facility.
-- Outstanding borrowings under the company's revolving credit facility
were $450 million as of December 31, 2014.
-- The company returned $55 million to its shareholders through two
dividend payments that occurred during the first quarter.
Other
References to per share amounts in this release are based on diluted shares of common stock, unless otherwise specified.
Outlook
IGT will not provide financial guidance for fiscal year 2015.
Earnings Conference Call
There will be no earnings conference call.
Q1 FY 2015 Excel file
Q1 FY 2015 PDF of this press release
Forward-Looking Statements
This press release contains forward-looking statements that involve risks and uncertainties. These statements include our expected future financial and operational performance and our strategic and operational plans. These statements involve a number of risks and uncertainties that could cause actual results to differ materially from the results predicted, and reported results should not be considered an indication of future performance. Among the factors that could cause actual results and outcomes to differ materially from those contained in such forward-looking statements are the following: general economic conditions and changes in economic conditions affecting the gaming industry; new or changing laws or regulations or new interpretations of existing laws or regulations affecting our business; difficulties or delays in obtaining or maintaining necessary licenses or approvals; slow growth in the number of new gaming jurisdictions or new casinos or the rate of replacement of existing gaming machines; changes in operator or player preferences for our products; our ability to compete in the gaming industry with new or existing competitors; our ability to develop and introduce new products and their acceptance by our customers; risks related to our international operations; our ability to protect our intellectual property; adverse results of litigation, including intellectual property infringement claims; our ability to leverage cost reduction initiatives; risks related to business combinations, investments in intellectual property and the integration of acquisitions; and future developments or changes affecting online gaming or social casino-style gaming, which is a new and evolving industry.
A further list and description of these and other risks, uncertainties and other matters can be found in our annual report and other reports filed with the Securities and Exchange Commission, including under the captions "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K for fiscal 2014 filed with the SEC on November 25, 2014 and available on the SEC website at www.sec.gov and on the investor relations section of our website at www.IGT.com/investors. Additional information will also be set forth in our Quarterly Report on Form 10-Q for our fiscal quarter ended December 31, 2014, which we expect to file with the SEC in the first quarter of calendar 2015. All information provided in this release is as of January 27, 2015, and IGT does not intend, and undertakes no duty, to update this information to reflect subsequent events or circumstances.
IGT Resources:
-- Like us on Facebook
-- Play DoubleDown Casino Games
-- Like DoubleDown Casino on Facebook
-- Follow us on Twitter
-- View IGT's YouTube Channel
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 approximately 5 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 .
IGT Contacts:
Kate Pearlman
Vice President, Investor Relations and Treasury
Cindy Klimstra
Director, Investor Relations
+1 866-296-4232
InvestorRelations@IGT.com
CONSOLIDATED STATEMENTS OF INCOME (Unaudited and Condensed)
First Quarters Ended
December 31, 2014 2013
-------------------- ---- ----
(In millions, except per
share amounts)
REVENUES
Gaming operations $211.1 $223.0
Product sales 148.0 243.6
Interactive 91.5 74.6
---- ----
Total 450.6 541.2
COSTS AND OPERATING
EXPENSES
Cost of gaming operations 79.8 86.8
Cost of product sales 77.0 116.7
Cost of interactive 35.4 27.9
Selling, general and
administrative 108.5 117.8
Research and development 57.3 60.3
Depreciation and
amortization 13.7 16.7
Contingent acquisition-
related 2.5 11.3
Impairment,
restructuring, and
merger-related 12.9 -
---- ---
Total 387.1 437.5
OPERATING INCOME 63.5 103.7
---- -----
OTHER INCOME (EXPENSE)
Interest income 9.3 10.1
Interest expense (21.3) (36.4)
Other 0.2 (1.9)
--- ----
Total (11.8) (28.2)
INCOME BEFORE TAX 51.7 75.5
Income tax provision
(benefit) 16.7 (3.7)
---- ----
NET INCOME $35.0 $79.2
===== =====
EARNINGS PER SHARE
Basic $0.14 $0.31
Diluted $0.14 $0.31
WEIGHTED AVERAGE SHARES
OUTSTANDING
Basic 247.6 252.6
Diluted 249.9 255.3
CONSOLIDATED BALANCE SHEET (Unaudited and Condensed)
December 31, September 30,
2014 2014
---- ----
(In millions)
ASSETS
Cash and
equivalents $201.6 $255.1
Restricted
cash
and
investment
securities 66.0 59.3
Jackpot
annuity
investments 51.9 53.0
Receivables,
net 463.9 530.2
Inventories 72.0 71.4
Other
assets
and
deferred
costs 237.3 252.1
----- -----
Total
current
assets 1,092.7 1,221.1
Property,
plant
and
equipment,
net 405.2 412.7
Jackpot
annuity
investments 235.5 236.7
Contracts
and
notes
receivable,
net 97.1 115.5
Goodwill
and
other
intangible
assets,
net 1,524.7 1,542.5
Other
assets
and
deferred
costs 453.4 461.0
----- -----
TOTAL
ASSETS $3,808.6 $3,989.5
======== ========
LIABILITIES
AND
SHAREHOLDERS'
EQUITY
Accounts
payable $66.3 $77.7
Jackpot
liabilities,
current
portion 117.5 117.5
Dividends
payable - 27.2
Other
accrued
liabilities 251.4 322.4
----- -----
Total
current
liabilities 435.2 544.8
Long-
term
debt 1,810.2 1,878.6
Jackpot
liabilities 259.5 261.6
Other
liabilities 110.4 106.9
----- -----
TOTAL
LIABILITIES 2,615.3 2,791.9
TOTAL
EQUITY 1,193.3 1,197.6
------- -------
TOTAL
LIABILITIES
AND
SHAREHOLDERS'
EQUITY $3,808.6 $3,989.5
======== ========
CONSOLIDATED STATEMENTS OF CASH FLOW (Unaudited and Condensed)
Three Months Ended
December 31, 2014 2013
------------------ ---- ----
(In millions)
OPERATING
Net income $35.0 $79.2
Adjustments:
Depreciation and
amortization 38.3 51.3
Acquisition-
related
contingent earn-
out costs 2.4 4.5
Other non-cash
items 14.0 28.6
Changes in
operating assets
and liabilities,
excluding
acquisitions:
Receivables 73.4 (13.2)
Inventories (1.2) 15.6
Accounts payable
and accrued
liabilities (80.1) (51.0)
Jackpot
liabilities (5.7) (16.6)
Income taxes, net
of employee stock
plans 5.8 (17.8)
Other assets and
deferred costs 21.0 (4.5)
---- ----
Net operating cash
flows 102.9 76.1
----- ----
INVESTING
Capital
expenditures (24.6) (24.6)
Proceeds from
assets sold 6.0 3.3
Investment
securities, net - (70.6)
Jackpot annuity
investments, net 6.1 9.0
Changes in
restricted cash (6.8) (0.8)
Loans receivable,
net - 6.4
--- ---
Net investing cash
flows (19.3) (77.3)
----- -----
FINANCING
Debt-related
proceeds
(payments), net (75.0) (0.5)
Employee stock
plan proceeds 3.8 8.3
Share repurchases,
including net
shares (8.1) (211.0)
Dividends paid (54.6) (25.9)
----- -----
Net financing cash
flows (133.9) (229.1)
------ ------
FOREIGN EXCHANGE
RATES EFFECT ON
CASH AND
EQUIVALENTS (3.2) (2.4)
---- ----
NET CHANGE IN CASH
AND EQUIVALENTS (53.5) (232.7)
BEGINNING CASH AND
EQUIVALENTS 255.1 713.3
----- -----
ENDING CASH AND
EQUIVALENTS $201.6 $480.6
====== ======
SUPPLEMENTAL DATA (Unaudited)
REVENUE METRICS
First Quarters Ended December 31, 2014 2013
--------------------------------- ---- ----
(in millions, unless otherwise noted)
GAMING OPERATIONS
Revenues $211.1 $223.0
North America 188.0 191.6
International 23.1 31.4
Gross margin 62% 61%
North America 62% 59%
International 67% 72%
Installed base (units '000) 45.4 54.3
North America 36.7 41.3
International 8.7 13.0
Yield (average revenue per unit per day -
$0.00) $46.36 $44.99
PRODUCT SALES
Revenues $148.0 $243.6
North America 94.0 170.0
International 54.0 73.6
Machines $80.1 $167.0
North America 51.7 118.0
International 28.4 49.0
Non-machine $67.9 $76.6
North America 42.3 52.0
International 25.6 24.6
Gross margin 48% 52%
North America 50% 53%
International 45% 50%
Machine units recognized ('000) 5.8 12.8
North America 3.9 9.6
International 1.9 3.2
Machine units shipped ('000) [includes units
where revenues deferred] 5.9 13.0
North America 4.2 9.8
New 0.7 3.7
Replacement 3.5 6.1
International 1.7 3.2
New 0.5 0.7
Replacement 1.2 2.5
Machine ASP ('000) $13.9 $13.2
North America 13.4 12.3
International 15.1 15.3
INTERACTIVE
Revenues $91.5 $74.6
North America 81.5 65.8
International 10.0 8.8
Social Gaming - North America 79.4 64.8
IGTi 12.1 9.8
North America 2.1 1.0
International 10.0 8.8
Gross margin 61% 63%
North America 61% 62%
International 65% 66%
DoubleDown average user metrics
DAU (daily active users) ('000) 1,910 1,716
MAU (monthly active users) ('000) 5,212 6,198
Bookings per DAU ($0.00) $0.43 $0.42
Reconciliations of GAAP to Non-GAAP Adjusted Financial Measures
(in millions, except EPS)
First Quarter Ended December
31, 2014 Cost of Cost of Operating Operating Net Diluted
Gaming Interactive Expenses Income Earnings EPS
Operations (a)
--- ---------- ---
GAAP measures $79.8 $35.4 $194.9 $63.5 $35.0 $0.14
% of revenue 43% 14%
Acquisition-related
charges: (b)
Contingent retention & earn-
out - - (2.5) 2.5 1.7 0.01
Amortization of intangibles - (2.5) (2.2) 4.7 3.2 0.01
Recovery of Alabama note
impairment - - 1.0 (1.0) (0.7) -
Merger-related costs - - (13.9) 13.9 9.2 0.04
Severance (0.9) - (0.9) 1.8 1.2 -
Certain discrete tax items
(benefits) - - - - (1.9) (0.01)
--- --- --- --- ---- -----
Total non-GAAP adjustments (0.9) (2.5) (18.5) 21.9 12.7 0.05
Adjusted measures $78.9 $32.9 $176.4 $85.4 $47.7 $0.19
% of revenue 39% 19%
(a) Adjustments tax effected at 34%; (b) Primarily DoubleDown
First Quarter Ended December
31, 2013 Cost of Cost of Operating Operating Net Diluted
Gaming Interactive Expenses Income Earnings EPS
Operations (a)
--- ---------- ---
GAAP measures $86.8 $27.9 $206.1 $103.7 $79.2 $0.31
% of revenue 38% 19%
Acquisition-related
charges: (b)
Contingent retention & earn-
out - - (11.3) 11.3 7.5 0.03
Amortization of intangibles - (2.7) (3.4) 6.1 4.0 0.02
Severance (0.6) - (2.1) 2.7 1.8 0.01
Certain discrete tax items
(benefits) - - - - (29.6) (0.12)
--- --- --- --- ----- -----
Total non-GAAP adjustments (0.6) (2.7) (16.8) 20.1 (16.3) (0.06)
Adjusted measures $86.2 $25.2 $189.3 $123.8 $62.9 $0.25
% of revenue 35% 23%
(a) Adjustments tax effected at 34%; (b) Primarily DoubleDown
Adjusted EBITDA For The First Quarters
Ended December 31, 2014 2013
-------------------------------------- ---- ----
GAAP Net income $35.0 $79.2
Other (income) expense, net 11.8 28.2
Income tax provision 16.7 (3.7)
Depreciation and amortization 38.3 51.3
Other charges:
Share-based compensation 8.7 8.9
Contingent acquisition-related costs 2.5 11.3
Impairment, restructuring, and merger-
related 12.9 -
---- ---
Adjusted EBITDA $125.9 $175.2
====== ======
Free Cash Flow For The Three Months Ended
December 31, 2014 2013
----------------------------------------- ---- ----
GAAP net operating cash flows $102.9 $76.1
Investment in property, plant and equipment (7.2) (7.6)
Investment in gaming operations equipment (17.3) (16.9)
Investment in intellectual property (0.1) (0.1)
---- ----
Free Cash Flow (before dividends) 78.3 51.5
Dividends paid (54.6) (25.9)
----- -----
Free Cash Flow (after dividends) $23.7 $25.6
===== =====
We believe that certain non-GAAP
financial measures, when presented
in conjunction with comparable GAAP
(Generally Accepted Accounting
Principles) measures, are useful
because that information is an
appropriate measure for evaluating
our operating performance. Non-
GAAP information is used to
evaluate business performance and
management's effectiveness. These
measures should be considered in
addition to, not as a substitute
for, or superior to, measures of
financial performance prepared in
accordance with GAAP. Non-GAAP
financial measures may not be
calculated in the same manner by
all companies and therefore may not
be comparable.
------------------------------------
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SOURCE IGT
