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US – AGEM Index down 1.5 per cent in November

By - 16 December 2015

After reporting a strong month-to-month increase of 7.6 per cent in October 2015, the AGEM Index returned some value in November 2015.

The composite index ended the month at 194.33, representing a decline of 2.89 points, down 1.5 per cent from the prior month.
Compared to a year ago, the AGEM Index reported a gain of 8.74 points, up 4.7 per cent, which represents the second consecutive month of positive annual growth. Agilysys (AGYS), a technology company that provides software and service to the hospitality industry, was added to the index in the latest period.

In November, 12 of the 14 global gaming equipment manufacturers reported month-to-month declines in stock price, with five down by more than 10 percent. Of the two manufacturers reporting gains in stock price during the month, both were up by less than five percent.

The broader stock markets reported modest improvements from October 2015 to November 2015. The S&P 500 ended the month at 2,080.41, which represents a gain of 0.1 percent. The Dow Jones Industrial Average reported a gain of 0.3 percent, rising to 17,719.92. NASDAQ reported the greatest month-to-month increase of the three major indices, rising 1.1 per cent to 5,108.67.

Aristocrat Technologies (ALL) contributed 2.43 points, due to a 1.8 per cent increase in stock price to AU$9.49.

With a stock price of ¥2,881, up 4.5 per cent, Konami Corp. (9766) contributed 1.27 points.

Scientific Games Corporation (SGMS) reported a stock price of $9.22, down 16.9 per cent and contributed negative 1.60 points. Due to a stock price of $15.53, down 4.3 per cent, International Game Technology PLC (IGT) contributed negative 1.56 points. Ainsworth Game Technology (AGI) contributed negative 1.52 points, due to a 24.5 per cent decline in stock price to AU$2.40.

In November 2015, many of the gaming equipment manufacturers released their financial results for the period ending September 30, 2015. Selected performances are noted below.

One quarter removed from its merger with GTECH, International Game Technology PLC (IGT) reported revenues of $1.2bn in the third quarter of 2015, up 29.5 percent from a year ago. An adjusted EBITDA of $413.8 million also displayed strong gains, up 21.1 percent from the third quarter 2014. However, on a pro forma basis, IGT reported a 17.6 per cent year-over-year revenue loss and a 23.5 per cent reduction in EBITDA. Net income attributable to IGT was $7.1m, while total net income on an adjusted basis was $82.5m. The company delivered $0.04 per diluted share or $0.41 per share on an adjusted basis. IGT’s total installed based fell 7.8 percent annually to 59,126 during the quarter, while total machines shipped declined 47.9 per cent to 6,622. However, global lottery same-store revenue growth was 6.2 per cent during the period.

Continuing the trend of industry consolidation, Everi Holdings Inc. (EVRI) reported third quarter revenue of $208.7m and adjusted EBITDA of $51.5m. The company reported a net loss during the quarter of $6.1 million, resulting in a net loss per diluted share of $0.09. The loss is attributable in part to the acquisition of Multimedia Games at the end of 2014, which is still in the process of being digested. However, the payments portion of the business reported positive trends, as revenue rose 6.4 percent to $154.8m, and both operating income and adjusted EBITDA for the division reported gains.

Agilysys (AGYS) reported second quarter fiscal 2016 revenue of $29.6m, which is a 12.6 per cent improvement from a year ago. Gross margin decreased, resulting in an adjusted EBITDA of $1.5m compared to the $1.6m in the same period of last year. The strong growth in revenue can be attributed to the double-digit growth in new customers and a 35-percent increase in subscription revenue, which have value given the predictability and loyalty of customers using these services.

Galaxy Gaming (GLXZ) announced revenues of $2.8m in the third quarter of 2015, a 9.4 per cent increase from last year. Adjusted EBITDA decreased 3.0 percent to $894,000, primarily due to increased regulatory and legal costs. However, net income saw a significant increase of 36.9 percent to nearly $120,000, due to an increase in recurring revenues. Galaxy Gaming’s focus on table games has led to strong gross margins in both the second and third quarters of this year. However, with the changing regulatory environment, those healthy margins were offset by a 12.1-percent increase in operating expenses, driven primarily by SG&A and other costs.

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