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US – Second quarter earnings slide at IGT

By - 28 April 2014

Slot giant International Game Technology reported a 66 per cent decline in earnings and a 15 per cent slide in revenues during the second quarter, ending March 31.

Net income fell to $25.7m compared with $78.2m in the same quarter last year whilst net revenues came in at $512.8m in the quarter was a 15 percent decrease compared with a year ago. Revenues decreased nine per cent to $230m in the second quarter primarily due to lower MegaJackpots revenue whilst installed units decreased six per cent driven by a decline in North America MegaJackpots and international lease operations units.

“During the quarter, we took decisive action to reduce IGT’s cost structure and position the company for long-term earnings growth,” said Patti Hart, CEO of IGT. “Looking forward, we are confident that we will be able to leverage our leaner cost structure, substantial R&D investments and premium brands to drive shareholder value.”

Average machine sales price increased four per cent to $14,700 in the second quarter due to higher mix of higher-priced units. One of the positives was social gaming where revenues increased 27 per cent to $69m in the second quarter compared to the prior year quarter and increased six per cent sequentially, driven by an increase in both average Daily Average Users and bookings per DAU. Average DAU were 1.8m, an increase of 5% over the prior year quarter.

The increase in second quarter total operating expenses was primarily attributable to a legal accrual of $8 million, as lower acquisition-related costs were nearly offset by an increase in impairment and restructuring resulting from our business realignment announced in March 2014.

During the quarter, the company invested $185m to extend land-based licensing rights for Wheel of Fortune and Jeopardy through 2024, as well as expand rights to include social gaming and online real-money wagering in the US.

The company is reiterating its fiscal year 2014 revised guidance for adjusted earnings from continuing operations of $1.00 to $1.10 per share.

GAAP earnings per share from continuing operations for fiscal year 2014 will include acquisition-related expenses, primarily related to DoubleDown, severance costs, business realignment expenses, asset impairment charges, legal accrual charges, and certain discrete tax items or benefits, the amount of which is not determinable at this time.

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