International Game Technology (IGT) reported first quarter fiscal 2015 adjusted earnings of 19 cents per share, falling short of the Zacks Consensus Estimate and the year-ago earnings of 25 cents.
Results were impacted by weakness in the company’s land-based casino business, which completely offset the gains from the DoubleDown social casino business.
Quarter Details
In the quarter, revenues decreased 17.1% year over year to $450.6 million and missed the Zacks Consensus Estimate of $481 million. Gaming Operations and Product sales declined 5% and 39% year over year, respectively. Interactive was the only segment to report revenue growth. Segment revenues increased 23% year over year to $91.5 million.
In the Gaming Operations segment, average revenue per unit per day increased 3% from the year-ago quarter to $46.36.
Adjusted operating expenses decreased 7% year over year in the quarter to $176.4 million, owing to a significant decline in selling, general & administrative (down 8% year over year) and research &development (down 5% year over year) expenses. As a result, operating ratio (adjusted operating expenses as a percentage of revenue) contracted to 39.1% from 77.7% in the prior-year quarter.
Balance Sheet
IGT exited the quarter with cash and investments of $201.6 million versus $255.1 million as on Sep 30. Contractual debt obligations declined 4% year over year to $1,750 million. During the quarter, IGT returned approximately $62.7 million in the form of dividends and through share repurchases.
Recommendation
We believe that increasing investments in product development will hurt profitability. Moreover, intensifying competition from the likes of Isle of Capri Casinos, Inc. (ISLE) and Zynga (ZNGA) in its core as well as interactive markets remains a concern.
However, cost savings from the restructuring program have helped the company lower its operating cost. In addition, the extended partnership with Sony (SNE) is a key revenue driver.
IGT currently has a Zacks Rank #4 (Sell).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Be the first to comment