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Howard Stutz

IGT increases second-quarter revenues with interactive help

25 April 2012

Tucked within International Game Technology's second-quarter earnings report were a few sentences about the company's interactive gaming business results.

It may be too early to attach a qualitative figure, but the slot machine maker clearly indicated to Wall Street where the business could be headed.

IGT reported a profit in the second quarter, though less than the company earned a year ago.

IGT, which has corporate headquarters in both Las Vegas and Reno, said its net income was $62.4 million in the quarter that ended March 31, down 8 percent from the same quarter in 2011. The results drove earnings per share of 21 cents, down from 22 cents a year ago. The company's net income has fallen for two quarters in a row - in the first quarter, net income fell 33.1 percent from the year-earlier quarter.

IGT grew revenues 13 percent in the quarter to $541.2 million, compared with $477 million in the second quarter of 2011.

The company said $300 million of the overall revenues came from the gaming operations division, which includes slot machines that IGT shares gaming revenues with the casinos. Revenues for the quarter jumped 11 percent in the division, "primarily due to increases in the interactive businesses and installed base."

Last year, IGT spent $115 million to acquire Entraction Holdings, a Swedish online poker operator. Earlier this year, the company spent $500 million to buy social gaming provider Double Down Interactive, which developed Facebook's Double Down Casino.

IGT said Tuesday Double Down Casino increased its monthly users by 24 percent, to 5.6 million as of March 31, compared with figures at the end of December.

Credit Suisse gaming analyst Joel Simkins said that by providing additional disclosure and metrics on the Double Down business model, IGT was helping investors better understand and assess the merits of the acquisition.

"As expected, our financial results are strengthening as we move through the fiscal year," IGT Chief Executive Officer Patti Hart said in a statement. "Every aspect of our business is providing a meaningful contribution to our strong financial performance."

The company also credited increases in slot machine sales in North America. The company sold 6,800 machines in the United States and Canada during the quarter, 19 percent more than a year ago. Revenues for those sales also increased 19 percent.

Roth Capital Partners gaming analyst Todd Eilers, in a note to investors before IGT announced earnings, thought the company would perform better financially in the second half of the fiscal year.

Eilers expects IGT to recognize on its books several large shipments of slot machines to the Revel in Atlantic City and two casinos in Ohio, and will take its initial orders for machines covering Canadian lotteries in Quebec and Alberta.

"We remain confident in our positive thesis on IGT shares and we look for the company's quarterly results to gain momentum throughout fiscal year 2012," Eilers said.

Shares of IGT closed at $15.90 on the New York Stock Exchange, down 29 cents of 1.79 percent. After the company announced earnings, shares rose almost 4 percent in after hours trading.
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