International Game Technology (IGT)

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International Game Technology (IGT)

Q4 2012 Earnings Call

November 08, 2012 5:00 pm ET

Executives

Matthew G. Moyer - Vice President of Investor Relations

Patti S. Hart - Chief Executive Officer, Director and Member of Stock Award Committee

John Vandemore - Chief Financial Officer and Treasurer

Analysts

Carlo Santarelli - Deutsche Bank AG, Research Division

Robin M. Farley - UBS Investment Bank, Research Division

Shaun C. Kelley - BofA Merrill Lynch, Research Division

Steven M. Wieczynski - Stifel, Nicolaus & Co., Inc., Research Division

Felicia R. Hendrix - Barclays Capital, Research Division

Joseph Greff - JP Morgan Chase & Co, Research Division

Clifford Kurz - Credit Agricole Securities (USA) Inc., Research Division

Presentation

Operator

Welcome to International Game Technology's Fourth Quarter and Fiscal Year 2012 Results Conference Call. [Operator Instructions] This call is being recorded. If anyone has any objections, you may disconnect at this time. I would now like to turn the call over to Matt Moyer, Vice President of Investor Relations. Sir, you may begin.

Matthew G. Moyer

Thanks, Kim. Good afternoon, and welcome to IGT's Fourth Quarter Fiscal Year 2012 Earnings Conference Call. On the call today are Patti Hart, CEO; and John Vandemore, CFO.

Before we begin, I'd like to remind listeners our discussion will contain forward-looking statements concerning matters, such as our expected financial and operational performance, including our guidance for fiscal 2013; our expectations for the economy in general and the gaming industry in particular; the expected impact of the Double Down acquisition; and our strategic, operational and product plans. Actual results may differ materially from the results predicted, and reported results should not be considered as indicative of future performance. Potential risks and uncertainties that could cause our business and financial results to differ materially from our forward-looking statements are included in our filings with the SEC, including our most recent annual report on Form 10-K and subsequent quarterly reports on Form 10-Q. All information discussed on this call is as of today, November 8, 2012, and IGT does not intend, and undertakes no obligation, to update this information to reflect future events or circumstances.

In addition, on today's call, we will discuss certain non-GAAP financial measures, including adjusted earnings per share, adjusted operating expenses and adjusted earnings per share guidance. Reconciliations of these non-GAAP measures to the GAAP measures we consider most comparable can be found in today's earnings release, which is posted on the Investor Relations section of our website, igt.com, and included as an Exhibit 99 to the Form 8-K we furnished today to the SEC. All references to 2013 or 2013 year refer to our fiscal year 2013. With all that in mind, I'll turn the call over to Patti.

Patti S. Hart

Thank you, Matt, and good afternoon, everyone. Today, we reported a very successful fourth quarter and concluded an equally strong year with momentum. Our exceptional financial results demonstrate the outcomes that we expect from the execution of our strategy and the day-to-day management of our business: first, the financial results reinforce the strength of IGT's leadership position in our core business. We create great games that our customers and players love; second, they validate our strategy for growing IGT in the future by leveraging our industry-leading content across a wide array of gaming platforms like online, mobile and social; third, our performance reflects the financial strength of our company, strength that allows us to make disciplined investments in our business while consistently returning substantial capital to shareholders.

Overall, the financial productivity of our business is accelerating in a very positive direction. I'd like to highlight just a few of the many significant achievements from our fourth quarter. We grew total revenues 17% to $631 million. This is our highest quarterly revenue performance in 4 years. We expanded adjusted earnings per share 58% to $0.38. We increased North American machine sales revenues 52% to $153 million, our highest quarterly mark in 8 years. And we grew our gaming operations installed base 6%.

Our performance for the year included a number of noteworthy accomplishments as well. We grew total revenues 10% to over $2.1 billion. We expanded adjusted earnings per share 12% to $1.04. This is our third consecutive year of double-digit earnings growth. We increased prices, ship share and gross margin simultaneously in our North American product sales business, a dynamic that's remarkable for any consumer-oriented company. We returned over $545 million in cash to shareholders in the form of dividends and share repurchases. And we began to leverage Double Down into a meaningful addition to our core business. All in all, we delivered a strong year that came in at the high end of our guided range.

Our core for sale business is healthier than it has been in many years. Our gaming operations profits are steady while generating tremendous cash flows. And our interactive business is gaining traction at an accelerating rate. We believe we have the pieces in place to generate significant value for shareholders now and into the future.

None of this would be possible without the dedication of the IGT workforce. To them, I would like to say thank you for the progress made, for the change affected and for the results delivered.

2012 marks the third straight year we have met or exceeded our initial earnings guidance. Our company is firmly positioned for the future, and we expect 2013 to be even stronger as we plan to continue our streak with a fourth consecutive year of double-digit adjusted EPS growth. With that, I'll ask John to cover some of the financial details. John?

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