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International Game Technology's (NYSE: IGT ) third-quarter profit slipped 5.6% compared with last year's quarter. But there's more to this figure than meets the eye. Growth in revenues helped the slot machine maker beat Wall Street's estimates.
The quarter in detail
On a year-on-year basis, IGT's net income declined to $86.9 million from $92.1 million. But let's dig deeper before drawing a conclusion about the company's fundamentals. IGT's revenue rose 3%, to $489 million, on the back of stronger product sales with higher average selling prices. Its total costs and operating expenses went down 2%, to $348.2 million. The higher revenues and lower costs resulted in a 17% increase in operating income. So what caused the dip in net income?
The dip in profits was largely due to a higher income tax provision of $29.9 million, compared to a benefit of $0.1 million last year. But tax issues don't really reflect the operational performance of the company. On the whole, IGT has kept the positive momentum going.
Some 55% of IGT's revenue came from gaming operations, while the rest was generated from product sales. While its gaming operations segment witnessed a slight dip of 0.6% in revenues due to a lower installed base, product sales recorded a 7.6% increase due to better performance in Latin America, North America, and Europe.
As far as growth plans are concerned, IGT seems to have a set of concrete game plans. On one hand, IGT has been in the news for a string of acquisitions; on the other, it's been divesting some operations. Its latest deal to acquire Entraction Holding is expected to give a boost to its online gaming portfolio by adding new games. Meanwhile, management believes its sale of the Barcrest Group to Scientific Games (Nasdaq: SGMS ) will allow IGT "to reinvest the proceeds to drive enhanced products."
The Foolish bottom line
IGT has performed well from an earnings standpoint. The dip in profits shouldn't be a major concern for investors. With lower costs, increasing revenues, and smart growth plans, IGT looks poised to grow in the future.