Gambling tech guru International Game Technology’s (NYSE: IGT) net income almost tripled year over year in the second quarter. Considering the ongoing bedlam in the gambling business, with FBI agents in hot pursuit and assets being confiscated, the news of the company making profits is more than welcome.
Impressive metrics
IGT saw a surge in its net income from continuing operations, growing to $69.6 million from $25.7 million. Revenue ticked up 1%, to $492.3 million, while operating expenses declined to $161 million from $208 million.
While the slot machine maker saw a slight decline in its revenues from gaming operations, its product sales grew on a year-on-year basis. In previous quarters, IGT’s revenue had been adversely impacted by the slowdown in Las Vegas, as spending on gaming equipment by companies like MGM Resorts (NYSE: MGM) and Las Vegas Sands (NYSE: LVS) had declined sharply. Las Vegas is hit and miss recently. While overall Vegas gaming revenues rose 3.8% sequentially in January, Strip revenues were down 9.6% in February. Still, visitors were up in the first two months of the year.
Besides, IGT recently signed another pact to install its industry-leading applications and games at Enjoy Group’s casino in Chile. In a recent article I spoke about a string of other deals that IGT has clinched since the beginning of this year as part of its growth strategy, and hinted at the possibility of a turnaround in its declining revenues.
Establishing credit
IGT’s interest expense, which has been rising over the last two years, also declined this quarter. The company recently entered into a $750 million, five-year credit facility, which replaces its existing $1.2 billion credit facility. Opting for a smaller credit facility with greater flexibility and a lower interest rate at the same time, I believe, makes a lot of sense at the moment. If, at anytime, the company requires more debt, it can request an additional $250 million.
A Foolish take
Although momentary market movements do not tell the whole story about a company, it may be interesting to know that IGT’s gloomy shares are up 8% since the earnings announcement. This, however, is only part of the bigger picture. Increasing revenues, significant deals, and a favorable credit facility -- all of these are definitely encouraging signs. All in all, IGT does look like a potential buy to me.
