Shuffle Master, Inc. today announced its results for the second quarter ended April 30, 2011.
“We attribute this success to our R&D efforts, continued investments in game content, and improved execution.”
“During the quarter we achieved record quarterly revenue of nearly $60 million, filled some key strategic roles such as a new CEO and General Counsel, witnessed yet another quarter of phenomenal EGM performance, and we continued to grow recurring revenue,” stated Gavin Isaacs, Chief Executive Officer of Shuffle Master. “In my first two months as CEO, I have been impressed with the commitment of our employees to build upon our industry leadership, the depth and breadth of our strong intellectual property portfolio, and the many rich opportunities that I believe lie ahead for Shuffle Master.”
Second Quarter 2011 Financial Highlights
- Total revenue increased year-over-year by 18% to $59.9 million, a quarterly record, due to strong recurring revenue growth in Utility and Proprietary Table Games, and significant sales of Electronic Gaming Machines.
- Total lease, royalty and service revenue was up 12% year-over-year and approximately 3% sequentially, and totaled $26.1 million, or 44% of total revenue.
- GAAP net income continued to be strong and remained consistent at $7.9 million. Diluted earnings per share (“EPS”) was $0.14, as compared to $0.15 in the year-ago quarter.
- Selling, general and administrative (\”SG&A\”) expenses increased $1.4 million year-over-year from $15.7 million to $17.1 million for the quarter due primarily to a $0.7 million increase in trademark, copyright and patent expenses, and an increase in depreciation expense of approximately $0.3 million driven by improvements to the Company’s IT network infrastructure. As a percentage of total revenue, SG&A decreased by 240 bps to 29%.
- Adjusted EBITDA totaled $19.0 million, up 5% from $18.0 million in the year-ago quarter.
- Free Cash Flow, a non-GAAP financial measure, was $15.4 million as compared to $4.6 million in the prior year period.
- Net debt (total debt, less cash and cash equivalents) was $56.8 million as compared to $56.3 million as of October 31, 2010. The Company paid approximately $6.0 million on its $200 million senior secured revolving credit facility during the second quarter.
- International revenue accounted for approximately 59% of total revenues in the second quarter; Australia represented 41%.
“We continued to strengthen our balance sheet in the second quarter as we further reduced debt by $6 million,” said Linster Fox, Chief Financial Officer of Shuffle Master. “We also continued to build our recurring revenues to a record $26 million, fueled by strong shuffler, premium table game and progressive leases.”
Second Quarter 2011 Business Segment Highlights
Utility
- Total Utility lease and service revenue of $12.0 million grew 19% year-over-year driven by the Company’s aggressive emphasis on leasing, the accumulation of new lease placements in Asia during the prior year, and to a lesser extent, continued i-Deal® upgrades.
- Total Utility revenue of $19.2 million declined 9% year-over-year due to a decrease in the number of sold units, in line with the Company’s strategic focus on leasing versus sales. The prior year period also included a large sale of shufflers to Singapore.
- The Company achieved a record lease installed base of approximately 7,400 shufflers, a 22% increase in units year-over-year.
- Gross margin declined slightly year-over-year from 61% to 60% due primarily to the overall decrease in total revenue.
- The total i-Deal installed base grew to 3,217 units, of which 63% are units on lease.
Proprietary Table Games (\”PTG\”)
- Total PTG lease, royalty and service revenue for the second quarter increased 12% year-over-year to a record $10.4 million, primarily due to increased placements of premium games, progressives and side bets, namely, Ultimate Texas Hold’ em®, Mississippi Stud®, Blackjack Switch®, Dragon Bonus® and Three Card Poker Progressive™, in domestic markets.
- Total PTG revenue increased by 4% year-over-year to $10.6 million, largely as a result of strong recurring revenue growth.
- Gross margin increased 380 bps year-over-year to approximately 80%, primarily due to the increase in total revenue and a $0.5 million write-off of certain intangible licenses and related equipment in the prior year.
- Including approximately 200 trial units, the progressive add-on installed base totaled over 900 units. Three Card Poker Progressive™ and Fortune Pai Gow Poker Progressive® comprised approximately 70% of all progressive add-ons.
Electronic Table Systems (\”ETS\”)
- Total ETS lease, royalty and service revenue was approximately $3.7 million, down 10% from the year-ago quarter, due to decreased revenue resulting from removals of Table Master® seats in Pennsylvania and Delaware in the prior year as those markets transitioned to live gaming.
- Total ETS revenue for the quarter declined by 5% to $11.8 million as compared to $12.4 million in the prior period due to a 9% decrease in sales revenue. The prior year included significant sales revenue from Vegas Star® and Rapid Table Games® placements in Australia, as well as sales of Table Master seats in Florida.
- Gross margin decreased year-over-year from 63% to 41% due primarily to the overall decrease in revenue and the unfavorable margin effect from Table Master® removals in the U.S.
Electronic Gaming Machines (\”EGM\”)
- Total EGM revenue grew over $11 million year-over-year to $18.4 million, a second quarter record. EGM performance was driven almost entirely by the new Equinox™ cabinet, which totaled 920 units in the quarter.
- Gross margin increased 660 bps year-over-year to 61% due to the increased Equinox™ placements driving higher average sales prices as well as more efficient production costs from a better designed cabinet.
- Total placements of EGM units grew 162% from the prior year period as a result of strong customer demand for the Equinox™ cabinet.
“We’re very encouraged with our steadily improving ship share in Australia resulting from customer demand for our new Equinox™ cabinet,” commented David Lopez, Chief Operating Officer of the Company. “We attribute this success to our R&D efforts, continued investments in game content, and improved execution.”
Further detail and analysis of the Company\’s financial results for the second quarter ended April 30, 2011, is included in its Form 10-Q, which has been filed with the Securities and Exchange Commission today, June 8th, 2011.
Webcast & Conference Call Information
Company executives will provide additional perspective on the Company’s second quarter results during a conference call on June 8, 2011 at 5:30 am Pacific Time. Those interested in participating in the call may do so by dialing (201) 689-8263 or toll-free (877) 407-0792 and requesting Shuffle Master’s Second Quarter 2011 Conference Call. A hardcopy of the presentation materials may be printed from the Shuffle Master, Inc. website, www.shufflemaster.com, shortly before the start of the call. In conjunction with the call, a live audio webcast may be accessed at www.shufflemaster.com. In order to access the live audio webcast please allow at least 15 minutes before the start of the call to visit Shuffle Master’s website and download/install any necessary audio/video software for the webcast. Immediately following the call and through July 8, 2011, a playback can be heard 24-hours a day by dialing (858) 384-5517 or toll-free (877) 870-5176; account number is 3055; conference I.D. number is 27059448.
About Shuffle Master, Inc.
Shuffle Master, Inc. (NASDAQ Global Select Market: SHFL) is a gaming supply company specializing in providing its casino customers with improved profitability, productivity and security, as well as popular and cutting-edge gaming entertainment content, through value-add products in four distinct categories: Utility products, which include automatic card shuffler, roulette chip sorters and intelligent table system modules; Proprietary Table Games, which includes live games, side bets and progressives; Electronic Table Systems, which include various e-Table game platforms; and Electronic Gaming Machines, which include traditional video slot machines for select markets. The Company is included in the S&P Smallcap 600 Index. Information about the Company and its products can be found on the Internet at www.shufflemaster.com, or on Facebook, Twitter and YouTube.
