AGEM releases March 2015 index

The composite index closed at 190.28 in March, which represented a modest decline of 2.43 points (-1.3 percent) when compared to the prior month. However, compared to a year ago, the AGEM Index witnessed a gain of 3.60 points (+1.9 percent). The latest annual increase follows five consecutive months of year-over-year declines.

In March 2015, five of the 14 global gaming equipment suppliers reported month-to-month gains in stock price, with three up by more than 10 percent. However, of the nine manufacturers that reported declines, seven were down by more than five percent, with three reporting declines of more than 10 percent.

The performance of the AGEM Index in March 2015 was in line with the broader stock markets, as each of the three major indices witnessed monthly declines. NASDAQ fell 1.3 percent to 4,900.88, while the S&P 500 declined 1.7 percent to 2,067.89. The Dow Jones Industrial Average witnessed the greatest decline of the three, falling 2.0 percent from 18,132.70 to 17,776.12.

Selected positive contributors to the March 2015 AGEM Index included the following:

• Aristocrat Technologies (ALL) contributed 3.97 points, due to its 13.3-percent increase in stock price to AU$8.43.  
• Ainsworth Game Technology (AGI) reported a stock price of AU$2.89 (+15.6 percent) and contributed 0.84 points to the index.  
• With a stock price of $7.62 (+7.2 percent), Global Cash Access (GCA) contributed 0.33 points.

Selected negative contributors included the following:

• Crane Co. (CR) contributed negative 2.17 points, due to its 6.6-percent decline in stock price to $62.41. 
• With a stock price of $10.47 (-22.5 percent), Scientific Games Corporation (SGMS) contributed negative 1.83 points to the overall index.

Consolidation continues in the equipment manufacturing industry. On April 7, 2015, GTECH completed its $6.4-billion acquisition of International Game Technology. The new company, which will go by the name "IGT," is the world's largest gaming machine manufacturer as well as top lottery contractor and expects to achieve roughly $280 million in corporate cost savings going forward. The transaction (consolidation of IGT and GTECH) will be reflected in the April 2015 edition of the AGEM Index, which will be released in early May 2015.

In March, GTECH released its fourth quarter 2014 financial results. During the quarter, the company reported EUR 809.5 million in net revenues, which represents an increase of 4.7 percent compared to the fourth quarter of 2013. The increase was primarily due to gains in product sales revenues, which increased 69.7 percent year-over-year to EUR 86.0 million. Service revenues reported little change during the period, rising 0.1 percent to EUR 723.5 million.

In the fourth quarter of 2014, GTECH reported a 9.7-percent increase in net revenues in the Americas, which rose to EUR 261.5 million, due to VLT sales in Oregon and strong instant ticket sales revenues. Meanwhile, International revenues increased 34.2 percent year-over-year to EUR 113.4 million, primarily attributable to strong product sales in Belgium, an increase in machine sales to casino customers in EMEA and a rise in systems sales in Europe. Additionally, GTECH was awarded a contract for up to 5,550 of the initial 16,500 VLTs in Greece. Strong revenues in the Americas and internationally were partially offset by a 3.5-percent decline in revenues in Italy to EUR 434.5 million. The company notes that the decline was attributable to higher sports betting payout during the period.

Global Cash Access (GCA) also recently completed an acquisition when its $1.2-billion buy-out of Multimedia Games completed in December 2014. During the fourth quarter of 2014, Global Cash Access reported $152.1 million in net revenues, which represents an increase of 8.3 percent compared to the prior year period. Adjusted EBITDA increased 40.4 percent year-over-year to $24.0 million.

In the fourth quarter, Multimedia Games reported an 18.9-percent decline in net revenues to $48.0 million, while adjusted EBITDA fell 21.9 percent to $22.8 million. During the quarter, the company reported 537 units sold compared to 1,375 in the prior year, while average sales price fell 6.0 percent to $16,318. By the end of the quarter, domestic participation installed units totaled 13,287, which is up 5.0 percent from a year ago.

The combined Global Cash Access and Multimedia Games operations will remain headquartered in Las Vegas, Nevada, while the technology and manufacturing facilities will continue to be located in Austin, Texas. The companies plan to consolidate their manufacturing operations later this year, which is expected to reduce costs.