Association of Gaming Equipment Manufacturers (AGEM) Releases November 2017 Index

During the latest period, seven of the 12 global gaming equipment manufacturers reported month-to-month increases in stock price. Five manufacturers reported decreases in stock price during the month, with one posting double-digit declines.

The three broader stock market indexes produced exceptional results in October. The S&P 500 reported a month-to-month increase of 2.81 percent to 2,647.58. The Dow Jones Industrial Average increased 3.83 percent to 24,272.35, while the NASDAQ increased 2.17 percent during the period to 6,873.97.

Selected positive contributors to the November 2017 AGEM Index included the following:

• International Game Technology PLC (IGT) contributed 12.99 points due to a 16.98 percent increase in stock price to $27.49.
   


• Konami Corp. (TYO:9766) reported a 7.82 percent increase in stock price to 5,930¥ and contributed 8.69 points.
   


• Scientific Games Corporation (SGMS) contributed 6.88 points due to a 10.61 percent increase in stock price to $52.65.

Selected negative contributors included the following:

• With its stock price falling 7.86 percent to AU$21.70, Aristocrat Leisure Limited (ASX:ALL) contributed negative 12.88 points.
   


• Ainsworth Game Technology (ASX:AGI) reported a 10.09 percent decrease in stock price to AU$2.05, contributing negative 0.79 points.  

In November, Aristocrat Technologies (ASX:ALL) announced an agreement to acquire Big Fish Games, Inc. from Churchill Downs. From 2014 until the acquisition closing by Aristocrat, Big Fish was Churchill Downs’ social casino. The purchase price is $990 million in cash. The acquisition represents Aristocrat’s second in this space in the second half of 2017. In August, Aristocrat announced the purchase of Plarium, an Israeli social game company, for $500 million, which closed in October.

The Big Fish acquisition comes in the wake of a moderating financial performance. On a year-over-year basis, revenues at Big Fish decreased by $4.4 million in the third quarter of 2017, and earnings before interest, taxes, depreciation and amortization (EBITDA) declined by $10.2 million, largely from an increase in user acquisition expense and overall operating expenses.

The acquisition in question is the latest in a series of high-value transactions in the social gaming space, with previous notable transactions including the $4.4 billion sale of Playtika by Caesars in 2016 to Shanghai Giant Network Technology Company (and other investors) and the $825 million sale of DoubleDown in April 2017 by IGT to an affiliate of DoubleU Games Co., a South Korean company. The Big Fish sale is scheduled for review and potential approval in Q1 2018.

In November, Agilysis released its second quarter results for its fiscal year 2018 (through September 2017). Net revenues fell 7.8 percent year-over-year during this period, decreasing from $32.7 million in the second quarter of fiscal year 2017 to $30.1 million in the second quarter of fiscal year 2018. Despite the revenue dip, adjusted EBITDA margin increased on a year-over-year basis from 4.0 percent to 7.7 percent. Adjusted EBITDA grew on a year-over-year basis from $1.3 million during the second quarter of fiscal year 2017 to $2.3 million during the second quarter of fiscal year 2018. Gross profit margin grew on a year-over-year basis from 48.6 percent in the second quarter of fiscal year 2017 to 51.0 percent in the same period of fiscal year 2018, driven by a $2.03 million year-over-year drop in cost of goods sold.

Everi also released its third quarter results for its fiscal year 2017. On a year-over-year basis, Everi’s quarterly net revenues increased $25.1 million, from $222.2 million to $247.3 million (11.3 percent increase). Adjusted EBITDA grew on a year-over-year basis from $51.6 million to $53.2 million (2.8 percent increase). As a result, the adjusted EBITDA margin declined on a year-over-year basis from 23.2 percent in the third quarter of 2017 to 21.5 percent in the most-recent period. Everi is also seeking to refinance its term loan and senior unsecured notes to reduce interest expenses and extend its debt maturity profile.