GameTech International (NASDAQ: GMTC) makes electronic bingo machines and video lottery terminals (VLTs). Players can play more bingo cards on an electronic bingo machine than on paper cards, leading to more revenue per bingo session. GameTech's VLTs, which let people play state lottery games on a video terminal, are the most profitable part of its business.
The growing number of casinos in the United States and a shift towards electronic casino games helped GMTC avoid big declines in its revenues, despite the overall economic recession. However, GMTC has not been insulated from this slowdown, as its net income for both 2008 and 2009 were negative $11.2 million and $10.5 million, respectively. The cause of these negative net incomes has been the result of impairments to the company's goodwill, which totaled $15.7 million in 2009.
The casino industry as a whole has struggled, as gambling is considered a luxury, and as the economic downturn has reduced the disposable income of many, fewer people now have extra money they can afford to lose gambling.
Note: GameTech International groups its Portable Bingo Terminals and Fixed Base Bingo Terminals segments into one segment, Bingo Systems, for its Net Income statement.
These products are electronic bingo machines that can be placed anywhere within a bingo hall or casino setting (hence the term 'portable'). In addition to the bingo terminals themselves, this segment includes the management systems the terminals run on:
This segment consists of products that use microcomputer hardware and touch screen displays, and enable players to play up to 600 cards simultaneously. Each fixed base unit consists of four parts:
This segment consists of both VLTs themselves and slot machines, both of which are produced under Summit Gaming. These products are created using themes developed both by GameTech and external companies. GMTC has used their VLT's to enter the Class III market. The Class III market consists of games such as slot machines and electronic casino games (such as video poker). GameTech's other products fall under the Class II market, which contains bingo games under all mediums.
In 2009, GMTC posted total revenues of $47.8 million, a slight decline from the previous year's revenues of $55.5 million. The company attributed the revenue declines to increased competition from regional competitors as well as the declining overall economy. Despite the decrease in revenues, GMTC's net loss declined from $11.2 million in 2008 to $10.5 million in 2009.
According to the Native American Times, there has been substantial growth in the number of casinos in the United States since 2006, especially on Native American reservations and 'racinos' (a racetrack with a casino). The increase in the number of casinos has presented manufacturers of slot machines, video poker machines, and bingo machines (such as GameTech) with new business opportunities. According to the U.S. Bureau of Labor Statistics, the growth in the casino industry will continue, with employment in gaming services occupations projected to grow by 23 percent between 2006 and 2016, a much faster rate than the average for all occupations. This growth is greatly beneficial to GameTech because these new casinos need to fill their floorspace with casino games, including GameTech's electronic bingo machines.
People tend to participate in luxury activities such as gambling only when they feel they have enough disposable income. In 2009, domestic disposable income suffered from factors such as all-time highs in oil prices, and a struggling U.S. housing market. These factors have contributed to shaky consumer confidence, which has hurt the Applied Analysis Gaming Index, which includes casino operators and gaming machine manufacturers. Although other factors, such as its acquisition of Summit Amusement & Distributing and the nationwide growth of casinos, enabled GameTech to avoid most of these harmful effects, this trend is nevertheless potentially harmful if GameTech is unable to continue to find ways to fuel its growth.
As an electronic bingo game manufacturer, GameTech primarily competes with other electronic bingo game makers. However, GameTech also heavily competes with manufacturers of other electronic casino games for valuable floorspace in casinos. Its competitors include: