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GameTech International (GMTC) |
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WIKI ANALYSIS
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.[1] 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.[2]
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.
Business Overview
Business Segments
Note: GameTech International groups its Portable Bingo Terminals and Fixed Base Bingo Terminals segments into one segment, Bingo Systems, for its Net Income statement.
Portable Bingo Terminals (64% of 2009 Revenues)[3]
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:
- AllTrak2 is a Windows-based accounting system for bingo hall operators running on standard PC. It provides inventory-tracking capabilities, complete sales data, and player tracking systems, and is used for all four of GameTech's portable bingo terminals.
- Diamond POS is GameTech's operating system that includes Point-of-Sale (POS) functionality and player tracking. This enables bingo hall and casino operators to load sales information to electronic player terminals. This system is also compatible with all four of GameTech's portable bingo terminals.
- GameTech Elite is the company's next generation operating system. It performs all of the traditional functions of the Diamond and AllTrak2 systems while supporting newer style games and markets. In addition to these systems, GameTech offers four specific terminals in this segment:
- The TED was GameTech's only black and white portable terminal. The TED terminal can display four bingo cards at a time, plays up to 600 cards in a single game and operates using either the Alltrak2 back-office system or the Diamond POS system.
- The TED2C is a terminal with a color screen and clear easy-to-see graphics, and is similar to GameTech's fixed-base bingo systems. The TED2C terminal can display up to 16 cards at one time and play up to 600 cards in one game, and operates using either the AllTrak2 back-office system or Diamond POS system.
- The Traveler is a compact portable terminal with a color display and wireless communications and GameTech's most technologically advanced color terminal. The Traveler can display up to 8 cards at one time and play up to 2,000 cards in a single game. The terminal uses the company's crate loading methodology, eliminating the need to load a player’s information into a separate terminal. These devices run on GameTech's AllTrak2 back-office system, the Diamond POS system, or the GameTech Elite system.
- The Tracker is a low-cost color terminal that incorporates many features of the TED terminal onto a high-resolution color screen. The Tracker terminal can display up to 6 bingo cards at a time while monitoring the play of 600 cards in a single game, and operates using the AllTrak2, Diamond POS, or GameTech Elite system.
Fixed Base Bingo Terminals (18% of 2009 Revenues)[3]
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:
- The File Server runs the terminal's network, and processes and stores the bingo game's data.
- The Caller Unit, located on the caller’s stand, enables the caller to communicate with each player’s terminal through touch screen. The caller unit connects with each player’s fixed-base terminal and enables the winning electronic bingo card images and paper cards to be displayed on monitors within the bingo hall.
- The Sales Unit is a point-of-sale terminal, typically located near the entrance of a bingo hall, where all customer purchases are made. Using a touch screen, the cashier can activate player buy-in choices for the session, after which the unit automatically calculates pricing and totals.
- Finally, the Player’s Terminal consists of a separate computer and touch screen monitor. Each player’s terminal lets players cycle through all of their electronic bingo card images during play, marking the numbers called on each electronic bingo card image being played.
Box Equipment (18% of 2009 Revenues)[3]
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.[4]
Business and Financial Analysis
In 2009, GMTC posted total revenues of $47.8 million, a slight decline from the previous year's revenues of $55.5 million.[5] 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.[2]
Key Trends and Forces
The growth of new casinos across the United States greatly increases business opportunities for GameTech
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).[6] 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.[7] 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.
Economic cycles that decrease disposable income hurt the gambling industry
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.
Competition
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:
- FortuNet (FNET) manufactures and distributes electronic video games and related servers. Its primary focus is on electronic bingo games, which it helped pioneer in the 1980s. Its BingoStar platform is its primary product, and competes for business from casinos and bingo halls with the electronic bingo games GameTech International produces.
- International Game Technology (IGT) manufactures electronic casino games, and has the largest market share in the North American slot machine industry with a 70% share. In addition to simple slot machines, IGT also manufactures video poker games and other electronic games, thus competing with GameTech for floorspace in casinos. IGT has an advantage over GameTech due to its wider range of products, as it also produces network systems for operating casinos.[8]
- Bally Technologies (BYI) is another manufacturer of slot machines and other electronic casino games, such as Easy Lotto and Millionaire Sevens. As a result, Bally is another company whose products compete for casino space with the less popular bingo games produced by GameTech International.[9]
- Multimedia Games (MGAM) supplies its customers with electronic video games, video lottery terminals, and casino management systems, offering products from gaming giants such as Bally Technologies and Shuffle Master.[10]
References
- ↑ Reuters: Gametech International Inc (Consolidated Issue listed on NASDAQ Global Market)
- ↑ 2.0 2.1 GMTC 10-K 2009 Item 6 Pg. 25
- ↑ 3.0 3.1 3.2 GMTC 10-K 2009 Item 7 Pg. 26
- ↑ Wikipedia: Indian Gaming Regulatory Act
- ↑ GMTC 10-K 2009 Item 7 Pg. 27
- ↑ Native American Times: Downstream Casino Resort Goes High-Tech
- ↑ SeekingAlpha: Eight Ways to Play the Slots
- ↑ Wikinvest: IGT
- ↑ Bally Technologies: Company Information
- ↑ Multimedia Games: Company
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