Minnesota
(State or Other Jurisdiction
of Incorporation or Organization)
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0-20820
(Commission File Number)
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41-1448495
(IRS Employer
Identification No.)
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1106 Palms Airport Drive
Las Vegas, Nevada
(Address of Principal Executive Offices)
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89119-3720
(Zip Code)
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99.1
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Press release dated December 20, 2011, regarding the Company’s financial results for its fourth quarter and fiscal year ended October 31, 2011.
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SHUFFLE MASTER, INC.
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(Registrant)
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Date: December 27, 2011
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/s/ MICHAEL GAVIN ISAACS
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Michael Gavin Isaacs
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Chief Executive Officer
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![]() SHUFFLE MASTER, INC.
1106 Palms Airport Dr.
Las Vegas, NV 89119
www.shufflemaster.com
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EXHIBIT 99.1
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News Release
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FOR FURTHER INFORMATION CONTACT:
Julia Boguslawski
Investor Relations/ Corporate Communications
ph: (702) 897-7150
fax: (702) 270-5161
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Gavin Isaacs, CEO
Linster W. Fox, CFO
ph: (702) 897-7150
fax: (702) 270-5161
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Revenue increased year-over-year by 12% to a record $65.7 million, up from $58.6 million in the prior year period.
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Total lease, royalty and service (“recurring”) revenue was up 12% year-over-year and 3% sequentially, and totaled $27.6 million.
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GAAP net income increased 71% year-over-year to a record $9.7 million, compared to $5.7 million in the prior year period.
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Diluted earnings per share ("EPS") increased 80% year-over-year to $0.18, compared to $0.10 in the prior year period. EPS in the prior year period included one-time charges of $0.03 for a legal settlement and $0.01 for the Company’s previous credit agreement’s financing costs.
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Gross margin improved year-over-year from 60% to 63% due to improved Electronic Gaming Machine (“EGM”) margins driven by higher average sales prices and value engineering on the new Equinox™ cabinet.
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Operating income margin increased 480 basis points year-over-year to 22%.
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Adjusted EBITDA was a Company record, totaling $22.7 million and up 42% year-over-year.
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Selling, general and administrative ("SG&A") expenses decreased 4% year-over-year to $18.5 million for the quarter.
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Free Cash Flow (1), a non-GAAP financial measure, was $15.9 million as compared to $11.3 million in the prior year period.
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Revenue reached a Company record of $227.8 million, a year-over-year increase of approximately 13% or $26.5 million.
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Year-to-date recurring revenue was up 12% year-over-year and totaled $105.8 million, or nearly half of total revenue.
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Net debt (total debt, less cash and cash equivalents) was $17.1 million, the lowest since 2003, and $39.2 million lower than the end of fiscal year 2010.
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Gross margin increased 100 basis points year-over-year to approximately 63% due to strong segment performance and positive foreign exchange impact.
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GAAP net income and diluted EPS increased to $31.6 million and $0.57, respectively, compared to $23.1 million and $0.43 in fiscal year ended 2010.
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Adjusted EBITDA totaled $74.7 million, up 20% year-over-year.
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(1)
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Free cash flow is Adjusted EBITDA less capital expenditures and cash paid for taxes
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SG&A increased $1.8 million, or 3% year-over-year. As a percentage of total revenue, SG&A represented 30% as compared to 33% in fiscal year ended 2010.
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Cash and cash equivalents totaled $22.2 million as of October 31, 2011 as compared to $10.0 million as of October 31, 2010.
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Revenues from outside of the United States totaled $126.8 million, representing 56% of total revenues in fiscal year ended 2011.
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Total Utility recurring revenue of $12.8 million grew over 13% year-over-year driven by increased leases of the i-Deal®, MD3™, and one2six® shufflers.
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Total Utility revenue grew 27% year-over-year to $23.8 million, due largely to increased units on lease and to 212 shufflers sold to a customer in Macau in the fourth quarter.
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Gross margin remained relatively flat year-over-year at 62%.
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The total MD3™ installed base grew to 475 units, of which approximately 55% are units on lease.
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The total i-Deal® installed base grew to 3,500 units, of which approximately 60% are units on lease. i-Deal® lease revenue was over $3.3 million in the fourth quarter and approximately $12.3 million for the fiscal year.
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Total PTG recurring revenue for the fourth quarter grew 12% year-over-year to $11.0 million.
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Total PTG revenue increased by 9% to $11.2 million, led by strong lease placements of premium games and progressives.
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Gross margin remained relatively flat at 81%.
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As of the fourth quarter the progressive add-on installed base totaled 860 units. Fortune Pai Gow Poker® Progressive and Three Card Poker Progressive comprised approximately 65% of all progressive add-ons.
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Total ETS recurring revenue grew 9% year-over-year to $3.7 million predominantly due to new lease placements of Vegas Star® in New York.
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Total ETS revenue for the quarter decreased by 28% to $7.2 million due to fewer sales as compared to the prior year period. The prior year quarter included an additional $3.5 million in sales of Vegas Star® and Rapid Table Games® in Australia and Singapore.
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Gross margin decreased year-over-year from 36% to 26% due to decreased sales, a service initiative in the U.S. to refurbish older Table Master® units in the field as well as sales of older Table Master® units into Latin America.
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Total EGM revenue grew over 20% to a record $23.5 million compared to the prior year period driven primarily by continued momentum from the Equinox™ cabinet and new, popular titles.
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Gross margin increased year-over-year from 60% to 66% primarily due to more efficient production costs from higher volumes, a better designed cabinet, and higher average sales prices.
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Total placements of 1,256 EGMs in fourth quarter grew 18% from the prior year period driven by Equinox™ placements in Australia.
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Three Months Ended
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Twelve Months Ended
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October 31,
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October 31,
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2011
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2010
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2011
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2010
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Revenue:
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Product leases and royalties
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$ | 25,744 | $ | 22,704 | $ | 98,369 | $ | 86,717 | ||||||||
Product sales and service
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40,002 | 35,899 | 129,402 | 114,585 | ||||||||||||
Total revenue
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65,746 | 58,603 | 227,771 | 201,302 | ||||||||||||
Costs and expenses:
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Cost of leases and royalties
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9,583 | 7,614 | 34,089 | 28,008 | ||||||||||||
Cost of sales and service
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15,092 | 15,832 | 51,127 | 49,324 | ||||||||||||
Gross profit
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41,071 | 35,157 | 142,555 | 123,970 | ||||||||||||
Selling, general and administrative
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18,532 | 19,244 | 68,609 | 66,817 | ||||||||||||
Research and development
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8,134 | 5,886 | 27,628 | 21,811 | ||||||||||||
Total costs and expenses
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51,341 | 48,576 | 181,453 | 165,960 | ||||||||||||
Income from operations
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14,405 | 10,027 | 46,318 | 35,342 | ||||||||||||
Other income (expense)
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Interest income
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206 | 127 | 635 | 577 | ||||||||||||
Interest expense
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(605 | ) | (976 | ) | (2,636 | ) | (4,015 | ) | ||||||||
Other, net
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(493 | ) | (1,230 | ) | (997 | ) | 282 | |||||||||
Total other income (expense)
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(892 | ) | (2,079 | ) | (2,998 | ) | (3,156 | ) | ||||||||
Loss on early extinguishment of debt
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- | (1,123 | ) | - | (1,123 | ) | ||||||||||
Income from operations before tax
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13,513 | 6,825 | 43,320 | 31,063 | ||||||||||||
Income tax provision
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3,799 | 1,148 | 11,730 | 7,980 | ||||||||||||
Net income
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$ | 9,714 | $ | 5,677 | $ | 31,590 | $ | 23,083 | ||||||||
Basic earnings per share:
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$ | 0.18 | $ | 0.11 | $ | 0.58 | $ | 0.43 | ||||||||
Diluted earnings per share:
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$ | 0.18 | $ | 0.10 | $ | 0.57 | $ | 0.43 | ||||||||
Weighted average shares outstanding:
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Basic
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54,425 | 53,294 | 54,344 | 53,258 | ||||||||||||
Diluted
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54,959 | 54,261 | 54,997 | 54,199 |
Three Months Ended
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Twelve Months Ended
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October 31,
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October 31,
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2011
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2010
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2011
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2010
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Reconciliation of net income to Adjusted EBITDA:
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Net income
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$ | 9,714 | $ | 5,677 | $ | 31,590 | $ | 23,083 | ||||||||
Other expense (income)
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892 | 2,079 | 2,998 | 3,156 | ||||||||||||
Share-based compensation
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1,069 | 645 | 3,253 | 3,969 | ||||||||||||
Income tax provision
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3,799 | 1,148 | 11,730 | 7,980 | ||||||||||||
Depreciation and amortization
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7,184 | 5,284 | 25,135 | 22,868 | ||||||||||||
Loss (gain) on early extinguishment of debt
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- | 1,123 | - | 1,123 | ||||||||||||
Adjusted EBITDA (1)
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$ | 22,658 | $ | 15,956 | $ | 74,706 | $ | 62,179 | ||||||||
Adjusted EBITDA margin
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34.5 | % | 27.2 | % | 32.8 | % | 30.9 | % |
1.
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Adjusted EBITDA is earnings before other expense (income), provision (benefit) for income taxes, depreciation and amortization expense, and share-based compensation. Adjusted EBITDA is presented exclusively as a supplemental disclosure because management believes that it is a useful and widely used performance measure, and as a basis for valuation, within the Company’s industry. Adjusted EBITDA is not calculated in the same manner by all companies and, accordingly, may not be an appropriate measure for comparison. Management uses Adjusted EBITDA as a measure of the operating performance and to compare the operating performance with those of its competitors. The Company also presents Adjusted EBITDA
because it is used by some investors as a way to measure a company’s ability to incur and service debt, make capital expenditures and meet working capital requirements. Gaming equipment suppliers have historically reported Adjusted EBITDA as a supplement to financial measures in accordance with U.S. generally accepted accounting principles (“GAAP”). Adjusted EBITDA should not be considered as an alternative to operating income (loss), as an indicator of the Company’s performance, as an alternate to cash flows from operating activities, as a measure of liquidity, or as an alternative to any other measure determined in accordance with GAAP. Unlike net income (loss), Adjusted EBITDA does not include depreciation and amortization or interest expense and therefore does not reflect current or future capital expenditures or the cost of capital.
The Company compensates for these limitations by using Adjusted EBITDA as only one of several comparative tools, together with GAAP measurements, to assist in the evaluation of operating performance. Such GAAP measurements include operating income (loss), net income (loss), cash flows provided by (used in) operations and cash flow data. The Company has significant uses of cash flows, including capital expenditures, interest payments, debt principal repayments, taxes and other non-recurring charges, which are not reflected in Adjusted EBITDA.
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Three Months Ended
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Twelve Months Ended
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October 31,
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October 31,
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2011
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2010
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2011
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2010
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Utility:
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Revenue
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$ | 23,834 | $ | 18,803 | $ | 82,942 | $ | 77,357 | ||||||||
Gross profit
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14,689 | 11,630 | 49,973 | 47,024 | ||||||||||||
Gross margin
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61.6 | % | 61.9 | % | 60.3 | % | 60.8 | % | ||||||||
Proprietary Table Games:
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Revenue
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$ | 11,220 | $ | 10,276 | $ | 43,986 | $ | 40,430 | ||||||||
Gross profit
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9,032 | 8,245 | 35,370 | 32,356 | ||||||||||||
Gross margin
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80.5 | % | 80.2 | % | 80.4 | % | 80.0 | % | ||||||||
Electronic Table Systems:
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Revenue
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$ | 7,216 | $ | 9,972 | $ | 33,937 | $ | 42,398 | ||||||||
Gross profit
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1,880 | 3,617 | 14,564 | 21,580 | ||||||||||||
Gross margin
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26.1 | % | 36.3 | % | 42.9 | % | 50.9 | % | ||||||||
Electronic Gaming Machines:
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Revenue
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$ | 23,476 | $ | 19,552 | $ | 66,906 | $ | 41,117 | ||||||||
Gross profit
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15,470 | 11,665 | 42,648 | 23,010 | ||||||||||||
Gross margin
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65.9 | % | 59.7 | % | 63.7 | % | 56.0 | % | ||||||||
Total:
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Revenue
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$ | 65,746 | $ | 58,603 | $ | 227,771 | $ | 201,302 | ||||||||
Gross profit
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41,071 | 35,157 | 142,555 | 123,970 | ||||||||||||
Gross margin
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62.5 | % | 60.0 | % | 62.6 | % | 61.6 | % | ||||||||
Adjusted EBITDA
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as a percentage of total revenue
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34.5 | % | 27.2 | % | 32.8 | % | 30.9 | % | ||||||||
Income from operations
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as a percentage of total revenue
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21.9 | % | 17.1 | % | 20.3 | % | 17.6 | % |
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