IGT 2Q revenue up, but earnings hit by debt costs
U.S.-listed IGT Plc saw its revenue grow in the second quarter but its income declined for the period, the company said on Tuesday. This was the first full earnings for the single entity since the US$6.4-billion merger in April of Nevada-based slot machine maker International Game Technology and Italy-based lottery specialist GTech SpA.
The recently formed IGT reported its earnings in U.S. dollars, under U.S. generally accepted accounting principles, and aligning the fiscal reporting calendars of the former companies in order to reflect its new organisational structure.
IGT said its consolidated revenue grew by 36 percent from the prior-year period to US$1.29 billion in the second quarter of 2015. On a pro forma basis, which represents the combined results of both companies assuming the acquisition of the legacy entity IGT as of January 1, 2014, revenue was down 9 percent year-on-year.
During the quarter, the company said it sold 10,147 gaming machines worldwide. Global lottery same-store revenue – excluding Italy – increased by 7 percent year-on-year.
The company reported adjusted earnings before interest, taxation, depreciation and amortisation (EBITDA) of US$427 million, up by 32 percent year-on-year. On a pro forma basis, adjusted EBITDA declined by 12 percent from the prior-year period. “Higher global lottery profits were offset by lower gaming profits,” the firm said.
For the three months to June 30, the combined company said its operating income declined 32 percent from a year ago to US$116 million. The results translated into a net loss of US$117 million, or US$0.59 per share, in the three months ended June 30. On an adjusted basis, net income was US$70 million, or US$0.35 per share, the firm said.
IGT incurred interest expenses of US$122 million in the second quarter, on increased debt to finance the merger. The creation of the new IGT has contributed to a group net debt of US$8.38 billion as of June 30, according to Tuesday’s release.
“All in, it was a good quarter for IGT with numbers beating muted expectations, guidance in line with consensus and the new reporting structure makes the story cleaner going forward,” analyst Cameron McKnight of Wells Fargo Securities LLC said in a note on Tuesday.
Mr McKnight said the company’s EBITDA guidance was “relatively in line with consensus”. “IGT expects pro forma 2015 adjusted EBITDA of US$1.58 billion to US$1.68 billion with the fourth quarter likely stronger than the third quarter, roughly in line with pre-release consensus of US$1.63 billion.”
On Tuesday, IGT reaffirmed its target of US$230 million in “cost synergies” by April 2018. It said it expects to achieve two-thirds of the targeted cost reductions by April 2016.
In a statement accompanying the results, IGT chief executive Marco Sala said the second quarter results “reflect the stable growth characteristics of our global lottery operations and a meaningful sequential improvement in our gaming operations”.
“We have accomplished a lot in the past four months, notably organising ourselves under a single leadership team and consolidating our manufacturing footprint,” Mr Sala added.
In a separate press release on Tuesday, IGT declared a quarterly cash dividend of US$0.20 per ordinary share. The dividend is payable on September 10, 2015 to shareholders of record as of August 26, the firm said.
The company said it intends to pay a regular US$0.20 quarterly cash dividend, representing an annual payout of US$0.80, “subject to ongoing board approval”.
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