IGT revenue up in 1Q, net loss jumps on forex losses
International Game Technology Plc – also known as IGT – posted higher revenue in the first quarter of 2016 as measured in year-on-year terms, but its net loss still increased, after foreign exchange losses, the firm announced on Thursday.
The company’s first quarter results were nonetheless seen overall as positive by several investment analysts covering the company.
“IGT reported a good quarter,” said Wells Fargo Securities LLC analyst Cameron McKnight. “We think IGT is becoming better understood and we are seeing increased interest from equity (versus credit) investors,” he added.
IGT was created from the US$6.4-billion merger in April 2015 of Nevada-based slot machine maker International Game Technology and Italy-based lottery equipment and management specialist GTech SpA. The combined companies took the name of IGT Plc.
IGT reported that consolidated revenue grew 51 percent to US$1.28 billion in the first three months of 2016 from US$848 million in the first quarter of 2015, reflecting GTech’s acquisition of the legacy IGT operation. On a pro forma – i.e. representing the combined results of both companies pre-merger – constant currency basis, consolidated revenue rose 4 percent in year-on-year terms.
Net loss attributable to IGT was US$93 million in the first quarter of 2016 compared to a net loss of US$39 million in the prior-year period, reflecting the impact of US$162 million in primarily non-cash foreign exchange losses, the firm stated.
“Revenue growth primarily reflects strong lottery performance, particularly in North America and Italy,” IGT stated in a press release.
Pro forma revenue – on a constant currency basis – from gaming was down 1 percent from the prior-year period, at US631 million. During the quarter, the company sold 5,695 gaming machines worldwide, it stated. Of these, 1,744 were shipped to places outside North America, compared to 1,587 units in the prior-year period, “reflecting demand for new cabinets”.
On a reported basis, adjusted earnings before interest, taxation, depreciation and amortisation (EBITDA) was US$460 million, 43 percent above the first quarter of 2015. On a pro forma, constant currency basis, adjusted EBITDA was up 12 percent, “as overall sales growth was accentuated by favourable revenue mix and synergy savings”.
IGT reported operating income of US$188 million for the first three months of 2016 compared to US$163 million in the first quarter of 2015. On a pro forma, constant currency basis, adjusted operating income was 35 percent above the first quarter of 2015, which included significant bad debt expense.
IGT stated it expected to achieve adjusted EBITDA of US$1.74 billion to US$1.79 billion for the full year 2016 period.
“We begin 2016 with a solid first quarter, evidenced by good revenue growth with all operating segments contributing to an improvement in profitability,” said Marco Sala, chief executive of IGT in a statement. He added: “Gaming revenues were resilient despite challenging market conditions in North America, our largest gaming market. We remain focused on re-energizing gaming operations and strengthening our global leadership in lotteries.”
Union Gaming Securities LLC said in a note following the IGT results announcement that it continued to see “signs of recovery in the gaming segment” at IGT.
“This coupled with the benefit of incremental merger cost synergies paints a favourable fundamental picture,” added analyst John DeCree.
IGT and Hong Kong-listed Paradise Entertainment Ltd announced last month the latter had agreed to transfer all of its electronic table game technology, patents and other intellectual property to IGT, with the exception of table game intellectual property used by LT Game in Macau.
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