International Game Technology has pointed to a “unique combination of elements” including record jackpot activity for its negative growth in 1Q17, which included a 10% fall in revenue and 19% year-on-year Adjusted EBITDA decline.
Consolidated revenue for the first three months of the year were US$1.15 billion compared to US$1.28 billion in the first quarter of 2016, while Adjusted EBITDA of US$371 million was 19% below the first quarter of 2016. Operating income was US$119 million compared to US$188 million 12 months earlier and Adjusted operating income was US$238 million compared to US$310 million in 1Q16.
IGT attributed the decline in revenue to comparisons with the high jackpot levels of the prior year, new Italy Lotto concession dynamics and lower gaming product sales, and the decline in Adjusted EBITDA and Adjusted operating income to lower revenues, International segment performance and unfavorable foreign exchange translation.
“As we noted in March, a unique combination of elements affected first quarter revenue and profit comparisons, including record jackpot activity in 2016,” said IGT’s Chief Financial Officer Alberto Fornaro. “Disciplined asset and operational management are a top priority for the Company and this is evident in the strong first quarter cash flow. We are updating our outlook to incorporate the DoubleDown transaction and the impact of increased taxation on gaming machines in Italy.”
IGT reported interest expense of US$115 million compared to US$118 million in the prior-year period. Net loss attributable to IGT was US$55 million in the first quarter of 2017, reflecting the after-tax impacts of US$70 million in purchase price accounting and $36 million impact in non-cash foreign exchange losses. On an adjusted basis, net income attributable to IGT was US$59 million.
The company has declared a cash dividend of US$0.20 per ordinary share.
Wells Fargo analyst Cameron McKnight said that although IGT missed expectations, the outlook remained unchanged with sequential improvement expected throughout the year and, “a number of avenues for growth including international market share gains,” in markets such as Macau and Australia.
“The new IGT is a global lottery operator and gaming technology supplier, with only a quarter of revenue from North American slots,” McKnight said. “We like IGT’s diversification, very defensive lottery revenues and improved industry structure. IGT is a deleverage story that is actually deleveraging and while its cash conversion is relatively low, we think its revenues are more defensive and “bankable” than a lot of our coverage.”
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