Operator News

US – IGT sees revenues improve in 2016

By Phil - 13 March 2017

International Game Technology pointed to strong lottery growth and higher gaming product sales in markets such as Australia as the key drivers behind its fourth quarter net income of $233m.

For the year as a whole it reported revenue of $5,154m compared to $4,689m in 2015, highlighting its North America and Italy performance.

Marco Sala, CEO of IGT, said: “We reached many important milestones in 2016. We reinforced our number one position in Lottery globally, achieving robust same-store revenue growth and securing valuable, multi-year contracts. We also made good progress with our Gaming turnaround, developing compelling new titles and hardware, in addition to expanding our International presence. We operate in growing global market segments and IGT has a long history of investing in innovation to create shareholder value.”

“We achieved our financial goals for 2016 and ended the year in strong financial condition,” said Alberto Fornaro, CFO of IGT. “Disciplined capital management enabled us to reduce our debt and improve our leverage profile despite the large upfront investment in the Italy Lotto. We expect 2017 to evolve as a year of two halves, with difficult comparisons in the first part of the year easing as we reach the second half.”

Consolidated revenue declined three per cent to $1,321m from $1,365m in the fourth quarter of 2015, which included approximately $20m of revenue benefits related to the catch-up reclassification of Stability Law taxes on gaming machines in Italy. Lower revenue reflects global lottery growth that was more than offset by lower gaming service revenue, mostly at DoubleDown.

For 2016 as a whole, consolidated revenue increased two per cent primarily reflecting growth in lottery service revenue that was partially offset by lower DoubleDown performance and gaming product sales.
During the year, the Company shipped 33,147 gaming machines worldwide and global lottery same-store revenue, excluding Italy, increased eight per cent. Italy lottery wagers rose six per cent in 2016.
On a reported basis, adjusted EBITDA of $1,755m was nine per cent greater than the 2015 level. On a pro forma, constant currency basis, adjusted EBITDA increased three per cent.

Mr. Sala added: “It was a very good year for our global lottery operations, where revenues increased seven per cent in constant currency. This includes same-store revenue growth of nearly 10 per cent in North America and three per cent at our International segment. Total lottery wagers were up six per centin Italy. The Lotto game surpassed €8bn in wagers fuelled by the continued success of 10eLotto, in addition to significant late number activity.”

IGT secured important new business and extensions during the year, including the new concession for the Italian Lotto, its largest single contract, which it has won for another nine years. In North America, it signed important new contracts in Florida, North Carolina, Virginia, and Wisconsin. It also extended key contracts in Georgia, Texas and Michigan. As a result, the weighted average contract length of its top 20 North American contract of lotteries including extensions increased to 8.5 years.

Internationally, it had new contracts and extensions in Argentina, Colombia, Switzerland and New Zealand.

Mr Sala explained: “We continue to work on the expansion of several additional lottery contracts around the world, while this requires incremental capital investment in the near-term, it ultimately provides improved visibility and better returns in the long run.”

In the participation business, IGT ended 2016 with an increase in its global installed, base reflecting significant international growth, up 11 per cent.

“In North America, its goal for the year was to progressively size our installed base. In fact, we experienced growth in the second half of the year at by new Casino openings and this function of our 3D game library, most notably the successful rollout of Wheel of Fortune 3D,” Mr. Sala explained. “While we are encouraged with our progress in the participation business, we’ll really be able to assess it more fully once we reach the middle of the year. This is when the most of the new games and cabinets we presented at G2E last September at ICE in February, we’ll become available in the market.”

The highest profile games such as The Voice and Sphinx 4D will be launched in the second half. In North America, Mr. Sala sees opportunities to grow its international installed base fairly consistently in 2017 led by Eastern European and Africa and with the progressive rollout of Greek VLTs.

“We have a lot of opportunity to grow our Video Reel sales, as we are currently under represented in that segment,” he explained. “Golden Egypt and the Ocean Magic are just two examples of new Video Reel games that are already generating the above average productivity of strong legacy franchisees such as Lucky Larry Lobstermania and Cleopatra. Our focus on developing locally attune content that leverages our centralised investment in R&D, and manufacturing is helping our international gaming product sales.”

Australia is a good case in point, as it was a key market focused for IGT in 2016. “There is great opportunity for us there,” Mr. Sala explained. “But to unlock it we needed to empower the local management team to make the right decision for their market, and that approach is working.We achieved the double-digit increases in our Australian unit shipments, revenues and profits during the year. Australia is just one example. The early feedback of the new AXXIS 23/23 and CrystalSlant cabinets has been good throughout Europe and Latin America.”

In terms of systems, IGT was selected for some of the year’s most high profile new openings including MGM National Harbor in North America and Wynn Palace in Macau in addition to several other casinos in North America, Latin America and Asia. It is also responsible for the new VLT central systems in Greece and Sweden.

“The deployment of our Service Window solution at Station Casinos was another significant milestone in the year,” Mr. Sala added. “Our PlaySpot and Cardless Connect systems offerings are transforming the industry by bringing gaming experiences to mobile devices. This extends playtime for existing players and potentially attract new players providing a seamless user experience. Global customer interest in these open add-on system solutions is very encouraging, and they are important pillars of our interactive growth strategy for both lottery and gaming.

IGT had a mixed year in terms of social and interactive operations. “DoubleDown trends were disappointing in 2016,” Mr. Sala explained. “We are actively working on improving DoubleDown’s performance, including investment in technology to offer a more engaging player experience, particularly on mobile devices. We will also launch a second standalone social gaming app that focus on our popular stepper games in the coming months.”