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US – IGT reports strong fourth quarter

By - 9 March 2018

A strong fourth quarter for International Game Technology (IGT) was not enough to stop revenue falling by four per cent for the year.

Revenue for the year dropped by four per cent to $4.94bn despite revenue increasing by two per cent in the fourth quarter to $1.35bn.

Revenue for the fourth quarter came in at $1,346m compared to $1,321m in the fourth quarter of 2016.

“We had a strong finish to 2017, amplifying the progress we made throughout the year,” said Marco Sala, CEO of IGT. “We delivered outstanding results in our Lottery business and improved our key performance indicators in the Gaming business. These achievements were enhanced by disciplined expense management. Bringing innovative content and technology to market remains the cornerstone of our strategy. Last year, we executed well along this path and established a solid foundation for growth in 2018 and beyond.”

“We met all of our financial objectives for the year, including the top end of our EBITDA expectations. Net debt was slightly better than our outlook, despite the early Scratch & Win renewal in the fourth quarter,” said Alberto Fornaro, CFO of IGT. “The results for the fourth quarter and full year highlight the diversity and resilience of the IGT franchise.”

Mr. Sala added: “We achieved a main important milestone in the year, including securing the Italian Scratch & Win Concession, one of our most important contracts through 2028. We also earned a seven year expansion on our California Lottery contract, adopted a new business model in social gaming and introduced a record number of new gaming machine audience.

“A strong second half performance led by the international segment in the fourth quarter enabled us to meet all our financial objective for the year,” he added. “In particular, we achieved the top end of our EBITDA guidance. The diversity and scope of our business in products and geographies are the key features and drivers of our four quarter and full year results. We experienced robust lottery performance improving gaming KPIs and we continued our disciplined cost of management throughout the year. An intense focus on bringing innovative content and technology to market fuelled our results and will continue to be a critical driver of future results.”

Growth in its North American Lottery, Italy, and International divisions during the fourth quarter was not enough to offset a 31 per cent fall in revenue from North America Gaming & Interactive, primarily due to the sale of Double Down Interactive last June to South Korea’s DoubleU Games.

Revenue for North America Gaming & Interactive was $281m compared to $368m in the fourth quarter of 2016. The company sold 5,295 gaming machine units in north America in the quarter compared to 5,419 units in the prior-year period.
Operating income for North America Gaming & Interactive was $69m compared to $102 million in the fourth quarter of 2016 due to the sale of DoubleDown, lower revenue, and the timing of jackpot expense, partially offset by lower operating costs.

North America Lottery revenue of $304m was up seven per cent from the prior-year period, on strong wager growth and product sales. Product sales revenue doubled to $34m, primarily due to lottery terminal and VLT central system sales.
International revenue was up 27 per cent to $280m reflecting strong growth in both Lottery and Gaming.
In Italy revenue increased by seven per cent to $481m.

Mr. Sala said: “Scratch & Win wagers were up over one per cent in 2017, the first increase in six years and up nearly four per cent in the second half on stronger results from the core Miliardario franchise. We reinvigorated Miliardario with improved game mechanics, payout structures, graphics and players have responded favorably.

“The Scratch & Win concession is vital to the success of the Italy segment,” he added. “Receiving a renewal for nine additional years of this large important contract is a great achievement for us. This award without the full tender process demonstrates the great confidence the regulator has in our ability to successfully run the business. Our success in lottery in Italy is a good example to how innovation can drive meaningful growth even in a matured market.”

For the year as a whole IGT shipped 32,103 gaming machines worldwide in 2017. The total installed base grew over six per cent to 62,236 units.

Mr. Sala added: “The nearly 11,000 units sold in the fourth quarter was the highest amount in two years including a 30 per cent increase in total replacement units. Internationally, replacement demand was strong in Latin America.
“The success of our test-bank process and demand for the CrystalCurve cabinet drove a double-digit increase in replacement sales to North America casino customers and higher ASPs in both the fourth quarter and second half,” he added. “This marks an important inflexion point for us.”

IGT grew its global installed base for the second consecutive year, was led by a robust international expansion especially in South Africa and Greece, and with the addition of a new video bingo business.

“We also stabilised the North American installed base starting in the second half of the year adjusted for conversions the North American casino installed base was up sequentially in the fourth quarter of the year,” Mr. Sala added: “We expect this positive trend to continue throughout 2018. The improvements were supported by high level of new games IGT brought to market in the period, including Fort Knox, The Voice, Sphinx 4D. We are also creating excellent momentum with Harley Davidson, The Goonies and Wheel of Fortune MegaTower.”

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