International Game Technology missed expectations on adjusted EBITDA and net revenue for the 2016 fourth quarter as gains in North America were offset internationally, the company reported Thursday morning.
The gaming, lottery and interactive giant posted adjusted EBITDA of $422 million – below the $446 million consensus estimate and down 6 percent year-over year – and revenues of $1.321 billion, $10 million shy of consensus and down 2 percent.
Earnings per share checked in at $0.88, which beat expectations by $0.36.
IGT also issued EBITDA guidance of $1.68 billion to $1.76 billion for 2017, below Wall Street projections of $1.8 billion.
The company saw its strongest growth for the quarter in the North America lottery segment, where revenues grew 6 percent and operating income grew 54 percent even against a tough comparison in the prior year quarter. IGT’s base of installed games rose by about 300 year-over-year to 24,472, but overall unit sales were down from 6,600 to 5,400 and operating income in the North America gaming segment fell 5 percent to $101 million.
Internationally, lottery grew by 2.6 percent on a same-store basis outside Italy and by 4 percent in Italy. Overall international revenue, however, and operating income fell by 17 percent to $45 million and 20 percent to $11 million, respectively.
For the full year 2016, IGT reported operating income of $660 million and adjusted EBITDA of $1.76 billion throughout the enterprise, increases of 9 percent and 3 percent on constant currency basis from 2015.
“We reached many important milestones in 2016,” said Marco Sala, chief executive officer of IGT. “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.
The company was able to reduce its total debt load from $7.7 billion to $7.57 billion during 2016, lowering its debt-to-adjusted EBITDA ratio from 4.52x to 4.31x.
“Disciplined capital management enabled us to reduce our debt and improve our leverage profile despite the large upfront investment in the Italy Lotto,” said Alberto Fornaro, chief financial officer. “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.”
“The defining aspects of the story are the improvement in the North American slot businesses and social gaming, which were acquired in 2Q15 and are expected to accelerate in 2H17,” said David Katz, an analyst with Telsey Group.
IGT also announced Thursday morning the appointment of Heather McGregor, who serves as Executive Dean of the Edinburgh Business School, to its board of directors.
“Heather’s global perspective and years of experience in talent acquisition and finance, along with her commitment to diversity and board experience, will be valuable additions to the expertise of our board,” said Philip Satre, chairman of IGT.
IGT shares were down as much as 14 percent in trading on Thursday after opening at $27.66.
