The combined international and domestic lottery business expansion buoyed casino technology giant International Game Technology in the second quarter, producing a cash flow rise that heartened company executives.
However, IGT’s adjusted income, which took out a big foreign currency gain, was flat compared with a year ago and earnings per share missed forecasts.
The London-based company on Tuesday said its net income for the three months ended June 30 was $161 million, which included $173 million of net foreign exchange gain.
Adjusted net income, which excluded this gain, was $264 million, or 28 cents per share, compared with net income of $264 million, or 15 cents per share, a year earlier.
Analysts polled by Zacks Investment Research had forecast IGT would earn 34 cents per share. Zacks noted that this was the second consecutive quarter that IGT missed earnings-per-share forecasts.
Revenue fell 1.6 percent to $1.2 billion from $1.22 billion. Nevertheless, the result topped the $1.18 billion forecast of Zacks-polled analysts. Zacks noted IGT has topped revenue forecasts for four straight quarters.
Adjusted earnings before interest, taxes, depreciation and amortization, a measure of cash flow, rose 4.2 percent to $442 million from $424 million.
“We believe most were not expecting for the company to maintain guidance for the year, which as they mentioned will experience a $26 million negative translational impact versus their prior guidance, given the decline in the Euro versus the U.S. Dollar,” Macquarie Securities gaming analyst Chad Beynon told investors in a research note.
During a Tuesday conference call with investors to accompany the results, CEO Marco Sala said higher-than-expected same-store lottery growth in Italy (3.5 percent) and in North America (a 4.2 percent jump) lifted EBITDA.
“We are encouraged that much of that (North America) growth is coming from the largest lotteries, such as California, Texas and Michigan,” Sala said.
Sala said the company global installed based on games grew 5 percent from the previous year to more than 63,000 machines. The North America installed base rose by nearly 170 units compared with the first quarter.
“We are encouraged by this trend and we expect the North American installed based to be higher at year end,” he said.
The company also shipped about 7,700 casino machines worldwide in the quarter, Sala said, helped by the June 27 openings of two Atlantic City hotel-casinos; Ocean Resort — formerly known as Revel — and Hard Rock Atlantic City.
Sala said replacement sales were soft, he said, but he expects an increase in the year’s second half, helped by the launch of the company’s Crystal 27 cabinet.
Sports betting remained prominent in IGT’s moves. The Supreme Court in May struck down the Professional and Amateur Sports Protection Act, the 1992 law which left Nevada as the only state offering single game wagering.
During the quarter, IGT reached deals to provide sports betting technology in New Jersey — in MGM Resorts International’s Borgata and the Meadowlands Racetrack in East Rutherford. MGM Resorts is also opening its new Springfield, Mass., casino Aug. 24 with a large cohort of IGT games.
Reuters reported this month that IGT can benefit even in states with a relatively high sports gambling tax rate, such as Rhode Island. Gov. Gina Raimondo in June signed a $9.6 billion budget for fiscal 2019 that legalizes sports betting and gives the state 51 percent of revenue from sports wagers.
Reuters said that as Rhode Island’s sole sports betting technology provider, the company would get $32 from a $100 bet a sports bettor loses at the state’s two Twin River-owned casinos. (One casino is open now; the other will open in September). With the 51 percent tax on such wagers, the state would take $51 and the casino would get $17.
During the conference call, Sala said IGT’s experience is paying off as sports betting expands. The company’s sports betting system has been running in Nevada for 18 months and is now also running in New Jersey and Mississippi — the first states to regulate sports betting since the ban’s lifting.
“The rapid deployment of IGT’s sports betting solution demonstrates that we can deliver the product, technology, support and service to make retail and mobile sports betting a reality as soon as any state legalizes this activity,” he said.
IGT shares closed at $25.28 on the New York Stock Exchange Tuesday, up $1.03 or 4.25 percent. The shares are down 3.8 percent since 2018 trading opened Jan. 2.
