IGT expects US growth after ‘credible’ Q2 results

International Game Technology (IGT) has its sights set firmly on growth in the US market after what analysts described as “credible” results in a second-quarter trading update. 

Operating income increased by 9% year-on-year to hit $209m (£159m/€179m) in the three months through to June 30 despite a 1% drop in revenue to $1.2bn, which IGT said was due to the sale of its DoubleDown Interactive unit in June last year.

However, IGT added that growth in other areas of the business, including a plethora of sports betting deals in the wake of the US Supreme Court ruling to overturn the 1992 Professional and Amateur Sports Protection Act (PASPA) in May, had kept the company on the right trajectory.

Last month, FanDuel Group selected IGT to serve as its sports betting platform provider in New Jersey, shortly after opening a sportsbook service at the state’s Meadowlands Racetrack.

In June, IGT also finalised a deal to provide its sports betting platform to MGM Resorts International on New Jersey. The agreement covers the Borgata Hotel Casino & Spa in Atlantic City (pictured).

Although North American gaming and interactive revenue at IGT was down from $310m in Q2 of last year to $254m in the most recent quarter, the company can expect a boost over the remainder of this year as its sports betting deals begin to bear fruit. New Jersey only began taking bets on June 14, just over two weeks before the end of IGT’s Q2 reporting period.

Moreover, North American lottery revenue was up to $309m from $293m last year.

“The North America Lottery and Italy segments each exceeded our expectations in the period,” IGT chief executive Marco Sala said. “The North America Gaming installed base grew sequentially, and we have a compelling roster of new, for-sale video reel games coming to market in the second half.”

Regulus Partners stated following the publication of the results today (Wednesday): “IGT’s Q2 performance is credible given its business positioning, though it is telling that its historical core strength of lottery is materially outperforming a more ‘mixed’ gaming performance (though with guidance for an improved H2) and a truly underwhelming betting outcome.”

Regulus also said that while the results illustrate a ‘robust’ underlying performance, they raise concerns over “growth issues” within more traditional business segments.

Despite the forecast benefits of sports betting in the US, Regulus erred on the side of caution, saying that even with “strong underlying catalysts”, sports wagering can “seriously underwhelm”.

Regulus also picked up IGT's online business, saying this “remains minimal relative to the size of the group”.However, Regulus also said that while the results illustrate a ‘robust’ underlying performance, they raise concerns over “growth issues” within more traditional business segments.

Despite the forecast benefits of sports betting in the US, Regulus erred on the side of caution, saying that even with “strong underlying catalysts”, sports wagering can “seriously underwhelm”.

Regulus also picked up IGT's online business, saying this “remains minimal relative to the size of the group”. This, in tandem with a ‘mixed’ gaming performance and what Regulus said was a “truly underwhelming betting outcome”, could be a cause for concern.

“We see this as a relatively dangerous performance cascade: progressively weaker the greater the competition,” Regulus said.

With this, Regulus flagged a further risk in the potential impact of Italian regulation changes on future revenue. At present, 15% of group revenue at IGT is from gaming machines in the country.

Regulus also returned to the issue of sports betting, saying that the contribution of this market from Italy – 3.4% group revenue and 9% country – while containing lots of ‘country-specific issues’, should raise concerns in terms of seeing sports betting as “some form of simple growth panacea for large traditional/slots-led businesses”.

Regulus added: “Italy is a nation of 61 million people, not dissimilar to the population of the east coast of the US, likely to enjoy regulated sports betting in some form in the medium-term.”