• Revenue: $1.9 billion for the first nine months of 2024.
• EBITDA: $880 million for the first nine months with a margin of 47.3%.
• Cash Flow from Operations: $725 million year-to-date.
• Free Cash Flow: $445 million consolidated year-to-date.
• Same-Store Sales: 6% decline in Q3 global same-store sales.
• Italy Wagers Growth: Approximately 3% growth in both Q3 and year-to-date periods.
• Adjusted EBITDA Margin: 47% for the first nine months.
• Adjusted EPS: $0.46 per diluted share year-to-date, with an 11% increase in adjusted EPS from continuing operations.
• Debt Reduction Commitment: $2 billion following the sale of gaming and digital assets.
• Liquidity: $1.9 billion consisting of $500 million in unrestricted cash and $1.4 billion in undrawn credit facilities.
• Q4 Revenue Outlook: $640 million to $690 million.
• Full Year Revenue Outlook: $2.5 billion to $2.55 billion.
• Full Year Adjusted EBITDA Outlook: $1.16 billion to $1.18 billion.

• Warning! GuruFocus has detected 2 Warning Sign with IGT.

Release Date: November 12, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• International Game Technology PLC (NYSE:IGT) reported a revenue of $1.9 billion for the first nine months of 2024, driven by sustained growth in Italy and improved trends in the US.
• The company achieved an EBITDA of $880 million for the first nine months, with a margin of 47.3%, highlighting strong profit margins.
• IGT's lottery business demonstrated solid financial performance, generating two-thirds of the $725 million year-to-date cash flow from operations.
• The company secured a 10-year facilities management contract extension in North Carolina, showcasing its leadership in lottery technology.
• IGT is investing in new talent and reallocating resources to support key areas such as high lottery, instant ticket printing, and international sales development.

Negative Points

• There was a 6% decline in Q3 global same-store sales due to unfavorable US multi-state jackpot comparisons.
• The company reported a $38 million pretax restructuring charge related to OPtiMa 3.0, impacting operating income.
• Year-to-date adjusted EBITDA declined from $898 million to $880 million, partly due to inflationary impacts on payroll and benefits.
• The sale of the gaming and digital business to Apollo is expected to close by the end of Q3 2025, indicating a lengthy transition period.
• IGT anticipates a potential decline in ticket sales initially with the increase in Mega Millions ticket price from $2 to $5.

Q & A Highlights

Q: Could you discuss your post-deal capital allocation strategy, particularly regarding dividends and share purchases, and what an M&A strategy might look like for a lottery-focused company? A: Massimiliano Chiara, CFO, explained that the company plans to repay $2 billion of debt from the sale proceeds, strengthening the balance sheet to support upcoming CapEx cycles. The remaining cash will be allocated to shareholder returns, but specifics will be disclosed closer to the deal's closing. Vincent Sadusky, CEO, added that the company is open to M&A opportunities if they present a good ROI, leveraging their strong balance sheet post-closing.

Q: Can you walk through some of the factors you're considering for the business in 2025? A: Vincent Sadusky, CEO, stated that industry dynamics remain strong, with sustainable growth achieved over the past five years. Despite unfavorable multi-state jackpot comparisons this year, the company expects continued growth driven by innovations in lottery operations, new game launches, and the upcoming price increase for Mega Millions.

Q: How has the mix shift into higher price point games contributed to the growth in instant tickets, and have you seen any changes in trade-up behavior? A: Vincent Sadusky, CEO, noted that higher price point games have driven growth, but the key is maintaining a robust portfolio with varied price points and game experiences. The company has seen growth in both high and low price points, emphasizing the importance of refreshing the portfolio to sustain player interest.

Q: Could you update us on the latest expectations for the Italian Lotto contract RFP issuance? A: Vincent Sadusky, CEO, mentioned that the company expects the next phase of the Italian Lotto contract requirements to be released by the end of 2024 or early 2025, with an award anticipated in the first half of 2025.

Q: Regarding the Mega Millions price increase from $2 to $5, did you have input in the process, and do you expect a digestion period for consumers? A: Vincent Sadusky, CEO, explained that while the decision is made by a committee of lottery directors, IGT provides input and support. Historically, price increases may initially lead to a decline in ticket sales, but overall revenue tends to increase over time.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.