IGThas said it is “on course” to meet expectations for 2023 after a first-quarter where revenue from gaming operations and digital operations increased compared to last year.
In reflecting on Q1 results, CEO Vince Sdusky stated that the period had “exceeded the expectations” of the company. He added that the momentum in all segments were fuelled by “compelling innovations and sustained strength in the customer and player demands”.
IGT’s gaming and digital segments reduce lottery losses
IGT , in its first quarter financial report, announcedan increase of 1 percent year-over-year in revenue. (Q1 2020: $1.05bn). This was due to gains in the Global Gamingand PlayDigitalsegments.
Global Gaming and PlayDigital both grew by 17 percent YoY to reach revenues of $381m (2020: $325m), and $55m (2020: $47m). Global Lottery, on the other hand, fell by 8 percent YoY to $624m ($680m in 2022).
IGT reported that its gaming revenue increased to $381m, thanks to “double-digit growth in both service revenue and product sales revenue streams” and to “record first quarter unit shipments, average selling prices, installation base growth, higher yields”.
Global Gaming’s revenue from service increased by 14% to $189m (2012: $165m), while the income from product sales increased by 21% to $192m (2012: $160m). Installation base units increased by five percent to 50,902 units (2022: 48.379), while the number of machine units sold increased by fifteen per cent, to 8,272 units (2022: 7,176).
Digital income grew to $55m mainly due to “icasino, with contributions from iSoftBetacquisition, organic growth and partially offset by higher Jackpot expense”.
After the sale of its commercial services in Italy, the company reported that lottery revenues fell by YoY to $624m. The segment’s service revenue fell by five percent to $602m (in 2022, $635m), while product sales dropped by 51 percent to $22m.
IGT stated that despite the fact that it was a consistent currency, and excluding the Italy commercial service sale, its revenue increased by 4%, thanks to “strong sales in same-stores, led by Italy, and an increase in US multi-jurisdictional lottery activity”.
Sadusky said: “Our first-quarter results exceeded expectations, and we are on track to meet our full-year forecast.
The global gaming, PlayDigital, and Global Lottery segments are all experiencing growth due to the innovation that is driving them. The excellent key performance indicators for the quarter clearly demonstrate this.
Amortisation increases adjusted EBITDA
Operating income for Q1 grew by one percent YoY, to $255m (in 2022: $252m), with a margin at 24,1 per cent (2022 : 24%).
Global Gaming saw its contribution increase by 34 percent YoY, to $69 million (2022: $52 million), thanks to “strong installed bases productivity and operating leverage with a leaner costs structure”.
PlayDigital’s operating income increased again, this time by 9 per cent to $14m (2022, $13m), with a margin that was “modestly higher than Q4 of 2022, despite significantly greater jackpot expenses”. Corporate support and other costs came in with a $68m ($64m) loss due to “higher amortization expense resulting in changes in currency rates”.
Global Lottery is the only segment that saw its operating income decline YoY in Q1, dropping by five percent to $240m (2022, $252m), following a sale of an Italian commercial services company.
The segment’s operating margin was 38 percent due to “high profit flow-through from same-store growth, including increased jackpot activity, as well as positive geographic mix”.
IGT reported an adjusted EBITDA for Q1 of $449m, a four percent increase YoY (2022 : $433m), and a margin 42.3 percent (2022 : 41.2%) due to “higher depreciation & amortisation”. The adjusted EBITDA figures for Q1 are among the highest in the history of the company.
IGT has seen its free cash flow increase by 88 percent to $217m (2022, $115m), while its net debt decreased by 12 percent YoY to $5.12bn (2022, $5.83bn). Its leverage is now at 3.0x – the lowest in IGT history.
The net debt has also decreased compared to $5.2bn in the previous quarter.
Q2 and beyond
IGT’s Q2 revenue is expected to reach approximately $1bn, with a margin of operating income between 22 and 24 percent.
The company anticipates revenue in the range $4.1bn-$4.3bn for the entire year. It also expects an operating profit margin between 21 and 23 percent, cash flow from operations of between $900m-$1bn, and capital expenditures ranging from $400m-$450m.
Max Chira is the CFO at IGT. He noted that “the strong start of the year included significant cash flow and a further improved credit profile.” The improvement in net leverage confirms our belief that we will achieve the lower end of the target range (2.5x-3.5x) by 2025.
“We will continue to focus on improving our financial flexibility and operational agility, while remaining cost-disciplined. This should allow us to achieve our 2025 cash flow and margin targets, even with the current macroeconomic uncertainty.”
Sadusky said: “We are confident that the execution of our growth, innovation and optimization strategy will create significant value in our progress towards our 2025 goals.”
