GGRAsia – IGT ‘off to a strong start’, upgrades 2024 forecast: CEO

IGT ‘off to a strong start’, upgrades 2024 forecast: CEO

May 15, 2024 Newsdesk Latest News, Top of the deck, World

Gaming equipment maker and content provider International Game Technology Plc (IGT) reported aggregate revenue of just under US$1.07 billion for the first quarter of 2024, flat from a year earlier but higher than the company had forecast.

“Fiscal 2024 is off to a strong start with first-quarter results that exceeded our outlook,” stated Vince Sadusky, IGT’s chief executive, on a Wednesday conference call with investment analysts.

First-quarter revenue of nearly US$1.1 billion “was better than expected, primarily on global gaming and iGaming performance,” he added. “The 24-percent operating margin was 400 basis points higher than anticipated.”

The company posted a net income attributable to shareholders of US$82.0 million for the three months to March 31, up from a profit of US$23.0 million recorded in first-quarter 2023.

IGT’s board declared a quarterly cash dividend of US$0.20 per common share, payable on June 13.

The group runs three main segments: global lottery; global gaming; and PlayDigital, its online content arm.

First-quarter operating income was flat year-on-year, at US$256 million. Excluding separation and divestiture costs related to the group’s gaming and digital segments, operating income for the three months to March 31 increased 7 percent year-on-year, “to a record US$273 million” and operating income margin expanded to 25.6 percent, said IGT.

IGT is to separate its gaming and PlayDigital segments and combine those businesses with another gaming technology supplier, Everi Holdings Inc, the companies had said on February 29 in a joint update. IGT shareholders are expected to own approximately 54 percent of the combined company, and Mr Sadusky will lead the combined entity.

IGT’s first-quarter adjusted earnings before interest, taxation, depreciation and amortisation (EBITDA) stood at US$443 million, down 1.3 percent from a year ago. EBITDA margin reached 41.5 percent in the period.

“Excluding separation and divestiture costs, adjusted EBITDA was US$461 million and the margin improved 80 basis points to 43.1 percent,” the company stated.

Mr Sadusky said on the call that “based upon first-quarter performance exceeding expectations,” the company has upgraded its full-year 2024 revenue and profit goals.

IGT now expects to record revenue of about US$4.4 billion in 2024, with an operating income margin of circa 21 percent. The firm said such margin includes “circa 300 basis point negative impact” from pre-closing separation and divestiture costs related to its gaming and PlayDigital segments. If not for those costs, the margin would be around 24 percent.

Merger, upsized revolver

The CEO also said that “broad-based demand for games and cabinets” was “driving sustained profit momentum” for the group’s gaming and digital segment, “where year-to-year profit margins expanded for the 12th consecutive quarter”.

Revenue from the global gaming and digital segment was US$406 million in the January to March period, down 6.9 percent from the prior-year period.

The company said the decline was driven by “lower product sales due to fewer terminal unit shipments in the current year and elevated intellectual property and software licences in the prior year”. The decline was “partially offset by higher service revenue driven by growth in the global installed base, which more than offset lower yields, and a 10-percent increase in iGaming revenue,” it added.

In the first quarter, the global gaming segment sold 6,627 machine units, compared with 8,272 units sold a year earlier. The sale of machines in the rest-of-the-world markets fell by 9.9 percent year-on-year, to 1,567 units, according to Wednesday’s announcement.

First-quarter revenue from global lottery increase 5.9 percent year-on-year, to US$661 million.

Max Chiara, IGT’s chief financial officer, said during Wednesday’s call that the group recorded “US$18 million in separation and divestiture costs” related to the planned spin and merger transaction of the its gaming and digital businesses.

The combined entity has obtained debt commitments of US$3.7 billion to pay off existing debt and to make the US$2.6 billion payment to IGT. About US$1.0 billion of the proceeds will be used to refinance Everi’s existing debt.

The financial commitments originally included an additional US$500 million revolver. Mr Chiara said the revolver had been “successfully upsized by 50 percent to US$750 million”.

“The strong interest in the IGT-Everi combination that we have seen from the banking side during this process is a testament to the strength of the proposed transaction,” said the CFO.

In March, IGT announced changes to the company’s board and executive team.