IGT Reports 3Q 2024 Results Reflecting Continuing Operations After Announced Sale of Gaming & Digital

November 13, 2024 | Financial

Q3’24 revenue of $587 million reflects sustained momentum in Italy and improved U.S. instant ticket and draw game wagers
Operating income of $110 million includes $38 million restructuring charge associated with proactively optimizing general & administrative and operating activities following transformational actions over the last several years
Adjusted EBITDA of $264 million and Adjusted EBITDA margin of 44.9% highlight attractive profit profile of pure play lottery business
Year-to-date cash from operations of $724 million, with $489 million from continuing operations; continuing operations represents over 85% of year-to-date consolidated free cash flow
Introducing Q4’24 and FY’24 outlook for continuing operations

LONDON, Nov. 12, 2024 /PRNewswire/ — International Game Technology PLC (“IGT”) (NYSE:IGT) today reported financial results for the third quarter ended September 30, 2024. This quarter marks the first reporting period where the results of the Gaming & Digital business are classified as discontinued operations. The sale of Gaming & Digital was announced on July 26, 2024, in a transaction expected to close by the end of the third quarter of 2025. Today, at 8:00 a.m. EST, management will host a conference call and webcast to present the results; access details are provided below.

“Our third-quarter and year-to-date performance underscores the strength and resilience of our business model marked by our scale, attractive margin structure, and strong cash generation,” said Vince Sadusky, CEO of IGT. “Over the first nine months, we generated $1.9 billion in revenue, led by steady Italy growth and improved third quarter trends in the U.S. We are excited to build upon a solid foundation as we transform into a leaner, more focused global lottery pure play and capitalize on attractive industry dynamics.”

“Sustained cash flow generation in the first nine months was predominantly driven by continuing operations,” said Max Chiara, CFO of IGT. “The value of IGT is enhanced on a go-forward basis by a low pro forma leverage profile and by the launch of a cost optimization initiative as we look to right size the organization while supporting long-term growth initiatives.”

Key Highlights:

Announced sale of Gaming & Digital business to funds managed by affiliates of Apollo Global Management, Inc. for $4.05 billion in cash
Executed 10-year facilities management contract extension with North Carolina Education Lottery
Awarded three-year primary instant ticket printing contract with Portugal’s national lottery, following a competitive procurement process
Strengthened partnership with La Française des Jeux, operator of the French national lottery, with signing of three-year instant ticket printing contract
Successfully issued €500M 4.25% Senior Secured Notes due 2030; subsequent call of $500M 6.50% Notes due 2025

Third Quarter 2024 Financial Highlights:

Revenue of $587 million compared to $601 million in the prior-year period

Elevated U.S. multi-state jackpot activity in the prior year
2.7% Italy same-store sales growth and improvement in U.S. instant ticket and draw game trends, partially offset by customer allowance
Increased other service revenue related to non-wager-based service contracts in Europe
Multi-year central system software license and higher terminal sales in the prior year, partially offset by higher instant ticket printing in the current year

Gross profit of $263 million versus $278 million in the prior year

High profit flow-through from U.S. multi-state jackpot activity in the prior year, partially offset by positive geographic mix in the current year
Stronger terminal sales and more favorable product mix in the prior year

Selling, general, and administrative expenses of $101 million compared to $106 million in the prior-year period with the improvement primarily related to lower legal costs

Research and development of $12 million versus $9 million in the prior year related to increased investment in growth initiatives

Operating income of $110 million versus $163 million in the prior year, primarily driven by a $38 million restructuring charge associated with OPtiMa 3.0, a program focused on optimizing general & administrative and operating activities following transformational actions over the last several years (see “Other Developments” section for further details)

Adjusted EBITDA of $264 million compared to $279 million in the prior-year period; Adjusted EBITDA margin of 44.9% versus 46.4% in the prior year

High profit flow-through from elevated U.S. multi-state jackpot sales in prior year partially offset by positive geographic mix in the current year
Higher terminal sales and beneficial product mix in prior year
Lower legal costs in the current year
Investment in growth initiatives

Net interest expense of $53 million in line with $54 million in the prior year

Foreign exchange loss of $39 million, compared to a gain of $36 million in the prior year, primarily due to non-cash impact of fluctuations in the EUR/USD exchange rate on debt and loss on a foreign currency hedge related to issuance of EUR debt

Other non-operating expense, net, of $2 million versus $3 million in the prior year

Income tax provision of $61 million, compared to $65 million in the prior year, primarily related to non-deductible foreign exchange losses and restructuring costs

Net income of $43 million versus $123 million in the prior-year period

Diluted loss per share from continuing operations of $0.39 compared to diluted earnings per share from continuing operations of $0.23 in the prior year primarily driven by the after-tax impact of foreign currency losses versus foreign currency gains in the prior year ($0.42 per share) and restructuring costs ($0.13 per share); adjusted diluted loss per share from continuing operations of $0.02 compared to adjusted diluted earnings per share from continuing operations of $0.04 in the prior year driven by lower operating income, partially offset by a higher effective tax rate

Nine Months Ended September 30, 2024 Financial Highlights:

Revenue of $1.86 billion compared to $1.85 billion in the prior year

Elevated U.S. multi-state jackpot activity in the prior year
3.1% Italy same-store sales growth
Increased other service revenue related to non-wager-based service contracts in Europe
Higher instant ticket printing services in the current year

Operating income of $507 million versus $555 million in the prior year, primarily driven by a $38 million restructuring charge associated with OPtiMa 3.0, a program focused on optimizing general & administrative and operating activities following transformational actions over the last several years (see “Other Developments” section for further details)

Adjusted EBITDA of $880 million compared to $898 million in the prior-year period; Adjusted EBITDA margin of 47.3% versus 48.6% in the prior year

High profit flow-through from elevated U.S. multi-state jackpot sales in prior year
Higher-margin product sales mix in prior year
Continued cost management discipline and lower legal costs in the current year
Investment in growth initiatives

Diluted earnings per share from continuing operations of $0.17 compared to $0.38 in the prior-year period, primarily driven by the after-tax impact of foreign currency losses versus foreign currency gains in the prior year ($0.16 per share) and restructuring costs ($0.12 per share); adjusted diluted earnings per share from continuing operations of $0.46 compared to $0.41 in the prior year driven by a reduced effective tax rate

Year-to-date cash from operations of $724 million, $489 million from continuing operations; free cash flow from continuing operations of $385 million

Net debt of $5.2 billion in line with balance at December 31, 2023; pro forma net debt leverage of 2.6x aligns Adjusted EBITDA from continuing operations with the committed $2 billion debt reduction upon closing the sale of the Gaming & Digital business

Cash and Liquidity Update
Total liquidity of $1.9 billion as of September 30, 2024; $0.5 billion in unrestricted cash and $1.4 billion in additional borrowing capacity from undrawn credit facilities

Other Developments
Initiated OPtiMa 3.0, a multi-year program aimed at optimizing the Company’s general & administrative and operating activities following transformational actions over the last several years, and to position the Company for success as a global lottery pure play

Immediately addresses stranded corporate costs associated with the sale of Gaming & Digital business
$40 million of annualized cost savings expected by the end of 2026; approximately 50% of those savings expected to be realized by the end of 2025
$38 million restructuring charge, $27 million after tax, incurred in the third quarter of 2024, primarily related to the planned reduction of approximately 3% of the Company’s global workforce

The Company’s Board of Directors declared a quarterly cash dividend of $0.20 per common share

Record date of November 26, 2024
Payment date of December 10, 2024

Introducing Fourth Quarter and Full Year 2024 Outlook
Fourth Quarter

Revenue of $640 – $690 million
Adjusted EBITDA of $280 – $300 million

Full Year

Revenue of $2.50 – $2.55 billion
Adjusted EBITDA of $1.16 – $1.18 billion

The Company has provided select recast historical income statement, cash flow, and KPI data (both on a U.S. GAAP and non-GAAP basis) in the body of this news release to show the impact of Gaming & Digital as discontinued operations.

See complete press release with tables HERE.

SOURCE: International Game Technology PLC.