Lottery supplier IGT generated total revenue of $4.23bn in full-year 2022, while managing to reduce its net debt leverage ratio from 3.5x to 3.1x.
Topline numbers
In Q4, IGT generated total revenue of $1.09bn, a modest 4.1% ahead of Q4 2021.
The business is divided into three segments, the largest earner of which was its Global Lottery division, which generated $639m of revenue, although that represented a 7% downturn year-on-year.Next up was the Global Gaming segment, generating $389m amid a 21.2% increase over the prior-year period.
IGT’s PlayDigital segment, meanwhile, generated the remaining $65m in revenue after growing 54.8% year-on-year.
Total operating income for the firm was $230m in Q4, up 23.7%, while adjusted EBITDA totalled $419m, up 8.3%.
IGT was also able to pay down some of its net debt during the period, ending the year with $5.15bn of net debt compared to $5.92bn at the end of 2021.
Despite an increase in operating income, IGT posted a net loss of $31m for the quarter compared to a $55m net income in Q4 2021, as a result of a $95m loss on foreign exchange costs due to fluctuations in the euro/dollar exchange rate on debt.
Turning to the full year 2022, total revenue came to $4.23bn amid a 3.3% increase compared to 2021.
Total operating income for the year was $922m, up 2.2%, while adjusted EBITDA reached $1.66bn, 1.3% behind 2021.
Net income for the full year was $414m, up 62.4%, following a $278m gain on the sale of IGT’s Italian commercial services business, lower income tax and interest expenses, and reduced losses related to the retirement of debt, among other factors.
On a constant currency (CC) basis, the results would have been somewhat more favourable than the real figures posted above – for example, full year adjusted EBITDA was up 4% in 2022 on a CC basis, according to IGT.
News nugget
In addition to reducing its net debt leverage from 3.5x at the end of 2021 to 3.1x at the end of 2022, IGT signed a number of new or extended supply contracts during the year.
It was awarded multiple lottery facilities management contract extensions, including a four-year extension in New York, a seven-year extension in Georgia, a 20-year extension in Rhode Island and a three-year extension in Missouri.The business also won a new 10-year instant ticket printing and services contract in Texas.
CEO Vince Sadusky commented on the new Texas contract: “We potentially have a greater opportunity on the printing side as we don’t have a significant share of that business, and there are some printing contracts coming up.
“That business is interesting. They’re typically shorter duration contracts, and also there’s been a trend for multi-vendor contracts on the printing side, unlike facilities management which would be impossible to administer.
“So we think we’ve got some opportunity coming up both in 2023 and 2024. I think with the significant investment we’ve made in our print line, as well as our patented technology like Infinity Instants, we’ve got the ability to earn some business, and I think that was an area that wasn’t a significant focus for the company many years ago.”
Best question
JP Morgan VP Jemma Permalloo asked whether IGT’s priorities had changed in recent years with regards to its desire to have an Investment Grade (IG) credit rating.
“I remember in the past you have said that getting to an IG rating would be great but that it was not a priority for IGT. I want to understand if there has been a slight change in your commitment to trying to get to an IG rating, because obviously that would mean a cheaper cost of capital,” she asked.
IGT CFO Max Chiara responded: “I think at the end of the day it’s a matter of where you land on the metrics. If you have an ability to stay within those investment grade metrics, it’s inherent with it to target the investment grade rating.”
Best quote
The best quote also came from Chiara as he elaborated on his response to Permalloo’s question:
IGT CFO Max Chiara: “The truth of the matter is Covid has taught us a lesson. Low-leveraged companies are probably better positioned to weather unexpected storms than highly leveraged companies.”
He added: “With that philosophy in mind, the importance of maintaining tight control on both costs and on cash, and targeting those metrics, definitely supports our value generation trajectory.”
Current trading and outlook
IGT said it expects revenue of around $1bn in Q1 2023 with an operating margin between 22% and 24%.
For the full-year 2023, the firm expects revenue between $4.1bn and $4.3bn in 2023, with an operating margin between 21% and 23%.
