IGT achieves lowest-ever net debt leverage as Q1 revenue grows just 1%
Topline numbersIn Q1 2023, IGT’s total $1.06bn in revenue represented a modest 1% growth ahead of Q1 2022.
The business operates across three main segments, the most lucrative of which is its Global Lottery division, which generated $624m in revenue. However, that figure represented a year-on-year decline of 8%.
Revenue from IGT’s Global Gaming segment, on the other hand, rose 17% to $381m, while PlayDigital revenue increased 17% to $55m, primarily driven by iCasino with contributions from the company’s acquisition of iSoftBet alongside organic growth, partially offset by higher jackpot expense.
Adjusted EBITDA was $449m, at a margin of 42.3%, which was among the highest levels in the company’s history.
Although IGT’s Q1 net income of $67m represented a year-on-year decrease of nearly 75%, it marked a significant improvement from the $31m net loss posted in Q4 2022.
The company’s net debt leverage also improved to 3.0x, which is the lowest level recorded in the company’s history.
IGT said it has started the year off on a positive note despite the flat revenue performance.
“The strong start to the year includes significant cash flow generation and further improvement in our credit profile,” said IGT CFO Max Chiara (pictured right).
The Q1 performance has strengthened IGT’s belief that it can achieve its target net leverage ratio of 2.5x to 3.5x by 2025, particularly towards the lower end of the range.
“From a balance sheet perspective, we are nicely positioned with total liquidity of $2.1bn, including unrestricted cash of $700m and $1.4bn in additional borrowing capacity from undrawn credit facilities,” he added.
CEO Vince Sadusky highlighted that although revenue from the Global Lottery division decreased, IGT recorded an 8% increase in same-store sales, which was “the fastest growth in the last six quarters”.
Most notably, Sadusky commented: “Italy same store sales were up over 10% as new game innovation and portfolio optimisation strategies drove sales higher for both draw games and instant tickets.”“Our first quarter results exceeded expectations and put us firmly on track to achieve our full-year outlook,” he added.
For the second quarter, IGT expects to report revenue of approximately $1bn.
Additionally, the company anticipates an operating income margin of 22% to 24%, which it said reflects solid operational efficiency and effective cost management.
Sadusky discussed the potential for M&A during the earnings call, given the company’s strong cash position and the current market conditions with reduced valuations.
Sadusky was asked by Domenico Ghilotti from Equita whether the success of the Italian lottery can be emulated in other markets.
Sadusky responded by saying that IGT is focusing on communication across the company to utilise innovation from one market to the other.
“We believe IGT is in a bit of unique position. We actually run the lottery. So we have the direct relationship with the consumer, we get all the data in places like Italy and New Jersey, for example. And so, we’re able to utilise that data immediately in the development of new games,” he said.
Sadusky also gave an example of a successful scratch game in Italy and explained how they are analysing the data from that game to develop similar games in other markets.
“I think our global footprint, and being in more jurisdictions than any other lottery, gives us that database and that opportunity to learn from these experiences and drive product innovation across all of our markets around the world,” he concluded.
Current trading & outlookLooking ahead to the full year, IGT’s revenue is expected to be in the range of $4.1bn to $4.3bn.
The company also expects to maintain a healthy operating income margin of 21% to 23%.
Furthermore, IGT aims to generate cash from operations between $900m and $1bn.
The company also plans to invest in its growth by allocating capital expenditure between $400m and $450m.