INTERNATIONAL GAME TECHNOLOGY PLC REPORTS THIRD QUARTER 2024 RESULTS REFLECTING CONTINUING OPERATIONS AFTER ANNOUNCED SALE OF GAMING & DIGITAL
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 $1.9 billion in revenue, led by steady Italy growth and improved third quarter trends in the U.S. We are excited to build upon a solid foundation as we transform into a leaner, more focused global lottery pure play and capitalize on attractive industry dynamics."
"Sustained cash flow generation in the first nine months was predominantly driven by continuing operations," said Max Chiara, CFO of IGT. "The value of IGT is enhanced on a go-forward basis by a low pro forma leverage profile and by the launch of a cost optimization initiative as we look to right size the organization while supporting long-term growth initiatives."
Overview of Consolidated Third Quarter 2024 Results
Quarter Ended
Y/YChange
Constant CurrencyChange
All amounts from continuing operations
September 30,
2024
2023
($ in millions, except per share data)
GAAP Financials:
Revenue
587
601
(2) %
(3) %
Operating income
110
163
(33) %
(33) %
Operating income margin
18.7 %
27.1 %
Earnings per share - diluted
$(0.39)
$0.23
NA
Net cash provided by operating activities
173
226
(23) %
Cash and cash equivalents
501
483
4 %
Non-GAAP Financial Measures:
Adjusted EBITDA
264
279
(6) %
(6) %
Adjusted EBITDA margin
44.9 %
46.4 %
Adjusted earnings per share - diluted
$(0.02)
$0.04
NA
Free cash flow
144
195
(26) %
Net debt
5,156
5,327
(3) %
Note: Reconciliations of non-GAAP financial measures to the most directly comparable GAAP financial measures are provided at the end of this news release
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 UpdateTotal 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 DevelopmentsInitiated 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.
Earnings Conference Call and WebcastNovember 12, 2024, at 8:00 a.m. EST
To register to participate in the conference call, or to listen to the live audio webcast, please visit the "Events Calendar" on IGT's Investor Relations website at www.IGT.com. A replay will be available on the website following the live event.
Comparability of ResultsAll figures presented in this news release are prepared under U.S. GAAP, unless noted otherwise. Adjusted figures exclude the impact of items such as purchase accounting, impairment charges, restructuring expense, foreign exchange, and certain one-time, primarily transaction-related items. Reconciliations to the most directly comparable U.S. GAAP measures are included in the tables in this news release. Constant currency changes for 2024 are calculated using the same foreign exchange rates as the corresponding 2023 period. Management uses non-GAAP financial measures to understand and compare operating results across accounting periods, for internal budgeting and forecasting purposes, and to evaluate the Company's financial performance. Management believes these non-GAAP financial measures reflect the Company's ongoing business in a manner that allows for meaningful period-to-period comparisons and analysis of business trends. These constant currency changes and non-GAAP financial measures should however be viewed in addition to, and not as an alternative for, the Company's reported results prepared in accordance with U.S. GAAP. Amounts reported in millions are computed based on amounts in thousands. As a result, the sum of the components may not equal the total amount reported in millions due to rounding. Certain columns and rows within tables may not add due to the use of rounded numbers. Percentages and earnings per share amounts presented are calculated from the underlying unrounded amounts.
About IGTIGT (NYSE:IGT) is a global leader in gaming. We deliver entertaining and responsible gaming experiences for players across all channels and regulated segments, from Lotteries and Gaming Machines to Sports Betting and Digital. Leveraging a wealth of compelling content, substantial investment in innovation, player insights, operational expertise, and leading-edge technology, our solutions deliver unrivaled gaming experiences that engage players and drive growth. We have a well-established local presence and relationships with governments and regulators in more than 100 jurisdictions around the world, and create value by adhering to the highest standards of service, integrity, and responsibility. IGT has approximately 11,000 employees. For more information, please visit www.IGT.com.
Cautionary Statement Regarding Forward-Looking StatementsThis news release may contain forward-looking statements (including within the meaning of the Private Securities Litigation Reform Act of 1995) concerning International Game Technology PLC and its consolidated subsidiaries (the "Company") and other matters, including with respect to the proposed sale of the Gaming & Digital business to funds managed by affiliates of Apollo Global Management, Inc. (the "Buyer"). These statements may discuss goals, intentions, and expectations as to future plans and strategies, transactions, including the sale of Gaming & Digital to the Buyer, trends, events, dividends, results of operations, and/or financial condition or measures, including our expectations on the future release of revenue, Adjusted EBITDA, and any other future financial performance guidance for continuing operations, based on current beliefs of the management of the Company as well as assumptions made by, and information currently available to, such management. Forward-looking statements may be accompanied by words such as "aim," "anticipate," "believe," "plan," "could," "would," "should," "shall," "continue," "estimate," "expect," "forecast," "future," "guidance," "intend," "may," "will," "outlook," "possible," "potential," "predict," "project" or the negative or other variations of them. These forward-looking statements speak only as of the date on which such statements are made and are subject to various risks and uncertainties, many of which are outside the Company's control. Should one or more of these risks or uncertainties materialize, or should any of the underlying assumptions prove incorrect, actual results may differ materially from those predicted in the forward-looking statements and from past results, performance, or achievements. Therefore, you should not place undue reliance on such statements. Factors that could cause actual results to differ materially from those in the forward-looking statements include (but are not limited to) the factors and risks described in the Company's annual report on Form 20-F for the financial year ended December 31, 2023 and other documents filed or furnished from time to time with the SEC, which are available on the SEC's website at www.sec.gov and on the investor relations section of the Company's website at www.IGT.com. Except as required under applicable law, the Company does not assume any obligation to update these forward-looking statements. You should carefully consider these factors and other risks and uncertainties that may affect the Company's business, including management's discussion and analysis of potential or actual impacts to operations and financial performance. Nothing in this news release is intended, or is to be construed, as a profit forecast or to be interpreted to mean that the financial performance of International Game Technology PLC for the current or any future financial years will necessarily match or exceed the historical published financial performance of International Game Technology PLC, as applicable. All forward-looking statements contained in this news release are qualified in their entirety by this cautionary statement. All subsequent written or oral forward-looking statements attributable to International Game Technology PLC, or persons acting on its behalf, are expressly qualified in their entirety by this cautionary statement.
Non-GAAP Financial MeasuresManagement supplements the reporting of financial information, determined under GAAP, with certain non-GAAP financial information. Management believes the non-GAAP information presented provides investors with additional useful information, but it is not intended to, nor should it be considered in isolation or as a substitute for the related GAAP measures. Moreover, other companies may define non-GAAP measures differently, which limits the usefulness of these measures for comparisons with such other companies. The Company encourages investors to review its financial statements and publicly filed reports in their entirety and not to rely on any single financial measure.
Adjusted EBITDA represents net income (loss) from continuing operations (a GAAP measure) before income taxes, interest expense, net, foreign exchange gain (loss), net, other non-operating expenses (e.g., gains/losses on extinguishment and modifications of debt, etc.), net, depreciation, impairment losses, amortization (service revenue, purchase accounting, and non-purchase accounting), restructuring expenses, stock-based compensation, litigation expense (income), and certain other non-recurring items. Other non-recurring items are infrequent in nature and are not reflective of ongoing operational activities.
Adjusted EBITDA margin represents Adjusted EBITDA divided by revenue
Adjusted EPS represents diluted earnings per share (a GAAP measure), excluding the effects of foreign exchange, impairments, amortization from purchase accounting, discrete tax items, and other significant non-recurring adjustments that are not reflective of on-going operational activities (e.g., gains/losses on sale of business, gains/losses on extinguishment and modifications of debt, etc.). Adjusted EPS is calculated using diluted weighted-average number of shares outstanding, including the impact of any potentially dilutive common stock equivalents that are anti-dilutive to GAAP net income (loss) per share but dilutive to Adjusted EPS. Management believes that Adjusted EPS is useful in providing period-to-period comparisons of the results of the Company's ongoing operational performance.
Net debt is a non-GAAP financial measure that represents debt (a GAAP measure, calculated as long-term obligations plus short-term borrowings) minus capitalized debt issuance costs and cash and cash equivalents, including cash and cash equivalents classified as held for sale. Cash and cash equivalents, including cash and cash equivalents held for sale, are subtracted from the GAAP measure because they could be used to reduce the Company's debt obligations. Management believes that net debt is a useful measure to monitor leverage and evaluate the balance sheet.
Net debt leverage is a non-GAAP financial measure that represents the ratio of Net debt as of a particular balance sheet date to Adjusted EBITDA for the last twelve months ("LTM") prior to such date. Management believes that net debt leverage is a useful measure to assess IGT's financial strength and ability to incur incremental indebtedness when making key investment decisions.
Free cash flow is a non-GAAP financial measure that represents cash flow from operations (a GAAP measure) less capital expenditures. Management believes free cash flow is a useful measure of liquidity and an additional basis for assessing IGT's ability to fund its activities, including debt service and distribution of earnings to shareholders.
Constant currency is a non-GAAP financial measure that expresses current financial data using the prior-year/period exchange rate (i.e., the exchange rate used in preparing the financial statements for the prior year). Management believes that constant currency is a useful measure to compare period-to-period results without regard to the impact of fluctuating foreign currency exchange rates.
A reconciliation of the non-GAAP measures to the corresponding amounts prepared in accordance with GAAP appears in the tables in this release. The tables provide additional information as to the items and amounts that have been excluded from the adjusted measures.
Outlook for Fiscal 2024 and Guidance PolicyThe Company's updated guidance for fiscal 2024 is:
Total revenue of approximately $2.50 - $2.55 billion
Adjusted EBITDA of $1.16 - $1.18 billion
The Company provides guidance of select information related to its financial and operating performance, and such measures may differ from year to year. The guidance is only an estimate of what the Company believes is realizable as of the date of this release. Actual results will vary from the guidance and the variations may be material. The Company undertakes no intent or obligation to publicly update or revise any of these projections, whether as a result of new information, future events or otherwise, except as required by law.
A reconciliation of the Company's forward-looking non-GAAP financial measures to the most directly comparable GAAP financial measure cannot be provided without unreasonable effort. This is due to the inherent difficulty of accurately forecasting the occurrence and financial impact of the adjusting items necessary for such a reconciliation to be prepared, for example, the provision for income taxes or net foreign exchange gain/loss, as such items have not yet occurred, are out of the Company's control, or cannot be reasonably predicted.
Contact:Phil O'Shaughnessy, Global Communications, toll free in U.S./Canada +1 (844) IGT-7452; outside U.S./Canada +1 (401) 392-7452Matteo Selva, Italian media inquiries, +39 366 6803635James Hurley, Investor Relations, +1 (401) 392-7190
Select Performance and KPI data: ($ in millions, unless otherwise noted)
Constant
Q3'24
Q3'23
Currency
Revenue
Y/Y Change
Change(1)
Service
Instant ticket & draw wager-based revenue
477
472
1 %
— %
U.S. multi-state jackpot wager-based revenue
21
47
(56) %
(56) %
Upfront license fee amortization
(48)
(47)
(2) %
— %
Other
116
105
11 %
11 %
Total service revenue
566
576
(2) %
(2) %
Product sales
20
25
(17) %
(19) %
Total revenue
587
601
(2) %
(3) %
Operating income
110
163
(33) %
(33) %
Adjusted EBITDA(1)
264
279
(6) %
(6) %
Same-store sales growth (%) at constant currency (wager-based growth) (2)
Global
Instant ticket & draw games
1.0 %
(0.8 %)
U.S. multi-state jackpots
(55.2 %)
43.6 %
Total
(5.8 %)
3.1 %
U.S. & Canada
Instant ticket & draw games
0.2 %
(1.0 %)
U.S. multi-state jackpots
(55.2 %)
43.6 %
Total
(9.8 %)
4.9 %
Italy
Instant ticket & draw games
2.7 %
4.7 %
Rest of world
Instant ticket & draw games
1.9 %
(6.9 %)
Revenue (by geography)
U.S. & Canada
284
306
(7) %
(7) %
Italy
228
218
5 %
3 %
Rest of world
75
77
(3) %
(3) %
Total revenue
587
601
(2) %
(3) %
(1) Non-GAAP measure; see disclaimer on page 6 and reconciliations to the most directly comparable GAAP measure in Appendix for further details
(2) Same-store sales represents the change in wagers recorded in lottery jurisdictions where IGT is the operator or facilities management supplier, using the same lottery jurisdictions and perimeter for comparisons between periods
International Game Technology PLC
Consolidated Statements of Operations
($ and shares in millions, except per share amounts)
Unaudited
For the three months ended
For the nine months ended
September 30,
September 30,
2024
2023
2024
2023
Service revenue
566
576
1,771
1,767
Product sales
20
25
89
82
Total revenue
587
601
1,861
1,849
Cost of services
300
301
907
894
Cost of product sales
24
22
71
59
Selling, general and administrative
101
106
300
312
Research and development
12
9
34
27
Restructuring
38
—
39
2
Other operating expense, net
2
—
3
—
Total operating expenses
477
438
1,354
1,294
Operating income
110
163
507
555
Interest expense, net
53
54
160
154
Foreign exchange loss (gain), net
39
(36)
23
(9)
Other non-operating expense, net
2
3
9
9
Total non-operating expenses
94
21
192
155
Income from continuing operations before provision for income taxes
15
142
315
400
Provision for income taxes
61
65
161
209
(Loss) income from continuing operations
(46)
77
154
192
Income from discontinued operations, net of tax
88
46
101
88
Net income
43
123
256
280
Less: Net income attributable to non-controlling interestsfrom continuing operations
34
31
120
115
Less: Net income (loss) attributable to non-controllinginterests from discontinued operations
1
(2)
5
2
Net income attributable to IGT PLC
7
94
130
164
Net (loss) income from continuing operations attributable to IGT PLC per common share - basic
(0.39)
0.23
0.17
0.39
Net (loss) income from continuing operationsattributable to IGT PLC per common share - diluted
(0.39)
0.23
0.17
0.38
Net income attributable to IGT PLC per common share - basic
0.04
0.47
0.65
0.82
Net income attributable to IGT PLC per common share - diluted
0.04
0.46
0.64
0.81
Weighted-average shares - basic
202
200
201
200
Weighted-average shares - diluted
202
203
203
202
International Game Technology PLC
Consolidated Balance Sheets
($ in millions)
Unaudited
September 30,
December 31,
2024
2023
Assets
Current assets:
Cash and cash equivalents
501
508
Restricted cash and cash equivalents
102
146
Trade and other receivables, net
394
403
Inventories, net
123
110
Other current assets
152
141
Assets held for sale
4,783
816
Total current assets
6,056
2,123
Systems, equipment and other assets related to contracts, net
578
622
Property, plant and equipment, net
78
74
Operating lease right-of-use assets
102
103
Goodwill
2,684
2,678
Intangible assets, net
77
87
Other non-current assets
677
835
Assets held for sale
—
3,943
Total non-current assets
4,196
8,342
Total assets
10,252
10,465
Liabilities and shareholders' equity
Current liabilities:
Accounts payable
662
643
Current portion of long-term debt
224
—
Short-term borrowings
27
16
Other current liabilities
481
561
Liabilities held for sale
1,169
472
Total current liabilities
2,563
1,691
Long-term debt, less current portion
5,406
5,655
Deferred income taxes
178
178
Operating lease liabilities
84
88
Other non-current liabilities
127
129
Liabilities held for sale
—
771
Total non-current liabilities
5,795
6,821
Total liabilities
8,358
8,513
Commitments and contingencies
IGT PLC's shareholders' equity
1,482
1,443
Non-controlling interests
412
510
Shareholders' equity
1,894
1,952
Total liabilities and shareholders' equity
10,252
10,465
International Game Technology PLC
Consolidated Statements of Cash Flows
($ in millions)
Unaudited
For the three months ended
For the nine months ended
September 30,
September 30,
2024
2023
2024
2023
Cash flows from operating activities
Net income
43
123
256
280
Less: Income from discontinued operations, net of tax
88
46
101
88
Adjustments to reconcile net income to net cash provided by operating activities fromcontinuing operations:
Amortization of upfront license fees
51
50
150
149
Depreciation
42
45
127
134
Foreign exchange loss (gain), net
39
(36)
23
(9)
Stock-based compensation
12
11
31
29
Amortization
8
9
24
30
Deferred income taxes
(21)
14
(11)
29
Other non-cash items, net
1
6
8
11
Changes in operating assets and liabilities, excluding the effects of dispositions:
Trade and other receivables
(8)
11
11
(23)
Inventories
(6)
(12)
(12)
(37)
Accounts payable
87
20
18
11
Accrued interest payable
(34)
(27)
(44)
(33)
Accrued income taxes
(6)
(14)
3
99
Other assets and liabilities
52
