During Tuesday’s investor’s call, International Gaming Technology CEO Vince Sadusky and Executive Vice President and Chief Financial Officer Max Chiara highlighted the company’s recent deals, notably the July sale of its gaming and digital business to funds managed by Apollo Global Management for $4.05 billion in cash.
That sale may open the way for IGT to acquire more assets.
“We continue to believe that we are focused with a balanced capital allocation approach,” Chiara said. “We highlighted the fact that through the proceeds of the sale, we expect to repay $2 billion of debt, which will put ourselves in a very strong position from a balance sheet perspective going forward to support our upcoming capex cycle, which is expected to last at least a couple of years in front of us as a result of the renewal of large contracts in the U.S. and in Italy.”
IGT reported revenue of $587 million for the third quarter of 2024, a decrease of 2% from the $601 million generated in 3Q24. Adjusted EBITDA was $264 million, a year-over-year decrease of 6% from the $279 million posted in 3Q23.
“With regard to M&A, we feel like our portfolio in traditional areas and growth areas is very solid,” Sadusky said. “ … For four years, we talked about the investment in our incremental capabilities and capacity around printing and continued investment in ilottery, and we continue to look at other growth areas as well, including enhancing our capabilities internationally on the product sales side.”
Sadusky added that IGT also is “excited about the good work the company’s done over the course of years to get its balance sheet to the best position, where it currently is. Post-closing, we anticipate having a very, very reasonable leverage level that will enable us to potentially engage in M&A if we see there’s an opportunity where there’s an ROI that makes sense for us.”
IGT recent deals include a 10-year extension with the North Carolina Education Lottery, a three-year primary instant ticket printing contract with Portugal’s national lottery, and a “strengthened” partnership with La Française des Jeux, operator of the French national lottery with a three-year instant ticket printing contract.
“If you look forward to 2025 … the industry dynamics remain intact,” Sadusky said. “We think that the growth that the industry has achieved over the last five years or so is sustainable. So, since 2019 I think our lottery take here has been somewhere between three and 4% and even greater than that in North America.”
But a lack of large multi-state jackpots in the U.S. has been unavoidable, and the recent announcement that tickets for the Mega Millions lottery will increase to $5 in April 2025 is a concern.
Sadusky said IGT was consulted by a commission of state lottery directors about the raise.
“We do anticipate, just based upon our last prior experience, that there’s a potential for a decline in ticket sale initiatives,” Sadusky said. “However, on a net basis, if you look at the history, that’s recovered over time. But more importantly, the increase in revenue associated with the increase in tickets has outpaced, been in excess, of the decline. I think that net-net, the group anticipates there will be an increase in sales volume, the absolute dollar value of sales, initially. We can anticipate a decline initially and then a recovery.”
Jefferies analyst David Katz, in a note in advance of the investor’s call, wrote that IGT’s results were “generally in line” during a period of transformation for the company.
“The quarter should further be the initial moment for the Street to view the lottery business standalone, despite the lengthy timing until the gaming deal closes in 2025,” Katz wrote. “In short, the report is an important step on a lengthy journey.”
