International Game Technology PLC(IGT) - 2025 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company reported adjusted EBITDA of $250 million with a margin of 43% for Q1 2025, down from $661 million in the prior year due to lower jackpot activity and associated impacts [21][22] - Revenue for Q1 2025 was $583 million, a decrease from $661 million in the previous year, primarily due to the absence of large jackpots [22][24] - Cash generation from continuing operations was strong, with a cash conversion ratio of 67%, delivering $168 million in cash from operations and free cash flow of $92 million [25] Business Line Data and Key Metrics Changes - Instant ticket and draw games accounted for about 95% of annual wager-based revenue and nearly 80% of total revenue, with normalized same-store sales rising nearly 1.5% in the quarter [5][6] - iLottery sales increased by 26%, driven by successful game launches in states like Georgia and Kentucky [9][10] - In Italy, same-store sales growth was 2%, with notable increases in Scratch and Win and Lotto games [6][11] Market Data and Key Metrics Changes - U.S. sales were stable, with large jurisdictions like California and Florida experiencing growth due to new game launches [8][9] - The company noted that the macroeconomic environment is fluid, with ongoing tariff discussions and consumer spending uncertainty impacting projections [32][39] - The Italian market showed resilience, with growth in lottery products alongside sports betting and iCasino [80] Company Strategy and Development Direction - The company is focusing on product innovation, including the recent shift of Mega Millions to a $5 price point, which is expected to enhance sales and player engagement [11][48] - Expansion of retail touchpoints and optimization of the point-of-sale network are key initiatives, including the rollout of self-service lottery vending machines and in-lane purchasing solutions [12][13] - The company is transitioning to a cloud-based solution for iLottery platforms to improve player experience and scalability [16] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the long-term prospects of the business despite current macroeconomic challenges, noting historical resilience of lottery sales during recessions [17][18] - The company anticipates a normalization of jackpot activity and expects improved profit margins in the future [25][39] - The upcoming award of the Italy Lotto license is seen as a significant catalyst for growth [19][86] Other Important Information - The company successfully issued a new €1 billion term loan to enhance liquidity ahead of the Italy Lotto award [25] - Net debt rose to $5 billion, with a pro forma net debt leverage of 2.8 times, in line with targets [26] - The company expects full-year 2025 revenue of approximately $2.55 billion and adjusted EBITDA of $1.1 billion at the low end of the outlook range [26] Q&A Session Summary Question: Guidance revision and macro environment impact - Management indicated that the guidance revision was influenced by lower jackpot activity and macroeconomic uncertainty, with expectations for growth in the second half of the year [29][39] Question: Mega Millions $5 shift and player resistance - Management remains optimistic about the $5 Mega Millions price point, noting that the transition was smooth and enhancements are expected to attract players [48][50] Question: Texas Lottery renewal process - The legislative session in Texas is ongoing, with clarity expected after June 2 regarding the future of the Texas Lottery [52][53] Question: Margin expectations and cost impacts - Management confirmed that margins are expected to improve in the second half of the year as jackpot activity normalizes [58][62] Question: Italian market growth and cannibalization concerns - Growth in the Italian market is attributed to ongoing innovation in lottery products, with no significant cannibalization observed between verticals [80][81]