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

Financial Data and Key Metrics Changes - The company reported Q1 revenue of $583 million, down from $661 million in the prior year, primarily due to lower jackpot activity and associated LMA impacts [25][30] - Adjusted EBITDA for the quarter was $250 million, with a margin of 43%, despite the challenges faced [7][24] - Cash conversion ratio was 67%, consistent with the previous fiscal years, generating $168 million in cash from operations [29][30] 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 same-store sales rising nearly 1.5% globally [6][10] - iLottery sales increased by 26%, driven by successful game launches in states like Georgia and Kentucky [12][20] - In Italy, normalized same-store sales growth was 2%, with strong performance from Scratch and Win and Lotto games [8][10] 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 [10][11] - The company noted that the macroeconomic environment is uncertain, but lottery sales in the U.S. and Italy have historically shown resilience during recessions [20][21] - The Rest of World segment contributed under 15% of total revenue but showed positive growth driven by strong EuroMillions jackpots [66] Company Strategy and Development Direction - The company is focused on product innovation, including the recent shift of Mega Millions to a $5 price point, which is expected to enhance sales [13][51] - Strategic initiatives include expanding retail touchpoints and optimizing the point of sales network, with investments in self-service lottery vending machines and in-lane purchasing solutions [14][16] - The company is transitioning to a cloud-based iLottery platform to improve player experience and scalability [18][84] Management's Comments on Operating Environment and Future Outlook - Management expressed caution regarding the macroeconomic environment and its potential impact on consumer spending, while remaining optimistic about long-term growth prospects [20][30] - 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 [30][31] - Management anticipates a normalization of jackpot activity in the second half of the year, which should positively impact profit margins [28][42] Other Important Information - The Italian Lotto license process is underway, with economic proposals to be opened on May 19, which is a significant milestone for the company [21][72] - The company successfully issued a new €1 billion term loan to enhance liquidity ahead of the Lotto license award [29][30] - The gaming and digital assets sale is on track to close in Q3, which will further strengthen the company's financial position [22][30] Q&A Session Summary Question: Can you elaborate on the guidance revision and its relation to the macro environment? - Management indicated that the macro environment is fluid, with stability in core player demand, but volatility primarily associated with jackpot performance and related LMA impacts [36][37] Question: What is the impact of the Mega Millions $5 shift? - Management is optimistic about the potential impact of the price increase, noting that historical price changes have led to increased sales volume [51][52] Question: What is the status of the Texas Lottery renewal process? - The legislative session in Texas is ongoing, with clarity expected after June 2, and the procurement process is still proceeding [55][56] Question: Can you provide insights on the Italian market growth? - Growth in the Italian market is attributed to ongoing innovation in lottery products, with a combination of new product launches and volume growth contributing to the increase [88][89] Question: How does the company plan to manage its financial position amid increasing debt? - Management noted that half of the recent debt increase was due to foreign currency translation, and they expect to maintain positive cash flow despite heavy CapEx [83][84]