IGT revenue and net profit down in Q3 after gaming and digital sale

Private equity giant Apollo Global agreed to acquire IGT and Everi in a combination worth $6.3 billion (£4.9 billion/€5.9 billion) on 26 July. The deal superseded the companies’ previous merger plans with Everi that were set out in February.

As part of the Apollo announcement, IGT elected to report gaming and digital as discontinued operations in Q3. This comes as the group prepares to begin life as a lottery-only business, should the sale complete as expected by Q3 next year.

Ultimately, this had an impact on year-on-year comparisons for the three months to 30 September. Revenue was down 2.3% to $587 million in Q3, while net loss from continuing operations hit $46 million, in contrast to last year’s $77 million profit.

However, IGT CEO Vince Sadusky is positive about the new-look business in the long-term. He said the transformation will allow IGT to become a “leaner, more focused” operation.

“Our Q3 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,” Sadusky said.

Breaking down Q3 at IGT

Of all revenue at IGT in Q3, $566 million came from its B2B services, down 1.7% year-on-year. This is despite instant ticket and lottery draw-based revenue, the main revenue source within the services segment, rising 1.1%.

US multi-state jackpot wager-based revenue dropped 55.3% to $21 million in Q3. IGT said this was due to higher jackpot activity across the US in the previous year. On top of this, up front licence amortisation costs were higher at $48 million, although other services revenue increased 10.5% to $116 million.

Aside from services, IGT also saw product sales revenue decline 20% to $20 million for the quarter. IGT put this down to stronger terminal sales and a more favourable product mix last year.

In terms of geographical performance, some $284 million of revenue came from the US and Canada, down 7.2%. Italy revenue increased 4.6% to $228 million but rest of world revenue declined 2.6% to $75 million.

Transformation costs hit bottom line

Turning to spending, operating expenses increased 8.9% to $477 million during Q3. This was mainly due to an additional $38 million in costs related to the restructuring of the business.

As such, operating profit dropped 32.5% to $110 million. After $94 million in non-operating costs, a large part of which were foreign exchange losses, pre-tax profit was 87.8% lower at $15 million.

IGT paid $61 million in income tax, resulting in the $46 million net loss from its continuing operations.

However, when including $88 million in pre-tax profit from discontinued operations, minus net loss from non-controlling interests within this segment, this read slightly better for IGT.

Bottom line net profit after this inclusion was $7 million. This is still 92.6% down on last year. In addition, adjusted EBITDA slipped 5.4% to $264 million.

Year-to-date revenue edges up at IGT

As for the year-to-date, revenue in the nine months to 30 September was 0.7% up at $1.9 billion. This was helped by marginal increases across both the services and product sales segments.

Operating costs climbed 4.6% to $1.4 billion, pushing operating profit down 8.7% to $507 million. After non-operating costs of $192 million, pre-tax profit was 21.3% lower at $315 million.

IGT paid $161 million in tax, leaving $154 million in net profit from continuing operations, a drop of 19.8%.

When also accounting for $101 million in profit from discontinued operations, net profit hit $256 million, down 8.6%. After a $120 million net loss from non-controlling interests, IGT posted a bottom-line net profit of $130 million, down 20.7% year-on-year.

On top of this, adjusted EBITDA declined 2% to $880 million.

What does the full year look like for IGT?

IGT also issued an update on guidance for both Q4 and the full year. In Q4, revenue will likely be between $640 million and $690 million, with adjusted EBITDA ranging from $280 million to $300 million.

As for the full year, revenue is estimated at $2.50 billion to $2.55 billion. This would be some way behind last year’s $4.23 billion due to the new look of the business.

Full-year adjusted EBITDA is set to be between $1.16 billion and $1.18 billion. Again, this would fall short of the $1.78 billion posted in FY23.