International Game Technology Isn’t Playing Games With Guidance

Global gaming company International Game Technology PLC NYSE: IGT is best known for supplying a majority of the slot machines in Las Vegas. However, the consumer discretionary sector company has additional revenue streams focusing on lotteries, digital gaming and sports betting.

The Spinoff and Merging with Everi

IGT is in the process of spinning off and merging its Global Gaming and PlayDigital divisions to merge with gaming competitor Everi Holdings Inc. NYSE: EVRI. The combined companies will trade as IGT, while the remaining Global Lottery business will operate independently under a new ticker symbol on the NYSE. The transaction is still subject to approval by Everi shareholders. However, IGT expects the merger to close by the end of 2024 or early 2025.

A New Dawn for IGT

The new IGT will be a one-stop shop that offers land-based gaming, sports betting, iGaming and fintech. Projected pro forma 2024, revenues will be around $2.7 billion and adjusted EBITDA around $1 billion. The entity will have a large installed base of 70,000 electronic gaming machines (EGMs) generating revenues. It will own a premium IP portfolio and the opportunity to leverage IGT's global sales teams and distribution network to bring existing Everi content and fintech solutions internationally. The merger is expected to generate $85 million in cost savings. 

IGT has competitors on several fronts, including gaming and lottery giant Light & Wonder Inc. NASDAQ: LNW, sports betting and iGaming companies DraftKings Inc. NASDAQ: DKNG and Flutter Entertainment plc NYSE: FLUT, parent of Fan Duel.

Daily Descending Triangle

IGT formed a daily descending triangle breakdown pattern. The descending trendline formed at $22.87 on March 28, 2024, capping bounce attempts at lower highs towards the flat-bottom lower trendline support at $19.48. IGT spiked to $22.22 on its Q1 2024 earnings report as it initially looked to break out of the triangle, but shares fell back under the descending trendline and rejected a bounce attempt at $20.65 resistance. The daily relative strength index (RSI) peaked and fell back to the 45-band. Pullback support levels are at $19.48, $18.25, $17.27 and $16.46.

Steady Results

IGT reported Q1 2024 EPS of 46 cents, beating consensus estimates by 15 cents. Revenues grew 1% YoY to $1.07 billion, beating consensus estimates for $1.03 billion. Operating income was $256 million, in line with the prior year, but the operating income margin exceeded expectations by 400 bps to 24%. Excluding separation and divestiture costs, operating income rose 7% to a record $273 million as margins expanded 150 bps. Adjusted EBITDA was $443 million with adjusted EBITDA margin of 41.5%. If backing out Separation and divestiture costs, then adjusted EBITDA improved by 80 bps to 43.1% at $461 million.

Global lottery same-store sales (SSS) outperformed. Global Lottery growth drove revenues partially offset by Gaming and Digital product sales.

Raising Full Year 2024 Guidance

IGT issued downside guidance for Q2 2024 revenue around $1.05 billion versus $1.09 billion consensus estimates. IGT raised full-year 2024 revenue guidance to around $4.4 billion versus $4.36 billion consensus estimates.

CEO Insights

IGT CEO Vince Sadusky noted that fiscal 2024 is off to a strong start as results for Q1 exceeded their outlook. Revenues rose to nearly $1.1 billion, better than expected. This growth was primarily due to the strength of Global Gaming and iGaming performance. The 24% operating margin beat internal forecasts by 400 bps due to better-than-expected lottery results from Italy SSS and North American jackpot activity at the end of March. Operating income hit a record $273 million, excluding separation and divestiture costs.  

Global Lottery has hit 6 consecutive quarters of expanding operating margins. Global SSS performed better than expected, driven by strong instant ticket sales in Italy, which rose 4% YoY on top of the 10% YoY performance in the year-ago Q1 2023 period. The $1 billion-plus jackpots in Mega Millions and Powerball drove strong growth in the United States. The company's best-in-class lottery hardware and software solutions enabled another solid quarter of growth.

Sadusky concluded, "So 2024 is off to a strong start with record operating income, net of separation and divestiture costs. Our upgraded full-year '24 revenue and profit outlook reflects broad-based momentum across key performance indicators in the balance of the year. We continue to make progress in separating global gaming from gaming and digital and preparing for the proposed transaction with Everi."

International Game Technology analyst ratings and price targets are on MarketBeat.