International Game Technology PLC (IGT) released its Q3 2024 financial results, marking its first reporting period where the Gaming & Digital business is classified as discontinued operations. This pivotal shift follows IGT’s decision to sell its Gaming & Digital division to Apollo Global Management affiliates for $4.05 billion in cash, anticipated to close by Q3 2025. In the first nine months of 2024, IGT achieved $1.9 billion in revenue, demonstrating robust growth in Italy and improving trends in the U.S. This shift will allow IGT to transform into a streamlined, global lottery-focused company poised for growth in a dynamic industry.

IGT's Transformation: Sale of Gaming & Digital Business

Strategic Shift to Focus on Core Lottery Business
IGT announced the sale of its Gaming & Digital business for $4.05 billion in cash to affiliates of Apollo Global Management. CEO Vince Sadusky emphasized that this strategic divestiture will streamline operations, allowing IGT to concentrate on its global lottery services and capitalize on favorable industry dynamics. The transaction is expected to close by the end of Q3 2025, marking a major transition for the company.

Financial Stability through Cost Optimization and Low Leverage
CFO Max Chiara highlighted IGT’s ongoing cost optimization initiatives, which are designed to “right size” the organization for long-term growth. The restructuring program will improve cash flow, reduce expenses, and support IGT’s low pro forma leverage profile, setting the stage for a more focused and resilient business.

Key Business Developments: Contract Extensions and Strategic Partnerships

North Carolina Education Lottery Contract Extension
IGT executed a 10-year facilities management contract extension with the North Carolina Education Lottery, ensuring continued revenue from this partnership and underscoring its commitment to key markets in the U.S.

New Contract with Portugal’s National Lottery
IGT secured a three-year primary instant ticket printing contract with Portugal’s national lottery following a competitive process. Additionally, IGT strengthened its relationship with La Française des Jeux, operator of the French national lottery, by signing a three-year instant ticket printing agreement, further expanding its presence in Europe.

Q3 2024 Financial Highlights: Revenue and Profitability

Revenue and Gross Profit
IGT reported Q3 revenue of $587 million, a slight decrease from $601 million in the prior year. This decline is partially attributed to elevated U.S. multi-state jackpot activity in the previous year, while Q3 2024 benefitted from a 2.7% same-store sales growth in Italy and improved instant ticket and draw game trends in the U.S.

Gross Profit Dynamics
Gross profit came in at $263 million, compared to $278 million in Q3 2023. While prior-year results benefited from high U.S. jackpot profits, Q3 2024 saw a favorable geographic mix and increased non-wager-based service revenues in Europe, partially offsetting the impact.

Operating Metrics: Cost Management and Efficiency Gains

SG&A and Research & Development Costs
Selling, General, and Administrative (SG&A) expenses were reduced to $101 million from $106 million in Q3 2023, reflecting cost-cutting efforts, including reduced legal expenses. Research and Development (R&D) expenses rose to $12 million, driven by IGT’s commitment to growth and innovation in its core lottery services.

Operating Income and EBITDA
Operating income decreased to $110 million from $163 million in the previous year, impacted by a $38 million restructuring charge associated with OPtiMa 3.0, a cost-optimization initiative targeting G&A and operational activities. Adjusted EBITDA was $264 million, with an EBITDA margin of 44.9%, compared to 46.4% in the previous year. This slight contraction is primarily due to the high flow-through from prior-year jackpot activities and a stronger product mix.

Non-Operating Expenses: Interest, FX, and Tax Implications

Interest and Foreign Exchange Impacts
Net interest expenses were stable at $53 million, while a $39 million foreign exchange loss replaced a gain of $36 million from Q3 2023. This FX impact is primarily attributable to the EUR/USD exchange rate fluctuations on IGT’s debt and a loss on a foreign currency hedge related to EUR debt issuance.

Income Tax and Net Income Decline
IGT’s income tax provision was $61 million, down from $65 million in Q3 2023, reflecting non-deductible FX losses and restructuring charges. Net income dropped to $43 million from $123 million in the prior year, primarily driven by the after-tax impact of FX losses and restructuring costs.

Per-Share Metrics: Impact of FX and Restructuring on Earnings

Diluted Loss per Share
IGT reported a diluted loss per share from continuing operations of $0.39, compared to earnings per share of $0.23 in Q3 2023. This loss is primarily due to foreign currency losses and restructuring expenses, which reduced EPS by $0.42 and $0.13, respectively.

Adjusted EPS Highlights
Adjusted diluted loss per share was $0.02 in Q3 2024, compared to adjusted EPS of $0.04 in the prior year. This decline reflects reduced operating income, partially offset by a higher effective tax rate, underscoring the financial impact of IGT’s restructuring efforts.

Conclusion and Strategic Outlook
IGT’s Q3 results reflect a transformative period as the company exits its Gaming & Digital business to focus solely on its lottery operations. With strategic contracts, an improved cost structure, and a strong U.S. and European market presence, IGT is well-positioned for sustainable growth. Despite FX and restructuring headwinds, the company’s long-term outlook remains robust, supported by an optimized business model and stable cash flows from core operations.