Lottery Schemes in Italy Show Promise as Licensing Decision Nears, First-Quarter Income Suffers a Setback (IGT)
A Gutsy Move: IGT's Billion-Dollar Bet on the Italian Lottery
IGT's CEO, Vince Sadusky, spilled the beans during the Q1 earnings call, revealing a stunning $500 million war chest set aside for securing the coveted Italian lottery license. The big reveal came amidst the publication of IGT's earnings report, which, unfortunately, saw a 10% dip in group revenue to €583 million, with slumps in three of its four core operating segments.
Geographically, the losses were ubiquitous, yet Italy showed the smallest decline of 3%. This tiny dip caught Sadusky's attention, as he sees a golden opportunity for IGT in Italy, particularly with the licensing up for grabs once the current term ends in November this year.
Since 1993, IGT has been the kingpin of the Italian lottery, but it's not the only contender in the race. Notable rivals like Novomatic, Allwyn, and Flutter are also gunning for the sweet prize. Fingers crossed, the tender process is reportedly sailing smoothly, with the Italian gaming authorities preparing to open the economic proposals on May 19th. But, here's the twist - the technical evaluations are said to be already completed, and the results are expected even before the May 19th date.
In a bold strategic move, IGT has issued a new €1 billion term loan. Of that grand sum, €500 million has been used for debt repayment, and the remaining €500 million will be reserved if the company snags another term for the lottery license. Boom!
Tariff Tussles and Recession Rumblings
Moving on, the Q1 update touched upon wider issues, including the impact of tariffs and the potential risk of another economic downturn. Light & Wonder tackled the tariff concerns during their Q1 earnings call earlier in the month. Sadusky remains optimistic about IGT's performance, believing that the lottery markets in the US and Italy will remain bulletproof during any economic hardship.
Sadusky also touched upon the pending sale of gaming and digital assets to private equity titan Apollo Global, a deal that was struck last July. Assuming the deal goes according to plan, the transaction is set to be wrapped up in Q3 this year, leaving IGT as a lottery-only company.
The Nitty-Gritty of Q1 Performance
Going into detail on the Q1 performance, IGT pinned the drop in group revenue primarily on decreased instant ticket and draw-based revenue. The revenue in this segment dipped 3% to €500 million. IGT also reported a substantial 46% drop in US multi-state jackpot wager-based revenue, which was attributed to higher activity in the previous year and incentives from associated lottery management agreements and multi-year central system software licences and terminal sales in 2024.
Other revenue also plummeted by 28% to €89 million, although up-front licence fee amortisation showed a slight improvement. All in all, service revenue took a 10% hit, falling to €557 million, with product sales revenue dropped 38% to €26 million.
The US and Canada remained the primary source of income, albeit 20% lower than the previous year, at €259 million. Italy's figures were lackluster but tolerable, dipping 3% to €246 million, while the rest of the world revenue dipped 7% to €79 million.
Despite the Q1 setbacks, Sadusky remains upbeat, expressing excitement about the initiatives in the pipeline to foster sustainable, long-term growth and shareholder value. As the licensing race heats up, the future ahead seems uncertain but promising for IGT. In the words of the man himself, "Bring it on!"
In light of the ongoing strategic moves within the business sector, IGT's CEO, Vince Sadusky, has expressed optimism regarding the company's performance in the lottery markets, particularly in the US and Italy, despite potential economic downturns or tariff concerns. Additionally, with a fortified position through a new €1 billion term loan, IGT is well-prepared to seize opportunities in technology, such as the upcoming tender process for the Italian lottery license.
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