International Game Technology's Focus on Digital Growth and M&A Opportunities
2023-07-30
The recent earnings call meeting of the company focused on discussing its recent innovation and growth opportunities, as well as its strategy for mergers and acquisitions. The CEO expressed confidence in achieving the company's targets. One of the most important topics discussed during the meeting was the company's emphasis on growth and innovation, particularly in their high-growth digital business, specifically in the iLottery and iGaming sectors.
The company recognizes the potential in these areas and is actively working towards expanding their presence and market share. The CEO highlighted their strong portfolio of games and best-in-class operating platform in these sectors, indicating a competitive advantage. Additionally, the company expressed openness to exploring potential opportunities for mergers and acquisitions that could further enhance their business. This demonstrates their willingness to invest in strategic partnerships or acquisitions to accelerate growth and gain a competitive edge. The company's strategy team is actively monitoring the market and evaluating studios and technology that align with their growth objectives, showcasing a proactive approach to staying ahead of the curve. Furthermore, the company's strong cash position and balance sheet provide them with the financial flexibility to capitalize on reduced valuations in the market.
The company reaffirmed its full-year 2023 outlook with increased confidence, thanks to a strong performance in the first quarter. However, they expressed caution about the potential for an economic slowdown in the U.S. and other macroeconomic uncertainties. For the second quarter, the company provided guidance, expecting revenue of around $1 billion and an operating income margin of 22% to 24%. The company had a strong start in 2023, meeting or exceeding expectations in the first quarter and generating solid cash flows. They have secured financial flexibility with low net debt leverage and significant liquidity. While remaining positive in a strong environment, the company acknowledges the potential impact of a macro slowdown.
The key drivers of the business discussed during the meeting include structural changes in demand in the Canadian market, orders and deliveries in the VLT market, and growth in the lottery sector, particularly in North America and Italy.
In terms of product and service plans, the company highlighted its focus on the high-growth digital business, specifically in iLottery and iGaming. They believe they have a strong portfolio of games and operating platform in these areas. They also expressed openness to potential mergers and acquisitions that could enhance their business, particularly in terms of studios and technology. However, no specific details or announcements were made during the meeting.
While the specific KPIs discussed in the meeting were not explicitly mentioned, the company's focus on areas such as user engagement, revenue growth, customer acquisition, operational efficiency, cost optimization, innovation success, cost-to-income ratio, return on investment in innovation projects, and time-to-market for new products or features provide insights into the potential KPIs that the company may be monitoring.
The company's outlook for the quarter and year is positive, with a reaffirmation of their full-year 2023 outlook. They expressed caution regarding the second half of the year due to the potential economic slowdown in the U.S. For the second quarter, they expect to achieve revenue of around $1 billion and an operating income margin in the range of 22% to 24%. The company is off to a good start in 2023 and is confident in achieving their financial goals. They also have solid cash flows, low net debt leverage, and significant liquidity, providing them with financial flexibility.
In terms of capital spending plans, the company mentioned incremental investment in their capex cycle, particularly in the lottery business, starting next year and increasing further in 2025. They are cautious about how they allocate their available cash flow generation, considering the expected capex investments. Additionally, the company continues to execute a dividend payout and has a share repurchase authorization. They feel comfortable with their current position but are also focused on generating cash reserves for future developments in line with their capital allocation philosophy.
The participants of the call included Jim Hurley, Senior Vice President of Investor Relations, Vince Sadusky, Chief Executive Officer, Max Chiara, Chief Financial Officer, and various analysts from Deutsche Bank, Credit Suisse, Truist Securities, B. Riley Financial, Stifel Financial Corp., Jefferies, Equita, and Macquarie Group.
During the call, Vince Sadusky expressed optimism about the company's recent innovation and growth potential. He highlighted their strong cash position and balance sheet, which allows them to consider opportunities for mergers and acquisitions. The company has a dedicated internal strategy to drive further success.
The company has experienced growth in various segments, including the lottery, gaming, and PlayDigital. In the lottery segment, the company has seen increased sales volume and player base, particularly in Italy where scratch-and-win tickets have performed well. In North America and the rest of the world, same-store sales have increased, driven by core instant tickets and draw-based games, as well as elevated mega-million sales. The global gaming segment has achieved revenue and operating income growth, with a strong product positioning and successful titles. The company has shipped a record number of gaming machines and maintained market share in the U.S. and Canada. The PlayDigital segment has also experienced double-digit growth, particularly in iCasino, thanks to new game launches and the benefit of acquisitions. The company is exploring opportunities to expand its online casino concept into additional jurisdictions. Overall, the company's financial performance and growth indicators have reached new heights.