IGT capitalizes on strong consumer demand in world’s casinos

Strong casino play has prompted operators to upgrade their slot machines, a boon to gaming equipment behemoth IGT.

The London-based company with a heavy presence in Nevada reported narrowing net income despite a 3.5 percent increase in revenue in the first quarter of 2022. IGT executives attributed the decline to omicron variant-produced downturns and higher supply-chain costs this year and a tough comparison against first-quarter 2021 numbers, particularly in IGT’s lottery division.

IGT reported net income of $117 million, 39 cents a share, on revenue of $1.051 billion for the quarter that ended March 31. In the same quarter a year ago, IGT posted net income of $138 million, 44 cents a share, on revenue of $1.015 billion.

“We’re off to a great start in 2022. The first quarter results clearly reflect the power of our portfolio,” said Vince Sadusky, the new CEO of IGT. “The quarter’s strong margin profile highlights the long-term recovery of the gaming business as well as increased levels of lottery play from pre-COVID periods. The company’s initiatives around a simplified corporate structure have resulted in strong liquidity as we continue to invest in product development and return capital to shareholders.”

The company repurchased 1.4 million shares and the company’s board of directors declared a quarterly cash dividend of 20 cents a share, payable to shareholders of record as of May 24 on June 7.

Sadusky told investors in Tuesday’s earnings conference call that casino operators worldwide are reporting increased numbers of players who are spending more in their properties, and a higher number of younger-demographic players. That has prompted operators to freshen their casino floors with upgraded machines and games.

The company’s Global Gaming division showed revenue increases of 42 percent to $325 million, driven by significantly higher product sales revenue and higher active installed base units. In the first quarter, the company shipped 7,200 machines, the highest amount ever for a first quarter.

Sadusky said casino operators believe they need to have up-to-date game technology in order to stay competitive in their markets. The number of replacement machines was roughly triple what it was a year ago.

Also during the quarter, IGT secured a three-year lottery contract extension with the Missouri Lottery; awarded multiyear instant ticket contract with Lotto Baden-Württemberg in Germany; executed a broad patent cross-licensing agreement with Aristocrat Leisure Ltd.; signed agreement with Atlantic Lottery Corp. to provide 1,375 CrystalDual 27 video lottery terminals; launched IGT PlayCasino games in West Virginia, expanding its digital footprint to five U.S. states and in Ontario, Canada; and extended its sports betting system through strategic agreements with Meruelo Gaming LLC and Kalispel Casino. IGT now operates its sports-betting system at 70 sportsbooks in 20 states.

Meruelo operates the Sahara in Las Vegas and the Grand Sierra Resort in Reno.

“Whether IGT can break away, from a stock perspective, from its gaming sector peers, in the current environment, remains a question, but the fundamental performance of the company is hard to poke holes in at present,” gaming analyst Carlo Santarelli of the New York office of Deutsche Bank, said in a note to investors. “Given the lottery segment resilience, fundamental performance is unlikely to serve as a headwind for shares for the foreseeable future.”

IGT shares, traded on the New York Stock Exchange, closed up $1.84, 10.1 percent, to $20.07 a share on volume about twice the daily average. After hours, shares fell 53 cents, 2.6 percent, to end at around $19.54 a share.

Contact Richard N. Velotta at rvelotta@reviewjournal.com or 702-477-3893. Follow @RickVelotta on Twitter.