CONSUMER CYCLICALS: International Game Technology; 3Q Results
(IGT Secured; Ba1/BB+ CW Pos/BBB-) {IGT US Equity}
Reminder it sold gaming business to Apollo for $4.05b cash - $2b will go to debt paydowns when it closes (exp. 3Q25). It reports numbers for remain-co only now (what we care about);
- 3Q revenue $587m (-3%), leaving YTD ~flat yoy
- EBIT $110m (vs. $163m last yr) at a 18.7% margin (-840bps)
- $38m drag on cost-saving investments
- YTD at $507m vs. $555m last yr - gap on above
- adj. EBITDA at a 44.9% margin (-150bps), YTD at $880m at 47.3% (-130bps)
- Net debt $5.2b (will move to $3.2b post-close)
- Qtrly dividend maintained at $0.2/share (~$40m/qtr)
4Q Guidance;
- Revenue of $640-690m (vs. $681m last yr)
- adj. EBITDA of $280-300m (vs. $343m last yr)
- It will leave FY in line with consensus, equities +1.5% in pre-market
At mid-point of guidance it will end the year net/gross 2.7x/3.2x levered (pro-forma sale). Moody's threshold is <3.5x (on stable). S&P will either upgrade by 1-2 notches (BBB- to BBB) when it closes - we see 1-notch upgrade at most here.
On RV, reminder we are awaiting Flutter M&A supply (€2.5b bridge facility taken out, exp. close 2Q) and French lottery operator FDJ (Baa1) is in primary with 6/9/12y €1.5b mandate. Keeping both in mind, we don't see much value in IGT; Flutter 29s (shorter duration than IGT 28s) only gives up 20bps and runs firmer fundamentals (our view).