- Earnings call transcript Q3 2022

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Operator

Good morning. My name is Devin, and I will be your conference operator today. At this time, I would like to welcome everyone to the International Game Technology Q3 2022 Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer. you. Thank Instructions] [Operator Vice Investor Senior begin you the conference. President Hurley, Relations, of may James

James Hurley

thank for Max Vince you IGT's and prepared our you, Thank all After Officer. available XXXX Officer; Max some call, for Chief Executive questions. Financial third Vince joining conference hosted be Chief by and Sadusky, remarks, and Chiara, will quarter on us your

of be call, some forward-looking meaning we the laws. will making the today's securities During within federal statements

detailed may of differ guarantees implied related not statements uncertainties, results The expressed statements our cause our of Forward-looking to our including differ filings. COVID-XX from pandemic. uncertainties are earnings and or materially and from our actual our in based are and those on factors those release principal in forward-looking the effects the SEC latest a in results to could number that materially and the expectations risks current

discuss press with this financial Investor GAAP call, non-GAAP measures. non-GAAP over comparable find we this Relations SEC website, each our now of the And and turn call will webcast I’ll posted of reconciliations regarding measures which these you’ll In on During measures, these disclosures is measures. with Vince accompanying our certain our to slides additional the release, including filings Sadusky.

Vince Sadusky

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Now, over I'll call Max. the to turn

Max Chiara

you Thank today. and you, for all joining thank us Vince,

quarter growth accelerating and third momentum company. the strong underlying results The highlight across

structure generating optimizing cost innovation our in and cash and focus investment strong flow. is Our on processes

currency prior a step and growing services. EBITDA currency reflecting amortization the while billion EBITDA profitability at our Gaming despite from drive industry year Gaming costs adjusted was you multi-jurisdiction financial to constant Year-to-date XXXX of contributions cash XX% constant margin supply reflects currency currency associated increased a up our achieve revenue, our Global and inflationary grew $X.X margin to year. iSoftBet deliver results operating Adjusted improvement that and was significant and products player strong growth in up manner return and constant project due initiatives was from Slide of X% to contributions the Global investment $XXX acquisition. top jackpot are showcase at with in XX% which EBITDA in XX% XX%. with Revenue and improvement impact related quarter in in The the by X%, strategic XXX will income and XX% in in macro at capital all momentum throughout third ability objectives. performance mostly each business expectations. and flow and leverage of iSoftBet of operating see X% million at year the summary $XXX across includes Global full Lottery came We and Operating million the On adjusted highlights. of at adjusted on reduce of constant of Betting segment, basis currency, margin $X.X investing XX% revenue deploying robust income gaming of to were This XX, lottery segments. prior year financial our at margin future impacting X% up an income versus challenges businesses while constant with navigating structural grew $XXX chain respectively. Digital at & initiatives track X% profit a KPI strong significant balanced driven we grew of XX% and grew included to million for debt over and and X% profit are headwinds impressive about growth, and accelerating shareholders. currency. key over $X.X was Operating margin. Year-to-date, billion by up of Operating driven billion point constant the EBITDA demand the from

Let's starting to now with the move segments, Lottery.

an historic Italy and fueled was sales. XX% iLottery nearly and growth in Global and instant $XXX activity up XX% improved the Belgium This versus and growth the representation, at sales strong levels. our a Third revenue same-store North increased low-double QX for XX% versus continued across up are target. of types sales, geographies jackpot sales in categories. over sales growth mitigated trends. was of X.X% the be and in quarter jackpot. same-store Same-store ticket Compared constant trends margin partially launches growth global at draw (ph) half approaching Italy America game nearly growth sales eInstant over pre-COVID quarter improving XX% Italy sales new all on and over quarter for midpoint Same-store iLottery totaled by Europe grew was draw to strong the third in Global North same-store opportunity. sales in strength sales XXXX, year-over-year with operating currency. exciting progressively improved robust growth to Lottery for game and doubled ticket are by sales of game America. area game up was XXXX digit sales even for Lottery U.S. of million, draw Italy. from lower off already good to with lottery are and first XXXX jackpot the third on multi-jurisdiction achieved game million strong X% especially with in games. in low game the Powerball start U.S. draw sales

Global to Turning Gaming.

most supported that a U.S. fueled Solutions. on of where WAP from and and XX%. to and $XX,XXX. among XX% operating leadership up growth license The nearly & GXE. by ASP multi-year is geographies margin almost combination X% Canada a the of by We year than revenue operating company our the comfortably million than long R&D in up expected MLP XXX of contribution the We up in are iSoftBet Products of continue a successful cost shipped $XX $XX, revenue growth our games. over up new Operating was markets and of exciting quarter, especially and installed across with space IGT Betting intellectual from significant of focus about from and currency improvement our There were third of the iGaming 'XX organic EURXX arising as demand, was constant increased in a more more units the Canada, term remarkable with of better an stable also and underrepresented. areas. we to business for drove XX% supported goals. XXX the basis XX% and income in $XX highest by the to history, light the hardware heels roster units West points on and see U.S. were rising improve Global sales opportunities growth. operating Connecticut and productive player Operating prior at higher property income as over investments. in income which drove lot leverage iSoftBet increased is of poker believe areas by share constant activity broad-based million on XX% unit at compelling to VLT in The rose about three which strong, growing the Total XX%, currency. we up Product into We're casino global the new full record alignment momentum the excitement customer doubled opportunities benefited base translated we sequentially prospect Product especially categories. growth above offer margin where level. excited integration in games and global X,XXX replacement of approached Gaming currently key Virginia Digital iSoftBet and with in year such site about was million and growing period, new and from yield sales revenue.

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with Now free capital turning cash cash allocation. almost $XXX cash and flow operations from $XXX to flow Year-to-date totaled million, million. of

are quarter, unwinding started In in fourth some the we are a working third the of year. in current part in the payments concentrated from capital As quarter, and first reminder, interest third investment first quarter. the while see of the tax concentrated to payments and the the of

We expect this to QX. continue in

additional us allocation. to share third million returned recent company balanced mid-October, of in repurchases greatly $XXX share our asset XXXX maintaining brought from including goal. leverage ‘XX times with in the history. liquidity divestitures of We long average our the of has X.X% the in $XXX and while to total enhanced $X.X a notes opportunistically and $XX.XX, sizable X.X million borrowing outstanding also capacity $XXX to debt us due million be $X.X certain notes our nimble pursue $XXX interest capital toward debt Through our remains We another than credit allows is this undrawn an a approaching is credit retirement during as we debt due share shareholders, level represent price quarter This in company million quarter partial our from inflow authorization leverage and long-term objectives. The reduction. target midpoint to including and vast the term enabled This the of program. the fixed lowest billion is repurchase tender facilities. and debt operationally majority million better in quarter, includes of approach of notes at exited senior realized in of our X.X% the far expense reduce secured Net strategically cash to debt done XXXX of profile. EURXXX so net acquisitions. The and milestone year our billion

Slide points fourth of the This euro As for XXX quarter in amortization, dollar billion an iSoftBet assumes to of project-related from basis and revenue around XX% guidance $X margin and around expenses. operating shown restructuring operating up step XX, XX% to on acquisition points impact margin. introducing costs are basis we to XXX an income parity and

our open remarks. our year enhanced and full would year full summary, profile, our line of targets. results is and to In concludes This our the significantly prepared questions? upper very We deliver third please achieve to guidance, half financial shareholders targeting XXXX for reaffirming dividends the the share outlook. XXXX track ranges. the repurchases, IGT you through in 'XX reaffirm financial Operator, full quarter returns generated compelling also strong are We year on credit

Operator

Carlo Instructions] Deutsche Santarelli Bank. first [Operator comes Our question with from

Carlo Santarelli

parts, or the moving Hi. Hey, obviously everybody. morning. At out end a iSoftBet in. Italian postpaid. Good coming Vince, The lot business of going BXC with

this overcome guys a have You lot year.

little to XXXX building on -- a the bit than momentum in the reasonable kind build about more -- continuing obviously to year gaming lottery think we As than this side, the of comps, it ‘XX of a and line? put think together, on were do ‘XX. When you on in you the prospects kind for kind how both of all growth EBITDA line revenue adjusted bridge they about

Vince Sadusky

Yeah.

you give qualitative thoughts. I'll So some

in our IGT the still we're XXXX. have clear But finalizing the kind quarter. third trends KPI Of think of thoughts been around pretty course, for and through Lottery underlying it's really Gaming I encouraging

obviously XXXX, points -- from been Italy sales lottery prior the and you the kind same-store to think about up has cover grow. the and in a year for to operator the in progress flows decline which think quarter success, reduced continue gap I've and made has really great then the operators spent significant given returns. far cash been leading been and you amount importantly some prior the Just data to continue gaming XXXX, with when high of discrete the all slides level have And of down you and the record in they about industry, has third casino record has significantly. most as fair room saw to go to GXE benefits as CEOs time rates casino -- us

We slowdown indication seen of investment in heard any have slot their or not in floor. anticipated

and take sales in internationally. IGT at market America a both you growth at And good North moment, is in the they think good spot. next in unit I forecasters kind of year, If expect the look really

better. Our are games

encouraging been think our And keeping has really we've the up again, really struggles fourth customers. going demand. feedback good XXXX third through of had into success, quarter greatest the from I quarter with our good and

network. as incremental we've both So helping to basis games able to in to be to, producing then increase a the at than period in be And I think to iCasino’s capabilities really are think of and in and platform a good you North well Betting, games Digital good. in that first is where on us with through easy iSoftBet switch legislation makes I to best-in-class momentum the the integrate significant distribution we for slower America over & bit I think, system mentioned opening signs got best-in-class you think overall with helps moment originally it anticipated. digital us provide And third-party our regard as on a I iSoftBet, having that take that advantage capabilities connect our of

So all on view XXXX. feel terms things those pretty in of our I think good current

Carlo Santarelli

Vince. just one you, Thank then, if And follow-up. Great. could I

in You and margins U.S. clearly gaming points lot a bit XXX about a have parts, Canada out you guys of of and guys talked obviously the were within business or ASPs record But of moving or little that bunch a year-over-year. the up cost clearly basis so taken in general.

So my question chain of, the to was in in basis on apples-to-apples of lines the cost? more along increase an kind the cover enough increases has been pricing supply

Max Chiara

Hi, Carlo. This take one. is Max I'll this speaking.

of So QX have drives product come targeted categories features in into prices, And primarily in of said that the we with we have the on pricing true vividly have until price cost. to have of Obviously, our comes with increase significantly that supply have and QX that up increased fruition we higher some later been there expected more And to not but touched significantly again, have on the higher price of an a -- mix of chain into improved also XXXX. own. impact enhanced a heels content previously, mid-single up digit product heels an still actions the about is improved come points. impact the really obviously is ASP as product, our

Vince Sadusky

QX, Speakers] makes Again you. which (ph). Thank [Multiple

Operator

Securities. Truist with Our next Barry Jonas comes from question

Barry Jonas

a guidance upside Is was are you billion Good what jackpot. of kind $X.X follow-up, million the morning. for assuming $XX about that from or what about the quarter recognized? Last And in Powerball? you so upside of current Hey, talked then guys. EBITDA as

Vince Sadusky

Yes.

$X.X million knows. sales We impact the give Million, as $XX It's running a through the Obviously, $X.X is favorable flow to billion now in hit jackpot So you jackpot July about estimated correctly. Mega higher. would recollect that everyone (ph) profit. billion much of to right us

in So higher will million hit, jackpot could be much see hit, but expected that. also fatigue Powerball market. It be than to get benefit we is how $XX the to need post the to up

is up right level the again, high So to fourth $XX for quarter. million probably now

Barry Jonas

think Great. how And to lottery prior the then relative that just about extensions we economics announced, you relative the to the contracts? should

Vince Sadusky

that we There Yes, incremental associated with commitment to got typically our report contract is happy were the some York I renewed. think capital New renewal. expenditures

So get point the our technology that that can and for great customers out of into team of some of the machines has help marketplace. to advantage upgrade part our sales their most the and we take designed new

And again, that front, that continues Georgia upgrade have the terms year And of really don't no of think on contract. that very seven terminals renewal. well. was capital attractive we includes that then a I talk Texas was a a years retail we the with On as bunch XX commitment. for and printing, And to and an printing there's returns, about financial renewed But associated that. of their course,

Barry Jonas

Perfect. you All right. Thank so much, guys.

Operator

we [Operator Instructions] Suisse. Next, have Ben Chaiken with Credit

Ben Chaiken

questions. my Hey, for taking everyone. Thanks

XXX in know points should then much The (ph) does I'm Carlo's within to in gaming? the about cost And the to significant just that based opportunities a see 'XX those that sure margin called basis enhancements basis line opportunity you EBITDA hit impact Thanks. response then my that side question, about in XQ, I the points you on some guys pricing talked through. if out? there talked gaming. well how in you it. in XXX operating margin initiatives quick we Should in on of pricing for other 'XX are question, as Just not first. covered increases? -- improvement And presentation, flow one the second you those

Max Chiara

take Max is this Hi. one. I'll speaking. This

bps of reference, XXX say, terms of if XXX I EBITDA, bps to the EBITDA XXX, use impact in to would you specific the the point of So XXX OI (ph). XXX a as

hitting EBITDA. one-third it's So

progression, closed so margin the OI to go. XXXX get over for way at margin on we three of that years, we to the is to We think that terms some target be be up quarter the gaming to and we XX%. to between target. be XX% displayed In next have our there will But XX% able

the expect we margin improve sequentially year-on-year. So to

Ben Chaiken

Thanks. Okay.

Operator

Beynon with comes question Macquarie. from next Our Chad

Chad Beynon

side. going business lot that and gaming this I Thanks in finger you a factor of even kind question. -- market for our into Latin forecast in some to installed Hi. in just of installed continue and taking on been Australia, is those pulse. get are of reopening strong, dial if you. outside South help can Good of for And America if believe base States. United in probably my the up really rest concentrated The markets to grow of a kind growth little of Africa in us share was north the Wanted and pretty if is the on that things installed But us world? I kind the for a taking of your to morning. regions? what's maybe you're guess, or of start and Thank base base harder on particularly growth that's kind to

Vince Sadusky

sure things. Yes,

Cleopatra. our our So Link software driven in early and on by based our our MLP like course, our amount can of of terrific saw WAPs out we've And had game, Prosperity and Money of newest cabinets. is coming around installed base, sequential we of excitement Media, say upon and the growth success and hardware titles interest our especially a there GXE, new games quarter-over-quarter kind with that new and was I really just

the significantly North I first and off, in American important America the North installed on trends, the think had market. company in it's focus to base has improved

opportunity the we've area Class the space competitive good where MLP has base all in from sure success our game And think, effort. achieving, that on categories. we've installed and top producing MLP example, years been XXXX, was well. IGT But that in grown well I And growth as feel improving continued in over XX%. based yields in category growth MLP an many been for of as as space we II has grown we're I'd base also not as we many got say all installed For the category good other years focused upon it's as that, category. after on for has continued seeing games of IGT's for then significant know like further really nearly most the

the IGT's America. of kind in strength scorecard of the performance, Yeah. when the with North operators, So speak in is ultimate game I terms clearly gains continued they're casino driving which reaffirming of

growth great long-term we've we Latin our rest base the America, the of look I EMEA is in for opportunity think contributor the America. increase well are also primarily been at strength our what Greece in at to And a significant world, Latin significant and when in and quarter. had America look a We've if rest think third as Latin world, installed of drivers plan, installed our in of was the base good we the you underrepresented international yeah, base installed us. in

Chad Beynon

how down it. standpoint? kind with down, or tick then, Makes M&A? more sense. be as leverage, sheet to excess dividend want tuck-in continues X.X And from operational times. Max, capital, us the of you you mentioned respect just to whether an you increases to this plans about to you're it's remind thinking it where balance Appreciate Can Thanks. And it's for repurchases,

Max Chiara

Yes, Chad.

of to As X.X% you X.X% be know the leverage. is to our in range target long-term

good a like coming. be in are for times we in the now bad right potential protect to to end feel low spot. we we Obviously, buffer So ourselves the of would

be done. work still to is there So

year-to-date we of as in you that under to the allocation. terms approach full our continue see master towards share And well. XXX authorization balanced period buyback. There the are million capital existing in allocation, fruition capital the on remaining In a will

we continue on the to of the lower of program and pillars So in But long-term expect to to to leverage take half continue is the it bring going conjunction of execute forward. milestone care to the the with us again, those down target. strategic

Chad Beynon

Thank you Nice much. results. very

Operator

question Domenico next from comes Our Ghilotti.

Domenico Ghilotti

Yeah. have three Good questions. I morning.

on trend? question terms the was of the driver quite of And is is performance. on [indiscernible] the gaming impressive business. comment on the current and in instant Italy in sustainability Can ticket the The second you first business the

As usually, chain issue. seasonality QX in you supply But is chain quite this clearly, or supply the you had strong. have

expect is you debt were can mentioning by legal us if moving be dispute would an is So net cash capital, seen do also several seasonality color to working taxes year-end, QX? you indication see more there on are can that parts. and some be the a in that last the this you of Max, cash provide or give that where the can great. And if you generation, net

Vince Sadusky

Max and rest out start help answering off of the and let I'll Yeah. question. the then

in stronger-than-expected offset mentioned earlier, and sales. sales, game recovery draw scratch So what has slower-than-expected as we've we helped is, us in which Italy seen wind to really

is for improvement I games. think ahead the opportunity draw us going continued in

And the were two third quarter games only As quarters. XXXX. said, we below significant very versus draw improvement improvement in slightly first progression was really good we've seen such based that

of been XX% interesting of team I really of quarter. really we're in that direct win XXXX, operate saw scratch and the from games. and Italy, with. first much come the through number has growth of we, directly progress focused digit we team And game that in games, up very, pleased of I think and think improved we're a And very mid-single I quality the has to I XXXX introductions, the was and so the good titles effort driven half since the the of to growth lottery we've multiyear the to that concepts by third I impact think versus see, the think think, been able course,

Max Chiara

because a year. is out first in of among year, on the of the the historically, there It the daily a been of on the of supply in deliveries. half than Domenic, finishing sales kind of gaming a gaming, quarters but bit in and locations. year the remains So little as fight product it was the This on basis, chain in has QX better different seasonality much these dog it's a obviously, result strongest terms of

deliveries have visibility on increased of We components.

complete. product reengineer been easier have different to some to able of the of simpler, make them with components We and to some the suppliers, resource

into it cash QX tax from although, from year in were you about at deliver capital working year-to-date, on So the of of definitely we big versus generation. basis. generation, net-net, coming We should a and QX $XXX are you more on of of production us there we working QX, out the watch And in full million then terms And front lower $XXX as probably cash When about need use cash an a it's we look a is to simple. about you cash guidance deliver to pivot, confident terms payments. QX. able capital obviously delivery. can that interest in When million quarter it all schedule to daily keep increased in assume the in is that there just

us the So QX. working end And again, if it depends the how at from line in much of efficient inflow be we that see year. our should another capital goes guidance. expectation, everything cash into But you should with home drive the can

Domenico Ghilotti

And matter. on payment a for (ph) the just follow-up potential Benson the

So cash when should out. we the assume

Max Chiara

Yeah.

So the terms after settlement. of court that the effect of settlement approval class only final takes proposed

sometime approval soon, approval final expected take months. will the So more is than six but the likely preliminary

right in So within -- now. again, we're still, frame time this

Domenico Ghilotti

Okay. Thanks.

Operator

Jeff Stantial comes question next Our Stifel. from with

Jeffrey Stantial

Good similar of living morning, business, trends. so or anything game in anecdote if hoping could consumer pressures, ops trend? cost or Curious suggests whether U.S. the a softening more you than to Max. We've heard this a season, lottery earnings otherwise European in bit about at least seeing in you're your was that some talk Thanks. a I some Great. international more the related

Vince Sadusky

Yeah. Thanks. Sure.

us So significant is of for course, the most market Italy.

been Italy our sale of business company the the over particular. payments very exposure the reducing years think on Italian through our to has recently, and in focused I most

lottery energy primarily strong that year has Europe. the our And kind of higher impacted been the by really been operation got we've economic They have against a over of seen through And conditions high those trends really part had prices already. growth the grain that we've inflation place and Italy. this the of improving the runs that consumer in XXXX, taking inflation. lottery really, for driven So good Italian in certainly, over

in resilient low we've last long-time been So susceptible then, business think, difficult the lottery over of really decades, impact course, we've shown And couple lottery versus Italy of got lottery Again, operator, and again, it's not And form being we've high the reward, I disruptions we've of periods. of cost -- the the economically. a as of very been last seen we lot And have operator, value, that kind year. these lottery to significant politically has lottery high a seen has the any market data, sales. on both and progressive the entertainment. throughout improvement

Europe part in believe, goes -- struggle as I presence and XXXX. To view recession, of far greater Europe in gaming definitely very would been share to actually of has the Europe. now honest, chain of the good earlier, to part long-term supply demand games resonating okay. it we've that way As the slower making our mentioned market in we're is coming and opportunity, is they recover challenges had rest with Europe meet we of I out COVID we be which the are

of be position to And as North be for so of America more fine. is to growth the but slowly, if actually world And grow recovers the as just share. driver good we we'll Europe feel in the a and rest market

Jeffrey Stantial

really on earlier the Domenico's a helpful. And questions with could That's if one Italian Great. follow-up on follow of contracts. up then, I

over some there the behavior. wagering kind nice as out the consumers normalized contract sequential called of to, it, some You in of improvement lotto revert call back

to ramps back in starting seen effectively you signs should think entirely win, if it of strength levels, impact you've back as or contract XXXX Thanks. you're lotto curious and lotto to scratch that additive closer seeing any coming levels? Just XXXX the be to if

Vince Sadusky

draw games can continue trend both is always tenured coming win have and be that a our been data and continue to good And XXXX along back through going determine try games. scratch Yeah. been scratch draw we like and expertise based terrific towards improving, to challenge one have encouraging hopeful to if our is again, It's drivers the and and again, levels. forward. I we're team, based impacting negatively point success area strong, But win has think,

Jeffrey Stantial

Great. on. I’ll helpful. Thank you. it Very pass

Operator

Our next question Instructions] comes from [Operator with Katz David Jefferies.

David Katz

Good Thanks taking for Hi. question. my everyone. morning,

But and prospect characterize X.X% a with the sort leverage to I co-exist range don't that of out lower that sub-X level? ground, I And back would And could of covered minute, for drumbeat a wanted to in that recession the does there that if for you've to that lot IGT balance Max, of term might slowdown any coming, to we go too the near sheet back wanted X.X%. the tuck-ins. the just in to how just end reiterate go you likelihood much. range to or for closer is with potentially? a Thanks. -- of the there of range And the think target I keep I you want to

Max Chiara

Yeah.

exactly rationale way. Are the one for withstand recession. completely target was of our in downturns to leverage we low along So the the enough potential the coming turn range of industry company in help a offset spend the kind to

long-term kind I it a know continue to range. is a the If knows, of absorb But to able more next recession we operate your again, don't we recession, we're at able intent to year recession, face was of typical within that recessions probably hope that is be certain it right? a mild to If point. First all, what a are potentially. answered going could negative depressed that who impact question. for come to

David Katz

say Yeah. near term? And tuck-ins more on any you likely, would just with probability respect to less or

Vince Sadusky

iLottery on a for created and of that's there's individuals out the We lot content always providers on and there talented have on -- side a with jump lot I'll in. the as well technology both land-based Yeah, say even studios, that work very studios. we're I talented side would that and on iCasino of side lookout gaming the the them.

to for right, But any our nothing of attuned see out get perform. games a got ride. our opportunity So how games an we changed the an opportunity that on wouldn't area capabilities. they everything and we terms an continue But potentially outlook have has that's that if to is that be to I to in imminent. platform to their of say take of kind We've there's test adding and

David Katz

Thank perfect. very much. That’s you

Operator

time. the Sadusky. back call turn to questions this CEO, Vince There at over are further no I

Vince Sadusky

joining Thanks Yeah. for us today.

innovation it's one optimizing paying on and our and across scale processes of strategic each year-to-date highlight indication We momentum our is through a good business off. clear segments. think our Our results driving focus growth that

forward we leverage a meeting in solid trends as on Our year and commitments. appreciate look net record player XXXX coming the we customer always, lowest remain a on demand in path weeks. interest, your debt we're We to levels and and ever delivering day. with and strong, Current our a at are you IGT shareholders. and their returned capital our to to Have fiscal of great many

Operator

you Thank attending presentation. today's for

may disconnect. You now

International Game Technology (IGT) 8 Nov 222022 Q3 Earnings call transcript