Gaming equipment giant International Game Technology – which saw worldwide business impacts on national and international lotteries from COVID-19 – is looking at “structural cost savings” in the company’s operations in wake of the pandemic.
In a statement Tuesday, IGT, which is headquartered in Rome but has a large North American manufacturing and sales presence in Nevada, said it identified $200 million in cost savings it expects to achieve by 2021.
IGT CEO Marco Sala said on a conference call the company’s second-quarter results were better than anticipated three months ago.
“Our second-quarter results reflect the intense impact of global lockdowns caused by the pandemic,” Sala said. “Thanks to strong North America Lottery performance and our swift adoption of cost-saving and avoidance measures, we delivered better cash flow than we expected back in May.”
IGT’s total revenues fell 48% in the quarter to $637 million, down from $1.24 billion a year ago. The company’s revenues from gaming equipment sales and interactive gaming fell 65%.
In the U.S. and Canada, revenues from the sale of slot machines and other gaming equipment fell 57% to $45 million. The U.S. casino industry was closed for more than half of the quarter due to the coronavirus pandemic.
North American lottery revenue was down 12% and international lottery revenue was off 56%. The company’s revenues from the Italian lottery – its largest business segment a year ago – trailed North American lottery numbers and was off 56%.
In a statement, IGT lottery revenue declined due to reduced traffic to points of sale and temporary game shutdowns in Italy.
The company said gaming and lottery trends improved each month as venues re-opened and restrictions eased
IGT’s cash flow in the quarter was $168.4 million, a decline of 63%.
The company’s net loss was $282 million, compared to net income of $39 million in the second quarter a year ago.
“Our resilience is a direct consequence of the diversity of our global portfolio of products and solutions,” Sala said. “The improving trends we are currently seeing are encouraging, but we remain prudent with our planning. Our new organizational structure enhances our readiness to adapt to changes in market conditions.”
Truist Securities gaming analyst Barry Jonas told investors the post-lockdown trends were better than expected.
“Consistent with commentary from Scientific Games and our broader gaming coverage, management noted trends following initial ‘Stay-at-Home’ orders are trending much better than initially feared,” Jonas said in a research note.
Macquarie Securities gaming analyst Chad Beynon said IGT is on track to achieve its targets $500 million in cost savings by next year.
“Management is seeing improving trends but remains focused on cash generation, liquidity, and cost reductions,” Beynon told investors. He said the company had $2.3 billion of total liquidity as of the end of June, including $1.3 billion in cash and $1 billion through a revolver.
On Monday, IGT and FanDuel Group announced an extension and enhancement of the companies’ multi-year agreement covering sports betting and igaming in the U.S. According to the announcement, IGT PlaySports platform will be utilized by FanDuel retail sportsbooks in eight states and FanDuel agreed to offer IGT’s online casino games in the two states – New Jersey and Pennsylvania – where it currently operates.
Financial terms were not disclosed, and the agreement runs through September 2024.
“We have enjoyed a strong partnership over the last two years of pioneering the development of the U.S. sports betting market,” Sala said. “We look forward to remaining their trusted partner.”
Shares of IGT closed at $9.80 in trading on the New York Stock Exchange Tuesday, down 76 cents or 7.20%. IGT shares increased 7% Monday following the announcement of the FanDuel deal.
“Looking at IGT in the context of the industry pressure broadly, the strength of the lottery business and positive free cash flow stands out,” Jefferies gaming analyst David Katz told investors. “We remain focused on the trajectory of recovery and visibility for the remainder of 2020 earnings and power for 2021.”
Howard Stutz is the executive editor of CDC Gaming. He can be reached at hstutz@cdcgaming.com. Follow @howardstutz on Twitter.
