Back to Basics for Gaming Giant IGT

Following a slew of relatively upbeat or better-than-expected financial reports from the betting industry during the current Covid-19 pandemic, comes this disappointing posting from big beast International Game Technology (IGT) reporting a near-50 per cent plummet in Q2 revenues – and a net loss of US$279.6m (£214.7m) during the financial period.

So, it would appear that it’s back to basics for the New York-listed gaming combo; with a promise, perhaps, of accelerated online growth.

Now “cash generation and liquidity remain our top financial priority,” stressed IGT’s Chief Financial Officer Max Chiara.

“We have the resources we need to navigate the impact Covid-19 is having on our business,” said Chiara. “And we are making important, strategic decisions to enhance our operational flexibility.

“This includes over US$200m (£152.15m) in structural and discretionary cost savings compared to pre-pandemic levels.”

This, in so many words, means the gambling giant, is poised to swing the financial cost-cutting axe.

IGT revenue during Q2 fell to US$637.5m (£484.95m) — of which US$560.3m (£426.22m) was service revenue, which was down 42.8 per cent. Product sales fell 69.7 per cent, flattening to US$77.2m (£58.73m).

The only positive on the horizon was IGT’s North American lottery unit — its core source of revenue in the fiscal second quarter. Revenue in the division was “only” down 11.7 per cent, to US$273m (£207.67m).

Biggest loser was IGT’s North America gaming and interactive segment, with revenue falling a massive 65 per cent to US$96m (£73.03m), hardly surprising given shuttered casinos in the U.S. and Canada.

The international division (ex North America and Italy) reported a similar slump in revenue, down 63.3 per cent to US$84m (£63.89m).

Italian revenue was also hit by the Covid-19 lockdown. Real world gaming machine income fell 56.4 per cent to US$184m (£139.95m).

But the blow was mitigated by a significant increase—of 44 per cent–of punters who switched to online betting – surely a portend of growth to come.

Overall, earnings–before interest, tax, depreciation and amortisation for Q2– declined sharply, by 62.9 per cent, to US$168.4m (£128.08m).

The drop in footfall, quite naturally, saw operating costs fall by 26.7 per cent to US$731.6m (£556.37m).

In statistical summation, IGT thus posted a US$94.1m (£71.56m) operating loss, compared to a US$223.7m (£170.12m) profit in Q2 2019.

“Our second quarter results reflect the intense impact of global lockdowns caused by the pandemic,” said IGT Chief Executive Marco Sala.

“But 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.

“Our resilience is a direct consequence of the diversity of our global portfolio of products and solutions.

“The improving trends we are currently seeing are encouraging, but we remain prudent with our planning. Our new organisational structure enhances our readiness to adapt to changes in market conditions.”

For the six months to June 30, IGT revenue was down 33.7 per cent at US$1.58bn (£1.26bn), comprising US$1.34bn (£1.09bn) from service revenue, and US$230m (£174.88m) from product sales, while EBITDA declined 45.2 per cent to $476.9m (£362.53m).

After operating costs of US$1.87bn (£1.42bn), down 5.5 per cent, IGT’s operating loss stood at US$291.4m (£221.56m), compared to a US$401.9m (£305.57m) profit in H1 2019.

After non-operating expenses of US$233m (£177.15m), its pre-tax loss amounted to US$524.4m (£398.69m).

Once an US$8.2m (£6.23m) income tax benefit and US$11.7m (£8.89m) charge were factored in, IGT posted a net loss of US$527.9m (£401.32m) for H1.

The business currently claims liquidity totalling US$2.3bn (£1.75bn): US$1.3bn (£988m) in unrestricted cash and US$1bn (£760m) available under revolving credit facilities.