IGT revenue falls 48.4% in second quarter

4 August 2020

The novel coronavirus (Covid-19) pandemic has hit International Game Technology (IGT) hard in the second quarter of 2020, with revenue dropping 48.4% and the business posting a net loss of $279.6m (£214.7m/€237.6m).

Revenue for the three months to 30 June fell to $637.5m, comprising $560.3m in service revenue (down 42.8%), while product sales were down 69.7% at $77.2m.

Looking at revenue by division - for the last time, with financial results to be reported in global lottery and gaming segments from Q3 - IGT’s North American lottery unit was the core source of revenue in Q2. It was also the division that experienced the lowest year-on-year decline in revenue, with its total down just 11.7% to $273m, thanks to lottery revenue dipping marginally, mitigating larger declines in gaming machine revenue.

In contrast, the biggest decline was reported for the North America gaming and interactive segment, which saw its contribution fall 65.0% to $96m. IGT noted that casino closures in the US and Canada hit terminal revenue, while product sales suffered in comparison to particularly high figures for the prior year.

The international division, comprising revenue from all non-North American and Italian operations, also reported a steep drop in revenue, which fell 63.3% to $84m. Again, Covid-19 shut-downs harmed performance, the supplier said, though it added that trends were “progressively improving” as restrictions eased.

In Italy, meanwhile, revenue was down 56.4% at $184m, after machine revenue was impacted by the closure of retail gambling venues. During this period, however, interactive wagers were up 44%, as customers migrated online.

Earnings before interest, tax, depreciation and amortisation for the quarter declined 62.9% to $168.4m. Though operating costs for the period fell 26.7% to $731.6m, the decline in revenue saw IGT post a $94.1m operating loss, compared to a $223.7m profit in Q2 2019.

Non-operating expenses actually increased for the three month period, to $199.4m, due to an increased foreign exchange loss and other expenses rising to $29.4m, resulting in a pre-tax loss of $293.5m. After an $11.3m income tax benefit, net loss in Q2 amounted to $282.1m, though a $2.5m benefit from non-controlling assets resulted in a net loss attributable to IGT of $279.6m.

"Our second quarter results reflect the intense impact of global lockdowns caused by the pandemic," IGT chief executive Marco Sala said.

"That 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.

“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 30 June, revenue was down 33.7% at $1.58bn, comprising $1.34bn from service revenue, and $234.0m from product sales, while EBITDA declined 45.2% to $476.9m.

After operating costs of $1.87bn (down 5.5%), IGT’s operating loss stood at $291.4m, compared to a $401.9m profit in H1 2019. After non-operating expenses of $233.0m, its pre-tax loss amounted to $524.4m.

Once an $8.2m income tax benefit and $11.7m charge related to businesses in which IGT held a non-controlling stake were factored in, it posted a net loss of $527.9m for the first half.

Despite its struggles, IGT chief financial officer Max Chiara said that cash generation and liquidity remains the business’ top financial priority. This saw it look to cut costs in Q2, and raise $500m through the sale of senior secured notes during the period.

“We have the resources we need to navigate the impact Covid-19 is having on our business and we are making important, strategic decisions to enhance our operational flexibility,” Chiara said. “This includes over $200m in structural and discretionary cost savings compared to pre-pandemic levels."