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Cost cutting helps IGT limit Q3 losses


International Game Technology (IGT) said efforts to reduce costs in the third quarter helped limit the business’s net loss, while a strong performance from its lottery division helped revenue improve from its novel coronavirus (Covid-19)-hit second quarter.

The supplier’s revenue for the three months to 30 September, reported as two core lottery and gaming divisions for the first time, fell 14.9% year-on-year to $981.5m (£743.8m/€832.8m). 

This comprised $880.1m in services revenue, down 4.5%, followed by a sharper drop in product sales, which fell 56.2% to $101.3m.

Looking at the new divisions’ performance, IGT’s global lottery unit enjoyed a relatively strong quarter, with revenue up 3.3% to $570m. The supplier said this was driven by double-digit growth in North America same-store sales, helping to offset a decline in product sales to $20m. 

Global gaming, on the other hand, saw performance weighed down by continued Covid-19 restrictions and venue closures in Q3, despite recovering significantly from a second quarter that covered the first peak of the pandemic.

As such revenue was down 31.4% compared to Q3 2019, at $412m. This comprised $331m in service revenue, with a further $81m coming from product sales. 

Looking at revenue by geography across both divisions, IGT’s Italian operations was the only jurisdiction to report year-on-year growth, with its contribution rising 3.5% to $416m. 

Italy remained the business’s second largest market, however, with North America remaining the leader despite revenue falling 17.7% to $443m. Revenue from the rest of the world, meanwhile, was down 42.3% at $123m. 

The consolidated revenue figure included a $104m contribution from digital betting and gaming revenue, up 40.5%.

“Strong player demand and a host of compelling new games, systems, and digital solutions led to a sharp, sequential improvement in our most important markets,” IGT chief executive Marco Sala said. 

“We continue to monitor the evolution and impact of the pandemic around the world. With a simplified organization firmly in place, we are creating a leaner, stronger IGT.”

IGT said that with Covid-19 still weighing heavily on results, it had ramped up efforts to reduce costs, something Sala said was “on full display” in the Q3 figures. Total operating expenses for the period fell 14.6% to $853.0m. 

Costs related to product sales and services decline, as well as drops in research and development, and selling, general and administrative outgoings. IGT did record a €98m charge related to its restructuring into two core divisions, while other expenses were up to $2.1m.

This left an operating profit of $128.5m, down 16.5%. When the restructuring costs and other expenses, plus depreciation and amortisation expenses were factored back in, earnings before interest, tax, depreciation and amortisation (EBITDA) for the quarter came to $354.0m, a 13.0% drop from the prior year. 

However, non-operating expenses increased sharply, from a $21.2m benefit in the prior year to total costs of $257.5m. While interest expenses declined marginally to $101.0m, IGT then recorded a $149.4m loss on foreign currency translations, as well as $7.0m in other expenses. 

This left a pre-tax loss of $129.0m, compared to a $175.1m profit in Q3 2019. This was reduced by a $26.6m income tax benefit, but then offset by a $25.7m loss from IGT’s non-controlling interests in other venues. 

As a result the business recorded a net loss of $128.0m for the third quarter. While this was a significant decline from Q3 2019’s $103.6m profit, it marked a 54.0% decline on the $279.6m loss posted for the second quarter. 

During the quarter IGT reduced its net debt by 1.5%, to $7.24bn.

“Robust cash flow generation during the quarter and year-to-date periods have enabled us to improve our liquidity and reduce net debt,” IGT chief financial officer Max Chiara said. 

“We are on track to achieve our 2020 temporary cost-reduction targets and have identified a number of initiatives that will enable us to deliver over $200m of structural savings over the next two years. 

“As a result, the improvement in our profitability should support our continued focus on reducing debt.”