International Game Technology Announces Sobering Q1 Numbers

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International Game Technology (IGT) is out with their Q1 numbers which are reflecting the impact of COVID-19 on the US legal betting industry. The company reported a "solid start" to the quarter with sports betting in January and February setting records in the US. But then March happened and the whole company was dragged down, from a strong position of profit making to the weak position of declines in their business across the board.

IGT's business, like so many in March others grounded to a halt. It all added up to a Q1 that saw revenues drop 18% over the same period last year. Q1 of 2020 brought in $940 million while 1.14 billion was brough in in Q1 of 2019. Those are sobering numbers for a company hoping to gain some traction and keep up momentum in not only the US but Italian markets.

IGT is reporting revenue declines in every one of its business segments.

The COVID factor

IGT's business was especially hit hard by COVID-19. As mentioned, every aspect of the company reported some kind of decline during Q1. Simply put, IGT is a service provider and people just weren't using their services during the time of lockdown.

“After a solid start in the first two months of the year, we quickly shifted our focus to the global COVID-19 health crisis in March,” said Marco Sala, CEO of IGT. “The safety and well-being of our people, customers, and communities have been our highest priority since day one."

The good thing for IGT is the fact that the US is starting to open up and things could return to the glory days of... January and February. Hopes for the company are that people start to play lotteries again and that their strong gaming sector sees a resurgence during Q2 and beyond.

Lotteries

Lotteries are a big part of what IGT does - they are a service provider for gaming sites. IGT Lottery service revenue came in lower on reduced traffic to points of sale. With retail locations shuttered and US citizens on lockdown, lottery tickets were the last things on peoples’ minds. Because of that, North America Lottery division took in around $251 million in revenue for Q1 - the $214 million from lotteries was down 16%.

Gaming, which can also be put in a category of “IGT’s Bread and Butter” was also down across the board. Of the $251 million, $34 million game from Gaming which represents a 17% drop.

Other drops

IGT's North America Gaming and Interactive division also reported some uninspiring numbers. They took in $196 million in revenue in Q1 which is an 18% drop. Gaming services dropped 24% to $117 million of the $196 million and product sales slipped 12% to $74 million for the quarter.

Italy was predictably down across the board which certainly didn’t help IGT during the pandemic.

Cash on hand and a plan

IGT is fortunate enough to have $2.2 billion in liquidity, comprised of $1.5 billion in unrestricted cash and $743 million in capacity under revolving credit facilities. They also seem to have a plan post-COVID.

CFO Max Chiara commented: “We’ve taken swift actions across all non-essential costs and are now switching our focus to structural cost savings initiatives. At the same time, we have adopted strict measures to preserve liquidity in the current environment. Given the uncertainty created by COVID-19, we are withdrawing our previous financial outlook for 2020, but we are confident that with $2.2 billion of liquidity, we are geared with sound financial flexibility to weather the storm caused by the COVID-19 pandemic.”

Playing catch-up

International Gaming Technology appears to be yet another in a long line of victims in the COVID-19 landscape but the company appears to have positioned themselves well for climbing out of their coronavirus hole. There will be a major time of catch-up for virtually all companies following the COVID-19 lockdowns.

Count IGT as one of the companies that should be able to bounce back quickly from the effects of the last two months. While Q2 may show further declines because of the lost month of April and half of May, IGT should be on solid ground and ready to roll with services once again assuming the world gets back to “normal”.

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