IGT fourth quarter results top forecasts; company is braced for coronavirus’s advance

CDC Gaming Reports

The fourth quarter was a mixed bag for slot and lottery giant International Game Technology.

A $99 million goodwill impairment charge sparked a fourth-quarter loss. But excluding that charge, the company was net income positive for the quarter and topped Wall Street forecasts, buoyed by a rise in sports betting revenue and lottery product sales in North America. Revenue also topped forecasts.

Meanwhile, company officials said they’re monitoring the advance of the coronavirus, especially in Italy where the company has significant business.

In a Tuesday morning statement, London-based IGT, which produces and operates gaming and lottery machines in more than 100 countries, said its net loss was $168 million, or 82 cents per diluted share, for the three months ended Dec. 31, wider than the loss of $102 million or 50 cents per diluted share, a year earlier.

Excluding nonrecurring costs, though, IGT had net income of 31 cents per share, up from 24 cents per share a year earlier.

The latest result topped the 24 cents-per-share forecasts of analysts surveyed by Thomson Reuters.

“IGT delivered a solid 6% fourth-quarter (cash flow) beat and has now exceeded quarterly expectations in 10 of the last 11 quarters,” Macquarie Securities gaming analyst Chad Beynon told investors. “For 2020, IGT expects cash flow to grow mid-single digits, though importantly this does not include any impact from coronavirus.”

Adjusted earnings before interest, taxes, depreciation, and amortization, a cash flow measure that excludes nonrecurring costs, rose 4.8% to $436 million from $416 million.

Quarterly revenue fell 1% to $1.25 billion from $1.27 billion. Thomson Reuters-polled analysts had expected $1.23 billion in revenue.

Despite the topped forecasts, IGT shares sold off, dropping 71 cents, or 7.1% to close at $9.29 in regular trading on the New York Stock Exchange. The skid continued after hours; the stock dropped 3 cents, or 0.32% to reach $9.26 at 5 p.m. PST.

“The better than expected quarter was overshadowed by the flattish guidance and prospective COVID-19 impact on the business, which the guidance excludes,” Jefferies gaming analyst David Katz said in a research note. “Management continues to execute well on the business it can control, despite issues it cannot.”

IGT CEO Marco Sala focused on full-year results in a conference call with analysts and journalists. He said gaming product sales rose 20% from a year earlier, setting a record, he said. A 29% increase in global unit shipments fueled the rise, he said.

Also, he said, North America, replacement unit shipments rose 13%, marking the third consecutive year of growth, fueled by IGT’s Fortune Coin, Griffin’s Throne, and Scarab games.

IGT’s same-store global lottery revenue rose, Sala said, helped by increases in Florida, Michigan, Texas, and the United Kingdom. Same-store revenue for instant and draw games rose 4.5% outside Italy. And, sports betting revenue rose, boosted by a 9.1% increase in wagers.

“Our 2019 results confirm the vitality of IGT’s main businesses,” Sala said. “They also demonstrate the advantage of adding such a diverse mix of business across products and geographies.”

Sala said IGT is prepared to address the coronavirus.

“The weeks ahead will be crucial in assessing its impact on our businesses,” he said. “We are well prepared to control what we can control. And that’s first of all about people. … we have taken immediate measures including restricting travels, encouraging telecommuting, creating centralized people resource center and preparing contingency plans where appropriate.

“And we continue to monitor the situation in Italy and across all the regions because we feel that the health and well-being of our people and the community, we operate in is our utmost concern.”

For the full year, IGT had a net loss of $19 million, or 9 cents per share, reflecting the effect of the aforementioned impairment charge. But adjusted net income was $221 million, or $1.08 per share, up from $201 million, or 99 cents per share, a year earlier.

Full-year adjusted EBITDA was $1.71 billion; 12-month revenue was $4.79 billion, down 1% from a year earlier.