Gaming equipment providers can’t escape addressing coronavirus concerns

Howard Stutz has over 30 years of experience reporting on the gaming industry.

Everi Holdings CEO Mike Rumbolz said the company had not experienced “any discernable impact to date” from worldwide concerns surrounding COVID-19, the name now given to coronavirus.

International Game Technology CEO Marco Sala, whose corporate headquarters are in Rome, a country that has seen more than 2,000 confirmed cases of the viral outbreak, couldn’t make the same claim.

During quarterly earnings conference calls, gaming-equipment providers have been forced to discuss impacts of the coronavirus outbreak in the same breath as they spoke about slot machine sales figures.

“It’s very unpredictable, as all the CEOs are saying to everybody,” Sala said Tuesday. “And we are saying within our management team, we are well-prepared to control what we can control.”

U.S.-based casino operators in Macau saw gaming revenues decline almost 88% during February, following January’s 11% drop. Analysts don’t expect a quick recovery, saying Macau’s gaming revenues could continue on a downward spiral into the summer. On Tuesday, producers of G2E Asia postponed the conference and tradeshow from May until late July.

U.S. casino markets are also on high alert.

On Monday, the Wildhorse Resort and Casino in Oregon was closed by the Confederated Tribes of the Umatilla Indian Reservation after an employee contracted coronavirus.

Meanwhile, Las Vegas is hyper-sensitive to any signs of the outbreak. Last week, Nevada Governor Steve Sisolak was asked about banning visitation from California, which has seen cases of coronavirus pop up.

“We’re not building a wall on the Nevada-California border,” Sisolak said. “And I speak with (California) Gov. (Gavin) Newsom on a very regular basis.”

On Monday, software company Adobe said it will not host its upcoming customer summit at The Venetian, citing the spread of coronavirus.

Gaming equipment company leadership admit it’s hard to quantify what impacts the coronavirus is having on sales and distribution.

Rumbolz said Everi’s customer base “is very diversified even within North America. In fact, the majority of our business is from commercial and tribal customers operating regional or ‘locals’ casinos that are outside of the gaming markets frequented by international visitors.”

Still, the company’s stock price has been crushed along with the entire gaming sector, declining roughly 24% during last week’s stock market meltdown. Shares of Everi closed at $9.40 Tuesday on the New York Stock Exchange, down 34 cents or 3.49%, despite reporting revenue increases of 22% in the fourth quarter and 14% for 2019.

“Although we cannot declare with certainty Everi shares have bottomed, we believe long-term investors would be foolish not to begin taking advantage of the discounted valuation to add to positions in the name,” said Stifel gaming analyst Brad Boyer.

As for IGT, Sala said the largest impact is in Italy, where the primary provider for the government-run lottery and revenues from its contract are a large contributor to the company’s bottom line. Sala provided extensive detail on how a dozen small Italian towns have significant restrictions on travel, three large regions in northern Italy have fewer travel restrictions, and the rest of Italy is free and clear.

“Outside the northern regions, we’re seeing very little change in player behavior,” Sala told analysts.

SunTrust Bank gaming analyst Barry Jonas told investors it was too early to quantify the effect the coronavirus outbreak has had IGT’s financial picture. The company said Tuesday it had a net loss of $167.7 million in the fourth quarter on revenue of $1.253 billion.

IGT’s stock price, which declined 25% over the past week, closed at $9.29 Tuesday on the New York Stock Exchange, down 71 cents or 7.10%.

“Management cited a material impact to the machines business and a modest impact to the lottery in the restricted northern regions, with only a nominal impact to machines and no impact to lotteries outside of those restricted areas,” Jonas said.

On Monday, Rumbolz said coronavirus hasn’t interrupted the company’s supply chain, and the focus has been the “well-being of our team members.”

Sala expressed similar sentiments, saying IGT’s “people” is the company’s priority.

“We have taken immediate measures including restricting travels, encouraging telecommuting, creating a centralized people-resource center and preparing contingency plan where appropriate,” Sala said. “We continue to monitor the situation in Italy and across all the regions, because the health and well-being of our people and the community we operate in are our utmost concern.”