Slot machine giant IGT reported mixed fourth-quarter results Tuesday with better-than-expected earnings and reduction in debt, but widening losses and a decline in revenue.
The London-based company that has a strong presence in Nevada and once was based in the state reported a loss of $167.7 million, 82 cents a share, on revenue of $1.253 billion for the quarter that ended Dec. 31. That compares to a loss of $102 million, 50 cents a share, on revenue of $1.266 billion.
A survey of analysts expected IGT to report earnings of 26 cents a share before special charges and the company ended up hitting 31 cents.
The company is facing headwinds with its large presence in Italy, one of the locations most affected by the coronavirus outside of Asia. IGT, which has a lottery operation, video lottery terminals and sports wagering in Italy, also is restricted from advertising and the Italian government increased taxes in 2019 by 5 percentage points to 25 percent.
The company attributed gains it has made to increased game sales worldwide.
“In the full year, we grew global gaming product sales by more than 20 percent thanks to higher unit shipments and the success of our new games,” said IGT CEO Marco Sala. “Global lottery same-store revenue also rose. We are closely monitoring the impact of the coronavirus outbreak. Apart from this, solid operational performance across products and regions should support continued momentum in 2020.”
Concerns about virus
Questions about how the spread of the virus could affect IGT dominated the company’s conference call with investors.
“It is very unpredictable as all the CEOs are saying to everybody,” Sala said. “Our management team will control what it can control.”
He explained that protecting the company’s employees is its top priority and that the company is encouraging telecommuting and is developing contingency plans to address problems that arise as a result of the virus.
Sala said the company has not seen any behavioral changes by customers since the outbreak began, but he acknowledged it’s still early in gauging the future outlook.
Asked during the earnings call about how market consolidation is affecting IGT, Sala said with the exception of the $17.3 billion merger between Eldorado Resorts Inc. and Caesars Entertainment Corp., “we aren’t seeing significant consolidation.”
Concerns about Eldorado
As for the Eldorado-Caesars deal, which is expected to close in the first half of 2020, Sala said IGT is ready.
“We feel that we are better positioned than ever to compete for our fair share of floor because we have a particularly strong lineup of products at this time,” he said.
Gaming industry analyst Carlo Santorelli of the New York office of Deutsche Bank said despite IGT’s cash flow, investors may need something more to increase the company’s value.
“Another headwind that we believe has weighed on shares is the lack of a true story, or, said differently, something for investors to gravitate to,” Santorelli said in a note to investors.
“IGT throws off considerable free cash flow and has generated north of $2 in free cash flow per share in each of the past two years, and we expect the company will again do so in 2020,” he said. “Despite the healthy free cash flow generation, IGT, in our view, has all but closed the door on capital returns via buybacks, despite the weakness in shares that has persisted for some time.”
IGT shares tumbled 71 cents, or 7.1 percent, on volume nearly 10 times the daily average in Tuesday trading. After hours, it slid another 3 cents, 0.3 percent, to end the day at $9.26 a share.
Fourth-quarter revenue and earnings for London-based IGT, a gaming equipment and slot machine manufacturer with a major presence in Las Vegas and Reno. (NYSE: IGT).
4Q 2019: $1.253 billion
4Q 2018: $1.266 billion
4Q 2019: ($167.7 million)
4Q 2018: ($102 million)
Earnings/(Loss) per share
4Q 2019: (82 cents)
4Q 2018: (50 cents)