IGT reduces net loss despite revenue decline in 2019

International Game Technology (IGT) has announced a lower net loss in 2019, despite reporting a year-on-year decline in consolidated revenue for the year.

Consolidated revenue for the 12 months to 31 December 2019 totalled $4.79bn (£3.74bn/€4.31bn), down 1.5% from $4.83bn in the previous year.

IGT said global service revenue was impacted by higher gaming machine taxes in Italy, as well as the conclusion of its contract with the Illinois Lottery and what it described as exceptional North American jackpot activity in the prior year.

However, despite the slight decline in revenue, IGT noted significant growth in global gaming product sales, sports betting and Italian commercial services.

In terms of operating expenses, IGT spent 0.72% less than in 2018, with total costs amounting to $4.15bn for the year. Cost of services was by far the main outgoing for IGT, but spend here was down 2.9% to $2.38bn.

Product sales expenses were up 12.7% year-on-year to $553.3m, while selling, general and administrative costs were up slightly to $856.0m. Spending on research and development also increased from $263.3m to $266.2m.

IGT, however, was able to make some savings elsewhere, with other operating expenses down from $17.3m to $3.7m, while it benefited from a lower goodwill impairment of $99m, compared to $118.0m.

Non-operating costs were up slightly to $352.4m, with the main outgoing being $410.1m in net interest spend. Foreign exchange net gain fell from $129.1m to $39.8m, but other income was up to $17.9m.

Despite lowering operating costs, operating income was down 1.5% year-on-year to $637.1m, mainly due to the decline in revenue, while income before tax fell 6.3% to $284.8m. After paying $173.1m in tax – down from $189.4m in the previous year – net income stood at $111.7m, a year-on-year decline of 2.5%.

After also taking into account $130.7m in non-controlling interests, a net loss of $19.0m for the year was attributable to IGT, though this was an improvement on a net loss of $21.4m in 2018.

“We achieved the high end of our profit and cash flow expectations for 2019, led by strong results for our North America Gaming and Italy segments,” IGT chief executive Marco Sala said.

“In the full year, we grew global gaming product sales by more than 20% thanks to higher unit shipments and the success of our new games. Global lottery same-store revenue also rose.”

Sala also noted that IGT is monitoring the impact of the Coronavirus outbreak, but apart from the expected impact this could have on the business, he said that operational performance across products and regions should support continued momentum in 2020.

Looking more closely at IGT’s performance during the final quarter of the year, revenue was down 1.6% year-on-year to $1.25bn, but IGT did report growth in some areas of the business.

Revenue from the North America gaming and interactive segment was up 9.1% to $300.0m as IGT was boosted by a 13.5% increase in gaming product sales for the year, with this figure rising to $143.0m. However, gaming service revenue was down 5.4% to $139.0m.

Elsewhere, North America lottery revenue slipped 9.7% to $279.0m, partially due to the end of a contract with the Illinois Lottery. IGT did, however, see lottery product sales revenue increase due to strong demand for self-service vending machines.

Revenue from IGT’s international business climbed 2.3% in Q4 to $226.0m, as the business was boosted by an 11.7% rise in gaming product sales revenue to $105.0m due to a rise in the delivery of replacement units. Gaming service revenue fell slightly to $27.0m, but lottery service revenue increased 4.2% to $75.0m in the quarter.

Finally, revenue in Italy slipped 3.0% year-on-year to $448m as IGT reported declines in revenue from lottery services, gaming services and other services in the country. Lottery wagers were slightly down and IGT faced higher taxes on certain machines, but was partially helped by a rise in sports betting wagers.

Q4 spending was down 4.9% to $1.17bn, with IGT reporting lower costs across all segments. However, this did not stop IGT posting a net loss of $167.7m for the quarter – primarily due to a $101.8m loss on foreign exchange in the period, compared to a gain of $32.1m in Q4 of 2018.

Loss before tax also jumped from $80.6m to $207.2m due to foreign exchange losses, but it was more positive in terms of operating income, with this almost doubling from $40.9m to $81.4m.