A resilient lottery business, which accelerated in North America during the year’s second half, and disciplined cost management produced tailwinds that boosted International Game Technology’s 2020 cash flow. But the company posted a fourth-quarter loss and lower revenue, both of which missed Wall Street forecasts.
In a statement Tuesday, the London-based slotmaker said its net loss was $242 million, or 18 cents per share, for the three months ended Dec. 31, compared with a net loss of $168 million, or 82 cents per share, a year earlier. Noncash foreign-exchange losses, primarily on euro-denominated debt instruments, factored in the latest results.
Analysts surveyed by Zacks Investment Research had, on average, forecast breakeven earnings per share for IGT.
Adjusted earnings before interest, taxes, depreciation and amortization, a cash flow measure that excludes one-time costs, fell $295 million versus $365 million in the prior year.
Revenue fell 14.9 percent to $885.1 million from $1.04 billion and missed the $976.4 million in revenue forecast by Zacks-polled analysts.
By segment, fourth-quarter global lottery revenue rose 11% to $630 million, while global gaming revenue fell 46% to $255 million, a drop the company called pandemic-related.
In a conference call with analysts and journalists, IGT Chief Executive Officer Marco Sala said although the pandemic has challenged his company, continued momentum for digital and betting activities produced a strong finish to 2020. Strong lottery performance and disciplined capital management delivered $576 million of combined free cash flow for 2020, among the highest level of free cash flow generation in the last five years.
“Market dynamics caused us to think differently about how we manage day-to-day operation,” he said. “In April, we set an ambitious target to preserve cash with a $500 million program in temporary cost savings and avoidance for the year, and that goal was achieved. The experience enabled us to retain our cost structure in a way that has opened additional opportunities.”
Sala said IGT shifted business tactics quickly during the pandemic, applying safety and business-continuity measures to protect employees and maintain service. He said IGT has already identified programs for more than $200 million in structural cost reductions in the coming months.
Sala said IGT will also benefit from selling its Italy gaming-machine and sports-betting activities for $1.2 billion in cash to Apollo’s Gamenet Group. The deal is expected to close in this year’s first half.
Sala said the sale will better balance IGT’s business mix and reduce exposure to Italy’s market, which he said has the highest regulatory volatility and where profits eroded over the last few years.
Looking forward, Chief Financial Officer Max Chiara said the pandemic was creating enough uncertainty to keep IGT from issuing full-year earnings guidance. He said the company expects higher year-to-year operating income and global lottery revenue in the 2021 first quarter, buoyed by growth trends for instant ticket and draw games.
For the full year ended Dec. 31, IGT said its loss widened to $897.9 million, or $4.39 per diluted share from $19 million, or 63 cents per diluted share.
Full-year revenue fell 22.% $3.12 billion from $4.03 billion.
IGT shares fell in both regular and after-hours trading on the New York Stock Exchange on Wednesday. The shares declined 14 cents, or 0.76% to close at $18.23 in regular trading then slipped an additional 19 cents, or 1.04% to reach $18.04 at 5 p.m. PST.
