Russia-Ukraine conflict adds to concerns for future IGT business
Shares of IGT, the giant gaming equipment manufacturer with a strong presence in Nevada, fell nearly 14 percent Tuesday after the company failed to hit analysts’ fourth-quarter revenue and profit projections.
Shares closed down $4.25, 13.9 percent, to $26.37 a share in volume nearly seven times the daily average. After hours, there was a 23-cent rebound, 0.9 percent, to around $26.60 a share.
“We would classify the reaction to the fourth quarter earnings call today as a head scratcher, to say the least,” said Carlo Santarelli, a New York-based gaming analyst with Deutsche Bank.
“In our view, the reaction in the stock, which is down on the day … relates to two primary factors, positioning, which was seemingly more crowded than we considered, and the fourth-quarter cash-flow miss, on the heels of an extended run of consensus beats for IGT. The reality, in our view, is that very little changed. While IGT missed our adjusted cash flow estimate, and that of consensus, by less than 3 percent … management reaffirmed guidance for 2022.”
That guidance, while positive about the company’s current operational and financial shape, also touched on four key operational challenges.
New CEO Vincent Sadusky told investors in the company’s fourth-quarter earnings call Tuesday that the London-based company is addressing the impact of the omicron variant in certain markets, labor shortages, increases in supply-chain pressure and cost inflation. But then, he added one more potential concern.
“It is hard to know if we will experience any impact from the conflict between Russia and Ukraine,” Sadusky said. “We have minimal direct exposure to those countries, but the repercussions for Europe and the rest of the world are difficult to assess at this time.”
Sadusky said the omicron variant of COVID-19 negatively affected the company’s lottery sales in Italy since late December and there have been some incremental casino restrictions, mostly outside the United States.
“Lower employment and higher attrition are impacting our ability to fill open positions as quickly as we’d like,” he said. “We are also experiencing increased pressure on product delivery due to longer lead times and availability of certain components. We are mitigating this by prioritizing key products and customer delivery.”
Still, the success of the gaming industry in 2021 generated higher revenue for the company with key developments in the Nevada market. About 70 percent of IGT’s global gaming segment involves sales in North America and the replacement cycle of machines and systems is closing in on 2019 prepandemic levels, Sadusky said.
“I think that the 2021 results are clearly highlighted by the locality of the company’s portfolio and we’re in great operational and financial shape as we look to execute on our long-term goals,” Sadusky said. “Personally, I entered my role (as CEO) with a high level of comfort, with confidence in the company and confidence in the leadership team.”
Sadusky was appointed CEO and chairman of IGT in January, replacing Marco Sala, who will remain with the company as executive chair of the board of directors.
Sala said during the call that he is confident in Sadusky’s abilities having worked with him in the past seven years.
Sadusky was CEO and a board member of Univision Communications, the largest Hispanic media company in the United States, from 2018 to 2020. In that role, he operated multiple broadcast and cable networks, local television and radio stations, digital video and audio streaming. Prior to that, he was the CEO and board member of Media General, a local television and media company with more than 50 TV stations.
IGT reported net income of $55 million, 9 cents a share, on revenue of $1.05 billion for the quarter that ended Dec. 31. That compared with a net loss of $220 million, $1.18 a share, on revenue of $885 million in the same quarter a year earlier.
For the full year, IGT reported net income of $670 million, 31 cents a share, on revenue of $4.089 billion. In 2020, the company had a net loss of $839 million, $4.59 a share, on revenue of $3.115 billion.
The company’s full-year operating income of $902 million – total revenue less various operating expenses – was the highest in company history. IGT also reinstated a shareholder dividend of 20 cents a share in the fourth quarter and bought back more than $40 million in shares.
Some of IGT’s recent successes involved Nevada.
The company won regulatory approval in January for its Resort Wallet module of IGT Advantage, a cashless gaming system. With that approval, casinos in Nevada using IGT Advantage can offer their players the option to fund their cashless wagering accounts directly from their mobile devices, eliminating the need to transfer funds from bank accounts or credit and debit cards through ATMs.
Also in January, IGT announced a sports-betting agreement with Meruelo Gaming LLC to use the company’s IGT PlaySports system for SaharaBets, the sports-wagering app that is being used by the company in Arizona. Meruelo, operator of the Sahara in Las Vegas and the Grand Sierra Resort in Reno, also owns the Arizona Coyotes National Hockey League team that plays in Glendale, Arizona. Through the Coyotes, Meruelo is a sports-wagering vendor that can take bets in Arizona.
Contact Richard N. Velotta at rvelotta@reviewjournal.com or 702-477-3893. Follow @RickVelotta on Twitter.