International Game Technology (IGT) CEO Marco Sala says the company will look to make some of its cost-saving measures during the ongoing COVID-19 pandemic permanent after booking a net loss of US$248.3 million in the three months to 31 March 2020.
The loss, down from net income of US$40.3 million in 1Q19, reflected an 18% year-on-year decline in revenue to US$940 million and 26% fall in Adjusted EBITDA to US$309 million, mainly due to the loss of business in IGT’s key jurisdictions of North America and Italy from COVID-19 closures.
With Q2 set to represent the trough for revenue, profit and cash flow, Sala told analysts during the company’s 1Q20 earnings call overnight (Asian time) that the company had identified cost savings of around US$500 million in 2020 – some of which would become permanent.
“We have to learn from this crisis, as everybody has to learn when facing difficult times,” he said. “Our savings have been concentrated in employee-related expense, capex reduction or deferrals and discretionary costs. We believe that some of the changes we have put in place will become permanent. We will work on personnel. We can maintain hiring, and over time, freeze. We intend to extend beyond the crisis the work-from-home practices that can reduce our real estate costs.
“When it comes to R&D, supply chain and capex, it’s clear that all these costs need to be aligned with market realities. I think that they can be optimized for the new normal and we feel there are opportunities to streamline our product offering.
“And the same in regards to the discretionary costs. I think that after this experience, globally, we will travel less. We will focus more on our marketing investments and we will review very carefully the outside services.
“We will be working on it in the preparation of our budget for next year.”
IGT revealed it has reduced the base salaries of all employees group-wide by between 10% and 50% as well as cancelling salary increases and short-term incentive compensation programs. It has also instituted a hiring freeze and furloughed employees who aren’t primarily involved in operations and customer support.
Sala said IGT was currently experiencing cash burn – although he didn’t reveal how much – but pointed to liquidity of US$2.2 billion, comprising US$1.5 billion in cash and US$743 million in additional borrowing capacity, as of 31 March 2020, which would provide “sufficient flexibility to weather the pandemic.”
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