Renato Ascoli, IGT CEO Global Gaming, speaks about the current state of business and decisions to ensure its competitive edge, including reorganising the company into two global business units.
What was IGT’s trajectory going into 2020 based on the results of 2019?
IGT started 2020 with notable business momentum. We had strong performance throughout 2019 and a solid Q1 2020 prior to the worldwide closure of casinos and gaming halls that commenced in March. In gaming, the strength of our core video portfolio, video poker sales, specialty market opportunities and the expansion of our PlaySports footprint in the US were among the many factors that fueled IGT’s 2019 performance. Also, IGT’s Lottery performance was driven by solid same-store sales growth, winning new lottery contracts, significant contract extensions, and the global expansion of digital lottery.
How soon did you recognise the seriousness of the pandemic?
IGT recognised the gravity of the COVID-19 pandemic very early on. Given IGT’s global footprint, we had employees, customers and operations, particularly in Italy, experiencing the intensely negative impact of the pandemic well before the seriousness of the situation was fully understood and accepted by many. As a company, IGT took quick and decisive action and created six crisis management workstreams to address the following: employee protection, business continuity, customer engagement, cost-savings initiatives, scenario planning and liquidity/cash preservation. These proactive actions continue to protect the safety and well-being of our internal and external stakeholders and are fundamental to IGT’s solid balance sheets and positive free cash flow.
How has IGT been able to adapt over the last few months, especially in Q2, in terms of interim cost saving initiatives?
Over the last several months, IGT took decisive cost savings and capital avoidance actions, which are expected to drive more than $500 million in fixed and discretionary cost savings in 2020. In addition, we have identified over $200 million in structural cost savings, primarily related to certain strategic initiatives including eliminating duplicative functions and streamlining back offices; optimising global technology to re-focus on the value of accretive know-how; rationalising R&D investment based on risk versus reward priorities; and optimising our supply chain with a focus on design-to-cost efficiency.
The combination of disciplined, proactive business management and IGT’s diverse product portfolio and geographic reach contribute to our ability to successfully navigate the new normal. Despite all the change, uncertainty and unprecedented business conditions, IGT has maintained its focus on creating growth-driving solutions and services that return customer and shareholder value.
As a company, IGT took quick and decisive action and created six crisis management workstreams to address the following: employee protection, business continuity, customer engagement, cost-savings initiatives, scenario planning and liquidity/cash preservation
Can you detail the reasoning behind IGT’s long-term strategy adjustments to reorganise the company into two global business units?
There are several key reasons why IGT elected to reorganise into two distinct business units, Global Gaming and Global Lottery. First, this new structure positions IGT to provide greater responsiveness to customers and players. Second, we can increase IGT's effectiveness and competitiveness in providing products and solutions that address the opportunities of each market segment. The new structure also harmonises best practices across both B2B and B2C channels in each product category. And our new, more simplified structure reduces complexity and increases organisational efficiency to support IGT's intrinsic value.
Can you describe how lottery and gaming will coexist?
There is an inherent relationship that will forever exist between gaming and lottery not just within IGT, but also among operators and players. There are countless markets around the world where lottery and gaming operators coexist and they seamlessly collaborate to elevate the player experience, drive policy and innovation and maximise contributions to good causes.
We strongly believe that among IGT’s most valuable assets are our relationships with customers and regulators. This belief was the key driver of our decision to maintain the existing “IGT single points of contact” for these important audiences, despite our internal separation into two business units. Given the success and longevity of these highly productive and effective partnerships, we are confident that our accessibility and our conversations will continue to be as fluid as they were before IGT’s reorganisation.
Operationally, IGT will continue to benefit from operational synergies derived from our global scale and leadership in both gaming and lottery. For example, we’ll continue to manufacture gaming and lottery equipment in our Reno facility, and our creative teams will continue to draw upon IGT’s industry-leading IP portfolio that is backed by decades of innovation expertise across both segments. Even with the new business unit assignments, we are still One IGT. Our employees around the world are unified by the common goals of driving growth through unrivaled gaming experiences and returning value to our customers and shareholders.
Where are you seeing exciting new opportunities in each segment, especially gaming where you are leading?
We are in a unique moment where people are open to change and are readily accepting new technologies. This is evident by the volumes of people who rapidly turned to a variety of web-based services such as grocery delivery over the last several months. For a technology company such as IGT, this paradigm shift is exciting as it creates growth opportunities and an environment where technology adoption is primed to occur at an accelerated rate. Take for example cashless gaming and our Resort Wallet product. Pre-COVID-19, Resort Wallet was still viewed by some operators as a “nice to have” or a tech-advanced option for casinos looking to differentiate their offering. Today, cashless gaming technology is highly desired by operators for its ability to reduce the need for cash handling and to lower patron and staff dependency on in-person interactions.
I am equally excited about the tremendous work of our PlaySports team and the market opportunities in the sports betting segment. In the US, IGT has firmly established its leadership as a B2B sports betting technology provider, and with pending sports betting legislation in multiple states across the country, IGT is favorably positioned for continued sports betting growth. Similarly, our PlayDigital business is growing at a remarkable rate and we expect our customers and their players to harness that momentum to create new opportunities.
We strongly believe that among IGT’s most valuable assets are our relationships with customers and regulators. This belief was the key driver of our decision to maintain the existing “IGT single points of contact” for these important audiences, despite our internal separation into two business units
Has the pandemic been a sort of catalyst to focus more on digital?
The pandemic has undoubtedly elevated the global relevance of and demand for digital gaming across gaming and lottery. In Q2, IGT’s global B2B online gaming wagers were up 75% worldwide and they more than doubled in North America. Our Italy operations saw a 33% increase in digital wagering despite the absence of sports betting. In addition, we saw 72% growth in iLottery in Q2. I anticipate the upward trajectory in digital gaming performance will continue, especially as players become increasingly more comfortable with digital forms of entertainment and as local governments identify new ways to expand and diversify revenue models. Similarly, with many US states actively defining their sports betting regulations and strategies, I believe the pandemic and the public’s comfort with mobile entertainment will help accelerate the rate at which states introduce digital sports wagering.
Can you detail IGT’s management cohesion during this unprecedented time to ensure employee retention and peace of mind?
Employees are the heart of IGT. Protecting the safety and well-being of our employees has been and continues to be our top priority. We made some tough decisions early in the year to ensure the long-term financial health of the company and that included temporary salary reductions, the short-term furloughing of some employees and significant workload realignment. Realising the potentially negative engagement implications that those conditions could prompt, we made a strategic decision to increase and prioritise employee communication during that time. While furloughed employees were away from IGT, we were diligent about offering opt-in communications from every level of the organization, whether in the form of executive emails, “Bright Spots” emails that outlined recent business achievements or Zoom-based, optional social gatherings.
Today, with employees back from furlough and approximately 75% of our global workforce working remotely, we continue to refine and expand our employee engagement programs. Our People & Transformation and Diversity & Inclusion teams are working hard to deliver a range of web-based engagement activities, trainings and professional growth opportunities. I am immensely proud of the resiliency, passion, resourcefulness and adaptability of the entire IGT workforce around the world.
How are you prioritising your ability to stay nimble through ongoing industry and global unpredictability?
Operating with agility and having the ability to quickly meet the needs of our customers is a top priority and among the key motivations for our recent company-wide reorganisation. Additionally, IGT highly values ongoing, unfiltered communication with internal and external stakeholders. We welcome the tough conversations from our employees, customers and vendors, as we believe those exchanges are essential for true alignment, collaboration and problem solving. Raising concerns, opportunities and success stories in real time enables the leadership team to address these topics with urgency, and to ensure that we are acting as swiftly as possible to address our customers’ unique needs.
Based on the severe impact of this year and the necessary responses to it, how is 2021 shaping up and what optimism can you impart?
We will continue to provide our company performance updates through our quarterly earnings reports and calls. IGT’s future is bright. With a strong balance sheet, a diversified product portfolio, a resilient lottery business and the most passionate, experienced and skilled team in Gaming and Lottery, I am confident we’ll continue to execute on our plans and drive growth for our customers.