Year one

IGT has long been gaming’s global leader, and the company’s acquisition by GTECH made it an even bigger player in different markets. This freshly-minted IGT made its debut at G2E Asia 2015, and so at this year’s event, we caught up with Walter Bugno to ask about that first 12 months and the changes that have been made.


Casino International: Are all of the synergies, all of the streamlining of the merged companies done and dusted now?

Walter Bugno: 12 months down the track, the integration and associated work streams have progressed very well.  The first year was one of significant accomplishment, and we have been able to progress externally and internally.  We’ve realized synergies faster than expected and increased our cost savings target to $270 million from an original goal of $230 million.  The Reno manufacturing facility evolved ahead of schedule in terms of our establishing a new, integrated manufacturing organization.  The design studios have been amalgamated under one leadership structure. The focus now is really on bringing improved product and content to market.

CI: Mergers and acquisitions look so simple from outside – one company buys another, job done. But it’s not that simple, there are operating debts and other assumed burdens when a purchase happens. How is IGT’s health in that sense?

WB: The Company generates substantial free cash flow. With nearly 85 percent of our revenues recurring in nature, there is good visibility and stability into our anticipated revenues and profits. Since the transaction close, we’ve been able to consistently reduce debt, which remains a primary focus for the organization.  However, we didn’t reduce our R&D investment, so when we talked synergies we didn’t attack what makes the difference in the marketplace because of some major constraint. We are quite comfortable with what we are doing and the financial market is recognising that more and more so.

CI: Has there been any notable growth on the gaming side, both in established and potential newer or formerly weaker markets?

WB: I’m responsible for IGT’s international markets – the regions outside of the US.  If we look at the progress we have made since the acquisition, I think we are seeing good progress in Latin America, where our legacy companies coming together were very complementary. In markets where IGT was strong traditionally, GTECH was not as strong and vice versa.  Together with an expanded portfolio it has allowed us to accelerate our growth.

In Europe, we are steady. We had a very good 2015 and drove some growth. There is quite a lot of change happening in Europe, and we are introducing a new range of cabinets and content to the market there. In Italy there are three markets: the casino market, which is very small; the VLT market, which is medium-sized; then there is a very large AWP market. In the latter we are a major player in content and supplying new games. That’s doing very well for us.

In Asia, we are seeing some growth and continuing to push for more.  Our Systems business in Asia has been really positive for us and that can lead to additional opportunities.   Areas across the APAC region where we identify opportunities for growth include Australia, where we are making some amount of positive progress.

CI: Did you need to do any…massaging of perception when you elected to carry on the IGT name?

WB:  We recognised, like we did with the branding, that there was an importance in continuity.  This wasn’t an acquisition of a small business; it was two extremely large and diverse businesses coming together.  Let’s also remember, IGT had been trading on the New York Stock Exchange for a very long time and our organisation, as an Italian company, was trading in Milan.  Therefore we knew there would be an evolution of understanding about how the new IGT represents both gaming and lottery.  The financial market that follows the NYSE is continuing to learn and feel more comfortable about the lottery business.  This was helped by IGT winning the Italian lotto re-bid, representing an important part of our Italian business that has now been secured.

We very much were conscious of the need to maintain some continuity but to give it a new spirit. The appointment of Marco Sala as group CEO and the management team he appointed was about giving that new sense of spirit and leadership, while maintaining the continuity with the past by establishing our Board of Directors with members from both legacy organizations.

Structuring the Company with different business unit CEOs has given us the advantage of being very specific regionally, so we can give the most senior leadership representation in specific markets. Rather than having someone who comes to Macau once a year, we have someone from the senior team who is here many times each year.  This is how we’re organized across the globe, so that we provide senior leadership proximity or intimacy with our customers. That allows us to understand first-hand if what we are doing is right, and to ensure that it’s what the customers want.  This is a senior leadership team that is very hands-on, out in the market; we are not stuck in our offices.  That’s the beauty of our leadership construct.

CI: Is branding so important – or is it all about product at the end of the day?

WB: B2B businesses and B2C businesses would answer that in a slightly different way. From our perspective, the IGT brand had a persona, a reputation, history – just like Lottomatica had in Italy, and GTECH in the lottery space in the US. Of course it’s about product but your brand reflects your product, and also your style of doing business.  The IGT name serves well as an all-encompassing brand that captures all that we do internationally.  In B2B, our end user is the casino operator, and IGT carries significant global brand equity in that space.  In Italy, where we are a B2C player, the company name has been changed to IGT but the brand to the consumer has remained Lottomatica.

CI: What are your big innovations at the moment? What’s front and centre for IGT?

WB: In the last 12 months, the big innovation was TRUE 3D, which has been a great success for us in every market. It’s been a cornerstone of us in terms of being extremely different from the rest from a content perspective.  Expect to see more exciting introductions from this area.  The other big innovation that I am very positive about is On Premise. We started that journey from the US with the concept of sports betting, and OnPremise is now integrated at MGM sports books in Las Vegas. At G2E Asia, On Premise moved to tables, with baccarat back betting and side betting functionality on display.  This is just another in the many steps of OnPremise replicating a casino floor experience on a mobile device. As a player, anything that is happening in the casino, I can now have on my mobile phone.  While for us, the prevailing concept is to help the operator drive efficiency.  Take a baccarat table as an example. You walk around the floor and you see players all of a sudden gravitate to one table because it’s hot; they crowd around it trying to bet. That drives lots of excitement, but it also drives inefficiency for the operator, as it slows down the gameplay on that table and leaves other tables idle. What we have done is develop this concept of you being able to bet on that live table from wherever you are in the casino because you get an alert that it’s hot. We think bringing that solution to market has major potential for operators, major satisfaction for players; it’s a real win-win.