Earnings Release
International Game Technology PLC Reports Second Quarter 2017 Results
International Game Technology PLC ("IGT") (IGT) today reported financial results for the second quarter and six months ended June 30, 2017. Today, at 8:00 a.m. EDT / 1:00 p.m. BST / 2:00 p.m. CEST, management will host a conference call and webcast to present the second quarter results; access details are provided below.
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"Our second quarter results reflect strong key performance indicators for both our global Lottery and Gaming businesses," said Marco Sala, CEO of IGT. "Lottery growth is benefiting from innovation and effective sales and product marketing initiatives. In Gaming, the global installed base was up and unit sales of gaming machines were higher, as were average selling prices, all supported by strong demand for new cabinets. Overall, we are pleased with the results of the first half, and we expect a more robust product offer to support stronger sales and profit levels in the second half of the year."
"We’ve made a lot of good progress on many levels so far this year," said Alberto Fornaro, CFO of IGT. "We are lowering our debt and we are enhancing cash generation through disciplined asset and financial management. We are maintaining our outlook for adjusted EBITDA and net debt for the year, and have modestly reduced capital expenditures to account for certain timing shifts."
Summary of Consolidated Second Quarter 2017 Financial Results
Quarter Ended June 30,
Change Constant
(In $ millions, unless otherwise noted)
Operating Income
192
171
12%
12%
Net (loss) income per diluted share
(1.43)
0.36
NA
NA
Adjusted EBITDA
424
443
-4%
-4%
Adjusted Operating Income
264
290
-9%
-9%
Adjusted net income per diluted share
0.15
0.43
-65%
NA
Note: Adjusted EBITDA, adjusted operating income, and adjusted net income per diluted share are non-GAAP financial measures.
Reconciliations of non-GAAP financial measures to the most directly comparable GAAP financial measures are provided at the end of this news release.
Comparability of Results
All figures presented in this news release are prepared under U.S. GAAP, unless noted otherwise. Adjusted figures exclude the impact of items such as purchase accounting, impairment charges, restructuring expense, foreign exchange, and certain one-time, primarily transaction-related items. Reconciliations to the most directly comparable U.S. GAAP measures are included in the tables in this news release. Constant currency changes for 2017 are calculated using the same foreign exchange rates as the corresponding 2016 period. Management uses non-GAAP financial measures to understand and compare operating results across accounting periods, for internal budgeting and forecasting purposes, and to evaluate the Company’s financial performance. Management believes these non-GAAP financial measures reflect the Company’s ongoing business in a manner that allows for meaningful period-to-period comparisons and analysis of business trends. These constant currency changes and non-GAAP financial measures should however be viewed in addition to, and not as an alternative for, the Company’s reported results prepared in accordance with U.S. GAAP.
Overview of Consolidated Second Quarter Results
Consolidated revenue was $1,220 million compared to $1,285 million in the second quarter of 2016. The constant currency decline of 5% is mostly attributable to the new Lotto concession dynamics and the sale of Double Down Interactive LLC ("DoubleDown"), which closed on June 1, 2017.
Global lottery same-store revenue, excluding Italy, grew 2.6% in the second quarter, on top of strong North America jackpot activity in the prior year period. Excluding multi-state jackpot games, global lottery same-store revenue grew 4.9%. In Italy, late numbers activity was lower than the elevated levels in the second quarter of 2016. Excluding late numbers, Italy Lotto wagers increased 1%.
Gaming service revenue was primarily impacted by the sale of DoubleDown. The global installed base continues to grow, rising 2,701 units from the prior-year period. Global gaming product revenue increased 5% over the second quarter of 2016 driven by 25% growth in terminal sales that was partially offset by lower systems sales. The Company shipped 8,884 gaming machines worldwide during the second quarter, led by strong replacement unit demand.
Operating income was $192 million, compared to $171 million in the second quarter of 2016, and Adjusted operating income was $264 million compared to $290 million in the prior-year period. Adjusted EBITDA was $424 million compared to $443 million in the second quarter of 2016, reflecting the DoubleDown sale and the new Italy Lotto concession terms that were partially offset by disciplined operating expense management.
Interest expense was $116 million compared to $118 million in the prior-year period.
Net loss attributable to IGT was $290 million in the second quarter of 2017 inclusive of $220 million of net foreign exchange loss. On an adjusted basis, net income attributable to IGT was to $31 million. The Company reported a net loss per diluted share of $(1.43) and earned $0.15 per diluted share on an adjusted basis.
Cash from operations was $543 million in the first half of the year and capital expenditures were $371 million. The Company made the final $185 million upfront installment payment for the new Lotto concession in Italy during the second quarter.
Cash and cash equivalents were $495 million as of June 30, 2017, compared to $294 million as of December 31, 2016. Net debt was $6,999 million as of June 30, 2017.
Operating Segment Review
North America Gaming & Interactive Revenue for North America Gaming & Interactive was $310 million compared to $350 million in the second quarter of 2016. Comparability is affected by the sale of DoubleDown.
Service revenue was $208 million compared to $246 million in the prior-year period, reflecting the DoubleDown sale and a year-over-year decrease in the installed base. Product sales were $102 million compared to $104 million in the second quarter of 2016, which benefitted from a large system sale. Terminal sales improved 16%, driven by higher average selling prices and increased new and expansion unit shipments. The segment shipped 5,293 gaming machine units in the quarter compared to 5,163 units in the prior-year period.
Operating income for North America Gaming & Interactive was $76 million compared to $88 million in the second quarter of 2016. The decline is primarily due to lower revenues, largely from the sale of DoubleDown, and partially offset by a decrease in operating expenses.
North America Lottery North America Lottery revenue was $293 million in the second quarter of 2017, compared to $286 million reported in the second quarter of 2016. The growth reflects solid same-store revenue growth, as well as an incentive contribution from the New Jersey Lottery. Excluding the New Jersey contribution, revenue declined as same-store revenue growth was offset by the exit of certain contracts and lower product sales.
Service revenue was $278 million compared to $267 million in the second quarter of 2016. Same-store revenue growth of 2.2% was supported by 5.6% growth in draw-based games and instant tickets, offset by lower jackpot game activity and the exit of certain low-margin contracts. Product sales were $15 million compared to $19 million in the second quarter of 2016, which included a large sale in California.
Operating income for North America Lottery rose 29% to $79 million reflecting the contribution from the New Jersey incentive and higher same-store revenues, partly offset by lower product sales.
International International revenue was $211 million compared to $207 million in the second quarter of 2016. On a constant currency basis, International revenue increased 3%.
Lottery same-store revenue grew 3.6% on broad-based strength in Latin America.
Gaming service revenue was $43 million compared to $46 million in the second quarter of 2016, down 4% at constant currency due to lower interactive revenue. The installed base continued to grow led by Greece and South Africa.
Product sale revenue rose to $79 million from $73 million in the prior-year period, driven by higher gaming terminal sales in Latin America and EMEA, including revenue recognized for gaming machines shipped in the first quarter of 2017. The segment shipped a total of 3,591 gaming machine units during the second quarter of 2017 compared to 2,989 units in the prior-year period, led by strong replacement unit demand.
International operating income, at constant currency, increased 68% on higher gaming product sales and favorable mix; reduced selling, general and administrative expenses; and lower bad debt and impairment expenses.
Italy Italy revenue was $404 million compared to $443 million in the second quarter of 2016. At constant currency, revenue declined 8% as a result of the new Lotto concession dynamics and a lower contribution from late numbers.
Total Lotto wagers in the quarter were EUR 1,842 million compared to EUR 2,056 million in the prior-year period, reflecting significantly lower late numbers activity. Excluding late numbers, Lotto wagers increased 1% over the prior year period reflecting continued strength in 10eLotto. Instant-ticket wagers were essentially unchanged at EUR 2,183 million on strong sales of multiplier tickets despite fewer new ticket launches in 2017.
Machine gaming service revenue was in-line with the prior year period, as increased vertical integration was offset by higher gaming machine taxes. Sports betting revenue increased in the second quarter of 2017 on higher wagers and improved payout.
Italy operating income was $114 million compared to $161 million in the second quarter of 2016. The decrease was mainly attributable to the new Lotto dynamics and lower late number wagers.
Other Developments
The Company’s board of directors declared a quarterly cash dividend of $0.20 per ordinary share. The dividend is payable on August 24, 2017 to holders of record as of the close of business on August 11, 2017.
On July 26, 2017, the Company issued a news release announcing a new term loan facility and amendment to the revolving credit facilities. As communicated in that release, those transactions, along with certain additional actions, are expected to deliver approximately $60 million in annualized interest cost savings.
Outlook
The Company is maintaining its outlook for adjusted EBITDA of $1,600-$1,680 million, and the expectation for net debt remains $6,950-$7,150 million for the full year 2017 period. The outlook for maintenance and growth capital expenditures has been reduced by $50 million to $575-$625 million.
Conference Call and Webcast
Today, at 8:00 a.m. EDT / 1:00 p.m. BST / 2:00 p.m. CEST, management will host a conference call to present the second quarter 2017 results. Listeners may access a live webcast of the conference call along with accompanying slides under "News, Events & Presentations" on IGT’s Investor Relations website at www.IGT.com. A replay of the webcast will be available on the website following the live event. To listen by telephone, the dial in number is +44 (0) 20 3427 1915 for participants in the United Kingdom and +1 877 280 1254 for listeners outside the United Kingdom. The conference ID/confirmation code is 3185617. A telephone replay of the call will be available for one week at +44 (0) 20 3427 0598 or +1 347 366 9565 using the conference ID/confirmation code 3185617.
About IGT IGT (IGT) is the global leader in gaming. We enable players to experience their favorite games across all channels and regulated segments, from Gaming Machines and Lotteries to Interactive and Social Gaming. Leveraging a wealth of premium content, substantial investment in innovation, in-depth customer intelligence, operational expertise and leading-edge technology, our gaming solutions anticipate the demands of consumers wherever they decide to play. We have a well-established local presence and relationships with governments and regulators in more than 100 countries around the world, and create value by adhering to the highest standards of service, integrity, and responsibility. IGT has over 12,000 employees. For more information, please visit www.IGT.com.
Cautionary Statement Regarding Forward-Looking Statements This news release may contain forward-looking statements (including within the meaning of the Private Securities Litigation Reform Act of 1995) concerning International Game Technology PLC and its consolidated subsidiaries (the "Company") and other matters. These statements may discuss goals, intentions, and expectations as to future plans, trends, events, dividends, results of operations, or financial condition, or otherwise, based on current beliefs of the management of the Company as well as assumptions made by, and information currently available to, such management. Forward-looking statements may be accompanied by words such as "aim," "anticipate," "believe," "plan," "could," "would," "should," "shall", "continue," "estimate," "expect," "forecast," "future," "guidance," "intend," "may," "will," "possible," "potential," "predict," "project" or the negative or other variations of them. These forward-looking statements speak only as of the date on which such statements are made and are subject to various risks and uncertainties, many of which are outside the Company’s control. Should one or more of these risks or uncertainties materialize, or should any of the underlying assumptions prove incorrect, actual results may differ materially from those predicted in the forward-looking statements and from past results, performance, or achievements. Therefore, you should not place undue reliance on such statements. Factors that could cause actual results to differ materially from those in the forward-looking statements include (but are not limited to) the factors and risks described in the Company’s annual report on Form 20-F for the financial year ended December 31, 2016 and other documents filed from time to time with the SEC, which are available on the SEC’s website at www.sec.gov and on the investor relations section of the Company’s website at www.IGT.com. Except as required under applicable law, the Company does not assume any obligation to update these forward-looking statements. You should carefully consider these factors and other risks and uncertainties that affect the Company’s business. All forward-looking statements contained in this news release are qualified in their entirety by this cautionary statement. All subsequent written or oral forward-looking statements attributable to International Game Technology PLC, or persons acting on its behalf, are expressly qualified in its entirety by this cautionary statement.
Contact: Robert K. Vincent, Corporate Communications, toll free in U.S./Canada +1 (844) IGT-7452; outside U.S./Canada +1 (401) 392-7452 James Hurley, Investor Relations, +1 (401) 392-7190 Simone Cantagallo, +39 06 51899030; for Italian media inquiries
International Game Technology PLC
Condensed Consolidated Statements of Operations
($ and shares in thousands, except per share data)
For the three months ended
Service revenue
1,023,478
1,089,954
Product sales
196,026
195,515
Total revenue
1,219,504
1,285,469
Cost of services
616,740
637,832
Cost of product sales
138,362
144,640
Selling, general and administrative
210,185
239,241
Research and development
80,512
84,288
Restructuring expense
11,463
6,438
Transaction income, net
(29,630)
(43)
Total operating expenses
1,027,632
1,114,748
Operating income
191,872
170,721
Interest income
2,460
2,754
Other expense, net
(26,112)
(575)
Foreign exchange (loss) gain, net
(220,386)
88,152
Interest expense
(115,984)
(117,715)
Total non-operating expenses
(360,022)
(27,384)
(Loss) income before provision for income taxes
(168,150)
143,337
Provision for income taxes
84,086
60,439
Net (loss) income
(252,236)
82,898
Less: Net income attributable to non-controlling interests
37,665
10,202
Net (loss) income attributable to IGT PLC
(289,901)
72,696
Net (loss) income attributable to IGT PLC per common share - basic
(1.43)
0.36
Net (loss) income attributable to IGT PLC per common share - diluted (1.43)
0.36
Weighted-average shares - basic
202,946
201,229
Weighted-average shares - diluted
202,946
201,565
International Game Technology PLC
Condensed Consolidated Statements of Operations
($ and shares in thousands, except per share data)
Service revenue
2,050,423
2,225,075
Product sales
321,665
341,955
Total revenue
2,372,088
2,567,030
Cost of services
1,241,034
1,286,595
Cost of product sales
252,698
266,416
Selling, general and administrative
410,709
466,767
Research and development
163,133
168,995
Restructuring expense
20,730
15,856
Transaction (income) expense, net
(27,309)
1,431
Total operating expenses
2,060,995
2,208,412
Operating income
311,093
358,618
Interest income
5,086
7,047
Other expense, net
(23,445)
(7,901)
Foreign exchange loss, net
(267,223)
(73,404)
Interest expense
(230,783)
(236,130)
Total non-operating expenses
(516,365)
(310,388)
(Loss) income before provision for income taxes
(205,272)
48,230
Provision for income taxes
73,756
51,781
Less: Net income attributable to non-controlling interests
65,663
16,527
Net loss attributable to IGT PLC
(344,691)
(20,078)
Net loss attributable to IGT PLC per common share - basic
(1.70)
(0.10)
Net loss attributable to IGT PLC per common share - diluted (1.70)
(0.10)
Weighted-average shares - basic
202,714
200,840
Weighted-average shares - diluted
202,714
200,840
International Game Technology PLC
Condensed Consolidated Balance Sheets
Cash and cash equivalents
494,681
294,094
Restricted cash and investments
229,858
247,222
Trade and other receivables, net
824,527
947,237
Inventories
380,307
347,494
Other current assets
381,877
424,727
Income taxes receivable
21,474
28,792
Total current assets
2,332,724
2,289,566
Systems, equipment and other assets related to contracts, net
1,368,878
1,199,674
Property, plant and equipment, net
196,529
357,841
Goodwill, net
6,391,819
6,810,012
Intangible assets, net
2,403,203
2,874,031
Other non-current assets
1,507,464
1,497,662
Deferred income taxes
32,872
31,376
Total non-current assets
11,900,765
12,770,596
Total assets
14,233,489
15,060,162
Liabilities, redeemable non-controlling interests, and shareholders’ equity
Accounts payable
1,180,035
1,216,079
Other current liabilities
829,681
1,097,045
Current portion of long-term debt
567,313
77
Income taxes payable
178,945
28,590
Total current liabilities
2,755,974
2,341,791
Long-term debt, less current portion
6,926,234
7,863,085
Deferred income taxes
654,635
761,924
Other non-current liabilities
460,664
444,556
Total non-current liabilities
8,041,533
9,069,565
Total liabilities
10,797,507
11,411,356
Commitments and contingencies
-
-
Redeemable non-controlling interests and shareholders’ equity
3,435,982
3,648,806
Total liabilities, redeemable non-controlling interests, and shareholders’ equity 14,233,489
15,060,162
International Game Technology PLC
Condensed Consolidated Statements of Cash Flows
Foreign exchange loss, net
267,233
73,404
Amortization
218,427
253,074
Depreciation
185,906
198,881
Amortization of upfront payments to customers
101,039
55,178
Loss on early extinguishment of 7.500% Senior Secured Notes due 2019
25,725
-
Debt issuance cost amortization
10,042
9,086
Stock-based compensation expense
3,273
17,034
Non-cash gain on sale of Double Down Interactive LLC
(51,233)
-
Cash flows before changes in operating assets and liabilities
485,424
624,704
Changes in operating assets and liabilities, net of disposition:
Trade and other receivables
146,763
35,133
Accounts payable
(105,477)
(68,596)
Other assets and liabilities
14,695
(61,163)
Net cash flows provided by operating activities
543,224
523,807
Proceeds from sale of Double Down Interactive LLC, net of cash divested
823,662
-
Proceeds from sale of assets
162,758
49,394
Upfront payments to customers
(185,368)
(390,390)
Capital expenditures
(370,590)
(219,632)
Net cash flows provided by (used in) investing activities
433,082
(547,624)
Principal payment on 7.500% Senior Secured Notes due 2019
(355,697)
-
Principal payments on other long-term debt, net
(315,918)
(236,669)
Dividends paid
(81,162)
(80,340)
Dividends paid - non-controlling interests
(50,464)
(27,552)
Payments in connection with the early extinguishment of 7.500% Senior Secured Notes due 2019
(38,824)
-
Return of capital - non-controlling interests
(35,907)
(35,407)
Net (payments of) receipts from financial liabilities
(28,092)
4,510
Capital increase - non-controlling interests
127,211
151,359
Net cash flows used in financing activities
(798,205)
(226,387)
Net increase (decrease) in cash and cash equivalents
178,101
(250,204)
Effect of exchange rate changes on cash
22,486
12,732
Cash and cash equivalents at the beginning of the period
294,094
627,484
Cash and cash equivalents at the end of the period
494,681
390,012
Supplemental Cash Flow Information:
Interest paid
(245,753)
(256,331)
Income taxes paid
(21,492)
(38,742)
International Game Technology PLC
6.250% Senior Secured Notes due 2022 1,476,196
1,472,150
6.500% Senior Secured Notes due 2025 1,086,213
1,085,537
4.750% Senior Secured Notes due 2023 958,878
884,917
4.125% Senior Secured Notes due 2020 792,032
730,465
5.625% Senior Secured Notes due 2020 594,847
593,954
4.750% Senior Secured Notes due 2020 553,922
509,050
7.500% Senior Secured Notes due 2019 149,420
521,894
5.500% Senior Secured Notes due 2020 126,001
126,294
5.350% Senior Secured Notes due 2023 61,135
61,187
6.625% Senior Secured Notes due 2018 -
521,556
Senior Secured Notes
5,798,644
6,507,004
Term Loan Facilities due 2019
909,931
839,552
Revolving Credit Facilities due 2021 217,659
516,529
Long-term debt, less current portion 6,926,234
7,863,085
6.625% Senior Secured Notes due 2018 567,313
-
Current portion of long-term debt
567,313
77
Total debt
7,493,547
7,863,162
Cash and cash equivalents
494,681
294,094
Net debt
6,998,866
7,569,068
International Game Technology PLC
Condensed Consolidated Statement of Operations
Reconciliation of Non-GAAP Financial Measures
($ and shares in thousands, except per share data)
Q2 2017
Transaction
Q2 2017
As
Purchase
Foreign
Restructuring
and Refinancing
As
Reported
Accounting
Exchange
Expense
Expense, net
Adjusted
Total revenue
1,219,504
(180)
-
-
-
1,219,324
Cost of services
616,740
(38,510)
-
-
-
578,230
Cost of product sales
138,362
(23,618)
-
-
-
114,744
Selling, general and administrative
210,185
(28,169)
-
-
-
182,016
Research and development
80,512
(210)
-
-
-
80,302
Restructuring expense
11,463
-
-
(11,463)
-
-
Transaction income, net
(29,630)
-
-
-
29,630
-
Total operating expenses
1,027,632
(90,507)
-
(11,463)
29,630
955,292
Operating income
191,872
90,327
-
11,463
(29,630)
264,032
Foreign exchange loss, net
(220,386)
-
220,386
-
-
-
Other (expense) income, net
(26,112)
1,617
-
-
25,725
1,230
Interest expense, net
(113,524)
717
-
-
-
(112,807)
Total non-operating expenses
(360,022)
2,334
220,386
-
25,725
(111,577)
(Loss) income before provision for income taxes
(168,150)
92,661
220,386
11,463
(3,905)
152,455
Provision for income taxes (a)
84,086
32,003
50,428
2,962
(85,782)
83,697
Net (loss) income
(252,236)
60,658
169,958
8,501
81,877
68,758
Less: Net income attributable to non-controlling interests
37,665
26
-
-
-
37,691
Net (loss) income attributable to IGT PLC
(289,901)
60,632
169,958
8,501
81,877
31,067
Net (loss) income per common share - diluted
(1.43)
0.15
Weighted-average shares - diluted (b)
202,946
203,076
(a) Provision for income taxes was determined based on the statutory tax rate in effect in the respective jurisdiction where the adjustment originated.
(b) Weighted-average shares - diluted, as adjusted, include shares that were excluded from the as reported computation, due to the net loss as reported.
International Game Technology PLC
Consolidated Statement of Operations
Reconciliation of Non-GAAP Financial Measures
($ and shares in thousands, except share amounts)
Q2 2016
Impairment/
Transaction
Q2 2016
As
Purchase
Foreign
Restructuring
(Income)
As
Reported
Accounting
Exchange
Expense
Expense
Adjusted
Total revenue
1,285,469
264
-
-
-
1,285,733
Cost of services
637,832
(45,340)
-
-
-
592,492
Cost of product sales
144,640
(29,687)
-
-
-
114,953
Selling, general and administrative
239,241
(34,857)
-
-
-
204,384
Research and development
84,288
(496)
-
-
-
83,792
Restructuring expense
6,438
-
-
(6,438)
-
-
Impairment loss
2,352
-
-
(2,352)
-
-
Transaction income, net
(43)
-
-
-
43
-
Total operating expenses
1,114,748
(110,380)
-
(8,790)
43
995,621
Operating income
170,721
110,644
-
8,790
(43)
290,112
Foreign exchange gain, net
88,152
-
(88,152)
-
-
-
Other expense, net
(575)
1,260
-
-
-
685
Interest expense, net
(114,961)
2,036
-
-
-
(112,925)
Total non-operating expenses
(27,384)
3,296
(88,152)
-
-
(112,240)
Income (loss) before provision for income taxes
143,337
113,940
(88,152)
8,790
(43)
177,872
Provision for (benefit from) income taxes (a)
60,439
41,330
(22,703)
2,054
(32)
81,088
Net income (loss)
82,898
72,610
(65,449)
6,736
(11)
96,784
Less: Net income attributable to non-controlling interests
10,202
25
-
-
-
10,227
Net income (loss) attributable to IGT PLC
72,696
72,585
(65,449)
6,736
(11)
86,557
Net income per common share - diluted
0.36
0.43
Weighted-average shares - diluted
201,565
201,565
(a) Provision for (benefit from) income taxes was determined based on the statutory tax rate in effect in the respective jurisdiction where the adjustment originated.
International Game Technology PLC
Condensed Consolidated Statement of Operations
Reconciliation of Non-GAAP Financial Measures
($ and shares in thousands, except per share data)
Year to date
Adjustments
Year to date
June 2017
Transaction
June 2017
As
Purchase
Foreign
Restructuring
and Refinancing
As
Reported
Accounting
Exchange
Expense
Expense, net
Adjusted
Total revenue
2,372,088
(358)
-
-
-
2,371,730
Cost of services
1,241,034
(80,740)
-
-
-
1,160,294
Cost of product sales
252,698
(53,300)
-
-
-
199,398
Selling, general and administrative
410,709
(63,097)
-
-
-
347,612
Research and development
163,133
(411)
-
-
-
162,722
Restructuring expense
20,730
-
-
(20,730)
-
-
Transaction income, net
(27,309)
-
-
-
27,309
-
Total operating expenses
2,060,995
(197,548)
-
(20,730)
27,309
1,870,026
Operating income
311,093
197,190
-
20,730
(27,309)
501,704
Foreign exchange loss, net
(267,223)
-
267,223
-
-
-
Other (expense) income, net
(23,445)
1,651
-
-
25,725
3,931
Interest expense, net
(225,697)
1,805
-
-
-
(223,892)
Total non-operating expenses
(516,365)
3,456
267,223
-
25,725
(219,961)
(Loss) income before provision for income taxes
(205,272)
200,646
267,223
20,730
(1,584)
281,743
Provision for income taxes (a)
73,756
70,232
61,096
6,134
(84,929)
126,289
Net (loss) income
(279,028)
130,414
206,127
14,596
83,345
155,454
Less: Net income attributable to non-controlling interests
65,663
51
-
-
-
65,714
Net (loss) income attributable to IGT PLC
(344,691)
130,363
206,127
14,596
83,345
89,740
Net (loss) income per common share - diluted
(1.70)
0.44
Weighted-average shares - diluted (b)
202,714
203,066
(a) Provision for income taxes was determined based on the statutory tax rate in effect in the respective jurisdiction where the adjustment originated.
(b) Weighted-average shares - diluted, as adjusted, include shares that were excluded from the as reported computation, due to the net loss as reported.
International Game Technology PLC
Consolidated Statement of Operations
Reconciliation of Non-GAAP Financial Measures
($ and shares in thousands, except share amounts)
Year to date
Adjustments
Year to date
June 2016
Impairment/
June 2016
As
Purchase
Foreign
Restructuring
Transaction
As
Reported
Accounting
Exchange
Expense
Expense
Adjusted
Total revenue
2,567,030
956
-
-
-
2,567,986
Cost of services
1,286,595
(91,144)
-
-
-
1,195,451
Cost of product sales
266,416
(59,351)
-
-
-
207,065
Selling, general and administrative
466,767
(69,603)
-
-
-
397,164
Research and development
168,995
(994)
-
-
-
168,001
Restructuring expense
15,856
-
-
(15,856)
-
-
Impairment loss
2,352
-
-
(2,352)
-
-
Transaction expense, net
1,431
-
-
-
(1,431)
-
Total operating expenses
2,208,412
(221,092)
-
(18,208)
(1,431)
1,967,681
Operating income
358,618
222,048
-
18,208
1,431
600,305
Foreign exchange loss, net
(73,404)
-
73,404
-
-
-
Other expense, net
(7,901)
4,092
-
-
-
(3,809)
Interest expense, net
(229,083)
4,074
-
-
-
(225,009)
Total non-operating expenses
(310,388)
8,166
73,404
-
-
(228,818)
Income (loss) before provision for income taxes
48,230
230,214
73,404
18,208
1,431
371,487
Provision for income taxes (a)
51,781
81,901
13,574
5,180
262
152,698
Net (loss) income
(3,551)
148,313
59,830
13,028
1,169
218,789
Less: Net income attributable to non-controlling interests
16,527
50
-
-
-
16,577
Net (loss) income attributable to IGT PLC
(20,078)
148,263
59,830
13,028
1,169
202,212
Net (loss) income per common share - diluted
(0.10)
1.00
Weighted-average shares - diluted (b)
200,840
201,547
(a) Provision for (benefit from) income taxes was determined based on the statutory tax rate in effect in the respective jurisdiction where the adjustment originated.
(b) Weighted-average shares - diluted, as adjusted, include shares that were excluded from the as reported computation, due to the net loss as reported.
International Game Technology PLC
Adjusted EBITDA and Free Cash Flow
Reconciliations of Non-GAAP Financial Measures
For the three months ended
Net (loss) income
(252,236)
82,898
Provision for income taxes
84,086
60,439
Non-operating expenses
360,022
27,384
Amortization
102,186
127,578
Depreciation
93,985
100,364
Amortization of upfront payments to customers
51,640
27,769
Restructuring expense
11,463
6,438
Stock-based compensation expense
2,424
7,732
Non-cash purchase accounting (excluding D&A)
(204)
224
Transaction income, net
(29,630)
(43)
Adjusted EBITDA
423,747
443,135
Cash flows from operating activities
259,556
318,202
Capital expenditures
(198,538)
(121,961)
Upfront payments to customers
(185,368)
(390,390)
Free Cash Flow
(124,350)
(194,149)
International Game Technology PLC Segment Performance
INTERNATIONAL GAME TECHNOLOGY PLC
Quarter Change
2016
2017
Percentage Constant FX
Gaming
Total Revenue
663
630
-4.9%
-4.5%
Gaming Services
495
454
-8.3%
-7.8%
Social (DDI)
72
43
-40.1%
-39.9%
Product Sales
168
177
5.1%
5.0%
Lottery
Total Revenue
546
502
-8.1%
-7.6%
Lottery Services
519
485
-6.6%
-6.2%
FM/Concessions
458
426
-7.0%
-6.6%
Other Services
22
4
-82.8%
-79.9%
Product Sales
27
18
-35.5%
-35.3%
Systems/Other
19
16
-13.1%
-12.9%
Other
Total Revenue
76
87
13.9%
14.5%
Service Revenue
76
85
12.0%
12.4%
Product Sales
0
2
586.2%
636.8%
Consolidated
Revenue
1,285
1,220
-5.1%
-4.7%
Segment Total
338
315
-6.9%
-6.8%
Purchase Accounting (111)
(90)
-18.4%
-18.3%
Corporate Support
(57)
(33)
-42.7%
-41.1%
NORTH AMERICA GAMING & INTERACTIVE
Quarter Change
2016
2017
Percentage Constant FX
Gaming
Total Revenue
350
310
-11.3%
-11.1%
Gaming Services
246
208
-15.4%
-15.3%
Social (DDI)
72
43
-40.1%
-39.9%
Product Sales
104
102
-1.6%
-1.3%
Total
Revenue
350
310
-11.3%
-11.1%
Operating Income
88
76
-13.5%
-14.5%
NORTH AMERICA LOTTERY
Quarter Change
2016
2017
Percentage Constant FX
Gaming
Total Revenue
37
37
-1.6%
-1.1%
Gaming Services
37
37
-1.5%
-1.1%
Product Sales
0
0
-34.3%
-34.3%
Terminal
0
0
-100.0% -100.0%
Lottery
Total Revenue
249
256
2.9%
2.9%
Lottery Services
230
242
5.1%
5.1%
FM/Concessions
163
158
-3.0%
-3.0%
Other Services
28
28
0.5%
0.5%
Product Sales
19
15
-22.9%
-22.8%
Systems/Other
11
14
20.2%
20.3%
Total
Revenue
286
293
2.3%
2.4%
Operating Income
61
79
29.2%
28.9%
INTERNATIONAL
Quarter Change
2016
2017
Percentage Constant FX
Gaming
Total Revenue
110
117
6.0%
6.7%
Gaming Services
46
43
-7.0%
-4.2%
Product Sales
64
74
15.4%
14.5%
Lottery
Total Revenue
79
75
-5.1%
-2.6%
Lottery Services
70
72
1.8%
4.6%
FM/Concessions
53
49
-7.7%
-5.5%
Other Services
18
23
30.5%
35.0%
Product Sales
8
3
-65.0%
-64.6%
Systems/Other
8
3
-63.2%
-62.7%
Other
Total Revenue
18
20
7.7%
7.6%
Service Revenue
18
18
-0.7%
-1.6%
Product Sales
0
2
586.2%
636.8%
Total
Revenue
207
211
2.0%
3.3%
Operating Income
28
45
63.3%
68.4%
2016
2017
Percentage Constant FX
Gaming
Total Revenue
166
165
-0.4%
0.1%
Gaming Services
166
165
-0.5%
-0.1%
Product Sales
0
1
92.3%
96.0%
Lottery
Total Revenue
219
171
-21.7%
-21.5%
Lottery Services
219
171
-21.7%
-21.5%
FM/Concessions
242
219
-9.6%
-9.4%
Other Services
(23)
(48)
102.7%
103.2%
Other
Total Revenue
58
67
15.9%
16.8%
Service Revenue
58
67
15.9%
16.8%
Total
Revenue
443 404
-8.8%
-8.4%
Operating Income
161 114
-29.2%
-28.9%
Consolidated Key Performance Indicators (KPIs)
Period Ended June 30
2017
2016
% change
Installed base (end of period)
VLT - Government Sponsored (ex-Italy)
16,192
15,605
3.8%
VLT - Italy Supplier (B2B)
8,819
8,159
8.1%
Total installed base
59,864
57,163
4.7%
Yield (average revenue per unit per day - $0.00)
29.63
32.57
-9.0%
Additional Italian Network Details:
VLT - Operator (B2C)
10,907
10,995
-0.8%
New/Expansion
1,849
1,447
27.8%
Replacement
7,035
6,705
4.9%
Total machines shipped
8,884
8,152
9.0%
Global lottery same-store revenue growth
Instants & draw games
4.9%
Multistate Jackpots
-14.1%
Total lottery same-store revenue growth (ex-Italy)
2.6%
Italy lottery revenue growth
-21.5%
Period Ended June 30
2017
2016
% change
Installed base (end of period)
VLT - Government Sponsored
15,267
15,355
-0.6%
Total installed base
38,916
39,526
-1.5%
New/Expansion
1,408
1,277
10.3%
Replacement
3,885
3,886
0.0%
Total machines shipped
5,293
5,163
2.5%
Lottery same-store revenue growth
Instants & draw games
5.6%
Multistate Jackpots
-18.2%
Total lottery same-store revenue growth
2.2%
Period Ended June 30
2017
2016
% change
Installed base (end of period)
VLT - Government Sponsored
925
250
270.0%
Total installed base
12,129
9,478
28.0%
New/Expansion
441
170
159.4%
Replacement
3,150
2,819
11.7%
Total machines shipped
3,591
2,989
20.1%
Lottery same-store revenue growth
Instants & draw games
2.8%
Total lottery same-store revenue growth
3.6%
Period Ended June 30
2017
2016
% change
(In EUR
millions, except machines)
Lotto wagers
1,842
2,056
-10.4%
Scratch & Win Wagers
2,183
2,200
-0.8%
Italy lottery revenue growth
-21.5%
Installed base (end of period)
VLT - Operator (B2C)
10,907
10,995
-0.8%
VLT - Supplier (B2B)
8,819
8,159
8.1%
Total Installed Base
78,796
75,454
4.4%
VLT - Operator (B2C)
1,370
1,324
3.5%
Interactive Wagers (Gaming)
413
398
3.8%
Sports Betting Wagers1
226
206
9.5%
Sports Betting Payout (%)1
82.3%
86.5%
-4.2 pp
1Includes Virtual Wagers and Pools & Horses
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SOURCE International Game Technology PLC
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