International Game Technology PLC reports third quarter 2017 results
- Net loss of $804 million includes $714 million non-cash impairment charge and $118 million of net foreign exchange loss; adjusted Net income of $81 million
- Adjusted EBITDA of $428 million reflects robust lottery same-store revenue growth, strong product sales, and reduced operating expenses
- The Company expects to achieve Adjusted EBITDA of $1,640 – 1,680 million for the full-year period
- Cash dividend declared of $0.20 per ordinary share
LONDON, U.K.– International Game Technology PLC (“IGT”) (NYSE:IGT) today reported financial results for the third quarter and nine months ended September 30, 2017. Today, at 8:00 a.m. EST, management will host a conference call and webcast to present the third quarter results; access details are provided below.
“Our strong third quarter performance reflects the scope and balance of our business,” said Marco Sala, CEO of IGT. “Our largest global Lottery operations are growing steadily and acceptance of our newest gaming machines is expanding around the world. The significant increase in Gaming and Lottery product sales demonstrates clear interest in our systems and technology solutions. We expect our sustained investment in innovation, led by a customer-first, player-centric focus, to drive continued momentum in both Lottery and Gaming.”
“Thanks to a favorable product sales mix and reduced operating expenses, Adjusted EBITDA improved from the prior-year period, after considering certain non-comparable items, such as the DoubleDown sale,” said Alberto Fornaro, CFO of IGT. “Based on the year-to-date results and current exchange rates, we expect to achieve Adjusted EBITDA of $1,640-$1,680 million for the full-year period.”
Summary of Consolidated Third Quarter 2017 Financial Results
|(In $ millions, unless otherwise noted)|
|Operating income (loss)||(556)||164||-439%||-447%|
|Net (loss) income per diluted share||(3.95)||(0.01)||NM|
|Adjusted operating income||258||286||-10%||-12%|
|Adjusted net income per diluted share||0.40||0.45||-11%|
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 Third Quarter Results
Consolidated revenue was $1,221 million compared to $1,266 million in the third quarter of 2016. Revenue was down 6% in constant currency, primarily on the sale of Double Down Interactive LLC (“DoubleDown”) and new Lotto concession amortization. Adjusted for these items, consolidated revenue was up 2% in constant currency, reflecting growth in global Lottery and Gaming revenue.
Global lottery same-store revenue, excluding Italy, grew a robust 6.8% in the third quarter, led by broad-based strength in North America. In Italy, late numbers activity was considerably lower than the elevated levels in the third quarter of 2016. Excluding late numbers, Italy lottery wagers increased 6% on exceptional growth for both 10eLotto and Scratch & Win.
Gaming service revenue declined 9%, primarily impacted by the DoubleDown sale; adjusted for DoubleDown, gaming service revenue increased 5%. The global installed base grew 3,275 units from the prior-year period, including expansion for both casino and VLT units. Global gaming product revenue increased 9% from the prior-year period on strong system and software sales. The Company shipped 6,406 gaming machines worldwide during the third quarter with higher average selling prices than the prior year.
Operating loss of $556 million is due to a non-cash, non-tax deductible impairment charge of $714 million to write down the carrying value of the Company’s North America Gaming and Interactive reporting unit to fair value. The impairment charge reflects a delayed recovery for the North America Gaming and Interactive reporting unit. Going forward, revenue and profit levels for the North America Gaming and Interactive reporting unit are expected to grow as new games and cabinets come to market. The impairment charge has no impact on the Company’s operations, cash flow, ability to service debt, compliance with financial covenants, or underlying liquidity.
Adjusted operating income was $258 million compared to $286 million in the prior-year period. Adjusted EBITDA was $428 million compared to $430 million in the third quarter of 2016, as higher product sales and lower operating expenses essentially compensated for the DoubleDown sale and the timing of incentive contributions from the New Jersey Lottery.
Interest expense was $114 million compared to $118 million in the prior-year period.
Net loss attributable to IGT was $804 million in the third quarter of 2017, reflecting the previously mentioned impairment charge and $118 million of net foreign exchange loss. On an adjusted basis, net income attributable to IGT was to $81 million. The Company reported a net loss per diluted share of $(3.95) and earned $0.40 per diluted share on an adjusted basis.
Cash from operations was $601 million in the first nine months of the year and capital expenditures were $552 million.
Cash and cash equivalents were $300 million as of September 30, 2017, compared to $294 million as of December 31, 2016. Net debt was $7,335 million as of September 30, 2017, compared to $7,569 million as of December 31, 2016.
Operating Segment Review
North America Gaming & Interactive
Revenue for North America Gaming & Interactive was $262 million compared to $317 million in the third quarter of 2016. Comparability is affected by the DoubleDown sale; adjusted for DoubleDown, revenue for North America Gaming & Interactive rose 4% in the third quarter.
Service revenue was $171 million compared to $241 million in the prior-year period, the decline is primarily attributed to DoubleDown and a year-over-year decrease in the installed base.
Product sales revenue increased 20% to $91 million, driven by large software and system sales. The segment shipped 3,597 gaming machine units in the quarter compared to 5,238 units in the prior-year period, when there was significant new and expansion and VLT replacement activity. Average selling price per unit was higher, supported by demand for new cabinets.
Operating income for North America Gaming & Interactive was $65 million compared to $68 million in the third quarter of 2016. The decline is entirely attributable to the DoubleDown sale, which was largely offset by a high-margin product sales mix and lower operating expenses.
North America Lottery
North America Lottery revenue of $307 million was in line with the prior-year period, which included a significant incentive contribution from the New Jersey Lottery; the 2017 New Jersey incentive was mostly recognized in the second quarter of 2017. Adjusting for the timing of the New Jersey contribution, revenue increased 9% from the prior year.
Lottery same-store revenue rose 9.4% on top of 6.3% growth in the prior year, supported by broad-based strength in draw-based games, instant tickets, and multi-state jackpots. Product sales were significantly above the prior year.
Operating income for North America Lottery was $75 million compared to $85 million in the third quarter of 2016. Adjusted for the timing of the New Jersey Lottery incentive, operating income was up double-digits on the high profit flow-through of strong same- store revenue growth.
International revenue increased 9% to $234 million, and was up 8% on a constant currency basis.
Lottery service revenue of $70 million was essentially in line with the prior year, as a 1.4% decline in same-store revenue was offset by a higher effective rate in the period.
Gaming service revenue increased 36% to $59 million, reflecting the benefit of discrete, non-recurring items and significant expansion in the installed base.
Product sales revenue rose 5% to $87 million, supported by Gaming system and Lottery software sales. Gaming terminal sales were below the prior year, as the segment shipped a total of 2,809 gaming machine units during the third quarter of 2017 compared to 3,742 units in the prior-year period.
International operating income of $40 million increased 7% at constant currency, reflecting higher revenue and disciplined cost management that was partially offset by product mix.
Italy revenue was $418 million compared to $426 million in the third quarter of 2016. The decline in revenue is entirely attributable to amortization associated with the new Lotto concession and significantly lower late numbers activity.
Total Lotto wagers in the quarter were €1,815 million compared to €1,967 million in the prior-year period. Excluding late numbers, Lotto wagers increased 7% over the prior- year period reflecting strong growth in 10eLotto. Instant-ticket wagers grew 5% reaching €2,198 million on the strong acceptance of new games.
Machine gaming service revenue was down in constant currency on higher gaming machine taxes that were partially offset by improved VLT performance. Sports betting revenue rose on strong wager growth.
Italy operating income was $126 million compared to $147 million in the third quarter of 2016. The decrease was entirely attributable to the new Lotto amortization, as strong underlying performance offset higher gaming machine taxes and lower late number wagers.
The Company’s board of directors declared a quarterly cash dividend of $0.20 per ordinary share. The dividend is payable on December 12, 2017 to holders of record as of the close of business on November 28, 2017.
Based on the year-to-date results and current exchange rates, the Company expects to achieve adjusted EBITDA of $1,640-$1,680 million for the full-year period. Net debt is expected to remain essentially in line with the third quarter level.
Conference Call and Webcast
Today, at 8:00 a.m. EST, management will host a conference call to present the third 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 US/Canada toll-free dial-in number is +1 844 842 7999 and the dial-in number for participants outside the US/Canada is +1 612 979 9887. The conference ID/confirmation code is 2259942. A telephone replay of the call will be available for one week at +1 855 859 2056 for the US/Canada or +1 404 537 3406 outside the US/Canada using the conference ID/confirmation code 2259942.
You can find the full report here
About IGT (www.igt.com)
IGT (NYSE: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 approximately 13,000 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 IGT 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 IGT 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 are subject to various risks and uncertainties, many of which are outside IGT’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 the forward-looking statements. Factors that could cause actual results to differ materially from those in the forward-looking statements include (but are not limited to) the possibility that the businesses of International Game Technology and GTECH S.p.A. will not be integrated successfully, or that the combined companies will not realize estimated cost savings, synergies, growth or other anticipated benefits or that such benefits may take longer to realize than expected, or that the Company will incur unanticipated costs in connection with the integration; the possibility that the Company will be unable to pay future dividends to shareholders or that the amount of such dividends may be less than anticipated; the possibility that IGT may not obtain its anticipated financial results in one or more future periods; reductions in customer spending; a slowdown in customer payments and changes in customer demand for products and services as a result of changing economic conditions or otherwise; unanticipated changes relating to competitive factors in the industries in which the Company operates; the Company’s ability to hire and retain key personnel; the impact of the consummation of the business combination on relationships with third parties, including customers, employees and competitors; the Company’s ability to attract new customers and retain existing customers in the manner anticipated; reliance on and integration of information technology systems; changes in legislation or governmental regulations affecting the Company; international, national or local economic, social or political conditions that could adversely affect the Company or its customers; conditions in the credit markets; risks associated with assumptions the Company makes in connection with its critical accounting estimates; the resolution of pending and potential future legal, regulatory or tax proceedings and investigations; and the Company’s international operations, which are subject to the risks of currency fluctuations and foreign exchange controls. The foregoing list of factors is not exhaustive. You should carefully consider the foregoing factors and the other risks and uncertainties that affect IGT’s business, including those described in IGT’s annual report on Form 20-F for the financial year ended December 31, 2015 and other documents filed from time to time with the Securities and Exchange Commission (the “SEC”), which are available on the SEC website at www.sec.gov and on the investor relations section of IGT’s website at www.IGT.com. Except as required under applicable law, IGT does not assume any obligation to update the forward-looking statements. Nothing in this news release is intended, or is to be construed, as a profit forecast or to be interpreted to mean that earnings per IGT share for the current or any future financial years will necessarily match or exceed the historical published earnings per IGT share, as applicable. 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 IGT, or persons acting on its behalf, are expressly qualified in their entirety by this cautionary statement.
Robert K. Vincent,
toll free in U.S./Canada (844) IGT-7452;
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Telephone: (401) 392-7190
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