International Game Technology PLC Reports Third Quarter 2017 Results

November 14, 2017 | By forimmediaterele | Filed in: Press Releases.

Travel & Tourism Industry release:

“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

Quarter Ended
September 30,

Change

Constant
Currency
Change 

2017

2016

(%)

(%)

(In $ millions, unless otherwise noted)

Revenue

1,221

1,266

-4%

-6%

Operating income (loss)

(556)

164

-439%

-447%

Net (loss) income per diluted share

(3.95)

(0.01)

NM

Net debt

7,335

7,937

-8%

Adjusted EBITDA

428

430

0%

-3%

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
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
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.

Other Developments

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.   

Outlook

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.

About IGT
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 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)

Unaudited

 For the three months ended 

 September 30, 

2017

2016

Service revenue

1,013,054

1,088,842

Product sales

208,147

176,808

Total revenue

1,221,201

1,265,650

Cost of services

625,247

625,235

Cost of product sales

150,358

136,702

Selling, general and administrative

196,862

242,510

Research and development

79,009

87,354

Restructuring expense

9,976

5,658

Impairment loss

715,220

4,230

Transaction expense, net

627

129

Total operating expenses

1,777,299

1,101,818

Operating (loss) income

(556,098)

163,832

Interest income

2,906

3,240

Other (expense) income, net

(9,802)

2,907

Foreign exchange loss, net

(117,526)

(21,143)

Interest expense

(113,711)

(117,618)

Total non-operating expenses

(238,133)

(132,614)

(Loss) income before (benefit from) provision for income taxes

(794,231)

31,218

(Benefit from) provision for income taxes

(19,824)

12,812

Net (loss) income

(774,407)

18,406

Less: Net income attributable to non-controlling interests

29,207

20,309

Net loss attributable to IGT PLC

(803,614)

(1,903)

Net loss attributable to IGT PLC per common share – basic

(3.95)

(0.01)

Net loss attributable to IGT PLC per common share – diluted

(3.95)

(0.01)

Weighted-average shares – basic

203,489

202,029

Weighted-average shares – diluted

203,489

202,029

International Game Technology PLC

Condensed Consolidated Statements of Operations

($ and shares in thousands, except per share data)

Unaudited

 For the nine months ended 

 September 30, 

2017

2016

Service revenue

3,063,477

3,313,917

Product sales

529,812

518,763

Total revenue

3,593,289

3,832,680

Cost of services

1,866,281

1,911,830

Cost of product sales

403,056

403,118

Selling, general and administrative

607,571

709,277

Research and development

242,142

256,349

Restructuring expense

30,706

21,514

Impairment loss

715,220

6,582

Transaction (income) expense, net

(26,682)

1,560

Total operating expenses

3,838,294

3,310,230

Operating (loss) income

(245,005)

522,450

Interest income

7,992

10,287

Other expense, net

(33,247)

(4,994)

Foreign exchange loss, net

(384,749)

(94,547)

Interest expense

(344,494)

(353,748)

Total non-operating expenses

(754,498)

(443,002)

(Loss) income before provision for income taxes

(999,503)

79,448

Provision for income taxes

53,932

64,593

Net (loss) income

(1,053,435)

14,855

Less: Net income attributable to non-controlling interests

94,870

36,836

Net loss attributable to IGT PLC

(1,148,305)

(21,981)

Net loss attributable to IGT PLC per common share – basic

(5.66)

(0.11)

Net loss attributable to IGT PLC per common share – diluted

(5.66)

(0.11)

Weighted-average shares – basic

203,002

201,238

Weighted-average shares – diluted

203,002

201,238

International Game Technology PLC

Condensed Consolidated Balance Sheets

($ thousands)

Unaudited

September 30,

 December 31, 

2017

2016

Assets

Current assets:

Cash and cash equivalents

300,079

294,094

Restricted cash and investments

236,731

247,222

Trade and other receivables, net

948,993

947,237

Inventories

370,911

347,494

Other current assets

400,991

424,727

Income taxes receivable

26,919

28,792

  Total current assets

2,284,624

2,289,566

Systems, equipment and other assets related to contracts, net

1,405,335

1,199,674

Property, plant and equipment, net

197,633

357,841

Goodwill, net

5,715,885

6,810,012

Intangible assets, net

2,325,960

2,874,031

Other non-current assets

1,485,199

1,497,662

Deferred income taxes

32,303

31,376

  Total non-current assets

11,162,315

12,770,596

Total assets

13,446,939

15,060,162

Liabilities, redeemable non-controlling interests, and shareholders’ equity

Current liabilities:

Accounts payable

1,150,748

1,216,079

Other current liabilities

814,161

1,097,045

Current portion of long-term debt

588,342

77

Income taxes payable

165,072

28,590

  Total current liabilities

2,718,323

2,341,791

Long-term debt, less current portion

7,046,678

7,863,085

Deferred income taxes

602,015

761,924

Other non-current liabilities

434,174

444,556

  Total non-current liabilities

8,082,867

9,069,565

Total liabilities

10,801,190

11,411,356

Commitments and contingencies

Redeemable non-controlling interests and shareholders’ equity

2,645,749

3,648,806

Total liabilities, redeemable non-controlling interests, and shareholders’ equity

13,446,939

15,060,162

International Game Technology PLC

Condensed Consolidated Statements of Cash Flows

($ thousands)

Unaudited

 For the nine months ended 

 September 30, 

2017

2016

Operating activities

Net (loss) income

(1,053,435)

14,855

Adjustments for:

Impairment loss

715,220

6,582

Foreign exchange loss, net

384,749

94,547

Amortization 

317,989

377,163

Depreciation 

289,088

293,284

Amortization of upfront payments to customers

155,318

85,160

Loss on early extinguishment of debt

35,428

Debt issuance cost amortization

16,602

13,757

Stock-based compensation expense

5,102

24,502

Non-cash gain on sale of Double Down Interactive LLC

(51,348)

Other, net

8,428

16,603

Cash flows before changes in operating assets and liabilities

823,141

926,453

Changes in operating assets and liabilities, net of disposition:

Trade and other receivables

42,023

83,085

Inventories

16,526

(46,761)

Accounts payable

(60,733)

(135,297)

Other assets and liabilities

(220,004)

(206,483)

Net cash flows provided by operating activities

600,953

620,997

Investing activities

Proceeds from sale of Double Down Interactive LLC, net of cash divested

823,788

Proceeds from sale of assets

168,201

55,713

Upfront payments to customers

(185,368)

(390,390)

Capital expenditures

(552,169)

(371,497)

Other

2,779

15,196

Net cash flows provided by (used in) investing activities

257,231

(690,978)

Financing activities

Principal payments on long-term debt

(1,601,134)

(177,977)

Dividends paid

(121,840)

(120,726)

Return of capital – non-controlling interests

(62,538)

(35,407)

Dividends paid – non-controlling interests

(51,508)

(27,813)

Payments in connection with the early extinguishment of debt

(38,832)

Net payments of financial liabilities

(32,495)

Debt issuance costs paid

(16,350)

(10,736)

Capital increase – non-controlling interests

127,211

151,359

Proceeds from long-term debt

938,160

Other

(24,785)

2,225

Net cash flows used in financing activities

(884,111)

(219,075)

Net decrease in cash and cash equivalents

(25,927)

(289,056)

Effect of exchange rate changes on cash

31,912

11,471

Cash and cash equivalents at the beginning of the period

294,094

627,484

Cash and cash equivalents at the end of the period

300,079

349,899

Supplemental Cash Flow Information:

Interest paid

(397,555)

(408,864)

Income taxes paid

(159,613)

(136,015)

International Game Technology PLC

Net Debt

($ thousands)

September 30,

December 31,

2017

2016

6.250% Senior Secured Notes due 2022

1,476,058

1,472,150

6.500% Senior Secured Notes due 2025

1,086,560

1,085,537

4.750% Senior Secured Notes due 2023

992,426

884,917

4.125% Senior Secured Notes due 2020

820,013

730,465

5.625% Senior Secured Notes due 2020

595,304

593,954

4.750% Senior Secured Notes due 2020

574,535

509,050

7.500% Senior Secured Notes due 2019

148,876

521,894

5.500% Senior Secured Notes due 2020

125,856

126,294

5.350% Senior Secured Notes due 2023

61,106

61,187

6.625% Senior Secured Notes due 2018

521,556

Senior Secured Notes

5,880,734

6,507,004

Term Loan Facilities due 2023

935,198

Revolving Credit Facilities due 2021

230,746

516,529

Term Loan Facilities due 2019

839,552

Long-term debt, less current portion

7,046,678

7,863,085

6.625% Senior Secured Notes due 2018

588,320

Other

22

77

Current portion of long-term debt 

588,342

77

Total debt

7,635,020

7,863,162

Cash and cash equivalents

300,079

294,094

Net debt

7,334,941

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) 

Adjustments

Q3 2017

Impairment/

Transaction

Q3 2017

As

Purchase

Foreign

Restructuring

and Refinancing

As

Reported

Accounting

Exchange

Expense

Expense, net

Adjusted

 Total revenue 

1,221,201

(182)

1,221,019

 Cost of services 

625,247

(36,918)

588,329

 Cost of product sales 

150,358

(23,961)

126,397

 Selling, general and administrative 

196,862

(27,180)

169,682

 Research and development 

79,009

(15)

78,994

 Restructuring expense 

9,976

(9,976)

 Impairment loss 

715,220

(715,220)

 Transaction expense, net 

627

(627)

 Total operating expenses 

1,777,299

(88,074)

(725,196)

(627)

963,402

 Operating (loss) income 

(556,098)

87,892

725,196

627

257,617

 Foreign exchange loss, net 

(117,526)

117,526

 Other expense, net 

(9,802)

(84)

9,703

(183)

 Interest expense, net 

(110,805)

610

(110,195)

 Total non-operating expenses 

(238,133)

526

117,526

9,703

(110,378)

 (Loss) income before (benefit from) provision for income taxes 

(794,231)

88,418

117,526

725,196

10,330

147,239

 (Benefit from) provision for income taxes (a) 

(19,824)

30,834

26,056

2,998

(3,230)

36,834

 Net (loss) income 

(774,407)

57,584

91,470

722,198

13,560

110,405

 Less: Net income attributable to non-controlling interests 

29,207

26

29,233

 Net (loss) income attributable to IGT PLC 

(803,614)

57,558

91,470

722,198

13,560

81,172

 Net (loss) income per common share – diluted 

(3.95)

0.40

 Weighted-average shares – diluted (b)  

203,489

203,689

(a) 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 

 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 

September 2017

Impairment/

Transaction

September 2017

As

Purchase

Foreign

Restructuring

and Refinancing

As

Reported

Accounting

Exchange

Expense

Expense, net

Adjusted

 Total revenue 

3,593,289

(540)

3,592,749

 Cost of services 

1,866,281

(117,658)

1,748,623

 Cost of product sales 

403,056

(77,261)

325,795

 Selling, general and administrative 

607,571

(90,277)

517,294

 Research and development 

242,142

(426)

241,716

 Restructuring expense 

30,706

(30,706)

 Impairment loss 

715,220

(715,220)

 Transaction income, net 

(26,682)

26,682

 Total operating expenses 

3,838,294

(285,622)

(745,926)

26,682

2,833,428

 Operating (loss) income 

(245,005)

285,082

745,926

(26,682)

759,321

 Foreign exchange loss, net 

(384,749)

384,749

 Other (expense) income, net 

(33,247)

1,567

35,428

3,748

 Interest expense, net 

(336,502)

2,415

(334,087)

 Total non-operating expenses 

(754,498)

3,982

384,749

35,428

(330,339)

 (Loss) income before provision for income taxes 

(999,503)

289,064

384,749

745,926

8,746

428,982

 Provision for income taxes (a) 

53,932

101,066

87,152

9,132

(88,159)

163,123

 Net (loss) income 

(1,053,435)

187,998

297,597

736,794

96,905

265,859

 Less: Net income attributable to non-controlling interests 

94,870

77

94,947

 Net (loss) income attributable to IGT PLC 

(1,148,305)

187,921

297,597

736,794

96,905

170,912

 Net (loss) income per common share – diluted 

(5.66)

0.84

 Weighted-average shares – diluted (b) 

203,002

203,303

(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 

 Condensed Consolidated Statement of Operations 

 Reconciliation of Non-GAAP Financial Measures 

 ($ and shares in thousands, except per share data) 

Adjustments

Q3 2016

Impairment/

Transaction

Q3 2016

As

Purchase

Foreign

Restructuring

(Income)

As

Reported

Accounting

Exchange

Expense

Expense

Adjusted

 Total revenue 

1,265,650

376

1,266,026

 Cost of services 

625,235

(46,222)

579,013

 Cost of sales 

136,702

(29,740)

106,962

 Selling, general and administrative 

242,510

(35,254)

207,256

 Research and development 

87,354

(465)

86,889

 Restructuring expense 

5,658

(5,658)

 Impairment loss 

4,230

(4,230)

 Transaction expense, net 

129

(129)

 Total operating expenses 

1,101,818

(111,681)

(9,888)

(129)

980,120

 Operating income 

163,832

112,057

9,888

129

285,906

 Foreign exchange loss, net 

(21,143)

21,143

 Other income, net 

2,907

(211)

2,696

 Interest expense, net 

(114,378)

2,073

(112,305)

 Total non-operating expenses 

(132,614)

1,862

21,143

(109,609)

 Income before provision for income taxes 

31,218

113,919

21,143

9,888

129

176,297

 Provision for income taxes (a) 

12,812

40,437

9,857

2,538

40

65,684

 Net income 

18,406

73,482

11,286

7,350

89

110,613

 Less: Net income attributable to non-controlling interests 

20,309

26

20,335

 Net (loss) income attributable to IGT PLC 

(1,903)

73,456

11,286

7,350

89

90,278

 Net (loss) income per common share – diluted 

(0.01)

0.45

 Weighted-average shares – diluted 

202,029

202,606

 (a) Provision for 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 

September 2016

Impairment/

September 2016

As

Purchase

Foreign

Restructuring

Transaction

As

Reported

Accounting

Exchange

Expense

Expense

Adjusted

 Total revenue 

3,832,680

1,332

3,834,012

 Cost of services 

1,911,830

(137,366)

1,774,464

 Cost of sales 

403,118

(89,091)

314,027

 Selling, general and administrative 

709,277

(104,857)

604,420

 Research and development 

256,349

(1,459)

254,890

 Restructuring expense 

21,514

(21,514)

 Impairment loss 

6,582

(6,582)

 Transaction expense, net 

1,560

(1,560)

 Total operating expenses 

3,310,230

(332,773)

(28,096)

(1,560)

2,947,801

 Operating income 

522,450

334,105

28,096

1,560

886,211

 Foreign exchange loss, net 

(94,547)

94,547

 Other expense, net 

(4,994)

3,881

(1,113)

 Interest expense, net 

(343,461)

6,147

(337,314)

 Total non-operating expenses 

(443,002)

10,028

94,547

(338,427)

 Income before provision for income taxes 

79,448

344,133

94,547

28,096

1,560

547,784

 Provision for income taxes (a) 

64,593

122,338

23,431

7,718

302

218,382

 Net income 

14,855

221,795

71,116

20,378

1,258

329,402

 Less: Net income attributable to non-controlling interests 

36,836

76

36,912

 Net (loss) income attributable to IGT PLC 

(21,981)

221,719

71,116

20,378

1,258

292,490

 Net (loss) income per common share – diluted 

(0.11)

1.45

 Weighted-average shares – diluted 

201,238

201,901

 (a) Provision for income taxes was determined based on the statutory tax rate in effect in the respective jurisdiction where the adjustment originated. 

International Game Technology PLC

Adjusted EBITDA and Free Cash Flow

Reconciliations of Non-GAAP Financial Measures

($ thousands)

For the three months ended

September 30,

2017

2016

Net (loss) income

(774,407)

18,406

(Benefit from) provision for income taxes

(19,824)

12,812

Non-operating expenses

238,133

132,614

Impairment loss

715,220

4,230

Depreciation 

103,182

94,403

Amortization

99,562

124,089

Amortization of upfront payments to customers

54,279

29,982

Restructuring expense

9,976

5,658

Stock-based compensation expense

1,829

7,468

Transaction expense, net

627

129

Bad debt expense

4

Non-cash purchase accounting (excluding D&A)

(126)

67

Adjusted EBITDA

428,455

429,858

Cash flows from operating activities

57,729

97,190

Capital expenditures

(181,579)

(151,865)

Free Cash Flow

(123,850)

(54,675)

For the nine months ended

September 30,

2017

2016

Net (loss) income

(1,053,435)

14,855

Provision for income taxes

53,932

64,593

Non-operating expenses

754,498

443,002

Impairment loss

715,220

6,582

Amortization

317,989

377,163

Depreciation 

289,088

293,284

Amortization of upfront payments to customers

155,318

85,160

Restructuring expense

30,706

21,514

Stock-based compensation expense

5,102

24,502

Non-cash purchase accounting (excluding D&A)

(513)

921

Bad debt recovery

(17,858)

Transaction (income) expense, net

(26,682)

1,560

Adjusted EBITDA

1,223,365

1,333,136

Cash flows from operating activities

600,953

620,997

Capital expenditures

(552,169)

(371,497)

Upfront payments to customers

(185,368)

(390,390)

Free Cash Flow

(136,584)

(140,890)

International Game Technology PLC Segment Performance

Revenue Detail 

($ millions)

INTERNATIONAL GAME TECHNOLOGY PLC

Quarter Change

2016

2017

Percentage

Constant FX

Q3 

Q3 

Q3

Q3

Gaming

Total Revenue

644

611

-5.1%

-7.1%

Gaming Services

489

443

-9.4%

-11.7%

Terminal 

322

319

-1.1%

-3.8%

Social (DDI)

66

0

-100.0%

-100.0%

Other

101

124

23.1%

20.8%

Product Sales

155

168

8.6%

7.4%

Terminal 

108

98

-9.7%

-10.7%

Other

47

70

50.8%

49.5%

Lottery

Total Revenue

545

521

-4.4%

-6.0%

Lottery Services

523

487

-6.9%

-8.6%

FM/Concessions

436

448

2.7%

-0.4%

LMA

59

34

-42.9%

-42.9%

Other Services

28

5

-81.5%

-63.1%

Product Sales

22

34

55.3%

55.9%

Terminal 

2

1

-63.2%

-63.2%

Systems/Other

20

34

65.2%

65.8%

Other

Total Revenue

77

89

16.1%

10.7%

Service Revenue

77

84

8.6%

3.2%

Product Sales

(0)

6

NM

NM

Consolidated

Revenue

1,266

1,221

-3.5%

-5.5%

Operating Income:

Segment Total

338

305

-9.6%

-11.3%

Purchase Accounting

(112)

(802)

615.6%

615.6%

Corporate Support

(62)

(59)

-3.9%

-5.6%

Total

164

(556)

-439.4%

-442.2%

NORTH AMERICA GAMING & INTERACTIVE

Quarter Change

2016

2017

Percentage

Constant FX

Q3 

Q3 

Q3

Q3

Gaming

Total Revenue

317

262

-17.5%

-17.7%

Gaming Services

241

171

-29.1%

-29.2%

Terminal 

133

123

-8.0%

-8.2%

Social (DDI)

66

0

-100.0%

-100.0%

Other

42

48

14.9%

14.8%

Product Sales

76

91

19.7%

19.1%

Terminal 

51

47

-9.3%

-9.5%

Other

24

44

80.5%

79.2%

Total

Revenue

317

262

-17.5%

-17.7%

Operating Income

68

65

-4.1%

-2.4%

NORTH AMERICA LOTTERY

Quarter Change

2016

2017

Percentage

Constant FX

Q3 

Q3 

Q3

Q3

Gaming

Total Revenue

37

48

29.7%

28.9%

Gaming Services

37

40

8.1%

7.3%

Terminal 

25

25

0.3%

0.3%

Social (DDI)

0

0

0.0%

0.0%

Other

12

14

25.2%

22.5%

Product Sales

0

8

NM

NM

Terminal 

0

6

0.0%

0.0%

Other

0

2

NM

NM

Lottery

Total Revenue

271

259

-4.1%

-4.2%

Lottery Services

253

237

-6.1%

-6.1%

FM/Concessions

163

171

4.7%

4.7%

LMA

59

34

-42.9%

-42.9%

Other Services

31

33

6.7%

6.7%

Product Sales

18

22

24.1%

22.9%

Terminal 

2

1

-63.2%

-63.2%

Systems/Other

16

22

33.2%

31.9%

Total

Revenue

307

307

-0.1%

-0.2%

Operating Income

85

75

-11.6%

-11.6%

INTERNATIONAL

Quarter Change

2016

2017

Percentage

Constant FX

Q3 

Q3 

Q3

Q3

Gaming

Total Revenue

122

128

4.8%

2.9%

Gaming Services

43

59

36.3%

34.0%

Terminal 

12

14

10.9%

11.2%

Social (DDI)

0

0

0.0%

0.0%

Other

31

45

46.6%

43.3%

Product Sales

79

69

-12.4%

-14.2%

Terminal 

57

45

-19.9%

-21.8%

Other

22

24

6.8%

5.4%

Lottery

Total Revenue

75

82

8.9%

11.0%

Lottery Services

71

70

-1.6%

0.1%

FM/Concessions

51

48

-5.5%

-7.9%

LMA

0

0

0.0%

0.0%

Other Services

20

22

8.3%

20.3%

Product Sales

4

12

191.9%

200.1%

Terminal 

0

0

0.0%

0.0%

Systems/Other

4

12

191.9%

200.1%

Other

Total Revenue

18

24

31.9%

28.9%

Service Revenue

18

18

-0.4%

-3.2%

Product Sales

(0)

6

NM

NM

Total

Revenue

215

234

8.5%

7.9%

Operating Income

38

40

3.8%

7.0%

ITALY

Quarter Change

2016

2017

Percentage

Constant FX

Q3 

Q3 

Q3

Q3

Gaming

Total Revenue

168

173

3.1%

-2.6%

Gaming Services

168

173

3.1%

-2.6%

Terminal 

151

157

3.8%

-1.9%

Social (DDI)

0

0

0.0%

0.0%

Other

16

16

-3.7%

-9.0%

Product Sales

0

0

5.7%

0.3%

Terminal 

0

0

-100.0%

-100.0%

Other

0

0

7.0%

1.5%

Lottery

Total Revenue

199

180

-9.9%

-14.8%

Lottery Services

199

180

-9.9%

-14.8%

FM/Concessions

222

229

3.2%

-2.5%

LMA

0

0

0.0%

0.0%

Other Services

(23)

(50)

115.8%

103.9%

Product Sales

0

0

0.0%

0.0%

Terminal 

0

0

0.0%

0.0%

Systems/Other

0

0

0.0%

0.0%

Other

Total Revenue

59

66

11.3%

5.2%

Service Revenue

59

66

11.3%

5.2%

Product Sales

0

0

0.0%

0.0%

Total

Revenue

426

418

-1.8%

-7.2%

Operating Income

147

126

-14.5%

-20.0%

Consolidated Key Performance Indicators (KPIs)

Third Quarter

Period Ended September 30

2017

2016

% change 

Installed base (end of period)

   Casino

35,946

34,159

5.2%

   VLT – Government Sponsored (ex-Italy)

16,794

15,594

7.7%

   VLT – Italy Supplier (B2B)

8,752

8,464

3.4%

   Total installed base

61,492

58,217

5.6%

   Yield (average revenue per unit per day – $0.00)

29.07

32.27

-9.9%

   Additional Italian Network Details:

   VLT – Operator (B2C)

10,958

10,930

0.3%

   AWP

59,084

58,069

1.7%

Machine units shipped

   New/Expansion

905

2,315

-60.9%

   Replacement 

5,501

6,665

-17.5%

   Total machines shipped

6,406

8,980

-28.7%

Global lottery same-store revenue growth

   Instants & draw games

4.2%

   Multistate Jackpots

24.3%

   Total lottery same-store revenue growth (ex-Italy)

6.8%

   Italy lottery revenue growth

-14.9%

North America KPIs

Third Quarter

Period Ended September 30

2017

2016

% change 

Installed base (end of period)

    Casino

22,924

24,163

-5.1%

    VLT – Government Sponsored

15,225

15,322

-0.6%

   Total installed base

38,149

39,485

-3.4%

Machine units shipped

   New/Expansion

729

2,017

-63.9%

   Replacement 

2,868

3,221

-11.0%

   Total machines shipped

3,597

5,238

-31.3%

Lottery same-store revenue growth

   Instants & draw games

6.3%

   Multistate Jackpots

26.4%

   Total lottery same-store revenue growth

9.4%

International KPIs

Third Quarter

Period Ended September 30

2017

2016

% change 

Installed base (end of period)

    Casino

13,022

9,996

30.3%

    VLT – Government Sponsored

1,569

272

476.8%

   Total installed base

14,591

10,268

42.1%

Machine units shipped

   New/Expansion

176

298

-40.9%

   Replacement 

2,633

3,444

-23.5%

   Total machines shipped

2,809

3,742

-24.9%

Lottery same-store revenue growth

   Instants & draw games

-1.8%

   Multistate Jackpots

5.8%

   Total lottery same-store revenue growth

-1.4%

Italy KPIs

Third Quarter

Period Ended September 30

2017

2016

% change 

(In € millions, except machines)

Lottery

Lotto wagers

1,815

1,967

-7.7%

   10eLotto

1,261

1,094

15.3%

   Core

494

550

-10.1%

   Late Numbers

60

324

-81.6%

Scratch & Win Wagers

2,198

2,091

5.1%

Italy lottery revenue growth

-14.9%

Gaming

Installed base (end of period)

   VLT – Operator (B2C)

10,958

10,930

0.3%

   VLT – Supplier (B2B)

8,752

8,464

3.4%

   AWP

59,084

58,069

1.7%

   Total Installed Base

78,794

77,463

1.7%

Wagers

   VLT – Operator (B2C)

1,329

1,309

1.5%

   AWP

948

986

-3.9%

   Interactive Wagers (Gaming)

404

393

2.8%

Other

   Sports Betting Wagers1

204

178

14.6%

   Sports Betting Payout (%)1

83.3%

82.1%

1.1 pp

1Includes Virtual Wagers and Pools & Horses

View original content with multimedia:http://www.prnewswire.com/news-releases/international-game-technology-plc-reports-third-quarter-2017-results-300555088.html

SOURCE International Game Technology PLC

Related Links

http://www.igt.com

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