International Game Technology PLC Reports Second Quarter 2016 Results

International Game Technology PLC Reports Second Quarter 2016 Results

– Net income of $73 million; adjusted Net income of $87 million
– Adjusted EBITDA rose 4% to $443 million on strong service revenues in Italy and North America
– Continued expansion in Lottery, resilience in Gaming
– Stable net debt despite initial Italian Lotto concession payment

LONDON, July 28, 2016 /PRNewswire/ — International Game Technology PLC (“IGT”) (NYSE:IGT) today reported financial results for the second quarter and six months ended June 30, 2016. 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.

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...

“Robust growth in our global lottery operations, notably in Italy and North America, and the resilience of our global gaming business are the key takeaways from our second quarter results,” said Marco Sala, CEO of IGT. “Service revenues, which account for the bulk of our business and are mostly supported by long-term contracts, rose a solid 6% at constant currency in the period. We are making good progress implementing our strategy of developing innovative content and technology that we can leverage across gaming platforms and around the world. We look forward to showcasing the full scope of our new gaming and lottery offerings at high-profile trade shows later this fall.”

“This is our third consecutive quarter of year-over-year adjusted EBITDA growth,” said Alberto Fornaro, CFO of IGT. “A solid increase in service revenue, additional synergy savings and disciplined operational management all supported significant operating cash flow generation during the quarter. As a result, we maintained a stable net debt and leverage profile in the period when we paid the largest installment of the upfront Italian Lotto concession payment.”

Summary of Consolidated Second Quarter 2016 Financial Results

Quarter Ended June 30, Change Constant
Currency
Change 
2016 2015 (%) (%)
(In $ millions, unless otherwise noted)
Revenue 1,285 1,274 1% 1%
Operating Income 171 116 48% 48%
Net income (loss) per diluted share 0.36 (0.59) NM
Net debt 7,830 8,384 -7%
Adjusted EBITDA 443 427 4% 4%
Adjusted Operating Income 290 283 2% 2%
Adjusted net income per diluted share 0.43 0.38 13%
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 2016 are calculated using the same foreign exchange rates as the corresponding 2015 period.

Overview of Consolidated Second Quarter Results

Consolidated revenue grew 1% to $1,285 million from $1,274 million in the second quarter of 2015. Revenue growth primarily reflects strong lottery performance, particularly in Italy and North America. Global lottery same-store revenue, excluding Italy, increased 6% during the second quarter while Italy lottery wagers increased 8%. Gaming service revenue grew 5% during the second quarter, primarily on increased software contribution that was partially offset by a lower global installed base. Product sales declined on a challenging comparison with the prior year given significant lottery product sales in South Africa and large Canada video lottery terminal (“VLT”) sales in 2015. The Company shipped 8,152 gaming machines worldwide during the second quarter.

Operating income grew 48% to $171 million from $116 million in the second quarter of 2015 driven by revenue growth, synergy savings and lower transaction-related expenses. Adjusted operating income grew 2% to $290 million from $283 million in the second quarter of 2015 as revenue growth and synergies were partially offset by higher operating expenses.

Adjusted EBITDA of $443 million was 4% higher than the second quarter of 2015 driven by the growth in service revenue.

Interest expense was $118 million compared to $122 million in the prior-year period.

Net income attributable to IGT was $73 million in the second quarter of 2016. On an adjusted basis, net income attributable to IGT rose 14% to $87 million. The Company reported net income per diluted share of $0.36 and earned $0.43 per diluted share on an adjusted basis.

Cash from operations was $524 million in the first half of the year and capital expenditures were $220 million. In addition, the Company made the first of three upfront installment payments for the new Lotto concession in Italy during the second quarter.

Cash and cash equivalents were $390 million as of June 30, 2016, compared to $627 million as of December 31, 2015. Consolidated shareholders’ equity totaled $3,409 million and net debt was $7,830 million as of June 30, 2016.

Operating Segment Review

North America Gaming & Interactive   

North America Gaming & Interactive revenue was $350 million compared to $353 million in the second quarter of 2015.

Service revenue was $246 million, a 4% increase over $237 million in the prior-year period as higher software revenue offset a decline in the installed base. DoubleDown revenue was down modestly from the prior year.

Product sales were $104 million compared to $116 million in the second quarter of 2015, primarily due to lower machine unit volume that was partially offset by higher systems sales. The segment shipped 5,163 units compared to 6,218 units in the second quarter of 2015, which included large Canada VLT sales.

Operating income for North America Gaming & Interactive was $87 million compared to $96 million in the second quarter of 2015. The decline was largely attributed to lower revenue from terminal sales and incremental investments to support the Company’s Gaming turnaround efforts.

North America Lottery

North America Lottery revenue was $286 million in the second quarter of 2016, 6% higher than the $270 million reported in the second quarter of 2015.

Service revenue of $267 million was 6% higher than the prior-year period, reflecting 7.3% same-store revenue growth. The same-store revenue growth was broad-based and supported by continued strength in Jackpot games and Instant tickets. Product sales were $19 million in the second quarter of 2016, compared to $17 million in the prior-year period.

Operating income for North America Lottery rose 31% to $62 million reflecting the strong operating leverage profile of the business and favorable product mix.

International

International revenue was $207 million compared to $247 million in the second quarter of 2015. At constant currency, International revenue declined 12% from the prior year, which included large lottery product sales in South Africa.

International lottery service revenue of $70 million was 10% higher than the prior-year period at constant currency. Same-store revenue growth of 2.2% was supported by strength in Latin America and Eastern Europe, partially offset by weakness in the United Kingdom. Lottery service revenue also benefitted from a higher effective rate in the period. Lottery product sales were below the prior-year period, which included large terminal and systems sales in South Africa.

International gaming service revenue was $46 million compared to $50 million in the second quarter of 2015. At constant currency, International gaming service revenue was flat, with EMEA performance offsetting a lower Latin America installed base. Revenue from gaming product sales declined from the prior-year period. The segment shipped a total of 2,989 gaming machines during the second quarter of 2016 compared to 3,929 units in the prior-year period, which benefitted from higher sales of new and expansion units.

International operating income was $28 million compared to $47 million in the second quarter of 2015. Operating income declined on lower product sales and adverse foreign exchange impact.

Italy

Italy revenue was $443 million, 6% higher than the second quarter of 2015.

Total Lotto wagers in the quarter were €2,056 million, a 19% increase over the prior-year period, when wagers had already posted 11% growth. Strong Lotto performance was achieved with double-digit expansion for 10eLotto and a significant contribution from late numbers. Excluding late numbers, Lotto wagers increased 7% over the same period last year. Instant-ticket wagers were flat at €2,200 million.

Machine gaming service revenue increased 6% on higher wagers per machine and lower return to player. The strength in revenues was partially offset by lower installed units and higher Stability Law taxes.

Operating income for the Italy segment was $161 million, 14% higher than the second quarter of 2015. The increase in operating income was mainly attributable to strong lottery and gaming performance, a shift in timing of certain marketing expenses, and a multi-year value-added tax (“VAT”) credit. These benefits were partially offset by higher Stability Law taxes.

Other Developments

The Company entered into an amendment agreement with respect to its $1.8 billion and €1.05 billion multicurrency revolving credit facilities pursuant to which the maturity date was extended from November 2019 to July 2021, and the maximum leverage ratio was increased by 0.25x through the third quarter of 2019. The amendment reflects advantageous market conditions that provide the Company with substantial financial flexibility for the next several years.

Outlook

The Company continues to expect adjusted EBITDA of $1,740-$1,790 million for the full year 2016 period. Capital expenditures excluding upfront Lotto concession payments are now expected to be $550-$580 million, which includes Lotto-related infrastructure upgrades. This compares to previous guidance of $575-$625 million in capital expenditures, which did not include an estimated $35 million in Lotto-related infrastructure investments. The 2016 portion of the Lotto-related, upfront concession payments is €600 million. Net debt is still expected to be $7,700-$7,900 million at the end of 2016.

Adjusted EBITDA is a non-GAAP measure. 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.

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 2016 results. Listeners may access a live webcast of the conference call along with accompanying slides under “News, Events and 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 7136 2051 for participants in the United Kingdom and +1 877 280 2296 for listeners outside the United Kingdom. The conference ID/confirmation code is 5641427. A telephone replay of the call will be available for one week at +44 (0) 20 3427 0598 or +1 866 932 5017 using the conference ID/confirmation code 5641427.

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 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 International Game Technology PLC 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 International Game Technology PLC’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 (Nevada) 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; unanticipated costs of integration of International Game Technology (Nevada) and GTECH S.p.A.; the possibility thatInternational Game Technology PLC will be unable to pay future dividends to shareholders or that the amount of such dividends may be less than anticipated; the possibility that International Game Technology PLC 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 International Game Technology PLC operates; International Game Technology PLC’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; International Game Technology PLC’sability 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 International Game Technology PLC, including as a consequence of the announced withdrawal of the UK from the EU; international, national or local economic, social or political conditions that could adversely affectInternational Game Technology PLC or its customers; conditions in the credit markets; changes in the top management team; risks associated with assumptions International Game Technology PLC makes in connection with its critical accounting estimates; the resolution of pending and potential future legal, regulatory or tax proceedings and investigations; and International Game Technology PLC’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 International Game Technology PLC’s business, including those described inInternational Game Technology PLC’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 International Game Technology PLC’s website at www.IGT.com. Except as required under applicable law, International Game Technology PLC does not assume any obligation to update the forward-looking statements. Nothing in this presentation is intended, or is to be construed, as a profit forecast or to be interpreted to mean that earnings per International Game Technology PLC share for the current or any future financial years will necessarily match or exceed the historical published earnings per International Game Technology PLC share, as applicable. All forward-looking statements contained in this presentation 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 their 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
Consolidated Statements of Operations
($ and shares in thousands, except per share data)
Unaudited
 For the three months ended
 June 30,
2016 2015
Service revenue 1,089,954 1,034,693
Product sales 195,515 239,591
Total revenue 1,285,469 1,274,284
Cost of services 637,832 616,648
Cost of sales 144,640 177,244
Selling, general and administrative 239,241 232,216
Research and development 84,288 84,514
Restructuring expense 6,438 15,818
Impairment loss 2,352
Transaction (income) expense, net (43) 32,344
Total operating expenses 1,114,748 1,158,784
Operating income 170,721 115,500
Interest income 2,754 7,506
Equity income, net 414 243
Other income 3,474 2,341
Other expense (4,463) (1,563)
Foreign exchange gain (loss), net 88,152 (102,345)
Interest expense (117,715) (122,418)
Total non-operating expenses (27,384) (216,236)
Income (loss) before provision for income taxes 143,337 (100,736)
Provision for income taxes 60,439 11,599
Net income (loss) 82,898 (112,335)
Less: Net income attributable to non-controlling interests 10,202 4,555
Net income (loss) attributable to IGT PLC 72,696 (116,890)
Net income (loss) attributable to IGT PLC per common share – basic 0.36 (0.59)
Net income (loss) attributable to IGT PLC per common share – diluted 0.36 (0.59)
Weighted-average shares – basic 201,229 197,149
Weighted-average shares – diluted 201,565 197,149

 

International Game Technology PLC
Consolidated Statements of Operations
($ and shares in thousands, except per share data)
Unaudited
 For the six months ended
 June 30,
2016 2015
Service revenue 2,225,075 1,824,955
Product sales 341,955 297,571
Total revenue 2,567,030 2,122,526
Cost of services 1,286,595 1,123,383
Cost of sales 266,416 212,342
Selling, general and administrative 466,767 327,767
Research and development 168,995 106,985
Restructuring expense 15,856 30,299
Impairment loss 2,352
Transaction expense, net 1,431 43,394
Total operating expenses 2,208,412 1,844,170
Operating income 358,618 278,356
Interest income 7,047 8,119
Equity income, net 414 15
Other income 4,700 2,955
Other expense (13,015) (122,684)
Foreign exchange loss, net (73,404) (95,341)
Interest expense (236,130) (216,806)
Total non-operating expenses (310,388) (423,742)
Income (loss) before provision for income taxes 48,230 (145,386)
Provision for income taxes 51,781 2,540
Net loss (3,551) (147,926)
Less: Net income attributable to non-controlling interests 16,527 8,281
Net loss attributable to IGT PLC (20,078) (156,207)
Net loss attributable to IGT PLC per common share – basic (0.10) (0.84)
Net loss attributable to IGT PLC per common share – diluted (0.10) (0.84)
Weighted-average shares – basic 200,840 185,007
Weighted-average shares – diluted 200,840 185,007

 

International Game Technology PLC
Condensed Consolidated Balance Sheets
($ thousands)
Unaudited
 June 30,  December 31,
2016 2015
ASSETS
Current assets:
Cash and cash equivalents 390,012 627,484
Restricted cash and investments 137,614 169,101
Trade and other receivables, net 930,748 959,592
Inventories 284,096 269,982
Other current assets 436,475 423,701
Income taxes receivable 30,906 35,514
Total current assets 2,209,851 2,485,374
Systems, equipment and other assets related to contracts, net 1,123,496 1,127,518
Property, plant and equipment, net 343,005 349,677
Goodwill, net 6,838,652 6,830,499
Intangible assets, net 3,112,165 3,335,633
Other non-current assets 1,734,795 937,917
Deferred income taxes 47,202 48,074
Total non-current assets 13,199,315 12,629,318
Total Assets 15,409,166 15,114,692
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable 1,014,140 1,057,860
Other current liabilities 1,318,684 922,586
Current portion of long-term debt 163 160
Income taxes payable 124,841 30,020
Total current liabilities 2,457,828 2,010,626
Long-term debt, less current portion 8,219,711 8,334,013
Deferred income taxes 861,520 941,418
Other non-current liabilities 461,091 462,493
Total non-current liabilities 9,542,322 9,737,924
Total Liabilities 12,000,150 11,748,550
Commitments and contingencies
Shareholders’ equity 3,409,016 3,366,142
Total liabilities and shareholders’ equity 15,409,166 15,114,692

 

International Game Technology PLC
Consolidated Statements of Cash Flows
($ thousands)
Unaudited
 For the six months ended
 June 30,
2016 2015
Operating activities
Net loss (3,551) (147,926)
Adjustments for:
Amortization 253,074 152,135
Depreciation 198,881 164,543
Foreign exchange loss, net 73,404 95,341
Amortization of upfront payments to customers 55,178 53,876
Stock-based compensation expense 17,034 20,970
Debt issuance cost amortization 9,086 34,168
Loss on early extinguishment of debt 73,806
Write-off of bridge facility costs 35,061
Other, net 21,598 4,175
Cash flows before changes in operating assets and liabilities 624,704 486,149
Changes in operating assets and liabilities:
Trade and other receivables 35,133 (2,266)
Inventories (6,271) (556)
Accounts payable (68,596) (145,140)
Other assets and liabilities (61,163) (121,102)
Net cash flows from operating activities 523,807 217,085
Investing activities
Upfront payments to customers (390,390)
Capital expenditures (219,632) (167,092)
Purchases of jackpot annuity investments (1,446) (786)
Proceeds from jackpot annuity investments 11,625 12,184
Proceeds from sale of assets 49,394 7,136
Acquisition of IGT, net of cash acquired (3,241,415)
Other 2,825 3,927
Net cash flows used in investing activities (547,624) (3,386,046)
Financing activities
Principal payments on long-term debt (236,669) (2,300,504)
Dividends paid (80,340) (129,524)
Return of capital – non-controlling interest (35,407) (30,281)
Dividends paid – non-controlling interest (27,552) (27,205)
Net proceeds from (payments on) financial liabilities 4,510 (54,493)
Capital contribution non-controlling interest 151,359
Proceeds from issuance of long-term debt 6,599,368
Payments in connection with note consents (29,022)
Payments on bridge facility (51,409)
Debt issuance costs paid (78,878)
Payments in connection with the early extinguishment of debt (79,526)
Payments to withdrawing shareholders (407,759)
Other (2,288) 24,313
Net cash flows (used in) provided by financing activities (226,387) 3,435,080
Net (decrease) increase in cash and cash equivalents (250,204) 266,119
Effect of exchange rate changes on cash 12,732 (26,132)
Cash and cash equivalents at the beginning of the period 627,484 317,106
Cash and cash equivalents at the end of the period 390,012 557,093
Supplemental Cash Flow Information:
Interest paid (256,331) (162,732)
Income taxes paid (38,742) (27,785)

 

International Game Technology PLC
Net Debt
($ thousands)
June 30, December 31,
2016 2015
Long-term debt, less current portion
6.250% Senior Secured Notes due 2022 1,502,024 1,468,875
6.500% Senior Secured Notes due 2025 1,084,882 1,084,249
4.750% Senior Secured Notes due 2023 931,215 912,418
4.125% Senior Secured Notes due 2020 768,191 752,212
5.625% Senior Secured Notes due 2020 593,087 592,245
Senior Secured Notes 4,879,399 4,809,999
6.625% Senior Secured Notes due 2018 546,834 533,915
4.750% Senior Secured Notes due 2020 533,495 520,649
Legacy GTECH Notes 1,080,329 1,054,564
7.500% Senior Secured Notes due 2019 526,029 530,009
5.500% Senior Secured Notes due 2020 126,570 126,833
5.350% Senior Secured Notes due 2023 61,243 61,303
Legacy IGT Notes 713,842 718,145
Term Loan Facilities due 2019 884,607 866,785
Revolving Credit Facilities due 2019 661,494 834,968
Capital Securities 49,472
Other 40 80
Long-term debt, less current portion 8,219,711 8,334,013
Current portion of long-term debt  163 160
Total debt 8,219,874 8,334,173
Cash and cash equivalents 390,012 627,484
Net debt 7,829,862 7,706,689

 

 International Game Technology PLC 
 Consolidated Statement of Operations 
 Reconciliation of Non-GAAP Financial Measures 
 ($ and shares in thousands, except share amounts) 
Adjustments
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 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) expense, 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 
 Consolidated Statement of Operations 
 Reconciliation of Non-GAAP Financial Measures 
 ($ and shares in thousands, except share amounts) 
Adjustments
Q2 2015 Transaction Q2 2015
As Purchase Foreign Restructuring and Refinancing As
Reported Accounting Exchange Expense Expense Adjusted
 Total revenue  1,274,284 11,826 1,286,110
 Cost of services 616,648 (40,446) 576,202
 Cost of sales 177,244 (32,213) 145,031
 Selling, general and administrative 232,216 (34,579) 197,637
 Research and development 84,514 (561) 83,953
 Restructuring expense 15,818 (15,818)
 Transaction expense, net 32,344 (32,344)
 Total operating expenses  1,158,784 (107,799) (15,818) (32,344) 1,002,823
 Operating income  115,500 119,625 15,818 32,344 283,287
 Foreign exchange loss, net (102,345) 102,345
 Other income, net 1,021 6,454 8 7,483
 Interest expense, net (114,912) (33) (114,945)
 Total non-operating expenses  (216,236) 6,421 102,345 8 (107,462)
 (Loss) income before provision for income taxes  (100,736) 126,046 102,345 15,818 32,352 175,825
 Provision for income taxes (a) 11,599 45,387 23,482 4,873 10,125 95,466
 Net (loss) income  (112,335) 80,659 78,863 10,945 22,227 80,359
 Less: Net income attributable to non-controlling interests 4,555 26 4,581
 Net (loss) income attributable to IGT PLC  (116,890) 80,633 78,863 10,945 22,227 75,778
 Net (loss) income per common share – diluted  (0.59) 0.38
 Weighted-average shares – diluted  197,149 198,612
 (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 
 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 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  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.

 

 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   Year to date 
June 2015 Transaction June 2015 June 2015
As Purchase Foreign Restructuring and Refinancing As Pro Forma Pro
Reported Accounting Exchange Expense Expense Adjusted Adjustments Forma
 Total revenue  2,122,526 11,648 2,134,174 399,387 2,533,561
 Cost of services 1,123,383 (56,664) 1,066,719 113,306 1,180,025
 Cost of sales 212,342 (32,228) 180,114 63,355 243,469
 Selling, general and administrative 327,767 (34,576) 293,191 134,166 427,357
 Research and development 106,985 (1,129) 105,856 62,760 168,616
 Restructuring expense 30,299 (30,299)
 Transaction expense, net 43,394 (43,394)
 Total operating expenses  1,844,170 (124,597) (30,299) (43,394) 1,645,880 373,587 2,019,467
 Operating income  278,356 136,245 30,299 43,394 488,294 25,800 514,094
 Foreign exchange loss, net (95,341) 95,341
 Other (expense) income, net (119,714) 6,250 117,252 3,788
 Interest expense, net (208,687) (20) (208,707)
 Total non-operating expenses  (423,742) 6,230 95,341 117,252 (204,919)
 (Loss) income before provision for income taxes  (145,386) 142,475 95,341 30,299 160,646 283,375
 Provision for income taxes (a) 2,540 51,146 21,556 9,182 40,600 125,024
 Net (loss) income  (147,926) 91,329 73,785 21,117 120,046 158,351
 Less: Net income attributable to non-controlling interests 8,281 51 8,332
 Net (loss) income attributable to IGT PLC  (156,207) 91,278 73,785 21,117 120,046 150,019
 Net (loss) income per common share – diluted  (0.84) 0.81
 Weighted-average shares – diluted  185,007 186,179
 (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
Adjusted EBITDA and Free Cash Flow
Reconciliations of Non-GAAP Financial Measures
($ thousands)
For the three months ended
June 30,
2016 2015
Net income (loss) 82,898 (112,335)
Provision for income taxes 60,439 11,599
Non-operating expenses 27,384 216,236
Amortization 127,578 118,763
Depreciation 100,364 92,687
Amortization of upfront payments to customers 27,769 27,033
Stock-based compensation expense 7,732 5,109
Restructuring expense 6,438 15,818
Impairment loss 2,352
Non-cash purchase accounting (excluding D&A) 224 19,372
Transaction (income) expense, net (43) 32,344
Adjusted EBITDA 443,135 426,626
Cash flows from operating activities 318,202 163,302
Capital expenditures (121,961) (95,452)
Upfront payments to customers (390,390)
Free Cash Flow (194,149) 67,850

 

International Game Technology PLC Segment Performance
Revenue Detail
($ millions)
INTERNATIONAL GAME TECHNOLOGY PLC Quarter Change
2015 2016 Percentage Constant FX
Q2  Q2  Q2 Q2
Gaming Total Revenue 670 663 -1.1% -0.4%
Gaming Services 474 495 4.5% 5.3%
Terminal 322 320 -0.7% -0.2%
Social (DDI) 73 72 -0.9% -1.0%
Other 78 102 30.7% 33.7%
Product Sales 197 168 -14.5% -13.9%
Terminal 143 106 -26.2% -25.7%
Other 54 63 16.8% 17.5%
Lottery Total Revenue 524 546 4.3% 4.6%
Lottery Services 481 519 7.9% 8.3%
FM/Concessions 424 458 7.9% 8.1%
LMA 38 39 3.4% 3.4%
Other Services 19 22 16.3% 20.5%
Product Sales 43 27 -36.4% -36.0%
Terminal 21 8 -60.2% -59.7%
Systems/Other 22 19 -13.3% -13.1%
Other Total Revenue 80 76 -5.0% -3.7%
Service Revenue 80 76 -5.0% -3.8%
Product Sales 0 0 -10.3% 31.5%
Consolidated Revenue 1,274 1,285 0.9% 1.5%
Operating Income:
Segment Total 331 338 2.2% 2.5%
Purchase Accounting (120) (111) -7.5% -7.5%
Corporate Support (96) (57) -40.6% -39.4%
Total 116 171 47.8% 47.5%

 

NORTH AMERICA GAMING & INTERACTIVE Quarter Change
2015 2016 Percentage Constant FX
Q2  Q2  Q2 Q2
Gaming Total Revenue 353 350 -1.0% -0.9%
Gaming Services 237 246 3.7% 3.7%
Terminal 140 132 -6.0% -5.8%
Social (DDI) 73 72 -0.9% -1.0%
Other 24 42 73.1% 73.2%
Product Sales 116 104 -10.5% -10.2%
Terminal 84 64 -23.9% -23.7%
Other 32 40 24.5% 24.8%
Total Revenue 353 350 -1.0% -0.9%
Operating Income 96 87 -9.0% -13.0%

 

NORTH AMERICA LOTTERY Quarter Change
2015 2016 Percentage Constant FX
Q2  Q2  Q2 Q2
Gaming Total Revenue 37 37 -0.8% 1.0%
Gaming Services 37 37 0.2% 2.0%
Terminal 25 26 3.0% 3.0%
Social (DDI) 0 0 0.0% 0.0%
Other 12 12 -5.4% 0.1%
Product Sales 0 0 -82.9% -82.9%
Terminal 0 0 -91.9% -91.9%
Other 0 0 -81.1% -81.1%
Lottery Total Revenue 233 249 7.1% 7.1%
Lottery Services 216 230 6.4% 6.4%
FM/Concessions 154 163 6.1% 6.1%
LMA 38 39 3.4% 3.4%
Other Services 25 28 13.2% 13.2%
Product Sales 17 19 15.4% 15.5%
Terminal 5 8 66.1% 66.1%
Systems/Other 12 11 -4.6% -4.5%
Total Revenue 270 286 6.0% 6.2%
Operating Income 47 62 30.9% 31.7%

 

INTERNATIONAL Quarter Change
2015 2016 Percentage Constant FX
Q2  Q2  Q2 Q2
Gaming Total Revenue 134 110 -17.8% -13.9%
Gaming Services 50 46 -8.3% 0.4%
Terminal 15 13 -16.6% 0.5%
Social (DDI) 0 0 0.0% 0.0%
Other 35 34 -4.8% 0.3%
Product Sales 84 64 -23.5% -22.5%
Terminal 59 42 -29.4% -28.5%
Other 25 22 -9.5% -8.3%
Lottery Total Revenue 94 79 -16.1% -12.1%
Lottery Services 67 70 4.4% 9.9%
FM/Concessions 51 53 3.9% 9.9%
LMA 0 0 0.0% 0.0%
Other Services 17 18 6.1% 9.8%
Product Sales 26 8 -69.0% -68.4%
Terminal 16 1 -96.3% -95.6%
Systems/Other 10 8 -23.8% -23.4%
Other Total Revenue 19 18 -4.1% 3.9%
Service Revenue 19 18 -4.0% 3.5%
Product Sales 0 0 -10.3% 31.5%
Total Revenue 247 207 -16.1% -11.8%
Operating Income 47 28 -39.1% -26.7%

 

ITALY Quarter Change
2015 2016 Percentage Constant FX
Q2  Q2  Q2 Q2
Gaming Total Revenue 157 166 5.6% 4.8%
Gaming Services 157 166 5.8% 4.9%
Terminal 142 150 5.6% 4.7%
Social (DDI) 0 0 0.0% 0.0%
Other 15 16 7.6% 6.9%
Product Sales 1 0 -48.1% -47.9%
Terminal 0 0 -100.0% -100.0%
Other 0 0 -40.2% -39.9%
Lottery Total Revenue 197 219 10.7% 9.7%
Lottery Services 197 219 10.7% 9.7%
FM/Concessions 220 242 10.1% 9.1%
LMA 0 0 0.0% 0.0%
Other Services (22) (23) 5.1% 4.2%
Product Sales 0 0
Terminal 0 0
Systems/Other 0 0
Other Total Revenue 61 58 -5.3% -6.1%
Service Revenue 61 58 -5.3% -6.1%
Product Sales 0 0 0.0%
Total Revenue 416 443 6.4% 5.5%
Operating Income 141 161 13.9% 13.0%

 

Key Performance Indicators (KPIs)
Consolidated Key Performance Indicators (KPIs)
Second Quarter
Periods Ended June 30 2016 2015 % change 
Installed base (end of period)
   Casino 33,399 35,332 -5.5%
   VLT – Government Sponsored (ex-Italy) 15,605 16,231 -3.9%
   VLT – Italy Supplier (B2B) 8,159 8,465 -3.6%
   Total installed base 57,163 60,028 -4.8%
   Yield (average revenue per unit per day – $0.00) 32.79 34.28 -4.3%
   Additional Italian Network Details:
   VLT – Operator (B2C) 10,995 10,988 0.1%
   AWP 56,300 62,156 -9.4%
Machine units shipped
   New/Expansion 1,447 2,187 -33.8%
   Replacement 6,705 7,960 -15.8%
   Total machines shipped 8,152 10,147 -19.7%
Global lottery same-store revenue growth
   Instants & draw games 3.1%
   Multistate Jackpots 31.1%
   Total lottery same-store revenue growth (ex-Italy) 6.0%
   Italy lottery revenue growth 4.9%
North America KPIs
Second Quarter
Periods Ended June 30 2016 2015 % change 
Installed base (end of period)
    Casino 24,171 25,516 -5.3%
    VLT – Government Sponsored 15,355 15,981 -3.9%
   Total installed base 39,526 41,497 -4.7%
Machine units shipped
   New/Expansion 1,277 974 31.1%
   Replacement 3,886 5,244 -25.9%
   Total machines shipped 5,163 6,218 -17.0%
DoubleDown 
   Revenue ($ Thousands) 72,354 73,010 -0.9%
   Mobile penetration 54% 47% 14.9%
   DAU (Daily Active Users) 1 1,668 1,839 -9.3%
   MAU (Monthy Active Users) 1 4,075 4,421 -7.8%
   Bookings per DAU ($0.00) 1 $   0.48 $   0.45 4.8%
Lottery same-store revenue growth
   Instants & draw games 3.1%
   Multistate Jackpots 40.1%
   Total lottery same-store revenue growth 7.3%
1As a single application with multiple games, active users equal unique users
International KPIs
Second Quarter
Periods Ended June 30 2016 2015 % change 
Installed base (end of period)
    Casino 9,228 9,816 -6.0%
    VLT – Government Sponsored 250 250 0.0%
   Total installed base 9,478 10,066 -5.8%
Machine units shipped
   New/Expansion 170 1,213 -86.0%
   Replacement 2,819 2,716 3.8%
   Total machines shipped 2,989 3,929 -23.9%
Lottery same-store revenue growth
   Instants & draw games 3.3%
   Multistate Jackpots -10.5%
   Total lottery same-store revenue growth 2.2%
Italy KPIs
Second Quarter
Periods Ended June 30 2016 2015 % change 
(In € millions, except machines)
Lottery
Lotto wagers 2,056 1,728 19.0%
   10eLotto 1,191 1,056 12.7%
   Core 542 566 -4.3%
   Late Numbers 324 106 206.5%
Scratch & Win Wagers 2,200 2,215 -0.7%
Italy lottery revenue growth 4.9%
Gaming
Installed base (end of period)
   VLT – Operator (B2C) 10,995 10,988 0.1%
   VLT – Supplier (B2B) 8,159 8,465 -3.6%
   AWP 56,300 62,156 -9.4%
   Total Installed Base 75,454 81,609 -7.5%
Wagers
   VLT – Operator (B2C) 1,324 1,306 1.4%
   AWP 1,034 1,072 -3.5%
   Interactive Wagers (Gaming) 398 414 -3.8%
Other
   Sports Betting Wagers1 206 205 0.6%
   Sports Betting Payout (%)1 86.5% 82.9% 3.6 pp
1Includes Virtual Wagers and Pools & Horses

Source: News Releases