LONDON, Nov. 21, 2016 /PRNewswire/ — International Game Technology PLC (“IGT”) (NYSE: IGT) today reported financial results for the third quarter and nine months ended September 30, 2016. Today, at 8:00 a.m. EST / 1:00 p.m. GMT / 2:00 p.m. CET, management will host a conference call and webcast to present the third quarter results; access details are provided below.
“Strong lottery performance across the world, a larger global installed base, and increased sales of gaming machines drove another quarter of solid revenue and profit expansion,” said Marco Sala, CEO of IGT. “IGT’s leadership positions in lottery and gaming machines were evident at the recent gaming and lottery trade shows. The engaging player experiences and technology solutions IGT creates are the cornerstones of our growth strategy, and we are encouraged by customer enthusiasm for our innovative new products.”
“We achieved broad-based growth across regions in the third quarter and our financial condition is strong,” said Alberto Fornaro, CFO of IGT. “Higher profitability enabled us to maintain our leverage ratio despite the significant interest and tax payments of the quarter. Based on our performance to date, we remain comfortable with our adjusted EBITDA outlook for the full year.”
Summary of Consolidated Third Quarter 2016 Financial Results
|(In $ millions, unless otherwise noted)|
|Net (loss) income per diluted share||(0.01)||0.04||NM|
|Adjusted Operating Income||286||261||9%||9%|
|Adjusted net income per diluted share||0.45||0.42||7%|
|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 Third Quarter Results
Consolidated revenue rose 5% to $1,266 million from $1,202 million in the third quarter of 2015. Revenue growth primarily reflects strong performance in the North America Lottery and Italy segments. Global lottery same-store revenue, excluding Italy, increased 6% during the third quarter while Italy lottery wagers increased 7%. Gaming service revenue was below the prior year, primarily on lower DoubleDown revenues. Product sales increased in the quarter on higher gaming machine unit demand in the North America and International segments as well as on higher International systems sales. The Company shipped 8,980 gaming machines worldwide during the third quarter.
Operating income increased 26% to $164 million from $130 million in the third quarter of 2015. Adjusted operating income grew 9% to $286 million, from $261 million, as higher lottery profits were partially offset by the timing of bad debt expense, investment in the installed base, increased global product marketing costs, and research & development spending.
Adjusted EBITDA of $430 million was 4% higher than in the third quarter of 2015, representing the fourth consecutive quarter of year-over-year growth.
Interest expense was $118 million compared to $122 million in the prior-year period.
Net loss attributable to IGT was $2 million in the third quarter of 2016, reflecting the impact of $21 million in primarily non-cash foreign exchange losses. On an adjusted basis, net income attributable to IGT rose 6% to $90 million. The Company reported net loss per diluted share of $(0.01) and earned $0.45 per diluted share on an adjusted basis.
In the first nine months of the year, cash from operations was $621 million and capital expenditures were $372 million. The Company made the first of three upfront installment payments for the new Lotto concession in Italy during the year-to-date period.
Cash and cash equivalents were $350 million as of September 30, 2016, compared to $627 million as of December 31, 2015. Consolidated shareholders’ equity totaled $3,421 million and net debt was $7,937 million as of September 30, 2016.
Operating Segment Review
North America Gaming & Interactive
North America Gaming & Interactive revenue was $317 million compared to $341 million in the third quarter of 2015.
Service revenue was $241 million compared to $267 million in the prior-year period, largely driven by fewer daily active users (“DAU”) at DoubleDown and a year-on-year decrease in the installed base. Sequentially, terminal service revenue and the installed base were relatively stable.
Product sales increased to $76 million from $73 million in the third quarter of 2015, primarily due to higher replacement unit volume. The segment shipped 5,238 units compared to 3,326 units in the prior-year period. A portion of the new and expansion unit revenue was deferred and is expected to be recognized in the fourth quarter of 2016.
Operating income for North America Gaming & Interactive was $66 million compared to $85 million in the third quarter of 2015. The decrease was largely attributed to lower revenue, as well as costs to revitalize the installed base and higher research & development spending.
North America Lottery
North America Lottery revenue was $307 million, up 22% from the third quarter of 2015. The strong growth reflects robust same-store revenue expansion as well as an incentive contribution from the New Jersey Lottery, largely driven by the record Powerball jackpot in the first quarter of 2016. Excluding the New Jersey contribution, revenue for the North America Lottery segment rose 10%.
Service revenue of $290 million was 19% higher than in the prior-year period, reflecting 6.3% same-store revenue growth and the New Jerseyincentive contribution. The same-store revenue growth was primarily driven by continued strength in multi-state Jackpot games. Product sales were $18 million in the third quarter of 2016, compared to $10 million in the prior-year period, and included higher hardware sales in California as well as increased instant ticket printing revenue.
Operating income for North America Lottery rose 70% to $85 million, reflecting the strong same-store revenue growth and the New Jersey incentive.
International revenue was $215 million in the quarter, up from $210 million in the third quarter of 2015. At constant currency, revenue for the International segment rose 5% from the prior year.
International lottery service revenue of $71 million was 8% higher than in the prior-year period at constant currency. Same-store revenue growth of 5.7% was supported by strength in Latin America and Eastern Europe, partially offset by weakness in the United Kingdom.
International gaming service revenue was $43 million compared to $50 million in the third quarter of 2015, mainly due to the exit of certain interactive operations. At constant currency, terminal service revenue grew 3% over the prior year and the installed base rose 500 units to 10,268. Revenue from gaming product sales rose 12% at constant currency, supported by the 3,742 gaming machines shipped at higher average unit prices during the third quarter of 2016 compared to 3,296 units in the prior-year period. Product sales also benefited from a large systems sale in Asia.
International operating income was $39 million compared to $37 million in the third quarter of 2015. At constant currency, operating income rose 15% on strength in lottery, improved contribution from the installed base, and higher gaming product sales.
Italy revenue was $426 million, 7% higher than in the third quarter of 2015.
Total Lotto wagers in the quarter were €1,967 million, a 17% increase over the prior-year period, reflecting a significant contribution from late numbers. Excluding late numbers, Lotto wagers increased 2% over the same period last year. Scratch & Win wagers were relatively stable at €2,091 million.
Machine gaming service revenue increased 8% over the third quarter of 2015 on improved unit productivity. The strength in service revenues was partially offset by lower installed units. Sports betting wagers increased 7% and payout was steady compared to the prior year.
Operating income for the Italy segment was $147 million, 12% higher than the third quarter of 2015. The increase in operating income was mainly attributable to strong Lotto and sports betting contribution.
The Company’s Board of Directors has declared a quarterly cash dividend of $0.20 per ordinary share. The dividend is payable on December 19, 2016to all shareholders of record as of the close of business on December 5, 2016.
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 no more than $550 million. This compares to previous capital expenditure guidance of $550-$580 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. EST / 1:00 p.m. GMT / 2:00 p.m. CET, management will host a conference call to present the third quarter 2016 results. Listeners may access a live webcast of the conference call along with accompanying slides under “News, Events & Presentations” on IGT’s Investor Relations website at www.IGT.com. A replay of the webcast will be available on the website following the live event. To listen by telephone, the dial in number is +44 (0) 20 3427 1904 for participants in the United Kingdom and +1 877 280 2296 for listeners outside the United Kingdom. The conference ID/confirmation code is 8241308. 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 8241308.
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.
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