International Game Technology PLC Reports Fourth Quarter And Full Year 2018 Results

LONDON, March 7, 2019 /PRNewswire/ -- International Game Technology PLC ("IGT") (NYSE:IGT) today reported financial results for the fourth quarter and full year ended December 31, 2018. Today, at 8:00 a.m. EST, management will host a conference call and webcast to present the fourth quarter and full year results; access details are provided below.

"Our 2018 results are in line with the improved outlook we provided in October. The year was characterized by strong global Lottery performance, resilience in Italy, and progress in North America Gaming," said Marco Sala, CEO of IGT. "We've established solid foundations to build on – securing large, long-term Lottery contracts in key markets and executing a full refresh of our gaming machine cabinet and content portfolio. These efforts will translate into improved free cash flow beginning in 2019."

"We achieved 4% Adjusted EBITDA growth on stable revenue at constant currency and scope in 2018," said Alberto Fornaro, CFO of IGT. "We managed our net debt effectively, while making large upfront payments for a key Lottery license in Italy, investing in long-term North America Lottery contracts, and returning capital to shareholders through dividends. Our outlook for 2019 Adjusted EBITDA of $1.70-$1.76 billion assumes underlying growth for our core Lottery and Gaming businesses."  

Overview of Consolidated Fourth Quarter and Full Year 2018 Results

Overview of Consolidated Fourth Quarter 2018 Results

Consolidated revenue of $1,266 million, down 4% at constant currency

• Stable Gaming and Lottery revenue
• Decline driven by Sports Betting dynamics in the prior year, including exceptionally low payout percentage in Italy and large International product sales
• $14 million negative impact from ASC 606

Adjusted EBITDA of $416 million, down 6% at constant currency

• Lower revenue
• Increased SG&A due to timing differences of certain expense accruals between years

Adjusted operating income was $218 million, a decline of 17% at constant currency

• Higher depreciation associated with recent Lottery contract wins and extensions, upgrading of Gaming installed base

Interest expense was $108 million compared to $114 million in the prior-year quarter 

Provision for income taxes was $30 million compared to a benefit of $83 million in the prior-year period

• One-time, non-cash benefit of $104 million related to U.S. tax reform in the prior year

Net loss attributable to IGT was $102 million in the quarter; Adjusted net income attributable to IGT was $48 million

• Includes non-cash, non-tax-deductible impairment charge of $119 million, reducing the carrying value of the International segment
• Underlying International growth outlook unchanged
• Charge has no impact on the Company's operations, cash flow, ability to service debt, compliance with financial covenants, or underlying liquidity

Net loss per diluted share of $0.50; Adjusted net income per diluted share of $0.24

Overview of Consolidated Full Year 2018 Results

Consolidated revenue was $4,831 million, stable at constant currency and scope

• Constant scope adjusts for the sale of Double Down Interactive, LLC in June 2017
• Underlying improvement in North America for both Gaming and Lottery
• Broad-based strength in Italy
• Lower International revenue
• $73 million negative impact from reclass of jackpot expense to contra-revenue item under ASC 606

Adjusted EBITDA of $1,737 million, up 4% at constant currency and scope  

• Stable revenue
• Optimization of R&D

Adjusted operating income was $990 million, a decline of 3% at constant currency and scope

• Higher depreciation associated with recent Lottery contract wins and extensions, upgrading of Gaming installed base

Capital Expenditures of $533 million compared to $698 million in the prior year

Cash from operations was $30 million for the full year

• Includes $878 million (gross) upfront payments for the Italy Scratch & Win license

Cash and cash equivalents were $251 million as of December 31, 2018, compared to $1,057 million as of December 31, 2017

Net debt was $7,761 million as of December 31, 2018, compared to $7,319 million as of December 31, 2017

• Increase driven by Italy Scratch & Win upfront license payments

Operating Segment Review

North America Gaming & Interactive

Revenue down slightly to $275 million compared to $281 million in the prior-year quarter

• Up $9 million, or 3%, after adjusting for $15 million jackpot expense reclass (ASC 606)
• Product sales revenue up 11% to $126 million
• 27% increase in Gaming machine units shipped and higher average selling prices
• Decline in Other product sales primarily driven by higher intellectual property revenue in the prior year
• Gaming service revenue of $147 million compared to $167 million in the prior year
• Terminal service revenue stable after adjusting for jackpot expense reclass
• Installed base increased 301 units on strength of new games and cabinets
• Yields lower on shift in jurisdictional and machine mix

Operating income of $51 million compared to $69 million in the prior-year quarter

• Increased depreciation expense
• Contribution from high-margin intellectual property revenue in the prior year

North America Lottery

Revenue increased 2% to $309 million

• Lottery service revenue up 10% to $255 million
• Significant increase in Multistate Jackpots driven by $1.5 billion Mega Millions jackpot
• 5.0% same-store revenue growth for instant tickets and draw-based games
• Lower LMA revenue (reimbursable expenses)
• Lottery product sales of $13 million compared to $30 million in prior year
• Prior year benefitted from higher lottery terminal sales and a large Canadian VLT central system sale

Operating income increased 21% to $79 million

• Significant profit flow-through on robust same-store revenue growth
• Partly offset by higher depreciation related to recent contract wins and extensions

International

Revenue of $221 million compared to $280 million in the prior-year period

• Comparisons reflect significant contract-specific milestones achieved in prior year
• Lottery service revenue of $72 million compared to $80 million in the prior year
• Same-store revenue growth of 4.4% driven by instant tickets, draw-based games, and jackpot games
• Prior-year benefit from contract milestone-driven revenue
• Lottery product sales reflect higher software sales in the prior year
• Gaming service revenue of $34 million compared to $55 million in the prior year
• Prior-year benefit from contract milestone-driven revenue
• Installed base decline includes 1,484-unit conversion sale, partly offset by an increase in Greece VLTs
• Jackpot expense reclass of $2 million
• Gaming product sales revenue stable at $94 million
• Terminal revenue impacted by lower unit shipments to Latin America and Europe
• Other product sales increased on higher software sales

Operating income of $28 million compared to $72 million in the prior-year period

• Lower revenue with less favorable mix
• Increased SG&A due to timing differences of certain expense accruals between years

Italy