International Game Technology PLC Reports Second Quarter 2018 Results

LONDON, July 31, 2018 /PRNewswire/ -- International Game Technology PLC ("IGT") (NYSE:IGT) today reported financial results for the second quarter ended June 30, 2018. Today, at 8:00 a.m. EDT, management will host a conference call and webcast to present the second quarter results; access details are provided below.

"The strong second quarter results reflect continued global Lottery expansion that is accentuated by disciplined expense management," said Marco Sala, CEO of IGT. "The North America Lottery and Italy segments each exceeded our expectations in the period. The North America Gaming installed base grew sequentially, and we have a compelling roster of new, for-sale video reel games coming to market in the second half. The strong start to the year gives us confidence we can achieve our 2018 strategic and financial goals."

"With better-than-expected Adjusted EBITDA growth of 10% in the first half, we are raising our full-year outlook for the underlying business," said Alberto Fornaro, CFO of IGT. "As a result, we are able to absorb the negative impact of foreign currency translation and maintain the Adjusted EBITDA range of $1,700-$1,780 million for 2018."

Overview of Consolidated Second Quarter Results

Consolidated revenue was $1,202 million, down 1% from the prior-year quarter

• Flat at constant currency and scope (adjusted for the sale of Double Down Interactive LLC ("DoubleDown"))
• Negatively impacted by $33 million due to ASC 606
• Reflects strong lottery performance in North America and Italy

Adjusted EBITDA rose 4% to $442 million; Adjusted operating income flat to the prior year at $264 million

• Adjusted operating income up 2% at constant currency and scope
• Strong lottery performance more than compensates for ASC 606 impact
• Improvements in operating expenses

Interest expense was $106 million compared to $116 million in the prior-year period 

Provision for income taxes was $52 million compared to $84 million in the prior-year period 

• Prior year impacted by gain on the sale of DoubleDown and accrual for Mexico tax litigation

Net income attributable to IGT was $161 million in the quarter; Adjusted net income attributable to IGT was $57 million

Net income per diluted share of $0.79; Adjusted net income per diluted share of $0.28

Cash from operations was $120 million in the first half of the year and capital expenditures were $259 million

• $366 million (gross) upfront payment for the Scratch & Win license in Italy paid during the quarter

Cash and cash equivalents were $568 million as of June 30, 2018, compared to $1,057 million as of December 31, 2017

Net debt was $7,530 million as of June 30, 2018, compared to $7,319 million as of December 31, 2017

Operating Segment Review

North America Gaming & Interactive

Revenue of $254 million compared to $310 million in the prior-year quarter, which included DoubleDown

• Decline fully attributable to the sale of DoubleDown and ASC 606 classification of jackpot expense as a contra revenue item (previously included in cost of services)
• Gaming service revenue was $169 million compared to $208 million in the prior-year period
• Up 10% at constant scope and adjusted for jackpot expense, primarily due to the upfront recognition of revenue from a large, multi-year poker contract
• Installed base up 168 units sequentially
• Product sales of $85 million, down 17% from the prior year
• Shipped 4,550 gaming machine units in the quarter compared to 5,293 units in the prior-year period
• New and Expansion units up from 1,408 units to 1,803 units primarily due to Ocean Resort and Hard Rock Atlantic City openings, and MGM Springfield's anticipated opening
• Replacement unit decline impacted by large unit sales in Oregon and Washington in the prior year

Operating income of $66 million compared to $76 million in the prior-year quarter

• Stable with prior-year period at constant scope

North America Lottery

 Revenue up 5% to $309 million

• Lottery service revenue down 2% to $236 million
• Same-store revenues up 4.2% on higher instant tickets and draw-based games
• $17 million negative impact from the timing of incentive recognition for LMA agreements under ASC 606 and lower pass-through revenue which has no associated profit
• Lottery product sales revenue more than doubled to $34 million on higher retailer point-of-sale terminal and hardware sales

Operating income of $80 million up modestly from the prior year

• Despite differential timing of incentives and higher depreciation
• Driven by same-store revenue growth, product sales mix, and operating expense discipline

International

 Revenue down 6% to $199 million

• Lottery service revenue of  $70 million compared to $72 million in the prior year
• Same-store revenue growth of 1.4% driven by instant ticket and draw-based games, partially offset by significantly lower jackpot activity
• Lower non-wager revenue compared to the prior year
• Gaming service revenue of $34 million compared to $43 million in the prior year
• Exit of certain legacy businesses and jackpot expense reclassification
• Continued growth in the installed base
• Gaming product sales revenue down 10% to $67 million
• Lower gaming machine replacement unit shipments primarily to Latin America

Operating income down to $36 million from $45 million

• Lower revenue and a higher margin mix of business in the prior year
• Partially offset by lower operating expenses

Italy