“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.”
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. 3 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.
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 6 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.