International Game Technology PLC Reports First Quarter 2015 Results For Predecessor Companies

LONDON, May 13, 2015 /PRNewswire/ -- International Game Technology PLC ("IGT") (NYSE: IGT) today reported results for GTECH S.p.A.'s ("GTECH") first quarter of 2015 and for International Game Technology's ("Legacy IGT") second quarter of 2015, ended March 31, 2015. The combination of GTECH and Legacy IGT was completed on April 7, 2015. As such, results presented in this news release are for periods predating the combination and during which each company was under separate management. The respective reporting formats of the legacy companies have been maintained in this release for ease of comparison. The results in this news release relating to GTECH are presented in Euros under International Financial Reporting Standards ("IFRS") and results relating to Legacy IGT are presented in U.S. Dollars under U.S. generally accepted accounting principles ("GAAP"). IGT will begin reporting as a combined entity with its second quarter of 2015 results under GAAP.

Commenting on the first quarter performance, Marco Sala, CEO of IGT, noted:  "We had a solid first quarter for GTECH operations, continuing to run the underlying business efficiently and profitably, at the same time as we were completing a transformative merger. We were ready to launch the integration from day one, focusing on revitalizing our R&D capabilities. Exciting content delivered across the whole range of platforms is the key to consolidating our leadership of the global gaming industry."

"We achieved near-record GTECH EBITDA during the first quarter on top of challenging, multi-year comparisons. We also improved our net financial position excluding one-off items linked to the transaction. We have confirmed our $280 million target for cost and revenue synergies and are on track to deliver them on schedule," said Alberto Fornaro, CFO of IGT.

GTECH S.p.A. First Quarter 2015 Results Comparison

EBITDA is principally comprised of operating income plus depreciation, amortization, and impairment. EBITDA is considered an alternative performance measure that is not a defined measure under IFRS and may not take into account the recognition, measurement and presentation requirements associated with IFRS. We believe that EBITDA assists in explaining trends in our operating performance, provides useful information about our ability to incur and service indebtedness and is a commonly used measure of performance by securities analysts and investors in the gaming industry. EBITDA should not be considered as an alternative to operating income as an indicator of our performance or to cash flows as a measure of our liquidity. As we define it, EBITDA may not be comparable to other similarly titled measures used by other companies.

Consolidated Revenues grew 3% to €808 million from €781 million in the first quarter of 2014. This increase was principally driven by higher service revenues, which rose 4% to €755 million from €729 million in the prior year, reflecting net favorable foreign currency effects and lottery growth in Italy and the Americas. Product sales of €52 million were in line with the prior year as lower lottery product sales in the Americas and International machine gaming revenues were offset by favorable currency translation.

EBITDA of €296 million was in line with the first quarter of last year and near all-time peak levels, reflecting growth in the Americas and stability in the International segment, in addition to net favorable foreign currency effects, which offset the impact of a higher sports betting payout in Italy.

Operating Income was €149 million compared to €181 million in the first quarter of 2014. Operating Income was €170 million excluding one-off items, primarily transaction and restructuring costs associated with the acquisition of Legacy IGT.

Interest Expense was €81 million compared to €41 million last year, the increase being principally due to financing associated with the acquisition of Legacy IGT.

Net Loss Attributable to the Owners was €27 million compared to net income of €75 million in the first quarter of 2014. The Net Loss Attributable to the Owners primarily reflects higher Interest Expense and other charges associated with the acquisition of Legacy IGT. Diluted Loss-Per-Share was €0.16 compared to Diluted Earnings-Per-Share of €0.43 in the comparable prior year period, again reflecting acquisition-related items.

Cash from Operations was €158 million compared to €163 million in the prior year. Capital Expenditures in the first quarter were €65 million.

At March 31, 2015, Consolidated Shareholders' Equity totaled €2.59 billion. GTECH had a Net Financial Position (NFP) of €3.16 billion versus €2.59 billion as of December 31, 2014. Excluding one-off items primarily related to the acquisition of Legacy IGT, NFP was €2.56 billion at the end of the first quarter of 2015.

First Quarter Results by Segment

Americas
Revenues in the Americas segment grew 23% to €300 million in the quarter. In constant currency and excluding pass-through reimbursements, Revenues were up 4%. Service revenues increased 26%, supported by favorable foreign currency effects; strong instant ticket sales and multistate jackpot activity; and substantial growth for machine gaming operations. Product sales of €34 million in the quarter were modestly above the prior year period, as a significant increase in machine gaming revenues and favorable foreign currency effects were partially offset by lower lottery product sales.

Operating Income from the Americas segment of €46 million was 51% greater than the prior year period, reflecting favorable foreign currency effects, strong lottery same-store revenue growth, and higher machine gaming profits from both product sales and the contribution from a larger installed base of gaming machines.

International
Revenues in the International segment were €77 million, €1 million greater than the prior year, driven by favorable foreign currency effects and increased lottery revenues that were partially offset by lower machine gaming product sales.

International lottery same-store revenues were up approximately 11% compared to the same period in 2014, reflecting continued strength in instant ticket sales in the United Kingdom and robust jackpot growth in Eastern Europe. 

Operating Income in the International segment was €13 million versus €15 million in the first quarter of last year, as higher lottery profits were more than offset by lower product sales and a broad mix of items.

Italy
Revenues in Italy were €430 million compared to €461 million in the first quarter of 2014, principally due to higher sports betting payout. While sports betting wagers were up 2% in the first quarter, sports betting revenues were €39 million compared to €62 million last year due to a 10 percentage point increase in payout.

Total Lotto wagers for the quarter were up 16% to €1.82 billion compared to €1.57 billion last year, driven by strong performance in 10eLotto and late-numbers. Instant-ticket wagers declined 7% to €2.30 billion versus €2.48 billion last year, partially due to the cadence of new product introductions.

Machine gaming revenues were €135 million versus €145 million last year, reflecting the impact of the new Italian Stability Law.

Operating Income of €140 million compared to €158 million last year primarily reflects the impact of the higher sports betting payout.

Other News

Pursuant to the Agreement and Plan of Merger, as amended, providing for the combination of GTECH and Legacy IGT, Philip G. Satre was appointed as Chairman of the Board of Directors and each of Patti S. Hart and Lorenzo Pellicioli was appointed as Vice Chairman of the Board of Directors.

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 first quarter 2015 results. Listeners may access a live webcast of the conference call along with accompanying slides under "News and Presentations" on IGT's Investor Relations website at www.merger.igt.com/investors. 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 3450 9571 for participants in the United Kingdom and +1 646 254-3387 for listeners outside the United Kingdom. The conference ID/confirmation code is 2660253. A telephone replay of the call will be available for one week at +44 (0) 20 3427 0598 or +1 347 366-9565 using the conference ID/confirmation code 2660253.

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 generated approximately $6 billion in revenues in 2014 and has more than 13,000 employees. For more information, please visit www.merger.igt.com.

Cautionary Statement Regarding Forward-Looking Statements
This communication may contain forward-looking statements (including within the meaning of the Private Securities Litigation Reform Act of 1995) concerning IGT and other matters. These statements may discuss goals, intentions, projections and expectations as to future plans, strategies, strengths, trends, events, results of operations or financial condition, revenue, income, earnings (or loss) per share, capital expenditures, dividends, capital structure or other financial items, or otherwise, based on current beliefs of the management of IGT 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 IGT'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 such statements. Factors that could cause actual results to differ materially from those in the forward-looking statements include (but are not limited to) risks that the businesses of Legacy IGT and GTECH S.p.A. will not be integrated successfully, following the recent completion of their business combination, or that the combined companies will not realize estimated cost savings, value of certain tax assets, synergies, growth or other anticipated benefits or that such benefits may take longer to realize than expected; risks relating to unanticipated costs of integration of the two companies; reductions in customer spending; a slowdown in customer payments and changes in customer demand for products and services; unanticipated changes relating to competitive factors in the industries in which the company operates; ability to hire and retain key personnel; the potential impact of the consummation of the business combination on relationships with third parties, including customers, employees and competitors; ability 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 the company; international, national or local economic, social or political conditions that could adversely affect the company or its customers; conditions in the credit markets; risks associated with assumptions the company makes in connection with its critical accounting estimates; the resolution of pending legal proceedings and investigations; and the company'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 the company's business, including those described in IGT's registration statement on Form F-4 and other documents filed from time to time with the Securities and Exchange Commission (the "SEC"). Forward-looking statements speak only as of the date on which such statements are made, Except as required under applicable law, the company does not assume any obligation to update these forward-looking statements. Nothing in this announcement is intended, or is to be construed, as a profit forecast or to be interpreted to mean that earnings per IGT share for the current or any future financial years will necessarily match or exceed the historical published earnings per IGT share, as applicable. All forward-looking statements contained in this communication are qualified in their entirety by this cautionary statement. All subsequent written or oral forward-looking statements attributable to IGT, or persons acting on its behalf, are expressly qualified in its entirety by the cautionary statements contained throughout this communication.

Contact:
Robert K. Vincent, Corporate Communications, +1 (401) 392-7452
James Hurley, Investor Relations, +1 (401) 392-7190
Simone Cantagallo, Italian Media Relations, +39 06 51899030

Legacy IGT Second Quarter Fiscal Year 2015 Results

Second quarter results for Legacy IGT (compared to last year's second quarter)

• Total revenue decreased 22% to $399 million
• Adjusted earnings per share decreased to $0.09 from $0.20
• GAAP earnings per share decreased to ($0.05) from $0.10
• Social gaming revenue increased 17% to $81 million and average bookings per daily active user grew 9% to $0.47
• Returned $27 million to shareholders in the form of dividends

• Revenue decreased 22% to $399 million in the quarter primarily due to declines in product sales and gaming operations, partially offset by an increase in interactive revenue.
• Non-GAAP adjusted financial measures for the quarter excluded $24 million in bad debt provision and $19 million in merger-related costs.
• Operating cash flow for the first six months increased by $251 million, primarily due to the prior year investment of $185 million to extend land-based licensing rights for Wheel of Fortune^® and Jeopardy!^® through 2024, as well as expand rights to include social gaming and online real-money wagering in the U.S.

• Revenue decreased 17% to $191 million in the quarter primarily due to installed base declines.
• Gross margin for the quarter was consistent with prior-year results.
• Installed base decreased 18% driven largely by declines in International lease units converted to sales in the prior year, as well as declines in North America MegaJackpots^®  most significantly in the standalone category.
• Average revenue per unit per day in the quarter was $47.06, slightly above the prior-year quarter.

• Revenue decreased 43% to $115 million in the quarter, primarily due to lower new unit sales, as well as lower non-machine sales
• North America replacement sales increased 400 units to 3,800 units in the quarter compared to 3,400 units in the prior-year quarter primarily due to lease units converted to sales.
• Gross margin decreased to 39% from 51% primarily due to lower manufacturing productivity and inventory charges associated with reduced volume.
• Average machine sales price decreased 18% to $12,000 in the quarter primarily due to product mix, mostly due to lower-priced lease units converted to sales.

• Social gaming revenue increased 17% to $81 million compared to the prior year quarter, driven by increases in both average DAU and bookings per DAU.  Mobile revenue comprised 41% of total bookings in the quarter and increased 52% compared to the prior year quarter.
• Average DAU were 1.9 million, an increase of 9% over the prior year quarter due to improved content and enhanced player retention and engagement strategies.
• Average MAU were 4.7 million, a decrease of 24% compared to the prior year quarter, primarily due to increased marketing efforts to procure higher-quality players.
• Average bookings per DAU in the first quarter were $0.47, an increase of 9% over the same quarter last year.

• GAAP operating expenses increased 3% to $227 million, primarily due to an increase of $20 million in bad debt provision and an increase of $7 million in impairment, restructuring, and merger-related costs.
• Adjusted operating expenses decreased 7% to $175 million, in part due to cost savings initiatives resulting from the March 2014 business realignment.

• Contractual debt obligations totaled $1.75 billion as of March 31, 2015.
• Outstanding borrowings under the company's revolving credit facility were $450 million as of March 31, 2015.
• The company returned $27 million to its shareholders in the form of dividends during the quarter.

Other

References to per share amounts in this release are based on diluted shares of common stock, unless otherwise specified.

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SOURCE International Game Technology PLC