- Revenue increased 5% at constant currency on significant growth in global gaming product sales and continued strength in global lottery same-store revenue
- Operating income of $224 million; adjusted operating income of $274 million, up 6% at constant currency
- Adjusted EBITDA of $454 million, up 5% at constant currency, driven by higher North America Gaming and Italy profits
- Year-to-date operating cash flow of $592 million and free cash flow of $361 million, record first-half levels
- Cash dividend declared of $0.20 per ordinary share

"We had a strong second quarter, with top-line growth driven by a sharp increase in gaming product sales and impressive gains in global lottery same-store revenues. Profits were up nicely in our North America Gaming and Italy segments," said Marco Sala, CEO of IGT. "I am pleased with the broad-based improvement in key performance indicators for our main businesses."

"EBITDA in the quarter was the highest we achieved in three years and translated into substantial free cash flow for the first half," said Alberto Fornaro, CFO of IGT. "Recent capital markets activity strengthens our financial structure, enhances flexibility, and positions us well for the coming years."

Overview of Consolidated Second Quarter 2019 Results

Consolidated revenue of $1.23 billion, up 5% at constant currency

• Significant growth in global gaming product sales


• Sustained momentum in lottery same-store revenue


• More than offset increased machine gaming taxes in Italy

At constant currency, operating income rose 10% to $224 million; adjusted operating income up 6% to $274 million

Adjusted EBITDA increased 5% at constant currency to $454 million

• Growth in North America Gaming & Interactive and Italy profits


• Solid North America Lottery results


• Net impact of discrete items in North America Gaming & Interactive segment




• Multi-year, strategic lease and distribution agreement in Oklahoma


• Higher litigation charges

Interest expense, net was $104 million, in line with the prior-year quarter 

Income taxes of $63 million and adjusted taxes of $79 million on increased pre-tax income; adjusted tax rate improved due to higher income in lower-tax jurisdictions

Net income attributable to IGT was $5 million in the quarter; adjusted net income attributable to IGT was $91 million, up from $57 million in the prior year on growth in profit before taxes and a lower adjusted tax rate

Net income per diluted share of $0.02; adjusted net income per diluted share of $0.44 versus $0.28 in the prior year

Net debt of $7.64 billion, down from $7.76 billion at December 31, 2018

Operating Segment Review

North America Gaming & Interactive

Revenue of $274 million, up 8% at constant currency

• Gaming service revenue of $165 million, compared to $169 million in the prior- year period




• Installed base stable year-over-year; up sequentially on an underlying basis




• Growth in Class II markets, opening of Encore Boston Harbor


• Net of 2,076-unit reduction due to new Oklahoma agreement




• Slight decrease in other gaming services; large, multi-year poker contract in each period




• Product sales revenue of $104 million, up 22% over the prior year




• Terminal product sales rose 18% at constant currency




• 54% increase in replacement units driven by strength of product offering; higher average selling price


• Lower new/expansion activity compared to the prior year




• Other product sales up 34% on strong systems revenue




• Other service revenue includes contributions from sports betting and interactive

Operating income up 27% at constant currency on net impact of discrete items

North America Lottery

Revenue of $309 million, stable with the high level achieved in the prior year

• Lottery service revenue of $238 million, essentially in line with the prior year




• Overall same-store revenue up 7.2% driven by growth in instant ticket and draw games and increased jackpot activity


• More than offsets impact of Illinois supply contract conclusion




• Lottery product sales revenue of $32 million




• Essentially matched significant contribution from Massachusetts hardware sales in the prior year

Operating income of $78 million, down 3% at constant currency on higher depreciation

International

Revenue of $229 million, up 20% at constant currency

• Gaming product sales revenue of $114 million, up 76% at constant currency




• Significant increase in terminal units shipped, including approximately 1,600 Sweden VLTs; average selling price down due to mix 


• Other product sales driven by higher software revenue




• Lottery service revenue of $67 million, essentially stable at constant currency


• Gaming service revenue was $28 million




• Year-over-year and sequential declines in the installed base due to conversions


• Other gaming service revenue down on interactive performance and non-wager-related items

Operating income of $30 million compared to $36 million in the prior year, down $4 million at constant currency

• Lower profit flow-through on service and product revenue


• Higher SG&A

Italy

Revenue of $422 million, relatively stable at constant currency

• Lottery service revenue of $190 million, up 4% at constant currency




• Lotto wagers up 4.2% on continued growth in 10eLotto


• Scratch & Win wagers rose 0.9% on success of new games




• Gaming service revenue of $153 million compared to $176 million in the prior year




• Increased taxes on AWP and VLT machines


• Wagers grew despite lower installed base on quality of distribution network and new game introductions




• Other service revenue of $79 million, up 16% at constant currency




• Beneficial sports betting payout comparison; higher wagers despite World Cup in the prior year

Operating income of $133 million, up 8% at constant currency

• Strong profit flow-through from lotteries, sports betting, and interactive


• Beneficial shift in expense timing


• More than offsets increased gaming machine taxes

Other Developments

The Company's Board of Directors declared a quarterly cash dividend of $0.20 per ordinary share

• Record date of August 15, 2019


• Payment date of August 29, 2019

Issuance of €750 million 3.5% Notes due 2026, as previously announced

• Net proceeds used to redeem ~ €438 million 4.125% Notes due 2020


• Balance used to partially repay utilizations under revolving credit facilities

Revolving credit facility amendment and extension in July 2019, as previously announced

• Maturity extended to July 31, 2024


• Aggregate commitments reduced to ~ 1.75 billion


• Modifications to certain provisions that increase flexibility

Board appointment, as previously announced

• The Company's Board of Directors appointed Dr. Samantha Ravich as an independent director, effective July 30, 2019

Outlook

Outlook updated for currency; no change to operating assumptions

• 2019 adjusted EBITDA of $1.675 - $1.735 billion


• Capital expenditures of $450 - $550 million


• Full-year EUR/USD exchange rate of 1.12 vs. prior 1.15 estimate