The New GTECH: Our Game Plan. Company Presentation March 2014

Transcription

1 The New GTECH: Our Game Plan Company Presentation March 2014

2 Agenda Profile Market trends 2013 Achievements Strategic Guidelines 2

3 The World s Leading Gaming Group Largest global company in the regulated gaming space Revenues of 3.1 billion in 2013, EBITDA above 1 billion Long-term, secured contract portfolio ~60% of Service Revenue under contract for more than 5 years 1 Recognized as the Leader in Lottery technology service and Lottery Management Agreements (LMAs) #1 in government-sponsored VLT Machine and System provider Preferred provider of Interactive solutions for WLA customers Experienced operational and financial management (1): Including extension options 3

4 Unique Presence Across Industry Segments and Regions 2013 REVENUES BY PRODUCT (%) 2013 REVENUES BY REGION (%) Lottery Gaming Interactive* Other** International Americas Italy Source: GTECH (*) Includes SB Interactive; (**) Other includes mainly Italy SB Retail and Commercial Services 4

5 Agenda Profile Market trends 2013 Achievements Strategic Guidelines 5

6 A Steadily Growing Global Industry Global Gaming Market GGY¹ evolution ( B) Americas Asia Europe RoW (1): Gross Gaming Yield (GGY), consumer spending on gaming (amounts wagered less payout) Source: H2GC Global Summary, January

7 Key Market Trends Governments stimulate growth, broaden regulation Initiatives to drive Same Store Sales (SSS) Outsourcing of lottery operations Casino and VLT expansion Regulated markets driving Interactive growth Multichannel offering creates growth opportunities Incremental channels fueling growth via new players acquisition Existing players value opportunity to extend gaming experience across different channels CRM a key competitive factor Contents make the difference Diversified portfolio to meet multi-faceted player demands Market recognizes value of premium content Portability a key enabler for effective content development 7

8 Lottery Ongoing Growth Opportunities Key Highlights Lottery GGY ( B) Steady growth over years Nearly 25% of future growth from Americas Outsourcing trend fueling LMA pipeline Turkey and Ontario in 2014 Additional US jurisdictions Americas Asia Europe RoW Source: H2GC Global Summary, January

9 Lottery Room for Growth in Developed and Emerging Markets Lottery GGY per Capita vs GGY / GDP (% ) Fairly Saturated Room for Growth (SSS initiatives, PPPs, etc.) Emerging Opportunities 11 GGY per Capita, weighted cluster average on total GGY Source: H2GC, Jan-2014; IMF, Oct

10 Gaming Machine Market Growth Driven by Casino Expansion and Replacements Key Highlights B2B market revenues ( B) Global gaming equipment market worth 5.3 billion in B2B revenues, two-thirds from North America Casino segment largest opportunity Accounts for approximately 85% of total market New expansion opportunities in North America, as well as recovery in replacement trends Innovative players growing faster than market VLT market cyclical and related to specific developments Greece expected to introduce up to 35k new terminals starting in late 2014 Other opportunities in North America (Oregon, Illinois, Louisiana, West Virginia, ) Product Sales Recurring Systems Source: Eilers Research, Gaming Equipment Suppliers 2014 Excludes AWPs 10

11 Interactive Growth Fueled by New Regulated Markets and Mobile Expansion Key Highlights Interactive GGY ( B) New regulated markets (NRM) catalyzing growth Operators shift from cross-border business Mobile taking off, spreading from sports betting niche to all gaming segments Expected to represent about 40% of the total interactive volumes in 2016 Content is key distinctive factor in B2B segment, mainly in Casino games CAGR +7% CAGR +10% Desktop Mobile Regulated 32% 35% 36% 39% 43% 46% 48% *Includes skill games Source: H2GC Global Summary, January

12 Agenda Profile Market trends 2013 Achievements Strategic Guidelines 12

13 New Organization to Leverage Market Trends and Enhance Effectiveness One Company: Three Regions: Single customer interface Accountability across entire product portfolio Americas International Italy Integrated competencies: Unified product strategy Coordinated technology capabilities Central marketing expertise Products and Services Structure Reorganization seamlessly completed in

14 2013 Achievements Regions Americas Lottery: 3% SSR growth in North America and 4% in Latin America; new contract win in Colorado; New Jersey and Indiana encouraging start Gaming: leader in Canadian replacement cycle (40%+ value market share) and expanded in VLT markets (Pennsylvania system, Illinois) Interactive: leading ilottery provider in the US, introduced ikeno in Georgia and mobile App in Illinois International Lottery: stable full-year SSR; new contract wins (Belgium, Switzerland, Portugal) and major network expansion in UK Gaming: casino machine unit sales up 9% and geographical expansion into Asia for casino system Interactive: key contract wins with Norsk Tipping and LNB sports betting, focus on customer portfolio optimization Italy Lottery: stable wagers target achieved in a mature market Gaming: leadership consolidated, gained #1 position in both VLT and AWP Interactive: maintained #1 position in very fragmented market Sports Betting: acquired additional 210 licenses shop (+16%) Further cost-streamlining actions offsetting VLT lower contribution 14

15 2013 Achievements Products & Services Completed review of GTECH competitive position Set business priorities by product line, R&D investments reshaped accordingly Set foundation for converging technology, building path for operational excellence as well as future efficiencies Key innovations delivered: - New Interactive solutions launched for Norsk Tipping, Georgia, Illinois - Interactive casino games from 30 to 130 titles on the shelf (+25 New Proprietary Products +75 from third parties) - Sphinx 3D awarded G2E 2013 Best Technology Prize - New CRM platform (PAM) offering a unified cross channel player view And launched SSS initiatives and executed 150+ customer deliveries with G2E 2013/2014 winner of 3 Best Slot Product awards 15

16 FY 13 Financial Highlights Revenues EBITDA 3,076 3,063 1,032 1,067 30* 1,037 FY'12 FY'13 FY'12 FY'13 Operating Income Net Income - Owners * 49** FY'12 FY'13 FY'12 FY'13 Diluted EPS Net Financial Position ,28 ** 2,549 2,507 1,01 FY'12 FY'13 Dec 31, '12 Dec 31, '13 * Adjustment to remove impact of 30M AWP settlement ** Adjustment to remove impact of 30M AWP settlement and 28M Italy tax settlement 16

17 Net Financial Position Levered FCF 326M 2,549 2, , (696) Cash from Ops. Maintenance Capex Interest Paid - Net Minorities Growth Dividends Other Capex (1) - Net (2) Net of 62M infusion from equity partners in New Jersey. 2 Includes 19M to adjust interest expense from paid to accrued basis. 17

18 Delivered on Plan Goals Achievements INDUSTRY POSITION Maintain leadership Minimize rebid activity Share of Italy GGY at 42% from 36% in 2010 US Lottery share at 71% from 67% of sales Share of VLT terminals at 38% from 34% in Canada GROWTH EBITDA & CAPEX Sustain growth in Italy Drive Same-Store-Revenues Enhance VLT growth Create foundation for EBITDA growth Lower CAPEX Lottery revenues '10-'13 CAGR 5.3% - Italy Lotteries +5.1% - US Same-store revenue +6.7% Machine Gaming revenues doubled to 900M - Recurring revenues 28.8% CAGR Grew EBITDA by 200M+ Average maintenance Capex around 20% of EBITDA in 12 and 13 Disciplined selection of opportunities FCF & NFP Improve FCF generation ( M Levered FCF target over 3-year Plan) Achieve leverage ratio of 2.6x-2.8x by 2013 Achieved 900M+ Levered FCF over Plan period Ended 2013 with 2.4x Leverage ratio 18

19 Agenda Profile Market trends 2013 Achievements Strategic Guidelines 19

20 Strategic Guidelines Product Segments Lottery Gaming Interactive Objective Consolidate market leadership Gain market share in a growing market Establish leadership in WLA segment Go-To- Market SSS and LMAs key sources of growth Focus on N.A. Casino (>2X share) and enhance leadership in VLTs Build up a comprehensive offer focusing on North America ilottery and International igaming R&D Maintain investments to consolidate market and technology leadership Increase content development for Casino Operations (+25%), maintain R&D contribution in line with best-in-class players Increase (>2X) content development, align mobile efforts to other content investments Accelerate mobile penetration (Probability contribution) Develop new sports betting platform 20

21 Strategic Guidelines Technology Objective Unique Distinctive Features Enable all platforms (Lottery, Gaming, Interactive and Sports Betting) to share: Content, Player data, Channels, Payment tools Maintain constant player focus / CRM across all access points (VLT, retail terminals, Smart TV, mobile, desktop) 1 2 Port contents from one "vertical / channel" to another Guarantee "openness" to third-party contributors (contents / platforms): IGT, Probability, etc. 3 1 Mobile SmartTV Internet Point of Sale Venue Players Retailers 2 PLAYERS CRM Lotteries Scratch & Win Poker Casino Core Platform Sports Betting Gaming RETAILERS CRM Payment Services (owned / third parties) Verification Services Regulatory Control Systems 3 Third parties: content, customer base, game engines 21

22 Americas: Grow Contribution across All Segments Lottery Gaming Same-store sales initiatives focused on product innovation and retail expansion (LMAs, Texas, California, Colombia) Retain existing contracts and seek new opportunities Deliver on current LMA commitments and pursue new wave (Ontario and new States) More than double market share by 2016 in North America casino market leveraging new content and cabinets (Sphinx 3D) Sustain leadership in VLT markets (Illinois, Oregon) and pursue new opportunities (Louisiana, West Virginia) Expand business presence in Latin America (Mexico, Colombia) Interactive Launch initial non-wagering products in US to progressively expand portfolio Exploit opportunity in LMA contracts Push to expand coverage of multi-jurisdictional Poker and Bingo networks in Canada and provide advance marketing services 22

23 International: Focus on Largest Opportunities and Build Future Growth Pillars Lottery Same-store sales initiatives focused on product innovation and retail expansion (UK, Czech Republic, Belgium) Pursue LMA opportunities (Turkey, Vietnam, South Africa, ) Expand presence in Asia Pacific, notably China Gaming Pursue VLT and Central System opportunities with focus on Greece, new geographies and emerging markets Maintain flow of content solutions to maximize AWP opportunities Increase market share in commercial Casinos Interactive Focus on expanding igaming and ilottery businesses within WLA sector (Sweden, Norway, Greece, Czech, ) Target geographical expansion with new Sports betting platform (OPAP-Greece, Australia, Singapore, ) Target key commercial customers with new content and mobile product 23

24 Italy: Defend Business and Profitability Lottery Stabilize wagers through product innovation and distribution optimization Prepare for upcoming Lotto renewal Gaming Consolidate market leadership Protect productivity performance optimizing pay-out and network management Interactive Strengthen leadership position in fragmented market Enlarge premium contents portfolio and leverage innovation (Casino games, new Bingo, Virtual Betting) Accelerate growth on the mobile channel Improve CRM platform to capture cross opportunities 24

25 Comprehensive Integration Plan on Track 50M Recurring Annual Cost Savings DRIVERS KEY INITIATIVES IN PLAN Sourcing, Manufacturing & supply chain Manufacturing logistics review New procurement model definition Content insourcing Lower transaction processing cost Technology Core platforms harmonization Casino and VLT systems integration Network, IT and ERP systems optimization Footprint Data and call centre optimization Interactive industrial footprint consolidation Administrative functions review Total expected annual recurring cost savings target 50M in two years Restructuring costs 35-40M; 21M expensed in

26 2014 Cash Flow Priorities Confirm dividend policy of no more than 50% of Levered FCF Allocate 326 million Levered FCF to: Growth initiatives Debt repayment 2013 dividend of 0.75 per share or 131 million - 40% of Levered FCF Repurchase 12.5% of Italy instant ticket license Remain in investment-grade credit rating range Stable leverage ratio 1 between 2.3x 2.4x at the end of 2014 Continued, disciplined approach to capital allocation (1): Net Financial Position / EBITDA, based on 2014 Guidance assumptions 26

27 2014 Guidance M 2013A 2014 Guidance Revenues 3,063 3,150-3,250 Operating Income * Capital Expenditures of which maintenance Net Financial Position 2,507 2,470-2,530 $/ FX Average * Net of 62M infusion from equity partners in New Jersey # December 31 $/ FX rate: 1.38 in 2013 # EBITDA 1,037 1,060-1,100 27

28 Conclusions World leader in steadily growing industry Unique presence across regions and industry segments New organization in place to fully leverage market trends Synergy plan on track Focus on profitability and shareholder return 28

29 Agenda Annexes Company Profile 1 Financial Highlights and Debt Structure 2 29

30 1 A Unique Position in a Growing Global Industry Capabilities to Fulfill Customers Requirements Across the Regulated Gaming Space GLOBAL FOOTPRINT ALL GAMING SEGMENTS LEADING TECHNOLOGY OPERATING CAPABILITIES 30

31 1 Global Footprint Long Term Customer Relationships Operating in 60 countries worldwide on six continents Total Revenues by Geography (2013-3,063M ) Serving 25 online lotteries out of 44 in the US Approximately 8,600 employees (plus outsourced) Well established government relationships 1,738 57% % % Americas International Italy Top 10 contracts (~74% of service revenues)(2) with average remaining contract length of approximately 6 years ~60% of service revenues(2) are under contract for more than five years (1) Analysis assumes all extension options are exercised (2) Top 10 contracts based on 2013 Service Revenues, excluding commercial services and Private Manager Operator pass through revenues. Top ten contracts Renewal dates 1 Contract Renewal Year Texas 2026 United Kingdom 2024 Illinois 2021 Italy - Gaming Machines 2022 New York 2020 Italy - Instants 2019 California 2019 Italy - Lotto 2016 Italy - Sports Betting 2016 Italy - Interactive

32 1 Global Footprint NORTH AMERICA Lottery 31 SPIELO 582 Printing 23 Interactive/Betting 5 EUROPE Lottery 19 SPIELO 571 Printing 13 Interactive/Betting 97 LATIN AMERICA/CARIBBEAN Lottery 10 SPIELO 377 Printing 14 Interactive/Betting 1 AFRICA/MIDDLE EAST Lottery 5 SPIELO 35 Printing 2 Interactive/Betting 1 ASIA/PACIFIC Lottery 8 SPIELO 54 Printing 1 Interactive/Betting 1 * Customer count includes printing contracts, self-service machine contracts, individual commercial casino operators, governments, government-sponsored organizations, and gaming operators (where permitted by local legislation). 32

33 1 Full Coverage of Market Offerings LOTTERY GAMING INTERACTIVE BETTING Business Operator (B2C) Market Offerings (B2B) Central System Galaxis (Casino Management System)/ INTELLIGEN (Central System for VLT) Game Management System (GMS)/ Player Account Management/Game Engines Wager Wise Betting Platform Terminals/ Self-service/ Communications Solutions VLT/AWP/Casino Slot Machines/ Game Content Channels Web, Mobile, Smart TV Interactive Channels/ Retail Terminals Operations Services Marketing, Sales, and Retail Support Operations Services Sales, Floor, and Game Optimization Services Marketing, Sales, Fraud, Risk Management, Player Support Services Marketing, Sales, Risk Management 33

34 1 Leading Technology Supplier to Lottery and Gaming Providers NORTH AMERICA 192,000 lottery terminals 45,600 self-service terminals 117,300 gaming terminals EUROPE 150,500 lottery terminals 2,100 self-service terminals 152,500 gaming terminals LATIN AMERICA/CARIBBEAN 38,000 lottery terminals 28 self-service terminals 32,300 gaming terminals AFRICA/MIDDLE EAST 12,170 lottery terminals 3,300 gaming terminals ASIA/PACIFIC 12,700 lottery terminals 46,000 gaming terminals 804,500 global points-of-sale *Internal estimates 34

35 Agenda Annexes Company Profile 1 Financial Highlights and Debt Structure 2 35

36 2 Financial Highlights ( ) Revenues (M ) EBITDA (M ) Operating Income (M ) Net Financial Position (M ) 36

37 2 FY 13 Income Statement % Constant Currency Income Statement FY'13 FY'12 Change FY'13 % Chg. Service Revenues 2,784 2,823-1% 2,818 0% Product Sales % % Revenues 3,063 3,076 0% 3,109 1% EBITDA 1,037 1,032 0% 1,048 2% Operating Income % 563-3% Interest Expense, Net (160) (153) Foreign Exchange (2) (1) Other (11) (5) Financial Charges, Net (173) (159) Income Before Tax % Net Income % Net Income - Owners % Diluted EPS % Restructuring Costs 21 1 n.m. USD/EUR FX Rate (Avg.) % 37

38 2 Debt Structure as of December 31st, 2013 Current Debt Maturities Profile Type Amount ( M) % Bank Facilities % 2018 Senior Eurobond % 2020 Senior Eurobond % 2016 Senior Eurobond % Capital Securities % Accruals & Others % Total Debt 2, % Cash 419 Un-drawn committed lines Available Capacity 1,318 Bank Eurobond Hybrid 205 Average maturity of debt is 3.3 years, assuming that Hybrid is called on March 31, 2016 Excluding Hybrid, average maturity of debt is 3.7 years 152 1, % Eurobond 8.25% Hybrid 5.375% Eurobond 3.50% Eurobond Gross Debt Breakdown USD/EUR Fixed/Variable Debt Portfolio 10% USD Variable 18% Hybrid 26% Bank Debt 13% 90% EUR (1) $/ FX as of December 31, 2013 (2) Accrued Interest (3) Available LTO & GTECH Committed Revolver Facilities Fixed 82% Eurobond 61% 38