International Game Technology PLC Stock

International Game Technology PLC operates as a gaming company that delivers entertaining and responsible gaming experiences for players across various channels and regulated segments, from lotteries and gaming machines to digital gaming and sports betting.

Leveraging a wealth of compelling content, substantial investment in innovation, player insights, operational expertise, and leading-edge technology, the company’s solutions deliver gaming experiences that responsibly engage players and drive growth. The company has a well-established local presence and relationships with governments and regulators around the world, and creates value by adhering to the highest standards of service, integrity, and responsibility.

The company operates and provides an integrated portfolio of innovative gaming technology products and services, including lottery management services, online and instant lottery systems, electronic gaming machines, gaming systems, digital lottery, digital gaming, sports betting, instant ticket printing, and commercial services.

Products and Services

The company has three broad categories of products and services: Lottery; Gaming; and PlayDigital.

Lottery

Through its Global Lottery segment, the company supplies a unique set of lottery solutions to approximately 93 customers worldwide, including to 37 of the 48 U.S. lotteries (including the District of Columbia, Puerto Rico, and U.S. Virgin Islands). Lottery customers frequently designate their revenues for particular purposes, such as education, economic development, conservation, transportation, programs for senior citizens and veterans, health care, sports facilities, capital construction projects, cultural activities, tax relief, and others. Many governments have become increasingly dependent on their lotteries as revenues from lottery ticket sales are often a significant source of funding for these programs.

Lottery products and services are provided through operating contracts, FMCs, LMAs, and product sales contracts. The company designs, sells, leases, and operates a complete suite of point-of-sale machines that are electronically linked with a centralized transaction processing system that reconciles lottery funds between the retailer and the lottery authority. The company provides and operates highly secure, online lottery transaction processing systems that are capable of processing approximately 1 million transactions per minute. The company provides more than 379,000 point-of-sale devices to lottery customers and lotteries that it supports worldwide. The company also produces high-quality instant ticket games and provides printing services, such as instant ticket marketing plans and graphic design, programming, packaging, shipping, and delivery services.

The company has developed and continues to develop new lottery games, licenses new game brands from third parties, and installs a range of new lottery distribution devices, all of which are designed to drive responsible same-store sales growth for its customers. In connection with its delivery of lottery services, the company actively advises its customers on growth strategies. Depending on the type of contract and the jurisdiction, the company also provides marketing services, including retail optimization and lottery brand awareness campaigns. The company works closely with its lottery customers and retailers to help retailers sell lottery games more effectively. These programs include product merchandising and display recommendations, a selection of appropriate lottery product mix for each location, and account reviews to plan lottery sales growth strategies. The company leverages years of experience accumulated from being the exclusive licensee for the Italian Scratch & Win instant lottery game and the Italian Lotto, one of the world’s largest lotteries. This lottery business-to-consumer (B2C expertise in Italy, which includes management of all the activities along the lottery value chain, allows the company to better serve business-to-business(B2B) customers.

The company also provides a complete suite of iLottery solutions and services. This, coupled with its professional expertise, allows lotteries to fully engage their players on any digital channel in regulated markets. Existing lottery game portfolios are extended to the digital channel to provide a spectrum of engaging content, such as e-Instant tickets. The company operates in the highly regulated global lottery market, with a customer base of public and private entities that are secured on a contractual basis.

The primary types of lottery agreements are outlined below:

Operating and Facilities Management Contracts

The majority of the company’s revenue in the Lottery business comes from operating contracts and FMCs.

Beginning in November 2016, the company’s exclusive license for the Italian Lotto includes purely financial partners as part of a joint venture. Lottoitalia s.r.l. (Lottoitalia), a joint venture company among IGT Lottery S.p.A., Italian Gaming Holding a.s., Arianna 2001 (an entity associated with the Federation of Italian Tobacconists), and Novomatic Italia, is the exclusive manager of the Italian Lotto game. Lottoitalia is 61.5% owned by IGT Lottery S.p.A. The company, through Lottoitalia, manages the activities along the lottery value chain, such as creating games, determining payouts, collecting wagers through its network, paying out prizes, managing all accounting and other back-office functions, running advertising and promotions, operating data transmission networks and processing centers, training staff, providing retailers with assistance, and supplying materials, including play slips, tickets and receipts, and marketing and point-of-sale materials for the game. Since 2004, and for a term expiring in 2028, the company also has been the exclusive licensee for the instant ticket lottery (Gratta e Vinci or Scratch & Win) through Lotterie Nazionali S.r.l., a joint venture 64.0% owned by the Parent’s subsidiary IGT Lottery S.p.A., with the remainder directly and indirectly owned by Scientific Games Corporation and Arianna 2001. As of December 31, 2022, the revenue weighted-average remaining term of the company’s existing lottery contracts in Italy was 4.4 years.

The company’s FMCs typically require the company to design, install, and operate the lottery system and retail terminal network for an initial term, which is typically five (5) to ten (10) years. The company’s FMCs are granted on an exclusive basis, and usually contain extension options under the same or similar terms and conditions, generally ranging from one (1) to five (5) years. Under a typical FMC, the company maintains ownership of the technology and equipment, and is responsible for capital investments throughout the duration of the contract, although the investments are generally concentrated during the early years. The company provides a wide range of services to lottery customers related to the technology, equipment, and facilities, such as hosting, maintenance, marketing, and other support services. The company generally provides its lottery customers retailer terminal and communication network equipment through operating leases. In return, the company typically receives fees based upon a percentage of the sales of all lottery tickets, including draw-based and/or instant ticket games, though under certain of its agreements, the company may receive fixed fees for certain goods or services. In limited instances, the company provides instant tickets and online lottery systems and services under the same facilities management contract (FMC). As of February 23, 2023, the company had FMCs with or for the benefit of 22 U.S. jurisdictions. As of December 31, 2022, the company’s largest FMCs by annual revenue were Texas, California, Florida, New York, and Georgia, and the revenue weighted-average remaining term of the company’s existing U.S. FMCs was 5.3 years (6.8 years including available extensions). Also, as of February 23, 2023, the company operated under operating contracts or FMCs in 20 international jurisdictions, excluding U.S. and Italy.

Operating contracts and FMCs often require the company to pay substantial monetary liquidated damages in the event of non-performance by the company. The company’s revenues from operating contracts and FMCs are generally service fees paid to the company directly by the lottery authority based on a percentage of such lottery’s wagers or ticket sales.

Another form of operating contract is a lottery management agreement (LMA). Under an LMA, the company manages, within parameters determined by the lottery customer, the core lottery functions, including the lottery systems and the majority of the day-to-day activities along the lottery value chain. This includes collecting wagers, managing accounting and other back-office functions, running advertising and promotions, operating data transmission networks and processing centers, training staff, providing retailers with assistance, and supplying materials for the games. LMAs also include a separate FMC, pursuant to which the company leases certain hardware and equipment, and provides access to software and support services. The company provides lottery management services in New Jersey as part of a joint venture and in Indiana through a wholly-owned subsidiary of the Parent. The company’s revenues from LMAs include incentives based on achievement of contractual metrics, and, with respect to the supply agreements, are based generally on a percentage of wagers. The company is also subject to penalties for failure to achieve contractual metrics under its LMAs.

Instant Ticket Services

As an end-to-end provider of instant tickets and related services, the company produces high-quality instant ticket games and provides ancillary services, such as instant ticket marketing plans and graphic design, programming, packaging, shipping, and delivery services. Instant tickets are sold at numerous types of retail outlets but most successfully in grocery and convenience stores.

As of February 23, 2023, the company provided instant ticket printing products and services to 32 customers in North America and 10 customers in international jurisdictions.

Product Sales and Services Contracts

Under product sales and services contracts, the company assembles, sells, delivers, and installs turnkey lottery systems or lottery equipment, provides related services, and licenses related software. The lottery authority maintains, in most instances, responsibility for lottery operations. The company sells additional machines and central computers to expand existing systems and/or replace existing equipment and provides ancillary maintenance and support services related to the systems, equipment sold, and software licensed. The company categorizes revenue from product sales and services contracts on a case-by-case basis as either service revenue or product sales from Systems, software, and other or Lottery products respectively.

Commercial Services

The company develops innovative technology and offers commercial and payment services over a standalone network. Leveraging its distribution network and secure transaction processing experience, the company offers high-volume processing of commercial and payment transactions, including prepaid cellular telephone recharges, bill payments, e-vouchers, electronic tax payments, stamp duty services and prepaid card recharges. These services are primarily offered outside of North America.

Gaming

The company designs, develops, assembles or orders the assembly of, and provides cabinets, games, systems, and software for customers in regulated gaming markets throughout the world under fixed fee, participation and product sales contracts. As of February 23, 2023, the company held more than 440 global gaming licenses and does business with commercial casino operators, tribal casino operators, and governmental organizations (primarily consisting of lottery operators). The company provides social casino content as part of a multi-year strategic partnership with DoubleU Games. Gaming products and services are provided through the Global Gaming business segment.

Gaming Machines and Game Content

The company offers a diverse range of gaming machine cabinets from which land-based casino customers can choose to maximize functionality, flexibility, and player comfort. In addition to cabinets, the company develops a wide range of casino games taking into account local jurisdictional requirements, market dynamics, and player preferences. The company combines elements of mathematics, play mechanics, sound, art, and technological advancements with a library of entertainment licenses and a proprietary intellectual property portfolio to provide gaming products designed to provide a high degree of player appeal and entertainment. The company offers a wide array of casino-style slot machines in a variety of multi-line, multi-coin, and multi-currency configurations.

The company’s slot games typically fall into two categories, such as premium games and core games.

Premium games include:

Wide Area Progressives - Games that are linked across several casinos and/or jurisdictions and share a large common jackpot, including the Wheel of Fortune franchise; and

Multi-Level Progressives - Games that are linked to a number of other games within the casino itself and offer players the opportunity to win different levels of jackpots, such as Prosperity Link.

Core games, which include video reel, mechanical reel, and video poker, are typically sold and in some situations leased to customers. Some of the company’s most popular core games in 2022 included Wolf Run Eclipse, Egyptian Link, Samurai 888, Double Chili Mania, Pinball Double Gold, Keno Star, Powerhouse Plus and Big City 4s Poker.

The company produces other types of games including:

Centrally Determined games, which are games connected to a central server that determines the game outcome;

Class II games which are electronic video bingo machines that can be typically found in North American tribal casinos and certain other jurisdictions like South Africa; and

Random-number-generated and live dealer electronic table games, including baccarat and roulette.

Gaming product sales revenues are generated from the sales of land-based gaming machines (equipment and game content), systems, component parts (including game conversion sales), other equipment and services. The company also licenses intellectual property rights to third parties through royalty bearing patent licensing agreements.

Video Lottery Terminals

The company provides video lottery terminals (each, a VLT and together, VLTs), VLT central systems, and VLT games worldwide. VLTs are gaming machines, which are regulated by lotteries, and is usually connected to a central system.

The company provides systems and machines to other gaming licensees, either as a product sale or with long-term, fee-based contracts where the service revenue earned is generally based on a percentage of wagers, net of applicable gaming taxes. The company categorizes revenue from VLTs as either service revenue from Gaming terminal services or product sales from Gaming terminals, depending on the nature of the transaction.

Gaming Management Systems

The company offers a comprehensive range of system modules and applications for all areas of casino management. Gaming systems products include infrastructure and applications for casino management, customer relationship management, patron management, and server-based gaming. The company’s main casino management system offering is the Advantage System, which offers solutions and modules for a wide-range of activities from accounting and payment processing to patron management and regulatory compliance.

The company’s systems feature customized player messaging, tournament management, and integrated marketing and business intelligence modules that provide analytical, predictive, and management tools for maximizing casino operational effectiveness. The server-based solutions enable electronic game delivery and configuration for slot machines, as well as providing casino operators with opportunities to increase profits by enhancing the players’ experience, connecting with players interactively, and creating operational efficiencies. Service Window enables operators to market to customers more effectively by leveraging an additional piece of hardware onto existing machines for delivering in-screen messaging. The company’s systems portfolio also encompasses mobile solutions, such as the Resort Wallet, which is a cardless, cashless loyalty solution for casino players. Resort Wallet includes IGTPay, a fully cashless land-based offering for casino operators which provides a direct link to external funding. Mobile solutions that drive efficiencies and enable floor monitoring for operators while decreasing response time to player needs include Mobile Host, Mobile Responder, and Mobile Notifier.

PlayDigital

PlayCasino

The company, through its PlayCasino brand, designs, assembles, and distributes a full suite of configurable products, systems, content, and services, and holds more than 45 licenses, 27 of which are specific to digital gaming only, that authorize the provision of digital gaming products and services worldwide, including digital products such as slot games, blackjack, roulette, poker, bingo, and other casino card games with features, such as single and multiplayer options with branded titles and select third-party content.

The company’s iGaming systems and digital platforms offer customers a remote game server solution, which is a fast gateway to extensive casino content, and digital gaming services that enhance player experiences and create marketing opportunities around either the company’s games or third-party games via its aggregation capabilities obtained through the acquisition of iSoftBet. PlayCasino has a vast content offering, either through the company’s dedicated studios or its content library to meet the needs of the market served. The content is either digital only or omni-channel in combination with its land-based gaming operations.

The company categorizes revenue from digital gaming products as product sales from Other and revenue from digital gaming services as service revenue from PlayDigital services.

PlaySports

The company provides sports betting technology and management services, branded as PlaySports, to licensed sports betting operators in over 26 states in the United States of America (U.S.) and a province in Canada, holding 54 licenses that authorize the provision of sports betting products and services, 25 of which are specific to sports betting only.

The company offers a combination of technology and services to U.S. licensed sportsbook operators in each state where sports betting is legal. The offering may be different in each market in order to comply with local regulations and market conditions. The company packages services in two ways:

Sports betting platform solutions offer modular services hosted and maintained in each U.S. state or tribal jurisdiction where sports betting is legal. These solutions provide certified and managed sports betting software made available for customers to operate retail and account-based interactive sports, as well as retail components, such as self-service betting kiosks and employee operated betting terminals, and integrate with pari-mutuel race wagering in a particular jurisdiction; and

Turnkey managed service solutions combine the company’s end-to-end sports betting management technology with a portfolio of value-added services, principally trading and trading support services, but that also may include offer management, payments, fraud management, advisory functions, and interactive components, such as mobile web and desktop applications, all of which support the operations of land-based, digital, and omni-channel sports betting operators.

Sports betting operators who are customers of the company in the U.S. include: FanDuel (Flutter plc), Rhode Island Lottery, Boyd Gaming Corporation, Delaware North, and SuperBook (SBOpco, LLC).

The company categorizes revenue from sports betting as service revenue from PlayDigital services.

Segments

The company operates through three business segments: Global Lottery, Global Gaming, and PlayDigital.

Through its three business segments, the company operates and provides an integrated portfolio of innovative gaming technology products and services, including online and instant lottery systems, iLottery, instant ticket printing, lottery management services, gaming systems, electronic gaming machines, iGaming, and sports betting.

The Global Lottery segment has full responsibility for the worldwide traditional lottery and iLottery business, including sales, operations, product development, technology, and support. The Global Gaming segment has full responsibility for the worldwide land-based gaming business, including sales, product management, studios, global manufacturing, operations, and technology. The PlayDigital segment has full responsibility for the worldwide iGaming and sports betting business, including sales, operations, studios, technology, and support.

The company’s three business segments are supported by central corporate support functions, including finance, people and transformation, legal, marketing and communications, corporate public affairs, and strategy and corporate development. Certain support costs that are identifiable and that benefit its business segments are allocated to them.

Global Lottery

Global Lottery segment provides lottery products and services primarily to governmental organizations through operating contracts, FMCs, LMAs, and product sales contracts.

As part of its lottery product and services, the company provides instant and draw-based lottery products, point-of-sale machines, central processing systems, software, commercial services, instant ticket printing services, and other related equipment and support services.

The company categorizes revenue from operating contracts, FMCs, and LMAs as Operating and facilities management contracts and revenue from commercial services, software hosting, software maintenance, and other services not included within operating contracts, FMCs, or LMAs as service revenue from Systems, software, and other. Revenue included within Operating and facilities management contracts include all services required by the contract, including iLottery and instant ticket printing.

The company categorizes sales or sales-type leases of lottery terminals, lottery systems, fixed-fee software licenses, and instant tickets not part of Operating and facilities management contracts as product sales from Lottery products.

Global Gaming

The company’s Global Gaming segment provides gaming products and services including software and game content, casino gaming management systems, video lottery terminals (VLTs), VLT central systems, and other related equipment and support services to commercial and tribal casino operators.

The company categorizes revenue from Wide Area Progressive services, and operating leases for VLTs and other gaming machines as service revenue from Gaming terminal services. The company categorizes sales or usage-based royalties promised in exchange for software intellectual property licenses, and systems as service revenue from Systems, software, and other.

Revenue from the sale or sales-type lease of gaming machines, systems, component parts, and other miscellaneous equipment and services are categorized as product sales from Gaming terminals and revenue from systems, fixed-fee software licenses, casino gaming management systems, game content, and spare parts as product sales from Other.

PlayDigital

The company’s PlayDigital segment provides iGaming systems and digital platforms offering customers a remote game server solution, which is a fast gateway to extensive casino content, and digital gaming services that enhance player experiences and create marketing opportunities around either the company’s games or third-party games via its aggregation capabilities. The segment also provides sports betting technology and services to commercial and tribal operators and lotteries in regulated markets, primarily in the U.S. The company categorizes revenue from iGaming and sports betting as service revenue from PlayDigital services.

Product Development

The company devotes substantial resources to research and development and incurred $255 million of related expenses in 2022.

Intellectual Property

The company’s intellectual property portfolio of patents, trademarks, copyrights, and other licensed rights is significant, and the company’s business depends in part on its ability to maintain its intellectual property rights. For example, some of the company’s most popular games and features, including the Wheel of Fortune franchise of premium games, are based on trademarks, patents and/or other intellectual property licensed from third parties. The company routinely obtains, retains, and expands licenses for popular intellectual property. As of December 31, 2022, the company held approximately 4,200 patents and 9,700 trademarks filed and registered worldwide. The company’s intellectual property portfolio is widely diversified with patents related to a variety of products, including game designs, bonus and secondary embedded game features, device components, systems features, and web-based or mobile functionality. The company also relies on trade secret protection, believing that its technical know-how and the creative skills of its personnel are of substantial importance to its success.

Most of the company’s products are marketed under trademarks and copyrights that provide product recognition and promote widespread acceptance. The company seeks protection for its copyrights and trademarks in the U.S. and various foreign countries, where applicable, and uses intellectual property assets offensively and defensively to protect its innovation. The company also has a program where it licenses its patents to others under terms designed to promote standardization in the gaming industry.

Software Development

The company has developed software for use in the management of a range of lottery, gaming, and betting functions and products, including leveraging integration with third-party software components. Software developed by the company is used in a variety of applications including in centralized systems for the management of lotteries, gaming (including digital gaming) and betting, and other commercial services; to enhance functions connected to services provided through websites and mobile applications (including lotteries, sports betting, instant win, and casino style games); and in a variety of back-office functions. Software developed by the company is also used in machines for the management of lotteries, gaming, betting and online payments; the provision of gaming and non-gaming content; and integration with other devices, such as mobile phones and tablets.

Regulatory Framework

The company holds over 500 gaming, digital, and sports betting licenses across approximately 350 jurisdictions. Key regulatory authorities that have licensed the company include, among others, the United Kingdom Gambling Commission, the Nevada State Gaming Control Board and the New Jersey Division of Gaming Enforcement. The company is subject to regulatory oversight by the ADM in Italy. As of December 31, 2022, the company held licenses for the activation and operation of the network for Italy’s Gioco del Lotto game; and the operation of the Italian Scratch & Win instant ticket game.

History

The company was founded in 2014. The company was incorporated in 2014. It was formerly known as Georgia Worldwide Limited and changed its name to Georgia Worldwide PLC in 2014. Further, the company changed its name to International Game Technology PLC in 2015.