Jim Hurley - Senior Vice President, Investor Relations Marco Sala - Chief Executive Officer Alberto Fornaro - Chief Financial Officer.

Barry Jonas - Bank of America Chad Beynon - Macquarie David Katz - Telsey Group Domenico Ghilotti - Equita Cameron McKnight - Wells Fargo David Hargreaves - Stifel Financial.

Good day and welcome to the IGT 2017 First Quarter Results Conference Call. Today’s conference is being recorded. At this time, I would like to turn the conference over to Jim Hurley, Senior Vice President of Investor Relations. Please go ahead, sir..

Thank you and thank you for joining us on today’s IGT’s first quarter 2017 conference call. Marco Sala, our CEO, will provide an overview of the quarter and comment on our broader strategic initiatives. Then Alberto Fornaro, our Chief Financial Officer will provide operational and financial perspective on the results.

After our prepared remarks, we will open the call for your questions. During today’s call, we will be making some forward-looking statements within the meaning of the Federal Securities Laws. Forward-looking statements are not guarantees and our actual results may differ materially from those expressed or implied in the forward-looking statements.

The principal risks and uncertainties that could cause our results to differ materially from our current expectations are detailed in our SEC filings. Now I will turn the call over to Marco Sala..

Thank you, Jim and hello everyone. The first quarter of 2017 has been a dynamic period for us. We have advanced our strategic objectives with a number of positive developments and initiatives.

At the same time, we are experiencing the reality of comparisons with the last year’s unusually high base and the headwinds that we expected in our gaming business.

While revenue and adjusted EBITDA did not match the record levels achieved in the first quarter last year, it is important to note that the results we are reporting today are consistent with the pattern for the year that we described in March. From a high level perspective, let me give you a sense of how I view the quarter.

Stripping away some of the major events of the first quarter of 2016, like record-setting jackpots in the United States and the UK and the large gaming system and software sales and also considering the new lotto contract effective since late last year, the picture comes into clearer focus.

The performance of our international business was uncharacteristically low in the first quarter for a combination of reasons, which we expect to fully offset in the balance of the year. Fundamentally, we have strengthened our leading position in global lotteries and began to rollout the new generation of gaming machines.

We are monetizing non-core assets that will allow us to significantly reduce our debt. And we are adopting a new business model for our future participation in the social casino space. Our global lottery business continues to deliver consistent underlying growth.

Same-store revenues for broad-based and distant games were up nearly 2% in North America in the first quarter. International same-store revenues rose 2%, reflecting strong trends in Latin America and in most of Europe, although the UK lottery performance remained weak. In Italy, 10eLotto game continues to grow with wagers rising 4% in the period.

Our investment in lottery solution demonstrates our commitment to leading the global lottery market and we have recently had some noteworthy milestones. In the first quarter, we went live with the first installation of RORA in North Carolina. RORA is the next generation of our central system for lottery customers.

It is designed to address the increasing convergence of gaming products and services. We have also made good progress rolling out the new lottery terminal in Italy by far the largest implementation in our company’s history.

Approximately half of the 40,000 point of sales has been upgraded so far, enhanced functionality should support wagers growth for this highly profitable business. Turning now to global gaming.

Revenues declined 4% in constant currency in the first quarter, reflecting comparisons with the largest system and software sales in the prior year and DoubleDown performance. The global installed base was up approximately 400 units sequentially, led by international growth. As we anticipated in March, there was a sequential decline in North America.

Most of the new content we showed at G2E will come to market in the second half of the year. We will be launching several new cabinets featuring some highly anticipated games, including The Voice, Wheel of Fortune, MegaTower and SPHINX 4D. It is a well-balanced mix of new standalone and enhanced WAP offerings.

The early reviews of the new products are positive. We began rolling out our new CrystalCurve cabinet at the end of the first quarter. We launched that with two [indiscernible] titles and quickly followed those up with early [indiscernible] on games. Based on the interest in CrystalCurve, we have decided to offer it on both a leased and for-sale basis.

We shipped nearly 6,000 gaming machine terminals during the period, about two-thirds of that in North America and the balance in our international segment. We are pleased with the customer and player acceptance of our new games and cabinets.

The field testing they go through before they were offered – they are offered to the market is supporting their success. With a growing library of proven content, we believe we can improve our market presence in for-sale Video Reel games. We are bringing a strong lineup of innovative content and products to the market this year.

I am confident that it will position us for a stronger growth in 2018 and beyond. We expect to build on this momentum with a more streamlined organization that simplifies and speeds up the game development process. The recent addition of several high-profile industry veterans, all with strong track records of success, should also support this.

As I noted earlier, we have made some important decision that we expect to have a very positive impact going forward. In April, we announced a strategic partnership with DoubleU Games in the social casino space.

We are selling DoubleDown to – sorry, DoubleU games for $825 million or 10.5x adjusted EBITDA and entering into a long-term game development and distribution agreement for social casino content. This is an important development in supporting our strategy of leveraging content across multiple distribution platforms.

It represents a much better fit for us than actually owning the channel. Through the partnership with the DoubleU, we continue participating in the social casino market as we will be collecting royalties on our casino game content. Asset and financial management continue to be of highest – of the highest priority for us.

The DoubleDown sale, in addition to the recently completed sales and leaseback of our Reno facility, will be important contributors to cash flow this year. To sum up, we expect to make important progress of many of our long-term goals this year.

As the initiatives unfold, I am confident we will drive improved sales and profit trends that create a significant value for our shareholders. Now, I will turn the call over to Alberto..

Thank you, Marco and hello to everyone on the call today. The summary of our first quarter financial results is presented on Slide 9. At constant currency, revenue decreased 9% from the first quarter of 2016, primarily on lower lottery service revenue and gaming product sales.

As we noted in March, there were some unique dynamics affecting year-to-year revenue comparison for the quarter. This can be understood in three main buckets, each representing about a third of the decline in revenues.

First, the record jackpot activity in North America and the high level late numbers in Italy in the prior year; second, the full quarterly impact of the new lotto concession, which includes amortization of the upfront payment and a lower fee and the balance, the remaining third is mostly related to large gaming system and software product sales in the prior year period.

Adjusted EBITDA declined 17% at constant currency on lower revenues and mix, with the international segment having a larger than normal impact that I will explain in more detail during the segment review. Let’s now look at our operating segments beginning with North American Gaming & Interactive on Slide 10.

Revenues of $305 million declined 10% from the first quarter of 2016, reflecting the lower install base that we had expected and called out for you last quarter. Strong player demand for the Wheel of Fortune and Megabucks games drove an improvement in WAP yields, up almost $3.

The revenue of DoubleDown is due to a year-over-year decline in the number of daily active users. Software product sales in the quarter were entirely driven by the comparison to a larger system sales stations in the first quarter of 2016.

Gaming machine shipments of 3,944 units in the first quarter were virtually unchanged from the same period last year and do not yet include 816 units for the Ilani opening in the Washington state. Terminal sales rose nearly 3% on improved ASP, led by demand for our Crystal series cabinet.

Operating income for North America Gaming & Interactive reflects lower revenue as well as increased depreciation associated with investment in the install base and higher jackpot expenses. Our North American lottery results are on Slide 11.

Revenue of $281 million was 11% lower than in the first quarter of 2016, which benefited from record jackpot activity, including the largest ever Powerball jackpot. The 14% same-store revenue decline was entirely due to lower jackpot activity.

Instant ticket and draw based games grew nearly 2% on top of growth of 9% in the first quarter of 2016 and 6% in the first quarter of 2015. As Marco mentioned, this is a testament to the consistent investment we have made in lottery innovation. Higher product sales came from increased instant ticket printing particularly in Texas, Georgia and Florida.

We continued to experience steady growth for the instant ticket printing and look forward to the expanded capacity we will gain from our new printing press in 2018. Operating income for North America Lottery was $69 million.

As a reminder, cost in our lottery business are relatively fixed, incremental sales growth, like the substantial jackpot activity in the first quarter of 2016, brings a significant benefit to our margin. Moving to International on Slide 12, revenue declined 9% at constant currency.

Lottery same-store revenues grew 2%, with broad based trends in Latin America and Europe that was partially offset by continued weakness in the UK. Gaming service revenue was down 9% at constant currency, mainly due to the closure of an interactive video bingo business during 2016 and to a lesser extent, the lower yields.

The gaming install base grew nearly 1,800 units from the prior year and was up 8% sequentially, reflecting the launch of the Greek VLT program and Class 2 units placement in South Africa. Many of these machines were placed late in the quarter and their contribution was not fully captured in our gaming service revenues.

The decline in product revenue is largely due to the comparison with high margin gaming software sales in the first quarter of 2016. We shipped 2,009 gaming machine units in the first quarter compared to 1,744 in the prior year.

The full increase in unit shipment is not reflected in gaming terminal sales as revenue associated with the new and expansions units shipped to Bahamas is expected to be recognized in the second quarter. As Marco mentioned, International operating income was uncharacteristically low in the first quarter.

There are three main drivers in roughly equal proportion; first, the lower revenue, second, the product sales mix and some discounts and finally, a combination of FX, bad debt and obsolescence expense. We expect to return to more normalized International segment profitability for the balance of the year beginning with the current quarter.

In fact we believe international sales and profits for the full year will be higher than 2016 levels. Our Italy results are on Slide 13. Revenue declined 6% at constant currency as growth in machine gaming was more than offset by the first full quarter impact from the new Lotto concession dynamics and lower sports betting revenue.

As a reminder, the Lotto fee amortization is now recognized against the revenue at the rate of approximately $23 million to $24 million per quarter. The $10 million rate impact you see on the slide [ph] refers to the change in fee, which is now fixed at 6% of wagers compared to the tiered fee structure of the previous contract.

Lotto wagers declined approximately 3%, reflecting significantly lower Late Numbers activity compared to the first quarter of 2016. 10eLotto wagers remains strong, growing 4% over the prior year period. Scratch & Win wagers were roughly unchanged.

Higher machine gaming revenue during the first quarter was essentially the result of increased vertical integration and the larger number of installed units. We have always operated the hybrid model of directly and indirectly managed machines in Italy. And as the direct portion grows, we are able to capture a larger share of the value chain.

Sports betting revenue was down, a significant increase in payout, up 850 basis points. Similar payout trends were recorded across the industries and that impacted ROI for $13 million.

At constant currency, Italy operating income was down 12%, with the new Lotto concession dynamics and sports betting performance partially offset by machine gaming growth. On Slide 14, you can see net debt at $7.4 billion at the end of the first quarter, $170 million lower at year end level. Our first quarter cash flow dynamics are shown on Slide 15.

Operational performance and disciplined working capital management generated $284 million in cash from operation, which after $211 million in interest payments.

Capital expenditure of $170 million – $172 million were mainly related to lottery maintenance CapEx, including the Italy Lotto network and infrastructure upgrade Marco mentioned as well as hardware upgrades for North America lottery customer who recently extended their contract.

Due to the timing of the sales and leaseback of our Reno facility at the very end of March, approximately $155 million in proceeds were sitting in cash on the balance sheet at the end of the quarter. As a reminder, we will have the final installment of the upfront Lotto concession payment in the second quarter.

On Slide 16, we have revised our outlook for 2017. Based on the assumed closing of the DoubleDown sales between now and the end of the second quarter and taking into account the impact of the increased taxation on gaming machines in Italy, we are currently expecting adjusted EBITDA of $1.6 billion to $1.68 billion for the full year.

This compares to our prior outlook of $1.68 billion to $1.76 billion. DoubleDown accounts approximately 75% of the adjustment, with Italy taxes representing the balance. We continue to expect profit to be more weighted to the back half of the year with adjusted EBITDA improving progressively quarter-to-quarter.

At this point, we have estimated the first half and second half contribution to full year adjusted EBITDA to be approximately 46% and 54%, respectively. Our expectation for capital expenditure has not changed. After the close of the DoubleDown sales, we expected to net approximately $700 million in cash after transaction fees and taxes.

The proceeds will be used to pay down debt, which remains a key priority for us. As a result, we have updated our outlook for net debt at year end, which is now $6.95 billion to $7.15 billion, down $650 million from our prior expectation. As a reminder, we are using an average euro-dollar exchange rate of 1.10 for all of our guidance ranges.

In the first quarter, the average euro-dollar rate was nearly 1.07 and it has moved closer to our guidance rate in the past month. The approximately annual impact of $0.01 change in the euro-dollar rate is $9 million on adjusted EBITDA and $35 million on net debt.

We have also updated cash taxes and purchase price amortization to reflect the expected impact of the DoubleDown sales. As Marco mentioned, we have made a lot of progress on important strategic initiatives in the first few months of the year. We have a lot more in store for the back half of 2017 and our global teams are focused on executing.

At this point, we would like to open the call for your questions.

Operator, could you please proceed?.

Thank you, sir. [Operator Instructions] And we will take our first question from Barry Jonas from Bank of America. Please go ahead..

Hi, guys. I just had a couple of questions for you. I want to make sure I understand the new guidance track lease at 75% of the change in guidance relates to DoubleDown.

So is the first, up till the point at which the deal closes, the EBITDA of DoubleDown still in your guidance and then just royalty fees going forward? Maybe just give some color on how to think about DoubleDown, explicitly, in this year’s guidance?.

Yes. Barry, it is very simple. We have said that the growth will be in the second quarter.

The most probable case, it will be a little bit early than the end of the quarter and therefore there is a correction of the EBITDA due to the sales of the DoubleDown business of around $60 million, which represents the contribution we were expecting from DoubleDown to the BBDA for the remaining part of the year since the date that we have in mind for the close of the transaction.

So this means that, obviously, if we plan to retain in our guidance the first quarter results that we have already announced for DoubleDown and a fraction of the second quarter..

Okay.

So implicit in – there is all of the guidance changes just DoubleDown and the new Italian pack to be clear?.

Yes and it’s 60 – approximately $60 million and $20 million..

Great.

So I wanted to get a sense as some of the lotto fees past, I wanted to just get a general sense of your view on increasing returns of capital in the near to mid-term and what do you need to see and what’s the preferred method of doing so?.

You mean in terms of prospecting investment or current investments?.

Just as free cash flow starts to accelerate, as you start to de-leverage more, I just wanted to get a sense to your thoughts on timing, of increasing the dividend and share repurchases and maybe what sort of happens?.

Okay. And no, let me tell this, I think that we have at the time of the merger, outlined our capital allocation policy and we continue to work. I don’t see any major change at the moment. We have said that in terms of that, we want to go to 4.0 in terms of leverage and so we will continue to pay that.

Obviously, what is important is our portfolio of investments. So, we are continuing to invest in the current contract that we have.

You are aware that every year we have a small amount of money in general, below $100 million, dedicated to grow investments and so therefore the CapEx for our own business and some selected growth initiatives and pay down the debt and then pay the dividend to our shareholders. So, I don’t think there is any change at the moment..

Got it. And then lastly, we haven’t talked about synergies some time, just wanted to know where you are relative to the original guidance of, I think it was $270 million of cost guidance for the IGT acquisition and then $50 million top line.

Maybe just any updates there would be helpful?.

Yes. I think we are basically on target. Originally, we announced $230 million of synergy and we upgraded to $270 million, of which $40 million we thought they are going to the balance sheet basically mostly in the installed base, because the synergy are mostly related to the gaming business and $230 million to the P&L.

We achieved at the end of – for the last 2 years, after the merger, we have achieved $185 million and the remaining amount is expected to be achieved this year. Regarding the revenue synergy, you know that is more difficult to make an assessment.

But I can tell you that the sum of the major initiative that were included in our calculation, they are on track. We have already brought some content from legacy IGT to the Italian market.

And also we have launched an important product, which is Wheel of Fortune 3D that combines a very important brand from legacy IGT with a technology that was introduced into the market by the former Spielo..

Great. Thank you so much..

Thank you, Barry..

And our next question is from Chad Beynon from Macquarie. Please go ahead..

Thank you and good morning. Wanted to just talk us a little bit on the Italian tax rate increase, you mentioned that, that was roughly 25% of the EBITDA guidance adjustment.

Can you just talk about maybe some of the things that would allow you to potentially mitigate that impact? It was a good performance in the quarter on the VLT side, if you could talk about that? And then also on Italy, just in your conversations with the government, if you are still expecting that the Scratch & Win renewal will come up as expected, which I believe is in 2019? Thanks..

Okay, Chad. I will reply to your questions. On the Italian taxation that as you know include higher taxes on both AWPs and VLTs.

Short-term, we do not expect the ability to recover, especially the AWPs part, because at the increase of the taxation does not correspond the ability to reduce the payout since the payout of the market is already fixed at the minimum level. So, we do not have the ability to reduce it any further.

It’s clear that, as you were saying, we are doing better on VLTs, but this was already factored in our plan. What I can add regarding the VLTs and – sorry, the AWPs, you might have seen that Italian government recently introduced an amendment even to accelerate the reduction in the number of AWPs that was part of last year’s budget law.

It caused for an approximately one-third reduction in AWPs, carried out in two phases by April 2018. I am raising this point, because I want to make the point quite clear that we do not expect any impact on wagers this year. We expect that the higher productivity per machine should offset the installed base reduction.

And also the number of point-of-sales will be impacted marginally thus securing most part of the current distribution. Next year, we expect some potential impact on wagers in the single-digit range. The impact on profitability would likely be offset anyway by lower operating expenses related to the smaller networks.

So, maybe it can be quite shocking reduction of those number of machines, but we believe it will not affect our business going forward. On Scratch & Win, I confirm what you said the account that is going to expire in 2019 and we will await the determination of the government in the next month..

Okay, great. My follow-up is just another one on guidance just trying to further understand there. I think you answered it pretty clearly, but I wanted to ask it a different way just because it is more back half loaded.

So if your reduction in guidance is really just DoubleDown and the tax in Italy, does that mean that the first quarter pretty much came in line with your internal expectations or are you just more positive on the back half on the international side, on the gaming side or some of the others? Just want to ask one more on the guidance? And that’s it for me.

Thank you..

Chad, it was mostly in line with our expectation. But in the international, there were a series of events all on the negative side that drove lower the EBITDA we were expecting for the international. Some of those, however, basically will not, we believe will not repeat in the next quarter.

And that’s why I have said that we expect an improvement in the second quarter and anyway an improvement compared to last year for the full year results of the international region..

Okay, thank you very much..

Thank you..

And we will take our next question from David Katz from Telsey Group. Please go ahead..

Hi, good morning everyone..

Good morning, David..

Good morning. So, I think you have just covered my first question, which was really drilling a little further around the international.

And so I would like to ask about the North American installed base where the number of premium – specifically in the premium end of that business where the number of units were down meaningfully in the first quarter, but the yield was actually also down year-over-year.

I think that, that’s kind of a critical portion of the North American business and if you could talk about where your confidence comes from as we progressed through the year with that? And then I have sort of a follow-up also..

No, I mean my point is very simple.

I realized that the full rollout of our new cabinet and content in the second half of the year represent for us an opportunity to reverse the trend and we intend to pursue it, because we expect to recover to begin building in the second half when our most high-profile games, Fort Knox, The Voice, SPHINX 4D and the cabinet, CrystalCurve ULTRA, we look forward to MegaTower begin to reach the casino floor.

They will build on the good progress that we have made since the second half of 2016, because you might remember that we improved our installed base for our 3D library and therefore this gives us the confidence that as long as we will launch the new product, we can recover.

I have also to mention that the WAP yield was up and the overall yield was only slightly down. So, I guess that the new products at the WAP initiatives, because we launched recently a couple of games that are doing pretty good. So again, it’s a matter of the new launches. It’s a matter of what we have developed.

It’s a matter of what we presented at G2E last year that we have now to deploy to the market..

Very good. And if you could – I know that there has been some change in leadership or personnel within the North American gaming business.

If you could provide us just a little bit of appropriate color around what’s going on there and the reasons for the change and what we can expect to see out of that as a result?.

Sure, I can do. But the organization is continuously evolving. We really have one main goal that is to deliver a compelling content to the market. And we have two big objectives to help achieve that goal, simplify the content development process and focus more on the need of our international customers.

From a practical perspective, let me tell you what that means. North America, we have integrated content management and broad marketing activities for both premium and core games under [indiscernible] as Chief Growth Officer. In international, we have dedicated some studios and field services resources to their business.

This should help them to create a more localized content and to be even more responsive to customer needs.

And we have also rounded out our senior content leadership team with the addition of some industry veterans and that is what we have done to speed up and to continue in our process, nothing dramatic, just a fine-tune based on the experience of the last month to better deliver on our objectives..

Understood.

And one last detail on Alberto, I missed the net proceeds from DoubleDown and that’s going to be a second quarter entry in the cash flow statement?.

Net of tax and transaction cost will be approximately $700 million..

$700 million? Perfect. Thank you very much..

Thank you, David..

[Operator Instructions] We will take our next question from [indiscernible] from UBS Asset Management..

Yes, hello, hi. I wanted to ask you if you are planning considering to bid for the [indiscernible] renewal this year in Italy? And if so, what would be the timing for that? Thank you..

I don’t know the timing. We will bid..

You will bid. Okay..

Yes..

Alright.

But you have a sense it could be at least within the year or?.

No, let me elaborate on it. I don’t know when the regulator will decide to issue the tender, but it should be during this year. We bid also last time. And it’s clear that for us it is a lot of interest. And so as we did in the past, we intend to bid also this time..

And – but it is not included in your guidance like net debt or?.

Not at all. Not at all..

Okay, thank you..

Thank you, Julio..

And we will take our next question from Domenico Ghilotti from Equita. Please go ahead..

Yes, good morning. First of all, a clarification on the guidance.

First, I want to check that the disposal of the Reno facility was already included in the original guidance? And I am trying to understand, what was the contribution of DoubleDown in terms of EBITDA in the first quarter? Because if I strip down, strip out this contribution really the quarter-on-quarter improvement that you have to reach the full year guidance is quite impressive.

If you have already been elaborating about the drivers supporting the recovery in North American gaming, can you give the same picture also for the international and Italian and on American lottery areas?.

Okay. Domenico, let’s go step by step. There is a lot of question in one. And if I forget something, please remind me. So regarding the Reno facility, we have included it in the original guidance. It was one – as you have probably seen, during the last 2 years, we are actually managing our balance sheet and this was part of what we planned for the year.

Regarding DoubleDown, let me put it this way, we were expecting significant improvement and you have seen already an improvement compared – sequentially compared to December in DoubleDown, but we were expecting in the second half of the year significant improvement, because in the second quarter, we are launching and this is something completely new for us, the games that are based on the same that we have on the steppers.

And obviously, we have a library of content on the stepper that is very, very strong, giving the expertise that we have on the land based business. This was a segment that we have not introduced in the past. This was very successful last year, mainly exploited smaller players and we thought the Tower product was extremely strong to regain revenues.

The other – I think we mentioned already that we were planning to launch another app and it was a first time too for DoubleDown because unlike the competitors, we were – we had a business model based on one app and we decided to move.

So there was a lot of activity in the pipeline that justifying also for DoubleDown a second half significantly better than the first half..

Sorry..

I think among the others, the most important question probably is related to the gaming, and I go back to what we have said, so basically the second half, due to the new product, we are forecasting an improvement in the gaming side of the business compared to the first half due to the new product introductions..

Yes, this is clear, but maybe on the other areas?.

And in the international region..

So if you can elaborate on the other areas, if you see any particular, for example, VLTs increase giving a boost on the profitability on international? Sorry, can you hear me? Hello..

I guess we will take the next question..

And our next question comes from Cameron McKnight from Wells Fargo. Please go ahead..

Good morning. Thanks very much..

Yes. We will take the next question, please..

Good morning. Can you hear me? [Technical Difficulty].

In case anyone can hear us, we are just having a little bit of technical difficulties where we can’t hear you, so please standby if you are on the line. [Technical Difficulty].

Please go ahead..

Sorry about that, folks. We had some technical difficulties on our end, so thank you for staying tuned. Could we take the next question, operator or I believe Domenico, if you are still on within the middle of asking a question..

At the moment, we have Cameron McKnight from Wells Fargo. Your line is open..

Good morning. Thanks very much.

Can you hear me?.

Yes. Thank you, Cameron..

Thanks.

A question for you first Marco, on DoubleDown, can you walk us through some of the high level reasons you made the decision to sell the asset and did you come up with multiple bidders through the process?.

Yes. I have to remind you our strategy that is to leverage our content across multiple distribution platforms. And when you look at the investment required to grow DoubleDown against our strategy, it made sense for us to unlock the value for our shareholders. We were able to do that at one of the highest multiple in the space.

We were able to do so because of very compelling growth plan we created for the business. And we feel that going forward under the strategic partnership with DoubleU, we will continue to participate in the social casino market and collect royalties on a large assortment of new and existing casino game content.

Regarding the second part of your question, we have consistently received inquiries on DoubleDown over the years, interest spiked the last fall following the Caesars Interactive transaction and as we were assessing long-term options for the business.

In addition to the attractive terms of the broader strategic partnership as I said with DoubleU made it the right thing for us..

Got it. Thanks Marco.

And then in terms of the purchase multiple, if you were to impute the royalty fee and a true or representative R&D expense to the purchaser, would it be fair to say that true multiple in the purchaser’s hands was more like 13x or 14x versus at 10.25x headline?.

Cameron, Alberto. That’s not the way we see it. We see it as basically the deal that was tracked regarding the content is a deal that is done at market rates and we will provide the content that we have as well as some of the license content after doing courting of this for the social casino space.

So at the end of the day, we see the two things to separate. There is a stream, there is a price paid and there is a stream of future net profits that we expect from this partnership..

Okay, got it. Thanks Alberto. And then finally, just on the U.S.

lottery side, could you walk through any major contracts that are coming due in the next 1 year to 2 years?.

Yes. There is not a lot in terms of our own contract. There are a couple of – there is, in terms of our contract, there is New York, which we are negotiating an extension. And then there is in 2019, there is California. There isn’t – not in our contract, there is South Carolina that is I think the bid is going on right now.

And then there are between us and the competition very few small contracts like West Virginia or Kansas. So I would say, probably the most important one will be California in 2019..

But we – to elaborate on it Cameron, I think we feel very comfortable with our lottery portfolio in the next years. I think we did important moves over the last few quarters. So, I think the predictability of our revenues in the lottery part of the business in North America is quite solid..

Okay, perfect. Thank you very much..

Thank you, Cameron..

And we will take our next question from Domenico Ghilotti from Equita. Please go ahead..

Yes. I was cut off, so I come back to my previous question.

And just to understand, my question was if there is any particular driver that is supporting a recovery sequentially quarter-on-quarter also for the other, the international and Italian operations, you have been already discussing, commenting about the North American gaming?.

Yes. Domenico, regarding the international part, it’s following the same path of the North American one. On one side, we see good trend as far as the lotteries are concerned and also, the international part of the business when it comes to gaming will benefit the launch of new products and new contents.

As you well know, in Italy, we do not see spikes in the second part of the year. And we believe that we can progress growing moderately as we generally do in the geography..

Okay. So, just to check I was maybe wondering if the startup of the lotto operation was creating some initial startup cost, but something that was particularly strong in the first part of the year. Okay, then....

Domenico, thank you for the question, I want to reply. The lotto deployment of terminals is doing very, very well. I mean, we are receiving great feedbacks from our customers. As I said in my initial remarks, we already deployed the new terminal in half of our network.

And what I can tell you that we are very, very satisfied on what is going on and I think it will help accelerating the growth of the lotto portfolio, which is the other question you were about to make?.

Well, on the international business, can you give us an update on the rollout of the VLTs in Greece?.

Yes, I can do that. It started – is progressing below the expectation in terms of velocity, but it happens when you have to establish a completely new network. So next month will be crucial to understand the speed of the development. Now, it’s too early to say.

What I can say, they are lagging behind a little bit than planned, but I think that we have to judge it more extensively over the next months..

And my last question is related to your previous comment on the impact of the, let’s say, reduction in the installed base in Italy. You were referring to a mid single-digit decline in wagers for 2018 with marginal impact on profitability, if I got well your comments.

Is indication related to AWPs or to the old gaming machine business in terms also the mid single-digit?.

No, the indication – the indication is the indication of the additional reduction of the number of AWPs, the 30% you are well aware about. So what I was saying when it comes to the reduction of 30% of AWPs, I was making the comment that we do not expect any impact for this year.

And even though this reduction will impact the wagers at the single-digit level for next year, we believe that will offset with a reduction in the cost we will have to operate a smaller network..

Can I ask you last question on you were mentioning the aptitude, so the limited room for mitigating the impact on the new taxation on AWPs.

And what is the attitude on the VLTs where you have more room, let’s say, to try to reduce the payout?.

I think that is, let me say, a competitive maneuver. So I do not disclose that. I agree with you that you have some more room. It’s up to us to decide how to use it from the competitive standpoint. So, I am not going to elaborate any further on it..

Okay, thank you..

Thank you..

And we will take our next question from David Hargreaves from Stifel Financial. Please go ahead..

Hi. I apologize if this is a stupid question, but in the press release, you made reference to non-core assets that you were going to use to pay down debt.

And I am just wondering if there are further assets, non-core assets that we maybe expecting to see beyond what you have already announced?.

There are some other opportunities. They are fairly small, in our view, at the moment. But we will pursue, I would say, probably for the year, we are done. Because in the first quarter, we have already done two important asset sales, but anyway, the answer is there is still something in the balance sheet, but it’s pretty small..

And to the extent you have anything you could volunteer, I’d really love some high level perspective on your customers’ appetite for new machines.

You are seeing any kind of acceleration in replacement and is it still driven by the titles you are bringing out or is there maybe any kind of change in demand that you are seeing?.

No, we are not seeing major changes in demand even though, I mean, I have seen that some competition in the recording part of the business is driving a moderate growth. So again, it implies that the customers are reacting to the innovative offering.

And as long as you bring some innovative new products as we believe we can do over the next months, we expect to improve our presence in the floor and we hope also we can contribute to the growth of the market going forward..

For the deployed base that you have on a lease basis, are you seeing any significant change in the win amounts?.

No, I would say no..

Okay, thank you very much..

Thank you..

As there are no further questions, I would now like to turn the call back to Marco Sala for any additional or closing remarks..

Thank you very much. As I told you in March, we see 2017 playing out as a tale of two halves, with a combination of factors impacting year-to-year comparisons in the first half followed by an execution-focused growth in the second half.

Our global lottery business is strong and growing and we are excited about the new gaming machines and content we are bringing to market. Thank you very much for your interest in IGT and have a great day..

That will conclude today’s conference. Thank you for your participation, ladies and gentlemen. You may now disconnect..