FactSet Research Systems Inc. (FDS) Q2 2019 Earnings Conference Call Transcript

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FactSet Research Systems, Inc. (NYSE:FDS)Q2 2019 Earnings Conference CallMarch 26, 2019, 11:00 a.m. ET

Contents: Prepared Remarks Questions and Answers Call Participants Prepared Remarks:

Operator

Good morning. My name is Stephanie, and I will be your conference operator today. At this time, I would like to welcome everyone to the FactSet Second Quarter 2019 Conference Call. All lines have been placed on mute to avoid any background noise. After the speakers' remarks, there will be a question-and-answer session. If you would like to ask a question during this time, simply press *, then the No. 1 on your telephone keypad. If you'd like to withdraw your question, press the # key. Thank you. Rima Hyder, Vice President of Investor Relations, you may begin your conference.

Rima Hyder -- Vice President, Investor Relations

Thank you, Stephanie, and good morning, everyone. Welcome to FactSet's second fiscal quarter 2019 earnings conference call. Before we begin, I would like to point out that the slides we will reference during the course of this presentation can be accessed via the webcast on the Investor Relations section of our website at factset.com. The slides will be posted on our website at the conclusion of this call. A replay of today's call will be available via phone and on our website. After our prepared remarks, we will open the call to questions from investors. To be fair to everyone, please limit yourself to one plus a follow-up.

Before we discuss our results, I encourage all listeners to review the legal notice on Slide 2, which explains the risks of forward-looking statements and the use of non-GAAP financial measures. Additionally, please refer to our Forms 10-K and 10-Q for a discussion of risk factors that could cause actual results to differ materially from these forward-looking statements.

Our slide presentation and discussions on this call will include certain non-GAAP financial measures. For such measures, reconciliation to the most directly comparable GAAP measures are in the appendix to the presentation and in our earnings release issued earlier today.

Joining me today are Phil Snow, Chief Executive Officer; and Helen Shan, Chief Financial Officer. Now, I'd like to turn the discussion over to Phil.

F Philip Snow -- Chief Executive Officer

Thanks, Rima, and good morning to everyone. We closed the first half of our fiscal year on a solid note. We continued our track record of steady growth with increases to our topline and bottom line, as well as operating margin improvement. We executed well against our strategy of providing smarter, connected data and technology solutions, and saw positive results across all our businesses. Our broadening suite of innovative solutions continued to resonate with the market.

We're laser focused on working with our clients to drive efficiency in their processes, and delivering content and analytics in new ways, all while providing FactSet's best-in-class service. We're encouraged by an increasing number of high level conversations with our largest clients regarding our entire solution set as they navigate a challenging economic backdrop.

In our second quarter, we increased our organic ASV and professional services at a growth rate of 6%. Organic revenue also grew over 6%, and adjusted operating margin came in at 33.2%, 180 basis-point improvement year-over-year. We're pleased with our overall cost discipline, allowing us to improve our margin and make meaningful progress toward our goal of 100 basis points' improvement for the year.

Adjusted diluted EPS increased 14% to $2.42, primarily due to stronger operating results. Turning to ASV, analytics and CTS were the main drivers this quarter, along with the annual price increase for our Americas clients. Both analytics and CTS have been sources of growth for several years due to the competitive strength of our analytics suite and the increasing demand for high quality integrated data in the marketplace.

Within analytics, our core portfolio analytics suite had a strong quarter and provided our sales team with many opportunities to increase ASV with existing clients. Analytics drove the majority of the increase this quarter. CTS was the second largest contributor in the second quarter, as it continues to increase its sales of core data feeds such as FactSet Fundamentals. And within the Open:FactSet Marketplace, data exploration is removing friction from the trial and evaluation process to evaluate content.

Wealth also had a positive quarter as it continues to expand and take market share. The branch rollout at Merrill is complete and was successfully implemented in under six months. We believe the wealth team has a growing number of significant opportunities in this space.

Within research, we saw a healthy increase in users on the sell-side. Additionally, we saw growth of our RMS solutions across both the buy-side and sell-side. We're also pleased with the results of the detailed banking sector data we rolled out last quarter. We've more than doubled the users for this new content and plan to add new content in other sectors. Lastly, our overall cancellation rate remains stable this quarter versus a year ago.

Looking at our Americas and international businesses, Americas delivered a solid growth rate of 6%, driven by our leading analytics and expanded CTS offering. We also see an increase in enterprise discussions across our client base for our workforce solutions. The EMEA region grew 4% this quarter, primarily as a result of analytics and CTS. Cancellations in one market drove a decrease in the growth compared with the first quarter of 2019. We have a good pipeline for the second half of the year, and we believe we will reach our goals for this region.

In Asia-PAC, we hit a strong second quarter with analytics and CTS again as the main drivers, followed by research resulting in an 11% growth rate for the region. Additionally, the cancellation rate in Asia-PAC is also trending positive. We believe we have significant opportunities in various markets in Asia-PAC, especially with CTS and analytics.

As we close the first half of the year, we're pleased with our financial metrics and progress on ASV relative to last year. At the same time, we remain cautious as client cost pressures remain. For the second half of the year, we'll continue to execute on our 2019 goals, and are making good progress integrating our products, bring seamless investment portfolio lifecycle platform, and enhancing our risk offering and unbundling our products to provide open and flexible solutions. Our broad suite of offerings is resonating well with clients who are looking to increase productivity through smarter, connected data, and gives us confidence in our growth trajectory.

As I've said before, it's important to look at our company performance on a half-yearly basis. We anticipate that our growth for the full fiscal year could be more concentrated toward our fourth quarter. We reaffirm our outlook for 2019 and look forward to a successful second half. Now, let me turn the call over to Helen to talk in more detail about our financial results.

Helen L. Shan -- Executive Vice President & Chief Financial Officer

Thank you, Phil, and good morning, everyone. It's great to be here with all of you again. We delivered a solid second quarter. Both organic revenue and organic ASV, plus professional services, grew at 6%. We expanded our GAAP and adjusted operating margins year-over-year, and grew adjusted diluted EPS by 14%.

As I go through this quarter's results, please keep in mind that our GAAP net income and EPS in the second quarter of our prior fiscal year were impacted by one-time past expenses related to U.S. tax reform. I'll expand on this a little later when I report out on the tax rate. I will now walk us through our second quarter.

GAAP and organic revenue increased 6% to $355 million and $357 million respectively versus the prior year. The growth was driven primarily by analytics, CTS, and wealth. Note that our solid first quarter ASV results are a contributor as prior period ASV is more fully recognized as revenue in the second quarter. For our geographic segment, Americas revenue grew 7%, and international revenue grew 4% organically. Americas benefited from an increase in wealth, analytics, and CTS, and international revenue was largely driven by analytics and CTS.

ASV plus professional services increased to $1.44 billion at the end of our second quarter at a growth rate of 6% year-over-year, and $21 million since the end of our first quarter. The growth was primarily driven by analytics and CTS, and reflects our annual price increase in the Americas. The price impact was approximately $10 million, in line with prior year.

Adjusted operating margin increased by 33.2%, a 180 basis-point improvement from the second quarter of 2018. This expansion is driven in part by tighter expense management and increased productivity. Some of this improvement comes from the restructuring efforts we took in prior quarters and a continued mix of resources between higher and lower cost regions. Favorable movement in foreign exchange rates were a notable driver as the dollar strengthened against some of the currencies we are most exposed to, such as the pound sterling, the Euro, and the Indian rupee. We believe that we remain on target to achieve the 100 basis-point margin expansion for the full year.

Operating expenses for the second quarter totaled $246 million, an increase of 3% over the prior year. This increase is lower than our revenue growth and, as a result, we were able to expand our operating margin. As a percentage of revenue, the expense improvement came from our cost of services, which was positively impacted by lower compensation expense and a decrease in data costs. These reductions were partially offset by higher technology costs supporting our infrastructure spend. Additionally, the higher productivity from the restructuring actions taken last year continues to have a favorable impact on cost of service.

SG&A expenses, expressed as a percentage of revenue, were in line with the prior year. Lower discretionary spend in marketing and office expenses were partially offset by higher compensation and bad debt expense.

Our tax rate for the quarter was 18.8%, impacted by a one-time settlement with tax authorities. Excluding this discreet item, our tax rate would be 17.6%. In the second quarter of our Fiscal 2018, our tax rate was 42.4%, reflecting the one-time toll tax that we had to pay on unremitted foreign earnings as a result of the U.S. Tax Reform. Excluding this and other discreet items, the effective tax rate for the period was also 17.6%.

GAAP EPS increased 65% to $2.19 this quarter, versus $1.33 in the second quarter of 2018. This increase is attributable to higher revenue, improved margins, a lower effective tax rate, and to a lesser extent, lower share count offset by higher interest expense. Last year's EPS was negatively impacted by $0.57 due to the aforementioned toll tax adjustment. Adjusted diluted EPS grew 14% to $2.42. A reconciliation of our adjustment to GAAP EPS is disclosed at the end of our press release.

Free cash flow, which we define as cash generated from operations less capital spending, was $87 million for the quarter, an increase of 1% over the same period last year, primarily due to higher net income, and partially offset by the timing of tax payments and higher capital expenditures. We increased the net number of new clients this quarter versus the prior quarter by 108, resulting in a total of over 5,400 clients. The drivers of the growth were mainly due to an increase in corporate and wealth management clients.

Looking at our share repurchase program for the second quarter, we repurchased 215,000 shares for $44 million at an average share price of $205. We have 137 million remaining in our share repurchase program. And we remain committed to buying back shares at a steady pace, and continue to balance our capital allocation between business investments and shareholder returns.

We are changing our guidance for a few metrics. First, we are lowering our annual effective tax rate for the full year. It is now expected to be between 17-18%. Second, we are tightening our GAAP diluted EPS guidance to be between $8.70 and $8.85, and our adjusted diluted EPS guidance to be in the range of $9.50 and $9.65 cents. There is no change to our annual guidance for GAAP revenues, organic ASV plus professional services, and GAAP and adjusted operating margins.

In summary, we are pleased with our quarter, and with our first-half results, where we had over 6% growth in both revenue and organic ASV plus professional services, and adjusted operating margin of 32.4%, and a 15% increase in adjusted diluted EPS. We continue to demonstrate successful execution against our strategy, both client collaboration and service, and on disciplined cost management.

As we look ahead to the remainder of this fiscal year, we will make investments that drive business growth to streamline our cost structure and to return long-term value to our shareholders.

...

So, with that, we are now ready for your questions. Stephanie?

Questions and Answers:

Operator

At this time, I'd like to remind everyone, in order to ask a question, please press * then the No. 1 on your telephone keypad. We'll pause for a moment to compile the Q&A roster. Your first question comes from Manav Patnaik with Barclays. Please go ahead.

Gregory R. Bardi -- Barclays Investment Bank -- Analyst

Hi, this is Greg calling, on for Manav. I just wanted to ask about the sales pipeline in a couple ways. Just wondering if there were any delayed buying decisions in the second quarter, given what we saw in December. And then also, a little bit of the rationale for why the growth will be tilted toward the fourth quarter.

F Philip Snow -- Chief Executive Officer

Hey, Greg, it's Phil Snow. So, I don't think we saw anything noticeable in terms of delays as a result of what happened in December. Nothing measurable that I can point to. And as I said in my script, we really do think about our business in halves. When we look at the pipeline in any given year, it's typically much more heavily weighted toward Q4, and this year is no different.

Gregory R. Bardi -- Barclays Investment Bank -- Analyst

Okay. And then, on the margin side, pretty nice results. We had always thought of the margins as being a steady tick up every quarter. But the second quarter was already above your guidance. So, any color on timing that happened in the third quarter or how we should think about the margin trajectory from here? Thanks.

Helen L. Shan -- Executive Vice President & Chief Financial Officer

Yeah, sure. Thank you for your question. I'll take that. This is Helen. We're very comfortable with where we are for the first half of the year. It really was driven by things that we've been executing on, which is good discipline on discretionary spend, on employee productivity improvement -- which we've seen from, as we noted, the employee mix as well as some of the actions that we've taken over the previous quarters. And then, also, we've benefited from foreign exchange favorable rates, largely exposed to the ones that we're most open to, which is the pound, the Euro, and the rupee.

As we think about it going forward, we're just going to continue to execute on the same plan, on getting operational efficiencies. And so, that gives us comfort of being able to meet our target for the year, and to be within the range that we've given you guidance on. Any other questions?

Operator

Your next question comes from Peter Heckmann with Davidson. Please go ahead.

Peter Heckmann -- D.A. Davidson & Co. -- Analyst

Good morning, everyone, thanks for taking my questions, Phil, I was curious on the M&A front. It'll be almost two years since the company's last acquisition. Are you -- when you look at the marketplace, are you changing some of your thoughts about organic versus nonorganic growth, or is there something else, like valuations, that's keeping you from closing deals?

F Philip Snow -- Chief Executive Officer

Yeah, it's a great question. So, I think I'd just start with we did make a number of acquisitions within a couple of years -- more software. So, we intentionally decided to pause and really get those integrated. And I think what you're going to see in the second half of this year is some real new exciting products coming out from FactSet, within the analytics and trading space. And we're already beginning to m

Contrarians Combine As Canadian Titan Brookfield Buys Credit Heavyweight Oaktree Capital

&l;figure class=&q;image-embed embed-1&q;&g;&l;div&g;&l;img src=&q;https://specials-images.forbesimg.com/imageserve/5c8983cb4bbe6f019c970ef9/960x0.jpg?cropX1=147&a;cropX2=3250&a;cropY1=224&a;cropY2=1970&q; alt=&q;Bruce Flatt, CEO of Brookfield Asset Management&q; data-height=&q;2586&q; data-width=&q;3879&q;&g;&l;/div&g;&l;figcaption&g;&l;fbs-accordion&g;&l;p class=&q;color-body light-text&q;&g;Bruce Flatt, CEO of Brookfield Asset Management.&l;small&g;FRANCO VOGT FOR FORBES&l;/small&g;&l;/p&g;&l;/fbs-accordion&g;&l;/figcaption&g;&l;/figure&g;&l;p&g;On Wall Street, there's no shortage of sharp elbows and big egos. Now comes a new power player who doesn't quite fit the bill. He's a trained accountant, raised and schooled in Winnipeg, Manitoba, and his latest move is rocking the world of finance. &l;/p&g;&l;p&g;On Wednesday, Bruce Flatt, the billionaire head of Toronto's Brookfield Asset Management, unveiled a deal to buy 62% of Oaktree Capital, a Los Angeles-based pioneer in distressed-debt investing headed by billionaires Howard Marks and Bruce Karsh. With Oaktree, Flatt adds one of the premier investors in credit markets around the world, with $120 billion in assets under management, to Brookfield's even larger scope in different markets. &l;/p&g;&l;p&g;In real estate, Brookfield manages a $188 billion stable of assets that includes city skylines from New York and Los Angeles to London and Sydney. Its infrastructure holdings of pipelines, ports, data centers and toll roads amount to $61 billion in assets, and there is no bigger institutional owner of solar, wind and hydropower plants than Flatt's $47 billion renewables business. From nuclear contractor Westinghouse to the auto battery division of Johnson Controls and real estate operators Forest City and General Growth, almost no one on Wall Street has matched Brookfield's private equity dealmaking pace over the past year. When you add the $350 billion that Brookfield oversees to Oaktree's $120 billion scope across credit markets, Flatt's closest peer on Wall Street is billionaire Stephen Schwarzman, the leader of $472 billion-in-assets Blackstone Group. In terms of fees, they earned a combined $2.5 billion last year, versus $3.2 billion for Schwarzman&s;s outfit. &l;/p&g;&l;fbs-ad position=&q;inread&q; progressive&g;&l;/fbs-ad&g;&l;p&g;"This deal makes all the sense in the world for Brookfield," says Thomas Gayner, the co-CEO of Markel Corp., an insurance holding company that's a big and long-term owner of both Brookfield and Oaktree shares. "I'm just processing it myself," he adds after picking up a phone call by &l;em&g;Forbes&l;/em&g; on Wednesday morning.&l;/p&g;&l;p&g;Founded in 1995, Oaktree is considered among the savviest distressed-debt investors on the planet, having made a fortune from downturns like the early 2000s dot.com and telecom bust, and the 2008 financial crisis, which helped a tripling of assets in a five-year span. Marks and Karsh, Oaktree's cofounders, and principals like Sheldon Stone are considered the deans of distress investing, possessing the rare demeanor to buy and help turn around businesses in falling markets. From a headquarters in Los Angeles with about $5 billion in assets to start with, the firm has seized on panic to grow by many measures into a powerhouse, with specialties not just in distress, but also private credit, emerging-market debt and senior loans. It also is a 20% owner of Jeffrey Gundlach's bond investing giant DoubleLine Capital.&l;/p&g;&l;div class=&q;vestpocket&q; vest-pocket&g;&l;/div&g;&l;p&g;It's a trajectory similar to Flatt's quiet ascent. He began rising the ranks at Brookfield's predecessor Brascan in the mid-1990s and slowly built a real estate, infrastructure and renewable energy empire largely by picking over the carcasses of ailing former giants like real estate developer Olympia &a;amp; York, Reliant Energy, Multiplex, Babcock &a;amp; Brown, General Growth, Petrobras and SunEdison. Eventually Brookfield and Oaktree's worlds even collided. In the restructuring of private equity's biggest failure, Energy Future Holdings, both Brookfield and Oaktree came out of bankruptcy courts holding board seats and the largest positions in its power producer, now called Vistra Energy.&l;/p&g;&l;p&g;This fall, Flatt initiated Wednesday's surprise tie-up by reaching out to Oaktree's Karsh to inquire about a partnership in the hope of adding a credit-investing capability to Brookfield's scale. &l;/p&g;&l;p&g;"When you look at Oaktree, it has a similar value orientation to investing as us. Our mindset is the same, but they offer products in credit that are different than ours," Flatt tells &l;em&g;Forbes&l;/em&g;. "Both of us have great businesses, and we could have carried on doing what we are doing. We could have built a credit business on our own, but it would have taken 15 years to build what Oaktree has."&l;/p&g;&l;p&g;When Karsh conferred with Marks about the possible deal, they both decided Brookfield's style and Flatt's fuss-free leadership and long-term orientation could be a good home. All three met in L.A. and a deal was quickly hashed out. &l;/p&g;&l;p&g;"We are partnering with Brookfield. This is not a financing transaction, this is a long-term partnership," Marks tells &l;em&g;Forbes&l;/em&g;. "We wouldn't do something if it wasn't something for the long run," he adds, further stating, "The threshold consideration is these are two great companies run by similar people of high repute and integrity. These are the keys." &l;/p&g;&l;p&g;For Oaktree, Marks believes Brookfield's size and scale will bring in new clients and capabilities around the world. "We will add a credit capability to their product world, which is extremely important. I believe we will have the broadest of offerings in the alternative investing world," he says. &l;/p&g;&l;p&g;Global scale, and a one-stop offering of top quality alternative strategies, has been Flatt's ambition for years. "The alternatives industry keeps getting larger, and institutional clients want a greater number of strategies from managers who can deploy capital for them in size," he says.&l;/p&g;&l;p&g;Brookfield is paying $49 a share to buy out the public holders of NYSE-listed Oaktree in a deal that's most likely to be split evenly between cash and Brookfield stock. Brookfield's purchase price is a 16% premium to Oaktree's trading price over the past month. While offering an exit for public shareholders, Oaktree will remain independently run by its cofounders and CEO Jay Wintrob out of their current offices. Flatt is joining Oaktree's board, and Marks will join Brookfield's. &l;/p&g;&l;p&g;Beginning in 2022, employees at Oaktree will have the option to sell their shares to Brookfield, as will top brass. However, Brookfield won't be able to take full control of Oaktree until 2029, and Marks and Karsh are selling just 20% of their holdings in Wednesday's deal. &l;/p&g;&l;p&g;Sean Thorpe, a longtime Brookfield shareholder at Aristotle Capital Management, is a fan of the deal Flatt has orchestrated. "They are both wonderful companies and there is not a ton of overlap," he says each firm&s;s respective strengths, while also pointing out similarities in their approaches. "Their styles are incredibly similar, neither are gunslingers or are into flash. I could see Bruce Flatt and Howard Marks agreeing most of the time and having a similar vision." &l;/p&g;&l;p&g;There could be some tax consequences for Oaktree holders. Robert Willens, an independent tax expert, expects Wednesday's deal to be a taxable event, partially taxed at a 37% ordinary income rate, not a 20% capital gain. For some holders, he raises an analogue of security roll-ups in the master limited partnership space, like Williams and Kinder Morgan. &l;/p&g;&l;p&g;Gayner of Markel is circumspect about the tie-up between two of his favored holdings. &l;/p&g;&l;p&g;Marks and Karsh, he says, have battled a 30-year decline in interest rates and a postcrisis decade of central bank accomodation that has limited work for distressed gurus, but Oaktree's upside was an eventual turn in the cycle. "I was a very patient Oaktree shareholder because I thought the time would come when there was more distress, and that would be when Oaktree would shine. I still expect it to happen in the future, and I was hoping to participate as a shareholder," he says, before reiterating, "It's a great deal for Brookfield."&l;/p&g;&l;p&g;Marks sympathizes. "There has been this long dragging period when there hasn't been much distress. Our ability to add assets has been limited because things to do have also been limited," he says. But he stresses the merit of Brookfield's offer and the potential growth opportunities ahead for Oaktree. &l;/p&g;&l;p&g;"We are not getting out of the game at all. I intend to keep working," says Marks. Brookfield's cash and stock offer is a significant premium for Oaktree shareholders, which comes with continued stock participation in the form of Brookfield's outperforming stock. He adds, "The bottom line is: I think we got &a;lsqb;shareholders&a;rsqb; a very good price."&l;/p&g;&l;p&g;&l;em&g;For more on Brookfield:&l;/em&g;&l;/p&g;&l;p&g;&l;a href=&q;https://www.forbes.com/sites/antoinegara/2017/05/02/brookfields-bruce-flatt-billionaire-toll-collector-of-the-21st-century/#1af0b0a0792d&q; target=&q;_blank&q; class=&q;color-accent&q;&g;&l;strong&g;See Forbes&s; 2017 Cover Story On Bruce Flatt Titled: "World Builder&l;/strong&g;&l;/a&g;&l;strong&g;"&l;/strong&g;&l;/p&g;&q;,&q;bodyAsDeltas&q;:&q; a very good price."\n&q;},{&q;attributes&q;:{&q;italic&q;:true},&q;insert&q;:&q;For more on Brookfield:&q;},{&q;insert&q;:&q;\n&q;},{&q;attributes&q;:{&q;bold&q;:true,&q;color&q;:&q;&q;,&q;link&q;:&q;https://www.forbes.com/sites/antoinegara/2017/05/02/brookfields-bruce-flatt-billionaire-toll-collector-of-the-21st-century/#1af0b0a0792d&q;},&q;insert&q;:&q;See Forbes&s; 2017 Cover Story On Bruce Flatt Titled: "World Builder&q;},{&q;attributes&q;:{&q;bold&q;:true},&q;insert&q;:&q;"&q;},{&q;insert&q;:&q;\n&q;}]

CMI rises 9% after co gets vendor approval from prestigious companies

Share price of CMI rose 9 percent intraday Friday after company received vendor approval from prestigious companies.

The company has been included as vendor with few prestigious companies in the third quarter ending December 2018, as per BSE filing by the company.

It includes vendor approval for manufacturing and supply of XLPE/PVC power cable and PVC insulated control cable for Power Grid projects and received vendor approval for manufacturing of power cables, control cables, telephone cables and optical fibre cables from Airport Authority of India.

Other approval from Mazagaon Dock Shipbuilders for electrical Power cables and vendor approval for all type of cables from Jawahar lal Nehru Port trust.

related news D-Street Buzz: Nifty IT outshines led by TCS; ICICI Bank at new 52-week high, Zee Ent jumps Hindustan Unilever declines 2% on management rejig; analysts remain bullish Ujjivan Financial, Coal India fall 1-2% on interim dividend news

Amit Jain, Chairman and Managing Director, CMI said, "Our focus on consistently increasing our clientele and new product development using advance research and development techniques have augmented well with our vision to become a leading player in the Cable Industry."

According to Sameer Kalra, Equity Research Analyst & Founder Target Investing, the company got vendor approval for providing power cables, optical fibre to companies like Power Grid, Airport Authority of India, JNPT which would help increase its capacity utilisation at Baddi Plant which will create operating leverage in financials.

He keeps the stop loss at Rs 148-145 with a target of Rs 162-169.

At 11:30 hrs CMI was quoting at Rs 159.60, up Rs 10.90, or 7.33 percent on the BSE.

For more market news, click here First Published on Mar 15, 2019 11:47 am

Best Heal Care Stocks To Watch Right Now

tags:HYG,KBE,AHL,GWGH,LEN.B,

James Altucher, here. I'm taking over for Nilus this weekend.

So let's get to it…

If you've ever followed anything I've written or interviews I've done, you've probably heard me say that the stock market is a scam.

And that's because, quite frankly, it largely is.

So many public companies manipulate their numbers, so many mutual funds and stockbrokers have a bunch of hidden fees. All these investment news sources preach that the stock market is going to collapse, or that you should buy this or that stock that's going to get you 6,000% gains.

Don't fall for any of it. It's all a scam.

But that doesn't mean you can't make money in the stock market.

In my years of investing, I've probably tried every strategy there is out there. There are only about three that I really care about. This is one of them.

In fact, if I were to die tomorrow, this is the strategy I would tell my children to use to invest the money from my life insurance policy.

Best Heal Care Stocks To Watch Right Now: iShares iBoxx $ High Yield Corporate Bd (HYG)

Advisors' Opinion:

• [By Stephan Byrd]

  PFS Investments Inc. decreased its position in shares of iShares iBoxx $ High Yield Corporate Bond ETF (NYSEARCA:HYG) by 11.9% during the 3rd quarter, according to the company in its most recent Form 13F filing with the Securities and Exchange Commission (SEC). The institutional investor owned 85,838 shares of the exchange traded fund’s stock after selling 11,634 shares during the period. PFS Investments Inc.’s holdings in iShares iBoxx $ High Yield Corporate Bond ETF were worth $7,420,000 at the end of the most recent quarter.

• [By Logan Wallace]

  State of Tennessee Treasury Department boosted its position in iShares iBoxx $ High Yield Corporate Bond ETF (NYSEARCA:HYG) by 173.5% during the fourth quarter, according to the company in its most recent 13F filing with the SEC. The fund owned 166,000 shares of the exchange traded fund’s stock after buying an additional 105,300 shares during the quarter. State of Tennessee Treasury Department owned approximately 0.10% of iShares iBoxx $ High Yield Corporate Bond ETF worth $13,463,000 as of its most recent filing with the SEC.

• [By Max Byerly]

  Equities research analysts expect Hydrogenics Co. (NASDAQ:HYGS) (TSE:HYG) to post earnings of ($0.07) per share for the current quarter, Zacks Investment Research reports. Two analysts have made estimates for Hydrogenics’ earnings. The lowest EPS estimate is ($0.13) and the highest is ($0.02). Hydrogenics posted earnings of ($0.13) per share in the same quarter last year, which suggests a positive year over year growth rate of 46.2%. The firm is expected to announce its next earnings results on Monday, November 5th.

Best Heal Care Stocks To Watch Right Now: SPDR S&P Bank ETF (KBE)

Advisors' Opinion:

• [By Jim Crumly]

  Bank stocks participated in the rally today, and a rise in crude oil lifted the energy sector. The SPDR S&P Bank ETF (NYSEMKT:KBE) climbed 2.3% and the SPDR S&P Oil & Gas Exploration & Production ETF (NYSEMKT:XOP) jumped 2.7%. 

• [By Jim Crumly]

  The new communication services sector had the best performance today, with the Communication Services Select SPDR ETF (UNKNOWN:UNKNOWN) rising 0.4%. Bank stocks fell on the flattening yield curve; the SPDR S&P Bank ETF (NYSEMKT:KBE) dropped 1.8%. 

• [By Jim Crumly]

  Several big banks reported earnings, but their shares slumped today; the SPDR S&P Bank ETF (NYSEMKT:KBE) fell 1.1%. Consumer stocks had a good showing, with the Consumer Staples Select Sector SPDR ETF (NYSEMKT:XLP) up 0.7%.

• [By Logan Wallace]

  SPDR KBW Bank (NYSEARCA:KBE) announced a quarterly dividend on Monday, June 18th, Wall Street Journal reports. Investors of record on Monday, June 18th will be paid a dividend of 0.1697 per share by the exchange traded fund on Wednesday, June 20th. This represents a $0.68 annualized dividend and a dividend yield of 1.38%. The ex-dividend date is Friday, June 15th. This is a boost from SPDR KBW Bank’s previous quarterly dividend of $0.16.

• [By Jim Crumly]

  Retail had a good session, with the SPDR S&P Retail ETF (NYSEMKT:XRT) jumping 2.3%. Bank stocks also rose as long-term interest rates moved up; the SPDR S&P Bank ETF (NYSEMKT:KBE) added 1.3%. 

• [By Max Byerly]

  Key Square Capital Management LLC bought a new position in shares of SPDR KBW Bank (NYSEARCA:KBE) in the first quarter, according to the company in its most recent 13F filing with the Securities and Exchange Commission (SEC). The institutional investor bought 403,000 shares of the exchange traded fund’s stock, valued at approximately $19,300,000. SPDR KBW Bank comprises 2.2% of Key Square Capital Management LLC’s portfolio, making the stock its 13th biggest position.

Best Heal Care Stocks To Watch Right Now: Aspen Insurance Holdings Limited(AHL)

Advisors' Opinion:

• [By Ethan Ryder]

  The Travelers Companies (NYSE: TRV) and Aspen Insurance (NYSE:AHL) are both finance companies, but which is the superior stock? We will compare the two businesses based on the strength of their institutional ownership, dividends, profitability, analyst recommendations, valuation, earnings and risk.

• [By Joseph Griffin]

  Get a free copy of the Zacks research report on Aspen Insurance (AHL)

  For more information about research offerings from Zacks Investment Research, visit Zacks.com

• [By Ethan Ryder]

  Get a free copy of the Zacks research report on Aspen Insurance (AHL)

  For more information about research offerings from Zacks Investment Research, visit Zacks.com

• [By Ethan Ryder]

  ValuEngine upgraded shares of Aspen Insurance (NYSE:AHL) from a sell rating to a hold rating in a research report released on Thursday morning.

  Separately, Zacks Investment Research cut shares of Aspen Insurance from a hold rating to a strong sell rating in a research report on Thursday, April 19th. Four investment analysts have rated the stock with a hold rating and one has assigned a buy rating to the company. The company presently has an average rating of Hold and a consensus price target of $43.50.

• [By Ethan Ryder]

  Aspen Insurance (NYSE: AHL) and Tokio Marine Holdings, Inc. Sponsored ADR common stock (OTCMKTS:TKOMY) are both finance companies, but which is the superior stock? We will contrast the two businesses based on the strength of their earnings, profitability, valuation, risk, dividends, analyst recommendations and institutional ownership.

Best Heal Care Stocks To Watch Right Now: GWG Holdings, Inc(GWGH)

Advisors' Opinion:

• [By Shane Hupp]

  Get a free copy of the Zacks research report on GWG (GWGH)

  For more information about research offerings from Zacks Investment Research, visit Zacks.com

• [By Stephan Byrd]

  Get a free copy of the Zacks research report on GWG (GWGH)

  For more information about research offerings from Zacks Investment Research, visit Zacks.com

• [By Shane Hupp]

  Here are some of the news articles that may have effected Accern Sentiment’s analysis:

  Get GWG alerts: Critical Review: Citizens (CIA) vs. GWG (GWGH) (americanbankingnews.com) (Watch) Zibanejad scores in Sweden’s win over Russia (sny.tv) GWG Holdings’ (GWGH) CEO Jon Sabes on Q1 2018 Results – Earnings Call Transcript (msn.com) Edited Transcript of GWGH earnings conference call or presentation 14-May-18 8:30pm GMT (finance.yahoo.com) DWWA judge profile: Davide Buongiorno (decanter.com)

  A number of equities research analysts recently commented on the company. Zacks Investment Research raised GWG from a “hold” rating to a “buy” rating and set a $9.25 price target for the company in a research report on Wednesday, April 11th. ValuEngine lowered GWG from a “hold” rating to a “sell” rating in a research report on Monday, May 14th. Finally, Maxim Group reaffirmed a “buy” rating and set a $14.00 target price on shares of GWG in a research report on Tuesday, January 23rd.

Best Heal Care Stocks To Watch Right Now: Lennar Corporation(LEN.B)

Advisors' Opinion:

• [By Ethan Ryder]

  ValuEngine lowered shares of Lennar Co. Class B (NYSE:LEN.B) from a sell rating to a strong sell rating in a research report sent to investors on Friday morning.

Snap Inc (SNAP) Stock: The Gains Will Be Ephemeral

Not long ago, Snap (NYSE:SNAP) looked doomed. In fact, it appeared that the company was facing a MySpace-level fate.

Source: Shutterstock

Yet all buzz was an overreaction. From mid-December, Snapchat stock has nearly doubled — with the market cap hitting $13 billion.

Granted, there were technical factors at work.

Of course, the explosive rally in the markets was a major contributor for the bull move in Snap Inc stock. There was also the impact from a short squeeze.  This is when short sellers have little choice but to buy back stock to cover their positions.

But there were some positive fundamentals for SNAP stock as well. In the latest earnings report, revenues grew by 36% and the adjusted net loss was 4 cents — representing a nice beat. Keep in mind that the company has been focused on cost-cutting, which has been paying off.

Yet, there are some other encouraging developments that have boosted SNAP stock, such as:

The company has released an improved app for Alphabet’s (NASDAQ:GOOG, NASDAQ:GOOGL) Android operating system. This should open up more growth opportunities. The original show “Dead Girls Detective Agency,” developed with NBCUniversal, has reached over 14 million viewers. Snap has been investing more in foreign markets, including France, Germany, Ireland, Norway, the UK and India. The daily viewing of Publisher Stories and Shows has increased by 30% on a year-over-year basis. A new cartoon, called Bitmoji Stories, has attracted over 40 million viewers. Snap Pixel logged more than 600 million purchase events in Q4, up from 230 million in the prior quarter.

But perhaps the most important factor for SNAP stock is the young demographic. For example, over 70% of the 13 -to 34-year-old population in the US watch its premium mobile ads every month. This is certainly a big-time validation of the platform, since reaching this group has been particularly difficult with traditional advertising channels.

User Issue With Snap Inc Stock

It does appear that the decay in the user base has stabilized. But this is not necessarily a good thing.  Keep in mind that the quarter-over-quarter growth was flat. And, on an annual basis, there was still a drop of one million users.

Yes, user growth is absolutely critical for any social platform. It is what has made Facebook (NASDAQ:FB) and TENCENT (OTCMKTS:TCEHY) into powerhouses.

But when a social platform is more of a niche, the valuation will likely be muted. Just look at Twitter (NYSE:TWTR).  Even though many efforts have been made to improve the platform, not much has moved the needle in regards to the user base.

Unfortunately, this also appears to be the case with SNAP.

Even worse, FB’s Instagram is still a huge problem for the company. The app continues to gain traction, especially with younger users. According to a survey from Piper Jaffray, Instagram has surpassed Snapchat as the most-used among US teens.

Instagram has also been able to be quite adaptable — with the users spanning age groups. Note that the app has more than 1 billion users.

Bottom Line On SNAP Stock

Snap is certainly a viable platform. And, again, it’s young demographic is valuable.

Yet, despite this, SNAP stock is still quite expensive. Consider that the shares are trading at a hefty 10 times sales. This is a significant premium for a company that is expected to grow at only about 24% to 34% for the current year.

Besides, as seen over the past couple years, SNAP stock has pulled off major gains — but that has proved temporary. The problem is that the business has been choppy and the user growth sluggish. In other words, it’s probably best for investors to take profits on SNAP stock for now, not take a larger position.

Tom Taulli is the author of High-Profit IPO Strategies, All About Commodities and All About Short Selling. Follow him on Twitter at @ttaulli. As of this writing, he did not hold a position in any of the aforementioned securities.

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$343.57 Million in Sales Expected for Wintrust Financial Corp (WTFC) This Quarter

Equities research analysts expect Wintrust Financial Corp (NASDAQ:WTFC) to post sales of $343.57 million for the current fiscal quarter, Zacks reports. Seven analysts have provided estimates for Wintrust Financial’s earnings, with the lowest sales estimate coming in at $338.00 million and the highest estimate coming in at $350.40 million. Wintrust Financial posted sales of $310.76 million during the same quarter last year, which would indicate a positive year over year growth rate of 10.6%. The business is scheduled to report its next earnings report on Monday, April 15th.

According to Zacks, analysts expect that Wintrust Financial will report full year sales of $1.45 billion for the current year, with estimates ranging from $1.42 billion to $1.48 billion. For the next year, analysts expect that the business will post sales of $1.54 billion, with estimates ranging from $1.52 billion to $1.57 billion. Zacks’ sales calculations are an average based on a survey of sell-side research analysts that follow Wintrust Financial.

Get Wintrust Financial alerts:

Wintrust Financial (NASDAQ:WTFC) last announced its quarterly earnings data on Tuesday, January 22nd. The bank reported $1.35 earnings per share for the quarter, missing the Zacks’ consensus estimate of $1.57 by ($0.22). The business had revenue of $329.40 million during the quarter, compared to analysts’ expectations of $344.46 million. Wintrust Financial had a return on equity of 11.36% and a net margin of 22.47%. During the same quarter last year, the company posted $1.17 EPS.

WTFC has been the topic of a number of recent research reports. BidaskClub upgraded shares of Wintrust Financial from a “sell” rating to a “hold” rating in a report on Friday, February 22nd. Zacks Investment Research cut shares of Wintrust Financial from a “buy” rating to a “hold” rating and set a $86.00 price objective on the stock. in a report on Saturday, November 17th. Finally, Piper Jaffray Companies upgraded shares of Wintrust Financial from a “neutral” rating to an “overweight” rating in a report on Monday, January 7th. Two investment analysts have rated the stock with a sell rating, two have assigned a hold rating, five have assigned a buy rating and one has issued a strong buy rating to the company. The company presently has a consensus rating of “Buy” and a consensus price target of $93.00.

Shares of WTFC opened at $71.23 on Wednesday. The stock has a market capitalization of $3.99 billion, a price-to-earnings ratio of 12.16, a price-to-earnings-growth ratio of 0.84 and a beta of 0.95. The company has a debt-to-equity ratio of 0.39, a quick ratio of 0.98 and a current ratio of 0.99. Wintrust Financial has a fifty-two week low of $61.53 and a fifty-two week high of $99.96.

The company also recently declared a quarterly dividend, which was paid on Thursday, February 21st. Stockholders of record on Thursday, February 7th were issued a dividend of $0.25 per share. This is a boost from Wintrust Financial’s previous quarterly dividend of $0.19. The ex-dividend date of this dividend was Wednesday, February 6th. This represents a $1.00 dividend on an annualized basis and a dividend yield of 1.40%. Wintrust Financial’s dividend payout ratio is presently 17.06%.

In other news, EVP Thomas P. Zidar sold 3,482 shares of the stock in a transaction that occurred on Friday, January 25th. The shares were sold at an average price of $72.62, for a total transaction of $252,862.84. Following the sale, the executive vice president now owns 31,016 shares in the company, valued at $2,252,381.92. The transaction was disclosed in a filing with the SEC, which is available at this link. Also, insider Timothy Crane sold 2,097 shares of the stock in a transaction that occurred on Friday, January 25th. The shares were sold at an average price of $72.82, for a total transaction of $152,703.54. Following the sale, the insider now owns 18,433 shares in the company, valued at approximately $1,342,291.06. The disclosure for this sale can be found here. Corporate insiders own 1.57% of the company’s stock.

Several large investors have recently bought and sold shares of the company. Commonwealth Equity Services LLC grew its holdings in shares of Wintrust Financial by 2.3% during the fourth quarter. Commonwealth Equity Services LLC now owns 8,202 shares of the bank’s stock valued at $545,000 after buying an additional 182 shares during the last quarter. OLD Second National Bank of Aurora lifted its position in Wintrust Financial by 100.0% during the fourth quarter. OLD Second National Bank of Aurora now owns 400 shares of the bank’s stock valued at $27,000 after purchasing an additional 200 shares during the period. Retirement Systems of Alabama lifted its position in Wintrust Financial by 0.4% during the fourth quarter. Retirement Systems of Alabama now owns 73,115 shares of the bank’s stock valued at $4,861,000 after purchasing an additional 275 shares during the period. Raymond James Trust N.A. lifted its position in Wintrust Financial by 10.5% during the fourth quarter. Raymond James Trust N.A. now owns 3,360 shares of the bank’s stock valued at $223,000 after purchasing an additional 319 shares during the period. Finally, American International Group Inc. lifted its position in Wintrust Financial by 0.3% during the fourth quarter. American International Group Inc. now owns 114,933 shares of the bank’s stock valued at $7,642,000 after purchasing an additional 364 shares during the period. Hedge funds and other institutional investors own 88.60% of the company’s stock.

About Wintrust Financial

Wintrust Financial Corporation operates as a financial holding company in the Chicago metropolitan area, southern Wisconsin, and northwest Indiana. It operates in three segments: Community Banking, Specialty Finance, and Wealth Management. The Community Banking segment offers non-interest bearing deposits, non-brokered interest-bearing transaction accounts, and savings and domestic time deposits; home equity, consumer, and real estate loans; safe deposit facilities; and automatic teller machine (ATM), Internet banking, and other services.

Recommended Story: Diversification For Individual Investors

Get a free copy of the Zacks research report on Wintrust Financial (WTFC)

For more information about research offerings from Zacks Investment Research, visit Zacks.com

Square Inc (SQ) President, CEO & Chairman Jack Dorsey Sold $7.8 million of Shares

President, CEO & Chairman of Square Inc (NYSE:SQ) Jack Dorsey sold 103,035 shares of SQ on 03/06/2019 at an average price of $75.33 a share. The total sale was $7.8 million.

Square Inc is a software company offering solutions ranging from payments and point-of-sale services to financial and marketing services. It offers a free software app with its hardware to turn mobile devices into powerful POS solutions in minutes. Square Inc has a market cap of $31.23 billion; its shares were traded at around $74.40 with and P/S ratio of 9.51.

CEO Recent Trades:

President, CEO & Chairman, 10% Owner Jack Dorsey sold 103,035 shares of SQ stock on 03/06/2019 at the average price of $75.33. The price of the stock has decreased by 1.23% since.President, CEO & Chairman, 10% Owner Jack Dorsey sold 103,035 shares of SQ stock on 02/27/2019 at the average price of $78.04. The price of the stock has decreased by 4.66% since.President, CEO & Chairman, 10% Owner Jack Dorsey sold 103,035 shares of SQ stock on 02/20/2019 at the average price of $77.16. The price of the stock has decreased by 3.58% since.President, CEO & Chairman, 10% Owner Jack Dorsey sold 103,035 shares of SQ stock on 02/13/2019 at the average price of $76.45. The price of the stock has decreased by 2.68% since.

Directors and Officers Recent Trades:

Chief Accounting Officer Ajmere Dale sold 2,658 shares of SQ stock on 03/04/2019 at the average price of $74.98. The price of the stock has decreased by 0.77% since.Chief Accounting Officer Ajmere Dale sold 2,048 shares of SQ stock on 02/28/2019 at the average price of $80. The price of the stock has decreased by 7% since.

For the complete insider trading history of SQ, click here

.

International Game Technology PLC (IGT) Q4 2018 Earnings Conference Call Transcript

Image source: The Motley Fool.

International Game Technology PLC  (NYSE:IGT)Q4 2018 Earnings Conference CallMarch 07, 2019, 8:00 a.m. ET

Contents: Prepared Remarks Questions and Answers Call Participants Prepared Remarks:

Operator

Good day, ladies and gentlemen, and welcome to the IGT 2018 Fourth Quarter and Full Year Results Conference Call. At this time, all participants are in a listen-only mode. (Operator Instructions) As a reminder, today's conference is being recorded.

I would now like to turn the call over to Jim Hurley, Senior Vice President of Investor Relations. Sir, you may begin.

James Hurley -- Senior Vice President of Investor Relations

Thank you. Thank you for joining us on IGT's fourth quarter and full year 2018 conference call, which is hosted by Marco Sala, our Chief Executive Officer, and Alberto Fornaro, our Chief Financial Officer. After we make some introductory remarks, we'll open the call for your comments.

During today's call, we'll be making some forward-looking statements within the meanings 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.

And now, I'll turn the call over to Marco Sala.

Marco Sala -- Chief Executive Officer

Thank you, Jim, and good day, everyone. We are pleased to be reporting fourth quarter and full year results that are in line with the improved outlook we provided last October. On a currency-adjusted basis, we reached the top end of our initial full year EBITDA guidance. We delivered mid-single-digit EBITDA growth on stable revenue in 2018, at constant currency and scope. Our profits also benefited from overall operating expenses discipline, particularly the optimization of R&D.

Global Lottery performance was strong and Italy was resilient, despite increased pressure on the sector. In addition, we achieved a nice recovery in our North American Gaming segment. The International segment did not meet our expectation for the year based on its fourth quarter results.

Thanks to the recurring nature of most of our revenue base and the diversity of products and geographies, we met our financial objectives, despite some incremental headwinds during the year. These included the foreign exchange, higher taxes on Italy gaming machines and shifts in timing of certain product sales. Of course, we also had some unexpected benefits from elevated North American jackpot activity.

As I mentioned, our global lottery results were impressive in 2018. Total lottery same-store revenues, outside of Italy, rose nearly 8%, reflecting 5% growth in instant and draw-based games and nearly 30% increase in Multistate Jackpot games. North America Lottery performance was especially robust, with same-store revenues up 9% in the year, supported by October's $1.5 billion Mega Million jackpot.

Draw-based and instant ticket games also performed well, with same-store revenues up 5%. Many of the jurisdictions with the highest annual per capita lottery spending, including Florida, Michigan and New Jersey, generated strong increases confirming the long-term vitality of the business. With the current revenue weighted average contract duration of eight years, including extension in North America, we have significant visibility and a stable base to grow from.

International lottery same-store revenues rose 3% in 2018, led by the EMEA region. A recovery in the UK lottery wagers was an important contributor to growth, thanks to the new scratch cards and instant win games. We also had good results in the Czech Republic and benefited from the continued success of the EuroMillions game.

Italy lottery results were very good in 2018, a true testament to innovation driving growth. Lotto wagers were up 7%, led by 11% growth for 10eLotto and the incremental contribution from the new MillionDAY game. We also achieved a 2% increase in Scratch & Win wagers, the second consecutive year of growth on the successful relaunch of the Miliardario and the Multipliers games. Innovation is the most important driver of lottery growth. We are constantly developing ways to drive industry expansion and reach a new generation of players. These efforts have earned IGT, the International Gaming Awards Lottery Product of the Year for two years in a row.

In Gaming, full year results were mixed. Total Gaming revenues were stable with the prior year on an underlining (ph) basis. Encouraging progress in North America and stability in Italy were offset by lower International revenue. Global shipments of gaming machines rose slightly in 2018. In North America, total replacement units were up more than 6% as we are completing a full refresh of our hardware and bringing these cabinets to market with better-performing games.

Scarab, Solar Disc, Mistress of Egypt, and Ocean Magic Grand were among the most popular titles that we sold and are currently recognized as some of the best-performing games in the market. As a result, we have successfully upgraded our standing in the core video market. This is evident in the record number of replacement unit shipment in North America in the fourth quarter, including a more than 20% increase to casino customers. Demand for our Crystal series cabinet and new game content also drove higher ASPs for the fourth quarter and full year periods.

By contrast, International Gaming machine shipments were down for the fourth quarter and full year. This is largely due to market dynamics in Argentina and Peru, and to lower replacement demand in certain European markets against robust unit sales in 2017. This being said, it is worth mentioning that we are making headway in some important strategic markets like Australia and in Eastern Europe. In Australia, for example, our gaming machine unit sales were up more than 25% in the year. The CrystalCurve and Crystal 27 cabinets are driving this growth, particularly with successful new games Star Stax and Fortune Gong. We'll build on Star Stax's success in Australia by introducing it to additional international markets.

The recovery in the North America installed base during 2018 was achieved by executing on our main strategies. We reinforced the Wheel of Fortune franchise with new hardware and games. We increased our commitment to multi-level progressive games. Going forward, we intend to leverage more of our achievements in core video reel games by integrating the most impactful test banking sites and game mechanics into the premium portfolio.

The International installed base declined in 2018, due a -- due to a larger South Africa conversion sales in the first quarter, partially offset by higher Greece VLTs. We are seeing good improvement in productivity in Greece related to the successful introduction of new fruit games in the second half of 2018. We expect to add more than 1,000 Greece VLTs in 2019.

In Italy, the installed base of gaming machines was significantly lower on the government-mandated reduction in AWPs that was largely completed in the first half of 2018. Despite the unit reduction and the impact of higher taxes, total gaming machines' wagers were modestly above the prior year. We managed these by improving productivity of the remaining AWP fleet and the VLTs.

For many of you, new government restrictions imposed on the Italian gaming sector have been frustrating. I think it is important to stay grounded in the fact that player demand across all gaming verticals remains quite solid, confirming the resilience of the market. The Italy team has done a great a job, managing through these challenges over the past few years and delivered higher profit in 2018.

We won several high profile central casino management system contracts in 2018 around the world. While the industry pipeline of new casino openings is not as strong as in 2019, we do have important new advantage installations planned for the year. There is also considerable opportunity for us to leverage innovative add-on system products such as Cardless Connect, Resort Wallet and intelligent offer with our existing customers.

It was a year of important progress for the North American Sports Betting business. To date IGT's Sports Betting platform is operational in all jurisdictions that are live, 24 land-based locations across five states and mobile in three states. We also established important strategic partnership with FanDuel and William Hill. The QuickBet kiosks and the Crystal betting terminals, we launched at G2E, are in the regulatory certification process. We recently received approval for the QuickBet kiosk in New Jersey and have just begun rolling them out.

IGT is well positioned to continue to provide technology and services for commercial casinos, Tribal Casino or lotteries plus betting operators across retail, digital and mobile channels. As we look to 2019, we expect to see continued underlining growth in our core lottery and gaming business. There are some specific items to consider when comparing the P&L to 2018, but the underlining business is expected to grow.

Over the last four years, we have established a solid foundation to build from securing large, long-term lottery contracts, stabilizing the North American Gaming business and investing in new growth opportunities like Sports Betting. All of that should result in a meaningful improvement in free cash flow starting in 2019.

Now, I'll turn the call over to Alberto.

Alberto Fornaro -- Executive Vice President and Chief Financial Officer

Thank you, Marco, and hello to all of you on the call today. On Slide 8, we summarize the full year results.

Revenue was stable with the prior year at constant currency and scope, which reflects the sale of Double Down. This was achieved despite the reclassification of $73 million of jackpot expense as a contra-revenue item under ASC 606. Underlying core business improvement in North America for both Gaming and Lottery, and strength in Italy, offset the lower International revenues.

Adjusted EBITDA was $1.74 billion, and 4% higher than the prior year and within the updated October outlook after normalizing for foreign exchange. Adjusted operating income was below the prior year due to the higher depreciation associated with the long-term Lottery contract wins and extension, as well as increased investment in the Gaming installed base.

Our fourth quarter financial results are summarized on Slide 9. Consolidated revenue increased (ph) 4% at constant currency. Gaming and Lottery revenue was stable, with the decline coming from certain Sports Betting dynamics in the prior year, including an exceptional low payout in Italy and large International product sales.

Adjusted EBITDA was down 6% at constant currency, primarily due to lower revenues. Additionally, higher SG&A in the fourth quarter was partly a result of some timing difference in various expense accruals between the two years and partly higher bad debt, legal and other personnel costs for 2018. The higher SG&A is not reflective of a structural increase in operating costs and partly reflects a higher seasonal increase. Once again, adjusted operating income includes higher depreciation from recent lottery wins as well as the upgrading of our global gaming machine installed base.

Let's turn now to our operating segments. North American Gaming and Interactive is shown on Slide 10. Adjusted for jackpot expense reclass, revenue rose 3%. Product sales were up double digits, thanks to 27% increase in gaming machine unit shipments, coupled with higher ASPs. In fact, ASPs in the fourth quarter were the highest since 2015. Customer demand for our field tested products such as Scarab, Temple of Fire, Ocean Magic, Solar Disc and Mistress of Egypt is driving these results.

Net of the jackpot expense reclass, service revenue was relatively stable. The year-over-year increase in the installed base was offset by lower yields to -- due to a shift in the overall mix of jurisdictions and machines. The decline in operating income is entirely due to depreciation. This includes depreciation of new cabinets we are installing as well as accelerated depreciation on older units. Additionally in the prior year, we had a significant contribution from high-margin IP revenues.

Slide 11 shows the results of North American Lottery segment. The fundamental of this business are very sound. Same-store revenue was up over 20% in the quarter, driven by October, $1.5 billion Mega Millions jackpot, the second largest Multistate Jackpots ever. Same-store revenues from instant ticket and draw games was also good, up 5% in the quarter primarily on the success of high price point instant ticket at larger customers like Texas and Michigan.

The decline in product sales is related to higher lottery terminal sales and a large Canadian VLT central system in the prior year. Product sales in the North America Lottery business are highly variable and represent as more percentage of annual revenues for this segment. The 21% increase in operating income reflects the stronger profit flow through, more robust same-store revenues that was partially offset by higher depreciation associated with recent contract wins and extensions.

Now let's turn to the International segment on Slide 12. While the results of this segment were below our expectation, it is worth noting that the quarterly cadence of revenue and profit differ greatly in '18 versus 2017. We delivered much stronger international results in the first nine months of 2018, assisted by the shift in timing of the Finland contract from Q4 to Q3. As previously said, we also saw a timing shift from Q4 to 2019 of a very large VLT project in Sweden.

2017 was very back-end loaded with the concentration of both product sales and contract milestone-driven service revenue as well as operating expense benefit in the fourth quarter. Altogether, these dynamics contributed to a very significant change in the year-to-year comparison for the fourth quarter. In Lottery same-store revenue grew by over 4%, driven by contribution from instant ticket, draw-based games and jackpot games. These underlying core growth in the business was overshadowed by the prior year benefits associated with the contract milestone-driven service revenue, I just mentioned.

Gaming service revenue was down for the same reason. The decline in the store base reflects a nearly 1,500 units conversion sale in South Africa, partially offset by growth in Greece VLT units.

Turning to product sales, we shipped fewer units to Europe and Latin America where challenging foreign exchange rates as well as gaming taxes in Argentina and Peru impacted customer spending. This was partly mitigated by the South Africa conversion sales where the units reached the end of their -- almost the end of their contract. Excluding this sale, ASP was up sharply in the period.

Operating income reflects decreased revenue and the high-margin mix of items in the prior year, as well as the differential timing of certain operating expenses across periods. The $119 million impairment charges we recorded in the quarter was primarily a reduction of the carrying amount of goodwill in our International segment. Our underlying outlook for International has not changed and our expectation for growth remain about the same as before, but we are starting from a lower base with the 2018 results and these coupled with other factor, including higher weighted average cost of capital impacted the goodwill calculation.

Italy is here on the Slide 13. Results continue to be strong in Italy with fundamentals continue to improve across all our -- all core businesses. In Lottery, we continue to see strength in 10eLotto wagers, which rose by 8%, Scratch & Win wagers were up 2% primarily driven by a relaunch of the Multiplier family. In Machine Gaming overall wager increased once again due to strong productivity gains from both AWP and VLT machines. This helped to mitigate the impact of mandatory reduction in the number of (ph) AWP higher gaming machine taxes and certain regional restrictions. The decline in Sports Betting revenue is exclusively due to the comparison with the unusually low payout in 2017. Wager for their part were stable and the payout realized in the fourth quarter of 2018 is indicative of a more normalized level. Operating income reflects broad-based wager growth, with high profile flow through, partially offset by the differential Sports Betting payout and increased taxes on gaming machines.

Our debt and leverage profile is included on Slide 14. Leverage include -- increased to 4.47 times. This was primarily due to the net $559 million in upfront payments for the Italy Scratch & Win license that were paid during the year. Cash flow for the full year is shown here on Slide 15. Cash from operation totaled $30 million, including $878 million in gross upfront payment related to the Italian Scratch & Win license. The final installment of the upfront payment related to this license was made in October 2018. As a reminder, we have secured Scratch & Win to September -- through September 2028, and there are no significant capital demands for this license until the next tender.

CapEx was $533 million, coming in lower-than-expected range, $575 million to $625 million. Gross dividend and return of capital payments to minority partners, totaling $212 million were offset by $322 million in partner contribution to fund the Scratch & Win upfront payments.

Our initial outlook for 2019 is included here on Slide 16. We currently expect adjusted EBITDA of $1.70 billion to 1.76 billion for the full year period at the euro/dollar rate to 1.15. Our outlook assumes underlying growth for the core Lottery and Gaming business. As you are aware, there are several dynamics that impact comparison with our 2018 results. This represents over $100 million in headwinds that are included in our 2019 outlook.

FX is worth about $25 million. The impact of the new Italy gaming taxes is approximately $40 million. The large Mega Million jackpot in the fourth quarter of 2018 provided $20 million in incremental EBITDA that we do not plan to recur.

The balance is the loss of the Illinois supply contract. At constant currency, EBITDA will likely be slightly below the prior year in the first half and up in the second half. Along those lines, EBITDA should be a little bit more concentrated in the second half of the year. This reflected the timing of certain product sales, including the 4,000 Sweden VLT, which are now planned for the second half. We will work to change this profile as we did in 2018, but this is our best estimate at this time.

Capital expenditure is expected to be $450 -- between $450 million and $550 million, with maintenance CapEx of $400 million to $500 million and growth CapEx of approximately $50 million. In terms of timing, we expect approximately 60% of the CapEx to occur in the first half of the year. The RFP for the Brazilian instant ticket and Italy SuperEnalotto tenders are active. Our current outlook does not include the additional investment that would be required, if we secure either or both of these opportunities.

So to summarize, 2018 was a year of continued global strengths in lottery, resilience in Italy and stabilization in the North American business. We achieved our objective despite (inaudible) that we have not anticipated when we set them. With no major upfront payments ahead of us, we expect to return to significant free cash flow generation in 2019.

At this point, we'd like to open the call for questions.

Questions and Answers:

Operator

Thank you. (Operator Instructions) And our first question comes from Carlo Santarelli from Deutsche Bank. Your line is open.

Carlo Santarelli -- Deutsche Bank -- Analyst

Hey, guys. Good morning. If I could start, maybe Alberto, if you could maybe think about like we go back to the end of October, you guys obviously took your guidance range up to the $1.74 billion to $1.80 billion range and it obviously provided an implication for the fourth quarter, which you came in slightly below the low end of. I know you talked about it a little bit, but if you could just kind of highlight the one to two things that may be really deferred from what your expectations were at that time, I think it would be helpful?

Alberto Fornaro -- Executive Vice President and Chief Financial Officer

Carlo, I would say that there are two main reasons. The most important one is, as I mentioned, the performance in International, we were expecting higher product sales, and particularly in Latin America and the EMEA region. They are a little bit short of our expectation. The added -- compared to what we said in the prior call, the SG&A abnormally higher in Q4, but this time, we're a little bit higher for a series of circumstances that are related to some accrual that we did it at the end of -- right at the end of the quarter, and we didn't factor, because we're -- they were not forecasted simply at that time.

They were related to some accrual that we did in the last part of the quarter, but that was slightly higher than that. And then, in general, we achieved in terms of net debt a better results than what we expected that increase the management variable compensation, as well as we had a one-off at year-end in the overall personnel cost. So these are the two major items that were unforeseen and that are reflected in the current outlook compared to our conversation we had in November.

Carlo Santarelli -- Deutsche Bank -- Analyst

That's helpful. Thank you. And then just, obviously with the new guidance that you guys have put forth for 2019, you talked a little bit about some of your CapEx. I just wanted to kind of confirm that the Analyst Day targets that you guys laid out with respect to your annual free cash flow, net of minority distributions of $450 million to $550 million are still something you're able to standby right now given kind of your outlook from here?

Alberto Fornaro -- Executive Vice President and Chief Financial Officer

Carlo, at the Investor Day in August, we -- as you remember, we presented an overall framework of assumption regarding the main driver of our business. We are still comfortable with that set of assumption and the resulting improvement in the cash flow generation that we mentioned for 2019 with one exception, which is related to the impact of the -- to the impact of the Italian tax -- gaming tax increase that happened at year end. Our assumptions were based on the expected growth for the various business segments on the profitability trends and so on. These are all unchanged and therefore, we remain convinced that our cash flow generation profile will be significantly different from what we looked in the past three years.

Carlo Santarelli -- Deutsche Bank -- Analyst

Okay. And sorry, just to confirm with respect to the Italy, you called out a $40 million headwind. So you are saying as that -- as we think about that $450 million to $550 million of annual free cash flow, net of distributions, we need to make an adjustment for the Italy piece?

Alberto Fornaro -- Executive Vice President and Chief Financial Officer

What I'm saying is that, that was not in the numbers at that time. That is the only change compared to that. I made a very large you know -- provided a very larger framework regarding the growth of the different business, the profitability, the cost action. That has not changed at all.

Carlo Santarelli -- Deutsche Bank -- Analyst

Okay and then, just sorry on that last point with respect to the $40 million Italy headwind in your guidance. That obviously is very limited mitigation in 2019. How do you think about that impact in 2020?

Alberto Fornaro -- Executive Vice President and Chief Financial Officer

I think that the impact in 2020 will be limited. There is still a small increase in the taxes, but for now it will be very, very small.

Carlo Santarelli -- Deutsche Bank -- Analyst

Understood. Thank you very much.

Operator

Thank you. Our next question comes from Chad Beynon from Macquarie. Your line is open.

Chad Beynon -- Macquarie -- Analyst

Hi, good morning. Thanks for taking my question. Wanted to focus on International for a second, I believe in 2018 part of the reason why North America was so strong was because of your test-bank process and going back to the core product. I saw that your International approach was pretty similar. So could you just kind of talk a little bit more about what could change in 2019 for International Gaming services, if maybe this was kind of a one-off year and if a lot of the learnings and successes in North America can be applied to International and have that -- have that segment grow in 2019? Thanks.

Marco Sala -- Chief Executive Officer

Thank you, Chad. It's Marco, I think we are positive in the -- in regard 2019 also because next year we will benefit from the Sweden VLT, but in the core part of the business as you are aware, perfectly pointing out, I think there is room for improvement in the International market. The reasons are the following. In Australia, we did very well. We grew quite substantially and we developed a set of new games that can be exported in Asia, where we are historically quite weak. And I think we can improve our performance there.

The same games from our Australia can be used as titles to reinforce our offsetting in other International markets. In addition to that, we have a very clear strategy in the second half of the year to improve our position in the Eastern countries in Europe and we think that we will have a better performance also in the Western country. We had a couple of geographies where we did not perform very well, but we think that the programs in those couple of geographies in Europe are already showing good momentum. More challenging will be Latin America, notwithstanding we believe that we can improve with our titles also in that area.

Don't forget that we will continue deploying our now very well performing games in Greece. For all these reasons, we believe that we will improve our performance in North America. In addition to that and to conclude, of course, we will use some of the titles that are doing very well in North America, also in the International market.

Chad Beynon -- Macquarie -- Analyst

Okay, great. Very comprehensive. Thank you.

Marco Sala -- Chief Executive Officer

Thank you.

Chad Beynon -- Macquarie -- Analyst

And then separately, with respect to the two contracts that you said are in the 2019 outlook right now, so Brazil and the SuperEnalotto in Italy. How are you thinking about returns and then could you just remind us on the timing of the SuperEnalotto contract? Thanks.

Marco Sala -- Chief Executive Officer

No. The timing, I mean, in the next few months, we'll know about the award and regarding the returns, Alberto can elaborate on it.

Alberto Fornaro -- Executive Vice President and Chief Financial Officer

We are talking about two contracts that have an upfront fee. So as we have spelled out in the past, when there is an upfront fee, the risk -- the financial risk is higher and then we tend to factor higher returns. And therefore in certain cases, for example, we have not participated to certain bids, or normally we require an higher premium for in terms of returns overall. That's the way we look at this opportunity.

Chad Beynon -- Macquarie -- Analyst

Okay, thank you very much. Appreciate it.

Marco Sala -- Chief Executive Officer

Bye, Chad.

Operator

Thank you. Our next question comes from Domenico Ghilotti from Equita. Your line is open.

Domenico Ghilotti -- Equita -- Analyst

Good morning. Three questions. Three questions. The first is on the -- a follow-up on the cash generation. So if you can remind us what can be the cash taxes for '19 in order for us to, say, to elaborate on the bridge. And second question is on the Italian tax increases. I would like to understand, what are the actions that have already been taken to mitigate these -- the impact? I have the impression that all the market is running faster to reduce the payout, so I would like to have your comments. And my last question is on the inorganic options. So you were mentioning the SuperEnalotto and Brazil. Well, on the SuperEnalotto, I'm wondering why you decided to go alone, while in the past, you bid with partners for lotteries? And in Brazil, I'm wondering if you have already taken a decision on this front?

Marco Sala -- Chief Executive Officer

Okay. I will take the answers on the bids. Let's start from Brazil. The bids are due by March 20 then as you know, there is a lot to consider when investing in a greenfield opportunity like this, especially when there is a significant upfront payment. Having said that, for us, it's a compelling opportunity and we are assessing it seriously with the rigorous parameters, we use to evaluate any bid. So we will come up with our thinking in the next -- in the next days and weeks.

Regarding SuperEnalotto, again we assess every opportunity individually. In this case, we decided not to enter in any partnership and bid alone. Having said that, we continue to have a very strong relationship with our partners. It has been -- I mean, you cannot generalize. You decide bid-by-bid what is the approach that you intend to have. Regarding the question on the recovery of the tax increase in Italy, we are doing as the rest of the market. We are trying to reshape the -- our games, changing the payout for the players and this is what it will be done over the next months. In addition to that, we continue to look at our cost structure, to streamline our cost in order to recover part of the cost increase that is due to the taxation.

Alberto Fornaro -- Executive Vice President and Chief Financial Officer

Regarding --

Domenico Ghilotti -- Equita -- Analyst

And just a follow-up.

Alberto Fornaro -- Executive Vice President and Chief Financial Officer

Yes.

Domenico Ghilotti -- Equita -- Analyst

Just a follow-up on this last point. What is embedded in the guidance that you are providing on the impact of Italian taxation? So are you expecting to, say, recover -- to pass the higher taxes by year-end or sooner? So is there any guidance you can provide?

Marco Sala -- Chief Executive Officer

No, the $40 million includes the pace we have defined technically. I mean we will do along the year, but the $40 million are the $40 million that will impact the full year.

Domenico Ghilotti -- Equita -- Analyst

Yeah, I was trying to understand how prudent, you have been in this assumption --

Marco Sala -- Chief Executive Officer

In the next quarter, I will tell you.

Domenico Ghilotti -- Equita -- Analyst

Okay, quarter-by-quarter. Okay.

Alberto Fornaro -- Executive Vice President and Chief Financial Officer

Domenico, the only comment, additional comment is expect that the mitigation action is going to take a little bit of time. So the impact will be higher in the first quarter and lower in the future quarters, because we will have the time to implement that. That's the only comment we can make and going back to your question regarding the cash flow, we expect cash taxes to be a little higher than this year, but we expect the interest -- cash paid to be lower, OK.

Domenico Ghilotti -- Equita -- Analyst

Okay.

Operator

Thank you. Our next question comes from Barry Jonas from SunTrust. Your line is open.

Barry Jonas -- SunTrust -- Analyst

Hi guys. Just how should investors think about the longer-term risks to IGT in the Italian market? And with that, given you're bidding on SuperEnalotto, what do you think the right mix of business in Italy longer term for you? Thanks.

Marco Sala -- Chief Executive Officer

I think that we feel very comfortable in Italy. When I look at the performance over the last years, we have seen that the market is very resilient. The demand is very strong. The assets we have in the market in terms of brand, network, ability to have a strong CRM, the digital offering is giving us all the tools to deal with an increase complexity. So I'm very positive regarding the business area, regarding the demand.

Of course, the uncertainty of the political situation cannot be factored in the next several years, but when I look at the market, at the end of the day, I look at the need of the government to get this money year-after-year, I continue to be positive regarding Italy.

Barry Jonas -- SunTrust -- Analyst

Okay, great. And then, just given some of the pressures on VLTs, AWPs, I'm wondering if the product at some point becomes less competitive. Do you think there's overlap in the player base with your other offerings in Italy? Hence, could you see some player shifts over time to different gaming or lottery products you offer?

Marco Sala -- Chief Executive Officer

Now this is a very good question, Barry. The fact that I've been monitoring the Italian market for 15 years. As a matter of fact, if you look at the evolution of the Italian market, all the new regulation have provided additional wages and revenues for the government, and for the operators with a very minimal cannibalization.

Reality is that the target of the players are different and even when you have a player that is playing more games, they do following a different attitudes and they tend to some -- their behavior, instead of making choices. And then it happened when there have been the digital offering, it happen at the time of the gaming machines and we are monitoring the trends among the different players and we see that there is a good different positioning about the games and when the games are overlapped, the players are playing the games with a different attitude that are producing a very minor cannibalization.

Barry Jonas -- SunTrust -- Analyst

That's helpful. And then last one for me. Look, you've said in the past you could see increasing capital returns once four time leverage is in sight. So now with the license fees in Italy complete and having good visibility into free cash flow generation from here, do you have a better sense when that might be?

Alberto Fornaro -- Executive Vice President and Chief Financial Officer

No, I mean we have -- we have said we'll be progressive. We will see out -- how things will move forward. Now you understand, we also have some of these in. It also will depend on this opportunity of growth that we have, if we decided to take them or not. So I think what is going to be important is to start the deleveraging, start reducing the debt and improve our profitability to get there as quickly as possible. That is our target.

Barry Jonas -- SunTrust -- Analyst

Thanks so much, guys.

Operator

Thank you. Our next question comes from David Katz from Jefferies. Your line is open.

David Katz -- Jefferies -- Analyst

Hi, good morning everyone. Alberto, I just wanted to talk a bit more about the cadence of cash flow this year. I think in your prepared remarks, you said that more of the CapEx would be front loaded this year, and the EBITDA might be a bit more back-end loaded. Could you maybe give us a bit more color on the cadence of those two, please?

Alberto Fornaro -- Executive Vice President and Chief Financial Officer

Regarding the CapEx, I said, it's going to be in the -- is going to be in the first six months, so 60%. And then regarding -- this year is at the beginning, similar to what we said the last year that we see an increase in the EBITDA in the second half.

In 2018, we were able -- during the year to improve and to accelerate some of the deals and the transaction that allow us to reduce the kind of seasonality. We will try to do the same, but that is where we are today. Obviously I have more visibility on the CapEx, because we work according to schedule that regarding what we can do on EBITDA.

I think that also, let me anticipate that probably the minority, some of the minority payments that normally are done in the second quarter could be done in the first quarter if they will not -- but it doesn't mean that there is anything else than timing at this point regarding this payment. So I would suggest to look for the cash flow at our -- for the different component, what we see for the full year, rather than be focused on the first half.

David Katz -- Jefferies -- Analyst

Understood and just one follow-up. Given the heightened focus on cash flow and the prospects for capital return, I hope you don't mind if I take one more swing at that, which is, if I'm hearing correctly, the growth opportunities that are out there are really the one variable or barrier to you being able to start returning some capital, more capital sooner rather than later. There is no other barrier out there that we should be contemplating, correct?

Alberto Fornaro -- Executive Vice President and Chief Financial Officer

No, I mean, we anticipated what we are -- what is our forecast in general for the cash flow consistent, with the assumption that we had and nothing has changed compare like that. We kept -- regarding the leverage, we kept out the growth CapEx because simply it cannot be forecasted and right now, what we are seeing are the two opportunities we just mentioned, which is the SuperEnalotto and Brazil. So this is it, no change.

David Katz -- Jefferies -- Analyst

Got it. Thank you very much.

Operator

Thank you. (Operator Instructions) And our next question comes from Cameron McKnight from Credit Suisse. Your line is open.

Cameron McKnight -- Credit Suisse -- Analyst

Hi, good morning. Thanks very much. A question for Alberto first. In terms of thinking about 2019 levered free cash flow, how should we think about working capital needs in 2019? Do you expect working capital be a source or use of cash?

Alberto Fornaro -- Executive Vice President and Chief Financial Officer

I expect to be more or less neutral so far. That will be my expectation. This year in the first nine months, we had a series of items that impacted negatively, some of which were related to the commercial services in Italy. So we don't expect that happens for next year, so think about the net working capital as neutral. We have some initiatives that partly have generated some benefits. Also this year, we have reduced our inventory, we have streamlined our supply chain. So that is what is driving my forecast for 2019 on working cap.

Cameron McKnight -- Credit Suisse -- Analyst

Okay, so thanks. And then on the North American Gaming business, the accelerated depreciation of the older units, have you decreased the useful life on participation units generally or is that just a group of units that you've chosen to effectively get down to zero or some lower level?

Alberto Fornaro -- Executive Vice President and Chief Financial Officer

No, as you can imagine, with the change in the cabinets and the change in the content, obviously we are replacing some of the machines with the new title and the new cabinet. And so in certain cases, for the older ones, we have decided basically at the end of life of the product to basically take a charge and move on.

Cameron McKnight -- Credit Suisse -- Analyst

Okay, sure. And then, thirdly, a question for Marco. Would you mind commenting on the change in the DOJ's opinion on the Wire Act, particularly as it pertains to Powerball and Internet lottery sales?

Marco Sala -- Chief Executive Officer

Okay, Cameron I will provide you our view on the overall DOJ opinion and our understanding is that, the intent of the opinion was to clarify DOJ's position on interstate Internet-based wagering. However, as written, the new opinion might potentially apply to a much broader scope of gaming activity. It might even encompass technology infrastructure used to support traditional retail-based Lottery and Gaming transaction. And as you were saying, also Multistate and AWPs that did not exist in 1961, where the Wire Act was enacted.

Several lawsuits challenging and seeking clarification of the DOJ opinion have been filed. DOJ recently extended its regional non-prosecution period 60 days to June 14. We are evaluating the opinion and monitoring the lawsuits and industry response to it. We are also engaging with customers and other members of the industry to understand the potential impact on our businesses and to determine the best course of action and that is all I can say at this juncture.

Cameron McKnight -- Credit Suisse -- Analyst

Perfect. Thank you very much.

Carlo Santarelli -- Deutsche Bank -- Analyst

Thank you, Cameron.

Operator

Thank you. And our next question comes from Joe Stauff from Susquehanna. Your line is open.

Joe Stauff -- Susquehanna -- Analyst

Thank you. Good morning. I wanted to ask on North American Gaming in particular in the fourth quarter, replacement unit sales were up huge, right? The numbers in terms of just both the installed base were up as well as unit shipments, but the conversion into revenue, with revenue being down, can you just talk about that relationship and how to think about the model going forward, especially in 2019 with an improvement in your North American Gaming segment, in particular, product sales?

Alberto Fornaro -- Executive Vice President and Chief Financial Officer

Alberto here. Over -- when you look at the revenues of the North American Gaming, first of all, you need to consider that in the comparison year-over-year, we have $50 million of revenues that are due to an accounting reclass for the ASC. What it really mean is that, revenues are up 3%. The revenues for terminals sold are up significantly. The units were up 27%. We had better ASP. So revenues are up to 34% in the quarter.

Last year, we had in the systems and in the other parts of our business in North America higher revenues than now. That's why you don't see the full impact of the increasing terminals in the bottom line. But again, on the system side, it could be erratic from quarter-to-quarter the overall revenue. That's why we feel very positive about the performance of North American Gaming in terms of revenue.

Joe Stauff -- Susquehanna -- Analyst

And, wouldn't -- I guess going -- following up on an earlier question regarding working capital. With the turn basically in North American Gaming, wouldn't you expect basically a -- working capital to be a source of cash from this segment in particular, but I guess your commentary about flat working capital for the year is -- offsets another part of your business, is that fair to say?

Alberto Fornaro -- Executive Vice President and Chief Financial Officer

What I was implying is the following. First of all, we have -- the working capital is impacted by the different business model of our businesses. So in Italy, it's -- it moves, it fluctuates. But in the gaming business, normally the working capital is linked to the overall volume. So, again, we mentioned that we are expecting some growth for next year. So I would expect the working capital to go up, but because we have taken several initiatives to streamline our supply chain, overall, we think that the working capital could be stable on a year-over-year basis.

Joe Stauff -- Susquehanna -- Analyst

And I guess just kind of one follow-up, I know again it's been asked a couple of times, but I just -- Marco, if you could just comment a little bit more maybe -- or maybe I'll just take a different angle on the mitigants in terms of the tools that you have at your disposable in Italy, obviously on AWPs and VLTs, those take time as you suggested, does it take six months, are you able to implement some of the mitigants earlier, maybe on the AWPs or -- and again just relative to that Italian headwind of $40 million, if we assume no mitigants, what would that number look like?

Marco Sala -- Chief Executive Officer

Higher. No, I am joking. The -- now, Alberto will tell the number. But talking about the way, the mainstream to reduce the impact comes from the fact that you change the payout of the games. On AWPs, to do that, you have to change the motherboard. For the VLTs, it's easier and faster because you can download it from the central system. But it takes months, it does not take years. It's something that you have to look progressively over the months and that we are very active and consider that we have already done in some occasions. So this is the best answer we -- I can provide. And of course you are also trying to intervene with the best features in the game structure in order to minimize the perception for the player of the reduced payout, because that is the challenge and we have been successful in doing that in the previous cases, where we maintained reality, the demand at the same level notwithstanding a decrease in terms of payout.

And as I said before, we are trying also to look at all the structure of our costs when we serve our distributor or the overall supply chain trying to optimize the situation accordingly to the new profile on profitability of the game -- of the business.

Joe Stauff -- Susquehanna -- Analyst

Okay, thank you very much.

Operator

Thank you. And we'll take our final question from Domenico Ghilotti from Equita. Your line is open.

Domenico Ghilotti -- Equita -- Analyst

Yes, I have a question on the leakage that you have out of P&L on the minority that is growing year-after-year. So I'm wondering, if in this year -- so in 2018 number, there is also a significant contribution from the strong performance of the North American Lottery. So if I should expect -- so if you can provide any indication for '19 or if you can extrapolate from the 2018 number the exceptional part.

Alberto Fornaro -- Executive Vice President and Chief Financial Officer

I would say that the major driver Domenico is the performance of the Lotto. It's clear if the Lotto continue to perform very well, we will see -- and continue to grow, we will see the component of the minority in terms of their portion of the dividend of the units to go up. That is the main driver.

Domenico Ghilotti -- Equita -- Analyst

So it could continue to go up, if the Lotto is performing as well as in the past few years?

Alberto Fornaro -- Executive Vice President and Chief Financial Officer

That is what has happened in the last two years. That has grown above over our expectation and therefore, it's having an increase on the minority.

Domenico Ghilotti -- Equita -- Analyst

Okay. And just the last question. You are currently clearly introducing so the new -- in Italian market the new machines. I'm trying to understand, what is level of payout in VLTs in particular that you are testing on the market, just to understand what is the initial, say, assumption or initial tests that you are doing?

Alberto Fornaro -- Executive Vice President and Chief Financial Officer

Honestly, I do not know the number. What I know is that the first feedback I'm receiving from the Italian team is that the products are performing quite well and they're improving the quality and the performance of our offer. So we are pretty satisfied with what we have done so far.

Domenico Ghilotti -- Equita -- Analyst

Okay. Thank you.

Alberto Fornaro -- Executive Vice President and Chief Financial Officer

Thank you.

Operator

Thank you. And that does conclude our question-and-answer session for today's conference. I'd now like to turn the call back over to Marco Sala for any closing remarks.

Marco Sala -- Chief Executive Officer

Thank you all for your question and for your interest in IGT. 2018 was a year of good progress in reinforcing our positions in the growing global markets we operate on. We look forward to updating you on our efforts on our next call in May. With that, I wish you all a good day.

Operator

Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program. You may all disconnect. Everyone, have a wonderful day.

Duration: 62 minutes

Call participants:

James Hurley -- Senior Vice President of Investor Relations

Marco Sala -- Chief Executive Officer

Alberto Fornaro -- Executive Vice President and Chief Financial Officer

Carlo Santarelli -- Deutsche Bank -- Analyst

Chad Beynon -- Macquarie -- Analyst

Domenico Ghilotti -- Equita -- Analyst

Barry Jonas -- SunTrust -- Analyst

David Katz -- Jefferies -- Analyst

Cameron McKnight -- Credit Suisse -- Analyst

Joe Stauff -- Susquehanna -- Analyst

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