Brightstar Lottery PLC

Good day and thank you for standing by. Welcome to the International Game Technology Q1 2022 earnings conference call. At this time, all participants are in a listen-only mode. After this speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star 1 on your telephone. Please, the advice of today's conference is being recorded. If you require any further assistance, please press star 0. I would now like to have the conference over to your speaker today, James Furley, Senior Vice President of Investor Relations. Please go ahead.

Thank you for joining us on IGT's first quarter 22 conference call hosted by Vince Sadusky, Chief Executive Officer, and Max Chiara, our Chief Financial Officer. After some prepared remarks, Vince and Max will be available for your questions. We are presenting from multiple locations, so please bear with us if we encounter any technical difficulties. During today's call, we'll be making some forward-looking statements within the meaning of the federal securities laws. Forward-looking statements are not guarantees, and our actual results may differ materially from those expressed or implied in the foreign-looking statements based on the number of factors and uncertainties, including those related to the effects of the COVID-19 pandemic. The principal risks and uncertainties that could cause our results to differ materially from our current expectations are detailed in our latest earnings release and in our SEC filings. During this call, we may discuss certain non-GAAP financial measures. In our press release, slides accompanying this webcast, and our filings with the SEC, each of which is posted to our investor relations website, you will find disclosures regarding these non-GAAP measures, including reconciliations of these measures with comparable GAAP measures. And now I'll turn the call over to Vince Sadusky.

Thanks, Jim, and hello to everyone for joining us today. 2022 is off to a strong start with a terrific first quarter. Our strategy to grow, innovate, and optimize is delivering results. As revenue grew 7% at constant FX, above the targeted 22 to 25 range, this goes on investor day, driven by the strong gaming and lottery product sales. Operating margin of 24% exceeded expectations, bolstered by a 37% lottery margin. which is also above the 2025 target range of 33% to 36%. At constant currency, EBITDA matched the prior year's record level and was among the highest quarterly margin ever. This is a remarkable achievement considering the significant discrete lottery benefits we had in the first quarter of 2021 and incremental Omicron impacts and higher supply chain costs that we had this year. And importantly, we returned a record 80 million to shareholders through dividends and share repurchases for the second consecutive quarter. Let's delve a bit deeper into our operating segments, beginning with lottery, which represents most of our revenue and over three-quarters of IGT's total profit. As expected, lottery same-store sales were down from the prior year's record levels that benefited from pandemic-related restrictions. Nevertheless, the Q1-22 results confirm a strengthening in the multi-year compound annual growth rate and the attractive margin profile of this business. Instant ticket gains, which account for most of the lottery wagers in our portfolio, grew at a 7% compound annual rate from Q1-19 to Q1-22, up from about 4% in the 2015 to 2019 periods. This is consistent with our research, which indicates that players intend to play lottery games at higher levels in the pre-COVID period. It also supports our long-term outlook for the lottery segment. We will work with our customers to drive player demand through continuous innovation, as we have done in the past. One exciting example is IGT's proprietary drum-based game, Cash Pop. For a new draw-based game, it is a significant accomplishment to carve out a distinctive place in the market, as Cash Pop has. The game's easy-to-understand strategic play experience, something that can be enjoyed across retail and digital channels, has shown staying power since its 2019 launch. In Q1, the Florida, South Carolina, Virginia, and West Virginia lotteries became the latest to offer Cash Pop, bringing the total number of U.S. lotteries with the game to seven. Missouri is slated to launch the game in late May. Let me turn now to instant ticket printing, an area of incremental growth opportunity for IGT. Infinity Instance, a product that incorporates unique, ultra-high resolutions and ticket printing technology, is an example of exciting innovation that differentiates IGT. The Infinity process provides full-color, variable printing on the ticket front, back, and on play and prize symbols. This technique affords designers and lottery product managers the capability to create game mechanics and customize graphics that significantly enhances product value and the player experience. Seven Infinity instant games are now available in four U.S. jurisdictions. We hope and expect the success that the Infinity tickets are enjoying will continue to drive further adoption. iLottery is another important area of focus and opportunity for us. IGT's iLottery sales increased over 20% in the first quarter, including over 40% growth in North America. Today, all our U.S. iLottery customers have successfully transitioned to our cloud-based ESM platform. We are rolling it out to international customers over the next 12 months. Just like the land-based business, game innovation and portfolio optimization are important drivers of wager growth. We have invested in talent to increase new game production and to leverage our unique mix of strong creative game content and digital know-how. With a current library of 130 games, IGT's newly launched e-instance are performing stronger than ever based on their increased quality and complexity of gameplay. The Georgia Lottery launched its first progressive jackpot game in Q1, and it became the strongest first-month performer by a wide margin. The global gaming segment was a clear standout in the quarter, with revenue increasing by more than 40%, propelled by higher unit shipments, average selling prices, IP royalties, and active install-based units. Our product positioning around the world is as strong as it's been in a long time. We've invested heavily in key hardware and content initiatives over the last three years and are seeing the benefits in the success of recent launches. This sets us up very well for 2023 and beyond. Momentum behind the Peak family of gaming machines is accelerating and broad-based. From the newly launched large-format Peak 65 cabinets to the industry-leading Peak 49, Peak Bartop, and Peak Slant 32 that has consistently held the number one spot for a multi-screen cabinet in North America for more than a year. We're also excited about the upcoming launch of the Diamond RS cabinet, our first new mechanical wheel cabinet in many years. The success of the new hardware is also a function of compelling game content. You've heard us talk a lot about our focus on multi-level progressive games, an area where IGP has historically been underrepresented, especially in the U.S. Our efforts are paying off. Our North American MLP installed base has increased by nearly 20% since the end of 2020. On the lease side of the business, Money Mania is maintaining strong productivity of two and a half to three times house average. And Prosperity Link, launching soon, is among the strongest test bank titles we've had to date. Wolfhound Eclipse, our first MLP offered for sale in the U.S., is performing strong out of the gate at about two times house average. Apart from MLPs, Regal Wrenches and Stinkin' Rich, Skunk's Gone Wild and other are very popular for sale titles. The TV strength in the U.S. GGR trends, which remain above pre-pandemic levels in local and destination markets, is very encouraging. The potential player base has expanded with the younger demographic increasingly visiting casinos. This gives us confidence that with the Q1 unit sales momentum, the recent win of nearly 1,400 DLTs for the Atlantic Lottery Corporation, and the strength of our sales funnel, U.S. and Canadian shipments have the potential to reach 2019 levels this year. Our good progress is being recognized. IGT was named Casino Supplier of the Year for the second year in a row at the Global Gaming Awards in London. We won several top prizes at the Casino Awards 2022, and we were named Multi-Channel Supplier of the Year at the International Gaming Awards for our leadership in cross-platform content and technology. That's a nice segue into digital embedding where first quarter revenue rose over 20%, primarily on strong U.S. iGaming and sports betting trends. During the period, we went live with our iGaming content in West Virginia, bringing our U.S. iGaming footprint to five states, serving a record 56 operators. In addition, since April, we've gone live with several commercial operators in Ontario as market opportunities opened there. We also added new customers for our sports betting platform and turnkey solutions during the first quarter and are currently live in over 20 states, powering more than 70 sportsbooks. The turnkey pipeline remains strong until next year. Perhaps the biggest digital embedding news is the recently announced acquisition of Acquire iSoftBet, a leading iGaming content provider and third-party game aggregator. This is a unique opportunity to add significant complementary scale to our play digital business. The high-quality management team is a very good cultural fit. The transaction advances several strategic initiatives much faster than we could do on our own. It greatly enhances our talent pool, digital native content library, and global reach, including the opportunity to distribute proprietary IGT content in regulated European markets. For context, the transaction more than doubles our digital content library to approximately 225 proprietary games, and should enable us to create up to 70 new game titles per year. Once again, more than doubling Play Digital's historical rate. In this business, the velocity of new game launches is an important growth driver, and iSoftBed brings us more of a digital-first mentality. iSoftBed's aggregation technology should greatly simplify the integration of new studios and content and enable faster and more impactful entrance into new markets. It also provides a robust data analytics platform that will help our customers make focused strategic decisions on their game portfolios. We expect to launch ISOFET content in the aggregation platform in the U.S. and Canada in the second half of 2022 and to bring ICT proprietary content via ISOFET's platform to European regulated markets in the same time frame. Over the last few months, I've spent a lot of time meeting with employees. I'm encouraged by the high integrity and incredible energy of our people. They exhibit the qualities of true leaders. The priority they place on creating and nurturing an inclusive culture and good corporate citizenship is truly inspiring. This has always been a part of IGT's DNA, and it is important to me personally. I'm impressed with the team's efforts to consistently raise the bar here. There are several recent examples, such as joining the Science-Based Targets Initiative and issuing a formal human rights policy statement. The broad scope of our effort is being recognized. Earlier this year, ICT earned a Best Place to Work for LGBTQ Plus Equality designation from the Human Rights Campaign Foundation and was also named the Best Diversity and Inclusion Employer at the Casino Awards. The power of our portfolio is clear. The strong first quarter results and progress in key strategic initiatives gives us confidence in delivering on our financial outlook for the year. I'm pleased with the momentum and outlook for the long-term recovery of the gaming business, as well as increased levels of lottery play from pre-COVID periods. The strong margin profile highlights the attractiveness of the lottery business and the success of structural cost reductions, even as we continue to invest in product development and other growth opportunities. The company is in a great operational and financial shape as we focus on executing our long-term goals. And now I'll turn the call over to Max.