Brightstar Lottery PLC

Ladies and gentlemen, thank you for standing by, and welcome to the IGT 2022 fourth quarter and full year results. I would now like to turn the call over to James Hurley, Senior Vice President, Investor Relations. Please go ahead.

Thank you, and thank you all for joining us on IGT's Q4 and full year 2022 conference call, hosted by Ben Sedusky, Chief Executive Officer, and Max Chiara, our Chief Financial Officer. After some prepared remarks, Vince and Max will be available for your questions. During today's call, we will be making some forward-looking statements within the meaning of the federal securities laws. Forward-looking statements are not guarantees, and our actual results may differ materially from those expressed or implied in the forward-looking statements. The principal risks and uncertainties that could cause our results to differ materially from our current expectations are detailed in our latest earnings release and in our SEC filings. During this call, we will discuss certain non-GAAP financial measures. You'll find additional disclosures regarding these non-GAAP measures, including reconciliations with comparable GAAP measures in our press release, slides accompanying this webcast, and our filings with the SEC, each of which is posted on our Investor Relations website. And now I'll turn the call over to Vince Sedusky.

Thank you, Jim, and hello to everyone joining us today. We are reporting a strong finish to 2022 with profit growth and free cash flow generation accelerating in the fourth quarter. We achieved all financial goals for the year, mostly at the top end of our outlook, and we returned a record $276 million to shareholders through dividends and share repurchases. We end the year with revenue and profit margins comfortably above pre-pandemic levels and leverage at its lowest level ever. We strengthened our leadership positions across all our main activities during 2022. We remain the world's largest B2C operator of lotteries with a footprint that spans Europe, North America, and Latin America, as well as the leading provider of B2B lottery services and solutions for both land-based and iLottery channels. Our e-instant content is currently driving some of the strongest iLottery growth in the market, and our progressive e-instant games recently won Lottery Product of the Year at the International Gaming Awards. The American Gaming Association recently reported 2022 was a record year for commercial gaming in the U.S., our largest market. Total revenue grew 14% to $60 billion, with growth across all segments, including a 5% increase in slot GGR. Our global gaming team maintained the leading North American slot ship share in 2022 for the fourth consecutive year, and we steadily gained share in each of those years. This momentum is supported by the leading game feature patent portfolio that gets stronger every year, as recognized by the Global Gaming Awards Casino Supplier of the Year for the third consecutive time. We also won four categories at last week's Eiler Slots Award Show. That land-based success is fueling our strong position in the North American iGaming market, which we expect to build on with newly expanded capabilities and opportunities for our Play Digital division. We also enhanced our industry-leading ESG profile in the last year with improved scores from several rating agencies and our commitment to the science-based targets initiative. I'd like to spend some time in the operating performance of each segment, beginning with Global Lottery. Same-store sales strengthened progressively in 2022, reaching 7% global growth in Q4 on elevated Powerball sales in the United States, in addition to nice growth in Italy for both instance and draw games. iLottery sales were up an impressive 60% in the year, with even stronger growth in the second half, driving a 300 basis point increase in our US iLottery market share. Total lottery same-store sales have increased at 6% CAGR since 2019. Our 2022 results confirm the market is successfully maintaining the outside sales levels experienced during the pandemic. We believe this is directly attributable to the steady stream of innovation that we, in partnership with our lottery customers, continually bring to market. Some recent examples include the launch of Gong in Italy. an add-on game to the successful 10-E lotto franchise that drove meaningful sales increases during Q4. We also achieved record Italy instant ticket sales in the fourth quarter, thanks to a steady lineup of new game launches, including the highly successful launch of a 10-euro Super Numeracy game. It's a good proof point that our strategy to innovate with higher price points is working. The velocity of iLottery growth is fueled by a rapidly expanding e-instant portfolio. that is getting better with each new game launch. During the year, Bankbuster and Cleopatra Clusters established themselves as true blockbusters, and our investment in R&D should support about 40 new game launches in 2023, up from 30 in 2022. The robust performance of our expanding E-Instant portfolio opens an exciting new opportunity via third-party distribution arrangements. Our E-Instant games are live with 12 customers worldwide, and we expect to add a half dozen more in 2023. This should maintain double-digit iLottery growth even without any new market legislation. On the technology front, we launched Omnia, the company's first truly player-centric omni-channel lottery system, as well as Infinity Instance, a revolutionary digital instant ticket printing technology during 2022. We believe Omnia and Infinity are transformational innovations that offer powerful growth potential for the lottery industry. We also secured important new contract wins and extensions during the year, including a new 10-year instant ticket printing contract in Texas, as well as a multi-year facilities management extensions in New York and Georgia, which are among our top 10 lottery customers. The elevated lottery play levels achieved over the last few years have fueled about 500 basis points of operating margin expansion since 2019. This is despite increased R&D investment to support important initiatives like iLottery. And while the 35% operating profit margin is aligned with our 2025 target, there is room for more margin expansion with continued industry growth. Moving on to global gaming, Focused product and market strategies drove significant revenue and profit gains during 2022. A nearly 30% increase in revenue drove operating profit five times higher on improved service margins and disciplined cost control, despite significantly higher supply chain costs. 2022 OI and EBITDA margins each exceeded 2019 levels. We ended the year with record levels on important KPIs, including global ASPs, and U.S. and Canada unit shipments. Much of this progress came from an expanding portfolio of successful MLP games, with Wolfram Eclipse and Egyptian Link being some of the top-performing titles. There is further opportunity for IGT to achieve increased share of the MLP market, and we have an exciting pipeline of new games coming to market this year. The broad acceptance of our new Peak Dual 32, Peak Slant 49, and Diamond RS cabinets, in addition to our new poker cabinet offerings, is another important driver of the leading U.S. and Canada ship share we maintain for the fourth consecutive year. Demand for the Diamond RS is outpacing our ability to build units, reflective of the substantial stepper replacement cycle this cabinet offers. The global install base achieved annual growth for the first time in several years. Outside of the U.S. and Canada, the install base has been on an upward trajectory for some time, That momentum accelerated in 2022 on expansion in Latin America and Greece. In the middle of the year, there was an inflection that drove the U.S. and Canada installed base higher, marking what we believe is an important milestone for IGT. The improvement was fueled by the success of new WAP and MLP games, such as Wheel of Fortune iRoller, Prosperity Link, and Money Mania, and was complemented by stronger yields. We expect continued install-based growth as we look to the future, both for the U.S. and Canada and for the rest of the world. Today, we believe our global gaming segment has never been stronger. There are many avenues of growth over the next several years across product categories and geographic regions. Those top-line opportunities should drive continued operating leverage as we progress towards our 2025 margin goals. There is a lot of excitement at Play Digital. the new name and brand for our digital embedding segment. The change is reflective of the seamless iSoftBed integration and the expanded capabilities and future opportunities for the segment. Play Digital delivered over 25% revenue growth and a 50% increase in operating profit in 2022. This is a great achievement considering the elevated investment in talent and R&D we made during the year, in addition to absorbing iSoftBed integration costs. The nearly $70 million in EBITDA and 32% EBITDA margin generated in 2022 are impressive levels for a relatively new business with a compelling growth outlook. We are on pace to double new online casino game launches to over 65 per year. In 2023, those new launches will include digital versions of our most popular land-based WAP and MLP games, such as Prosperity Link and Money Mania. We will also introduce several top-performing iSoftBet games in the U.S. and Canada over the next few weeks. Soon, we will launch Wheel of Fortune Casino, the first brand-led online casino in the U.S. through our long-standing relationships with BetMGM and Sony Pictures Television. It is an exciting and unique omnichannel offer, leveraging one of the most successful and iconic slot brands. With a greatly expanded portfolio of over 250 proprietary games, and a world-class aggregation platform able to distribute thousands more, we can now develop exclusive game assortments and targeted marketing campaigns for specific customers and markets. We launched the first two iSoftBed games in Ontario in Q4 to great player acceptance and are working our way through the regulatory process in the U.S., The first launches of IGT iGaming titles through our more robust global distribution network will begin with Greece and Romania later this year. In sports betting, we had 16 new installations across 11 jurisdictions in 2022, and we're now powering over 80 sportsbooks. Vanduul and Rhode Island, our two largest sports betting customers, had their best years, and we just came off record Super Bowl betting with smooth operational performance for our customers. there is a lot more opportunity for us to expand our customer base with our best-in-class hardware, technology, and trading service solutions, especially as new states go live. Plate Digital's SaaS-like business model means that profit margins should expand as we gain scale. You can see the attractive margin dynamics in the 2022 results, a period that included elevated investments to support our growth objectives. The strength of our 2022 performance is a result of important strategic transformation at IGT over the last three years. In that time, the company recognized by global product responsibility, or I'm sorry, reorganized by global product responsibility, simplifying our organizational structure and financial disclosures. We monetized non-core assets at attractive valuations and significantly reduced structural costs. At the same time, we made important investments in growth, especially in the B2B iGaming and iLottery space. Our actions, coupled with the strong cash flow generation of the business, enabled us to reduce our debt and leverage, greatly improving our credit profile, which now stands at crossover investment grade with the recent Fitch rating. We have also enhanced shareholder returns by reinstating a dividend and establishing the company's first-ever share repurchase program. These changes have transformed IGT into a company with a higher growth prospect, and better profit profile than before the pandemic. It's required a lot from the team who has remained intently focused on the task at hand. We've increased investment in our team by hiring new talent, especially in critical digital and technology functions, and by funding important initiatives such as career development, DEI, and other recognition and engagement programs. Results are encouraging with attrition down significantly and the advancement of a winning culture. I want to thank the team for all their efforts to build a stronger IGT. This strategic transformation puts us on a solid path to deliver on our long-term goals. This is clear in the 8% cost and currency revenue growth we achieved in 2022. We expect to build on that momentum this year and are entering 2023 from a position of strength with good trends across business segments. Q1 23 is off to an encouraging start for lottery with accelerated growth in Italy lottery sales and elevated U.S. jackpot activity. For gaming, we have a robust Q1 unit sales funnel, and we also expect continued installed base growth. Play digital momentum should be maintained even in the absence of new iGaming jurisdictions as we leverage our newly expanded game development and distribution capabilities. Now I'll turn this call over to Max.