Brightstar Lottery PLC

Good morning. My name is Rob and I will be your conference operator today. At this time, I would like to welcome everyone to the International Game Technology First Quarter 2023 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, again press the star one. Thank you, James Hurley, Senior Vice President of Investor Relations. You may begin your conference.

Hello, and thank you for joining us on IGT's Q1 2023 conference call hosted by Vince Sadusky, our 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 gap measures in our press release, the slides accompanying this webcast, and our filings with the SEC, each of which is posted to our investor relations website. And now, I'll turn the call over to Ben Sedusky.

Thanks, Jim, and hello to everyone joining us today. As you've seen in our announcement this morning, we're reporting a great start to 2023. Q1 revenue exceeded expectations on good momentum across all operating segments. Net of FX and the sale of Italy Commercial Services, revenue was up 10% from the prior year. In Global Lottery, same-store sales were up 8%, marking another quarter of accelerated growth. The global gaming and play digital segments each achieved high-teens revenue growth in the period, fueled by strong key performance indicators. Q1's 24% operating income margin came in at the high end of our outlook, primarily due to better-than-expected global gaming performance. although it's worth noting all three segments had strong profit margins in the quarter. We generated $449 million in EBITDA, which is among the highest level in company history. That was achieved even without any contribution from Italy Commercial Services in the first quarter of this year. We also generated significant cash flow, and our financial condition has never been stronger with leverage improving to three times the lowest level ever. I'd like to spend some time on the operating performance of each segment, beginning with Global Lottery. Q1's 8% same-store sales increase was the fastest growth in the last six quarters. Italy's same-store sales were up over 10% as new game innovation and portfolio optimization strategies drove sales higher for both draw games and instant tickets. Teni Lotto, our largest draw game in Italy, is benefiting from players returning to their pre-pandemic behaviors. And Gong, the fourth add-on game for Teni Lotto launched late last year is also driving growth. We recently enhanced Italy's Scratch and Win portfolio with the introduction of a 25 euro and 50 euro cent tickets. Both are performing well and appear to be generating incremental sales volume. The Scratch and Win player base has increased by over 1 million players from pre-pandemic levels, which has supported sustained category growth. Turning to North America and the rest of the world, Same-store sales increased 7%, reflecting solid growth for core instant tickets and draw-based games that was driven in part by elevated mega-million sales related to the $1.3 billion jackpot in the period. Our expanding portfolio of instant games elevated U.S. multi-jurisdictional jackpot activity and the contribution from new international markets, led iLottery sales up over 80% in the first quarter. This performance helped maintain the accelerated growth profile we experienced in the second half of last year. The global gaming segment is executing on all fronts, evidenced by the 17% revenue increase and 34% operating income growth achieved in Q1. Our global product positioning has never been stronger, and key performance indicators continue to reach new heights. We shipped nearly 8,300 gaming machines, the highest ever for a Q1 period. The sustained success of MLP titles such as Wolf Run Eclipse and Egyptian Link is being complemented by a pipeline of exciting new MLP games like Magic Treasures, Raise the Sails, and Cats Wild Serengeti. The combination of compelling games and hardware has enabled us to maintain the leading U.S. and Canada ship share for the last few years, complemented by record ASPs for the region in Q1. The installed base was up year over year and sequentially for both the U.S. and Canada and rest of world. and it is high-quality growth as evidenced by the 7% year-over-year increase in global yields. The success of new WAP games and MLP games is an important factor sustaining our momentum. In a recent ILERS research report, IGT had 15 of the top 25 WAP games, highlighting the strength of the Wheel of Fortune and Megabucks franchises. Since 2020, we've greatly expanded the number of MLP games offered on our leased machines, and the MLP install base has grown by over 30%. Prosperity Link is a recent success story, and we launched two new game titles in April to support its momentum. We have an exciting lineup of new MLPs, including Mystery of the Lamp, which will be launched later this quarter on our new peak curve 49 cabinet. And we expect to build the rest of world install base in the balance of the year as we focus on increasing our release game presence in Latin America. We've made good progress with our cashless solutions, entering into a multi-year agreement to enable cashless gaming with our resort wallet and IGT pay solutions at the Grattan Resort and Casino, one of California's largest slot floors. Turning now to Play Digital, where our focus on key initiatives has resulted in double-digit top-line growth. iCasino, which represents about 80% of the segment's revenues, had a strong quarter thanks to an improved cadence of new game launches in the US and Canada, where player demand was heavily concentrated in progressive jackpot games during the period. We also have the benefit of contributions from our IsofBet acquisition coming in this year. In March, we launched Wheel of Fortune Online Casino in New Jersey through our longstanding relationship with BetMGM and Sony Pictures Television. It's a unique omnichannel offer leveraging one of the most successful and iconic slot brands, and we are exploring opportunities to expand the concept into additional jurisdictions. Our expanded iCasino IP portfolio and accelerated pace of new game development provides new ways to add value for our customers. This includes developing custom games and game assortments to drive a more engaging player experience and create a win-win-win proposition for IGT, our customers, and the player. Sports betting was up in the first quarter on an expanding footprint in new and existing markets. We executed new contracts in Mississippi, Nevada, New Mexico and Ohio in the period, and recently signed a three-year contract extension in Rhode Island. We're pleased with the growing adoption of our turnkey solution. To conclude, the compelling innovation we've been bringing to market, coupled with strong customer and player demand, is providing momentum across our global lottery, gaming, and play digital segments. The better-than-expected first quarter performance puts us on track to achieve our full-year goals. have a strong balance sheet and access to significant liquidity to support investments in our strategic objectives we believe this provides an opportunity to create significant value for our shareholders as we progress towards our 2025 targets now i'll turn the call over to max thank you vince good morning everyone and thank you all for joining us today the strengths of our various businesses were on full display in the first quarter financial results reported this morning we generated revenue of