Brightstar Lottery PLC

Hello and welcome to the International Game Technology Quarter 2023 Earnings 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 star 1 on your telephone. If you would like to withdraw your question, again, press the star 1. We'll now turn the conference over to Jim Hurley, Senior Vice President of Investor Relations. Please go ahead.

Thank you for joining us on IGT's Q2 2023 conference call, which is 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'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 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 Sadusky.

Thanks, Jim. Before we begin, I'd like to take a moment to honor Fabio Cairoli, who led our global lottery business until his untimely death a few weeks ago. Fabio was part of the IGT family for over a decade. He was an outstanding executive, distinguished by his passion, drive, sincerity, and commitment to results and innovation. He led an incredible team of world-class talent, and IGT's global lottery leadership expanded under his stewardship. Fabio left an indelible mark on IGT and the industry, and he will be missed. Turning to the news of the day, our Q2 and first half results reflect solid momentum across all business segments. Reported revenue was up 2% in the first half of the year, but up an impressive 10% when we adjust for the sale of Italy commercial services. This includes 5% growth for global lottery, a 15% increase for global gaming and 27% play digital growth. We delivered over 500 million in operating income in the first six months. The 24% operating margin achieved in both the second quarter and the first half met the high end of our outlook fueled by nice margin expansion for each segment. We earned approximately $900 million in EBITDA in the first half, and the EBITDA margin expanded 140 basis points to 42%. Based on the strength of our first half results, we are raising our outlook for the year. We strengthened our global lottery leadership in the year-to-date period with the focused execution of key strategic initiatives. 5% same-store sales growth highlights the vital impact of game-on innovation and portfolio optimization on lottery growth. There's no better proof than the 9% Italy same-store sales expansion in the first half, a remarkable achievement considering the scale and scope of our Italy lottery business. Sustained success of the new 25-euro Vinci and Grande game, in addition to the popularity of the 50-euro cent game, is helping to grow the player base and drive a double-digit increase in ticket sales. Draw games were also up on Teni Lotto performance and the contribution from new game mechanics, such as Gong, and the addition of a second draw for Million Day. Outside of Italy, 4% same-store sales growth reflects low single-digit expansion for instance in draw games and over 20% growth for multi-jurisdiction jackpot games. Last quarter, we mentioned the impact that several large jackpots were having on North American same-store sales in April. Notably, North America monthly same-store sales trends improved progressively during the second quarter and have improved further in July. We bolstered our industry-leading contract portfolio over the last few months. We went live in Connecticut as the lottery's new FM provider. In addition, an IGT consortium won an exclusive 20-year concession to operate instance and passive lottery games in the state of Minas Gerais in Brazil. Our reentry into the Brazilian market represents an important foothold in what we hope to be a more significant long-term opportunity. And we continue to make excellent progress in iLottery. Global iLottery sales are up over 70% in the first half, reflecting strong trends around the world, especially for e-instance. Compelling new games such as Reef Riches, a multi-level progressive jackpot launched in North America during Q2, is building on the sustained success of key franchises like Cleopatra Clusters. Italy iLottery sales are also benefiting from APC upgrades and the synchronized launch of games across digital, and land-based channels. We recently executed an e-Instant cross-licensing agreement with FDJ, operator of France's National Lottery. The focus is to leverage FDJ's full suite of e-Instant games in Italy and IGT's full suite of e-Instants in France. We also won an eight-year contract with the Connecticut Lottery in a competitive procurement process to launch its first-ever iLottery system to sell kino and draw-based lottery games. We expect to be live in late fall this year. Turning now to Global Gaming, where momentum in our business continued across all KPIs. This drove strong revenue and profit growth in the first half, up about 15% and 30% respectively. We shipped over 16,500 units in the first half, a 15% increase from the prior year, including record levels for a first half period in the U.S. and Canada, where we maintain the leading ship share. Global ASPs were up 13%. Our focus on multi-level progressive games, including popular new titles such as Raise the Sails and Cat's Wild Serengeti on the peak slant 49 cabinet, is an important driver of these strong results. Another is the growing demand for our Diamond RS cabinet, especially for Legend of the Phoenix and Double Chili Mania, which is among the top ranking games in the new core mechanical wheel segment. And we bolstered our VLT market leadership with recent contract awards in Western Canada and Alberta. Focused product strategies are also driving improvement in the install base, which was up 9% from the prior year, complemented by higher yields. Q2 marks the fourth consecutive quarter of sequential install base growth, including in the US. We expect to maintain this momentum with a strong and growing suite of MLP games. Prosperity Link's success continues to expand. There are now over 2,500 units in the field, and it's been an important driver of the more than 25% increase in our MLP install base over the last two years. And excitement is building for Mystery of the Lamp on our new Peak Curve 49 cabinet. In fact, Mystery of the Lamp themes secure the top two spots for new premium lease games a recent eiler survey the rest of world install base is up 19 in the last year fueled by progress in latin america and amia that's having a beneficial impact on rest of world yields which are up nearly 25 percent in the same period our igt advantage central casino management system was selected to power the recently opened santan mountain casino in arizona it has also gone live at the pottawami casino hotel Carter and will power the Rio Hotel and Casino in Las Vegas beginning in Q4 this year. In both instances, we replaced a competitor system, which is a true statement to our powerful expanding suite of system solutions. During the quarter, we announced a new 10-year licensing agreement with Sony, extending our 25-year partnership for the Wheel of Fortune brand through 2034. IGT's Wheel of Fortune slot is the most successful license slot theme of all time, And this agreement grants us exclusive brand rights across gaming, lottery, iLottery, and iGaming. Moving to Play Digital, where growth accelerated in Q2. GGR momentum for Play Digital's games is supported by a proven core strategy affording top performing land-based games to the digital channel. In fact, our Fortune Coin, Cash Eruption, and Cleopatra games scored the top three spots on EGR North America's June 2023 US slot ranking. Play Digital has a unique assortment of progressive jackpot and omnichannel WAP games. This includes Wheel of Fortune Triple Gold, Gold Spin in New Jersey, the first ever omnichannel WAP game in the United States that launched during the second quarter. IGT is the only company with a true omnichannel WAP offering where multiple games across multiple channels share a common jackpot. We launched our first omnichannel game in the Canadian market seven years ago with our highly successful Power Bucks franchise, which was recently extended to Alberta, along with several other popular mega jackpot games. It's an exciting area of incremental opportunity for us, one that is unique to IGT. In the balance of the year, we plan to launch a host of new game features to advance our core iCasino strategy, in addition to introducing a slate of top-performing iSoft bet games to the U.S. market. We expanded our long-term relationship with Rhode Island Lottery with the recent approval of iGaming in the state. Beginning next year, we will be offering iCasino games in Rhode Island through a joint venture with Bally's. In addition, we extended our sports betting contract with the state for three years. We continue to grow our sports betting customer base with our market-leading turnkey solution and were recently recognized as Sportsbook Supplier of the Year at the 2023 SBC Awards North America. IGT has made important strategic progress over the last few years. We reorganized the business by global product responsibility, simplifying our organizational structure and our 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 iCasino 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. We have also enhanced shareholder returns by establishing the company's first-ever share repurchase program. These changes have transformed IGT into a company with higher growth prospects and a better profit profile. We conveyed that at our November 2021 Investor Day when we issued 2025 goals that we believe can create significant value for shareholders. In June, we announced the Board is evaluating potential strategic alternatives for the global gaming and play digital segments. While there is no update to offer at this time, the goal is to unlock the full value of IGT's market-leading assets, which we don't believe is accurately reflected in the share price. We are fortunate to be undertaking this exercise from a position of strength. There is good momentum across lottery, gaming, and play digital, and a clear path to achieving our 2025 targets for each segment. I'll turn the call over to Max now, who will provide more insight into Q2 performance and how we're tracking to those 2025 targets.