Brightstar Lottery PLC

Hello, and welcome to the International Game Technology Third Quarter 2024 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, and if you would like to ask a question during that time, simply press star 1 on your telephone keypad. I would now like to turn the conference over to James Hurley, Senior Vice President of Investor Relations. You may begin.

Thank you, and thank you all for joining us on IGT's third quarter 2024 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. We are presenting from multiple locations this morning, so please bear with us if we encounter any technical difficulties. 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, the 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.

Thank you, Jim, and hello to everyone on the call. Our Q3 and year-to-date results highlight the scale and attractive margin structure of our business. We generated revenue of $1.9 billion for the first nine months of the year, driven by sustained growth in Italy and improved Q3 trends for instant ticket and draw games in the U.S. That translated into solid profit margins and cash flow, including adjusted EBITDA of $880 million for the first nine months of the year, with a margin of 47.3%. This is the first time we're reporting continuing ops, which includes our lottery and corporate functions, as a result of the announced transaction to sell the gaming additional business to Apollo. Some key observations include continuing operations generated two-thirds of the $725 million year-to-date cash flow from operations and over 85% of the $445 million consolidated free cash flow. The results highlight the solid financial performance and scale of our lottery business. Although the sale of our gaming and digital business to Apollo is expected to close by the end of the third quarter of 2025, we are already taking significant steps to optimize the organizational structure of our lottery corporate functions with the launch of Optima 3.0. The goal is to right-size costs by realigning and optimizing general administrative activities while supporting key long-term growth objectives and without sacrificing our superior customer service standards. In fact, we are reallocating resources and investing in new talent to support key areas such as iLottery, instant ticket printing, international sales development, and field services. Our lottery industry leadership is evident in the scale of our operations. In the first nine months of the year, our systems have processed nearly 80 billion lottery majors under our operator and FM contracts worldwide. Powerful organic levers such as innovation and game content portfolio optimization, and expanded distribution strategies have been important drivers of the 3.5% compounded growth achieved over the last five years. The 6% decline in Q3 global same-store sales was a function of unfavorable U.S. multistate jackpot comparisons. On a year-to-date basis, the unfavorable multistate jackpot impact is mostly offset by higher revenue from instance and draw games. Q3 sales of instant and draw games, which account for over 90% of our global wages, were up about 1%, an improvement from being down about a half percent in the first six months of the year. This reflects good growth in Italy and improved trends in the United States. Italy wages continued to grow, up approximately 3% in both the third quarter and year-to-date periods. Top three game launches included new instant games like 50 Euro and 100 Euro, which features bold graphics and an innovative infrastructure whereby players win either 50 Euros or 100 Euros on a 10 Euro ticket. We also had a new ticket under the Turista Persempre franchise and continued performance of the 20 Euro ultra-numerissimi game. The launch of the fourth Lotto Draw, which now includes numero oro options, is also driving incremental draw game wagers. Outside Italy, the improvement in Q3 trends came from better instant game sales in some of our largest customers, including Texas, New York, Michigan, and New Jersey in the U.S., and Poland in Europe. We continue to lead the industry with our lottery technology, as evidenced by the 10-year facilities management contract extension we secured at North Carolina. In the nearly 20 years serving the North Carolina Education Lottery, it has become one of the top 10 most successful lotteries in the U.S., raising more than $1 billion annually from the state's educational system. We are excited to support them on the next phase of growth with our high-performing Aurora Central System, up to 8,500 new retailer Pro S2 terminals, and hundreds of new self-service vending machines. iLottery continued its high growth with sales up over 26% in the third quarter and year-to-date periods, fueled by our expanding game portfolio. New e-instance such as Lucky Coins, Elephant King, and Sportstars are among the best ever new launches for us. In Georgia, Elephant King achieved the best ever performance of any game during its first 30 days. The success of our new e-instance is based on effectively leveraging data-driven and player insights. We look forward to bringing these games to new markets with our growing roster of e-instance content customers, which has reached 18 jurisdictions worldwide. the area of instant ticket printing we have one new business based upon our innovative game content marketing and other service capabilities we entered into a three-year primary printing contract portugal's lottery where we displaced an incumbent in a competitive procurement process we have been santa casa's lottery technology partner for nearly 25 years and this is an exciting evolution of our long-standing relationship we also signed a three-year printing contract with ftj operator of the french national lottery where we will make available our full suite of instant ticket games. We intend to support the anticipated increase in printing volume with a new press scheduled to become operational early next year. It will be the industry's most state of the art press that will increase our production capacity by more than 50%. Our future forward growth driven global lottery leadership is on display at recent industry events, including the North American Association of State and Provincial Lottery's annual conference in Kansas City, and the World Lottery Summit in Paris. The focus was on land-based and digital solutions that provide lottery operators the tools they need to run their business today and into the future. Highlights included our connected play capabilities enabled by Omdia, our integrated lottery solution that provides valuable insights to help drive improved marketing, product offerings, and increased sales. Our suite of land-based solutions is designed to modernize the retail environment, enhance player engagement, and bring games closer to players. iLottery was another important focus, especially our updated cloud-based player portal, top-rated mobile app, and enhanced mobile features. Of course, our high-performing retail and instant game portfolio got a lot of attention too, especially Infinity Instance, player favorite license brands, and omnichannel games. Our executive and operational leadership will remain largely intact following the sale of our digital and gaming assets. The launch of Optima 3.0 and the associated Q3 restructuring charge aims at right-sizing the organization while supporting our long-term growth objectives. Along those lines, we've established a new lottery organizational structure under Renato Ascoli's leadership. This includes the reallocation and acquisition of best-in-class industry talent in key areas, such as international sales and operations, high lottery technology, instant ticket printing, and strategic market development initiatives. We are excited about the solid foundation we can build upon as we transform into a leading lottery pure play company. Our global scale, complemented by strong profit margins and cash generation, positions us to capitalize on attractive lottery industry dynamics. We remain committed to innovating and developing strategic product initiatives to drive revenue and profit growth for ourselves and our customers. At the same time, we are proactively building a leaner, more focused, and stronger organization. With that, I will turn the call over to Max.