Brightstar Lottery PLC

Hello and welcome to the International Game Technology fourth quarter and full year 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 at this time, please press star 1 on your telephone keypad. I would now like to turn the conference over to Jim Hurley, Senior Vice President of Investor Relations. You may begin.

Thank you, and thank you all for joining us on IGT's Q4 and full year 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. 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 and 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.

Thank you, Jim, and good morning to all. Well, 2024 was a significant year for ITT. We concluded a strategic review that resulted in the announced sale of our gaming and digital business for more than $4 billion in cash. Upon closing, the company will have a singular focus on its leading lottery business, which provides products and services to more lotteries than any company in the world. In 2024, IGT generated over $1 billion in consolidated cash from operations and about $660 million of free cash. Highlighting the cash flow generation of the lottery business, more than 80% of that free cash flow came from lottery operations. The $2.5 billion of revenue achieved in the year was consistent with 2023, as growth in core instant ticket and draw game sales were offset by lower U.S. multi-state jackpot sales. Multi-state jackpot games remained popular. However, there were many more winners in 2024, resulting in fewer significant advertised jackpots and resulting in lower sales. The lottery business achieved $1.2 billion of EBITDA at a 47% margin, highlighting its attractive profit profile. The profit and cash flow contributions enabled significant debt repayment during the year. Year-end pro forma net debt leverage, which is adjusted for the $2 billion in gaming and digital sales proceeds committed for debt reduction, is 2.4 times, the lowest level in IGT history. Innovation in content and working with our lottery customers enabled improving core lottery same-store sales throughout the year. Instant ticket and draw game sales increased 4% in Q4, including improvement across all regions. Lower U.S. multi-state jackpot comparisons weighed on total reported same-store sales for both Q4 and the full year. While the randomness of large jackpot timing had a negative impact in 2024, they have been a meaningful driver of lottery sales over the last five years. Our product team drove strong growth in Italy in both Q4 and the full-year periods. Several new game launches, including the highly successful Tombola Holiday Bundle, and the new Gioco Piu e-Instant game were important drivers of Q4 results, as were special draws for Teni Lotto and Numero Oro add-on feature for traditional Lotto. The first scratch ticket in Italy, using IGT's proprietary Infinity print technology named POP, was well-received and has been effective in attracting new, younger players, as well as upselling existing players to the €5 price point. We believe our exemplary performance in increasing Italy's same-store sales and state revenue position us well for the upcoming Italian Lotto bid. Improving trends in large jurisdictions, including California, Florida, Georgia, New York, and Texas drove an increase in instant and draw game sales as the year progressed, especially in the fourth quarter. We play an important role in driving this dynamic. Our experience operating lotteries and in working with over 100 jurisdictions around the world provides player insights, performance analytics, and sales tools that enable a steady pipeline of innovations. The trusted partnerships we have with our customers enables us to offer guidance on game development, portfolio optimization, and go-to-market strategies. Our lottery sales rose 28% in both the fourth quarter and the full year 2024 periods, maintaining the double-digit pace of the last few years. Momentum was broad-based across the US, Italy, and several European markets, including Poland, the Czech Republic, and Belgium. We've invested significant resources and are committed to our iLottery platform, which is deployed in 11 jurisdictions, making us the number one iLottery platform supplier in the world. During the year, we launched our iLottery platform in Connecticut. Our customers in Georgia and Kentucky have this distinction of being among the fastest-growing iLotteries in the U.S. Much of this outperformance can be attributed to successful player acquisition programs powered by our iLottery marketing and CRM services. Congratulations to our Georgia Lottery customers surpassing $1 billion in iLottery sales during calendar 2024. We are excited to bring our top-performing eInstant games like Elephant King and Lucky Coins to new content customers. IGT now has content partnerships with 18 jurisdictions, including a recent five-year contract for iLottery content with Bakehouse in Finland. Our proven track record executing large and complex deployments is unrivaled. For context, our central systems handle billions of transactions annually and are capable of processing approximately one million transactions per minute. We are also the leading provider of lottery point of sales technology with more than 400,000 retailer terminals deployed globally, four times as many as any other vendor. Another hallmark of our business is the diversity of contracts in our portfolio, supported by an average customer relationship spanning three decades. In 2024, we won a seven-year FM contract with the Colorado Lottery, as well as a 10-year FM and a lottery contract with Luxembourg's Lottery Nationali. We also secured several long-term FM contract extensions, including 10 years with the North Carolina Education Lottery and three years with the Mississippi and Virginia Lotteries. And earlier this month, we announced a nine-year extension with the Tennessee Lottery. It was also a big year for our instant ticket service businesses, where we won a three-year primary contract in Portugal, displacing an incumbent. We entered a five-year contract with ONCE, the operator of Spain's lottery, and a three-year contract with FDJ, the operator of the French National Lottery. These additions will significantly increase production volume in 2025, enabling the company to leverage its new state-of-the-art press. 2024 was a year of significant accomplishments with key strategic initiatives. In 2025, we are focused on winning important contracts in Italy and Texas, which will require significant capital. We will also invest in new game content and technologies that we expect will fuel sales growth and strengthen our lottery industry leadership. Additionally, we are identifying structural cost savings to drive greater efficiencies across the organization, enhancing our financial profile that is already characterized by strong profit margins, significant free cash flow generation, and a solid balance sheet. We are diligently working to close the gaming and digital sale, which will provide over $4 billion in gross cash proceeds significantly strengthening our balance sheet and shareholder returns. Now I'll turn the call over to Max.