Brightstar Lottery PLC

Thank you for standing by and welcome to the International Game Technology first quarter 2025 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 star one. Thank you. I'd now like to turn the call 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 Q1 2025 Earnings Conference Call, which is hosted by Vince Sadusky, our Chief Executive Officer, and Max Chiara, our Chief Financial Officer. After some prepared remarks, both 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.

Thank you, Jim, and good morning to all. Our Q1 results confirm sustained global player demand for instant and draw games. Reported year-to-year variances reflect elevated U.S. multistate jackpot activity and associated LMA impacts in the prior year. in addition to calendar shifts that affect comparability. Instant ticket and draw games are the core of our business, representing about 95% of our annual wager-based revenue and nearly 80% of total revenue. Normalizing calendar shifts, global instant ticket and draw games, same-store sales rose nearly 1.5% in the quarter. This included growth in Italy, stability in the U.S., and a 26% increase in iLottery sales. We delivered $250 million in EBITDA at a 43% margin in the period, notwithstanding jackpot and LMA impacts. This highlights the attractive and resilient profit structure of a pure play lottery business. We converted 67% of that EBITDA into cash in the quarter, and we maintain a strong financial condition with pro forma net debt leverage below three times. Consistent innovation is the driving force behind the underlying growth in instant and draw games. In Italy, 2% normalized same-store sales growth included increases for both scratch-and-win and lotto games. The €20 extra Tudor by Tudor, a new addition to the Tudor by Tudor franchise, and the new €10 instant ticket games were among the top performers in the quarter. Lotto wagers were up on the continued success of Teni Lotto special draws and the numero oro option for the JoCo del Lotto game. U.S. sales were impacted by the significantly lower multi-state jackpot activity, which is a function of the variability and the timing of very large jackpots. Normalized same-store sales for U.S. instance and draw games were stable. Large jurisdictions, such as California and Florida, experienced nice instance growth thanks to the success of new game launches there, including new $25 and $40 games in California and the impact of additional $20 and $30 tickets in Florida. That was offset by a lack of comparable new game launches and offerings in other states. We are encouraged by the stability of the very high sales levels achieved in the U.S. over the last few years. iLottery sales maintain their excellent momentum in Q1, rising 26% on strength across geographies. iLottery penetration continues to climb, especially in the U.S., with Kentucky and Georgia achieving significant increases in the last six months. These gains are fueled by new e-Instant game launches. The success of titles such as Cats, Elephant King, and Supernova 9s drove over $100 million in iLottery sales in Georgia during March. its highest ever in a month. In Italy, games like Gioco Pio and an expanding Teni Lotto player base are driving iLottery sales. We're making good progress with key areas of our strategic focus that we expect will drive sustainable long-term growth. One of the most exciting developments in product innovation is the Mega Millions move to a $5 price point in early April. This is the first game change in eight years and was the result of a multi-year process where IGT led project management and game implementation on behalf of the Mega Millions Consortium. It required extensive planning and impeccable execution, including updating approximately 400,000 lottery terminals in the week leading up to going live. A big congratulations to the IGT team and the Mega Millions Consortium for this exciting evolution of the game. The change is more than a simple increase in price. It reflects new features that create good value for the new price point, including bigger prizes at every non-jackpot prize tier, better odds to win, larger starting jackpots, and faster growing jackpots. The enhancements are expected to drive increased sales and revenues for lotteries and the good causes they serve. Another area of focus is the expansion of retail touchpoints and the optimization of the point-of-sales network. There are three main initiatives here. First is growing the network of self-service lottery vending machines. We have a broad array of self-service solutions to bring lottery games closer to where players shop, which has proved effective in generating incremental sales. Over the last few months, we began rolling out our Gemini Touch 28 to popular malls across Italy. Second is in-lane purchasing, which is live in just a few states. at a range of retailers such as Kroger, CVS, and Winn-Dixie. We believe Lottery Link will be another driver of in-lane purchasing. It's the first ever solution enabling the sale of instant and draw games from a retailer's own POS device and without the need for any software changes to the retailer's POS system. Lottery Link won Lottery Product of the Year at ICE in January. There's a lot of interest in it and we intend to begin offering it to customers later this year. And third is investing to optimize the POS network. We are currently transitioning from satellite to cellular communications. We should provide improved bandwidth and reliability, access to a broader range of retailers, and reduce the time needed to set up new POS. It should also be more adaptable to new technologies and provide greater flexibility to accommodate emerging solutions like cashless transactions. We went live with our new printing press in April, expanding our capacity by over 50%. This should enhance our ability to service customers and improve our production efficiency. It's a well-timed addition given the increased production volumes we've secured with several large customers, including France's FDJ, Portugal's Santa Casa, and New York State. We're also investing in several areas to increase iLottery adoption. One is a faster pace of new e-instant game developments and launches. Another is transitioning all iLottery platform customers to our cloud-based solution. This has many benefits, including a more streamlined and faster player experience, increased scalability and stability, and new promotional features. In the week following Kentucky's transition, sales reached an all-time high. In January, we launched the MyLottery site in Italy, where it is possible to play both Lotto and Scratch and Win in the same place. The site is designed with a mobile-first player experience in mind and a scalable backend that makes it easy to integrate new content. In a matter of three months, MyLottery has already increased Italy iLottery market share by several percentage points. As you all know, the world is currently faced with significant macroeconomic and geopolitical uncertainty. The impact of tariffs and declining consumer confidence and spending are fueling fears of a recession. We feel good about the things we can control and the long-term prospects for our business, but we're not immune to these challenges. However, history has shown that lottery sales in the U.S. and Italy have proved to be resilient in both absolute and relative terms during recessions. We have some important milestones on the horizon. The Italy lotto license process is well underway. The Italian Gaming Authorities have informed the participants that the economic proposals they submitted in the lotto concession tender will be opened on May 19th. We also understand that the evaluation of the technical proposals is complete and we expect the results of the technical evaluation to be announced prior to May 19th. The sale of our gaming and digital assets remains on track to close in Q3. We intend to communicate our capital allocation strategy after the lotto outcome is known and around the gaming and digital closing. While we are contending with a high degree of macroeconomic and geopolitical uncertainty, we are excited about the strategic initiatives we are working on to drive sustainable long-term growth. Now I'll turn the call over to Max.