Brightstar Lottery PLC Trading under the Legal Name to begin at the market open on July 21, 2025. Ordinary Shares

Hello and welcome to the Bright Star Lottery second quarter 2025 earnings call. All lines have been placed on mute to prevent any background noise. After the speakers remarks, there will be a question and answer session. If you would like to ask a question during this time, please press star one 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, Sarah. And thank you all for joining us on Bright Star Lottery second quarter of 2025 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 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. Well, we're excited to welcome you to our first earnings call at Bright Star Lottery. As a pure-play business, we've got a clear mission of elevating lotteries and inspiring players to bring meaningful benefits to all stakeholders. Our name has changed, but our global industry leadership remains, and there are a few characteristics worth highlighting. We are the world's largest lottery operator, running -to-day operations in nine jurisdictions. We are also the primary technology provider to many of the world's largest lotteries. And we are the number one provider of iLottery platforms globally. These leadership positions are built on a nearly 50-year history of innovation, reliability, and an incredibly strong team with deep expertise in customer relations. This is the foundation from which we've been able to deliver steady growth and strong cash flows, and we firmly believe our future is even brighter. Several important milestones have been achieved over the last few months. We closed the gaming and digital sale for net cash proceeds of approximately $4 billion, which was better than expected. We secured the Italy Lotto license, our most important operator contract, through November 2034, and we've developed a compelling digital strategy to grow that business. And a capital allocation plan is in place to drive future growth while increasing returns for shareholders. With respect to the second quarter, results were in line with our expectations. Same-store sales trends improved around the world with close to 3% growth in core instant ticket and draw games and more than 30% increase in global iLottery wagers. Across the board, players are responding to innovative new games, especially those at higher price points. Italy's same-store sales performance was impressive, rising nearly 4%. -and-win wagers were up on a successful relaunch of the Miliadario franchise across multiple price points and a new summer bundle of tickets. For Lotto, multi-bed pay slips are driving 10E Lotto growth, while the Numidoro option is driving higher Giocco del Lotto sales. Italy iLottery wagers increased over 20% in the quarter on the success of new Giocco Pugh games as well as digital replicas of the most popular physical retail games. Our increase focused on driving digital adoption in Italy is working nicely. -to-year wagers on our B2C sites are growing at about twice the overall market rate, and we've gained about two and a half points of market share since launching the myLottery's app earlier this year. In the U.S., same-store sales for instance draw games returned to growth up close to 1% in the quarter. California and Florida instant ticket sales achieved strong increases, fueled by new games at $40 and $50 price points, and trends in Michigan improved with the launch of a new $50 ticket. Our proprietary Cash Pop game, which is currently in 16 jurisdictions, drove draw game sales growth in Florida, Georgia, and North Carolina. U.S. iLottery wagers were up over 30% in the period fueled by Georgia and Kentucky and the contribution from new e-Instant games we recently launched in Michigan. Multi-state jackpot activity remained low with the absence of any large jackpots in the period compared to $1.3 billion jackpot in Q2 of last year. Rest of world same-store sales were up more than 8% driven by EuroMillion's jackpot performance, which had four draws at the 250 million euro cap, in addition to double-digit high lottery and growth in Poland and in Belgium. Product sales were up about 60%, and our new -the-art printing presses is running 24-7, helping us to deliver on increased production volumes in Texas, France, and Portugal. We're seeing increased demand for our proprietary Gleam and Infinity tickets. In a short time, Infinity has developed a library of over 60 games available across 20 jurisdictions. We've had some noteworthy contract wins and extensions over the last few months. First and foremost is Italy Lotto, which we secured through November 2034. In Missouri, a Bright Star customer for over 30 years, we entered into a new 8-year contract to deploy our fully integrated Omnia solution. Omnia seamlessly connects retail and digital lottery channels to maximize operational flexibility. It also offers lotteries new ways of engaging players. We also secured several multi-year instant ticket printing contract extensions that we expect will maintain the strong momentum and opportunity we have in that business. The company has consistently returned capital to shareholders over the last decade through quarterly cash distributions. However, most of our capital during that period was allocated to investing in the business and reducing leverage. Today, with leverage in our target range, we are allocating more capital to enhance shareholder returns. In conjunction with the closing of the gaming and digital sale, we announced that a $1.1 billion net cash proceeds would be returned to shareholders. First, via a special dividend of $3 per share that provides an immediate benefit. Second, a $500 million share repurchase authorization that represents a significant portion of our current market cap and provides an opportunity for ongoing capital return and support for the stock. Today, we announced plans to launch a $250 million accelerated share repurchase program with a counterparty bank under the new authorization. This represents the largest buyback activity in the company's history. DiAgostini, our largest shareholder, will not be participating in the program, so the shares will come out of the public flow. We also intend to maintain the current level of about $160 million in annual regular cash dividends, even with a reduced share count. The return to a singular focus on lottery marks an exciting new era for the company. BrightStar enjoys global leadership and a growing industry. Our business model is supported by mostly exclusive, contractual, and recurring revenue streams that deliver steady growth and have proved to be very resilient in the face of macroeconomic and geopolitical challenges. For context, our average customer relationship is about 30 years, and the average revenue-weighted contract life remaining for our portfolio is seven years. This provides us with significant stability and visibility for our revenue, profit, and cash flow. We believe broader iLottery adoption, especially in the U.S. and Italy, will be a meaningful tailwind that enhances our future growth algorithm. We have a clear right to win in iLottery. Over the years, the BrightStar team and board of directors have consistently worked to unlock the intrinsic value of our assets. That is especially evident in the work done over the last two years to refocus the business on lottery, significantly improve the balance sheet, and return capital to shareholders. We believe BrightStar's current valuation provides a compelling entry point as we execute on our long-term objectives. We believe the future is BrightStar. Now I'll turn the call over to Max.

Thank you, Vince, and hello to everyone joining us today. BrightStar generated second-quarter revenue of $631 million and adjusted EBITDA of $274 million, propelled by 2.6 percent global same-store sales growth, an instant ticket, and draw gains and a double-digit increase in product sales revenue. As expected, the -over-year headwind caused by a lack of large U.S. multistage exports and the associated LMA benefit continued in the second quarter but were mostly offset by underlying revenue growth in the other part of the business. -over-year comparisons on profits are also impacted given the high profit flow-through of Jepot and LMA activity. Second-quarter revenue of $631 million was up 3 percent from $613 million in the prior year and was stable at constant currency. Improved trends in same-store sales across all geographies and higher product sales related to both terminal sales and instant ticket services drove a $25 million increase in revenue merely offsetting the $27 million impact from elevated levels of Jepot activity and associated LMA incentives in the prior year period. For the second quarter in a row, there were no -dollar-level Jepots in the second quarter compared to a $1.3 billion Powerball Jepot in the prior year period. Elevated levels of Jepot and LMA incentive revenue are highly dependent on the timing of very large multistage Jepots which occur sporadically causing -to-period variability. We delivered adjusted EBITDA of $274 million in the second quarter, down 5 percent as reported and 9 percent at constant currency, when compared to $290 million in the prior year. If you exclude the impact of multistage Jepot and related LMA incentives which are outside of our control, adjusted EBITDA was in line with the prior year despite incremental investments we are making in growth areas of the business. This reflects some of the benefits we are realizing from the Optima cost savings program and highlights the resilient nature of this business. -to-date cash generation continues to be strong. Delivering cash from operations of $433 million and free cash flow of $259 million. Cash from operations in the first half was about $100 million better than expected, mostly from timing of working capital items, although some of the upside will be maintained for the year. As Vince mentioned, we allocated $2 billion of the gaming and digital sales proceeds to which was completed earlier this month. This included the full redemption of the 418 senior secure US dollar notes due April 2026 and the 3.5 percent senior secure euro notes due June 2026 and prepayments of 300 million euro term loan facilities due January 27 and revolving credit facilities due July 2027. In addition, we drew the second 500 million euro tranche of the new 1 billion euro term loan which was predicated on us winning the Italy Lotta Award. Net debt increased 463 million from the end of the year to 5.2 billion which is primarily driven by the impact of foreign currency translation. Net debt leverage pro forma for the 2 billion debt reduction completed in July was 3.0x in line with our target and includes about a third of a term negative impact from currency translation for the first six months of the year. Our current balance sheet includes significant liquidity of 2.9 billion, putting us in a solid position in advance of the upcoming payment for the Italy Lotta license fee. As a reminder, this fee is payable in three installments with 500 million euro already paid in July, 300 million euro due when the new license term commences towards the end of this year and the balance of 1.43 billion euro due by April 30, 2026. Bright Star is responsible for 61.5 percent of the total, so euro 1.37 billion or approximately 1.6 billion dollars at current rate and our consortium partners will fund the balance. With the mandatory debt repayment beyond us, our debt maturity profile is attractive with no meaningful maturities until 2027. We continue to execute on Optima 3.0, our structural cost reduction program initially designed to proactively address the stranded costs associated with the sale of gaming and digital and have recently expanded the target to 50 million dollars in annualized savings by the end of 2026, with about 60 percent expected to be realized this year as we are proceeding expeditiously and now expect an acceleration on some structural cost roll off post-completion of the sale. And we are also working diligently to explore opportunities to further expand this program in the future with new initiatives focused on improving our operational efficiency. The bulk of the current program savings are focused on back office optimization and do not impact customer facing activities or jeopardize our growth initiatives in any way. In conjunction with this expansion, we incurred a 21 million dollar pre-tax restructuring charge in the second quarter. Increasing shareholder value is a key area of focus and we have recently announced several ways in which we are delivering enhanced shareholder returns. First is a two year 500 million dollar share repurchase authorization representing about 17 percent of the current market cap of the company. As part of that authorization we are planning to launch a 250 million dollar accelerated share repurchase program, the largest in company history. Next is the declaration of a three dollar per share special cash dividend that is payable today. For US shareholders we anticipate that this special dividend along with a quarterly dividend paid in June of this year and any remaining quarterly dividends that might be paid during the remainder of this year will be treated as return of capital for US federal income tax purposes. I refer you to the form 6K filing filed with the SEC today and the dividend history section of our investor relation website for further information. And finally we intend to maintain approximately 160 million dollar in annual regular cash dividends going forward, even with a reduced share count post execution of the buyback program, effectively increasing the per share dividend on an annualized basis. At the current share price our regular dividend represents a compelling yield of around 6 percent. Now I would like to turn to the outlook. For full year 2025 we are reaffirming our adjusted EBITDA outlook of 1.1 billion dollars while improving our cash flow expectations. Due to a timing shift in product sales and one month of the increased amortization related to the Italy law to upfront license fee we are adjusting full year revenue down 50 million to 2.5 billion dollars. As a reminder upfront license fee amortization is treated as counter revenue and the starting date of the new concession will be December 1st, 2025. With respect to adjusted EBITDA the benefit from a more favorable euro dollar exchange rate assumption to align with more current levels in the back half of the year is offset by higher than expected negative impacts from the US multistage efforts and LMA dynamics described during this call. We expect higher revenue and adjusted EBITDA in the second half of the year versus the first half reflecting improved multistage efforts and LMA comparisons as well as incremental optimal savings. In the third quarter of 2025 revenue and adjusted EBITDA are expected to be up mid single digits from prior year levels on same store sales growth and higher product sales. Our full year cash flow outlook has improved nicely. Cash from operations inclusive of the first two tranches of the lot upfront fee totaling 800 million euro is now expected to be a lower use of cash of about 275 million. This is 75 million better than our prior expectations based on various improvements across the board in interest, income taxes and other working capital items. CAPEX is revised lower by 75 million to around 375 million reflecting timing shifts related to recent contract extensions. Overall this translates to about a 150 million improvement in the outlook for free cash flows. To round out the outlook conversation following recent contract renewal developments we currently expect annual CAPEX of about 375 million from full year 25 through full year 28 with a reduction to 200 to 225 million for several years thereafter once we complete our current CAPEX cycle related to the renewal extensions of most of our largest FM and operator contracts. I would like to remind you that our full year 25 adjusted EBITDA outlook of 1.1 billion includes several items that specifically reduced profit in 2025 such as the severity of the jackpot and LMA headwind for a total amount north of 70 million and specific investment in the business which are considered temporary in nature for a total amount expected for the full year of about 25 million. This coupled with the benefits expected to be realized from Optima 3.0 gives us confidence that we can return to adjusted EBITDA levels closer to 1.2 billion in the future. Likewise cash from operations averaged around 780 million over the last three years and we believe we should be able to return to that level going forward if we exclude the Italy upfront license fee once we exit from this one-off period. One thing to note given the streamlined to play lottery business expected going forward we have initiated an extensive review of our financial disclosures to align to our post gaming industry group. With Q3 earnings we expect to provide a status update and any changes to our gap, non-gap, KPIs and other disclosures to achieve this enhanced alignment and to early adopt some recent new disclosure requirements published by the SEC. Bright Star is well positioned for the future as a pure play lottery business supported by our global leadership position, a growing resilient business with strong profit and cash flow profiles, a continued focus on structural cost reduction and a balanced capital allocation strategy. That includes enhanced shareholder returns. That concludes our prepared remarks operator would you please open the line for questions.

Thank you if you would like to ask a question please press star 1 on your telephone keypad. If you would like to withdraw your question simply press star 1 again. Please ensure that your phone is not on mute when called upon. Thank you. Your first question comes from Jeff Santiel with Stiefel. Your line is open.

Hey good morning Vince, Max thanks for taking our questions and congratulations again I'm closing the gaming and digital transaction. Maybe just starting off here on capital allocation and the buy deck authorization Max or Vince can you just walk us through the intuition on looking to the ASR structure you know versus more open market type purchases and then maybe how you decided on the 250 million amount for the ASR and then for that remaining 250 million should we expect the spend to be more opportunistic, more programmatic and just to be clear do we know yet or do you know yet if the Agostini will be opting out of this half of the 500 million as well. Thanks.

Yes, yes so good question. So first of all the first the total authorization that we have obtained by the board of directors in connection with the proceeds of 500 million dollars is a large program with regard to our capitalization that represents about 17 percent of the market cap of the company today so again we think that sizing the program with a first range of 50 percent of its value is definitely an important decision and an important step towards showing the full commitment of the company to execute that plan. We think the benefit of the ASR is obviously the immediacy of the ability to reduce the share count once the program is launched and also the fact that represents a constant support of purchase of shares during a relative period of time that would help the company kind of navigate through this interim period and so we believe that this program this instrument represents a better tool for our particular situation to help deliver the shareholder returns that we have we have committed for. In terms of the next kind of the next phase we would like to see how this first phase gets completed obviously the decision and the of our dear destiny of not tendering shares into this first range makes the case for the entire program insisting on the float which is obviously an important feature of this program as well obviously it's not appropriate for us to speculate on the dear destiny intentions with the development of future branches of the total program and again we have not decided yet speaking about that what are the most appropriate instruments going forward so we would like to launch to be able to launch this program see the program in execution see the outcome and then decide what to do next once we get to that point.

Yeah and I'll thank you for oh sorry I'll just add to that and thanks for the compliment you know long two-year process to get to get that strategic realignment done and raise the proceeds and now have the great opportunity to be able to you know have been competitive for Lotto and then also have the excess proceeds available to think about you know how to how to drive value for the company so I would just say from a big picture perspective you know we all believe firmly the management team our board of directors that the company's intrinsic value is significantly greater than where it's currently trading at I mean a lot of companies say that but when you look at free cash flow per share when you look at you know all the different metrics and valuations that we've looked at you know we've decided that's that's apparent so we're excited to invest back in buying back our shares yeah as you saw from the press release and and heard on our comments D. Agostini our largest shareholder will not participate in the buyback so triangulating to what is the right amount and what is the right structure you know the amount of 250 significant relative to the public float you know will take some time to execute that and as Max said we will then evaluate based upon the impact of that where we stand and and and what the next step might be but then also I think that this is significant from the perspective that you know the company historically has chosen to return capital to shareholders through dividends right and we're going to maintain that dividend policy in fact we're going to you know our intention is to maintain the account and we think that you know this ASR as a vehicle is efficient gives us the opportunity to buy shares back at a good value and I think equally as important it shows real commitment right this is the largest program the company's ever done and it's not you know engaged really in in buybacks it did a bit of that a few years back but not consistently and I think this this just really I think demonstrates the the the commitment entering into the contract and and our our strong view around about value opportunity for existing shareholders that's

great thank you both for for all that color and then maybe turning over to guidance that can you just you know talk about or or maybe remind us what's embedded in the back half guidance in terms of same store sales maybe focusing on Italy and the non-jackpots for North America and then if you can you compare that to you know exit rate growth rates coming out of q2 and if it is materially different sort of like what are the you know the puts and takes the levers to you know to drive towards that back half guidance

thanks I'll kick off on this Vince again so again going through the four major items so LMA, Jackpot, Italy and US so the the LMA starts a new fiscal year with our Q3 so again there is not a progress history that would influence any deviation from the norm that being the norm kind of an expectation of no incentive no shortfall so we don't expect Q3 to be a surprise at this point and obviously with Q4 we have to see what happens during Q3 in terms of jackpot performance but for now we expect a muted second half of the year in terms of LMA and so when you compare H1 to H2 we should hopefully get the benefit out of it. Jackpot again the jackpot has been extremely impacted in the last nine months since the 1.3 billion dollar early April of 24 there has only been one billion dollar jack mega million jackpot in at the end of December and so obviously we have we have suffered for the entire period we expect some sort of return to normalization in the casual play yet so again still modest improvement in the jackpot although definitely better than in the last nine months in terms of Italy. Italy has experienced the best quarter over the last six quarters in Q2 and even Q1 was phenomenal when you normalize it for the selling days and everything so again Italy is expected to continue well in Q3 and Q4 but probably at a slightly more modest growth than what we have experienced in Q1 and normalized for this adjustment and then last but not least in the US retail market we see a steady state improvement is step by step but we months in months out more states more jurisdictions turning the corner moving into a positive trend we have seen California Florida doing very well in Q2 and we expect more of those to improve also in the back half of the year and then finally iLottery we expect iLottery to continue this phenomenal trend really for us the the the turning page has been the full introduction of the transition to cloud which has allowed us to scale up the operations quickly and follow the market when the market goes up and like we have seen in Kentucky for example in this last three months. Vince anything to add?

Yeah i would just add to that i think you know Max summed up the revenue drivers and the profitability drivers well and the expectation for the for the back half of year i would say what i when we look at the pacings for the first three weeks of the year you know worldwide sales are up about two percent or so it was great in the second quarter to see you know return to to growth and the takeaway for me really is it's it's just great to have multiple revenue streams we're you know geographically diverse and any more and more so product diverse in that we're having more significant revenue streams coming in from iLottery and and for printing as well so i think it's just great to have this diversity and the way i look at it is if it you know if it had not been for you know fortunately another quarter of of bad luck with north america multi-state jackpots you know the top line growth would have been would have been very good for the quarter so you know that's that's our our view we definitely see the see the core trends have improved in the second quarter and continue that trend through the through the third quarter and hopefully we get we get a little bit of luck on on multi-state jackpots in the in the u.s. and just to put things in perspective i think there was about a year and a half about six quarters or so where there was a billion dollar jackpot or a million dollars jackpot and we haven't seen that i think in powerball since since the second quarter of 24 and i think mega millions has only seen one and you know we really think the the move to the five dollar mega millions can have a significant impact on the build but unfortunately mega millions has been hit multiple times it has not enjoyed a good run since the five dollar price change but over time we have the expectation that those jackpots will build and we'll you know we have a chance to see i think a good a good positive impact from that change as well

that's great thank you both

the next question comes from barry jonas with truest your line is open

hey guys good morning um maybe as a follow-up you know you've given some helpful color on current trends but last quarter you did highlight a high degree of macro uncertainty uh have you seen any improvements since so i'll start okay

okay so

um again the the macro uncertainty that we mentioned a quarter ago was really more of a warning in terms of really not knowing the the direction of discretionary consumption going forward in in light of the uncertainty created during the during the the issues around the particularly lower courts but we don't we have not seen the deterioration that that could have been possible so again the market is holding up pretty well for us is really the deciding factor is the ability to provide incremental innovation with new games uh new game features and new ways to access games that stimulate demand with existing players and new players and so again the company has the ability to offset potential weakness in the market by by fostering incremental innovation so again we remain cautious but we are optimistic that um the second part of the year will look better will show better and then the first part of the year

great

great and then i would agree with max i would say really the um you know that that comment was as max said just based upon uh so everything that was going on with tariffs and you know the the very potential negative scenario uh in the states and in europe and particularly where our business is primarily driven uh of what might happen now that you know we're not of course wrapped up but much more settled on the tariff front uh and the academic the negative economic fallout seems to be negligible and hopefully that continues um yeah it doesn't seem like that's that that's certainly not nearly as significant a concern as we had in the in the second quarter and again just to step back and keep in perspective you know the lottery business is one that has historically been anti-cyclical and in some cases when the economy's been tough folks uh play lotteries more often so um yeah i think it really is uh up to us and the team to continue to to bring great products to the marketplace and so i would definitely say that that that comment is is significantly reduced where we sit today than where we sat 90 days ago

that's extremely helpful um just and then just for my follow-up you know recognizing your average contract life i think it's about seven years one just to follow up there you know as you think about the next round of contract bids whether that's a renewal or maybe a competitive bid actually as the competitive environment and maybe walk through the balance between incumbency technology and then pricing to to really be successful thank you

yeah sure um you know when we look at all the act it is an incredible probably an unprecedented amount of activity in renewal just all happening to come together really over the last year or year and a half um and you know by and large those have kind of gone the way that we that we expected and i think what's really reassuring for for our company uh and our our solutions is in markets like um let's say missouri where you know there was a expanded uh contract renewal encompassing you know pretty much everything in lottery over the the next several years and their desire to have us implement umnia which really covers everything from you know from retail to to i lottery to connected play to player management data insights etc um you know so that's significant technical win that the company achieved to lotto which uh you know there was obviously a very competitive process in price but also with a capable capable competitor in seesaw slash flutter to win that technology score and then we look at markets like ohio and new mexico that came available and you know bright star did not win those opportunities based on value and we're very disciplined on price but we did win on technology so i think you know the the technology investments that we continue to make and again i mean a lot of this business is credibility and you know i lottery which is a huge huge focus will continue to be for for lotteries you know we continue to power you know by our calculations more lotteries platform any other operator in in the world um so you know we think these things are critical and that's the core business and we've got to continue to win and innovate and be the best in that regard um and then you know the pricing for these contracts is each individual one is in my view completely unique in terms of the dynamics and competitiveness and the competitive desires and and all of those so yeah we have to continue to win technically we have to be the best and then also certainly compete in all the other in all the other attributes of these rfps but i would say things are settling down now there's not that many that are up in the in the cycle as we work through this this recent very very active period

um perfect thank you so much

the next question comes from chad baynham with mccrary your line is open

good morning uh thanks for taking my question uh mince max i wanted to start with the double digit increase in instant uh ticket printing for the quarter this has been a focus to win more primary or secondary opportunities but i was wondering if you could just kind of dive into um again kind of vince on the back of your your recent comment with upcoming renewals or opportunities if there's anything on the instant ticket printing side and then maybe if you could just talk about how the efficiencies maybe helped in the quarter for for margins broadly and how that could help going forward with optima thank you

yeah sure i'll start off with a an overview and then let max talk more specifically to optima and the the efficiencies that we've been working on for you know kind of our new sized standalone you know lottery entity um yeah as you know you know instance has been an area that that we take is considerable opportunity and it's been an area of focus for us for you know for the last couple of years um you know we've you know we've been the market leader in central systems uh but certainly not in in printing so one of the things we did was invested significantly in hardware and software uh and also we've expanded our print library and our logistical capabilities and we've learned from the markets where we we we we perform those those operations we've come up with uh as i mentioned infinity instance um which is a great you know technology where we've rolled out a bunch of those games in a market that we can that we control in a very mature market in italy with with very good very good success uh we've also come up with

with innovation

uh with this gleam technology that's got these holographic looks on tickets so you know the goal is to constantly offer something beyond a commodity product so you have to you know obviously have the capabilities but then i think uh through through a deep library of content as well as some some interesting um uh production methodology uh offer offer something something else the the new press that we've we've put in uh is now operational and just by virtue of it being one of the most recent ones to be installed is you know is state of the art and so that you know as our learning curve progresses uh not only you know is the uh is the capacity there but you know our ability to continue to drive efficiencies over time uh is there i think in in 2025 and max can check this i think our production is up somewhere around uh 20 percent or so we think that that trend will continue as we've won some some new business some significant uh printing contracts over the last year or so with portugal a new contract with uh with fdj uh spain um etc and uh i think that that is an area that is something that uh it can contribute uh especially as the volume increases right like any manufacturing facility you know the greater the volume running you know two shifts a day 12 hours a day you know eight to 12 hours a day is really key to to driving uh profitability as well as certainly best practices minimizing uh waste and maximizing the the distribution opportunity so those contracts have a tendency to um to come up more more frequently than the fm contracts it's it's not nearly as difficult to change or add a printer a printing company as it is to to change fm um or central system and so we believe that you know that's one of the reasons for for the investment and why we think the you know the opportunity is greater and also we've seen a trend over the last decade or so where more and more lotteries are okay with and are have gone to multiple print vendors so unlike central system it's not an all or nothing uh rfp and and and value in value proposition and max all you talk about the um yeah

yes so um just to confirm what vince just said so uh in 2024 we produced uh 8.5 billion of standard unit in the instant ticket facility in lakeland florida so and we are running uh 25 percent above that right now we have expanded the capacity by 50 percent adding in a full new press we invested about 30 million dollars in the last two years to do that so again we we have created the conditions to expand the capacity beyond the current portfolio and we are obviously going after new contracts as um as um the the bid environment permits switching to the year the the question related to the margin progression in the second half of the year uh ebita margin has clocked around 43 percent in the first half we believe uh we are meant to go up in the second half maybe a point maybe two uh that is primarily going to be driven by um the efficiency generated by optima from a pure marginality standpoint we have some -and-takes in the top line and in the gross profit but the bottom line is uh is that we should be able to drive those savings home and uh hence improve our marginality in the second half of the year and speaking about that um we are looking very closely at the the new uh sec um recently um deliberated principles asu uh 2024 or three which is called income statement expense disaggregation disclosures um it has a 2027 as um a date of inception but with the possibility for an early adoption and since we are in the transition to this uh in a new company pure play lottery setup we are um we think that there is an opportunity for us to uh to take advantage of uh of this new uh requirement to kind of adopt uh early adopt potentially uh some of the features of all of the features of this new uh disclosures uh requirements and improve the transparency on our reporting and our kpi's and as well as improve the ability for investors and and the sell side to really compare uh side by side with our industry group in in a more linear fashion so again we think that this is an opportunity that we want to to look hard into it and and we'll come back with our q3 earnings with more um uh clear fact thank you

thanks max appreciate it thanks and uh and then secondly i just wanted to ask about the the greek state lottery opportunity i know there's a hundred plus page document out there that's been translated from from greek english but just in terms of maybe the timing of this or more importantly um historically i guess the financial arrangement if it's a similar type of contract or economics where there would be an upfront fee similar to the way that lotto is designed or if um if you're able to to win or participate in that opportunity that's more the traditional you know percentage of uh uh percentage of of of sales and no upfront fee from a capex standpoint just any color on that would be helpful thank you

yeah i would just say on on greece it's early days um right now the the rfi was issued so it's uh you know request for information um yeah as you know the you know the incumbent and ourselves we did a lot of work on it uh and submitted but uh it'll it'll run a process and they'll make a determination as to what the rfp will ultimately uh look like but uh that contract i think expires in 2027 um so it'll it'll be a process you know first step for some of these lotteries is an rfi gather information their commission will then utilize that information to make a determination as to what uh form of contract that they um and what what form of rfp that they they they want to to put together so um we're in the game on that one but it's uh it's early days great thanks fence appreciate

it

the next question comes from david cats of jeffries your line is open

uh morning everybody thanks for taking my question so um congrats on all the all the activity uh no no no small amount of work when i look at the business today and i think you pointed this out in your deck uh that by virtue of the repurchase you're getting a little bit of a dividend growth and you know i do wonder if that you know becomes just a part of the thought process going forward and you know whether dividend growth via you know one way or the other you know is something that will become more a part of the story going forward

yeah i think yeah as we and thanks thanks for the comment david appreciate it um yeah you know what i think about you know trying to make bright star lottery as attractive an investment vehicle as possible um to me it's it's pretty straightforward it's you know the company's done a lot of work to you know to get his balance sheet in a great a great place uh we have i think a really solid proven business that's that's been really resilient uh through kind of the explosion of digital gaming opportunities around the world and in particular in north america through the innovation i think enjoy that people get out of these these lotteries it's our job to work with these lotteries and certainly the ones that we directly control to continue that innovation and interest for for people um you get a bit a little bit of love to the positive and negative with uh you know with uh with the big jackpots and that's just part of the part of the business and then you have growth upside from the increasing digitization of of the business that's you know more mature in certain markets but when you think about bright star's footprint our most significant footprint of course is north american italy uh where it's not all that mature and there's uh we believe significant upside opportunity so you know you have a nice growth aspect associated with a very uh consistent and solid uh counter cyclical business and then you know to kind of do what we can do to enhance the profile for all of us collective uh shareholders um you know capital returns is certainly part of that value proposition that we've we've spent quite a bit of time thinking about and so initially the comment has been we intend to maintain the absolute value of our dividend uh each quarter despite the fact that shares are going down so yes you know you picked up on that grade and then the thinking on a go-forward basis you know we can't comment on it but we will you know we will constantly be evaluating uh you know what our yield is in order to remain competitive um and that's something that we think is an important part of our value proposition to to investors so

just to follow that up quickly please finish

no sorry this is my speaking i just wanted to substantiate one more one more item on on what vince just said obviously having a dispose of the more volatile of our businesses allows us to also come into our forecast uh uh process more comfortably -a-vis not only our profit but also our cash and that gives us confidence that we can we can kind of project and maintain going forward a posture -a-vis um use different usage of cash inclusive of of the dividend so again it's a technical step initially as a result of the the asr execution but again going forward obviously our ability to better project cash is a point of strength in terms of determining the dividend i

understood my very quick follow-up was was really just going to be you know whether you'll start thinking and talking about a you know pay dividend payout ratio um you know at some point in the future

um so it's a good question um there are companies that have stated payout ratios on earnings adjusted earnings cash flow adjusted cash flow so again this is definitely something that um we may want to look at in the future in terms of um our new equity story but again it's important to keep in mind the the specific uh the technicalities of of our industry and in particular of some of our contracts that require larger um amortization of afron fee to be deducted from revenue and have a straight flow through to profit uh which obviously had an impact to the bottom line so again we have to assess the situation and see what is the best indicators to improve the predictability of cash allocation to for all okay

thank you very much

the next question comes from domenico di lori with equita your line is open

good morning three questions first on the asr instrument because i'm less familiar just to be sure so there is a specific time frame time frame to execute the buyback is something that we will know in advance and so if you can just clarify on that second on the my lottery business evolution in in italy you were providing some comments during the the call if you can add some color on your strategy and and maybe some kpi's and third if you can remind us the sensitivity to the euro dollar with a new perimeter in terms of sales would be done and that financial position so i can take the

yeah go ahead max if you want to take number one and three i'll take three right

uh so on the asr timing obviously so predicated upon the volume trading daily volume trading but i would say that in general our expectation is that the company will be in the market with this program up to the end of the year probably so that's kind of roundabout where we expect where we expect the program to last in terms of sensitivity on the euro dollar obviously with the mandatory repayment we have taken out a big chunk of euro debt at the holding company which is functional currency dollar so hopefully we have turned the corner on on that fx volatility and now the impact on of one cent on net debt is down to 15 million dollar so that's the majority of the impact that you will see reflected in our in our financials going forward vince

yeah and and i would just say on the on the i lottery side in in italy um you know what we what we described and discussed our lotto win we also outlined our digital plan for for italy so you know the the attributes real quick are you know we've had greater than a 20 percent keger over the last five years in i lottery growth in in italy the first half of the of 2025 that continued i think we were up over over 20 percent or so having said that the i lottery penetration in italy is is low it's in the kind of the low to mid single digits and so our our focus area you know has certainly been on the on the opportunity to to grow that and so one of the steps that we've done is you know the team developed you know an outstanding my lotteries play app which has gained a significant amount of of market share already i think you know we gained over two points of market share just in the first half of of 2025 both on the on the e draw side as well as on the e instant side so you know this is a real focus of ours going forward and now that we've secured lotto so we've got you know both contracts for for many years you know we will deploy kind of all the very good and smart operator retail digital business execution around driving that whether it's you know kind of combined jackpots or the realization of in-store promotions to help to drive the the level of digital play and you know we believe that given our deep experience on both retail and i lottery and the the proven fact that the most successful digital operators whether it's in whether it's in i lottery or if it's in i gaming or sports betting have a combination of retail and and digital presence so you know we'll continue to build out build off of the my lotteries app and our goal is later this year to come out with with a product that that includes i gaming and sports betting and allows players of which there are you know quite a few that engage in both lottery activities as well as as i gaming and sports betting give them the opportunity to do all of that you know from from our our app so the goal is to is to expand the player base and engage with players beyond the retail destination coupled with having several opportunities available really a one-stop shop with our best in class i lottery games coupled with the opportunity to engage in in bingo and gaming and sports betting

thank you

your final question comes from joe stoff of susquehanna your line is open

uh good morning vince max on you know both texas and new york those contracts certainly the process the tender process seems to have been delayed somewhat the expiration of those are in august of 26 is it do they give you an official notice that hey it would be extended by an explicit time and what is that and then the second question is you know maybe the observations you have for the new pricing on mega millions in april and what you saw in the second quarter and thus far in the third you know um are the is is the volume demand there relative to what you expected you know i guess the simple say observation is that it kind of launched probably not in the most ideal timing you know of of april when the mark was getting smoked and just wondering if if more customers gravitated to the two dollar powerball at the expense of mega

yeah so um you know a couple of it's a really good question you know we've been looking over over data for the five dollar mega million launch and it is um what we what we've gleaned is the absolute sales levels at comparable jackpot levels so the five dollar game compared to the two dollar game looking at any given week with similar jackpot levels is higher under the the five dollar um ticket price um and so the the way the math works is the number of ticket sales is down uh for sure but of course the the average ticket purchase the number of tickets purchased uh you know that absolute transaction uh dollar value is is up now you know we certainly hope and expect that it will be up much more than it's currently been up and as you point out i think it was a tough uh moment in time but more importantly than that um as we said earlier we feel like uh you know the the the correlation between macro and and lottery ticket sales um you know certainly not perfectly correlated in fact a lot of these ticket sales attempts to do well in a tough macro it's more the jackpot experience um so players need to i think play have enough experience you know with the five dollar price point to recognize that there's value associated with that through you know a higher starting point for the jackpots but more importantly a faster build of the jackpots um week to week and unfortunately we just had some really bad luck that mega millions has been hit over and over again since the increase of the five dollars so we've not been able to demonstrate you know that experience to to consumers so it's going to take some time hopefully we have uh we have a good run or two and we really get people to to enjoy the the incremental benefit and understand uh what we think is a better um uh payout uh structure uh and then with regard to texas and new york yeah you pointed out uh right joe new york expires in in august of of 2026 um you know we don't have anything uh specific uh contract contract wise however we do expect that uh an rfp will come out at some point and because the the the date is now a year away for the the expiration that that will include some form of extension because uh you know we do not believe it would be possible to implement a new system um in this in this tight tight time frame and then finally uh texas um yeah texas was was disappointing we we you know we felt as if we had uh the best proposal etc and then you know all the noise surrounding the couriers uh really kind of threw that off and the consolidation of the you know the lottery um uh government agency and all those things took place and so you know the lottery has been extended uh out through 2029 and um and ict has been granted an extension uh for another few years until i think 2028 so we anticipate some time between now and then they'll they'll they'll start start anew on a on an rfp process but uh as you can imagine there's a lot of moving parts there and combining government agencies so i'm sure that's going to happen anytime anytime soon

this concludes the question and answer session i'll turn the call to ceo vin sadowski for closing remarks

yeah as always thank you for your interest we look forward to updating you as time progresses thanks and have a great day

this concludes today's conference call thank you for joining you may now disconnect