Q1 2021 International Game Technology PLC Earnings Call

Ladies and gentlemen, thank you for standing by and welcome to the IGT 2021 first quarter results conference call. At this time all participants are in a listen only mode. After the speaker's presentation. There will be a question and answer session to ask a question.

The session you will need the press star one on your telephone keypads. Please be advised that today's conference is being recorded.

If you require any further assistance. Please press star zero for the operator. Thank you. It is now my pleasure to turn the call over to Mr. Jim Hurley Senior Vice President of Investor Relations, Sir the floor is yours.

Thank you and thank you all for joining us on Igt's first quarter 2021 conference call, which is hosted by Marco Sala, Our Chief Executive Officer, and Max Chiara, Our Chief Financial Officer. After their prepared remarks, we'll open the call up for your questions. We are again presenting results from multiple locations. So please.

Bear with us if we encounter any technical difficulties.

During today's calls 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 based on the number of factors and uncertainties, including those related to the <unk>.

Facts of the COVID-19 pandemic.

The principal risks and uncertainties that could cause our results to differ materially from our current expectations are detailed in our latest earnings release in the in our SEC filings.

During this call we may discuss certain non-GAAP financial 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, you will find additional disclosures regarding these non-GAAP measures, including reconciliations to.

Of these measures with comparable GAAP measures with that I'll turn the call over to Marco Sala.

Thank you, Jim and Hello to everyone.

As you have seen net from today's announcement that we had an outstanding quarter.

The play of demand that drove improved momentum across all of our main activities in the Q1.

This has translated into 25% revenue growth from the priority he out of period.

And the 6% increase from Q1 19.

Lottery reach of the recall the lenders with the same store sales up over 30%, including double digit gains across the games and the regions.

The land base, there's lots of business nearly of recall the two priority Atlanta's thanks to strong yields on the active installed base.

<unk> 40 per cent increase in the machine of units sold in the U S and Canada.

Growth accelerated for the our digital impacting activity is aware of anything.

Use of nearly doubled in Q1.

We continue to monitor the costs as the top of line of the coolness and we are making excellent progress on structural cost reductions with the the Optima program, which Max will discuss later.

You can see these are in the over 70% the increase in EBITDA and the 44% the EBITDA margin for the first quarter.

He was an outstanding performance and among the highest level ever achieved them.

With such strong Q1 results and expectation of progressive recovery for land based gaming as we move through the year. We believe we can tune of two pre pandemic of revenue profit and leverage levels of DCF.

This leaves the recovery from the impact of the pandemic of is due to the unique and it was the nature of our business momentum across products and regions.

I'd like to spend some time on the Q1 was the lottery the four months. So the 32 per the saying the same store sales increase was fueled by 52 per cent of growth in Italy, and 28 that bit of saying the in North America and debt I ask of the war the ease.

Even without the benefit of the strong multi jurisdictional jackpot activity same store sales for North America and the rest of the war of the went up by over 20 per cent compared to 2019 net global same store sales went up by 24 per se.

And.

The sustained strength in lottery same store sales of for the last three quarters confirms a complete the recovery from the pandemic.

This is supported by the Ies segment, the revenue and profit the levels, we have ever achieved.

And the momentum continues.

<unk> same store sales of trending.

Trending up over 20 per cent for the Q2, two day period, the compared to the second quarter of between the 19th.

We must acknowledge that some of the recent strength comes from the relative lack of all of the data entertainment alternatives in the U S high yield of disposable income, which includes the benefit of government stimulus is another factor.

But the lottery has always maintained a steady growth profile. It is because the piece of content driven business the games and entertainment value with broad player appeal, a consistent stream of all the new games the office of fresh opportunities for the player engagement.

Throughout the the pandemic of lottery has become a value then the routine activity in the new normal we expected debt to continue according to our AR reserve true, meaning tend to play lottery at the higher level is that they did the before COVID-19.

This is an encouraging sign innovation is another important contributor in the draw base arena of Dawn and Progressive jackpot games out of fueling double digit growth in the U S. While the new tenant a lot of lakes drive is an important driver in Italy eastern ticket sales out of the benefit.

The income from higher average of ticket prices as well as the player interest in the <unk>.

Second chance and the three ticket games.

The jury's each of them show jackpot games were almost double the priority of them. Thanks.

1 billion of Omega mediums, and 750 million Powerball jackpot in the U S. Hence the wrong it will meet the guns of sales in Europe.

It is reasonable to expect sales to moderate from current levels as other entertainment options become more widely available, especially in Italy. We believe that we will see a return to more normal steady increases after we cycle through the pandemic.

Related the peaks and valleys over the next several quarters.

Our expectation is that the when the restriction of the funding will be largely all of them to see some stickiness to the recent increase play levels, particularly North America and the market will resume a more normal growth rate of mid single digit in the U S, but starting from <unk> in the.

While consumption.

Medical that he put out of global gaming segment that is progressing well in the U S, which accounts for about 70% of the segment the revenue.

U S casinos are open for business as the base of vaccination is driving confidence among the players and the operators of these.

This has led to a substantial improvement in lots of the GG Odyssey as of January not only in the region of the U S market, where most of our business is conducted the but also in Las Vegas. So core of players at the returned a new play is most of the young mostly young again out of entering the market.

The Intel to a NIM in the entertainment options are limited to the.

This is translating into as we of the recovery in our business. The gathering of revenues are improving the month over month of thanks to a stable installed base and more of those units of being activated.

Even as more units out of the powers of the up but he is on active U S units went up high single digits sequentially.

New multilevel progressive such as the lag on the lights Gong chief of Guy along with the wheel of Fortune franchise out of driving the deals of strong results.

We also had the good day of unit sales in the quarter of fueled by a 40% increase in the U S and Canada unions, including double digit growth of replacement of which we're not far from Q1 19 levels.

The resilience of speaks to the diversity of customer mix of cross regional tribal and commercial casinos as well as of E&ps we.

We gotta reaches in the Lion dance of when I'm on the top of selling part of video titles. While why is the life of extreme and the biggest Citi fives, where the best the VLT diagnose.

We expect the continued progressive improvements throughout the day across all aspects of our global gaming segment.

It is clear from our meetings over the last few months of that the digital investing ease of great interest to you. It is for US too as the IGT plays an important role in the gaming and sports betting and I lottery ecosystems.

During Q1 G. G are across the portfolio was two to three times of the prior right you've got the lenders.

Most of that the growth came from an expanding player base in existing markets.

There are no signs of the digital channel cannibalization in the land the land base of business day.

I am betting revenue nearly doubled in Q1, posting the strongest quarterly increase in the last year, we expect the business to maintain a strong double digit the growth profile for the next several years through a combination of organic growth, including the contribution from <unk>.

You do the actions.

We are investing to support this growth and maintain the leadership positions in all three there because of so.

In the I gaming, we are expanding our content portfolio through a combination of internally developed the games and those develop the with the third Party studios.

There is additional opportunity for IGT to act as a distributor of third party content and disease in the emerging got out of folks use of for us.

What was the user should result in IGT, having 2030 per cent a share of the North America end of I gave me of market outside North America. There is also opportunity to penetrate the emerging international markets, such as Germany, Greece, and the net of mountains.

We intend to maintain a leading role in the lottery industry leveraging the longest standing relationship where we add the with the awards of leading lottery today and through our commitment to investing in three main objectives first expand the portfolio of games second to announcing our.

From a capabilities and third the by increasing the marketing and other activities to support the player acquisition and retention for our customers.

As we look out over the next three to five years that we see the potential for the number of U S jurisdiction of to rising Guy lottery to double from current levels.

Today, our presence in the U S sports betting market spans the 16 states representing over 40 sports books.

IGT is the land based sports betting platform is the most widely used in the country.

We see the greatest opportunity for us in offering turn key sports betting solution to commercial and tribal casino operators since the launch of our E. Now's the trading team last summer we haven't made the good progress of signing customers.

Including Maverick gaming Snoqualmie and the Emerald Queen among guidance. So we have of many more deals in the pipeline.

They're out of 17 states, where the legislation is pending <unk> and full of more where legislation has been passed but sports betting is not yet the operational we are proactively securing the partnership in jurisdictions, where the regulatory approval is pending and ensuring our customer is with the launch as mark.

As the go live.

Our first quarter results marked a strong start to the year and illustrate the compelling foundation IGT can build on over the next several years.

This is especially true for our global lottery segment of where our record sales and profit confirm of the eye entertainment value and broad the player appeal of the games bolstering our favorable long term growth outlook the faster recovery now of our land base of the use of gaming activities is X into it.

By accelerating the momentum for ice growth of digital and the betting businesses.

Stronger revenue trends out of further announced the by significant structural cost reductions of debt improve our outlook for the profit margins and cash flows.

With the proceeds of the recent sale of certain of Italy, B to C. Gaming businesses of debt will be used for debt reduction our leverage profile should be significantly improve the by year end now I'll turn the call over to Max.

Thank you Marco and Hello, everyone on the call today.

To our last call in my prepared remarks, I will be speaking primarily to continuing operations due to the recent sale of our Italy would be to see gaming business.

The financial performance exhibited in the first quarter of 2021 displays the strength of the IGT portfolio with our lottery business running at the fast base, both on a core basis and supported by exceptional jackpot activity in the early part of the period.

Our gaming you when it is on an accelerated path to recovery with the strong contribution from our Optima program as well as the sustained robust growth in all the digital platform verticals.

The strength brought the performance of over $1 billion from revenue and 450 million in adjusted EBITDA off.

Profitability showcases the dynamic margin leverage of our lottery business as well as disciplined cost saving actions throughout the company.

We achieved roughly one third of this years over 200 million Optimus savings target during Q1, mainly through product simplification and margin improvement efforts.

Gaming volume gradually improve throughout the year, we expect to see an increasing benefit from our operational excellence initiatives.

To the prior year, we saw the expected re occurrence of certain normal running expenses in the first quarter, primarily employee related costs.

Continue with healthy cash conversion and Capex discipline drove over 200 million in free cash flow, which is high for the first quarter performance.

Interesting to note, we did turn to profitability of net income level this quarter generating 38 cents per share.

Turning to our lottery segment on slide 13 revenue increased over 40% to 749 million global same store sales rose over the rose over 30% on broad base growth across instant tickets and draw based games multi state jackpots and I lottery same store sales screwed up.

The digit in January and February where there were no priority of impacts from the pandemic highlighting the strong underlying play of demand in fact, the comparison to Q1 2019 in terms of top line is showing an astounding, 20% plus growth.

Part of the same store sales growth includes roughly 20 million of revenue from higher multi state jackpot activity.

And outside of the same store sales lottery service revenue includes approximately 60 million in performance driven incentive accruals from our U S Lottery management agreements.

80 million in total in Q1 benefits flow through almost entirely to profit.

Product sales, which have naturally lumpy and represent about 5% of annual lottery revenue went down 10 million on large software license sales in the prior year, partly offset by an increase in instant ticket printing revenue.

The margin leverage from lottery, largely fixed cost structure is particularly evident this quarter as our revenue growth translated into incremental margins of over 80% and we also had the benefit of the 80 million in Q1 revenue item syndicate before.

Operating income more than doubled from the priority of period to 337 million with adjusted EBITDA growing 74 per cent to $447 million. So all in all the excellent performance by our vibrant and pandemic resilient lottery business.

Turning to global gaming revenue of 266 million was down 14% over the prior year, we continued to see sequential improvement in this business with higher revenue and adjusted EBITDA and lower operating loss compared to the fourth quarter Kpis are improving and the contribution from digital and betting continues to accelerate with revenue.

Over 80% from the priority of <unk>.

Sequentially. The global installed base was stable over 75 per cent of our U S. Casino installed base was active and service revenues close to priority of levels due to higher productivity on the active machines in North America yields on active units increased double digits compared to the previous year period.

We sold just over.

4400 units globally in the quarter up 20% over the prior of year end up 2% sequentially.

Unit shipments were driven by VLT replacement sales in the U S and Canada and the casino opening separate sort of award in Las Vegas, and how did the wrong, Indiana.

Overall product sales of down due to a multiyear strategic agreement booked in Q1 last year and AWP upgrades in the priority of as well.

Operating loss and adjusted EBITDA reflect the lower base of revenue, partially offset by the benefit of cost savings actions margin leverage improved in the quarter as expenses have come down.

On slide 15, you can see that the recovery of top line trends and diligent cost savings initiatives of driving strong cash flow in the quarter cash from operations was 251 million. Despite the concentration of interest payments in the first quarter free cash flow was $204 million and you can see the direct impact to net debt and leverage.

Which was down a full turn versus year end of 'twenty 'twenty.

We now expect leverage to return to pre COVID-19 levels by the end of this year highlighting the unique resilience of agency business.

On the next slide we can see our debt maturities in the last year, we have made significant improvements to our capital structure as we pay down debt extending maturities and reduced interest costs. Each of our most recent debt transactions in Europe and dollars were at the lowest coupon rates in company history.

Since our last earnings call there have been two additional improvements first in late March we successfully refinanced approximately 1 billion of notes due in 2022 with a combination of new notes and bank debt and extended the maturity date of 2026 second the 630 plus million of net proceeds from the sale of the.

You were a 630 plus million euro in net proceeds from the sale of the Italy gaming business will contribute to the full redemption of our euro denominated 2023 notes through the exercise of the make hold.

As you can see the two changes meaningfully reduce our net near term debt maturities and will allow us to save going forward about $60 million in annual interest cost with the full run rate of savings starting to materialize in Q3 this year.

In summary, our strong first quarter performance was driven by a combination of global lottery growth progressive recovery in the U S gaming and Optima cost savings initiatives. We are on track the structurally reduce our cost structure by more than 200 million. This year with each segment contributing according to plan, we continue to convert the adjusted EBITDA to cash.

So at the healthy rate and the free cash flow, we generate is used primarily to reduce debt, allowing us to reach pre pandemic levels of leverage by the end of the year.

Now I'd like to share our perspectives on the second quarter of slide 18.

Quarter to date global Lottery same store sales growth is over 20% sort of second quarter revenue should be higher on a year over year basis, though we do not expect the $80 million in Q1 lottery revenue benefits related to the jackpot activity and LMA contract incentive to the car.

We expect continuous sequential improvement in the gaming business in line with what we have seen in the last few quarters.

While the second quarter profitability will be lower sequentially, we expect second quarter operating income and adjusted EBITDA will be higher than prior year, even without the benefit of the drastic temporary reductions in cost savings during the second quarter of 2020, depreciation and amortization should be relatively stable and for the full year, Let me reiterate.

That we expect all relevant key financial metrics to return in line with 2019 trends.

The meaningful progress one vaccination campaigns in our core markets and overall has convinced us that at this time to update the market on our long term targets in line with sentiment echoed by several market participants we have interacted with recently I'm excited to announce we will be hosting an investor day later in the year, where we kind of the.

Alright, and update you on our strategic priorities long term financial targets and capital allocation plans, we will have many opportunities to connect before debt, including second quarter earnings in early August G to eat in early October and our normal conference in the road show participation.

Then on November 9th we will report our third quarter earnings as well as host of at Investor Day, hopefully it will be in person in New York City. So please mark your calendars.

That concludes our prepared remarks, operator can you. Please open the call for questions.

Ladies and gentlemen, if you would like to ask a question. Please press star one on your telephone keypad again to ask a question. Please press star one on your telephone keypad, well pause for just a moment to compile the Q&A roster.

Your first question comes from the line of Carlo Santarelli from Deutsche Bank.

Hey, guys good morning.

Max maybe maybe this one's best for you as you kind of talked about it a lot of your prepared remarks, but as you guys have started to see kind of of the revenue kick back and obviously acknowledging that the $200 million run rate that you set forth for expenses clearly when you guys put those targets out there was probably some ambiguity as to what cost would be.

The return as revenue started to ramp up given the result here. It doesn't look like a lot of the have returned and obviously a lot of it some of the lottery side you spoke to some of the incremental flow through of drivers, but how have.

Have you noticed.

Perhaps maybe that debt estimate of costs that we're returning to the perhaps be lower than what you were previously articulated.

The revenue start to ramp across the business.

I kind of look at the end of the day and we.

We have been able to bank on actions that we have executed throughout 2020 in the early part of the year. So we're continuing to enjoy the same kind of benefit in nature than last year in terms of all of the reduction on discretionary cost.

As the year will unfold and eventually revenue, particularly on the gaming side will start to pick up.

We'll probably be we'll probably experience the shifting to the cost saving programs away from those discretionary cost savings more into structural permanent long term savings as we have been announcing since the beginning of the year with the operational excellence initiatives and the product simplification coming to throw flow.

<unk>.

We expect to still be able to beat our 200 million target for the full year, but the mix of the savings will change over time.

Great. Thanks, that's super helpful. I appreciate that and then.

Secondly.

Acknowledging there is some seasonality in the business, but when you look at the digital and betting revenue business right now I mean, you've kind of run rate of 230 to 240 million of from the richest annualize the 58 million of the first quarter.

Given the attention paid to kinds of dose streams, obviously I lottery huh.

I casino and enter your OSB platform business.

How much do you guys contemplate, perhaps maybe breaking that business out even further down the road to give investors obviously with the revenue disclosure of that that's great. But you know obviously that business is profitable for you guys as well.

How much of any thought about kind of feature of that a little bit more of the disclosure of riding a little bit more granular color on kind of exactly how that business is doing from the profit perspective as well.

So.

This is a very good question Carlo obviously, we enhance the visibility of our fast growing digital investing activities. Since we launched the new organization back in Q3 of last year.

We are also dedicated more time to talk about our business activities in digital and betting over the last few earnings calls base.

On the success that we have been able to track across the verticals and our gaming lottery and sports betting which is driving as you mentioned phenomena of revenue growth.

The number we generated last year in digital the betting revenue of $170 million in front of everyone and the further growth experienced in Q1 is very speaks by itself.

Obviously, if the business continues to expand the the rapid pace, we expect at the certain point it may make sense for us to consider breaking it out as a standalone segment.

Great. Thank you very much the care guys.

Yeah.

Your next question comes from the line of.

Ed.

From Macquarie.

Hi, good morning, Thanks for taking my question.

Wanted to start on the the gaming improvement Max you said, the second quarter, you'll start to see.

This business starts to come in one of the focus on your installed base. I believe you said 75 per cent of the units are currently active in.

And I'm sure. This differs across many jurisdictions, where you have units, but how should we think about when you know more of these units will be turned on and then by the end of the second quarter do you think we can do.

Get closer to closer to a 100% and then finally on that how should we think about the incremental costs that are needed. It's just comes back on should this mostly flow through to the bottom line. Thanks.

Good morning, Chad I think wireless speaking of him.

In the.

In April we add the 88 per cent.

All of our the.

The installed base are active and we think we will have progressively grow.

Till the end of the outerwear and now we believe we will reach almost the net.

The tally the of our installed base.

And we do not anticipate that.

Much of additional costs in order to get it done.

Perfect. Thank you and then just now the.

The free cash flow picture and your.

Recovery to previous our free cash flow levels as his insight how are you thinking about inorganic lottery growth opportunities or are there other opportunities that you have your eye on or tuck in acquisitions of either on the digital side or any of the other segments that could help position you guys for the future. Thank you.

No for the time being we are not working on any acquisition I think we have oh.

All we need the two.

To grow on the old the digital vertical and there you know the gardening lottery channel, we do not expect the.

Anything.

To be acquire the short book.

Thanks, Mark congrats on the quarter.

Thank you thank you chip.

Your next question comes from Barry Jonas from two of Securities.

Hey, guys.

So if you think youll get back to 2019, EBITDA levels and I guess, that's with cost cuts netting with the sale of of the Italy gaming B to C. I have a bit lower than your historical Forex net leverage target by year end.

I guess the question is how are you thinking about capital returns like share repurchases and dividends here.

I think Theres Marco.

Obviously, returning capital to shareholders is an important objective for us for now the although the priorities for capital allocation of still maintenance capex and paying down the debt until we achieve all of it four times leverage target.

Having said that since we expect leverage to return to pre pandemic levels by the end of this year. There is potential for the board to reconsider restarting dividend payments as doors of results materialize towards the end of the year.

Got it got it Okay and then just a quick one on the New York Sports betting market. We've got a couple of inbounds from clients just curious how youre thinking about potentially bidding there as the platform provider.

For New York, You said the.

Yeah, So the New York sports betting and mobile sports betting.

No I think of the visibility on New York is not the.

As a as big as you know, but we are preparing ourselves to take advantage of any opportunity we might of debt. So.

So we will learn the more details of the potential opportunity.

Though we are still of thinking that will be part of compelling opportunities for us.

Got it alright, thanks, so much guys and congrats on a great quarter.

Thank you. Thank you.

Your next question comes from the line of day medical.

From equator.

Yes.

Hi, good morning, and a couple of questions. The first is the on the Italian lottery is if you can give us the contribution of a sketch of win because it's not the wrong that'd been extremely extremely strong and so I mean, if you can elaborate on the performance and if you see any enemies.

As mentioned between sell in sell out or any one off contribution and the second question is on the.

On the savings.

Let's understand how much of the savings have been the flowing to the P&L of in particular up to the gaming compared to the lottery business.

Okay, Domenico I will take of the first question and the Max will elaborate on the second one but the first question, we do not see any mismatch on the on a scratch <unk> win in Italy is doing great and we have a great anything great to sell out the.

And of course, we ought to take advantage of by the closure of gaming goes in sports betting.

Shops up about the the business is doing very well with ni level of satisfaction.

From a player's accordingly, the wawa resort.

So it is continue so basically where you can we can take it as a sustainable level of at least for this part of the.

Yes, I think the the trend is continuing day is quite solid and I think.

We can.

Expect a very solid performance till the reopening of the point of sales I've just mentioned.

Okay.

On the second question Domenico Hi, This is Max so it was as it was elaborating before with Carlo mm mm. Our Optima program combination of initiatives will shift over time right now, we see a little bit more contribution coming from lottery than what should be the.

Great and a little bit less from gaming in terms of percentage of the total but we are ahead of where we are in line and like the head of our targets.

So far.

The gaming and will ramp up as soon as these operational excellence initiatives will come to fruition starting them with the second part of the year and more so going forward with.

And just the follow up of a clarification on the guidance on the education of being back to 2019 level. So should I take it on.

The reported number not the on adjusted for pro forma for the disposal.

We have a recast our historical two are around the continuing of ups through all of the financial So we are comparing Apple would that hey, that's what the upside of doing Nokia.

Okay.

Thanks.

Okay. Thank you.

At this time I would like to remind everyone of you would like to ask a question. Please press star one on your telephone keypad again star one.

The questions.

Your next question comes from the line of David Katz from Jefferies.

Hi, good morning, everyone.

Max and I guess, everyone. Appreciate all the commentary I wanted to I'm looking at slide 16, which has the maturity schedule out there.

I'm trying to think about the degree to which there could be more opportunities in there given how well you did on the most recent raise.

You know clearly, there's some bank debt and some bonds. The next few years have you gone through any sort of thoughts of math as to what those opportunities might look like.

Save some interest and drive some cash flow.

Yeah. So for the thank you for the question David I would first acknowledge the fact that with the two significant actions that we have taken and the second as of today with the make whole on the euro of 2023 debt. We're basically taken away towers are fundamentally a public market towers, we had in 'twenty, two and 'twenty three now from <unk>.

Good.

The next chapter is probably looking more into the bank a situation of the bank debt situation. We have a term loan a debt will come due in 'twenty, two and 'twenty three and then obviously we have the revolver expiring in 2020 for them on the on the bonds are obvious.

The we can always opportunistically look at tendering some of those bonds.

We actually are now a couple of years out in terms of early calls our.

Debt, we started to create into the structure as we mature our issuance program in the last few years. So I would say the long story short bank debt first and then bonds later on but I think we're pretty happy now with the situation debt we have.

<unk> by lowering the total amount of debt.

By a significant amount and also reducing the leverage by one full turn versus year end.

Yeah.

Okay, and I mean is it a fair I mean, maybe this is not the right form but is there a fair you know sort of thought that those interest costs are going to wind up being lower than where they were directionally at least on the bank debt.

The definitely the bank debt is the low cost the liability of financial liability for us so changing in the mix. It definitely improves the average costs the cost of debt with the has come down probably quarter points are in the last a year or so.

Obviously, we continue to look opportunities opportunistically at the capital market to see if there is any any chance to construct construct the transaction debt is effective.

But again I would really bank on the 60 million a debt. We have now generated took all of the last two actions that will start to come to fruition on a quarterly basis.

Obviously, one quarter of debt amount, starting with Q3 of.

This year.

Thank you very much.

Yeah.

We will take our last question from John Decree from Union gaming.

Hi, everyone. Thanks for taking my questions.

Hi, John Marco or Max I wanted to ask a question on the I gaming business.

And where you're seeing your revenue left obviously you have a lot of content to provide.

So I'm curious if you could help us unpack that revenue a little bit is mostly your your slot content available on gaming or the other <unk> services.

Services that you're providing I gaming customers I guess, specifically in the U S related to technology.

And the follow up question is is that business.

Gaming in general.

The two revenue and in terms of getting a revenue share or is it.

In the fixed <unk> cost of services, how do we think about as the market the I gaming market grows.

How should IGT grow with that market.

John.

I think.

I can elaborate on the on the on this question, let me start by saying that the over 80% of our I gaming revenues is in North America.

We enjoy a 25 of the Santa share in the U S base on the first quarter and the 50% share.

In our in Canada, and so are the other performance is very good the we aspect the four.

For the full year the.

The two dabble a hour.

The <unk> as we expect of the market will double and the base.

Of our strength that we expect the will be maintained the as the market grows the standard stays on our.

Game offering.

Because a lot of success is driven by the success of our games for the time being a lot of share is driven by our proprietary games.

We are working on our strong franchises a clear path on how we look forward on the Vinci diamonds.

Out of that truly working well across all of Chinas. Here's the point is the you cannot adjust the.

Poor thing from the land the base to the digital space and the games, but the you ever to rework them significantly better tune them.

To the digital space and this is where that we devoted a lot of effort. The name of LNG in order to build up of from solely the brand the.

And franchisees.

Very good the digital of games.

Some cases, we have to change the mechanics of in some cases that we change the payout because of we need that to make them stronger digital contents.

Sometimes in order to develop some species.

The feature.

Oscar the contribution from third parties. The studios. The recent example of has been of collaboration enough of a wheel of fortune Mega ways that we have launched the new Jersey in the Q4 and now is in Michigan in the Canada and it will be launched in Italy, two it means of debt.

We take of features of we work are the product of with the third Party studios in order to enhance the quality of our offering the.

We are also thinking about the distribute distributing it to become a distributor of third party contents of disease in the emerging got out of folks who support us that the can.

Also of bolstered our market share so.

It's a it's all about the content and with that said we are of very well per pad.

The two wave.

The solid the growth profile of the these business considering the number of jurisdiction that might decide especially in the United States to regulate the segment and the business model is a revenue sharing so.

To look at debt of two think about this business in terms of the revenue sharing accordingly to the performance.

Of our of our content.

Excellent. Thank you Marco I think you asked you answered a number of my questions in there. So I appreciate all of the help the congratulations on the quarter.

Thank you very much.

And I show no further questions at this time I will now turn the call back to management for any closing remarks.

Thank you for joining us today, Yeah, withstanding Q1 results, we deliver give us confidence that we can return on too.

Two key grip and David can financial measure of disease does with the recovery of reflects the unique of resilient nature of our business model across products and regions and the tremendous efforts of the IGT team around the world. We are building for the future office stronger foundation of each of our code of business activities.

We look forward to speaking with you about these over the next weeks of a great day.

Ladies and gentlemen, this does conclude today's conference. Thank you again for your participation you may now all disconnect.

Okay.

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Right.

Yes.

Yeah.

Good morning.

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Yes.

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