Q4 2023 International Game Technology PLC Earnings Call

Operator: Hello, and welcome to the International Game Technology PLC Q423 and Fiscal Year 2023 Earnings Call. All lines have been placed on mute to prevent any background noise.

Hello, and welcome to the International game Technology Plc, Q4, 'twenty three and fiscal year 2023 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 and if you would like to ask a question. During this time simply press star one.

Operator: After the speaker's remarks, there will be a question and answer session, and if you would like to ask a question during this time, simply press star 1. I will now turn the call over to Jim Hurley, Senior Vice President, Investor Relations.

I will now turn the call over to Jim Hurley Senior Vice President Investor Relations. Please go ahead.

James Hurley: Thank you, Sarah. And thank you all for joining us on IGT's Q4 and full year 2023 conference call, which is hosted by Vince Sadusky, 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 filing. 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 to our Investor Relations website. And now, I'll turn the call over to Vincent Sadusky.

James Hurley: Thank you Sarah and thank you all for joining us on Igt's Q4, and full year 2023 conference call, which is hosted by Vince The dusky Chief Executive Officer, and Max Chiara, Our Chief Financial Officer.

Speaker Change: After some prepared remarks, Vince and Max will be available for your questions.

James Hurley: During today's call, we will be making some forward looking statements within the meaning of the federal securities laws.

James Hurley: Forward looking statements are not guarantees and our actual results may differ materially from those expressed or implied in the forward looking statements.

James Hurley: 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.

James Hurley: During this call we will discuss certain non-GAAP financial measures you will 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 to our investor Relations website.

Speaker Change: And now I'll turn the call over to <unk>.

Vincent L. Sadusky: Thank you, Jim, and hello to everyone joining us today. We delivered a strong finish to 2023 with Q4 operating income growing 11 percent, yielding 160 basis points of operating margin expansion and strong free cash flow generation. This enabled us to meet our fiscal year 2023 financial goals, which were raised two times during the year. In fact, the growth across our global lottery, global gaming, and play digital segments contributed to record-breaking achievements of $1 billion in operating income, $1.8 billion in EBITDA, and a 41.3% EBITDA margin. This translated into significant cash generation during the period, including record cash from operations of over $1 billion, bringing the company's net debt leverage to the lowest level ever.

Speaker Change: Thank you, Jim and Hello to everyone. Joining us today, we delivered a strong finish to 2023 with Q4 operating income growing 11%, yielding 160 basis points of operating margin expansion and strong free cash flow generation.

Speaker Change: This enabled us to meet our fiscal year 2023 financial goals, which were raised two times during the year.

Speaker Change: In fact, the growth across our global Lottery Global gaming and play digital segments contributed to record breaking achievements of 1 billion and operating income $1 8 billion of EBITDA and.

Speaker Change: 41, 3% EBITDA margin is.

Speaker Change: This translated into significant cash generation in the period, including record cash from operations of over 1 billion, bringing the company's net average net debt leverage to the lowest level ever.

Vincent L. Sadusky: It's an impressive set of accomplishments that confirms we are on track with our long-term strategic and financial goals across the portfolio. I'd like to acknowledge the hard work of the entire IGT team in delivering them. We have a culture grounded in responsibility, collaboration, and passion.

It's an impressive set of accomplishments that confirms we are on track with our long term strategic and financial goals across the portfolio.

Speaker Change: I'd like to acknowledge the hard work of the entire IGT team and delivering them.

We have a culture grounded in responsibility collaboration and passion. These.

Vincent L. Sadusky: These values are not only the key drivers of our success but also make IGT a great place to work. So, thank you to all my IGT colleagues around the world. In fact, IGT was recently recognized as a top employer in the U.S., Italy, and Canada by the Top Employers Institute, which is the global certification company recognizing excellence in the conditions employers crave for their people.

Speaker Change: These values are not only the key drivers of our success, but also make IGT a great place to work.

Speaker Change: Thank you to all my IGT colleagues around the world.

Speaker Change: Fact, IGT was recently recognized as a top employer in the U S, Italy, and Canada by the top employers Institute, which is the global certification company recognizing excellence in conditions employers create for their people.

Vincent L. Sadusky: I'd like to spend some time on the operating performance of each segment, beginning with Global Lottery. We maintained our leadership position in 2023 through a combination of organic growth, portfolio expansion, and contract extension. That's clear in the 7% revenue growth achieved in Q4, as well as the 6% growth for the full year period, net of the Italy commercial services sale. These are impressive numbers for a business of this scale. Same-store sales rose a little more than 2% in the year, consistent with the steady low-to-mid single-digit growth for the lottery industry.

Speaker Change: I'd like to spend some time on the operating performance of each segment beginning with global lottery.

Speaker Change: We maintained our leadership position in 2023 through a combination of organic growth portfolio expansion and contract extensions.

Speaker Change: That's clear in the 7% revenue growth achieved in Q4 as well as the 6% growth for the full year period net of the Italy commercial services sale.

Speaker Change: These are impressive numbers for a business of this scale.

Speaker Change: Same store sales rose a little more than 2% in the year consistent with the steady low to mid single digit growth for the lottery industry.

Vincent L. Sadusky: Italy's same store sales increase of nearly 7% is especially noteworthy. The Lotto and Scratch and Win Games we operate in Italy are among the largest and most successful in the world. Italy's strong momentum during 2023 reflects IGT's expertise in understanding player behavior, developing compelling new games, managing a broad distribution network, and officially conducting day-to-day operations. The low single-digit same-store sales increase in North America and the rest of the world was achieved on top of accelerated growth in the last few years.

Speaker Change: Italy same store sales increase of nearly 7% is especially noteworthy.

Speaker Change: The Lotto in scratch and win games, we operate in Italy are among the largest and most successful in the world.

Speaker Change: Italy strong momentum during 2023 reflects igt's expertise and understanding player behavior developing compelling new games, managing a broad distribution network and officially conducting day to day operations.

Speaker Change: The low single digit same store sales increase in North America, and the rest of the World was achieved on top of accelerated growth in the last few years.

Vincent L. Sadusky: High lottery sales continue to expand at a fast cliff, up over 40% in 2023, mostly driven by organic growth and existing markets. During the year, we bolstered our contract portfolio with multi-year extensions in some of our largest jurisdictions, such as California, in addition to other key markets like Kentucky and Virginia. We also added some new business to the mix. We went live with a new facilities management contract in Connecticut and launched instance and passive games in Brazil's state of Minas Gerais, an important foothold in a market with significant potential. We were also awarded an iLottery platform contract in Connecticut where we expect to go live with draw-based games later this year. Overall, lottery profitability improved in 2023 with operating margin expanding 100 basis points to 36%.

Speaker Change: Hi, lottery sales continue to expand at a fast clip up over 40% in 2023, mostly driven by organic growth in existing markets.

Speaker Change: During the year, we bolstered our contract portfolio with multi year extensions in some of our largest jurisdiction jurisdictions, Texas, California. In addition to other key markets like Kentucky and Virginia.

Speaker Change: We also added some new business to the mix, we went live with a new facilities management contract in Connecticut, and launched instance in passive games in Brazil State of Munis drive an important foothold in a market with significant potential.

Speaker Change: We were also awarded and I lottery platform contract in Connecticut, where we expect to go live with draw based games later this year.

Speaker Change: Lottery profitability improved in 2023 with operating margin expanding 100 basis points to 36%.

Vincent L. Sadusky: Lottery is a large, steady-growing, and resilient industry with recession-proof characteristics. Growth accelerated during the pandemic, and our 2023 results confirm that we are successfully maintaining these higher play levels with significantly improved margins. Operating margins are up 600 basis points from their pre-pandemic level. We expect the industry to expand at a more customary low- to mid-single-digit rate off this higher sales base, fueled by organic growth and growing lottery adoption, especially in the U.S. There are some new opportunities on the horizon, such as Brazil, where many states are looking to launch lottery games. Now on to gaming.

Speaker Change: Lottery is a large steady growing a resilient industry with recession proof characteristics growth accelerated during the pandemic and our 2023 results confirm that we are successfully maintaining these higher play levels with significantly improved margins operating margins are up 600 basis points from their pre pandemic levels.

Speaker Change: We expect the industry to expand it more customary low to mid single digit rate off this higher sales base fueled by organic growth and growing our lottery adoption, especially in the U S.

Speaker Change: There are some new opportunities in the horizon, such as Brazil, where many states are looking to launch a lottery games.

Speaker Change: Now on to gaming.

Vincent L. Sadusky: The focused execution of key product and operational strategies is fueling strong growth for our global gaming segment. This is especially evident in profit performance, with Q4 operating income up 17% and full-year operating income up approximately 30%. 9% revenue growth for the year reflects broad-based strengths across several key performance indicators. We shipped over 35,000 gaming machines in 2023, up 7% from the prior year, and achieved record average selling prices. Unit growth was fueled by a double-digit increase in casino units, led by replacement demand. We continue to release high-performing new games, such as Magic Treasures, which has two titles ranking in the top ten. We also have three of the top ten new mechanical real games. The Peak Curve 49, Diamond RS, and Peak Slam 32 continue to rank among the top North American cabinets in their categories.

Speaker Change: Focused execution of key product and operational strategies is fueling strong growth for our global gaming segment.

Speaker Change: This is especially evident in profit performance with Q4 operating income up 17% and full year operating income up approximately 30%.

Speaker Change: 9% revenue growth for the year reflects broad based strength across several key performance indicators.

Speaker Change: We shipped over 35000 gaming machines in 2023 up 7% from the prior year and achieved a record average selling prices.

Speaker Change: Unit growth was fueled by a double digit increase in casino units led by replacement demand.

Speaker Change: We continue to release high performing new games, such as Magic treasures, which has two titles ranking in the top 10. We also have three of the top 10, new mechanical reel games.

Speaker Change: Peak care 49, Diamond IRS and peak 32 continue to rank among the top north American cabinets in their categories.

Vincent L. Sadusky: Our global installed base grew 9% to nearly 54,000 units, reflecting strong premium unit expansion in the U.S. and Canada and considerable growth in Latin America. We've delivered six consecutive quarters of installed base growth in the U.S. and Canada, led by premium units, and nine consecutive quarters in the rest of the world. Premium growth is fueled by the continued success of ProsperityLink and is accelerated with the launch of Mystery of the Lamp, which was recently named Top Performing New Premium Game at the EKG Slot Award Show. We have an exciting pipeline of new for sale and lease games planned for 2024, including the launch of the much anticipated Whitney Houston slots on IGT's new SkyRise cabinet this spring.

Speaker Change: Our global installed base grew 9% to nearly 54000 units, reflecting strong premium unit expansion in the U S and Canada and considerable growth in Latin America.

Speaker Change: We've delivered six consecutive quarters of installed base growth in the U S and Canada led by premium units and nine consecutive quarters in the rest of the world.

Speaker Change: Premium growth is fueled by the continued success of prosperity link and has accelerated with launch of misery of the lamp, which was recently named top performing new premium game at the EKG slot Award show.

Speaker Change: We have an exciting pipeline of new for sale or lease games, playing for 2024, including the launch of the much anticipated Whitney Houston slots on Igt's, New Sky rise cabinet. This spring.

Speaker Change: It was another record year for both revenue and profit at our play digital segment, 9% revenue growth was fueled by a double digit increase in a casino GTR across geographies.

Speaker Change: Operating profit rose over 30%, yielding 500 basis points of margin expansion highlighting the powerful leverage inherent in this business.

Speaker Change: Strong I casino GTR growth is a direct result of new games and creative solutions designed to deliver a rich player experience.

Vincent L. Sadusky: It was another record year for both revenue and profit at our play digital sector. 9% revenue growth was fueled by a double-digit increase in iCasino GGR across geographies. Operating profit rose over 30 percent, yielding 500 basis points of margin expansion, highlighting the powerful leverage inherent in this business. Strong iCasino GGR growth is a direct result of new games and creative solutions designed to deliver a rich player experience. Innovation is a vital growth driver in the absence of current new market regulation, especially in the U.S. Our top-performing games leverage IGT's unique capabilities. Wheel of Fortune Triple Gold Spin is the first and only omni-channel jackpot game in the U.S., inspired by our highly successful Power Bucks franchise in Canada.

Speaker Change: Innovation is a vital growth driver in the absence of current new market regulation, especially in the U S.

Speaker Change: Our top performing games leverage igt's unique capabilities.

Speaker Change: We look fortune Triple Gold's finished the first and only Omnichannel jackpot game in the U S. Inspired by our highly successful power box franchise in Canada.

Speaker Change: These games are effective player acquisition tools, they engage players across platforms for large scale wins with combined jackpot liquidity between land based mobile and online formats.

Speaker Change: In addition, our customers have had success with bespoke games that Taylor IGT is leading IP for a specific customer.

Speaker Change: Examples include Cleopatra Fort Knox and Blackjack go for <unk> Casino and Caesars Cleopatra for Caesars Palace online casino.

Speaker Change: We've also begun deploying our unique suite of user engagement and analytic tools. These are designed to provide real time player insights for our customers and drive player productivity.

Vincent L. Sadusky: These games are effective player acquisition tools. They engage players across platforms for large-scale wins with combined jackpot liquidity between land-based, mobile, and online formats. In addition, our customers have had success with bespoke games that tailor IGT's leading IP for a specific customer. Examples include Cleopatra Fort Knox and Blackjack Go for FanDuel Casino and Caesars Cleopatra for Caesars Palace Online Casino.

Speaker Change: We've seen great results with early adopters and we look forward to rolling these out more broadly.

Speaker Change: In sports betting we entered four new jurisdictions in 2023 and had 26, new installations, including 20, new casino retail locations three on premise mobile launches and three statewide mobile launches.

Speaker Change: We also introduced sports betting functionality with the capability to livestream sports on our T bar top and Crystal Flex terminals.

Speaker Change: Play digital growth is dependent on new gaming legislation, which has been slower than expected.

Vincent L. Sadusky: We've also begun deploying our unique suite of user engagement and analytic tools. These are designed to provide real-time player insights for our customers and drive player productivity. We've seen great results with early adopters, and we look forward to rolling these out more broadly. In sports betting, we entered four new jurisdictions in 2023 and had 26 new installations, including 20 new casino retail locations, three on-premise mobile launches, and three statewide mobile launches. We will also introduce sports betting functionality with the capability to livestream sports on our Peak Bartop and CrystalFlex terminals.

Speaker Change: This appears to be the case in 2024 as well.

Speaker Change: In that context will be focus on driving cost efficiencies to stay on track with our margin expectations for the business.

Speaker Change: We're pleased to have achieved record breaking profits for the year.

Speaker Change: <unk> team executed with excellence you see this and the momentum we had across segments our.

Speaker Change: Our 2024 outlook, which Maxwell Walkthrough later, primarily reflects organic growth for the existing businesses.

Speaker Change: Recently, we announced the transaction to spin off our global gaming and play digital businesses and merge them with every existing operations. The decision was the result of a strategic evaluation with the goal of unlocking the value of our portfolio.

Speaker Change: IGT shareholders will retain 100% ownership of the predictable growth and resilience of our global lottery pure play, while owning 54% of our faster growing gaming digital and Fintech business.

Vincent L. Sadusky: PlayDigital growth is dependent on new iGaming legislation, which has been slower than expected. This appears to be the case in 2024 as well. In that context, we'll be focused on driving cost efficiencies to stay on track with our margin expectations for the business. We're pleased to have achieved record-breaking profits for the year. The IG team executed with excellence.

Speaker Change: We believe the creation of two stronger more focused companies each with top notch teams and simplified business models better positions each company to serve its customers and create significant value for stockholders.

Speaker Change: It allows for more focused operating and capital allocation strategies capital structures that are optimized for different business models and increased flexibility to pursue organic and inorganic growth strategies.

Vincent L. Sadusky: You see this in the momentum we have had across sectors. Our 2024 outlook, which Max will walk through later, primarily reflects organic growth for the existing business. Recently, we announced the transaction to spin off our global gaming and play digital businesses and merge them with Evry's existing operations.

Speaker Change: Also provides the opportunity for investors to better appreciate the intrinsic value of each stand alone business.

Speaker Change: For context lottery peers trade between 12, and 18 times EV to EBITDA compared to IGT at <unk> six times.

Vincent L. Sadusky: The decision was the result of a strategic evaluation with the goal of unlocking the value of our portfolio. IGT shareholders will retain 100% ownership of the predictable growth and resilience of a global lottery pure play while owning 54% of a faster-growing gaming, digital, and fintech business. We believe the creation of two stronger, more focused companies, each with top-notch teams and simplified business models, better positions each company to serve its customers and create significant value for stockholders. It allows for more focused operating and capital allocation strategies, capital structures that are optimized for different business models, and increased flexibility to pursue organic and inorganic growth strategies. It also provides the opportunity for investors to better appreciate the intrinsic value of each standalone business. For context, lottery peers trade between 12 and 18 times EV to EBITDA, compared to IGT at just 6 times, and the non-match IGT scope of capabilities.

Speaker Change: And unmatched IGT scope of capabilities.

Speaker Change: The new gaming business will have a similar scale and growth trajectory as its peers and thats before the benefit of potential revenue synergies.

Speaker Change: These gaming peers trade between 11, and 13 times EV to EBITDA.

Speaker Change: IGT has a broad global product offering across class III Vlt's I gaming and Casino management systems. Every business is focused on North America, primarily with class II games and extensive fintech capabilities the.

Speaker Change: The combination of the two companies with complementary capabilities and geographic footprint creates an integrated omnichannel one stop shop addressing all aspects of the gaming ecosystem that we believe will provide a superior value proposition of best in class and efficient solutions.

Speaker Change: Together, we can generate touch points across the entire player journey from the casino floor to mobile.

Speaker Change: The business has an attractive recurring revenue model with recurring revenue streams from gaming operations, I gaming and Fintech solutions, representing over 60% of pro forma revenue.

Yes.

Speaker Change: We expect revenue to grow at a mid single digit compound annual growth rate through 2026, with adjusted EBITDA, increasing at an even stronger high single digit rates.

Vincent L. Sadusky: The new gaming business will have a similar scale and growth trajectory as its peers, and that's before the benefit of potential revenue centers. These gaming peers trade between 11 and 13 times EV to EBITDA. IGT has a broad global product offering across Class 3 VLTs, iGaming, and Casino Management.

Speaker Change: That's through a mix of organic topline growth for the existing businesses enhanced by significant cost synergies, mostly from straightforward supply chain and real estate optimization initiatives.

Speaker Change: These synergies on their own are worth over $500 million of value for the combined business.

Speaker Change: Given the minimal business overlap between the two companies there are some compelling revenue synergies across products and geographies that are not yet factored into our outlook.

Speaker Change: We expect to manage the business with a strong balance sheet and conservative leverage profile.

Vincent L. Sadusky: Every's business is focused on North America, primarily with Class 2 games and extensive fintech capabilities. The combination of the two companies with complementary capabilities and geographic footprints creates an integrated, omni-channel, one-stop-shop, addressing all aspects of the gaming ecosystem that we believe will provide a superior value proposition of best-in-class and efficient solutions. Together, we can generate touchpoints across the entire player journey, from the casino floor to mobile.

Speaker Change: And improved conversion of adjusted EBITDA to cash flow should allow for investments in both organic growth and M&A significant debt repayments and share buybacks.

Speaker Change: The company will be made up of a best in class team across both organizations with long standing industry knowledge relationships and a proven track record in BTB gaming in Fintech.

Speaker Change: Executive team has over 20 years average experience across M&A integration.

Speaker Change: Needless to say, we're very excited about the opportunity for long term value creation for the Standalone lottery and gaming business.

Speaker Change: Now I'll turn the call over to Max.

Max: Thank you, Vince and Hello to everyone joining us on the call today.

Max: Our fourth quarter and full year 2023 financial performance was strong achieving the upgraded outlook provided on our Q3 earnings call on all key financial metrics.

Vincent L. Sadusky: The business has an attractive recurring revenue model with recurring revenue streams from gaming operations, iGaming, and fintech solutions representing over 60% of pro forma revenue. We expect revenue to grow at a mid-single-digit compound annual growth rate through 2026, with adjusted EBITDA increasing at an even stronger high single-digit rate. That's through a mix of organic top-line growth for the existing businesses enhanced by significant cost synergies, mostly from straightforward supply chain and real estate optimization initiatives. These synergies, on their own, are worth over $500 million in value for the combined business.

Max: We delivered record profit on a full year basis. Despite the comparison to prior periods affected by significant divestitures like Italy gaming in 2021 and commercial services in 2022.

Max: These results confirm that most of our long term targets have already been achieved or are confidently insight with a clear trajectory to get there.

Max: A high level summary of our financial results is included here on slide 13, including comparisons to the prior year and.

Max: In the fourth quarter, we generated revenue of over $1 1 billion up 3% year over year, driven by a 7% increase in global lottery on strong product sales and continued momentum in Italy.

Vincent L. Sadusky: Given the minimal business overlap between the two companies, there are some compelling revenue synergies across product and geographies that are not yet factored into our outlook. We expect to manage the business with a strong balance sheet and conservative leverage profile. An improved conversion of adjusted EBITDA to cash flow should allow for investments in both organic growth and M&A, significant debt repayment, and share buyback. The company will be made up of a best-in-class team across both organizations with long-standing industry knowledge, relationships, and a proven track record in B2B gaming and fintech. The executive team has over 20 years of average experience across M&A integration. Needless to say, we're very excited about the opportunity for long-term value creation for the standalone lottery and gaming business. Now, I'll turn the call over to Matt.

Max: Operating income rose, 11% to 256 million and operating income margin increased 160 basis points to 23%, reflecting stronger performance across business segments.

Max: Adjusted EBITDA of 454 million increased 9% over the prior year period, and adjusted EBITDA margin expanded 190 basis points to 40% adjust.

Max: Adjusted EPS rose, 40% to 56 cents per share driven by the strong increase in operating income.

Max: For the full year, we generated revenue of $4 3 billion up 2% or 7% net of the Italy commercial service sale on mid to high single digit growth across business segments.

Max: Strong, Italy same store sales in global lottery easing of supply chain cost and R&D process improvements and global gaming and strong operating leverage and play digital drove operating income up 9% to 1 billion, which is a record profit in our company history operating income margin rose 140 basis points to 22.

Massimiliano Chiara: Thank you, Vince, and hello to everyone joining us on the call today. Our four-quarter and full year 2023 financial performance was strong, achieving the upgraded outlook provided on our Q3 earnings call on all key financial metrics. We deliver record profit on a full-year basis despite a comparison to prior periods affected by significant divestitures like Italy Gaming in 2021 and Commercial Services in 2022. This result confirms that most of our long-term targets have already been achieved or are confidently in sight with a clear trajectory to get there.

Max: 3%.

Max: Full year, adjusted EBITDA of $1 8 billion and adjusted EBITDA margin of 41% also achieved the highest level in company history.

Max: Reported EPS was <unk> 77, and adjusted EPS was over $2 per share at 2% increase year over year, driven by higher operating income, partially offset by some tax headwinds.

Max: Now, let's review the results of our three business segments.

Max: Global lottery deliver $681 million in revenue in the fourth quarter, an increase of 7% driven by strong product sales in Italy.

Max: Same store sales growth.

Massimiliano Chiara: A high-level summary of our financial results is included here on slide 13, including comparisons to the prior year. In the fourth quarter, we generated revenue of over $1.1 billion, up 3% year-over-year, driven by a 7% increase in global lottery on strong product sales and continued momentum in Italy. Operating income rose 11% to $256 million and operating income margin increased 160 business points to 23%, reflecting stronger performance across business segments. Adjusted EBITDA of $454 million increased 9% over the prior year period, and adjusted EBITDA margin expanded 190 business For the full year, we generated revenue of $4.3 billion, up 2% or 7% net of the Italy commercial service sale on mid to high single-digit growth across business segments.

Max: Global same store sales declined 3%, reflecting the impact of strong U S. Multi state jackpot sales in the prior year that were bolstered by a record 2 billion Powerball jackpot that hit on November seven 2022 same store sales in Italy rose, 3% with growth in both in both instant ticket and draw.

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Max: Customer demand for Igt's innovative hardware drove fourth quarter product sales revenue up 94% year over year propelled by large gain touched 28 self service terminal sales in Michigan, and Ontario, and the sale of a central I lottery system in Poland.

Max: Operating income rose, 10% to $238 million in the fourth quarter operating income margin expanded 110 basis points to 35% on continued with strong momentum in Italy and increased high margin per sales and despite lower benefits from jackpot activity.

Max: For the full year revenue of $2 5 billion was 2% lower year over year, but increased 6%, excluding the Italy commercial service business sales operating income of $913 million was in line with the prior year. Despite a 34 million contribution from Italy commercial services last year.

Max: Operating income margin increased 110 basis points to 36%.

Massimiliano Chiara: Strong Italy same-store sales in Global Lottery, easing of supply chain costs and R&D process improvements in Global Gaming, and strong operating leverage in Play Digital drove operating income up 9% to $1 billion, which is a record profit in our company history. Operating income margin rose 140 business points to 23%. Fully Adjusted EBITDA of $1.8 billion and Adjusted EBITDA Margin of 41% also achieved the highest level in company history. Reported EPS was $0.77, and adjusted EPS was over $2 per share, a 2% increase year-over-year, driven by higher operating income, partially offset by some tax headaches.

Max: Global gaming revenue of $390 million in the fourth quarter was slightly above the prior year. Despite unusually high jackpot expense associated with a higher than normal frequency of jackpots, one on the Nevada Megabucks wide area Progressive games.

Max: Increased terminal product sales revenue and higher IP fees were offset by lower system sales.

Max: We shipped nearly 9400 units in the fourth quarter driven by continued strength in casino replacement units, which grew 6% year over year.

Max: Global ASP were $15900 with North American ASP, increasing 4% to $16300 confirming the expected positive trajectory following a blip in that in the third quarter due to mix.

Massimiliano Chiara: Now let's review the results of our three business segments. Global Lottery delivered $681 million in revenue in the fourth quarter, an increase of 7% driven by strong product sales and Italy's same-store sales growth. Global same-store sales declined 3%, reflecting the impact of strong U.S. multistage jackpot sales in the prior year that were bolstered by the record $2 billion Powerball jackpot that hit on November 7, 2022. However, same-store sales in Italy rose 3%, with growth in both instant tickets and draw gains.

Max: The global installed base expanded to over 53900 units with significant increases across geographies momentum in the business accelerated in the fourth quarter as the U S and Canada installed base grew 1% sequentially and 6% year over year on continued success and multilevel progressive games, while the installed base.

Max: And rest of World Rose, 4% sequentially, and 14% year over year, reflecting growing demand for high performing games in Latin America and parts of Europe.

Max: Fourth quarter operating income rose, 17% to $80 million and operating income margin expanded 290 basis points to 21% as easing of supply chain cost and R&D process improvements were partially offset by the higher jackpot expense dynamics I explained earlier.

Massimiliano Chiara: Customer demand for IGT's innovative hardware drove fourth-quarter product sales revenue up 94% year-over-year, propelled by large GameTouch 28 self-service terminal sales in Michigan and Ontario and the sale of a central iLottery system in Poland. Operating income rose 10% to $238 million in the fourth quarter. Operating income margin expanded 110 basis points to 35%, on continuous strong momentum in Italy and increased high-margin per hour sales, and despite lower benefits from JetProtect. For the full year, revenue of $2.5 billion was 2% lower year-over-year, but increased 6%, excluding the Italy commercial service business sales. Operating income of $913 million was in line with the prior year, despite a $34 million contribution from Italy's commercial services last year.

Max: On a full year basis revenue of $1 6 billion increased 9% on broad based strength across key performance indicators operating.

Max: Operating income rose, 29% to $313 million and operating income margin expanded 320 basis points to 20%.

Max: Play digital generated $59 million in revenue in the fourth quarter down 10% from 65 million in the prior year due to a benefit related to jackpot expense in the prior year and lower sports betting volume and unfavorable hold rates in Rhode Island.

Max: I gaming <unk> trends remained strong with increases across geographies, including double digit growth in the U S and sports betting Gigi are in line with the prior year.

Max: Operating income increased to $17 million and operating margin rose 360 basis points to 29%, primarily driven by disciplined cost management and reduced variable compensation costs.

Massimiliano Chiara: Operating income margin increased 100 and basis points to 36%. Global gaming revenue of $390 million in the fourth quarter was slightly above the prior year, despite an unusually high jackpot expense associated with a higher-than-normal frequency of jackpots won on the Nevada Megabucks wide-area progressive game. Higher terminal product sales revenue and higher IP fees were offset by lower system sales. We shipped nearly 9,400 units in the fourth quarter, driven by continued strength in casino replacement units, which grew 6% year-over-year. Global ASP was $15,900, with North American ASP increasing 4% to $16,300, confirming the expected positive trajectory following a blip in the third quarter due to mix. The global install base expanded to over 53,900 units, with significant increases across geographies.

<unk> to proactively manage the cost structure is a priority in 2024, given the expected slower progression on new legislation expected in the next year.

Max: Record revenue and operating income levels were achieved in the full year period revenue increased 9% to 228 million on our gaming growth across geographies strong operating leverage drove operating income up 32% to $65 million with margin expanding 490 basis points to 29%.

Max: Record level operational performance and a 58% cash conversion rate drove cash from operations to over $1 billion.

Max: Hi, its level in company history with capital expenditures and deferred license fees of about $420 million free cash flow of around $620 million exceeded our expectations adjusted free cash flow was over $800 million.

Massimiliano Chiara: Momentum in the business accelerated in the fourth quarter as the U.S. and Canada install base grew 1% sequentially and 6% year-over-year on continuous success in multilevel progressive games, while the install base in the rest of the world rose 4% sequentially and 14% year-over-year, reflecting growing demand for high-performance games in Latin America and parts of Europe. Fourth quarter operating income rose 17% to $80 million, and operating income margin expanded 290 business points to 21%, as easing of supply chain costs and R&D process improvements were partially offset by the higher jackpot expense dynamics I explained earlier. On a full year basis, revenue of $1.6 billion increased 9% on broad-based strength across key performance indicators. Operating income rose 29% to $313 million, and the operating income margin expanded 320 basis points to 20%. PlayDigital generated $59 million in revenue in the fourth quarter, down 10% from $65 million in the prior year, due to a benefit related to jackpot expense in the prior year and lower sports betting volume and unfavorable hold rates in Rhode Island.

Max: We have been executing on our balanced approach to capital allocation over the last two years generally tracking very much in line with what we presented at our Investor Day in November of 2021.

Max: We returned $160 million to shareholders in 2023 in the form of cash dividends and we have $145 million outstanding under the current share repurchase authorization after having use about half of the $300 million program.

Max: Total liquidity remains robust at $1 8 billion at year end, which includes $1 2 billion in additional borrowing capacity from Undrawn credit facilities.

In the last three years, we are progressively strengthened our credit profile with significant debt reduction of over $2 2 billion and net debt leverage improving $3 five turns to a record low two nine times.

Max: This leaves us well within our target leverage range of two 5% to three five times.

Max: And in a nice position with no meaningful near term debt maturities.

Max: This improved credit profile was also reflected in credit rating actions taken early in the year by rating agencies.

Max: With Moody's upgrading our rating to be a one from <unk> with a stable.

Max: Outlook and Fitch assigning an issuer rating of double B, plus with a stable outlook and an investment grade senior debt rating of Triple B minus.

Max: In addition last week following the announcement of the planned spin and merger transaction, both S&P and Fitch placed IGT on a positive credit watch.

Massimiliano Chiara: The i-Gaming GGR trend remains strong, with increases across geographies, including double-digit growth in the U.S. and sports betting GGR. In line with the prior year, operating income increased to $17 million, and operating margin rose 360 basis points to 29%, primarily driven by disciplined cost management and reduced variable compensation. Continuing to proactively manage the cost structure is a priority in 2024, given the expected slower progression on new Record revenue and operating income levels were achieved during the full year period.

Max: Okay.

Max: Let me now introduce our 2024 outlook in.

Max: In an effort to provide a simpler view on underlying business expectations for the year. We are assuming the transaction closes in early 2025.

Max: This eliminates the need for complex accounting adjustments to the outlook. If we were to achieve a 2020 foreclosed.

Max: We believe this approach also helps you assess our progress towards the long term targets provided at our last Investor day.

Yeah.

Max: For the full year, we currently expect to generate revenue of four 3% to $4 4 billion, implying year over year growth of between zero and 2%.

Massimiliano Chiara: Revenue increased 9% to $228 million on iGaming growth across geographies. Strong operating leverage drove operating income up 32% to $65 million, with the iMargin expanding 490 business points to 29%. Record-level operational performance and a 58% cash conversion rate drove cash from operations to over $1 billion, the highest level in company history. With capital expenditures and deferred license fees of about $420 million, free cash flow of around $620 million exceeded our expectations. The adjusted free cash flow was over $800 million.

Operating income margin is expected to be between 20% to 21%, which includes a 300 basis point negative impact from $130 million in pre closing separation and divestiture costs related to the planned spin and merger transaction.

Max: Those costs are expected to be incurred ratably throughout the year.

Max: Excluding the separation and divestiture costs, a view that we believe offers a better assessment of underlying business performance. Our outlook calls for an operating margin between 23, and 24% up to 100 basis points higher than in 2020 in 2023.

Massimiliano Chiara: We've been executing on our balanced approach to capital allocation over the last two years, generally tracking very much in line with what we presented at our Investor Day in November of 2021. We returned $160 million to shareholders in 2023 in the form of cash dividends, and we have $145 million outstanding under the current share purchase authorization after having used about half of the $300 million program. Total liquidity remains robust at $1.8 billion at year-end, which includes $1.2 billion in additional borrowing capacity from undrawn credit facilities.

Max: Operationally this outlook assumes global lottery same store sales will be flat to slightly lower year over year due to the strong jackpot activity experienced in 2023.

Max: While large jackpots do tend to happen from time to time, the timing is unpredictable and therefore, we don't plan for them in our forecast. If you exclude the impact of jackpots same store sales are expected to increase low single digits across jurisdictions on the back of consolidated much higher play levels.

Max: In order to facilitate a clear understanding of the split between remain co activities and businesses that will merge with every we have decided to aggregate global gaming and play digital into a single segment named gaming and digital starting with our Q1 2024 results.

Massimiliano Chiara: In the last three years, we have progressively strengthened our credit profile with significant debt reduction of over $2.2 billion and net debt leverage improving three and a half times to a record low 2.9 times. That leaves us well within our target leverage range of two and a half to three and a half times and in a nice position with no meaningful near-term debt maturity. This improved credit profile was also reflected in credit rating actions taken early in the year by the rating agencies, with Moody's upgrading our rating to BA1 from BA2 with a stable outlook and Switch assigning an issuer rating of BB plus with a stable outlook and an investment grade senior debt rating of BBB minus. In addition, last week, following the announcement of the planned spin-off and merger transaction, both S&P and Fitch placed IGT on a positive credit watch.

Max: The new segment is a simple aggregation of the numbers of the two previously reported segments with no change to our central cost allocation policy. We will continue to provide the same level of API and revenue disaggregation as in the past. So we expect minimal impact from the modifications.

Max: Speaking about that we expect gaming and digital revenue to increase at high single digit rate. This comes from continued growth in the installed base unit shipments in Asp's for gaming and growth in existing markets for digital as the pace of new legislation has slowed.

Max: Operating income margin is forecasted to improve 250 to 400 basis points on the back of the favorable <unk> trends continued improvement in supply chain and focus on cost discipline, moving us one notch closer to our long term target of 28% to 30%.

Massimiliano Chiara: Let me now introduce our 2024 Outlook. In an effort to provide a simpler view on underlying business expectations for the year, we are assuming the transaction closes in early 2025. This eliminates the need for complex accounting adjustments to the outlook if we were to achieve a 2020 foreclosure.

Max: Turning to our cash flow, we expect cash from operations of at least $1 billion, which also includes the impact of separation and divestiture cost.

Max: Capital expenditures of approximately $500 million includes about $75 million increase from 2023 related to recent contract wins and multiyear contract extensions in our global lottery business.

Massimiliano Chiara: We believe this approach also helps you assess our progress toward the long-term targets provided at our last investor date. For the full year, we currently expect to generate revenue of $4.3 to $4.4 billion, implying Yerouberia growth of between 0% and 2%. Operating income margin is expected to be between 20 to 21 percent, which includes a 300 basis point negative impact from $130 million in pre-closing separation and divestiture costs related to the planned spin-and-merger transaction.

Max: For the first quarter, we expect to deliver revenue of approximately $1 billion and operating income margin of around 20%.

Max: Which also includes a 300 basis point impact from pre closing separation and divestiture cost I just mentioned.

Max: Global Lottery same store sales are expected to be down year over year as same store sales growth in Italy is offset by tough North American jackpot comps.

Massimiliano Chiara: Those costs are expected to be incurred ratably throughout the year, excluding the separation and divestiture costs, a view that we believe offers a better assessment of underlying business performance. Our outlook calls for an operating margin between 23% and 24%, up to 100 basis points higher than in 2023. Operationally, this outlook assumes global lottery same-store sales will be flat to slightly lower year-over-year due to the strong jet productivity experience While large airports do tend to happen from time to time, the timing is unpredictable, and therefore, we don't plan for them in our forecast.

Max: Gaming and digital revenues likely to be lower than the prior year on a return to more normal seasonality in unit shipments against pent up demand in the prior year period.

Max: In addition to elevated IP and software licenses last year.

Max: We are very excited about the significant value creation potential of separating IGT into two stand alone pure play companies. The combination of IGT Global gaming and play digital with every existing operations creates a podium position player with the scale diversification cash flow generation.

Massimiliano Chiara: If you exclude the impact of jackpots, same-store sales are expected to increase by low single digits across jurisdictions on the back of consolidating much higher play levels. In order to facilitate a clear understanding of the split between RemainCo activities and the businesses that will merge with Avery, we have decided to aggregate global gaming and PlayDigital into a single segment named Gaming and Digital, starting with our Q1 2024 results. The new segment is a simple aggregation of the numbers of the two previously reported segments, with no change to our central cost allocation policy.

Max: And growth outlook that is on par with other gaming peers that trade a significantly higher valuation multiples.

Max: I would now like to spend a few minutes reviewing some of the key financial aspects of the planned spin and merger transaction as well as the remaining steps that will need to be completed to close the transaction.

Max: Upon closing the newly created combined gaming entity will raise financing of $3 7 billion, which will be used to fund a $2 6 billion distribution to IGT plc and refinance every existing debt.

Max: IGT plc plans to use the proceeds from this distribution to repay 2 billion of existing indebtedness and fund about $400 million in transaction related cash outflows.

Massimiliano Chiara: We will continue to provide the same level of KPI and revenue disaggregation as in the past, so we expect minimal impact from the modification. Speaking about that, we expect gaming and digital revenue to increase at a high single-digit rate. This comes from continued growth in the installed base, unit shipments, and ASPs for gaming and growth in existing markets for digital as the pace of new legislation has slowed. Operating income margin is forecasted to improve 250 to 400 basis points on the back of the favorable KPI trends, continued improvement in the supply chain, and focus on cost discipline, moving us one notch closer to our long-term target of 28 to 30 percent. Turning to our cash flow, we expect cash from operations of at least $1 billion, which also includes the impact of separation and divestiture costs.

This debt reduction is expected to drive remain co plc pro forma net debt leverage down to around two five times. Shortly following the closing of the transaction, putting us in an even stronger balance sheet position.

Speaker Change: I'd like to address the taxable nature of the transaction since it has been an area of focus for some of you.

Speaker Change: Most RMT transactions in the U S have Dennis tax free distributions, followed by tax free merger.

Speaker Change: Since IGT plc has the benefit of a participation exemption regime tax.

Speaker Change: Tax leakage from the transaction is expected to be modest up to a 100 million or less than <unk> 50 per IGT sure.

Speaker Change: The other important benefit of a taxable transaction is that it provides maximum flexibility on strategic initiatives like M&A and share buybacks for both entities from day one.

Massimiliano Chiara: Capital expenditures of approximately $500 million include about a $75 million increase from 2023 related to recent contract wins and multi-year contract extensions in our global lottery business. For the first quarter, we expect to deliver revenue of approximately $1 billion and operating income margin of around 20%, which also includes the 300 basis point impact from pre-closing, separation, and devastation costs I just mentioned. Global Lottery same-store sales are expected to be down year-over-year, as same-store sales growth in Italy is offset by tough North American jackpot competition.

Speaker Change: The transaction is also taxable to IGT shareholders. We have provided additional disclosure on this matter in our 20-F to be filed with the SEC at the end of the day.

Speaker Change: Achieving a closing in late 'twenty four or early 'twenty five is predicated upon the successful completion of regulatory and licensing approvals as well as approvals from IGT plc shareholders on the spin of the global gaming and play digital segments and every shareholder approval on the merger transaction.

Speaker Change: To summarize we delivered strong financial performance in 2023 with results that met upgraded financial targets, we generate significant cash flows and improved net debt and net debt leverage to the lowest level in company history.

Massimiliano Chiara: Gaming and digital revenue is likely to be lower than the prior year on a return to more normal seasonality in unit shipments against pent-up demand in the prior year period, in addition to elevated IP and software licenses last year. We are very excited about the significant value creation potential of separating IGT into two standalone pure play companies. The combination of IGT Global Gaming and PlayDigital with every existing operation creates a podium position player with the scale, diversification, cash flow generation, and growth outlook that is on par with other gaming peers that trade at a significantly higher valuation model. I would now like to spend a few minutes reviewing some of the key financial aspects of the planned spin and merger transaction, as well as the remaining steps that will need to be completed to close the transaction. Upon closing, the newly created combined gaming entity will raise financing of $3.7 billion, which will be used to fund a $2.6 billion distribution to IGT-PLC and refinance every existing debt. IGTPLC plans to use the proceeds from this distribution to repay $2 billion of existing indebtedness and fund about $400 million in transaction-related cash outflows.

Speaker Change: We're heading into 2024 on a solid foundation with clear prospects for profitable growth significant liquidity and no material near term debt maturities.

Speaker Change: We have laid out the milestones to deliver the spin and merger transaction with every as expeditiously as possible and we are excited about the prospect for two standalone global pure play companies to create significant value for stakeholders.

Speaker Change: That concludes our prepared remarks.

Speaker Change: Later would you please open the line for questions.

Speaker Change: Thank you if you have a question. Please press star one on your telephone keypad. If you have queued up and want to withdraw your question simply press Star one again.

Speaker Change: Your first question comes from the line of Barry Jonas with tourists Securities. Your line is open.

Barry Jonathan Jonas: Hey, guys good morning.

Barry Jonathan Jonas: Wanted to start with gaming can you give a little more detail on the path and key components to hitting that 25, 20% to 30% Oi target and then help us understand how much of that could be transferable to every business for the newco.

Massimiliano Chiara: This debt reduction is expected to drive Remainco PLC's performance net debt leverage down to around two and a half times shortly following the closing of the transaction, putting us in an even stronger balance sheet position. I'd like to address the taxable nature of the transactions since it has been an area of focus for some of you. Most RMT transactions in the U.S. are done as tax-free distributions, followed by tax-free mergers.

Barry Jonathan Jonas: Embedded in the synergies and maybe what's upside thanks.

Sure Hi, Barry this is Max so again.

Max: We closed the year at 20%.

Max: We expect a margin accretion in 'twenty four of between $2 50, and 400 right and.

Which is effectively at the upper end mid of the way to the minimum of the F 2025 targets.

Max: With a year to go we have another similar trajectory to achieve so rapidly we are in a sequence.

Massimiliano Chiara: Since IGT PLC has the benefit of a participation exemption regime, tax leakage from the transaction is expected to be modest, up to $100 million, or less than $0.50 per IGT share. The other important benefit of a taxable transaction is that it provides maximum flexibility on strategic initiatives like M&A and shared buybacks for both entities from day one. The transaction is also taxable to IGT shareholders. We have provided additional disclosure on this matter in our 20-F, which will be filed with the SEC at the end of the day. Achieving a closing in late 2024 or early 2025 is predicated upon the successful completion of regulatory and licensing approvals, as well as the approvals from IGTPLC shareholders on the spin-off of the global gaming and play digital segments and every shareholder approval on the merger transaction. To summarize... We delivered strong financial performance in 2023 with results that met upgraded financial targets. We generated significant cash flows and improved net debt and net debt leverage to the lowest level in company history.

Max: Logical sequential to get there.

Max: <unk>.

Max: The tailwind to get there are primarily.

Max: Related to the positive momentum we have gained in our installed base, which reflects successful launches of games such as prosperity links mystery of the lamps.

Max: And more new games coming especially in 2024.

Max: Whitney Houston on the high rise cabinet.

Max: That is the first item that.

Max: Impact.

Max: Positive margin trajectory the second item is.

Max: Finally expectations on an expansion on international sales.

Max: <unk> to work in tandem with the successful expansion of the installed base so far achieved.

Max: I remind you of the 14% increase in the installed base in 2023 for international markets, which we expect to continue again based on the solid foot of the successful games and then lastly, we continue to expect a positive momentum on our supply chain easing of Costa.

Which will be a positive contributor to the margin accretion in 2024.

Operator: We're heading into 2024 on a solid foundation with clear prospects for profitable growth, significant liquidity, and no material near-term debt maturity. We have laid out the milestones to deliver the spin-and-merge transaction with Avery as expeditiously as possible, and we are excited about the prospect of two stand-alone global pure-play companies to create significant value for stakeholders. That concludes our prepared remarks. Operator, would you please open the line for questions? Thank you. If you have a question, please press star 1 on your telephone keypad. If you have queued up and want to withdraw your question, simply press star 1 again.

Max: Okay.

Speaker Change: Got it got it Okay, and then just as a follow up wanted to touch on the Italy Lotto renewal process any update there on timing or maybe just talk about how you see your positioning there as the incumbents. Thanks.

Speaker Change: Yes sure.

Speaker Change: Recently, there was a news in Italy that a draft online gaming decree was introduced by the Finance Committee and that outlines some of the terms of the tender for for the upcoming Lotto license.

Speaker Change: We know coming out of that was there would be a.

Speaker Change: Our start to the to the tender process.

Speaker Change: The terms would be a nonrenewable nine year concession.

Speaker Change: Minimum upfront license fee of $1 billion.

Barry Jonathan Jonas: Your first question comes from the line of Barry Jonas with Truist Securities. Your line is open. Hey guys, good morning. I wanted to start with gaming.

Speaker Change: Which could be divided into multiple installments part would be paid upon winning the tender in part with the start of the of the new concession.

Barry Jonathan Jonas: Can you give a little more details on the path and key components to hitting that 25, 20 to 30% OI target? And then help us understand how much of that could be transferable to every business for the new code? What's embedded in the synergies and maybe what's up. Thanks. Sure. Hi Barry.

Speaker Change: So considering the news that.

Speaker Change: It's come out.

Speaker Change: We'd say the regulator has set a high bar for interested parties willing to commit to such a significant amount of capital.

Speaker Change: Which we believe similar to the past likely limits the field of qualified candidates and then of course potential bidders will need to demonstrate their strategy and prove their execution capabilities.

Massimiliano Chiara: This is Max. So again, we closed the year at 20%. We expect a margin accretion in 2024 of between 250 and 400, right? And which is effectively at the upper end, mid of the way to the minimum of the 2025 target. So, with a year to go, we have another similar trajectory to achieve. So, relatively, we are in a logical sequential order to get there.

Speaker Change: In order both to I think convince the Italian authorities that they can.

Speaker Change: They can execute and then also internally to be ensure that they can achieve an appropriate ROI on such a significant.

Speaker Change: Commitment.

Speaker Change: For us we.

Speaker Change: Of course of operated a lottery for three decades, and we're excited about about the potential to continue to.

Massimiliano Chiara: The tailwinds to get there are primarily... Related to the positive momentum we have gained in our installed base, which reflects successful launches of games such as Prosperity Links, Mystery of the Lambs, and more new games coming, especially in 2024 with Whitney Houston on the high-rise cabinet. That is the first item that impacts the positive margin trajectory. The second item is finally expectations for an expansion of international sales to walk in tandem with the successful expansion of the installed base so far achieved. I remind you of the 14% increase in the installed base in 2023 for international markets, which we expect to continue again based on the solid foot of the successful game. And then lastly, we continue to expect positive momentum on supply chain easing of costs, which will be a positive contributor to margin accretion in 2024. Got it, got it.

Speaker Change: To do so.

Speaker Change: As far as the process goes.

Speaker Change: It's a lengthy process.

Speaker Change: The government has to codify and finalize the economics, then they have to draft the tender and they have in a legislative process.

Speaker Change: That needs to it needs to take place as well, which.

Speaker Change: We have seen in the past is quite.

Speaker Change: Quite Lindsay.

Speaker Change: Once of course all of that is done.

Speaker Change: Once the formal tender is issued.

Speaker Change: Then there is some time for interested parties to make their assessments ultra forbid then of course there is the assessment of all the offers and ultimately make an award. So we think the time frame for all of this is probably a year or two to a year and a half and our best our best estimate.

Speaker Change: Perfect appreciate the color and congrats on a nice quarter and year.

Speaker Change: Thank you.

Speaker Change: Your next question comes from the line of Chad Beynon with Macquarie. Your line is open.

Vincent L. Sadusky: Okay, and then just as a follow-up, wanted to touch on the Italy lotto renewal process. Any updates there on timing? And maybe just talk about how you see your position there as the incumbent. Thanks. Yeah, sure. Recently, there was news in Italy that a draft online gaming decree was introduced by the Finance Committee and that it outlined some of the terms of the tender for the upcoming lotto license. What we know coming out of that was there would be a start to the tender process, and the terms would be a non-renewable nine-year concession and a minimum upfront license fee of $1 billion, which could be divided into multiple installments.

Chad C. Beynon: Good morning, Thanks for taking my question nice quarter.

Chad C. Beynon: Vince Max I wanted to ask about the kind of the January softness that we've heard from a lot of your operating partners that affected.

Chad C. Beynon: Business.

Chad C. Beynon: In January was that also the case in lottery and then more importantly, after we got past some of that inclement weather.

Chad C. Beynon: Weekends have we seen.

Vincent L. Sadusky: More consistent stable trends in both your businesses gaming and lottery.

Vincent L. Sadusky: Yeah, I'll start off with with Lottery, and then touch base on gaming.

Speaker Change: Yes, I think what we what we saw in 'twenty will go from 2023 into 2024 because of course reminding everybody of the components of the 2023 growth.

Vincent L. Sadusky: Part would be paid upon winning the tender, and part with the start of the new concession. So, considering the news that's come out, we'd say the regulator has set a high bar for interested parties willing to commit to such a significant amount of capital, which we believe, similar to the past, likely limits the field of qualified candidates. And then, of course, potential bidders will need to demonstrate their strategies and prove their execution capabilities in order both to, I think, convince the Italian authorities that they can execute, and then also, internally, to be ensured that they can achieve an appropriate ROI on such a significant commitment. You know, for us, we, of course, have operated the lottery for three decades, and we're excited about the potential to continue to..., to do so. As far as the process goes, it's a lengthy one.

Speaker Change: Puts 'twenty 'twenty four and perspective.

Speaker Change: We saw.

Speaker Change: Over 2% same store sales growth and in 2023, and a very good year in product sales.

Speaker Change: We saw an increase in incidence and draw games.

Speaker Change: And a very significant increase in jackpot activity.

Speaker Change: Somewhere just under 6% or so driven by by Powerball and Mega millions of course, so as strong as it here as it is.

Speaker Change: As the jackpots were in 2022, they ended up being even stronger.

Speaker Change: In 2023.

Speaker Change: In 2023 in the fourth quarter, we saw we saw instants and draw were down slightly about 1% from the from the prior year and.

Speaker Change: But again made up for by by pretty strong.

Speaker Change: Pretty strong multistate jackpots.

Vincent L. Sadusky: You know, the government has to codify and finalize the economics, then they have to draft the tender, and they have a legislative process that needs to take place as well, which, as we've seen in the past, is quite, quite lengthy. And once, of course, all that is done, once the formal tender is issued, then there's some time for interested parties to make their assessments and offer up a bid. Then, of course, there's the assessment of all the offers and ultimately, making an award. So, you know, we think the time frame for all this is probably a year to a year and a half, at our best estimate. Perfect. Appreciate the collar, and congrats on a nice quarter and year.

Speaker Change: And if you think about this over multiple years theres been a pretty significant increase from going back to pre pandemic.

Speaker Change: Yes, I'd say.

Speaker Change: The growth has actually been really remarkable and to continue to have that play level at these elevated levels is.

Speaker Change: Our thesis.

Speaker Change: Pieces in and Thats held up really really well.

Speaker Change: Looking at the first quarter trends.

Speaker Change: Of course, you have to take Italy, and North America separate.

Speaker Change: In Italy, we continue to have very strong growth.

Speaker Change: Mid single digits. We expect there are a lot of that was due to continued innovation and project and product launches. The team has done an outstanding job over the last several years in particular and stimulating demand and making the.

Operator: Thank you. Your next question comes from the line of Chad Beynon with Macquarie. Your line is open.

Chad C. Beynon: Morning. Thanks for taking my question. Nice quarter. Vince, Max, I wanted to ask about the kind of January softness that we've heard from a lot of your operating partners that affected business in January. Was that also the case in lottery?

Speaker Change: The games constantly fresh and enjoyable, we think as those new launches moderate throughout.

Speaker Change: Throughout the course of the quarter, we will probably end up somewhere in the low single digit growth in the first quarter in Italy.

Speaker Change: In North America, and the rest of the world.

Speaker Change: Sales are down high single low double digits and of course, so much of that has to do with the timing of the of Multistate jackpots in particular.

Chad C. Beynon: And then, more importantly, you know, after we got past some of that inclement weather those weekends, have we seen more consistent, stable trends in both your businesses, gaming and lottery? Thanks. Yeah, I'll start off with lottery and then touch base on gaming. Yeah, I think, you know, what we saw in 20. I'll go from 2023 into 2024. Because, of course, reminding everybody of the components of the 2023 growth puts 2024 in perspective. You know, we saw over 2% same store sales growth in 2023 and a very good year in product sales. We saw an increase in instant and draw games and a very significant increase in jackpot activity, somewhere just under 6% or so, driven by Powerball and Mega Millions, of course.

Speaker Change: Powerball and Mega.

Speaker Change: North America.

Speaker Change: We think that will moderate the negative impact of that will moderate just again, given the timing of the of the growth of those jackpots that were hit in the first quarter last year and so we think we will will probably on a same store basis be download to single digits in North America and.

Speaker Change: And the rest of the world.

Speaker Change: And as Max provided.

Speaker Change: We believe that.

Speaker Change: We will be in kind of the low to mid single digit long term growth outlook. We think we can we can maintain that as a result of innovation.

Speaker Change: As well as kind of the expansion of our our game portfolios. Some of the I won't go into through a bunch of detail on that but.

Chad C. Beynon: So as strong of a year as the jackpots were in 2022, they ended up being even stronger in 2023. In 2023, in the fourth quarter, we saw instance and draw were down slightly, about 1% from the prior year, but again, made up for by pretty strong multi-state jackpots. And if you think about this over multiple years, there's been a pretty significant increase from going back to pre-pandemic.

Speaker Change: A bunch of the activities and efforts that you've seen IGT perform in over the last several years and in particular.

Speaker Change: On the gaming.

Speaker Change: Machine side.

Speaker Change: We're in really great shape in terms of our product portfolio I'll take a minute just to kind of remind everybody of of that.

We have five games at rank amongst the top 20, new Wap games in the most recent February Eilers report.

Speaker Change: We've got <unk>.

Speaker Change: Several of our mystery of the lamp games.

Speaker Change: There are in the top 15, new premium leased games, our magic treasures franchise, new franchise ranked in the top 10, new core Videogames are stepper, we have 13 of the top 25 games.

Vincent L. Sadusky: I'd say the growth has actually been really remarkable. And to continue to have that play level at these elevated levels was our thesis, and that's held up really, really well. Looking at the first quarter trends, of course, you have to take Italy and North America separately.

Speaker Change: And are are fairly recent hardware launches over the last year or so.

Speaker Change: Have ranked number one or number two in their in their categories.

Vincent L. Sadusky: In Italy, we continue to have very strong growth in the mid-single digits. We expect that a lot of that is due to continued innovation and product launches. The team's done an outstanding job over the last several years, especially stimulating demand and making the games constantly fresh and enjoyable. We think as those new launches moderate throughout the course of the quarter, we'll probably end up somewhere in low single-digit growth in the first quarter in Italy. In North America and the rest of the world, sales are down, high single digits, low double digits, and, of course, so much of that has to do with the timing of multi-state jackpots, in particular Powerball and Mega Millions in North America.

Speaker Change: Speak specifically about the industry.

Speaker Change: Chad 'twenty three of course, which was another record year for the gaming industry coming off of an incredible 2022.

Speaker Change: We estimate.

Speaker Change: The industry was slide <unk> was up.

Speaker Change: Somewhere around 2% and when you think about the started the year the concern around recessionary pressures in and concern around disposable income for consumers.

Speaker Change: None of that really played out at least in terms of the.

Speaker Change: People's affinity for entertainment and in particular casino play.

Speaker Change: The effect in the fourth quarter slides <unk> held right in there with the with the annual estimate of up around 2% or so and yes. There was a really strong December for sure.

Vincent L. Sadusky: We think that will moderate, the negative impact of that will moderate, just again given the timing of the growth of those jackpots that were hit in the first quarter last year, and so we think we'll probably, on a same store basis, be down low to single digits in North America and the rest of the world. And as Max provided, we believe that we'll be in kind of a low to mid-single digit, long-term growth outlook. We think we can maintain that as a result of innovation as well as the expansion of our game portfolio. I won't go through a bunch of detail on that, but a bunch of the activities and efforts that you've seen IGT perform over the last several years, in particular. On the gaming machine side, you know, we're in really great shape in terms of our product portfolio. You know, I'll take a minute just to kind of remind everybody of that.

Speaker Change: We start off the year as you've heard our casino customers discuss and the and the research that that's been that's been published the January trends are softer.

Speaker Change: And how much of that is potentially whether or not not really sure of course, but but overall.

Speaker Change: As you've heard our casino customers report customer sentiment remains remains really good.

Speaker Change: Of course slot play is the most profitable.

Speaker Change: Item four for our casino customers and.

Speaker Change: We're seeing kind of a more normalized sales funnel.

Speaker Change: Which is kind of returning to.

Speaker Change: Historical levels.

Speaker Change: Certainly went into.

Speaker Change: 2022, with a lot of pent up demand as a result of not being able to deliver product.

Speaker Change: Because of our supply chain lead times.

Vincent L. Sadusky: You know, we have five games that rank amongst the top 20 new WAP games in the most recent February Island Report. You know, we've got several of our Mystery of the Lamp games in the top 15 new premium lease games. Our Magic Treasures franchise, new franchise, ranks in the top 10 new core video games. Our Stepper, we have 13 of the top 25 games.

Speaker Change: So I would say things are more normalized rate right now.

Speaker Change:

Speaker Change: When you look at <unk>.

Speaker Change: Markets outside of the U S for for gaming.

Speaker Change: EMEA, Latam and Australia EMEA.

Speaker Change: EMEA is behind pre pandemic levels.

Speaker Change: <unk> seen kind of a.

Speaker Change: A very clear line between western and Eastern Europe Western Europe.

Vincent L. Sadusky: And our fairly recent hardware launches over the last year or so have ranked, you know, number one or number two in their categories. To speak specifically about the industry, Chad, 23, of course, was another record year for the gaming industry, coming off of an incredible 2022. The estimate in the industry was that slide GGR was up, you know, somewhere around 2 percent. When you think about the start of the year, the concern around recessionary pressures and concern around disposable income for consumers, you know, none of that really played out, at least in terms of people's affinity for entertainment and, in particular, casino play.

Speaker Change: It's pretty much back and we compete very well in that market Eastern Europe has been has been hurt by by kind of the.

Speaker Change: Sociopolitical situation is taking place there.

Some other specific challenges like Romanian tax and regulatory challenges.

Speaker Change: Challenges in Latin America.

Speaker Change: The recovery has been really strong and in particular, yes.

Speaker Change: Games play well, there you've seen a pretty significant increase in installed base.

Speaker Change: At the moment, though there are some macro related weaknesses in places like Argentina, and the new import restrictions imposed by the Mexican government that impacts all suppliers and we hope that gets resolved.

Speaker Change: Throughout the course of the of the year.

Speaker Change: And then Australia New Zealand.

Vincent L. Sadusky: In fact, in the fourth quarter, slide GGR held right in there with the annual estimate up around 2 percent or so. And, you know, there was a really strong December, for sure. We start off the year, you know, as you've heard our casino customers discuss in the research that's been published, the January trends are softer. Question how much of that is potentially weather, not really sure, of course.

Macro environment continues to be challenging, but but it's growing.

Speaker Change: We have not competed as well in that market.

Speaker Change: But we've we've got a slate of new games that the team is confident.

Speaker Change: Very very much increase our share and we've done well with systems in that in that market.

Speaker Change: So overall, yes.

Speaker Change: I'd say the start of the year.

Speaker Change: Is definitely slower than last year, we think it's for very specific reasons again gaming a lot of pent up demand from kind of that unnatural supply chain restrictions and then in lottery very specific to the timing of very strong jackpots.

Vincent L. Sadusky: But overall, as you've heard our casino customers report, the customer sentiment remains really good. You know, of course, slot play is the most profitable item for our casino customers, and we're seeing kind of a more normalized sales funnel, which is kind of returning to historical levels. We certainly went into 2022 with a lot of pent-up demand as a result of not being able to deliver product because of our supply chain lead times. So I would say things are more normalized right now when you look at markets outside of the U.S. for gaming. EMEA, LATAM, and Australia. EMEA is behind pre-pandemic levels. We've seen kind of a very clear line between Western and Eastern Europe. Western Europe is pretty much back, and we compete very well in that market. Eastern Europe has been hurt by the socio-political situations taking place there and some other specific challenges, like Romanian tax and regulatory challenges.

Speaker Change: <unk> until last year versus the start of 2024.

Speaker Change: Great. Thank you.

Speaker Change: And then on the Capex, just just a housekeeping follow up to the 500 million of guidance for 'twenty. Four can you help us think about what should go to gaming and digital versus lottery and then can you also just kind of help us with.

Our maintenance Capex number for lottery ex new contracts going forward post spin Kyle Thank you.

Speaker Change: Hi, Chad so in terms of the Capex.

Vincent L. Sadusky: In Latin America, the recovery has been really strong, and in particular, IGT games play well there. You've seen a pretty significant increase in the installed base. At the moment, though, there are some macro-related weaknesses in places like Argentina and the new import restrictions imposed by the Mexican government that impact all suppliers.

Speaker Change: Number.

Speaker Change: We effectively have increased our investment into our installed base and gaming in the last.

Kyle: Two five years and so the capex figure of gaming has increase above $200 million.

Kyle: We expect that to slightly moderate.

Kyle: Next year.

Kyle: Instead on the lottery side, we have been on a favorable cycle in the last couple of years and now we're starting to see that capex number picking up again.

Vincent L. Sadusky: And, you know, we hope that gets resolved throughout the course of the year. And then, you know, in Australia and New Zealand, the macro environment continues to be challenging, but it's growing. You know, we've not competed as well in that market, but we've got a slate of new games that the team is confident can very much increase our share, and we've done well with systems in that market. So, overall, you know, I'd say the start of the year is definitely slower than last year. We think it's for, you know, very specific reasons.

Kyle: As we are going to face some <unk>.

Kyle: Significant contract renewals in the next two to three years, but for next year. There is an expectation of an increase of about $75 million coming from lottery.

Kyle: Which is primarily related to the three contracts that we mentioned during the call So, California long extension, plus Kentucky and Virginia.

Kyle: The early early.

Vincent L. Sadusky: Again, in gaming, a lot of pent-up demand from kind of that unnatural supply chain restriction, and then in lottery, very specific to the timing of very strong jackpots going into last year versus the start of 2024. That's great. And then on the CapEx, just a housekeeping follow-up. So the $500 million of guidance for 2024, can you help us think about what should go to gaming and digital versus lottery? And then can you also kind of help us with a maintenance CapEx number for lottery X new contracts going forward post-Spinco? Thank you. Hi Chad.

Kyle: Early capex investments that we expect to spend on those contracts in 'twenty four.

Kyle: And so in terms of long term in terms of maintenance versus growth or new contracts again. This business has been running historically.

Kyle: Talking about the lottery business historically at a clip of about $200 million Capex per year, if you will.

Kyle: We're to exclude the cycles.

Kyle: And again, so anything above that number kind of if you want is really.

Kyle: Related to.

Kyle: The upcycle in Capex.

Kyle: Societe with large contract nuance extensions or wins.

Kyle: We will have going forward.

Speaker Change: Thank you.

Massimiliano Chiara: So in terms of the CAPEX number, we effectively have increased our investment in our installed base in gaming in the last two and a half years. And so the CAPEX figure for gaming has increased above 200 million. We expect that to slightly moderate next year.

Speaker Change: I appreciate it thank you Max Thanks Beth.

Speaker Change: Once again, ladies and gentlemen, if you have a question it is star one.

Speaker Change: Your next question comes from the line of Jeff <unk> with Stifel. Your line is open.

Jeff: Hey, good morning, Thanks for taking our questions.

Massimiliano Chiara: Instead, on the lottery side, we have been on a favorable cycle in the last couple of years, and now we're starting to see that CapEx number pick up again as we are going to face some significant contract renewals in the next two to three years. But for next year, there is an expectation of an increase of about $75 million coming from the lottery, which is primarily related to the three contracts that we mentioned during the call. So California, by long extension, plus Kentucky and Virginia.

Jeff: Or <unk> whoever wants to take this but you talked about the full year guide assuming low single digit growth for our global gaming lottery sales that you saw.

Strip out the impact of a multistate jackpots.

Jeff: To reflect a reversion back to a more stabilized core trends after several quarters of jackpot fatigue, I guess, what specifically in the data are you seeing that gives you conviction.

Massimiliano Chiara: These are the early CapEx investments that we expect to spend on those contracts in 2024. And so, in terms of the long term, in terms of maintenance versus growth or new contracts, again, this business has been running historically at a clip of about $200 million in CapEx per year, if you were to exclude the cycles. And again, anything above that number kind of, if you want, is really related to the upcycle in CapEx associated with large contract renewals, extensions, or wins that we will have going forward. Thank you. I appreciate it. Thank you, Max. Thanks, Beth.

Jeff: Improving underlying demand.

Jeff: Okay.

Speaker Change: Yes, I would say the.

Speaker Change: Week to week trends have been improving.

Speaker Change: And as we look in our our more significant markets.

Speaker Change: We have confidence given the slate of game launches that they've got.

Speaker Change: Coming coming up.

Speaker Change: And I think given our our past history, we have.

Speaker Change: <unk> seen that that play level again kind of post pandemic has been maintained.

Speaker Change: And has has grown some as well so.

Speaker Change: We certainly don't have <unk>.

Speaker Change: Perfect visibility given lottery is largely.

Speaker Change: An impulse purchase, but we do believe that given the slate of games as well as.

Operator: Once again, ladies and gentlemen, if you have a question, it is star number one. Your next question comes from the line of Jeff Stantial with Stiefel. Your line is open. Hey, good morning, everyone.

Speaker Change: The multistate jackpot ability to build again unpredictable but.

Speaker Change: The continued high interest rate environment, the calculation of the advertise multistate jackpot.

Jeffrey Austin Stantial: Thanks for taking our questions. Vincent or Max, whoever wants to take this, you talked about the full year guide, assuming low single-digit growth for global gaming lottery sales, stripping out the impact of multi-state jackpots. You know, this seems to reflect a reversion back to, well, say, more stabilized core trends after several quarters of jackpot fatigue. I guess, what specifically in the data are you seeing that gives you conviction in this improving underlying demand? Thanks.

Speaker Change: Give us states the ability to continue to advertise a number thats thats exciting to players and we think that will help.

Speaker Change: To get folks too.

Speaker Change: <unk> players to continue to think about playing lottery.

Speaker Change: Great. That's helpful. Thanks for that.

Speaker Change: Got it.

Speaker Change: Oh, yes, sorry, Jeff from a more technical standpoint here.

Jeff: So again as Vince said, we have seen steady increase in jackpot games for the last 18 to 24 months and this has been likely attributable to the advertised jackpot that exceeds the $1 billion.

Vincent L. Sadusky: Yeah, I would say the week-to-week trends have been improving, and as we look at our more significant markets, we have confidence given the slate of game launches that they've got coming up. And I think given our past history, we've seen that that play level, again, kind of post-pandemic, has been maintained and has grown some as well. So, you know, we certainly don't have perfect visibility, given that lottery is largely an impulse purchase.

Jeff: And we can mentioned six in the last 18 months at least.

Speaker Change: So advertise jackpot.

Speaker Change: Our levels are helped by the rising interest rate environment as they are based on a 30 year annuity stream.

Speaker Change: So that means that it doesn't take the same level of underlying sales today to advertise at 1 billion jackpot as it did a few years ago before the interest.

Massimiliano Chiara: But we do believe that given the slate of games, as well as the multi-state jackpot ability to build, again, unpredictable, but with the continued high interest rate environment, the calculation of the advertised multi-state jackpot gives states the ability to continue to advertise a number that's exciting to players. And we think that, you know, will help, you know, to get folks, the infrequent players, to continue to think about playing the lottery. Great, that's all for now. Thanks, Ben, for that. Sorry, Jeff, from a more technical standpoint here, so again, as Vince said, we have seen a steady increase in jackpot games for the last 18 to 24 months, and this has been likely attributable to the advertised jackpot that exceeds $1 billion, and we can mention six in the last 18 months at least.

Speaker Change: Tripped up.

Speaker Change: So keep in mind, although all of that keep in mind that igt's remunerated as a percentage of lottery ticket sales and not the advertised jackpot size and so net net we generate high revenue when there are large jackpots.

Speaker Change: We remain comfortable with this long low single digit long term growth outlook for the lottery business. When you exclude the impact of the jackpot and lastly on a full year of 23 basis versus 22, the impact of jackpot in the in the financials was about <unk> <unk>.

Speaker Change: $15 million for the full year.

Speaker Change: Thank you great. That's helpful color. Thanks, Thanks, Max and then for my follow up turning to the gaming business that you talked about normalizing.

Speaker Change: Slot seasonality embedded in the Q1 guidance, where it was at the end of the quarter. So I would assume that's informed by pretty accurate.

Massimiliano Chiara: So advertised jackpot levels are helped by the rising interest rate environment as they are based on a 30-year annuity stream. That means that it doesn't take the same level of underlying sales today to advertise a $1 billion jackpot as it did a few years ago before the interest crept up. So, keep in mind, although all of that, keep in mind that IGTs are remunerated as a percentage of lottery ticket sales, not the advertised jackpot size. And so, net-net, we generate high revenue when there are large jackpots. We remain comfortable with this low single-digit long-term growth outlook for the lottery business when you exclude the impact of the jackpots. And lastly, on a full-year 23 basis versus 22, the impact of the jackpots in the financials was about $15 million for the full year.

Speaker Change: The data here I guess more specifically what gives you comfort that that the pullback youre, saying is more related to seasonality as opposed to kind of pull back in.

Speaker Change: Any kind of underlying purchasing behavior related more to the macro or sequential market share.

Speaker Change: Go to competitors, just I guess, what kind of informs.

Speaker Change: View that this is.

Speaker Change: This is mostly seasonality driven thanks.

Speaker Change: Yeah sure so.

Speaker Change: A couple of a couple of data points. One is when you look at the estimate of the industry in North America for 2023.

Speaker Change: The installed base.

Speaker Change: A couple of percentage points and unit sales was up.

Massimiliano Chiara: Thank you. Great. That's helpful, Scarlett.

Speaker Change: Somewhere in the 10% range and <unk>.

Jeffrey Austin Stantial: Thanks, Max. And then for my follow-up, turning to the gaming business, you talked about normalizing slot seasonality embedded in the Q1 guidance. You know, we're almost at the end of the quarter, so I would assume that's informed by pretty accurate existing data here. I guess more specifically, what gives you comfort that the pullback you're seeing is more related to seasonality as opposed to the kind of pullback and kind of underlying purchasing behavior related more to macro or sequential market share, you know, go to competitors? Just, I guess, what kind of informs your view that this is mostly seasonality driven?

Speaker Change: Compared to that IGT grew grew share in 2024, the industry is calling for a slowdown in unit sales.

Speaker Change: And probably about the same similar increase in installed base.

Given the strength of our product.

Speaker Change: We feel we can.

Speaker Change: We can continue to compete and grow some share in North America, but not at the same rate as we have done over the last several years as we've significantly increased we think.

Jeffrey Austin Stantial: Thanks. Yeah, sure. So, you know, a couple of data points.

Speaker Change: The growth for for IGT.

Vincent L. Sadusky: One thing is, when you look at the estimate of the industry in North America for 2023, you know, the installed base went up a couple of percentage points, and you know, unit sales were up somewhere in the 10% range. And, you know, compared to that, IGT grew its share. In 2024, the industry is calling for a slowdown in unit sales and probably about the same, you know, similar increase in the installed base. So, you know, given the strength of our product, we feel we can, we can continue to compete and grow some share in North America, but, you know, not at the same rate as we have done over the last several years, as we've significantly increased.

Speaker Change: A lot of the growth is going to come internationally.

Speaker Change: Where we've had very good momentum in Latin America, good momentum in Europe, and less so in Asia Pac and when we look at.

Speaker Change: The exciting pipeline of games that are performed very well in North America.

Speaker Change: Ability to penetrate and continue to penetrate international markets as an opportunity that we believe is.

Speaker Change: As is achievable and important for for us.

Speaker Change: Great. That's really helpful. Thanks, guys. Thanks, Max I'll pass it on.

Speaker Change: Your next question comes from the line of Dominical Gillani with <unk>. Your line is open.

Dominical Gillani: And good morning, I have a question on the profitability on the lottery on the lottery business first of all just to be sure that I got the answer on the jackpot contribution as 15. So one five on an EBITDA for 2023 and second so in an environment that is maybe a bit a.

Vincent L. Sadusky: We think, you know, the growth for IGT, a lot of the growth is going to come internationally, where we've had very good momentum in Latin America, good momentum in Europe, and less so in Asia Pacific. And when we look at the, you know, kind of exciting pipeline of games that are performing very well in North America, you know, the ability to penetrate and continue to penetrate international markets is an opportunity that we believe is, is, is achievable and important for us. Great That's really helpful. Thanks, Max. I'll pass it on. Your next question comes from the line of Domenico Ghilotti on Ecuador. Your line is open.

Speaker Change: A bit less.

Speaker Change: Less supportive.

Speaker Change: And with the business.

Speaker Change: Very high it's a fixed cost should we expect.

You have some room for keeping the profitability above the.

Speaker Change: The level or at least at the level that we've seen in Q4.

Speaker Change: Should we expect some.

Speaker Change: Some.

Speaker Change: So a negative impact on profitability for the lottery business.

Domenico Ghilotti: Good morning. I have a question on the profitability of the lottery business. First of all, just to be sure that I got the answer on the jackpot contribution as 15, so 1.5 on EBITDA for 2023. And second, so in an environment that is maybe a bit less supportive, and with a business that is very high, a fixed cost, should we expect that you have some room for keeping the profitability above the..., www.globalonenessproject.org some say negative impact on profitability for the lot. Hi Domenico.

Speaker Change: Yes.

Speaker Change: Yes.

Speaker Change: The number you will repeat at this right $105 15 for the full year 2008 versus 22 in terms of the margin expectations that we expect we are at the high end of the margin target we quoted for our in our Investor day for lottery. So again.

Speaker Change: Holding that margin would be definitely a very good thing to do and in order to do that obviously, we have to work very hard to continue to earn.

Speaker Change: The rights to gain.

Speaker Change: To gain new contracts and to remain efficient in the execution of the existing pipeline.

Speaker Change: So again.

Massimiliano Chiara: Yes, the number you repeated is right, 1-5-15 for the full year 2023 versus 2022. In terms of margin expectations, we are at the high end of the margin target we quoted on our investor day for lottery. So again, holding that margin would definitely be a very good thing to do. And in order to do that, obviously, we have to work very hard to continue to earn the right to gain new contracts and to remain efficient in the execution of the existing pipeline. So again, finally, vis-a-vis the fourth quarter margin, there was a significant benefit, a one-time benefit, if you want, on product sales, which were up almost 100% year-over-year because of the specific deliveries that we executed. On a four-year basis, we are slightly ahead in terms of product sales in the lottery year-over-year. So it was really more of a quarterly impact.

Speaker Change: Finally vis vis the fourth quarter margin.

Speaker Change: A significant benefit one time benefit if you want on product sales.

Speaker Change: Which were up almost 100% year over year.

Speaker Change: Because of the specific deliveries that we executed.

Speaker Change: On a full year basis.

Speaker Change: We are.

Speaker Change: Slightly ahead in terms of product sales.

Speaker Change: In lottery year over year, so it's worth it.

Speaker Change: Was really more of a quarterly impact, but again long long term, we expect to be able to hold the line on the margin within that range that we quoted ourselves for.

Speaker Change: Okay.

Speaker Change: Thank you.

Speaker Change: Your next question comes from the line of David Katz with Jefferies. Your line is open.

David Brian Katz: Hi, good morning, everyone. Thanks for taking my questions.

David Brian Katz: Vince I wanted to just talk about the time period that we have between now and closing.

Massimiliano Chiara: But again, long-term, we expect to be able to hold the line on the margin within the range that we quoted ourselves for. Thank you. Your next question comes from the line of David Katz with Jeffreys. Your line is open.

David Brian Katz: Just to get a sense for us strategically.

David Brian Katz: How youre thinking about.

David Brian Katz: The two gaming business.

David Brian Katz: Continuing to push their momentum forward.

David Brian Katz: Product wise keeping people.

David Brian Katz: Thanks for taking my question. You know, Vince, I wanted to just, you know, talk about the time period that we have, you know, between now and closing and just get a sense for strategically how you're thinking about the two gaming businesses, continuing to push their momentum forward, you know, product-wise, keeping people, you know, in place, right? Because that closing process can take a while.

David Brian Katz: In place right because the closing process can take a while.

David Brian Katz: How do you think about the two.

David Brian Katz: <unk> gaming businesses together in some specifics around.

David Brian Katz: They're sort of standard out strange could be and where the combination of their capabilities or assets could help you lead whats the combination is done.

Speaker Change: Yeah, Hey, David Thanks for the question so.

Vincent L. Sadusky: And, you know, how do you think about the two gaming businesses together and some specifics around, you know, where their sort of standout strengths could be and where the combination of their capabilities or assets could help you lead, you know, once the combination is done? Yeah, hey, David, thanks for the question. So, a couple of things.

David Brian Katz: A couple of things one is both companies have retention plans in place for for their top talent.

Speaker Change: And I will say given the momentum in particular that IGT has had over the last couple of years.

Speaker Change: Even prior to announcing this transaction we've been able to recruit we don't really talk about this our highlight this but we've been able to recruit some top game developers that are responsible for.

Vincent L. Sadusky: One is, both companies have retention plans in place for their top talent. And I will say, given the momentum in particular that IGT has had over the last couple of years, even prior to announcing this transaction, we've been able to recruit, we don't really talk about this or highlight this, but we've been able to recruit some top game developers that are responsible for many games on Eiler's top game list. So, we believe now that there's been resolution, and I think excitement and anticipation to be associated with, you know, what's essentially going to be a new combined entity. We feel very strongly in our ability to recruit top talent in the industry, much less keep our talent. We've had really good conversations with our teams. We had the benefit of having our IGT commercial team together just a few weeks ago, last week. Every happened to have their commercial team together.

Speaker Change: Mini games on <unk> top game game list so.

Speaker Change: We believe now that there has been resolution and I think excitement and anticipation to be associated with.

Speaker Change: That's essentially going to be a new combined entity, we feel very strongly in our ability to recruit top talent in the industry much less.

Speaker Change: Keep our our talent.

Speaker Change: We've had really good conversations with our with our teams we had the benefit of having our IGT commercial team together just a few weeks ago last week every happened to have their commercial team together and.

Speaker Change: We've discussed a lot of the messages and feedback that we've received from our customers.

Vincent L. Sadusky: And, you know, we discussed a lot of the messages and feedback that we've received from our customers at the highest levels of the organizations, which really have reacted with genuine excitement about the merger. They really enjoy the commitment and the knowledge that both companies have and the fact that they are complementary in nature with very little overlap. So, I think that was really exciting.

Speaker Change: At the highest level of the organization, which really are reactive with genuine excitement about the merger.

Speaker Change: Really enjoy the commitment and the knowledge that both companies have and the fact that they are complementary in nature with very little overlap. So I think.

Speaker Change: That was really exciting.

Vincent L. Sadusky: We have talked to our teams about the combined portfolio being, you know, a real standout. It'll absolutely differentiate us from our peers and our competitors. As we've said, we don't believe anyone would have such a comprehensive range of products and solutions.

Speaker Change: We have talked to our teams about.

Speaker Change: The combined portfolio.

Speaker Change: Being a real standout it'll absolutely differentiate us from our peers and our competitors as we have said, we don't believe anyone would have such a comprehensive range of of products and solutions.

Speaker Change: And we're going to have a really impressive global studio and creative footprint, which is really the key to continuing to generate top performing games.

Vincent L. Sadusky: And we're going to have a really impressive global studio and creative footprint, which is really the key to continuing to generate top-performing games. Everybody's got expertise in several areas that IGT doesn't, in particular fintech. And, you know, we've got good international experience. And we think, you know, these things in combination will absolutely be complementary.

Speaker Change: Everybody has got expertise in several areas at IGT doesn't in particular fintech.

Speaker Change: Fintech and we've got good international experience and we think these things in combination will absolutely be.

Speaker Change: Complementary.

Vincent L. Sadusky: You know, when we think about what we have to offer on a go-forward basis, both for our employees recruiting new folks to the organization and for our customers. As we've said in the past, this is really an opportunity to create a podium position player with great scale, great product diversification, great cash flow, all on par with our competition. You know, we're looking at, I think, you know, we've mentioned in the past, just on a pro forma basis, revenue of $2.6 billion, EBITDA of more than $1 billion, roughly 60% of that recurring, and an installed base of somewhere around 70,000 units.

Speaker Change: When we think about.

Speaker Change: What we have to offer on a go forward basis, both for our employees recruiting new folks to the organization and for our customers as we've said in the past.

Speaker Change: This is really an opportunity to create a podium position player with with great scale, great product diversification.

Speaker Change: Great cash flow all on par with with our competition.

Speaker Change: We're looking at I think we've mentioned in the past.

Speaker Change: Just on a pro forma basis revenue of $2 6 billion EBITDA of more than $1 billion.

Speaker Change: Roughly 60% of that recurring and an installed base of.

Speaker Change: Somewhere around 70000 units, so we think that.

Vincent L. Sadusky: So we think, you know, the excitement around being a one-stop shop for land-based gaming and really being able to provide the complete player journey from iCasino to sports betting to fintech is something that is a very good value proposition to our customers and one that folks associated with the new company are very excited about. Perfect, and just one quick follow-up: with respect to FinTech and systems, putting those together, it strikes me as something that's a much longer-term opportunity. Are there shorter-term stingles and doubles and ways that you can leverage each other more immediately post-closing?

Speaker Change: Excitement around being a one stop shop for land based gaming and really being able to provide the.

Speaker Change: A complete player journey from casino the sports betting the Fintech.

Speaker Change: Is something that is a very good value proposition to our customers and one that folks associated with the new company.

Speaker Change: You are very very excited about.

Speaker Change: Perfect and just one quick follow up with respect to Fintech and systems, putting those together.

Speaker Change: Strikes.

Speaker Change: Something that's a much longer term.

Opportunity are there shorter term singles and doubles in ways that you can leverage each other more immediately post closing, it's just a discussion we've had with a lot of investors' past past week since we learned about this.

David Brian Katz: It's just a discussion we've had with a lot of investors this past week. Yeah, I would say, you know, overall, again, the longer-term play is, as you point out, to be the leading tech and content company in the B2B space. You know, we've got a lot of work to do to get there. We're working on detailed integration plans collectively with leaders from both organizations. And we think the combination has really strong operating and financial merit. So that's really our focus. It's not on the in the short term. It's really on the in the long term.

Speaker Change: Yes, I would say overall again the longer term play is as you point out is to be the leading tech and content company in the in the <unk> space. We've got a lot of work to do to.

Speaker Change: To get there we're working on our detailed integration plans collectively.

Speaker Change: With leaders from from both organization and we think the combination has really strong operating and financial Merit. So that's really our our focus it's not on the on the short term, it's really on the on the long term.

Vincent L. Sadusky: Perfect. Thank you. There are no further questions at this time. I'll turn the call over to CEO Vince Sadusky for closing remarks. Thanks, everyone. Thanks for joining us today. As you've heard, 2023 was a good, strong year with growth across our global lottery gaming and play digital segments. We drove record operating income in EBITDA, and we brought the company's leverage down to the lowest level ever.

Speaker Change: Perfect. Thank you.

Speaker Change: There are no further questions at this time I will turn the call to CEO, Vince the dusky for closing remarks.

Vincent L. Sadusky: Yes look thanks, everyone. Thanks for joining us today.

Vincent L. Sadusky: As you've heard 2023 was a good strong year with growth across our global lottery gaming and play digital segments. We drove record operating income and EBITDA and we brought the companys leverage down to the lowest level ever.

Vincent L. Sadusky: We truly believe the recent decision to spin off our global gaming and play digital businesses and merge them with Everee's existing operations creates a really exciting opportunity to unlock the full value of our portfolio. We think the creation of two or more focused, or two more focused companies better positions them to serve as customers and create significant value for stakeholders. Thanks for your interest in IGT and have a great day. This concludes today's conference call. We thank you all for joining us. You may now disconnect your lines.

Vincent L. Sadusky: We truly believe the recent decision to spin off our global gaming and play digital businesses immersion with every his existing operations creates a really exciting opportunity unlock the full value of our portfolio. We think the creation of two or more focused.

Vincent L. Sadusky: Two more focused companies better positions them to service customers and create significant value for stakeholders. Thanks Raj interest in IGT and have a great day.

Speaker Change: This concludes today's conference call. We thank you all for joining you may now disconnect your lines.

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