Q1 2024 International Game Technology PLC Earnings Call
Thank you for standing by my name is Christa and I will be your conference operator today at this time I would like to welcome everyone to the International game Technology first quarter 2024 earnings Conference call. All lines have been placed on mute to prevent any background noise. After the.
The speakers remarks, there will be a question and answer session. If you would like to ask a question at that time simply press star followed by the number one on your telephone keypad and if you would like to withdraw that question again press Star one. Thank you I will now turn the conference over to James Hurley Senior Vice President of Investor really.
James You May begin your conference.
Thank you Chris and thank you all for joining us for Igt's first quarter 2024 conference call, which is hosted by <unk>, Our CEO and Max Chiara, Our Chief Financial Officer after.
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.
The principal risks and uncertainties that could cause our results to differ materially from our current expectations are detailed in our latest earnings release and in our SEC filings.
During this call we will discuss certain non-GAAP financial measures you 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 on our Investor Relations website.
Now I'll turn the call over to Vince Thank.
Thank you, Jim and welcome everyone to the call.
This will 'twenty 'twenty four is off to a strong start with Q1 results that exceeded our outlook.
Revenue of nearly $1 1 billion was better than expected primarily in global gaming and gaming performance.
The 24% operating margin was 400 basis points higher than anticipated, mostly on better lottery results from Italy same store sales and strong North American jackpot activity in late March in addition to the timing of separation divestiture costs.
The company delivered record operating income of $273 million, excluding separation and divestiture costs.
Based upon Q1 performance exceeding expectations, we've upgraded our full year 2020 for revenue and profit goals, which mats will walk you through later.
Focusing on the operating segments Global Lottery revenue rose, 6% driven by another game innovation and strong product sales growth.
The lottery has now achieved six consecutive quarters of operating margin expansion.
Global same store sales were better than expected largely on strong, Italy instant ticket performance and significant U S. Multi state jackpot activity towards the end of the quarter, Thanks to $1 billion, plus jackpots for both Powerball and Mega balance okay.
Italy is more than 4% same store sales growth to reflect similar trends for both instants and draw games and was achieved on top of a 10% growth in Q1 of 'twenty three.
This performance is a true testament to IGT is unique market knowledge and player insights that create compelling game innovation and go to market strategies.
Same store sales in North America, and the rest of the world were slightly below prior year, mostly due to differences in a year to year cadence of new instant ticket game launches, especially for higher price case.
Global Lottery sales continue to expand the DFAST, but up over 20% of the period led by growing portfolio of high performing the instant games like Ghostbusters and the U S and also had numerous veins in Italy.
IGT is best in class lottery hardware and software solutions drove another quarter of strong product sales growth.
We have some meaningful updates on the upcoming Italy Lotto license tender.
A recent government to create confirmed the nine year term and minimum 1 billion euro upfront license fees, which will be payable in three tranches.
In addition, the effective rate will remain at 6%, which is consistent with the current license.
In preparation for the upcoming tender IGT and our current partners have entered into memorandums of understanding to maintain the existing joint venture structure for the new bid.
As the only operator of this license for three decades, we are confident in our ability to compete for the next license term.
I'd like to spend some time on our key product strategies driving global lotteries consistent growth.
Broadly they are new game launches increased play frequency and a multi channel focus.
In Italy. The team has done a fantastic job delivering compelling game innovation, including revitalizing core franchises across draw and instant games.
We're successfully amplifying the impact of this innovation with coordinated launches across both retail and digital channels.
And that our multi dimensional omnichannel teams, one lottery product of the year at February International Gaming Awards.
And instance, updated graphics and new price points and payout structures that maintain the success of iconic games like numerous me.
Last the 20 Euro ultra newer estimate extended play game in Q1, which helped drive incremental sales in the period.
We are executing a similar strategy with Adobe status franchise renewing with updated graphics and enrich gained experience that will be supported by several new retail and eastern games as well as expanded price points over the next few months.
Increased claim frequency is helping drive growth in Italy drug in this.
This includes a second million draw on introducing the second quarter of last year.
We believe Lotto is royal loss, Q3, and new to any Lotto special draws occur between <unk> and six PM. Each day that began in Q4 of last year.
Outside of Italy, The mid March launch 500 times, the money, Georgia second $50 instant ticket games is currently driving improved sales in that category.
New Jersey is $50 million explosion launched in the end of Q1 with a $20 price point and Thats, having a similarly positive impact.
Cash pop a proprietary IGT draw based games recently expanded to a 13th jurisdiction.
The highly customized gameplay multiple daily drug times creates an engaging player experience, which explains cashbox popularity and success and helping to drive lottery sales growth.
George This multichannel quick win game, Washington September currently has eight iterations in the market.
The retail and high lottery games share progressive jackpot, and sales are well balanced across channels.
Strong results there are another six quick win games planned for 2024.
Yes.
Broad based demand for games and cabinets is driving sustained profitable item for our gaming and digital segment, where year to year profit margins expanded for the 12 consecutive quarter.
The global installed base grew to over 54000 units in the quarter.
This includes the seven consecutive quarter of growth for U S and Canada premium units.
In fact, the U S and Canada installed base of multilevel Progressive games was up 6% from year end levels on the continued success Prestbury link industry of the lab, which was named the top performing new premium game of this year's EKG slots Award show.
Gaming machine unit sales a bit of a strong multiyear growth trajectory. Thanks to a consistent pipeline of exciting new games.
Rising rockets is one of the latest in that roster of securing the number three and number five spots in top indexing new core videogames.
Our new cabinets, and particularly Pinker 49 remain among the top performing North American cabinets and this helped drive record U S and Canada average selling prices in Q1.
Gaming revenue grew 10% in the quarter with GTR, reaching an all time high in March driven by strong IGT game performance in the U S.
That momentum was supported by the top performing cash eruption.
In addition to our popular video poker table game offerings we.
We continue to see success with our bespoke named programming and recently launched wheel of fortune Triple extreme spend with that MGM and for dogs cats been tangible.
IGT has had consistent success, bringing gaming and digital games to market and focused R&D investment, including process improvements and more disciplined and gaming hardware development.
By strengthening portfolio of terrific IP IGT is currently enjoying the most success we've had in game development in over a decade.
In the premium space, we've consistently delivered high performing linked progresses.
Tiger and Dragon, which was just released in April is one of our top scoring test bank titles and is off to a strong start.
Four of our non Wap premium games are in the latest Eilers top 25, new premium games, and we expect Tiger and Dragon to make its way to that soon.
In the Wap Arena IGT is 11 of the top 25 indexing games, including the number one and number three spots with Mega box double Diamond deluxe and wheel of Fortune double Diamond.
We've got exciting new titles on the horizon with Whitney Houston and prosperity Lake blessings.
We made significant inroads in the core video category, which represents the largest portion of industry sales and it's a space for IGT is underrepresented.
I already mentioned the recent success of rising rockets, but it's worth noting the longevity of titles like Magic Treasurers and a growing library of new games, such as Golden Eagle and Goldman Phoenix.
The success of our gains in North America is translating to the rest of the world that do treasures and Ministry of the Lam are among the top 10 in indexing premium games.
The region, while matching treasures and Egyptian Lake are among the top 10 core gains in Latin America.
The encouraging Lambastes results are also evident in our gaming business.
IGT is three of the top five performing U S online games.
We've had particular success with our multichannel focus leveraging strong land based franchises in the digital arena.
Later this year, we'll be rolling out new digital games under the successful cash eruption Cleopatra and fortune coin franchises.
So 2024 is off to a strong start with record operating income net of separation divestiture costs, our upgraded full year 'twenty for revenue and profit outlook reflects broad based momentum across key performance indicators in the balance of the year.
We continue to make progress in separating global gaming from gaming and digital and preparing for the proposed transaction with Everest.
Now I'll turn the call over to Max.
Yes.
Thank you Vince and good morning, everyone.
We generated strong revenue and operating income margin in the first quarter exceeding the outlook we provided in March.
And we delivered record operating income when you exclude 8 million.
Since separation and divestiture costs.
Related to the planned spin and merger transaction for gaming and leisure.
Revenue of $1 7 billion increased 1% general linear reflecting continued growth in global marketing function that was sent by the timing of product sales and gaming and digital.
And the name of operating income of $256 million and an operating margin of 24% in line with the prior year as strength in global lottery and improvements in R&D and SG&A costs.
Offset by the lower revenue contribution from gaming and leisure and Symphony has shown and divestiture costs.
Excluding separation divestiture costs operating income rose to an all time quarterly record of 273 million and operating margin expanded 160 basis points to 25, 6% propelled by strong same store sales and high end products since March and global alternatives and easy enough.
Supply chain and R&D process improvement engaging in digital.
Adjusted EBITDA was 443 million in line with the prior and again, but up 3% to 461 million, excluding the separation and divestiture costs.
We generated EPS of <unk> 40 per share as a result of the strong operating performance indicators in the bar and if that stays amortization adjusted EPS was <unk>, 46% compared to 49 per share in the priority and bundled beans for high yet you had a win again consistent to expense excluding the after tax.
Joseph punishment divestiture cost.
Speaker Change: I will now turn to the segment level review first quarter results.
Global lottery deliver solid revenue and profit growth in the first quarter.
Thank you rose 6% to six.
On $61 million driven by strong product sales and continued Italy same store sales growth.
Corporate private stage revenue nearly doubled bolstered by this antibody of game touched 28, <unk> in Canada and system software upgrades in Singapore, and Germany about 20% of this increase is due to a planned acceleration of face originally expected to occur later in the year.
As a reminder, the timing of condensates in this segment can be lumpy and we expect to see some moderation on a full year basis, given the high levels experienced in prior years.
Robust same store sales coupled with contributions from a 2023 contract win in Connecticut.
Drive service revenue up 3%.
Speaker Change: Operating income rose, 8% to 258 million and operating margin expanded 60 basis points propelled by strong same store sales and product sales margins.
I'd Multistate jackpot activity late in the quarter term hub neutralized it previously expected year over year decline.
In Q1 gaming and digital delivered the 12th consecutive quarter of year over year operating margin expansion and then achieved a profit in line with prior year, Despite lower revenue related to the timing of purposes revenue of $406 million declined 7% versus the prior year.
The global installed base continues to expand on this trend of high performing games and cabinets, particularly Danielle multilevel progresses.
Service revenue rose, 2% on growth in the global installed base.
On a sequential basis. There is some work installed base added over 230, <unk> why NDS in Canada was relatively stable as growth in premium casino units, mostly offset the expected new mobiles in the New York company of the market.
Speaker Change: We shipped over six to 600 units in the quarter and U S and Canada Asp's.
<unk> nearly $17000.
However, as anticipated product sales revenues declined year over year as the prior year benefit to some more new and expansion opportunities and pent up demand for replacement units in the U S and Canada and elevated IP and software licenses.
<unk> revenue increased 10%, primarily driven by strong performance in the U S coupled with favorable timing of checkpoints.
Speaker Change: Spinal revenue operating income of 81 million was in line with the prior year and profit expansions continue with operating margin, increasing 80 basis points to 20% driven by easing of supply chain cost and LNG process improvement.
We haven't tightened boom investment daytimes implanting reference from this quarter onward.
As the two segments combination surrenders in comparison with the previous margin do less revenue. However, we are maintaining our outlook for 250 to 400 basis points of margin progression and expect it to occur in 2024.
Following the closing of the merger transaction and the new management team, we provided our thoughts around appropriate long term financial targets for the new combined entity.
In terms of the specific forces behind 2024 operating margin improvement we can consider this fall.
And expected revenue growth backed by favorable KPN momentum primarily in the international markets. The continued moderation in our supply chain costs, which is mostly an H one event and a consistent approach focused on diligent cost management within Canadian operating leverage et cetera.
Revenue classes.
And the balance of Asia.
On the back of gaming demand stabilization in North America, and continuing expected recovery and expansion in international markets. We remain positive on our margin improvement trajectory going forward.
Turning to the balance sheet, we generated cash flow operations from operations of 120 million during the quarter, which included around $195 million in cash outflows, primarily related to the timing of cash taxes.
Speaker Change: AP dynamics.
Pending investment expected and we are confident in our ability to achieve our full year target of at least $1 billion in.
And cash from operations with about 40% of the time, we generated in the first half and 60% in the second half of the state.
We are in a solid financial position with net debt leverage of two nine times mentioned the lowest level in agencies, three manageable near term debt maturities and $1 7 billion independents.
Based on the strong first quarter results, we are updating our full year outlook to the upper end of the previous range, increasing revenue expectations to approximately $4 4 billion with an operating margin of around 21%. We continue to expect about $130 million in brief closing separation and divestiture costs.
It hit to the plan spin inbound transactions, excluding those events specific costs operating margin would be about 24% at record levels.
Yeah.
Speaker Change: Owning media for the second quarter, we expect to deliver revenue of approximately approximately one five.
<unk> 5 billion and operating income margin of around 22%, which includes about a.
250 basis point impact from the pre closing separation and divestiture costs. We've been aimed at the current run rate on the separation and divestiture cost will continue in the short term and see the bias of those costs back loaded towards the closing dates.
Speaker Change: Before moving to Q&A, we would like to spend some time on key areas of investor interest regarding the spin off.
In digital assets and subsequent merger with equity.
Speaker Change: And even the creation of two separate pure play companies have the potential to create significant value for IGT shareholders towards the delivery of cash proceeds to remain co to each vessel earnings per shares in exchange for units of sprinkle and the potentially raising up to two companies as well as the synergies expected at March.
Many of you have asked about the path to closing the transaction as you can see here in our various work streams and milestones required we're making progress on each and we expect closing to occur in late 2020 or early 2025.
Speaking of progress we have advanced in the financing portion of the transaction receiving strong support through the expansion of a bank financing commitments to seven more high caliber financial institutions.
It was more than two times oversubscribed within our borrowers successfully upsized by 50% to $750 million with strong interest in the IGT every combination as we have seen from the banking side. During this process is a testament to the strength of the proposed transaction.
Regarding the timing of the estimated $200 million separation divestiture call, we expect to pay about alternatives before closing and the remaining portion incurred upon closing this cockpit aligned with those of similarly complex transactions and give you some perspectives on the scope.
<unk>.
Speaker Change: Of the various work streams behind them. It is important to recognize we are executing two transactions in one.
Val spin off of one segment publicly compound and a merger with another pocket consistent comp that also explains partially the time needed to close the transaction as the new entity will need to be Sox ready from day one.
We have had many questions about the taxable nature of the transaction. We chose this path since there is minimal tax leakage to IGT and it allows both new companies on freedom to pursue strategic M&A and other capital allocation initiatives from day one.
We currently expect that distribution to be treated.
There are tax consequences to shareholders and we have provided some insight on implications on U S holders as their experts here.
Speaker Change: Also please refer to additional tax disclosures in IGT 20-F filed in March 2024.
Speaker Change: In general as toxic infrastructure holders can be viewed as a matter of timing as shareholders will receive a fair market value tax basis in the stock.
Yeah.
The cash distributions of inventory remained for closing of the merger isn't any favorable impact on the leverage profile of the standalone locked in a company we intend to on a paid about $2 billion net distribution.
Paying down debt that post <unk> 2023 pro forma net debt leverage at about two five times strengthening the companys financial condition based upon that the pro forma adjusted EBITDA figure will remain consistent at $1 2 billion.
At this point, we'd like to open the call for questions hopefully for cleaning up the density.
Thank you if you would like to ask a question. Please press star one on your telephone keypad you raise your hand.
Speaker Change: Q, if you would like to withdraw your question again press Star one.
We'll pause for a moment to compile the roster.
Your first question comes from the line of Barry Jonas with <unk> Securities. Please go ahead.
Hey, guys good morning.
Barry Jonathan Jonas: Vince what's the reaction been from customers regarding the proposed transaction I guess what are they most excited about and are there areas of concerns you've had to address thanks.
Barry Jonas: Okay.
Yes, good question.
<unk>.
Vince: Television commercial teams in every commercial teams have spent a lot of time with customers that have good sized sales force, especially in North America.
And I've spoken with customers.
And universally we've not received negative feedback I think.
Vince: Opportunity for customers to have a.
A competitor that has a greater collective amount of R&D resources are focused in the right areas I'd say over the last couple of years in particular.
<unk> been been very competitive.
We've got.
Our cabinet.
Take care of 49 cabinets ranked number two we've had a string of eight games in the MLP space, we've revamped our mechanical real wave we come out after more than a decade of new very effective video poker product et cetera. So we've got really good momentum.
Vince: The infrastructure side of the casino centered around cash access.
There has been a real strength.
<unk>.
<unk> and really integral to the operation best in class as well. So we've not had any customer is concerned.
<unk>.
Vince: Joe kind of market pressure or any of those types of things since we're complementary in those areas and then when you think about the various regions.
Joe: You have some regions our VLT markets.
Some of our AWP markets or are close to markets and each one of US has strong offerings in one of these respective areas. So the opportunity to over time be able to bring game themes that individually were were.
Vince: Producing on a standalone basis into those markets is something that operators understand and are are excited about so they see us as a.
Vince: As a better.
Equipment supplier with a more fulsome offering.
I think anecdotally.
We've got a good amount of cheerleaders.
On the casino side, just I think a real testimony to the service orientation.
After units are sold to support it that takes place on the equity side and on the IGT side with our amazing field services grew that ability to constantly upgrade and service fees. These machines in the field being best in class I think.
Vince: Overall, it's just been met with really really positive positive response.
Speaker Change: We can't wait to get this closed and we're excited we're excited to get together and.
If you're able to to be one unit.
That's great and then just as a follow up while you guys are working on your separation a gaming competitor just closed on an acquisition of an I lottery competitor. So I'm curious how you see that.
That transaction impacting your lottery positioning given your proposed separation. Thanks.
Speaker Change: Yes, I mean combinations right. It's all about execution, so it'll be interesting to see how that plays out but.
But that competitor has a good eye lottery product.
And we've competed against that product effectively with our lottery products.
Over the last three or four years, so again.
Lottery enjoyed good growth still being kind of early days of customer uptake.
Speaker Change: We've continued to enjoy really good double digit growth in.
In the lottery space.
We've been successful in continuing to bring more I lottery, both platform and content customers tools to IGT IGT lottery. So.
Imagine that.
Any high growth space as has competition.
Again.
I have no idea.
What what the plans are for that entity, but on a standalone basis, they've been a good competitor and they help to keep our team sharpened.
We rank our games versus our competition games performance, we got many of the top performing lottery games as well as benchmarking platform. So again.
Speaker Change: We welcome the competition.
Perfect. Thank you so much.
Your next question comes from the line of Jeff <unk> with Stifel. Please go ahead.
Great. Good morning, everyone. Thanks for taking our questions.
Starting off on the announcement around the or.
Lotto JV structure could you just expand a bit further on the strategic rationale for for leaving the JV structure intact, obviously, the balance sheet looks a lot different than the last time you went through this process. So just curious what led you to decide to incorporate funding partners again this time around.
Speaker Change: Yes, I would say.
When you look back at partnerships over over the duration of the term you have the ability of course.
With the advantage of hindsight two to evaluate how successful the partnership has been and we think the partnership between <unk> and <unk>.
We think it's been a successful partnership.
Speaker Change: The team has worked.
Speaker Change: I guess as good partners of course, we operate it we run it.
Speaker Change: The joint venture has advantages in terms of funding and.
Speaker Change: And also the ability to bring in.
Incremental folks: Incremental folks with with lottery experience in different areas. So.
The team: Again, it operated well and so quite simply we decided we would.
Speaker Change: We and our partners desire to continue it.
Speaker Change: We're moving ahead with this week.
Speaker Change: We think there is stability of what we've had for many years is beneficial to all had no reason to offset that.
Speaker Change: Alright that makes sense. Thanks, thanks for that color and then 32 to the guidance revisions. If you back out Q1, and your Q2 guidance from from the full year guidance. It looks like you're expecting about 52% of revenues to come in the back half of the year could you just expand a bit more on the expected seasonality.
Speaker Change: Or I guess acceleration is this mostly casino slot purchasing seasonality or what else is driving your expectation for more back half weighted 24. Thanks.
Speaker Change: Yes, I would say.
Speaker Change: On the lottery side.
Speaker Change: When you look forward, we expect a low single digit same store sales growth as we look with the.
Speaker Change: The limited visibility we have given the momentum we've got in Italy, and what we're seeing in North America.
Speaker Change: And the rest of the of the World.
Speaker Change: We've had several of our markets have launched new.
Speaker Change: Instant tickets, which is.
Speaker Change: Which I think would be super helpful. Given the strong the strong high priced instant ticket launches and some significant jurisdictions in the early part of last year. So we think that that's.
Speaker Change: That's super helpful. The Multistate jackpot theres been such so attractive to consumers.
Speaker Change: We saw towards the end of last year.
Speaker Change: The beginning of this year a bit of a jackpot fatigue in that area is theres been a lot more frequent billion or close to $1 billion advertise jackpots, but then that accelerated and we actually saw.
Speaker Change: On a weekly basis sales towards the large jackpots improve at the end of the run in 2024 for these last couple of Powerball and Mega millions.
Speaker Change: Billion.
Speaker Change: Plus jackpot, so thats I think a good a good encouraging sign on the gaming side.
Speaker Change: We had.
Speaker Change: Just had an incredible amount of pent up demand going into 2023, so a bit of a difficult comp. However, when we look forward and it's really all about how well the games are performing now and the upcoming.
Speaker Change: Game launches.
Speaker Change: Yes, we're really excited and again as I mentioned I think.
Speaker Change: Not just myself and the team would say that we are in the best shape, we've been in in a decade with consistent high ranking launches of not only MLP games premium games, which are critical and evidenced by the continued expansion of the installed base on the premium side in North America, but.
The team: But now in core as well the team has been able to put together some core games that.
Speaker Change: Pretty pretty exciting again I think.
Not mentioned: And you mentioned rising rocket is one of our premiering at number three and number five.
Speaker Change: Close to two five times house average and are in early days. So that's something that's new for us and pretty pretty exciting.
Speaker Change: So we're looking ahead at unit shipments and we know from what our casino customers have reported.
Speaker Change: Some mixed results, but again they had a very challenging January with weather as well as record setting numbers for last year. So I'm actually encouraged I see the continued performance at around last year's level as really good.
Speaker Change: And in chatting with our customers. So we got off to a bit of a slow start with capital expenditures, but.
Speaker Change: But the conversations have gone well and again I think as long as we're in a position.
Speaker Change: Vision, where our games are performing.
Speaker Change: We're entitled to get our fair share of that.
Speaker Change: Both the purchasing an installed base replacement set are projected to take take place this year.
Speaker Change: As we look out we do see.
Speaker Change: For the second quarter unit shipments I'm sorry.
Speaker Change: The sales funnel building kind of a round similar levels to prior year, and we think that throughout the course of the year.
Speaker Change: We will continue to improve for us.
Speaker Change: Through a combination of both.
Speaker Change: Industry and.
Speaker Change: The performance of our of our games.
Max: I'll hand, it over to Max for any other.
Max Smith: I'll say that the only item I would like to add is that on the back of this strong momentum we have been experiencing in the last few quarters and gaming, including MSP installed base and all of that we can that we can continue to achieve the positive revenue momentum and the balance will be.
Dan: Great. Thanks, Dan Thanks, Max I appreciate all the color and congrats on a strong quarter.
Max Smith: Thank you.
Max Smith: Your next question comes from the line of David Katz with Jefferies. Please go ahead.
Max Smith: Good morning, Thanks for taking my questions I appreciate it.
Max Smith: I wanted to Vince just talk about sort of the update on Italy.
Max Smith: Concession.
David Brian Katz: I'm a bit curious how that came about I don't recall sort of getting this early insight.
Vince: Last time, obviously is there any potential for it to change as we move down the road sensor.
Vince: A fair amount of time.
David Brian Katz: <unk>.
Speaker Change: To the degree that you can plan or provide for.
Speaker Change: It ultimately being resolved that.
Speaker Change: That obviously is a pretty good thing.
Speaker Change: Right.
Speaker Change: Any insight there would be helpful. Thanks.
Speaker Change: Yes.
Speaker Change: So going back to the <unk>.
Speaker Change: Years ago, the last renewal.
Speaker Change: I think.
Speaker Change: The process of the announcement of the term.
Speaker Change: And the rate and the C is the first step.
Speaker Change: And then of course, theres multiple approvals to steps that takes place including the.
Matt: The drafting of a formal RFP in the bid and award process, which will take will take some time and I'll, let Matt to take you through more of the details of the of the process.
Matt: So at the beginning of April.
Matt: Governmental decree has been issued in Italy.
Matt: Basically highlights of the key features of the new.
Matt: <unk>.
Matt: We'll include now.
ADM: The ADM the appropriate agency, a super ASP and tender.
ADM: That added few steps individually and you've agenda, followed the drafting of the tender, including the opinion of compatibility with EU tender.
interested parties: Once the tender is issued then interested parties make that assessment of pain.
interested parties: The bids and get.
Speaker Change: All the ultra skirt assessed by midyear and so all in all we expect that the timing is still to be around 12 to 18 months.
Speaker Change: Paul.
Speaker Change: Execution of this process, but definitely.
Speaker Change: We welcome.
Speaker Change: The announcement of the Kpis the key indicators for the for the beat.
Paul: As it provides a lot of clarity on tobacco that has been said we have extended the memorandum with a memorandum of understanding the existing consortium for them for the upcoming period.
Paul: Understood.
Speaker Change: If I can just follow up quickly on the margin side and make sure. We're perfectly clear I mean, the margins are very very good.
Speaker Change: I want to make sure that I'm comping.
Speaker Change: What you've said today with what was last time.
Speaker Change: <unk>.
Speaker Change: Reading correctly right it was 'twenty to 'twenty one.
Speaker Change: Including.
Speaker Change: Roughly 300 basis points of impact from the pending deals.
Speaker Change: Now right, we're excluding those and going to the top end of 24% right. So there is there is a.
Speaker Change: A bit of a bit of improvement, but I just wanted to make sure. We're all perfectly clear on what the changes are what the update us.
Speaker Change: Yes, alright, so effectively when you take the midpoint of the region.
Speaker Change: Margin guidance range, we're moving the margin up.
Speaker Change: Yes.
Speaker Change: This upgrade so again, we think that that.
Speaker Change: That improvement.
Speaker Change: Is a solid and.
Speaker Change: Backed by a very strong Q1, which came in better than expected some of that was timing related so timing of separation costs.
Speaker Change: The catch up on the jackpot was not on.
Speaker Change: How do you expect that on a year over year basis. So that also have filled the gap and then there is obviously underlying strength in our performance is a combination of the different market came to fruition a strong obviously a strong incentive market in lottery helps our margin alone.
Speaker Change: So again going forward, we believe that.
Speaker Change: We will continue to stay focused on improving our margin and again, we need to watch out.
Speaker Change: The impact of the separation on divestiture expenses, because they think is appropriate for the market to appreciate what is the organic earnings power is.
Speaker Change: Group of assets versus there obviously is an important number which includes those costs those onetime costs.
Speaker Change: Great. Congrats thanks appreciate it.
Speaker Change: Your next question comes from the line of Chad Beynon from Macquarie. Please go ahead.
Speaker Change: Good morning, Thanks for taking my question.
Chad C. Beynon: I wanted to focus on some of the underlying north American trends.
Speaker Change: You guys both mentioned.
Chad C. Beynon: The impact of that a lot of your clients. The operators saw in January given the inclement weather.
Speaker Change: But as it relates to to lottery did you see that in that segment as well in North America, meaning lower kind of same store demand in January and then that picked up and then second part of the weather related question is around yields.
Speaker Change: So did you see revenue per per unit or <unk>.
Speaker Change: The yields for the gaming ops business start to inflect positively in any month, when we got past the weather.
Chad C. Beynon: Yes, so absolutely Chad. This is great we have seen as well a very slow start toward the end of January which probably is due to that weather situation.
Chad C. Beynon: Which impacted a little bit about all the activity, but we saw also picked up momentum in February and March which realign.
Chad C. Beynon: Plants correctly during the quarter.
Speaker Change: Gained both in North America for a gaming, Virginia and altering the one thing that is more important to mentioned for lottery is a little bit here.
Speaker Change: The difference in the game new game launch cadence. So last year, we were on the verge of.
Speaker Change: Having launched a new high tech and games. So that initial momentum was very strong obviously.
Speaker Change: The launch cadence has a different St. Paul and we expect that to happen later in the year. So we're confident that we will be able to recover that.
Speaker Change: Game launch impact for the balance of the year result, and as far as gaming is concerned the e&ps.
Standalone units: <unk> yield dynamics has been very strong we continue to make good progress on our standalone units and by the way by the phone, replacing Standalone units.
Speaker Change: Coming in.
Speaker Change: With DST going out there is a net positive impact to the margin mix in the portfolio.
Speaker Change: Great. Thank you.
Speaker Change: On the digital business any updated views in terms of the potential impact from the white paper implementations in the back half of the year is that factored in in the guidance I know it's not a.
Speaker Change: A huge contributor but has anything changed from that respect.
Speaker Change: No nothing.
Speaker Change: Can't think of anything that.
Speaker Change: Has impacted our projections for the rest of the year and our business plan as a result of that.
Speaker Change: Okay, great. Thank you both I appreciate it.
Speaker Change: Thanks.
Speaker Change: Okay.
Speaker Change: Your next question comes from the line of Joe Stauff with Susquehanna. Please go ahead.
Speaker Change: Great.
Joseph Robert Stauff: Good morning.
Joseph Robert Stauff: Wanted to ask about.
Joseph Robert Stauff: The Italian results lottery results.
Joseph Robert Stauff: Yes.
Speaker Change: Really strong organic growth over 4% on a tough comp I was wondering if you could.
Speaker Change: Maybe disaggregate or discuss was this a product specific was it newer products was it across the board and then I add maybe two.
Speaker Change: Good morning.
Speaker Change: Deal specific questions.
Speaker Change: Maybe.
Speaker Change: Max when do you expect the carve out portion of the transaction.
Speaker Change: It should be done is that would you expect everything.
Speaker Change: In terms of the various Org chart boxes that you have to move around to be done by the third quarter or whatever.
Speaker Change: And when would you expect the S. Four to be filed thank you.
Speaker Change: I'll take the first question around.
Speaker Change: Around Italy so.
Speaker Change: Yes, there is continued growth in Italy, I think is a real.
Speaker Change: Testimony to the team's capabilities when you think about the <unk>.
S. Four: Significant increase that was experienced in in game play and sales in Italy in the first quarter of acute Q of 2023, and then following that up with a strong growth here in the first quarter of 2024.
Speaker Change: Yes.
I: Yes, I recently spent time with the team going through our strategic plan in Rome and.
Speaker Change: It's a little bit of everything.
Speaker Change: <unk> got really good game innovation since we've been operating.
Speaker Change: Our lottery since inception.
Speaker Change: The library of games and the knowledge of the proper games to evolve and refresh.
Speaker Change: Deep franchises like <unk> I think our.
Speaker Change: Things that are incredibly valuable and the research and analysis is done around price oriented various payout strategies.
Speaker Change: Being aware and observing best practices around the world.
Speaker Change #100: I think as all led to this but.
Speaker Change: Our retail distribution network the partnership we have with a tobacconist.
Speaker Change: Our point of sales teams that are constantly working.
Speaker Change: With our our point of sales operators is his second enough its very very aggressive.
Speaker Change: And then when we look out going forward.
The team: The team has a very I think impressive slate continued.
Speaker Change: Continued game launches an end game evolution with different price points.
Speaker Change: We're looking at lower end price points.
Speaker Change: <unk> launches all the way up to.
Speaker Change: I would kind of be very price by 15, Euro 25, euro different payout structures and different gameplay and all thats been coupled really recently in the last.
Speaker Change: Really less than two years with much more effective game launches on the lottery side as well.
Speaker Change #102: <unk> a lot of the themes that we have developed on the retail side.
Speaker Change: But in a digital format I think appealing to to an even broader group of.
Speaker Change: Players so we've seen really good growth.
Speaker Change: That front as well so.
Speaker Change #105: It's really I think a bit of a bit of everything and just great execution.
Speaker Change #105: Okay.
Speaker Change: In terms of the second part of your question.
Speaker Change: So we've been working on to cut about PREPA.
PREPA: Preparation for some time now obviously, we have to take into account that there are three years here that we need to compete.
PREPA: Complete plus obviously, we have to follow through with the quarterly cadence in 2000, and Florida as well depending on.
Speaker Change #110: When <unk> gets filed.
Speaker Change #101: So again work is in progress and we're making and we're making progress as expected at this point of the year in terms of the S. Four.
Speaker Change #101: England.
Speaker Change #116: Currently is in preparation as we speak.
Speaker Change #107: We expect that probably to be in a good position towards the second half of the second quarter towards the end of the second quarter to be able to do the initial filing and then obviously is that typical 30 to 60 days.
Speaker Change #101: Back and forth.
Speaker Change #101: With the staff.
Speaker Change #103: To finalize the document hopefully by the end of the summer time.
Speaker Change #103: Thanks, Vince Thanks Max.
Speaker Change #103: Our last question today comes from David Hargreaves with Barclays. Please go ahead.
David Hargreaves: Hi, I wanted to check the financing commitments, you've announced are those all of the financing you're going to need for the transaction and then secondly is there any update on the disposition of the every bonds.
David Hargreaves: What's going to happen with those thank you.
David Hargreaves: Yes, I'll take the first part of the question so the financial commitments of $3 7 billion.
Speaker Change #106: Before that involved here.
Speaker Change #106: Going to be split between <unk> and <unk>.
Speaker Change #119: Not to be issued and TSB instrument that also will be issued.
Speaker Change #109: Got him about that.
Speaker Change #115: The closing time.
TSB instrument: Think we believe that that package is sufficient to get to the nurse call going.
Speaker Change #112: On top of that we have and not add.
Speaker Change #113: It involved there offset for 750 million, which was upsized upsized from the original.
Speaker Change #123: Amount, which we think is sufficient to support the growth of an article in the financial needs of months call. It day, one and the good thing is that once we went out and.
Speaker Change #113: <unk>.
Speaker Change #121: Promote the package.
Speaker Change #117: We got.
Speaker Change #122: Superior response from financial institutions, primarily finance financial institutions, and we were very pleased to kind of revise their commitments to the upside.
Speaker Change #117: That's helpful.
Speaker Change #114: I think there's just a little.
Speaker Change #114: Concern among investors are you able to say at this point, if theres going to be a 101 change of control made for the every notes.
Speaker Change #114: That said, it's really everything.
Speaker Change #114: Question.
Speaker Change #114: Okay. Thank.
Speaker Change #114: Thank you so much.
Speaker Change #114: Sure.
Vincent L. Sadusky: That concludes our question and answer session today, I will now turn the call back over to Vince <unk> for closing comments.
Vincent L. Sadusky: Thanks for joining us today as regards.
Vincent L. Sadusky: 24 is off to a good start with record operating income net of separation divestiture costs are upgraded full year revenue and profit outlook reflects good momentum across key kpis and balance of the year and the work to separate global lottery and gaming and digital is underway.
Vincent L. Sadusky: As we prepare for the proposed transaction with Emirates.
Emirates: <unk> said before we believe the creation of two focused companies better positions them to service customers and create significant value for stakeholders. So thanks for your interest in IGT and have a great day.
Vincent L. Sadusky: This concludes today's conference call. Thank you for your participation and you may now disconnect.
Speaker Change #124: Please wait the conference will begin shortly.
Speaker Change #124: Okay.
Vincent L. Sadusky: Thanks.
Vincent L. Sadusky: Okay.
Vincent L. Sadusky: Okay.
Vincent L. Sadusky: Yes.
Vincent L. Sadusky: Okay.
Vincent L. Sadusky: Yes.
Vincent L. Sadusky: Yes.
Vincent L. Sadusky: Yes.
Vincent L. Sadusky: [music].