Q1 2025 International Game Technology PLC Earnings Call
Thank you for standing by and welcome to the International game Technology first quarter 2025 earnings Conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. If you'd like to ask a question. During this time simply press star followed by the number one on your telephone keypad.
Speaker Change: If you would like to withdraw your question again press Star one. Thank you I'd now like to turn the call over to James Hurley Senior Vice President of Investor Relations you may begin.
Speaker Change: Thank you and thank you all for joining us on Igt's Q1, 2025 earnings Conference call, which is hosted by Vince a dusky our chief Executive Officer, and Max Chiara, Our Chief Financial Officer.
Speaker Change: After some prepared remarks, both Vince and Max will be available for your questions.
Speaker Change: During today's call, we will be making some forward looking statements within the meaning of the federal securities laws.
Speaker Change: Forward looking statements are not guarantees and our actual results may differ materially from those expressed or implied in the forward looking statements.
Speaker Change: 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.
Speaker Change: 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.
Speaker Change: And now I'll turn the call over to Vince. Thank you, Jim and good morning to all of our Q1 results confirm sustained global player demand for instant and draw games reported a year to year variances reflect elevated U S multistate jackpot activity and associated LMA impacts in the prior year in addition to calendar.
Speaker Change: Shifts that affect comparability.
Speaker Change: Instant ticket and draw games at the core of our business, representing about 95% of our annual wage rebased revenue and <unk>.
Speaker Change: Really 80% of total revenue.
Speaker Change: Normalizing calendar shifts global instant ticket and draw games same stores sales rose nearly one 5% in the quarter.
Speaker Change: This included growth in Italy stability in the U S and a 26% increase in lottery sales.
Speaker Change: We delivered $250 million EBITDA at a 43% margin in the period, notwithstanding jackpot and LMA impacts this highlights the attractive and resilient profit structure of the pure play lottery business.
Speaker Change: We converted 67% of that EBITDA into cash in the quarter.
Speaker Change: We maintain a strong financial condition with pro forma net debt leverage below three times.
Speaker Change: Consistent innovation is the driving force behind the underlying growth in an instant and draw games.
Speaker Change: In Italy, 2% normalized same store sales growth included increases for both scratch and win and Lotto games.
Speaker Change: The 20 euro extra at Qdoba to Deb, a new addition to the <unk> franchise and the new 10 Euro instant ticket games were among the top performers in the quarter.
Speaker Change: Lotto wagers were up on the continued Sac success, a tinny lot of special draws and the Numero Oro option for that Joe Co del Lago game.
Speaker Change: U S sales were impacted by the significantly lower multistate jackpot activity, which is a function of the variability in the timing of very large jackpots.
Speaker Change: Normalized same store sales for U S instant and draw games were stable.
Speaker Change: Large jurisdictions, such as California, and Florida experienced Nice instance growth. Thanks to the success of new game launches, there, including new 25, and $40 games in California, and the impact of additional 20 and $30 tickets in Florida.
Speaker Change: That was offset by a lack of comparable new game launches and offerings in other states. We are encouraged by the stability of the very high sales levels achieved in the U S over the last few years.
Speaker Change: I lottery sales maintain their excellent momentum in Q1, rising 26% on strength across geographies.
Speaker Change: Lottery penetration continues to climb, especially in the U S with Kentucky, and Georgia, achieving significant increases in the last six months.
Speaker Change: These gains are fueled by new E instant game launches the success of titles, such as cats elephant King and supernova nines drove over $100 million.
Speaker Change: Re sales in Georgia during March.
Speaker Change: Highest ever in a month.
Speaker Change: In Italy games like Joe Co Po and an expanding tenure auto player base are driving high lottery sales.
Speaker Change: We're making good progress with key areas of our strategic focus that we expect will drive sustainable long term growth.
Speaker Change: One of the most exciting developments in product innovation is the mega millions move to a $5 price point in early April.
This is the first game change in eight years and was the result of a multi year process, where IGT led project management and game implementation on behalf of the Mega millions consortium.
Speaker Change: It required extensive planning and impeccable execution, including updating approximately 400000 lottery terminals in the week, leading up to going live.
Speaker Change: A big congratulations to the IGT team and the Mega millions consortium for this exciting evolution of the game.
The change is more than a simple increase in price. It reflects new features that create good value for the new price points, including bigger prizes at every non jackpot prize here better odds to win larger starting jackpots and faster growing jackpots. The enhancements are expected to drive increased sales and revenues for <unk>.
Speaker Change: <unk> and the good causes they serve.
Speaker Change: Another area of focus is the expansion of retail touch points and the optimization of the point of sales network.
Speaker Change: There are three main initiatives here.
Speaker Change: First is growing the network of self service lottery vending machines.
Speaker Change: We have a broad array of self service solutions to bring lottery games closer to where players shop, which has proved effective in generating incremental sales.
Speaker Change: Over the last few months, we began rolling out our Gemini touched 28 to popular malls across Italy.
Speaker Change: Second as inland purchasing which is live in just a few states at a range of retailers, such as Kroger, Cvs and Winn Dixie.
Speaker Change: We believe lottery link will be another driver of inland purchasing it.
Speaker Change: It's the first ever solution, enabling the sale of instant and draw games from a retailers own Pos device and without the need for any software changes to the retailers Pos system.
Speaker Change: Lottery link one lottery product of the year at ice in January there's a.
Speaker Change: A lot of interest in it and we intend to begin offering it to customers later this year.
Speaker Change: And third is investing to optimize the POS network. We are currently transitioning from satellite to cellular communications, which should provide improved bandwidth reliability access to a broader range of retailers and reduce the time needed to set up new Pos.
Speaker Change: It should also be more adaptable to new technologies and provide greater flexibility to accommodate emerging solutions like cashless transactions.
Speaker Change: We went live with our new printing press in April expanding our capacity by over 50%.
Speaker Change: This should enhance our ability to service customers and improve our production efficiency.
Speaker Change: It's a well timed addition, given the increased production volumes, we have secured with several large customers, including France is F D J, Portugal, Santa Casa and New York State.
Speaker Change: We're also investing in several areas to increase I lottery adoption.
Speaker Change: What is at a faster pace of new AE instant game developments and launches.
Speaker Change: Now there is transitioning all I lottery platform customers to our cloud based solution. This has many benefits, including a more streamlined and faster player experience increased scalability and stability and new promotional features.
Speaker Change: In the week following Kentucky's transition sales reached an all time high.
Speaker Change: In January we launched the my lottery site in Italy, where it is possible to play both lotto and scratch and win in the same place.
Speaker Change: The site is designed with a mobile first player experience in mind and as scalable back end that makes it easy to integrate new content.
Speaker Change: In a matter of three months my lotteries has already increased Italy lottery market share by several percentage points.
Speaker Change: As you all know the World is currently faced with significant macroeconomic and geopolitical uncertainty.
Speaker Change: The impact of tariffs and declining consumer confidence and spending are fuelling fears of a recession.
Speaker Change: We feel good about the things we can control in the long term prospects for our business, but we're not immune to these challenges. However history has shown that lottery sales in the U S and Italy have proved to be resilient in both absolute and relative terms during recessions.
Speaker Change: We have some important milestones on the horizon.
Speaker Change: Italy Lotto license process is well underway.
Speaker Change: <unk> gaming authorities have informed the participants that the economic proposals they submitted in the Lotto concession tender will be opened on may 19th.
Speaker Change: We also understand that the evaluation of the technical proposals is complete and we expect the results of the technical evaluation to be announced prior to may 19th.
Speaker Change: The sale of our gaming and digital assets remains on track to close in Q3, we.
Speaker Change: We intend to communicate our capital allocation strategy. After the lot of outcome is known and around the gaming and digital closing.
Speaker Change: Well, we are contending with a high degree of macroeconomic and geopolitical uncertainty. We are excited about the strategic initiatives. We are working on to drive sustainable long term growth now.
Max Chiara: Now I'll turn the call over to Max.
Max Chiara: Thank you, thank you Vince and Hello to everyone joining us today.
Max Chiara: IGT delivered adjusted EBITDA of $250 million in the first quarter in line with expectations at constant currency.
Max Chiara: And demonstrating the profit resilience of the lottery business and good cost discipline, even as we invest in the business.
Max Chiara: This was achieved despite lower than expected revenue related to the continued lack of large U S multi state jackpot and the associated impact on LMA incentives.
Max Chiara: And the timing shift of certain instant ticket product sales within the year.
Max Chiara: As expected while positive trends in instant ticket and draw games continue IGT first quarter revenue of 583 million was down from 661 million generated in the prior year.
Max Chiara: Primarily due to higher levels of jackpot activity and the associated positive impact on LMA incentives in the prior year period, resulting in a year over year impact of about 45 million on this particular matter alone.
Max Chiara: There were no billion dollar level jackpots in the first quarter compared to $1 1 billion Mega millions and 951 million Powerball jackpots in the prior year.
Max Chiara: Elevated levels of jackpot and LMA incentive revenue are highly dependent on the timing of very large multi state jackpots, which occur sporadically.
Max Chiara: Causing period to period variability.
Calendar shifts also created a headwind with leap year, providing an extra day of sales in the U S and rest award in 2024, and Italy, having additional instant ticket selling days and Lotto draws in the pre in the priority.
Max Chiara: On a normalized basis instant tickets and draw revenue grew $4 million and global same store sales.
Max Chiara: Rose one 4%.
Max Chiara: Product sales reflect higher multiyear central system software licenses and terminal sales in the prior year.
Max Chiara: As a reminder, the timing of product sales can vary quarter to quarter, but we do expect year over year growth for the full year period, primarily due to growth in instant ticket services.
Max Chiara: As I mentioned, we achieved first quarter adjusted EBITDA of $250 million in line with expectations at constant currency. This solid profit generation was despite the higher than expected year over year headwind.
Max Chiara: Of about $40 million related to the higher jackpot and associated LMA incentive in the prior year and includes a portion of the 25 million in temporary cost related contract extensions Rebids enhancements of cloud based solutions and point of sales network optimization that are expected to drive growth.
Max Chiara: And capex efficiencies in the future.
Max Chiara: We also had costs associated with rebranding the pure play lottery business.
Max Chiara: To put things in perspective through the last 10 months of the lottery fiscal year, which ends on June 32025.
Max Chiara: That has only been $1 billion of jackpot that compares to five $1 billion plus multi state jackpots in lottery fiscal year 2024, and three in luxury fiscal year 2023.
Max Chiara: So this is currently an exceptionally low level of jackpot activity we.
Max Chiara: We are confident that once this activity normalizes, we will see a positive impact on our profit margins. For example, after adjusting for a more normal level of jackpot activity and that the main incentives our first quarter adjusted EBITDA margin would have been around 46%, which once again highlights the attract.
Max Chiara: The profit profile of the pure play lottery business.
Max Chiara: Sure.
Max Chiara: First quarter cash generation from continuing operations was strong with a cash conversion ratio of 67% in line with the average of fiscal year, 'twenty, three and fiscal year 'twenty for delivering $168 million in cash from operations and free cash flow of $92 million.
Max Chiara: In preparation for the award of the Italy Lottery license, we successfully issued a new <unk>.
Max Chiara: Your 1 billion term loan the first 500 million tranche was drawn and used for debt repayment under our existing credit facilities, resulting in reestablishing a significant liquidity buffer at the end of the first quarter of $2 2 billion.
Max Chiara: The second 500 million Euro tranche is committed by currently undrawn to be utilized only if we are awarded a local license to preserve maximum flexibility.
Max Chiara: In addition, a 4.5 billion gross cash infusion needs to be received upon the completion of the gaming and digital sales.
Max Chiara: Net debt rose $270 million from the end of December 2000, $24 billion to $5 billion.
Max Chiara: About half of the increase coming from foreign currency translation.
Net debt leverage pro forma for the committed 2 billion dollar of debt reduction following the sale of gaming and digital was two eight times in line with our target.
Max Chiara: Given incremental jackpot and LMA headwinds in the first half of the year. In addition to the worsening macroeconomic environment and uncertainty around the ultimate impact on consumer spending we now expect full year 2025 revenue of approximately $2 55 billion and adjusted EBITDA of one point.
Max Chiara: One 1 billion at the low end of the outlook ranges, we provided on our last earnings call back in February.
Max Chiara: Cash from operations inclusive of the first two tranches of the Lotto upfront fee totaling 800 million Euro is now expected to be a use of cash of about $350 million, primarily reflecting the incremental FX impact on the first two installments of the Italy Lotto upfront license fee since day.
Max Chiara: Are denominated in euros.
Max Chiara: Second quarter 2025 revenue is expected to be flat to up slightly as higher product sales offset the impact of lower LMA incentives in adjusted EBITDA is forecasted to be down approximately $30 million due to the high flow through of LMA incentives and investments we are making.
Max Chiara: In the business.
Max Chiara: In the second half of the year, we expect profit to reflect the full impact of the five dollar Mega million game and the normalization of multi state jackpot activity. In addition to Optimus savings, bringing EBITA for the Q2 through Q4 period in line with the prior year.
Max Chiara: As a reminder, this outlook does not include any potential benefit from large U S. Multi state jackpots in the second quarter, given actual quarter to date trends.
Max Chiara: IGT is well positioned as we head into the future player demand for instant ticket and draw games is growing and demonstrating resilience, we're making investments in the future to drive sustainable long term growth and we have a strong balance sheet with ample liquidity ahead of the Italy Lotto Award and other import.
Max Chiara: On upcoming contract renewals.
Max Chiara: This concludes our prepared remarks, operator would you. Please open the line for questions.
Speaker Change: Thank you we will now begin the question and answer session. If you'd like to ask a question. Please press star one on your telephone keypad you raise your hand and joined the queue. If you would like to withdraw your question simply press Star one again.
Speaker Change: Your first question comes from the line of Jeff substantial from Stifel. Your line is open.
Speaker Change: Hey, great. Good morning, everyone. Thanks for taking our questions.
Speaker Change: Maybe starting off here on the guidance revision, which is where we've been getting the most questions. This morning.
You called out two things really explaining the revision jackpots and the worsening macro maybe just drilling into the ladder. We just want to better understand is there anything that youre seeing in real time that you would attribute to the macro environment or is this really more of a cautionary move just given the uncertainty and then.
Speaker Change: It is the former is the sequential weakness is that specific to any geographies is it more of a product sales impact just any additional color on this would be helpful. Given that it seems a bit dislocated from the historical resilience that you've called out in lottery.
Speaker Change: Yeah, absolutely. So look the situation from a macro standpoint is very fluid we have to watch out.
Speaker Change: Particularly the tariff discussion is evolving.
Speaker Change: We continue to see stability in our <unk>.
Speaker Change: Court players in terms of total demand and obviously the volatility is primarily associated with the jackpot.
Speaker Change: Four months and the related LMA impact.
Speaker Change: So again we.
Speaker Change: We're projecting a higher growth or regionally in particularly in the in our core U S markets.
Speaker Change: The situation is relatively stable right now and we expect some growth to come to fruition in the second half, but we continue to keep a cautionary.
Speaker Change: Our outlook going forward.
Max Chiara: Yeah, and I'll add a little bit of color to that to Max's comments as well.
Speaker Change: Yes, so the quarter was anticipated that we were going to have.
Speaker Change: Some negativity associated with a prior year given as Mac said Multistate jackpot comparison was very difficult. We had some really bad luck with multiple heads and no big run ups during the quarter, which contrast, two two last year. So that was significant and then also we have there.
Speaker Change: Impact of our.
Speaker Change: Operating the lotteries in Indiana, and New Jersey, where for years, we've enjoyed an incremental benefit from over performing the baseline. Some of that was driven by by the jackpot is quite a bit of that was driven by by core growth. Unfortunately with the run that we've had and they have.
Speaker Change: These <unk> have a fiscal of June to June.
Speaker Change: And as you know really for the tail end of 2024 as well we had.
Speaker Change: A lot of hits on the jackpot and not.
Speaker Change: Not as many significant run so you kind of get the incremental negativity associated with a benefit for many many years and then and then a detriment.
Speaker Change: On the on the scoring.
Speaker Change: If you take a look at that and you take a look at.
Speaker Change: The timing of product sales, which as Max mentioned, we anticipate will be positive based upon whats in our pipeline.
Speaker Change: Yes.
Speaker Change: Resulted in a quarter that.
Speaker Change: It was certainly down from from last year, but when you Peel back the normalization for calendar days and you look at the underlying core business. We did we did expect more growth, but again a lot of this was driven as a result of fewer people coming in and buying.
Speaker Change: Jackpots, So I think overall, our normalized growth. We had commented was about one 5% for the quarter.
Speaker Change: So pretty good considering the topline was really challenged compared to the prior year and when you look at our normalization of Italy, where the team continues to innovate we were more like 2%.
Speaker Change: And very good growth in lottery and then when we look out to the second quarter and we look at our.
Speaker Change: Our sales pacing information.
Speaker Change: Fortunately we've seen.
Speaker Change: <unk> hit the jackpot. So we don't see a great second quarter driven by both the purchase of jackpot tick tickets and the incremental activity associated with the casual player.
Speaker Change: Bye Bye lottery lottery tickets, but nonetheless, we're seeing a second quarter in the U S extra jackpots.
Speaker Change: Flattish, Italy is doing really well at a lease up about 4% or so.
Speaker Change: So I think that's what led us to be somewhat cautionary and our guide for the year and as Max mentioned.
Speaker Change: We expect.
Speaker Change: Easier comparisons in more of a normalization in the back half of the year and expect expect better growth in overall lottery sales and some of the timing related issues to to abate in the back half of the year.
Speaker Change: That's great. Thank you, probably probably maybe if I could just summarize just to make sure I got the net net of that correctly. So if you think about the impact to date. Since you last reported it's been really felt boring Jack costs, which.
Speaker Change: I assume you would chalk up mostly to the jackpot fatigue that we've talked about for several quarters, but that given the macro uncertainty you are revising the assumptions embedded in for the back half as well a little bit more broadly, but less of a real time impact witness. There is that is that sort of a fair summary.
Speaker Change: Can you just laid out okay.
Speaker Change: And then just okay.
Speaker Change: Okay Perfect and then just one quick clerical follow up Matt could you confirm the assumptions that are baked in to guidance for the Euro and then what was assumed back at Q4, just Edr has gone to 105 to 111, so right now we're assuming 110 balan.
Speaker Change: One time right now we are assuming 110.
Speaker Change: 110, right now and then what was in guidance when you when you established at Q4.
Speaker Change: I believe it was one of seven.
Speaker Change: Understood. Okay, great. Thank you both very much I'll pass it on.
Speaker Change: Your next question comes from a line of Barry Jonas from <unk> Securities. Your line is open.
Barry Jonas: Hey, guys wanted to dive a little bit more into the mega millions $5.
Speaker Change: Yes.
Speaker Change: Is this really in your view just kind of just a waiting game or are you seeing any resistance to the higher pricing from players.
Speaker Change: Yes, it's a great question as we mentioned in the past, we're very optimistic about the potential impact for the increase to $5 four for Mega millions. It gives it gives us a great choice, so lower price point with with Powerball at $2 $5 Mega millions.
Speaker Change: As we've commented in the past, where we've seen price point changes the net impact of the overall dollar sales volume has been very good very good increase and we're hopeful that it'll be the the result from Mega millions and.
Speaker Change: Unfortunately, there's not much to report right now.
Speaker Change: Have no trending information, hence that multistate jackpot got hit very very quickly after the the price change took place in <unk>.
Speaker Change: In April.
Speaker Change: But I think the key is the transition was very smooth the technical team did a truly amazing job of of updating all of these point of sales around around the U S and the game enhancements with a higher jackpot the built in Meg Meg.
Speaker Change: Mega player.
Speaker Change: The fact that the odds of winning have gone up and enterprises are bigger et cetera, We believe folks who who play a multistate jackpot games will come to recognize these trends over over time, but unfortunately, it's still too early to assess the impact and.
Speaker Change: Players are playing in and beginning the process of learning and understanding that.
Speaker Change: The positive the positive impact is so we will hope to have more data to be able to share with you all when we report our second quarter results.
Speaker Change: Got it understood and just for my follow up we've definitely been getting a lot of inbounds about Texas.
Speaker Change: Maybe talk about.
Speaker Change: The renewal process, where it stands as of now and how investors should think about potential risks IGT given some of the noise coming out of the state government there as it relates to the lottery. Thank you.
Speaker Change: Yes, it's been.
Speaker Change: As you know there is.
Speaker Change: He has been an amazing amount of press and.
Speaker Change: And scrutiny around.
Speaker Change: The Texas lottery.
Speaker Change: Yes. So the legislature is in session and they are currently evaluating the future of <unk>.
Speaker Change: The Texas lottery.
Speaker Change: During this review process the same thing took place.
Speaker Change: I guess about 12 years ago or so when it was when it was last up four for a review of the Legislative session is in it will wrap up the state of Texas Legislature's, we'll adjourn on June 2nd and we'll have a I.
Speaker Change: I think more clarity at that point, all we know right now is.
Speaker Change: The last communication that the vendors received regarding their procurement.
Speaker Change: Let us know that the process is still proceeding and we expect a decision.
Speaker Change: Time later later this year.
Speaker Change: Understood. Thank you.
Speaker Change: Your next question comes from the line of Chad Beynon from Macquarie. Your line is open.
Chad Beynon: Hi, Good morning, Thanks for taking my question I wanted to start with with margin Max I believe you said.
Chad Beynon: Excluding some of the items in the first quarter margin would've been closer to 46%. The print was little under 43% for Q2 Youre also guiding too.
Chad Beynon: Below 43% and then that will pick up in the back half of the year. So.
Chad Beynon: I know last quarter, you talked about some additional costs that could hurt margin that would be front half weighted can you update us on that and then the guide for the year at 43, 5% I'm assuming that could eventually.
Chad Beynon: Creep up higher if we're seeing higher jackpot activity, just a little bit more more clarification on that thank you, yes, yes. So I can confirm everything you said.
Chad Beynon: The onetime cost are running almost ratably.
Chad Beynon: As we speak.
Chad Beynon: As a reminder, primarily project expense related to the new.
Chad Beynon: The new contract so the rebids.
Chad Beynon: And extensions that we got granted recently.
Chad Beynon: About 60% of that total cost.
Chad Beynon: And then I would say the balance is split equally between.
Speaker Change: The transition to cloud and the transition to sorry to sell mobile from satellite and cloud investments in a lottery.
Vince Dusky: As Vince was alluding to we recently completed the transition to cloud in Kentucky and.
Vince Dusky: The infrastructure is very stable there.
Vince Dusky: And we have been able to leave.
Vince Dusky: Lift sales and achieve great results since.
Vince Dusky: The implementation of the new platform and so we continue to look favorably into this.
Vince Dusky: Technological evolution in our lottery solution.
Vince Dusky: Vis vis the marginality again, we think that the three points plus of difference to the adjusted number is all related to them to the very low jackpot performance again, if you look at the last three years.
Vince Dusky: This year, we got one.
Vince Dusky: Last year, we got five 1 billion plus and the year. Prior we got three so it may be five is an extreme on the upper end definitely one is an extreme on the on the lower end.
Vince Dusky: So somehow in the middle is probably where we should land on a normalized basis.
Vince Dusky: It's not only the billion plus jackpot that matters is really how many rounds. You can you can get through and get to kind of at least 500.
Vince Dusky: Million ranges because at that point, you've got incremental saves coming through more casual players that starts to be attracted by the advertised jackpot level and so again, we feel a relatively strong about that kind of.
Speaker Change: Earmark profit margin in terms of normalized performance and as far as the balance of the year is concerned as you said, we expect Q2 again.
Speaker Change: <unk> be a bit a bit weak vis vis the average expected for the year at 43, and a half that you mentioned.
Speaker Change: And the reason is primarily by the evidence of the latest 40 days. The early 40 days on the quarter with very low jackpot activity to report so far so the situation may change, but again, we are in and still we have not.
Speaker Change: Had any significant jackpot activity.
Speaker Change: We stay very positive on the Mega million, we believe that there is definitely.
Speaker Change: Positive trends associated with that innovation.
Need that on on the jackpot to come to manifestation.
Speaker Change: That's great. Thanks for running through all of that that's really helpful.
Speaker Change: And then as a follow up I know rest of world is under 15% of total revenue contribution, but that was a highlight in the quarter.
Speaker Change: Are those markets I guess collectively just less.
Speaker Change: Exposed to the macro are there are there tech and pricing initiatives broadly across those markets.
Speaker Change: Given a mid single digit increase in Q1 is that something that you expect to be more of an anomaly or could we continue to see that.
Speaker Change: If trends persist here. Thank you.
Speaker Change: Yes that that activity was really driven by very strong euro millions jackpot. So.
Speaker Change: The exact opposite of of North America, we see the.
Speaker Change: <unk>.
Speaker Change: All over the world, we see when when the jackpot builds.
Speaker Change: The jurisdictional jackpot builds it has a significant impact on <unk>.
Speaker Change: Sales.
Speaker Change: That was that was the primary driver and I think those trends are consistent with North America and other parts of the world.
Chad Beynon: Thanks, Vince I appreciate it.
Vince Dusky: Sure thing.
Speaker Change: Your next question comes from the line of David Katz from Jefferies. Your line is open.
David Katz: Good morning, guys.
David Katz: Good morning, Thanks for taking my questions.
David Katz: Apologies.
David Katz: Over beating on an issue, but I think you may have talked about this a bit Vince you said that.
David Katz: You get the results of the technical assessment.
David Katz: In may.
David Katz: Since it comes up so often.
David Katz: Can you just walk us through why what might be the next steps.
David Katz: That process or put some historical perspective around it that may be helpful. Again, just because it comes up so often.
David Katz: With respect to LNG lateral of course, that's what I'm asking.
Speaker Change: Yes, yes, sure David So yes.
Speaker Change: As you know don't come up very often so nine years ago or so when it came up.
Speaker Change: It took some time for the commission to make to do their technical evaluation and overall make their determination and.
Speaker Change: And issued their preliminary award.
Speaker Change: In this particular case the bids were submitted on.
Speaker Change: March 17th as I recall the commission formed we confirm that there were two bidders.
Speaker Change: And we.
Speaker Change: We found out this week that the economic proposals will.
Speaker Change: We'll be opened on may 19th at Monday.
Speaker Change: So a much shorter time frame than our experience nine years ago, and we also understand the evaluation of the technical proposals is complete and as I mentioned, we we believe that we will we will find out the results of the technical evaluation, scoring.
Speaker Change: At or prior to may 19th as well so.
Speaker Change: Early next week.
Speaker Change: We should we should know.
Speaker Change: And so that's an outcome of just the technical.
Not the financial aspects or.
Speaker Change: Do we have sort of a final answer.
Speaker Change: On the evaluations of everything by the 19.
Speaker Change: Yes, what I described is what the commission has communicated.
Speaker Change: Which is.
Speaker Change: We anticipate the technical scoring will be done.
<unk>.
Speaker Change: They will they will open up.
Speaker Change: The envelope if you will.
Speaker Change: Around the economic bids for ourselves and our competitors so.
Speaker Change: When they actually do the math on the two pieces.
Speaker Change: Will we anticipate will be.
Speaker Change: Sometime shortly after the opening of the of the economic letter, we don't know exactly whether it's that day several days.
Speaker Change: And how long to issue a preliminary award, but when the two pieces are disclosed.
Speaker Change: We should all be able to do the math and anticipate a preliminary award.
Speaker Change: Pretty pretty shortly thereafter.
So open often disclosed to us to everyone.
Speaker Change: Just to be clear.
Speaker Change: Yes, correct.
Speaker Change: Okay. Thank you very very much sure.
Speaker Change: Sure thing.
Speaker Change: Your next question comes from the line of Dominical Gulati from <unk>. Your line is open.
Dominical Gulati: Good morning, two questions. The first is on the Italian market.
Dominical Gulati: I Wonder if you can elaborate a little bit more on the spending we have seen.
Dominical Gulati: Some some.
Dominical Gulati: Back to cause I'm, not referring to the lotteries about for example, the <unk> gaming business growing really very fast mid teens or even higher.
Dominical Gulati: And.
Dominical Gulati: I heard you comment on the Q1, but also give you. Some highlight on April that these are quite reassuring. So I wonder if you. If you think there is any kind of cannibalization between divert because or not or just was a matter of.
Dominical Gulati: Let's say working days and sell in sell out and second question is on the bridging that Tonight and that financial position I understood that you have the so it'd be almost a 300 million increase in depth how forthcoming from.
Dominical Gulati: The effects, if I'm not wrong and I wonder how can I say bridge. This number with the free cash flow generation that you have been reporting.
Dominical Gulati: Sure I'll take the first part of the question <unk>. So I know you've been following the market for a long time know that it's a very mature.
Dominical Gulati: And robust gaming marketplace and.
Dominical Gulati: We had good growth in our lottery products.
Dominical Gulati: For several years I think again, if you take out the calendar relation of the days as you pointed out growth in the first quarter as well and currently second quarter pacing up 4%. So I think the ability for the.
Dominical Gulati: Pi.
Dominical Gulati: To grow for the market to grow alongside the growth that Italy is seen in sports betting and casino.
<unk> continues to occur for for the lottery business and again, we keep mentioning the need for ongoing innovation, both on the retail products and on.
Dominical Gulati: Lottery products has been we believe that's that's been attributing a lot of the a lot of the growth. So we've seen growth in lottery, both both land based and digital alongside the ongoing growth in sports betting and casino in Italy.
Dominical Gulati: Yeah.
Max Chiara: Hi, This is Max speaking so with regard to the second question, yes half of the impact was due to the translation on the FX. The other half is kind of split between EBITDA and working capital almost equally in terms of how to look at the cash flow for the balance of the year.
Max Chiara: I think our performance in Q1 is definitely remarkable compare to the last two years.
Max Chiara: The cash conversion in the upper <unk> is definitely where we should be on a.
Max Chiara: Normalized basis.
Max Chiara: So we anticipate.
Max Chiara: That we.
Max Chiara: We will continue to deliver positive cash flow.
Max Chiara: Ex obviously.
Max Chiara: The lotto upfront fee payments, so when you exclude those payments.
Max Chiara: For the balance of the year.
Max Chiara:
Max Chiara: And when you look at the normalization of that cash flow you should expect.
Max Chiara: Gained some again something in the range of $700 million to $750 million from a CFO point of view cash from ops point of view ex upfront fee Danny.
Max Chiara: Then you have obviously this heavy capex balance that is coming to fruition. This year because of the ramp up in the Capex cycle.
Max Chiara: So again, the free cash flow is going to be.
Max Chiara: Below our normal run rate.
Max Chiara: But again there is.
Max Chiara: We have highly advertised this period of time in the pasta.
Max Chiara: And it's this capex cycle is going to stick with us probably for 2025 and 2026.
Max Chiara: So we will be running at about 400 to 454 each of the two years and then we anticipate the capex to come down starting in 2007 to more normalized levels in the range of $200 million to $225 million per year.
Max Chiara: Yeah.
Max Chiara: Thank you.
Speaker Change: Your last question comes from the line of Joe Stauff from Susquehanna. Your line is open.
Speaker Change: Thank you.
Max Chiara: Vince Max.
Speaker Change: Just to follow up Vince on the Lotto Award obviously.
A pretty significant catalyst.
Speaker Change: The economic waiting is about 60%, whereas the technical waiting in terms of the award is about 40% is that correct.
Speaker Change: Yes, I think thats right.
Speaker Change: Yep.
Speaker Change: And then on.
Speaker Change: On the Italian growth that you had mentioned.
Speaker Change: Up 4%.
Speaker Change: Thus far in the second quarter is there a way for you to maybe describe.
Speaker Change: Is that.
Speaker Change: Is that more new product oriented growth is it.
No.
Speaker Change: Volume growth is it or.
Speaker Change: Is it most likely just a combination of both.
Speaker Change: Yeah.
Speaker Change: It really is a combination.
Speaker Change: <unk> had good ongoing instant ticket innovation.
Speaker Change: Steve.
Speaker Change: <unk> re launched some products in the second quarter, we mentioned a while back we we have our our patented printing.
Speaker Change: Thanks.
Speaker Change: <unk>.
Speaker Change: We've launched that in the market and that seems to have very good very good attraction to two players.
Speaker Change: Things like the special draws that we've done we've had good success with with <unk>.
Speaker Change: <unk> auto.
Speaker Change: For the core Lotto game so.
Speaker Change: It's coming across across the board and continued continued really strong growth in NII lottery sales as well.
Speaker Change: Understood. Good luck next week.
Speaker Change: Thank you.
Vince Dusky: And that concludes our question and answer session I will now turn the call back over to CEO, Vince the dusky for closing remarks.
Vince Dusky: Yes. Thank you for joining us our first quarter results confirm sustained global player demand for instant and draw games and the good profit structure of a pure play lottery business.
Vince Dusky: As I noted, we've we have some really important milestones in the near term horizon and while we are contending with the high degree of macroeconomic and geopolitical uncertainty. We're excited about the strategic initiatives. We are working on to drive sustainable long term growth.
Vince Dusky: We appreciate your interest in IGT and look forward to reconnecting with you soon.
Vince Dusky: Certainly following the news of the Lotto outcome have a great day.
Vince Dusky: This concludes today's conference call. Thank you for your participation you may now disconnect.
Vince Dusky: Please wait the conference will begin shortly.
Vince Dusky: Okay.
Vince Dusky: Okay.
Vince Dusky: Yes.
Vince Dusky: Yes.
Vince Dusky: Okay.
Vince Dusky: Yes.
Vince Dusky: Yes.
Vince Dusky: Yes.
Vince Dusky: Okay.
Vince Dusky: Okay.