Q2 2025 Brightstar Lottery Earnings Call
Unknown Executive: 2nd Quarter 2025 Earnings Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session.
Hello and welcome to the Brightstar Lottery Q2 2025 earnings call. All lines have been placed on mute to prevent any background noise.
Unknown Executive: If you would like to ask a question during this time, please press star 1 on your telephone keypad.
James Hurley: I would now like to turn the conference over to James Hurley, Senior Vice President of Investor Relations. You may begin. Thank you, Sarah.
After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, please press star 1 on your telephone keypad, I would now like to turn the conference over to James Hurley senior vice president of investor relations. You may begin.
James Hurley: And thank you all for joining us on Brightstar Lottery's second quarter of 2025 conference call, hosted by Vince Sadusky, our Chief Executive Officer, and Max Chiara, our Chief Financial Officer. After some prepared remarks, Vince and Max will be available for your questions. During today's call, we will be making some forward-looking statements within the meaning of the Federal Securities Laws. Forward-looking statements are not guarantees, and our actual results may differ materially from those expressed or implied in the forward-looking statement. 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.
Thank you, Sarah, and thank you all for joining us on BrightStar Lottery. Second quarter of 2025 conference call hosted by Vince sadusky, our chief executive officer and Max, Kiara 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, our detailed, and our latest earnings release, and in our SEC filings,
James Hurley: During this call, we will discuss certain non-GAAP financial measures. You'll find additional disclosures regarding these non-GAAP measures, including reconciliations with comparable GAAP measures, in our press release, slides accompanying this webcast, and our filings with the SEC, each of which is posted on our Investor Relations website.
Vincent Sadusky: And now I'll turn the call over to Ben. Thank you, Jim. And good morning to all.
During this call we will discuss certain non-gaap Financial measures. You'll find additional disclosures regarding these non-gaap measures including reconciliations with comparable. Gaap measures in our press release, slides accompanying this webcast and our filings with the SEC, Each of which is posted on our invest investor relations website.
And now, I'll turn the call over to Vince.
Vincent Sadusky: Well, we're excited to welcome you to our first earnings call is Brightstar Lottery. As a pure play business, we've got a clear mission of elevating lotteries and inspiring players to bring meaningful benefits to all stakeholders. Our name has changed, but our global industry leadership remains, and there are a few characteristics worth highlighting. We are the world's largest lottery operator, running day-to-day operations in nine jurisdictions We are also the primary technology provider to many of the world's largest lotteries. and we are the number one provider of iLottery platforms globally. These leadership positions are built on a nearly 50-year history of innovation, reliability, and an incredibly strong team with deep expertise and customer relations.
Thank you, Jim, and good morning to all. We’re excited to welcome you to our first earnings call as BrightStar Lottery.
As a pure play business, we've got a clear mission of elevating Lottery and inspiring players to bring meaningful benefits to all stakeholders.
Our name is changed but our Global industry leadership remains and there are a few characteristics worth highlighting.
Vincent Sadusky: This is the foundation from which we've been able to deliver steady growth and strong cash flows, and we firmly believe our future is even brighter.
We are the world's largest Lottery. Operator running day-to-day operations in 9 Jesus. The primary technology provider to many of the world's largest Lottery and we are the number 1, provider of iot platforms globally. These leadership positions are built under nearly 50-year, history of innovation, reliability, and an incredibly strong team with deep expertise and customer relations.
This is the foundation from which we've been able to deliver steady growth and strong cash flows, and we firmly believe our future is even brighter.
Vincent Sadusky: Several important milestones have been achieved over the last few months. We closed the gaming and digital sale for net cash proceeds of approximately $4 billion, which was better than expected. We secured the Italy Lotto License, our most important operator contract, through November 2034, and we've developed a compelling digital strategy to grow that. and a capital allocation plan is in place to drive future growth while increasing returns for shareholders.
Several important Milestones have been achieved over the last few months. We closed the gaming and digital sale for net cash. Proceeds of approximately 4 billion, which was better than expected.
We secured the Italy. Lotta license. Our most important operator contract through November 2034 and we've developed a compelling digital strategy to grow that business.
Vincent Sadusky: With respect to the second quarter, results were in line with our expectations. Same store sales trends improved around the world with close to 3% growth in core instant ticket and draw games and more than 30% increase in global iLottery wages. Across the board, players are responding to innovative new games, especially those at higher price. Italy's same store sales performance was impressive, rising nearly 4%. Scratch and Win Wagers were up on a successful relaunch of the Mille Dario franchise across multiple price points and a new summer bundle of tickets. For lotto, multibet payslips are driving 10-e lotto growth, while the Numeradoro option is driving higher Joka de Lotto sales.
And a capital allocation plan is in place to drive future growth while increasing returns for shareholders.
With respect to this second quarter results for in line with our expectations same store sales Trends improved around the world with close to 3% growth in core, instant ticket, and draw games and more than 30% increase in global. I Lottery wages.
Plus the board players are responding to Innovative new games, especially those at higher price points.
Italy seems to indicate that our sales performance was impressive, rising nearly 4%.
Scratch and win! Wagers were up on a successful relaunch of the Milionario franchise across multiple price points and a new summer bundle of tickets.
Vincent Sadusky: Italy iLottery wagers increased over 20% in the quarter on the success of new Jocopew games, as well as digital replicas of the most popular physical retail games. Our inquiries focused on driving digital adoption in Italy's working Year-to-year wagers on our B2C sites are growing at about twice the overall market rate, and we've gained about 2.5 points of market share since launching the MyLotteries Play app earlier this year. In the US, same store sales, for instance, draw games returned to growth of close to 1% in the quarter. California and Florida instant ticket sales achieved strong Fueled by new games at $40 and $50 price points, and trends in Michigan improved with the launch of a new $50 ticket.
For lotto multi bed, pay slips are driving 10y. Lotto growth. While the numerator Auto Oro option is driving higher. Joe could do sales.
Italy. I I Lottery wages increased over 20% in the quarter on the success of new Joco, Pew games, as well as digital replicas of the most popular physical retail games.
Our increased focused on driving digital adoption in Italy is working nicely year to year wages on our b2c sites are growing at about twice, the overall market rate. And we've gained about 2 and a half points of market share since launching the my lottery Play app earlier this year.
In the US same store sales, for instance, in drug games, return to growth up close to 1% in the quarter.
California and Florida, instant ticket sales achieved. Strong increases fueled by new games at 40 and 50 price points and Trends in Michigan improved with the launch of a new $50 ticket.
Vincent Sadusky: our proprietary cash pop game, which is currently in 16 jurisdictions. drove draw game sales growth in Florida, Georgia, and North Carolina. U.S. high lottery wagers were up over 30% in the period, fueled by Georgia and Kentucky and the contribution from new eInstinct games we recently launched in Michigan. Multistate jackpot activity remained low with the absence of any large jackpots in the period compared to $1.3 billion jackpot in Q2 of last The rest of the world's same store sales were up more than 8% driven by EuroMillions jackpot performance, which had four draws at the 250 million euro cap, in addition to double digit iLottery and growth in Poland and in Belgium.
Our proprietary Cash Pop game, which is currently in 16 jurisdictions, drove strong sales growth in Florida, Georgia, and North Carolina.
Us High Lottery wages were up over 30% in the period, fueled by Georgia, and Kentucky, and the contribution for new e. Instant games we recently launched in Michigan.
Of any large jackpots in the period compared to 1.3 billion jackpot in Q2 of last year.
Rest of world, same store sales were up, more than 8% driven by euromillions jackpot performance which had 4 drawers at the 250 million euro cap. In addition to double digit, I Lottery and growth in Poland and in Belgium,
Vincent Sadusky: Product sales are up about 60%. And our new state-of-the-art printing presses is running 24-7, helping us to deliver on increased production volumes in Texas, France and Portugal. We're seeing increased demand for our proprietary Gleam at Infinity. In a short time, Infinity has developed a library of over 60 games available across 20 jurisdictions.
Product sales were up about 60% and our new state-of-the-art printing. Press is is running 24/7. Helping us to deliver on increased production volumes in Texas, France and Portugal.
We're seeing increased demand for our proprietary Gleam at Infinity tickets. In a short time, Infinity has developed a library of over 60 games available across 20 jurisdictions.
Vincent Sadusky: We've had some noteworthy contract wins and extensions over the last few months. First and foremost is Italy Lotto, which we secured through November 2034. In Missouri, a Brightstar customer for over 30 years, we entered into a new eight-year contract to deploy our fully integrated Omnia service. Omnia seamlessly connects retail and digital lottery channels to maximize operational flexibility. It also offers lotteries new ways of engaging players. We also secured several multi-year instant ticket printing contract extensions that we expect will maintain the strong momentum and opportunity we have in that.
We've had some noteworthy contract wins and extensions over the last few months. First and foremost is Italy. Lotto, which we secured through November 2034 in Missouri, has been a BrightStar customer for over 30 years. We entered into a new 8-year contract to deploy our fully integrated Omnia solution.
Omnia seamlessly connects, retail and digital Lottery channels to maximize operational flexibility.
It also offers lot's new ways of engaging players.
We also secured several multi-year instant ticket printing contract extensions that we expect will maintain the strong momentum and opportunity we have in that business.
Vincent Sadusky: The company has consistently returned capital to shareholders over the last decade through quarterly cash distribution. However, most of our capital during that period was allocated to investing in the business and reducing Today, with leverage in our target range, we are allocating more capital to enhance shareholder retention. In conjunction with the closing of the gaming and digital sale, we announced that a $1.1 billion net cash proceeds would be returned to shareholders. First, via a special dividend of $3 per share that provides an immediate benefit. Second, a 500 million share repurchase authorization that represents a significant portion of our current market cap and provides an opportunity for ongoing capital return and support for the stock.
The company has consistently returned capital to shareholders over the last decade through quarterly cash distributions.
however, most of our Capital during that period, was allocated to investing in the business and reducing Leverage
Today, with leverage in our target range, we are allocating more capital to enhance shareholder returns.
In conjunction with the closing of the gaming and digital sale, we announced that $1.1 billion in net cash proceeds would be returned to shareholders. First, we have a special dividend of $3 per share that provides an immediate benefit.
Second, a 500 million share repurchase authorization that represents a significant portion of our current market cap and provides an opportunity for ongoing capital return and support for the stock.
Vincent Sadusky: Today we announce plans to launch a $250 million accelerated share repurchase program with a counterparty bank under the new authorization. This represents the largest buyback activity in the company's history. DeAgostini, our largest shareholder, will not be participating in the program, so the shares will come out of the public flow. We also intend to maintain the current level of about $160 million in annual regular cash dividends, even with a reduced share.
Today, we announced plans to launch a 250 million accelerated share repurchase program with a counterparty bank. Under the new authorization. This represents the largest buyback activity in the company's history.
D. Augustine: Our largest shareholder will not be participating in the program, so the shares will come out of the public float.
We also intend to maintain the current level of about $160 million in annual, regular cash dividends, even with a reduced share count.
Vincent Sadusky: The return to a singular focus on lottery marks an exciting new era for the company. Brightstar enjoys global leadership and a growing industry. Our business model is supported by mostly exclusive contractual and recurring revenue streams that deliver steady growth and have proved to be very resilient in the face of macroeconomic and geopolitical challenges. For context, our average customer relationship is about 30 years, and the average revenue weighted contract life remaining for our portfolio is 70 years. This provides us with significant stability and visibility for our revenue, profit and cash. We believe broader iLottery adoption, especially in the US and Italy will be a meaningful tailwind that enhances our future growth out We have a clear right to win in iLive.
The return to a singular focus on lottery. Marks an exciting New Era for the company Price Star enjoys Global Leadership and a growing industry. Our business model is supported by mostly exclusive contractual and recurring revenue streams that delivers steady growth and have proved to be very resilient in the face of macroeconomic and geopolitical challenges.
For context, our average customer relationship is about 30 years and the average revenue weighted contract life remaining for our portfolio is 7 years.
This provides us with significant stability and visibility for our Revenue profit and cash flow.
Vincent Sadusky: Over the years, the Brightstar team and board of directors have consistently worked to unlock the intrinsic value of our assets. That is especially evident in the work done over the last two years to refocus the business on lottery, significantly improve the balance sheet and return capital to shareholders. We believe Brightstar's current valuation provides a compelling entry point as we execute on our long-term We believe the future is Brightstar.
We believe broader iLottery adoption, especially in the U.S. and Italy, will be a meaningful tailwind that enhances our future growth algorithm. We have a clear right to win in iLottery.
Over the years, the Brightstar team and Board of Directors have consistently worked to unlock the intrinsic value of our assets.
That is especially evident in the work done. Over the last 2 years to refocus to business on lottery significantly, improve the balance sheet and return Capital to shareholders. We Believe brightstar's current valuation provides a compelling entry point as we execute on our long-term executives.
Massimiliano Chiara: Now I'll turn the call over to Max.
We believe the future is bright star. Now, I'll turn the call over to Max
Massimiliano Chiara: Thank you, Vince. And hello to everyone joining us today. Brightstar generated second quarter revenue of $631 million and adjusted EBITDA of $274 million, propelled by 2.6% global same-store sales growth in instant ticket and draw games and a double-digit increase in product sales revenue. As expected, the year-over-year headwind caused by a lack of large U.S. multistage exports and the associated LMA benefit continued in the second quarter, but were mostly offset by underlying revenue growth. in the other part of the business. Year-over-year comparisons on profits are also impacted, given the high profit flow-through of jackpots and LMA activities.
Thank You. Vince. And hello to everyone joining us today.
Ristar generated second quarter revenue of $631 million and adjusted EBITDA of $274 million, propelled by 2.6% global same-store sales growth in instant ticket and draw games and a double-digit increase in product sales revenue.
As expected the year over year had wind caused by a lack of large US multi-state, jackpot. And the associated LMA benefit continued in the second quarter, but were mostly offset by underlying Revenue growth.
In the other part of the business.
Year-over-year comparisons and profits are also impacted given the high profit flow through of jackpot and LMA activity.
Massimiliano Chiara: Second quarter revenue of $631 million was up 3% from $613 million in the prior year and was stable at constant currency. Improved trends in same-store sales across all geographies and higher product sales related to both terminal sales and instant ticket services drove a $25 million increase in revenue nearly offsetting the $27 million impact from elevated levels of jet productivity and associated LMA incentives in the prior year period. For the second quarter in a row, there were no billion dollar level jackpots in the second quarter compared to a 1.3 billion Powerball jackpot in the prior year period.
Currency improvements, trends in same-store sales across all geographies, and higher product sales related to both terminal sales and instant ticket services drove a $25 million increase in revenue, nearly offsetting the $27 million impact from elevated levels of jackpot activity and associated LMA incentives in the prior year period.
Massimiliano Chiara: Elevated levels of JetBot and LMA incentive revenue are highly dependent on the timing of very large multi-stage JetBots which occur sporadically, causing period-to-period variability. We delivered Adjusted EBITDA of $274 million in the second quarter, down 5% as reported and 9% at constant currency, when compared to $290 million in the prior year. If you exclude the impact of multistage equity and related LMA incentives, which are outside of our control, Adjusted EBITDA was in line with the prior year, despite incremental investments we are making in growth areas of the business. This reflects some of the benefits we are realizing from the Optima Cost Savings Program and highlights the resilient nature of this business.
For the second quarter in a row, there were no billion-dollar level jackpots in the second quarter, compared to a $1.3 billion Powerball jackpot in the prior year period.
Elevated levels of jackpot and LMA incentive Revenue are highly dependent on the timing of very large, multi-stage efforts, which occurs occurs, sporadically, causing period, to period variability.
We delivered adjusted EBITDA of $274 million in the second quarter, down 5% as reported and 9% at constant currency when compared to $290 million in the prior year. If you exclude the impact of multi-stage jackpot and related LMA incentives, which are outside of our control, adjusted EBITDA was in line with the prior year, despite the incremental investments we're making in growth areas of the business.
This reflects some of the benefits, we have realizing from the Optima cost Savings Program and highlights the resilient nature of this business.
Massimiliano Chiara: Year-to-date cash generation continues to be strong, delivering cash from operations of $433 million and free cash flow of $259 million. Cash from operations in the first half was about $100 million better than expected, mostly from timing of working capital items, although some of the upside will be maintained for the year. As Vince mentioned, we allocated $2 billion of the gaming and digital sales proceeds to that reduction, which was completed earlier this month. is included the full redemption of the four and one eight senior secure US dollar notes due April 2026 and the three and a half percent senior secure euro notes due June 2026 and prepayments of 300 million euro term loan facilities due January 27 and revolving credit facilities due July 2027.
Here to date cash. Generation continues to be strong delivering cash from operations of 433 million and free cash flow of 259 million.
Cash from operations. In the first half, was about 100 million better than expected mostly from timing of working capital items, although some of the upside will be maintained for the year.
As Vince mentioned we allocated 2 billion dollars of the gaming and digital sales proceeds to that reduction which was completed earlier this month.
Massimiliano Chiara: In addition, we drew the second 500 million euro tranche of the new one billion euro term loan, which was predicated on us winning the Italy Lottery Award. Net debt increased $463 million from the end of the year to $5.2 billion, which is primarily driven by the impact of foreign currency translation. Net debt leverage pro forma for the $2 billion debt reduction completed in July was 3.0x, in line with our target, and includes about a third of a turn negative impact from currency translation for the first six months of the year. Our current balance sheet includes significant liquidity of $2.9 billion, putting us in a solid position in advance of the upcoming payment for the Italy lottery license fee.
This included the full Redemption of the 4 and 1/8 senior, secure US dollar notes, due April 2026, and the 3 and a half percent, senior security Euro notes, due June 2026, and prepayments of 300 million. Euro term loans facilities, due January 27th and revolving credit facilities. Due July 2027,
In addition, we drew the second €500 million tranche of the new €1 billion Term Loan, which was predicated on us winning the Italy Lotto award.
Net debt increased by $463 million from the end of the year to $5.2 billion, primarily driven by the impact of foreign currency translation. Net debt leverage performer for the $2 billion debt reduction completed in July was 3.0x, in line with our target, and includes about a third of a turn negative impact from currency translation for the first six months of the year.
Massimiliano Chiara: As a reminder, this fee is payable in three installments, with €500 million already paid in July, €300 million due when the new license term commences towards the end of this year, and a balance of €1.43 billion due by April 30th, 2026. Brightstar is responsible for 61.5% of the total, so euro 1.37 billion or approximately $1.6 billion at current rates, and our consortium partners will fund the balance. With the mandatory debt repayment beyond us, our debt maturity profile is attractive with no meaningful maturities until 2027. We continue to execute on Optima 3.0, our Structural Cost Reduction Program, initially designed to proactively address the stranded costs associated with the sale of gaming and digital, and have recently expanded the target to $50 million in annualized savings by the end of 2026, with about 60% expected to be realized this year, as we are proceeding expeditiously and now expect an acceleration on some structural cost roll-off post-completion of the sale.
Our current balance sheet includes significant liquidity of $2.9 billion, putting us in a solid position in advance of the upcoming payments for the Italy lost license fee.
As a reminder, this fee is payable in three installments, with €500 million already paid in July. An additional €300 million is due when the new license term commences towards the end of this year, and the balance of €1.43 billion is due by April.
30th 2026.
Price Star is responsible for 61.5% of the total, so €1.37 billion, or approximately $1.6 billion at current rates, and our Consortium Partners will find the balance.
With the mandatory debt repayment behind us, our debt maturity profile is attractive, with no meaningful maturities until 2027.
Massimiliano Chiara: And we are also working diligently to explore opportunities to further expand this program in the future, with new initiatives focused on improving our operational efficiency. The bulk of the current program's savings are focused on back-office optimization and do not impact customer-facing activities or jeopardize our growth initiatives in any way. In conjunction with this expansion, we incurred a $21 million pre-tax restructuring charge in the second quarter.
We continue to execute on Optima 3.0 our structural cost Reduction Program, initially designed to proactively address. The stranded cost associated with the sale of gaming and digital, and have recently expanded the target to 50s in annualized savings by the end of 2026 with about 60% expected to be realized this year. As we are proceeding expeditiously and now expect an acceleration on some structural costs to roll off. Post completion of the sale and we are also working diligently to explore opportunities to further. Expand this program in the future with new initiatives, focused on improving our operational efficiency.
In the second quarter.
Massimiliano Chiara: Increasing shareholder value is a key area of focus and we have recently announced several ways in which we are delivering enhanced shareholder returns. First is a two-year, $500 million share repurchase authorization representing about 17% of the current market cap of the company.
Increasing shareholder value is a key area of focus and we have recently announced several ways in which we are delivering, enhancer all the returns.
Massimiliano Chiara: As part of that authorization, we are planning to launch a $250 million accelerator share repurchase program, the largest in companies. Next is the declaration of a $3 per share special cash dividend that is payable today. For U.S. shareholders, we anticipate that this special dividend, along with the quarterly dividend paid in June of this year and any remaining quarterly dividends that might be paid during the remainder of this year, will be treated as a return of capital for U.S. federal income tax purposes.
First is a 2-year, $500 million purchase authorization, representing about 17% of the current market cap of the company. As part of that authorization, we are planning to launch a $250 million accelerator share repurchase program, the largest in the company's history.
next is the Declaration of a 3 dollar per share, special cash dividend. They that is payable today.
Massimiliano Chiara: I refer you to the Form 6K filing filed with the SEC today and the Dividend History section of our Investor Relations website for further information. And finally, we intend to maintain approximately $160 million in annual regular cash dividends going forward, even with a reduced share count post-execution of the buyback program, effectively increasing the per share dividend on an annualized basis. At the current share price, our regular dividend represents a compelling yield of around 6%.
For user holders, we anticipate that this special dividend, along with a quarterly dividend paid in June of this year and any remaining quarterly dividends that might be paid during the remainder of this year, will be treated as a return of capital for U.S. federal income tax purposes.
I refer you to the Form 6-K filing filed with the SEC today and the dividend history section of our investor relations website. For further information,
And finally, we intend to maintain approximately 160 million in annual regular cash, dividends going forward even with the reduced share count post-execution of the buyback program, effectively increasing the per share dividend on an annualized basis.
The pattern share price or regular dividend represent a compelling yield of around 6%.
Massimiliano Chiara: Now I would like to turn to the outlook. For July 2025, we are reaffirming our adjusted EBITDA outlook of $1.1 billion while improving our cash flow expectations. Due to a timing shift in product sales and one month of the increased amortization related to the Italy lotto upfront license fee.
Now, I would like to turn to the outlook.
For the full year 2025, we are reaffirming our adjusted EBIT outlook of $1.1 billion while improving our cash flow expectations.
Due to a timing shift in product sales and 1 month.
Massimiliano Chiara: We are adjusting for your revenue down 50 million to 2.5 billion dollars. As a reminder, upfront license fee amortization is treated as contra revenue and the starting date of the new concession will be December 1st, 2025. With respect to adjusted EBITDA, the benefit from a more favorable euro-dollar exchange rate assumption to align with more current levels in the back half of the year is offset by higher than expected negative impacts from the U.S. multistage outputs and LMA dynamics described during this call. We expect higher revenue and adjusted EBITDA in the second half of the year versus the first half, reflecting improved multistage output and LMA comparisons, as well as incremental optimal savings.
Of the increase, the mortiser related to the Italy law to offline. License fee, we are adjusting fully revenue down, $50 million to $2.5 billion.
As a reminder up front licensed p is treated as Contra revenue and the starting date of the new concession will be December 1st 2025.
With respect to adjusted ebita, the benefit from a more favorable euro dollar exchange rate, assumption to align with more current levels in the back, half of the year is offset by higher than expected negative impacts from the US multi-stage efforts and LMA, Dynamics, described during this call.
Massimiliano Chiara: In the third quarter of 2025, revenue and adjusted EBITDA are expected to be up mid-single digits from prior year levels on same-store sales growth and higher product sales.
We expect higher revenue and adjusted EBITDA in the second half of the year versus the first half, reflecting improved multi-stage efforts and LMA comparisons, as well as incremental Optima savings. In the third quarter of 2025, revenue and adjusted EBITDA are expected to be up mid-single digits from prior levels, driven by same-store sales growth and higher product sales.
Massimiliano Chiara: Our full-year cash flow outlook has improved nicely. Cash from operations inclusive of the first two tranches of the lot offering fee totaling 800 million euro is now expected to be a lower use of cash of about 275 million. This is 75 million better than our prior expectations based on various improvements across the board in interest, income taxes, and other working capital items. CAPEX is revised lower by $75 million to around $375 million, reflecting timing shifts related to recent contract extensions. Overall, this translates to about a $150 million improvement in the outlook for free cash flow.
Our full year cash flow Outlook has improved nicely cash from operations, inclusive of the first 2 branches of the lot off from fee. Totaling 800 million euro is now expected to to be a lower use of cash of about 275 million.
This is $75 million better than our prior expectation, based on various improvements across the board in interest income, taxes, and other working capital items.
Massimiliano Chiara: To round out the Outlook conversation, following recent contract renewal development, we currently expect annual CAPEX of about $375 million from full year 25 through full year 28, with a reduction to $200 to $225 million for several years thereafter, once we complete our current CAPEX cycle, related to the renewals extensions of most of our largest FM and operator contracts. I would like to remind you that our full year 25 adjusted EBITDA outlook of $1.1 billion includes several items that specifically reduced profit in 2025, such as the severity of the jackpot and LMA headwind, for a total amount north of $70 million, and specific investments in the business, which are considered temporary in nature, for a total amount expected for the full year of about $25 million.
Capex is revised lower by 75 million, to around 375 million reflecting time in shifts related, to recent contract extensions overall, this translates to about a 150 million Improvement in the outlook for KES Club.
To round out the Outlook conversation following recent contract, renewal developments. We currently expect annual capex of about 375 million from full year. 25 through full year, 28 with a reduction, to 200 to 225 million for several years thereafter. Once we complete our current capit, cycle related to the renewals extensions of most of our largest SM and operator contract.
Massimiliano Chiara: This, coupled with the benefits expected to be realized from Optima 3.0, gives us confidence that we can return to adjusted EBITDA levels closer to $1.2 billion in the future. Likewise, cash from operations averaged around $780 million over the last three years, and we believe we should be able to return to that level going forward if we exclude the Italy Lotto upfront license fee once we exit from this one-off period.
I would like to remind you that our full year 2025 adjusted EBITDA outlook of $1.1 billion includes several items that specifically reduced profit in 2025, such as the severity of the jackpot and LMA headwind for a total amount north of $70 million, along with specific investments in the business that are considered temporary in nature for a total amount expected for the full year of about $25 million.
This, coupled with the benefits expected to be realized from Optima 3.0, gives us confidence that we can return to adjusted EBITA levels closer to $1.2 billion in the future.
Over the last 3 years and we believe we should be able to return to that level going forward. If we exclude the Italy lot of upfront, license fee. Once we exit from this 1-off period,
Massimiliano Chiara: One thing to note, given the streamlined PurePlay Lottery business expected going forward, we have initiated an extensive review of our financial disclosures to align to our post-gaming industry groups. With Q3 earnings, we expect to provide a status update and any changes to our GAAP, non-GAAP KPIs and other disclosures to achieve this enhanced alignment and to early adopt some recent new disclosure requirements published by the SEC. Brightstar is well-positioned for the future as a pure play lottery business, supported by our global leadership position, a growing resilient business with strong profit and cash flow profiles, a continued focus on structural cost reduction, and a balanced capital allocation strategy.
One thing to note, given the streamlined Pure Play Lottery business expected going forward, is that we have initiated an extensive review of our financial disclosures to align with our post-gaming Industry Group.
With Q3 earnings, we expect to provide a status update and any changes to our GAAP, non-GAAP KPIs, and other disclosures to achieve this enhanced alignment and to early adopt some recent new disclosure requirements published by the SEC.
Massimiliano Chiara: that includes and hence should all the return.
Price Star is well, positioned for the future as a. Pure play Lottery business supported by our Global Leadership position. A growing resilient business with strong profit and cash flow profiles. A continued focus on structural cost reduction and the balance Capital allocation strategy.
That include enhance shareholder returns.
Unknown Executive: That concludes our prepared remarks.
Unknown Executive: Operator, would you please open the line for questions? Thank you. If you would like to ask a question, please press star one on your telephone keypad. If you would like to withdraw your question, simply press star one again. Please ensure that your phone is not on mute when called upon. Thank you.
That concludes our prepared remarks. Operator, would you please open the line for questions?
Thank you. If you would like to ask a question, please press star 1 on your telephone keypad, if you would like to withdraw your questions, simply press star 1 again.
Please ensure that your phone is not on mute when called upon thank you.
Jeffrey Stantial: Your first question comes from Jeff Stantial with Stiefel. Your line is open. Hey, good morning, Vince, Max, thanks for taking our questions. And congratulations, again, on closing the gaming and digital transaction.
Your first question comes from Jeff Santeiu with Stifel. Your line is open.
Massimiliano Chiara: Maybe just starting off here on capital allocation and the BIDEC authorization, Max or Vince, can you just walk us through the intuition on looking to the ASR structure versus more open market type purchases? And then maybe how you decided on the $250 million amount for the ASR. And then for that remaining $250 million, should we expect the spend to be more opportunistic, more programmatic? And just to be clear, do we know yet or do you know yet if D'Agostini will be opting out of this half of the $500 million as well? Yes, Jeff. Good question.
Hey, good morning, Vince, Max. Thanks for taking our questions and congratulations again. I'm closing the gaming and digital transaction maybe uh, just starting off here on on cap allocation and the buyback authorization, Max or Vince can you just walk us through the intuition on look into the ASR structure? You know, versus more open market type purchases and and then maybe how you decided on the 250 million amount
For the ASR and then for that remaining 250 million, should we expect to spend to be more opportunistic, more programmatic and, um, just to be clear? Do we know yet, or do you know yet, if they, the Augustine will be opting out of this half of the 500 million as well? Thanks,
Yes, yes. So um
Massimiliano Chiara: So first of all, the The first, the total authorization that we have obtained by the Board of Directors in connection with the proceeds of $500 million is a large program with regard to our capitalization. It represents about 17% of the market cap of the company today. So, again, we think that sizing the program with a first tranche of 50% of its value is definitely an important decision and an important step towards showing the full commitment of the company to execute that plan. We think the benefit of the ASR is obviously the immediacy of the ability to reduce the share count once the program is launched.
Good question. Um, so first of all, the, um,
The first the, the total um, authorization that we have, uh, obtained by the board of directors, uh, in connection with the, uh, proceeds, uh, of 500 million dollars.
Massimiliano Chiara: And also the fact that it represents a constant support of purchase of shares during a relative period of time that would help the company kind of navigate through this interim period. And so we believe that this program, this instrument represents a better tool for our particular situation to help deliver the shareholder returns that we have committed for.
Is, um, a large program, uh, with regard to, to our, um, capitalization, the represent about 17% of, uh, the market cap of the company today. So again, uh, we think that sizing the program, uh, with a first branch of, uh, 50% of its value is definitely an important decision. And an important step towards, uh, showing the full commitment of the company to execute that plan. We think the benefit of the ASR is obviously, the immediacy of the ability to reduce the share count once the program is launched. Um, and also the fact that, um, represents a constant support of, uh, purchase of shares during, uh, relative period of time. Uh, that would, uh, would help the company. Uh, kind of navigate through this interim period.
Massimiliano Chiara: In terms of the next, kind of the next phase, we would like to see how this first phase gets completed. Obviously, the decision of D'Agostini of not tendering shares into this first tranche makes the case for the entire program insisting on the float, which is obviously an important feature of this program as well.
And so, we believe that this, um, uh program. This instrument represent a better Tool, uh, for our particular situation, uh, to, uh, help deliver the shareholder returns that we have, uh, we have, uh, committed for
Massimiliano Chiara: Obviously, it's not appropriate for us to speculate on the D'Agostini intentions with the development of future tranches of the total program.
Massimiliano Chiara: And again, we have not decided yet, speaking about that, what are the most appropriate instruments going forward.
In terms of, um, uh, the next, uh, kind of the next phase we would like to see how this first phase, uh, gets completed. Obviously, um, the decision, uh, of our um, the Augustine of not, uh, tendering shares into this first branch, uh, makes the case for the entire program, insisting on the float, which is obviously um, an important feature of this program as well, obviously. Um, it's not appropriate for us to speculate on the D. Augustine intentions uh, with uh, the development of future uh, branches of the total program.
Vincent Sadusky: So, we would like to launch, to be able to launch this program, see the program in execution, see the outcome, and then decide what to do next once we get to that point. Sorry, I'll just add to that. And thanks for the compliment. It was a long two-year process to get that strategic realignment done and raise the proceeds and now have the great opportunity to be able to, you know, have been competitive for Lotto and then also have the excess proceeds available to think about, you know, how to drive value for the company. So I would just say from a big-picture perspective, you know, we all believe firmly, the management team, our board of directors, that the company's intrinsic value is significantly greater than where it's currently trading at.
And again, we have not decided yet speaking about that. Uh, what what are the most appropriate instrument going forward? So we, we would like to launch uh to be able to launch this program. Uh see the program in execution, see the outcome, and then decide what to do next. Once we get to that point
Vincent Sadusky: I mean, a lot of companies say that, but when you look at free cash flow per share, when you look at, you know, all the different metrics and valuations that we've looked at, you know, we've decided that's apparent. So we're excited to invest back in buying back our shares. Yeah, as you saw from the press release and heard on our comments, D. Agostini, our largest shareholder, will not participate in the buyback. So triangulating to what is the right amount and what is the right structure, you know, the amount of $250 significant relative to the public float, you know, will take some time to execute that.
Thank you for sorry, I'll just add to that, and thanks for the compliment. It was, you know, a long 2 year process to get uh, to get that strategic realignment done and raise the proceeds and now have the great opportunity to be able to, you know, have been competitive for a lot. And then also, uh, have the excess proceeds available. Think about, you know, how to how to drive value for the, for the company. So, I would just say, from a big picture perspective, you know, we all believe firmly, uh, the management team. Our board of directors that the companies intrinsic value is significantly greater, uh, than where it's currently trading at. I mean, a lot of companies say that, but when you look at free cash flow per share, when you look at, you know, all the different metrics and valuations that we've looked at um, you know, we've decided that's that's apparent. So we're excited to invest back in buying back, our shares. Yeah. As you saw from the press release and and and heard on our our comments uh D Augustine.
Vincent Sadusky: And as Max said, we will then evaluate based on the impact of that where we stand and what the next step might be. But then also, I think that this is significant from the perspective that, you know, the company historically has chosen to return capital to shareholders through dividends, right? And we're going to maintain that dividend policy. In fact, we're going to, you know, our intention is to maintain the dividends at the level that we can. So I think that, you know, this ASR as a vehicle is efficient, gives us the opportunity to buy shares back at a good value.
Our largest shareholder will not participate in the buyback. So, triangulating to what is the right amount and what is the right structure, you know, the amount, uh, of 250 significant relative to the public flow. Um, you know, we'll take some time to execute that. And as Max said, we will then evaluate based upon the impact of that, uh, where we stand and and, uh, and what the next step might be. Um, but then also, I, I think that this is
Vincent Sadusky: And I think equally as important, it shows real commitment, right? This is the largest program the company's ever done. And it's not, you know, engaged really in buybacks. It did a bit of that a few years back, but not consistently. And I think this just really, I think, demonstrates the commitment entering into the contract and our strong view around about value opportunity for existing shareholders.
Significant from the perspective that, you know, the company historically has chosen to return Capital to shareholders through dividends, right? And we're going to maintain that dividend policy. In fact, we're going to, you know our intention is to maintain the dividends of the current level, despite the reduced share count. And we think that, you know, this ASR is a vehicle is efficient. Uh, gives us the opportunity to buy shares back at a good value. Uh, and I think, uh, equally as important, it shows, uh, real commitment, right? This is the largest program, the company's ever done. And it's not, you know, engaged really in in BuyBacks it did did did a bit of that a few years back, but not consistently. And I think this, this just really I think demonstrates the, the, the commitment entering into the contract and, and our our, uh, strong view around, uh, about value opportunity, for existing shareholders
Unknown Executive: That's great. Thank you both for all that color.
Massimiliano Chiara: And then maybe turning over to guidance, Matt, can you just, you know, talk about or maybe remind us what's embedded in the back half guidance in terms of same store sales, maybe focusing on Italy, and the non jackpots for North America. And then if you can you compare that to, you know, exit rate growth rates coming out of Q2. And if it is materially different, sort of like what are the, you know, the puts and takes the levers to, you know, to drive towards that back half guidance. Thanks.
That's great. Thank you both for, for all that color. And then it may be turning over to to guidance. Can you just you know, talk about or or maybe remind us what's
Embedded in the back, half, guidance. In terms of same-store sales, maybe focusing on Italy. Um, and the non-jackpot for North America. And then if you can, you compare that to, um, you know, exit rate, growth rates coming out of Q2. And if it is materially different, sort of like, what are the, you know, the puts and takes, the levers to, um,
You know, to drive towards that back half guidance. Thanks.
I'll kick off on this, uh, Vince again. So again, uh, going through the 4 major items so LMA, jackpot, Italy, and us.
So the, the LMA starts a new fiscal year with our Q3. So again, there is, uh, not a progress history, uh, that would influence, uh, any deviation from the norm that being the norm, uh, kind of, uh, in expectation of no incentive no shortfall. So we don't expect Q3 to be a surprise at this point. And, um, obviously, with 2 4, we have to see what happens during Q3 in terms of objective performance. But, uh, for now we expect a muted second half of the year in terms of LMA. And so, when you compare H1 to H2, we should hopefully get the benefit out of it, in Jackpot. Um,
Uh, again the jackpot has been uh, has been extremely uh, impacted in the last 9 months. Uh, since the 1.3 billion early, April of 24, there has only been 1 billion dollar Jack Mega Million jackpot in at the end of December. Uh and so obviously we have we have suffered for the entire period. Uh we expect
Some sort of return to normalization in the second half, uh, but we don't see an excitement around, um, the casual play yet. Uh, so again, still modest improvement in the jackpot.
2, and even q1 was phenomenal when you normalize it for the selling days and and everything else. So again, uh, Italy, uh, is expected to continue well in Q3 and Q4, but probably it is slightly, uh, more modest growth than what we have experienced in q1 and normalized for for uh, the this adjustment. And then last but not least in the US retail Market. We see a, a steady state Improvement. Uh, is um, step by step, but we see months in months and months out, more States, more jurisdictions, uh, turning the corner. Moving into a positive trend. We have seen California Florida, uh, doing very well in Q2 and we expect more of those to improve also in the back half of the year. And then finally, I Lottery, we expect a lottery to continue this phenomenal Trend. Um, really for us
The the the the Turning Page has been the full, uh, introduction of the cloud, uh, the transition to Cloud which has allowed us to scale up the operations quickly and follow the market. When the market uh, goes up and like, we have seen in Kentucky, for example, in this last in the last 3 months.
Vincent Sadusky: Vince, anything to add? Yeah, I would just add to that. I think, you know, Max summed up the revenue drivers and the profitability drivers well, and the expectation for the back half of the year. Yeah, I would say when we look at pacings for the first three weeks of the year, you know, worldwide sales are up about 2% or so. It was great in the second quarter to see, you know, return to growth. And the takeaway for me really is it's just great to have multiple revenue streams. We're, you know, geographically diverse and more and more so product diverse in that we're having more significant revenue streams coming in for my lottery and for printing as well.
Been sending to add.
Vincent Sadusky: So I think it's just great to have this diversity. And the way I look at it is if it, you know, if it had not been for, you know, unfortunately, another quarter of bad luck with North America multi-state jackpots, you know, the top line growth would have been very good for the quarter. So, you know, that's our view. We definitely see the core trends have improved in the second quarter and continue that trend through the third quarter. And hopefully, we get a little bit of luck on multi-state jackpots in the U.S. And just to put things in perspective, I think there was about a year and a half, about six quarters or so, where there was a billion-dollar jackpot or build towards a billion-dollar jackpot.
Yeah, I would just add to that. I think you know, Max summed up, the the revenue drivers and the profitability drivers. Well um and the expectation for the, for the back half of the year. Yeah, I would say what I when we look at pacings for the first 3 weeks of the year, um, you know, worldwide sales are up about 2% or so it was greater than the second quarter to see, you know, return to, to growth. And the takeaway for me really is, it's it's just great to have multiple revenue streams where, you know, geographically diverse and any more and more. So, uh, product diverse in that we're having in more of a significant revenue streams coming in for my lottery and and for printing as well. So I think it's just great to have this this diversity and the way I look at it is if it you know, if it not been for you know unfortunately another quarter of of bad luck with North America multi-state jackpots. Uh you know the Topline growth would have been would have been very good for the quarter so uh you know, that's that's our our view, we definitely see the see the
Vincent Sadusky: And, you know, we haven't seen that, I think, in Powerball since the second quarter of 24. And I think Mega Millions has only seen one. And, you know, we really think the move to the $5 Mega Millions can have a significant impact on the build. But unfortunately, Mega Millions has been hit multiple times and has not enjoyed a good run since the $5 price change. But over time, we have the expectation that those jackpots will build and we'll, you know, we have a chance to see, I think, a good positive impact from that change as well.
Core Trends have improved in the second quarter and uh continue to that Trend through the through the third quarter. And uh, hopefully we get uh, we get a little bit of luck on, uh, on multi-day jackpots in the, in the US. Um, and just to put things in perspective, uh, I think there was, it was about a year and a half uh, about 6 quarters or so, where there was a billion dollar jackpot or a build towards a billion dollar jackpot. And
Um, you know, we haven't seen that. I think in Powerball since uh, since the second quarter of 24 and I think Mega Millions is only seen 1 and, you know, we really think the the move to the 5 Dollar Mega Millions can can have a significant impact on the build, um, but unfortunately, Meghan has been hit multiple times and has not enjoyed a good run since the 5 Dollar, uh, price change but, uh, uh, over time, we have the expectation that those jackpots will build. And we'll, you know, we have a chance to see, I think a good, uh, a good positive impact from that change as well.
Unknown Executive: That's great. Thank you both.
That's great. Thank you both.
Barry Jonas: The next question comes from Barry Jonas with Truist, your line is open. Hey, guys, good morning. Maybe as a follow up, you know, you've given some helpful color on current trends.
The next question comes from Barry Jonas with truist, your line is open.
Massimiliano Chiara: But last quarter, you did highlight a high degree of macro uncertainty. Have you seen any improvements? So I'll say, okay, I'll get back. So, again, the macro uncertainty that we mentioned a quarter ago was really more of a warning in terms of really not knowing the direction of discretionary consumption going forward in light of the uncertainty created during the spring for tariff events and other situations. So, I think we continue to be cautious around particularly lower court. But we have not seen the deterioration that could have been possible. So again, the market is holding up pretty well.
Hey, hey guys. Good morning. Um, maybe as a follow-up, you know you've given some helpful caller on current trends. But last quarter you did highlight a high degree of macro uncertainty. Uh, have you seen any improvements since
So I'll start. Okay, okay, okay, go ahead, go backs.
so um again the the macro uncertainty that we mentioned, a quarter ago, was really more of a warning in terms of really uh
Not knowing the the direction of, uh, discretionary consumption going forward. Um, in in light of the uncertainty created, uh, during the, um, during the the spring, uh, for uh, um, tariffs and events and, uh, uh, and other situations. So, I think we continue to see a cautious around uh, particularly uh, lower courts.
Uh, but we don't, we have not seen the deterioration that, um,
Massimiliano Chiara: For us, it's really... The deciding factor is the ability to provide incremental innovation with new games, new game features, and new ways to access games that stimulate demand with existing players and new players. And so again, the company has the ability to offset potential weakness in the market by fostering incremental innovation.
uh, for us is really uh,
Vincent Sadusky: So again, we remain cautious, but we are optimistic that the second part of the year will look better, will show better trend than the first part of the year. Great. I would agree with Max, I would say really the You know, that comment was, as Max said, just based upon everything that was going on with tariffs and you know, the very potential negative scenario in the States and in Europe, and particularly where our business is primarily driven of what might happen now that we're not, of course, wrapped up, but much more settled on the tariff front.
The the deciding factor is the ability to provide uh, incremental Innovation with new games. Uh, new game features and new ways to access games, uh, that stimulate demands with existing players and new players. And so again, uh, the company, uh, has the ability to offset potential weakness in the market, uh, by by fostering incremental Innovation. So again we remain cautious but uh, we are optimistic that um um, the second part of the year will look better will show better Trend than the first part of the year.
Great, great. And then I, I would agree with Max, I would say, really the, um,
You know, that comment was, as Max said, just based upon, uh, everything that was going on with tarot and, you know, the very potential negative scenario, uh, in the States and in Europe, in particular, where our business is primarily driven, uh, of what might happen now.
Vincent Sadusky: And the negative economic fallout seems to be negligible. And hopefully that continues. It doesn't seem like that's certainly not nearly as significant a concern as we had in the second quarter.
Massimiliano Chiara: And again, just to step back and keep in perspective, the lottery business is one historically been anti-cyclical. And in some cases, when the economy has been tough, folks play lotteries more often. So yeah, I think it really is up to us and the team to continue to bring great products to the marketplace. And so I would definitely say that that comment is is significantly reduced where we sit today than where we sat 90 days ago. That's extremely helpful.
You know, we're not, of course, wrapped up but much more settled on the Tariff front, uh, and the, the negative economic Fallout seems to be negligible and hopefully that continues. Um, you know, it doesn't seem like that's that. That's certainly not not nearly as significantly concern as we had in the in the second quarter. And again just to step back and keep in perspective, you know, the lottery business is 1 that is historically been anti-cyclical. And in some cases when the economy has been tough uh folks uh uh play Lottery is more often so, um, yeah. I think it really is, uh, you know, up to us and the team to continue to, uh, to bring great products to the marketplace. And uh, so I would definitely say that that uh, that that comment is is significantly reduced where we sit today than where we sat 90 days ago.
Unknown Executive: Just and then just for my follow up, you know, recognizing your average contract life, I think it's about seven years long, just to follow up there, you know, as you think about the next round of contract bids, whether that's a renewal, or maybe a competitive bid.
Massimiliano Chiara: and the other is to really characterize the competitive environment and maybe walk through the balance between incumbency, technology and then pricing to really be successful. Thank you.
That's extremely helpful. Um just and then just for my follow-up, you know, recognizing your average contract life. I think it's about 7 years wanting just to follow up there, you know, as you think about the next round of contract bids whether that's a renewal or maybe a competitive bid
Marker as the competitive environment, and maybe walk through the balance between incumbency, technology, and then pricing to really be successful. Thank you.
Vincent Sadusky: Yeah, sure. You know, when we look at all the activity, there's been an incredible, probably an unprecedented amount of activity in renewals, just all happening to come together really over the last year or year and a half. And, you know, by and large, those have kind of gone the way that we that we expected. really reassuring for our company and our solution.
Yeah, sure. Um, you know, when we look at uh all the active, there's been a, an incredible, probably an unprecedented amount of activity in renewals just all happening to come together really over the last year or a year and a half. Um, and you know by and large those have kind of gone the way that we that we expected and I think, what's
Vincent Sadusky: is in markets like, let's say, Missouri, where, you know, there was a pretty much everything in lottery over the next several years and their desire to have us implement Omnia, which really covers everything from, you know, from retail to iLottery to connected play to player management, data insights, et cetera. You know, so that significant technical win that the company achieved to Lotto, which, you know, there was a, obviously it was a very competitive process in price, but also with a capable competitor in CISO slash Flutter to win that technology score. And then we look at markets like Ohio and New Mexico that came available and, you know, Brightstar did not win those opportunities.
Really reassuring for for our company. Uh, and our, our Solutions is in markets like, um, let's say Missouri where, you know, there was a expanded, uh, contract renewal encompassing, you know, pretty much everything in in Lottery over the the next several years and they're, uh, desire to have us Implement Omnia, which really covers everything from, you know, from retail to, to high Lottery, to Connected, play to player, management Data, Insights Etc. Um, you know, so that's significant technical win. That the company achieved to Lotto which uh, you know, there was a obviously was a very competitive process in price but also uh, with a
Vincent Sadusky: based on value, and we're very disciplined on price, but we did win on technology. So, I think, you know, the technology investments that we continue to make, and again, I mean, a lot of this business is credibility, and, you know, iLottery, which is a huge, huge focus, will continue to be for lotteries. You know, we continue to power, you know, by our calculations, more lotteries platform-wise than any other operator in the world. So, you know, we think these things are critical, and that's the core business, and we've got to continue to win and innovate and be the best in that regard.
Vincent Sadusky: And then, you know, the pricing for these contracts is each individual one is, in my view, completely unique in terms of the dynamics and competitiveness and the competitive desires and all of those things. So, you know, we have to continue to win technically. We have to be the best, and then also certainly compete in all the other attributes. of these RFPs. But I would say things are settling down now. There's not that many that are up in the cycle as we work through this recent very, very active period.
Capital capable competitor, uh, in ceso, flutter to win that technology score. Um, and then we look at markets like Ohio and New Mexico, uh, that came available and, um, you know, bright star, did not win those opportunities, uh, based on value and we're very disciplined on price, but we did win on technology. So I I think, you know, the, the technology Investments that we continue to make. And again, I mean, a lot of this business is credibility and, you know, for our Lottery which is a huge, huge Focus. We'll continue to be for for lottery. You know, we continue to power, you know, by our calculations more Lottery platform wise than any other operator in in the world. Um, so you know, we think these things are critical and that's the core business and we've got to continue to win and innovate and be the best in that regard. Um,
The pricing for these contracts is each individual 1 is in my view completely unique, in terms of the Dynamics and competitiveness and the competitive desires and and all of those things. So, you know, we have to continue to win. Technically, we have to be the best. Uh and then also uh certainly compete in all the other in all the other attributes of these rfps. But uh, I would say things are settling down. Now, there's not that many that are up in the, in the cycle. As we work through this, this recent very, very active period.
Unknown Executive: Perfect.
Unknown Executive: Thank you so much.
Perfect, thank you so much.
Chad Beynon: The next question comes from Chad Beynon with Macquarie. Your line is open. Good morning. Thanks for taking my question. Vince, Max, I wanted to start with the double-digit increase in instant ticket printing for the quarter.
The next question comes from, Chad Bain with mqu your line is open.
Vincent Sadusky: This has obviously been a focus to win more primary or secondary opportunities, but I was wondering if you could just kind of dive into, again, kind of, Vince, on the back of your recent comment with upcoming renewals or opportunities, if there's anything on the instant ticket printing side, and then maybe if you could just talk about how the efficiencies maybe helped in the quarter for margins broadly and how that could help going forward with Optima. Thank you. Yeah, sure. I'll start off with an overview and then let Max talk more specifically to Optima and the efficiencies that we've been working on for, you know, kind of our new size, standalone, you know, lottery, Um, yeah, as you know, you know, instance has been an area that we take as considerable opportunity and it's an area of focus for us for, you know, for the last couple of years.
Hi, good morning. Uh, thanks for taking my question. Uh Vince Max. I wanted to start with the double digit increase in instant uh ticket printing for the quarter. Uh this is obviously been a focus to win more primary or or or secondary opportunities. But I was wondering if you could just kind of dive into um again kind of events on on the back of your your recent comment with
Um, upcoming renewals or opportunities if there's anything on the instant uh ticket uh printing side. And then maybe if you could just talk about how the efficiencies um maybe helps in the quarter for for margins broadly and how that could help going forward with Optima. Thank you.
Vincent Sadusky: You know, we've, you know, we've been the market leader in central systems, but certainly not in in printing. So one of the things we did was invested significantly in hardware and software. And also, we've expanded our print library and our logistical capabilities. And we've learned from the markets where we perform those operations. We've come up with, as I mentioned, Infinity Instance, which is a great technology. We've rolled out a bunch of those games in a market that we control, in a very mature market in Italy, with very good success. We've also come up with innovation with this Gleam technology that's got these holographic looks on tickets.
Yeah, sure. I'll start off with an overview and then let Max talk more specifically to Optima. And the, the efficiencies that we've been working on for um, you know, kind of our new sized Standalone, you know, Lottery entity. Um, yeah, as you know, you know, instance has been an area that that we think is considerable opportunity and it's been, uh, an area of focus for us for, you know, for the last couple of years. Um, you know, we've, you know, we've been the market leader in central systems, uh, but certainly not in in printing. So 1 of the things we did was invested significantly in hardware and software. Uh, and also, we've expanded our print library and our logistical, uh, capabilities. And we've learned from the markets where we we, we, we, we perform those those operations. Um, we've come up with, uh, EX in. As I mentioned, Infinity instance, um, which is a great
Vincent Sadusky: So the goal is to constantly offer something beyond a commodity product. So you obviously have the capabilities, but then, I think, through a deep library of content, as well as some interesting production methodology, offer something else. The new press that we've put in is now operational. And just by virtue of it being one of the most recent ones to be installed is state of the art. And so as our learning curve progresses, not only is the capacity there, but our ability to continue to drive efficiencies over time is there. I think in 2025, and Max can check this, I think our production is up somewhere around 20% or so.
You know, technology where we've rolled out a bunch of those games in a market that we can that, that we control in a very mature Market in Italy with with very good, very good success. Uh, We've also come up with with Innovation, uh, with this gleam technology. That's got these holographic looks at tickets. So you know, the goal is to constantly offer something Beyond a commodity product, so you have to, you know, obviously have the capabilities but then I think, uh, through through a deep library of content, as well as some some interesting, um, uh, production methodology, uh, offer offer something something else. The the new press that uh, We've we've put in, uh, is now operational and um, just by virtue of it, being 1 of the most recent ones to be installed is, you know, is state-of-the-art, uh, and so that, you know, as our learning curve, uh, progresses, uh, not only, you know, is the uh, is the capacity that
Vincent Sadusky: That trend will continue as we run some new business, some significant printing contracts over the last year or so with Portugal, a new contract with FDJ. Spain, et cetera. And I think that that is an area that is something that can contribute, especially as the volume increases, right? Like any manufacturing facility, you know, the greater the volume, running, you know, two shifts a day, 12 hours a day, you know, eight to 12 hours a day is really key to driving profitability as well as certainly best practices, minimizing waste and maximizing the distribution opportunity. So those contracts have a tendency to come up more frequently than the FM contracts.
There. But, you know, our ability to continue to drive efficiencies over time. Uh, is there I think in in 2025 and, and Max can check this. I think our production is up somewhere around uh, 20% or so we think that that Trend will continue as we run some, some new business, some significant, uh, printing contracts over the last year. Or so, with, with Portugal, a new contract with, uh, with fdj.
Vincent Sadusky: It's not nearly as difficult to change or add a printer, a printing company, as it is to change FM or central system. And so we believe that, you know, that's one of the reasons for the investment and why we think the, you know, the opportunity is greater. And also we've seen a trend over the last decade or so where more and more lotteries are okay with and have gone to multiple print vendors. So unlike central system, it's not an all or nothing RFP and value proposition.
Massimiliano Chiara: And Max, I'll let you talk about the nomination. Yes, so just to confirm what Vince just said, so in 2024, we produced $8.5 billion of standard unit in the instant ticket facility in Lakeland, Florida. And we are running 25% above that right now. We have expanded the capacity by 50%, adding a full new press. We invested about $30 in the last two years to do that. So again, we have created the conditions to expand the capacity beyond the current portfolio. And we are obviously going after a new contract as the bid environment permits. Switching to the question related to the margin progression in the second half of the year, EBITDA margin has clocked around 43% in the first half.
To to change FM um, or Central system. And so we believe that, you know, that's 1 of the reasons for for the investment and why we think the, you know, the opportunity is greater and and also we've seen a trend over the last decade or so where uh more and more Lottery are okay with and are have gone to multiple print vendors. So unlike Central system it's not an All or Nothing uh RFP and and and value and value proposition.
and Max, all you talk about the
Yes, so, um, just to confirm what Vince just said. So, uh, in 2024, we produced, uh, 8.5 billion of standard unit in the instant ticket, uh, facility in Lakeland, Florida. So and we are running, uh, 25% about that right now. Uh, we have expanded the capacity by 50% adding in a, full new press.
Uh, we invested about 30 million dollars in the last 2 years, to do that. So again, we, we have created the conditions to expand the capacity, um, beyond the current portfolio and we are obviously going after the new contracts as, um, as, um, the the bid environment permits.
Massimiliano Chiara: We believe we are meant to go up in the second half, maybe a point, maybe two. That is primarily going to be driven by the efficiency generated by Optima from a pure marginality standpoint. We have some puts and takes in the top line and in the gross profit, but the bottom line is that we should be able to drive those savings home and hence improve our marginality in the second half of the year.
Switching to the the question related to the margin progression in the second half of the year, uh, ibida margin has clocked around 43% in the first half, We Believe.
Massimiliano Chiara: And speaking about that, we are looking very closely at the new SEC recently deliberated principles ASU 2024-03, which is called income statement expense disaggregation disclosures. It has a 2027 as a date of inception, but with the possibility for an early adoption. And since we are in the transition to this new company, Pure Play Lottery setup, we think that there is an opportunity for us to take advantage of this new requirement to kind of adopt, early adopt potentially, some of the features of all of the features of this new disclosures requirements and improve the transparency on our reporting and our KPIs, as well as improve the ability for investors and the sales side to really compare side by side with our industry group in a more linear fashion.
Uh, we are meant to go up in the second half, maybe a point, maybe 2, uh, that is primarily going to be driven by um, the efficiency generated by Optima from a pure marginality standpoint. We have some puts and takes in the top line and in the gross profit. But the bottom line is, uh, is that we should be able to drive those savings home and, uh, hence improve our marginality in the second half of the year. And speaking about that. Um, we are looking very closely at the the new uh SEC. Um recently. Um the liberated principles ASU uh 2024 or 3, which is uh called income statement. Expense this aggregation disclosures
Um, uh, it has a 2027 as um, uh, date of inception but uh, with the possibility for an early adoption and uh, since we are in the transition to this, uh, a new company, Pure Play Lottery setup. We are, um, we think that there is an opportunity for us to, uh, to take advantage of, uh, of this new, uh, requirement to kind of uh, adopt uh, early adopter.
Potentially uh, some of the features of all of the features of this new, uh disclosures uh requirements and uh, improve the um, transparency on on our uh, reporting and our kpis.
Massimiliano Chiara: So again, we think that this is an opportunity that we want to look hard into it and we'll come back with our Q3 earnings with more clear facts. Thank you. Thanks, Max. Appreciate it. Thanks, Vince.
Um, as well as, uh, improve the ability for uh investors and uh, and the sell side to really compare uh, side by side uh, with our Industry Group in, in a more linear session. So again, with think that this is an opportunity that we want to, to look, uh, hard into it. And and we'll come back uh with our Q3 earnings uh with more um uh clear facts.
Thank you.
Vincent Sadusky: And then secondly, I just wanted to ask about the Greek state lottery opportunity. I know there's a 100 plus page document out there that's been translated from Greek to English. But just in terms of maybe the timing of this, or more importantly, historically, I guess the financial arrangement, if it's a similar type of contractor economics where there would be an upfront fee, similar to the way that Lotto is designed. Or if you're able to win or participate in that opportunity, if that's more the traditional percentage of of sales and no upfront fee from a CapEx standpoint.
Thanks Max, appreciate it. Thanks man. Uh, and then secondly, I just wanted to ask about the, the Greek State Lottery opportunity. I know there's a hundred plus page document out there that's been translated from from Greek to English, uh, but just in terms of, uh, maybe the timing of this or or more importantly, um, historically, I just the financial Arrangement, if it's a similar, uh, type of contractor economics, where there would be an upfront fee, uh, similar to to, to, uh, the way that Lotto is designed for is um, if you're able to to win or participate in that opportunity, if that's more, the traditional, you know, percentage of uh, uh,
percentage of
Vincent Sadusky: Just any color on that would be helpful.
Vincent Sadusky: Thank you. Yeah, I would just say on Greece, it's early days. Right now, the RFI was issued. So it's a request for information. As you know, the incumbent and ourselves, we did a lot of work on it and submitted, but it'll run a process and they'll make a determination as to what the RFP will ultimately look like. But that contract, I think, expires in 2027. So it'll be a process, you know, first step for some of these lotteries is an RFI gather information, their commission will then utilize that information to make a determination as to what form of contract that they and what form of RFP that they want to put together.
Of sales and no upfront fee for my CapEx. Uh, standpoint, just any color on that would be helpful. Thank you.
Vincent Sadusky: So we're in the game on that one, but it's it's early days.
Ultimately uh look like but uh, that contract, uh, I think expires in 2027 um, so it'll, it'll be a process, you know, first step for some of these lot of reasons, an RFI gather information, their commission will then utilize that information to make a determination as to what, uh, form of contract that they, um, and what what form of RFP that they they, they, they want to to put together. So, um, we're we're in the game on that 1, but it's, uh, it's early days.
Unknown Executive: Thanks, Vince. Appreciate it.
Great. Thanks Vince. Appreciate it.
David Katz: The next question comes from David Katz of Jeffreys. Your line is open. Morning, everybody. Thanks for taking my question. So, congrats on all the activity. No small amount of work.
The next question comes from David Katz of Jefferies. Your line is open.
Uh, morning everybody. Thanks for taking my question.
Vincent Sadusky: When I look at the business today, and I think you pointed this out in your deck, that by virtue of the repurchase, you're getting a little bit of dividend growth. And, you know, I do wonder if that becomes just a part of the thought process going forward. And, you know, whether dividend growth via, you know, one way or the other, you know, is something that will become more a part of the story going forward. Yeah, I think, you know, as we and thanks. Thanks for the comment. Appreciate it.
So um congrats on all the all the activity. Um no no no, no, small amount of work um when I look at the business today and I think you pointed this out in your deck uh that by virtue of the repurchase, you're getting a little bit of dividend growth.
and, you know, I do wonder if that, you know, becomes just a part of the thought process going forward, um, you know, whether dividend growth by, uh, you know, 1-way or the other, you know, is something that will become more a part of the story going forward,
Vincent Sadusky: Yeah, you know, really, when I think about, you know, trying to make Brightstar Lottery as attractive an investment vehicle as possible, to me, it's pretty straightforward. The company's done a lot of work to get its balance sheet in a great place. We have, I think, a really solid proven business that's been really resilient through kind of the explosion of digital gaming opportunities around the world, and in particular in North America. Through the innovation, I think, and joy that people get out of these lotteries. It's our job to work with these lotteries, and certainly the ones that we directly control to continue that innovation and interest for people.
Vincent Sadusky: You get a little bit of luck to the positive and negative with the big jackpots, and that's just part of the business. And then you have growth upside from the increasing digitization of the business. more mature in certain markets. But when you think about Brightstar's footprint, our most significant footprint, of course, is North American Italy, where it's not all that mature, and there's, we believe, significant upside opportunities. So, you know, you have a nice growth aspect associated with a very consistent and solid countercyclical business. And then, to kind of do what we can do to enhance the profile for all of us collective shareholders, you know, capital returns is certainly part of that value proposition that we've spent quite a bit of time thinking about.
Yeah, I think, you know, as, as we and thanks. Thanks for the comment. I appreciate it. Um, yeah, you know, really what I think about, you know, trying to make brakes are Lottery as attractive investment, uh, vehicle as possible, um, to me it's it's pretty straightforward. It's, you know, the company's done a done, a lot of work to, you know, to get his balance sheet. In a great, a great place. Uh, we have, I think a really solid proven business. That's, that's been really resilient, uh, through kind of the explosion of digital gaming opportunities around the world, and in particular, in North America, uh, through the Innovation, I think enjoy that people get out of, uh, these these Lottery. It's our job to work with these Lottery and certainly the ones that we directly control to continue that Innovation and interests for for people. Um you get a bit of a little bit of love to the positive and negative with, you know, with with the Big Jack.
Spots. And that's just part of the part of the business and then you have growth upside from the increasing digitization of of the business. That's, you know, more mature in certain markets. But when you think about Bright Stars footprint, our most significant footprint, of course, is North American Italy, uh, where it's not all that mature and there's uh, we believe significant upside opportunities. So, you know, you have an
Massimiliano Chiara: And so initially, the comment has been, we intend to maintain the absolute value of our dividend each quarter, despite the fact that shares are going down. So yes, you know, you picked up on that grade. And then the thinking on a go forward basis, you know, we can't comment on it, but we will, you know, we will constantly be evaluating, you know, what our yield is in order to remain competitive. And that's something that we think is an important part of our value proposition to invest. So just to follow that up quickly, please finish.
Device growth aspect associated with a very, uh, consistent and solid, uh, counter cyclical business. And then, you know, to kind of do what we can do to enhance the profile for all of us Collective, uh, shareholders. Um, you know, Capital returns are certainly part of that value. Proposition that we've, we've spent quite a bit of time thinking about and so initially, uh, the comment has been we intend to maintain the absolute value of our dividend, uh, each quarter despite the fact that shares are going down. So, yes, you know, you picked up on that great and then the thinking got to go forward basis. You know, we can't comment on it but we will, you know, we will constantly be evaluating uh you know, what our yield is in order to remain competitive. Um and that's something that we think is an important part of our value proposition to, to investors,
Massimiliano Chiara: No, sorry, this is Max speaking. I just wanted to substantiate one more item on what Vince just said. Obviously, having a dispose of the more volatile of our businesses allows us to also come into our forecast process more comfortably vis-a-vis not only our profit, but also our cash. And that gives us confidence that we can we can kind of project and maintain going forward a posture vis-a-vis different usage of cash inclusive of the dividend. So again, it's a technical step initially as a result of the ASR execution. But again, going forward, obviously, our ability to better project cash is a point of strength in terms of determining the dividend.
So just to follow that up quickly, please finish.
No, sorry, this is my speaking. I just wanted to substantiate one more item on what we just said. Obviously, having disposed of the more volatile of our businesses allows us to also...
Uh, come into our forecast, uh, uh, uh, process more comfortably with a V, not only our profit, but also our cash. And that gives us confidence that we can, we can kind of uh, project and and maintain going forward a posture Visa v, um, use different usage of cash. Inclusive of of the dividend. So again, it's a technical step initially as a result of the, the ASR execution. Uh, but again, going forward, obviously our ability to a better project. Cash is a point of strength, in terms of the determining the dividend.
Massimiliano Chiara: My very quick follow-up was really just going to be, you know, whether you'll start thinking and talking about a dividend payout ratio, you know, at some point in the future. So, it's a good question. There are companies that have stated payout ratios on earnings, adjusted earnings, cash flow, adjusted cash flow. So, again, this is definitely something that we may want to look at in the future in terms of our new equity story. But, again, it's important to keep in mind the specific technicalities of our industry and, in particular, of some of our contracts that require large amortization of upfront fee to be deducted from revenue and have a straight flow through to profit, which obviously have an impact to the bottom line.
whether you'll start thinking and talking about a, you know, pay dividend payout ratio, um, you know, at some point in the future,
Massimiliano Chiara: So, again, we have to assess the situation and see what is the best indicators to improve the predictability of cash allocation to shareholders.
So it's it's a good question. Um, there are companies that have stated payout ratios on earnings suggested earnings cash flow adjusted cash flow. So again, this is definitely something that um we may want to look at in the future in terms of um, our new Equity story. But again, it's important to keep in mind the the specific, uh, um, technicalities of, of our industry. And in particular of some of our contracts that require large, um, amortization of Afro fee to be deducted from revenue and have a straight flow through to profit, uh, which obviously have an impact to the bottom line. So, again, uh, we have to assess the situation and see what is the best indicators to improve the predictability of
Uh, cash allocation to yeah.
Unknown Executive: Okay, thank you very much.
Okay, thank you very much.
Domenico Ghilotti: The next question comes from Domenico Ghilotti with Ecuador. Your line is open. Good morning.
The next question comes from dominicano, gilori with Ecuador. Your line is open.
Massimiliano Chiara: Three questions. First, on the ASR instrument, because I'm less familiar, just to just to be sure. So there is a specific timeframe timeframe to execute the buyback is something that we will know in advance. And so if you can just clarify on that.
Um, good morning. Uh, three questions. First on the ASR instrument, because I'm less familiar, just to be sure. So, is there a specific time frame to execute the buyback? Is it something that we will know in advance?
Vincent Sadusky: Second, on the MyLottery business evolution in Italy, you were providing some comments during the call.
Massimiliano Chiara: If you can add some color on your strategy. So I can take the... Yeah, go ahead, Max. If you want to take number one and three, I'll take that. Three. Right. So on the ASR timing, obviously, it's all predicated upon the volume trading, daily volume trading. But I would say that in general, our expectation is that the company will be in the market with this program up to the end of the year, probably. So that's kind of roundabout where we expect the program to last. In terms of sensitivity on the euro-dollar, obviously, with the mandatory repayment, we have taken out a big chunk of euro debt at the holding company, which is functional currency dollars.
And, uh, so if you can, uh, just uh, clarify on that second, uh, on, uh, the my lottery business evolution in in Italy. You were providing some, uh, comments during the the call, if you can, uh, add some color on your strategy and, and maybe some kpis and third, uh, if you can, uh, remind us, uh, the sensitivity to the euro dollar with the new perimeter, in terms of, uh, sales to be done and and net financial position.
So I can take the yeah go ahead max. If you want to take number 1 and 3 I'll take the 3.
Right? Uh, so on the ASR timing, obviously, it's all predicated upon, uh, uh, the volume, uh, trading daily volume trading. But
I would say that in general, our expectation is that uh, uh, the, the company will be in the market with this program up to the end of the year, probably. Uh, so that's kind of roundabouts where we expect uh, where we expect the program to last in terms of sensitivity on the euro dollar, obviously, with the mandatory repayment we have taken out a big chunk of Euro debt at the holding company.
Massimiliano Chiara: So hopefully, we have turned the corner on that FX volatility. And now the impact of one cent on net debt is down to $15 million. So that's the majority of the impact that you will see reflected in our financials going forward.
Which is functional currency dollars. So hopefully we have uh, turned the corner on on that. Uh, effects volatility. And uh, now the impact on um, uh, of 1 cent on net debt is down to 15 million.
Vincent Sadusky: Vince? Yeah, and I would just say on the on the iLottery side in Italy. What we described and discussed our lotto in, we also outlined our digital plan for Italy. So the attributes real quick are, we've had greater than a 20% CAGR over the last five years in iLottery growth in Italy. The first half of 2025 that continued, we were up over 20% or so. Having said that, the iLottery penetration in Italy is low. It's in the kind of the low to mid single digits. And so our focus area has certainly been on the opportunity to grow that.
So that's the majority of the impact that you will see reflected in our financials going forward, Vince?
Yeah. And and I would just say, on the, on the, I Lottery side in in Italy. Um, you know what we what we described and discussed our our Lotto when we also outlined our digital plan for for Italy. Um, so, you know, the, the, the attributes real quick are, you know, we've had greater than a 20% kegger of The Last 5 Years, in our Lottery growth, uh, in in Italy, the first half of the of 2025 that continued. I think we were up over over 20% or so.
Vincent Sadusky: And so one of the steps that we've done is the team developed an outstanding iLottery's Play app, which has gained a significant amount of market share already. I think we gained over two points of market share just in the first half of 2025, both on the eDraw side, as well as on the eInstant side. So this is a real focus of ours going forward. And now that we've secured lotto, so we've got both contracts for many years, we will deploy kind of all the very good and smart operator, retail, digital business execution around driving that, whether it's kind of combined jackpots or the utilization of in-store promotions to help to drive the level of digital play.
Having said that the I Lottery penetration in Italy is is low. It's in the kind of the low to mid single digits. Um, and so our our Focus area, you know, has certainly been on the, on the opportunity to to grow that. And so 1 of the steps that uh, we've done is, you know, the team developed. Um uh, you know, an outstanding, uh, my lottery is Play app which is gained, uh, significant amount of of market share already. I think, you know, we gained over 2 points of market share just in the first half of of 2025 both on the on the era side as well as on the E instant uh side. So you know, this is a real focus of ours going forward and now that we've, you know, secured Lotto. So we've got, you know, both contracts for for many years. Um, you know, we will
Deploy, uh, kind of all the very good and smart operators, retail.
Vincent Sadusky: And we believe that given our deep experience on both retail and iLottery and the proven fact that the most successful digital operators, whether it's in iLottery or if it's in iGaming or sports betting, have a combination of retail and digital presence. So we'll continue to build off of the myLotteries app, but our goal is later this year to come out with a product that includes iGaming and sports betting and allows players, of which there are quite a few that engage in both lottery activities as well as as iGaming and sports betting, give them the opportunity to do all of that from our app.
Um, uh, execution around driving that, whether it's, you know, kind of combined jackpots or the utilization of in-store promotions to help, uh, to drive the the level of of digital play. And, you know, we believe that, um, given our deep experience on both retail and our Lottery. And, uh, the, The Proven, uh fact that the most successful digital operator is whether it's in, whether it's in, I lottery, or if it's in I gaming or sports betting, have a combination of retail, uh, and and digital, uh, prices. So, you know, we'll continue to build out, uh, build off of the, my lottery app. And our goal is uh, later this year to come out with, uh, with a product that that includes I gaming and and sports betting and allows uh, players of which there are
Vincent Sadusky: So the goal is to expand the player base and engage with players beyond the retail destination, coupled with having several opportunities available, really a one-stop shop with our best in class iLottery games, coupled with the opportunity. engage in bingo and iGaming and sports.
You know, quite a few that engage in both Lottery activities as well as, as I gaming and sports betting. Give them the opportunity to do all of that, you know, from from our our app. Um, so the goal is to is to expand the player base and, uh, engage with players Beyond, uh, the retail destination coupled, with having several opportunities available, really a 1-stop shop, with our Best in Class, I lottery games.
Coupled with the opportunity to engage in Bingo and iGaming and sports betting.
Thank you.
Joe Stauff: Your final question comes from Joe Stauff of Susquehanna. Your line is open. Good morning, Vince, Max. On, you know, both Texas and New York, those contracts, certainly the process, the tender process seems to have been delayed somewhat. The expiration of those are in August of 26. Is it, do they give you an official notice that, hey, it would be extended by an explicit time? And what is that?
Your final question comes from Joe Stoff of Susua. Your line is open.
Uh, good morning.
Vince Max.
On, you know, both Texas and New York, those contracts. Um,
Vincent Sadusky: And then the second question is, You know, maybe the observations you have for the new pricing on Mega Millions in April and what you saw in the second quarter and thus far in the third. you know, are the is is the volume demand there relative to what you expected? You know, I guess The simple, say, observation is that it kind of launched. Probably not in the most ideal timing of April when the market was getting smoked. And just wondering if more customers gravitated to the $2 Powerball at the expense of Mega.
Certainly the process, the tender process seems to have been delayed somewhat. Um, the expiration of those are in August of 26. Is, is it do they give you an official notice that? Hey, it would be extended by an explicit time and what is that? And then the second question is,
you know, maybe the observations you have, for the new pricing on, make a millions in April and what you saw on the second quarter and thus far in the third
You know, um are the is, is the volume demand their relative to what you expected, you know, I guess.
The simple say, observation is that it kind of launched?
Uh, probably not in the most ideal timing, you know, of of April when the market was getting smoked.
and just wondering if if more customers gravitated to the 2 power ball at the expense Omega,
Vincent Sadusky: Yeah, so, you know, a couple of it's a really good question. Yeah, we've been looking over over data for the $5 mega million launch. And it is What we've what we've gleaned is the absolute sales levels at comparable jackpot level. So the $5 game compared to the $2 game, looking at any given week with similar jackpot levels is higher under the $5 ticket price. And so the way the math works is the number of ticket sales is down for sure. But of course, the average ticket purchase, the number of tickets purchased, that absolute transaction dollar value is up.
Vincent Sadusky: Now, we certainly hope and expect that it will be up much more than it's currently been up. And as you point out, I think it was a tough moment in time, but more importantly than that, as we said earlier, we feel like the correlation between macro and lottery ticket sales is certainly not perfectly correlated. In fact, a lot of these ticket sales oftentimes do well in a tough macro. It's more the jackpot experience. So players need to, I think, play, have enough experience with the $5 price point to recognize that there's value associated with that through a higher starting point for the jackpots, but more importantly, a faster build of the jackpots week to week.
Yeah, so um, you know a couple of it's it's a really good question. You know, we've been looking over over a data for the 5 Dollar Mega Million launch and it is um, what what we, what we've gained is the absolute, uh, sales levels at comparable jackpot levels. So the 5 game compared to the 2s is higher under the, the 5 Dollar um, ticket price. Um, and so the the way the math works is the number of ticket sales is down uh, for sure. But of course the the average ticket purchase and number of tickets purchased uh, you know that absolute transaction uh dollar value is is up. Now, you know, we certainly hope and expect that it will be up much more
Than it's currently been up. And as you point out, I think it was a tough moment in time, but more importantly than that. Um, as we said earlier, we feel like, uh, you know, the the, the correlation between macro and, and lottery ticket sales, um, you know, certainly not poor.
Vincent Sadusky: And unfortunately, we just had some really bad luck. That mega millions has been hit over and over again since the increase of the $5. So we've not been able to demonstrate that experience to consumers. So it's gonna take some time. Hopefully we have a good run or two, and we really get people to enjoy the incremental benefit and understand what we think is a better payout structure.
Vincent Sadusky: And then with regard to Texas and New York, yeah, you pointed out. New York expires in August of 2026. We don't have anything specific contract-wise, however, we do expect that an RFP will come out at some point, and because the date is now a year away for the expiration, that that will include some form of extension because, you know, we do not believe it would be possible to implement a new system in this tight timeframe.
Experience to to Consumers. So it's going to take some time. Hopefully we have, uh, we have a good runner to and we really get people to, to enjoy the, the incremental benefit and understand, uh, what we think is a better um uh payout structure. Uh, and then with regard to Texas and New York. Yeah, you pointed out.
Vincent Sadusky: And then finally, Texas, yeah, Texas was disappointing. We felt as if we had the best proposal, et cetera, and then, you know, all the noise and consolidation of the, you know, the lottery government agency and all those things took place. And so, you know, the lottery has been extended out through 2029, and ITT has been granted an extension for another few years until, I think, 2028. So we anticipate sometime between now and then they'll start anew on an RFP process, but as you can imagine, there's a lot of moving parts there and combining government agencies, so I'm not sure that's going to happen anytime soon.
Right, to a New York expires in, in August of of 2026. Um, you know, we don't have anything, uh, specific, uh, Contra contract wise. However, we do expect that, uh, an RFP will come out and at some point and because, uh, the, the, the, the date is now a year away for the the expiration that, that will include some form of extension because, uh, you know, we do not believe it would be possible to implement a new system, um, in this in this tight tight time frame, uh, and then finally, uh, Texas. Um, yeah, Texas was was disappointing. We we, you know, we felt as if we had, uh, the best proposal, uh, Etc. And then, you know, all the noise surrounding the couriers, uh, really kind of through that off and, and the consolidation of the, you know, the lottery, um, uh, government agency.
And and all those things to took place. And so, you know, the lottery has been extended uh out through 2029. And um, and it has been very granted an extension uh, for another few years until I think 2028. So, uh, we anticipate sometime between now and then they'll they'll they'll start start a new on, uh, on an RFP process. But uh, as you can imagine there's a lot of moving Parts there and combining government agencies. So I'm not sure that's going to happen. Anytime anytime soon.
Unknown Executive: This concludes the question and answer session.
Vincent Sadusky: I'll turn the call to CEO Vince Sadusky for closing remarks. Yeah, as always, thank you for your interest. We look forward to updating you as time progresses. Thanks and have a great day. This concludes today's conference call. Thank you for joining. You may now disconnect. Please wait, the conference will begin shortly.
This concludes the question and answer session. I'll turn the call over to CEO Vincent Sadusky for closing remarks.
Yeah, as always, thank you for your interest. We look forward to updating you as time progresses. Thanks, and have a great day.
This concludes today's conference call, thank you for joining. You may now disconnect
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