Brightstar Lottery Plc Q4 FY2024 earnings call

• 2024 was a significant year with the strategic review resulting in the sale of gaming and digital business for over $4 billion. The lottery business had strong cash flow generation, with over $1 billion in consolidated cash from operations and about $660 million of free cash, over 80% from lottery. - Core lottery same-store sales improved throughout the year, with instant ticket and draw game sales up 4% in Q4. Italy had strong growth in Q4 and full year with new game launches like Tambola holiday bundle and Doppio Oro e-instant game. - iLottery sales rose 28% in Q4 and full year, with momentum in multiple markets. Secured long-term contracts including a 7-year FM contract with Colorado Lottery, 10-year FM and iLottery with Luxembourg, and extensions with several US lotteries. - Invested in new game content and technologies, and worked on winning important contracts in Italy and Texas for 2025.

The lottery business was the key segment. In 2024, the lottery business achieved $1.2 billion of EBITDA at a 47% margin. Revenue for the year was $2.5 billion. Over 80% of the $660 million free cash flow came from lottery operations. In Q4, instant ticket and draw game sales increased 4%, including improvement across all regions. iLottery sales rose 28% in both the fourth quarter and the full year 2024 period, with momentum broad-based across the US, Italy, and several European markets.

• 2025 revenue expected $2.55 billion to $2.65 billion, low to mid-single-digit growth. Q1 revenue down low to mid-single digits due to lower US multi-stage jackpot activity. - Product sales revenue expected to rise due to new contract awards. Adjusted EBITDA expected $1.1 billion to $1.15 billion. - Cash from operations excluding Italy upfront license fee expected $550 million to $570 million. CapEx expected around $450 million, including investments from recent contract wins.

• Uncertainty in the timing of large US multi-state jackpots which can impact sales. - Legal and regulatory changes regarding carrier models in different jurisdictions could affect operations. - Execution risks on large contracts like the Italian Lotto bid and Texas contract, which require significant capital.

Q: Jeff Stantial asked about the $25 million investment into new contract extensions and rebids.

A: Max Chiara responded that these costs are typically temporary, related to R&D, cloud-based solution extension, and point-of-sale network optimization.

Q: Barry Jonas inquired about the Italy lotto rebid process and Texas carriers.

A: Vince Sadusky said IGT is prepared to compete for the Italy lotto bid, and Vince Sadusky explained that carriers' impact on IGT is insignificant due to small revenue percentage.

Q: Chad Beynon asked about Mega Millions price increase and new printing press.

A: Vince Sadusky said Mega Millions price increase is expected to have a positive impact in the back half, and the new press will improve cost efficiency and enable winning larger print contracts.

Q: David Katz asked about new product launch and development.

A: Vince Sadusky discussed product development through partnership with lottery customers, cloud investment, and hardware investment for point-of-sale.

Q: Domenico Ghilotti asked about Texas lottery renewal and LMA incentives.

A: Max Chiara explained the LMA incentive situation is due to different jackpot activity compared to prior year, and it's an estimated impact.

Q: Joe Stauff asked about Italian renewal process and Powerball pricing.

A: Vince Sadusky said details on Italian bidder number after March 17 deadline, and Powerball may consider price increase based on Mega Millions impact.