BRSL

Hello, everyone. Thank you for joining us and welcome to the Brightstar Lottery first quarter 2026 earnings call. After today's prepared remarks, we will host a question and answer session. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. I will now hand the conference over to James Hurley, Senior Vice President of Investor Relations. James, please go ahead.

Our actual results may differ materially from those expressed or implied in the forward-looking statements. The principal risks and uncertainties that could cause our results to differ materially from our current expectations are detailed in our latest earnings release and in our SEC filings. 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. Our statements are as of today, May 12th, and we have no obligation to update any forward-looking statements we make. Now I'll turn the call over to Vince Sadusky.

Great. Thank you for joining us today. Well, we delivered a solid start to the year with first quarter results reflecting the strength of our global portfolio and disciplined execution against our strategic priorities. While reported revenue growth was modest, underlying performance was stronger and profitability expanded, demonstrating the resilience of our business model and the impact of our operational initiatives. Revenue for the quarter was approximately EUR 590 million, increasing 1% as reported and 3% on a constant currency basis, excluding service revenue amortization. Growth was driven by strong performance in Italy and a favorable mix in the United States, partially offset by the impact of the U.K. transition. Adjusted EBITDA grew 15% as reported and 5% in constant currency, reflecting both operating discipline and continued benefits from our Optima efficiency program.

This level of increase in associated margin expansion is a clear indication that we're executing well while continuing to invest for long-term growth. Our balance sheet remains a source of strength. We ended the quarter with net debt leverage of 2.4x, one of the lowest levels we have achieved, positioning us well ahead of the final lotto payment completed last month. Capital allocation remains consistent and disciplined. In the first quarter, we returned more than $70 million to shareholders through dividends and share repurchases. These actions reflect our confidence in the durability of our cash flows and our view that the current share price does not fully reflect the intrinsic value of the business. Now, let me turn to our strategic priorities for 2026 and the progress we've made in the first quarter.

Game innovation and portfolio optimization continue to be key drivers of performance, particularly in Italy, where same-store sales grew 3%. Scratch and win performance benefited from the successful launch of new Infinity Instants at EUR 5 and EUR 10 price points, as well as Milioni di Diamanti, our first EUR 30 ticket. We are seeing continued consumer demand for premium offerings, reinforcing the strength and evolution of the Italian market. In draw-based games, product enhancements are also gaining traction. In March, we launched [Fai 3, Fai 4], expanding our portfolio with format modeled on proven U.S. game mechanics. In the United States, same-store sales were flat and below our expectations. Performance varied significantly by jurisdiction. We saw growth in markets such as Florida, Indiana, and Michigan, where innovation cadence and price point expansion remains favorable. In contrast, large markets, including California, face more challenging comparisons.

One notable highlight was the February launch of Millionaire for Life, a multi-jurisdiction draw game with an enhanced prize structure. Early results are encouraging, and we see meaningful long-term potential as distribution expands. Turning to digital and iLottery, where we continue to lead globally, we now have 11 iLottery platforms deployed worldwide, with iInstant content available across 12 jurisdictions. In the first quarter, global iLottery wagers increased 30%, reflecting broad-based momentum across our portfolio. In the U.S., wagers grew 36%, led by strong performance in Michigan, Georgia, and Kentucky, as well as the expansion of iInstants in Virginia. In Italy, wagers increased 27%, supported by new game launches and continued strength in established franchises. Milioni di Diamanti contributed to a strong finish to the quarter, including a new single-day wagering record.

Beyond iLottery, we're making important progress in our direct-to-consumer digital strategy in Italy. Our offering now includes a full suite of lottery products, about 500 casino games, and newly launched sports betting. We are particularly focused on converting our approximately 1 million monthly app users into active digital players. Full wagering functionality will be introduced on mobile later this quarter, and we expect those efforts, supported by our retail network, to begin contributing more meaningfully in the second half of the year. Finally, channel expansion and new content contract opportunities remain important growth levers. In the U.S., we continue to expand and enhance our retail footprint through investment in self-service vending machines. These upgrades, including cashless capabilities and optimized game mix, are driving strong engagement and are now being scaled beyond the success we've had in California into additional states such as New Jersey and Indiana.

We are also expanding distribution through new retail partnerships. Our initial rollout in a new national retailer with thousands of locations is currently underway, with additional states expected to follow. This represents a meaningful opportunity to broaden access and drive incremental sales. In Italy, we are progressing on the rollout of upgraded point-of-sale terminals under the new lotto license, with completion expected in the third quarter. Another growth initiative is São Paulo, where we are currently building a full-service lottery from the ground up, integrating retail and digital capabilities into a modern, scalable platform. A digital launch is planned for the second half of this year, followed by a retail rollout beginning in early 2027. In summary, we are executing well against our strategic priorities with solid first quarter performance and continued momentum across key growth initiatives.

We expect these investments to contribute more meaningfully to revenue and profit as the year progresses. With that, I'll turn the call over to Max to discuss our financial results and outlook in more detail. Please bear with us. It seems like we're having some technical difficulties with Max's mic. I think so. Please, we appreciate your patience. Hang on one more minute.

Hello, can you hear me now? Okay, I apologize. We have some connection issues. I'm connecting here from Italy. I would like to pick up from slide 10. Thank you, Vince, and hello everyone joining us on the call today. Our first quarter results reflect modest reported growth, stronger underlying momentum at constant currency, and outcomes broadly in line with our expectations for the quarter, demonstrating the resilience of our portfolio and the effectiveness of our operating focus on disciplined cost management, especially as we continue to invest in long-term strategic initiatives. First quarter revenue of EUR 587 million increased 1% as reported. More importantly, growth at constant currency and before non-cash service revenue amortization, which is about EUR 50 million higher per quarter with the start of the new lotto concession, was 3% or 5% net of the U.K. transition.

As a reminder, the U.K. transition started in August 2025, we have one full quarter plus one month left to anniversary the transition in year-to-year comparisons. As for the components of reported revenue growth, instant ticket and draw wager-based revenue was in line with the prior year at constant currency as strong more than 3% Italy same store sales growth and favorable mix in the U.S. was offset by the impact of the U.K. transition. Other service revenue increased 14% primarily on LMA dynamics. There are two drivers at play. The first is higher pass-through revenue, which has no profit associated with it. The second is a lower shortfall accrual in Q1 2026 compared to the prior year period. This outcome differed from our expectations.

Initially, we were expecting a breakeven LMA outcome in the quarter. Instead, we booked a $10 million shortfall specifically associated with the New Jersey LMA due to the combination of two factors affecting the New Jersey incentive calculation. A constant increase in the contractual annual net income target, which was known, and since the last large jackpot in late December 2025, Powerball hit two times at or below $250 million. This phenomenon, in addition to the continuous subdued Mega Millions performance in the period, prevented any large jackpot formation in Q1.

Since Powerball has also hit multiple times at very low levels to date in Q2, we are currently trending towards incurring a similar LMA shortfall in New Jersey in the second quarter, as there is not enough time left in the period to develop a jackpot above $700 million, the level at which we tend to see jackpot sales inflate. This results in an approximate $20 million New Jersey shortfall for the first half of 2026, which is in line with the prior year and represents the maximum capped penalty in this contract fiscal year. Our team has developed several strategies to help mitigate the New Jersey LMA jackpot sensitivity going forward. One is improved payouts on new instant ticket games, which is already driving stronger sales in March and April. Another is an increased deployment of self-service vending machines, which have delivered immediate sales lift.

Outside of the New Jersey LMA contract, modest jackpot activity did not have a meaningful impact to our sales, demonstrating its limited exposure in the overall business. Moving now to our very resilient profit performance, we delivered an adjusted EBITDA of EUR 287 million in the first quarter, a 15% increase as reported and up 5% at constant currency with a reported EBITDA margin of nearly 49%. The increased upfront license fee amortization artificially bolstered the EBITDA margin, which would have been approximately 42% in Q1 2026 and about 40% last year excluding that item. Contributors to the strong profit growth included high flow-through of strong Italy same-store sales growth, the reduced LMA shortfall, continued progress on our Optima cost savings initiatives, and certain expense recoveries.

Partial offsets to growth were the U.K. transition, human capital investments tied to retention, execution, and long-term value, and significant investments in growth initiatives during the quarter. In fact, approximately $20 million of the year's $50 million investment spend was incurred in Q1. We also experienced inflationary pressures impacting postage and freight and other costs. In addition, we saw a nice year-over-year improvement in income from operations driven by three main items: the adjusted EBITDA growth just mentioned, FX, which is a non-cash positive impact from a change in the euro-dollar exchange rate on debt balances at the parent company, and a lower tax provision resulting from various strategic actions we have taken to lower our effective tax rate in the last three years.

For the full year 2026, we currently expect an effective tax rate in the high 30% range compared to 55% in the prior year and heading closer to our normalized rate in the mid-to-low 30s. We expect full year 2026 cash taxes in the range of around $150 million versus $220 million in the prior year period. First quarter cash from operations of $165 million was in line with our expectations and reflect an over $50 million negative impact from timing of working capital items, primarily reflected to the day of the week that the quarter ended on in Italy and the associated collection cycle.

While this tracks behind the full year run rate, the timing impacts are expected to reverse in the second quarter, and we are reaffirming our expectations for full year 2026 cash generation. Capital expenditures total EUR 110 million, with about two-thirds of the investments related to the rollout of new terminals in Italy. We return over EUR 70 million to shareholders, including EUR 30 million in share repurchases and a cash dividend of EUR 42 million or EUR 0.23 per share. Our LTM quarterly cash dividend yield is nearly 7%. While no payments were due on the Italy Lotto upfront license fee in the quarter, I just want to remind you of the funding requirement. The first two installments, totaling EUR 926 million, were paid in 2025, and the final installment of EUR 1.67 billion was paid on April 24th.

While the full amount of the license fee is reported in cash from ops, Brightstar is only responsible for its 61.5% share, with the balance funded by our minority partners. As a matter of fact, Brightstar balance sheet and credit profile are strong with net debt leverage of 2.4x. We expect leverage to peak around 3.5x mid-year and anticipate that it will subsequently restart a more favorable trajectory thereafter. Total liquidity following that payment is around EUR 1.8 billion, providing substantial support for our capital allocation plans. In April, we successfully refinanced our revolving credit facility, moving its new maturity date to March 2031. We improved terms and subsequently fully repaid the EUR 200 million outstanding principal amount due under the euro-denominated term loan due 2027.

We have a sound profile on our debt with no new term maturities and very competitive terms on our senior note. Turning now to our outlook. Second quarter revenue is expected to be below the prior year, primarily due to higher service revenue amortization. Adjusted EBITDA in the second quarter is currently expected to be modestly below the prior year as underlying growth in the business and continued cost discipline is more than offset by the impact of the U.K. transition and the likelihood of a higher New Jersey LMA shortfall, in addition to investments in growth initiatives. We are reaffirming our full year 2026 revenue, profit, and cash flow outlook. As Vince outlined, we are executing on many initiatives to drive accelerated revenue and profit growth in the second half of the year and beyond.

We believe that diversity mitigates the risk associated with any single area of focus, as our Q1 clearly demonstrated. In addition, our LTM sales and adjusted EBITDA performance, coupled with the proven resilience of Lottery in the face of macroeconomic and geopolitical uncertainty, gives us confidence we can deliver on our financial targets for the current year. Now, we'd like to open the call for your questions.

We will now begin the question-and-answer session. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question comes from Jeff Stantial with Stifel. Your line is open. Please go ahead.

Great. Thank you. Morning, everyone. Maybe just starting off, Max, that last point that you raised of some initiatives to try to drive, you know, re-acceleration in the back half of the year. If you think about sort of bridging between the, call it 1% of growth in global same-store sales that you reported for Q1, and then last quarter, I think you sort of talked about, you know, 3-ish%, 2% from retail, 1% from iLottery. If you think about how you go from 1% to 3%, you mentioned some initiatives, you know, retailers, self-service terminals. You mentioned sort of the timing of product. Can you just, you know, sort of walk through or help us think about, you know, rank ordering which of these is most material?

Then, you know, if you could also help us think about sort of like which ones you feel like you have the cleanest line of sight to, which ones might require sort of fee or lottery partner approvals to roll out and sort of your degree of confidence in this, in this back half acceleration. Thanks.

Yeah. To ground everyone up, around the 5% organic growth projections for the year, we anticipate effectively 2026 to behave more or less similarly to 2025, where we see a second half that it will be more prominent or expected to be more prominent than the first half of the year, as a result of a couple of factors, not least the U.K. transition, which is still negatively affecting our revenue growth by about 1%, 2% each quarter, negatively. While instead in the second half, we anticipate product sales to be a significant positive contributor with between 3% and 5% contributions for each of the two remaining quarters of the year.

Again, that is backed by an order backlog with the deliveries expected to be completed between Q3 and the majority in Q4 of the year. From a same-store sales trajectory, we expect the same-store sales to pick up in the second half as well on the back of those retail initiatives that Vince and I mentioned during the call, more prominently, the game innovation with the introduction of the new price point, the vending machine expansion, the new retailer contracts that are also providing additional point of sales overall in the second half as we roll out the initiatives.

All of that together is supposed to give us a little bit of pick-up in the second half of the year versus the first half of the year. Obviously, we would anticipate a sort of a normalization of the multi-stage jackpot. Again, similarly to what has happened last year, the sequence of jackpots in the first four months of the year, four and a half months of the year has been extremely negative, even worse than a year ago. Again, we think that some sort of normalization may occur in the second half that should help us contribute favorably to kind of get to a total retail performance in the year up 3% versus the previous year.

Then we have the two growth initiatives, mainly the iLottery that continues to overachieve our projections in terms of growth rate, to contribute 1% as well as the Italy B2C initiative also to start ramping up more decisively in the second half of the year and finishing up the year with about a 1% contribution on a total year basis.

That's great. Thank you for all that color, Max. Maybe switching gears, you talked about in the release notes some margin pressure from higher postage and freight costs. Max, can you just help us think about sort of the magnitude of impact here, you know, resulting from the spike we've seen in crude? You know, on the guidance piece, did you assume sort of a consistent impact through the remainder of the year? Did you anchor to the forward curves? How do you sort of think about, you know, the impact through the remainder of the year? Thanks.

Yeah. Yeah. The inflationary pressure per se is not super significant. We're talking about a few million dollars in the quarter, mostly concentrated in the postage and freight activity. We think that this is a manageable number within our cost initiatives. We think we can absorb that impact relatively easily during the year.

Perfect. If I could just squeeze in one quick housekeeping. You know, apologies if I missed this, Max. Did you say what the embedded euro assumption was for the full year guide? Is it still 1.15, or did that move just given, I think, spot moved a little bit higher since you last reported?

I mean, questions. I think at this point, with four and a half months in, it's probably the right thing to do is to update the FX to 1.17. There is still some volatility associated with that, but we believe 1.17 is more appropriate than 1.15 at this point.

Perfect. Thanks very much.

Thank you.

Your next question comes from Barry Jonas with Truist. Your line is open. Please go ahead.

Hey, guys. Thanks for taking my questions. Wanted to start on the multi-state lotteries. I believe Powerball is going to be expanding internationally. Wanted to get your thoughts on any potential upside there and walk us through the timing. Then just on the other side of the coin, you know, clearly Mega Millions hasn't achieved the results we were hoping with the increase to $5. There's been some talks about tweaks from the consortium and just wanted to get your thoughts on those potential tweaks. Thank you.

We cannot hear you.

Sorry, did you not hear the question?

This is Ellen, the operator. Barry, if you could please repeat your question to confirm our speakers can hear it. Thank you.

Great. Can you guys hear me now?

Yes.

Okay, great. My question was a two-parter on the multi-state lotteries. First, Powerball is expanding internationally. Wanted to get your thoughts on potential upside there and timing. For Mega Millions, I believe the consortium is talking about making tweaks to potentially improve results. Was hoping you can give us some color on those tweaks and expectations there. Thank you.

Sorry, I cannot hear Vince, unfortunately. I hope Barry, you can hear me and apologize.

I can hear you.

You are connecting from different locations. Yes, the Powerball is expanding internationally, scheduled to go live in the U.K. later this summer, pending final regulatory approval. The game would cost GBP 4, and the jackpot would be the only sure element of the price structure. The anticipation is that about GBP 0.68 for every U.K. ticket will go towards the jackpot, consistent with a absolute value per the U.S.-based game contribution. Again, we think that overall the game will provide some support to the formation of the jackpot in the U.S., and this is the positive, the positive information that could provide an upside, again, to the game overall.

I think this is a positive development at the end of the day because we'll create additional support to the development of the jackpot. We are not per se forecasting any significant sales increase as this type of expansion is unprecedented. We would like to be very conservative, and we need to understand, first of all, how the U.S. players will react to this expansion before we clearly can take some significant upside.

Okay, got it. Just for Mega Millions, are there actions the consortium can take to maybe improve trends there? Or is it just a waiting game to get the jackpots at a sufficient level?

Yeah. Again, as we all now realize, I mean, the sales on the Mega Millions are below the prior year levels. It's very clear at this point, consumers don't appreciate the value proposition of the $5 price point. As a reminder, the higher price point was introduced in April of 2025. Since then, the jackpot, to be fair, has been hit 6x, which has not allowed the formation of a jackpot exceeding $1 billion so far. We got 1 time barely just below the $1 billion. Again, when you take this statistic and compare it to previous years, based on wagers, on average, the jackpot would have been hit 2x or 3x in the same period.

The frequency of hitting has been much, much greater than what we have experienced in the previous years. Yes, as you said, there has been some discussions around evaluating options to optimize the game, but so far, nothing has been decided from the consortium point of view.

Okay.

Yeah, we're. Sorry, sorry. We had some technical issues. It's been a morning of technical issues here in Rhode Island with, otherwise, a beautiful day here in New England. Max, I assume you took the question on Powerball, and it sounds like multi-state jackpots in general. If there's anything else I can help out with there. Otherwise, I think we're back.

Very good.

Okay, great.

Barry, just to finish up on this important commentary. As you can imagine, we were grounded on two games. One of the two games is definitely structurally underperforming, that puts more pressure on the one game, if you want less Powerball to perform. Unfortunately, again, also on Powerball, five hits since the beginning of the year, all five at below $250 million or one of the five at $250 million is really unprecedented from the last few years of statistics. That also has put a lot of pressure on the game.

Having said that, our own exposure to the multi-state jackpot on a year-over-year basis has been very, very limited, with the only exception of the New Jersey LMA contract, as I explained in my prepared remarks.

Understood. maybe just one more follow-up. you know, now that pro forma leverage after the last Italy payment is 3.5 and the shares are still depressed, you know, how are you thinking about capital allocation here and maybe just timing to hit that mid-cycle target of 3x or less? Thank you.

Yeah. I think, with the payment behind us, we're probably gonna see the peak of that leverage on or around 3.5, probably on the low end of 3.5, potentially. Since then, we anticipate that leverage to come down gradually over the next few quarters. We, definitely, we are very cognizant of the fact that we have an ability to bring the leverage back to our long-term target of 3x over the foreseeable future without compromising our investment, our core investment, and/or our support to the balanced capital allocation plan that we launched July last year and that we are in full execution mode.

Since then, we have been able to deliver about 60% on the buyback program, the $500 million program. The rest of the program is still open for execution. We anticipate that you will see from time to time the company being able to continue to execute on the remaining part of the program. Plus, in addition to that, we have been able to also increase our ordinary dividend to the tune of about 15% over the last two quarters. We have taken a pause on the increase this quarter because, again, we had to absorb that large last lot of payment in April. With that in mind, I think we have the ability to continue to support our capital allocation plan going forward.

Great. Thank you.

Your next question comes from Chad Beynon with Macquarie Capital. Your line is open. Please go ahead.

Good morning. Thanks for taking my question. I was wondering if you could elaborate just a little bit more just in terms of opportunities on the AI front in this business, either from a cost-saving standpoint or just from an efficiency standpoint, if any of that has improved as we've kind of worked through the year thus far. Thank you.

Yeah. Hey, Chad, I'll take the question. We've done a lot of work in this, in this area, including using third-party consultants to assist us and then also assess where Brightstar stands relative to others in the industry, more importantly, I think, outside of the industry. I think we're in pretty good shape in terms of our evolution. I think I've mentioned in the past, you know, a while back, we put in a governance structure for the management and utilization of various AI tools. We've, you know, we've got the tools in place. We've got our controls and guidelines. We've got a structured program. We had an innovation committee where our senior executives sit on that committee. I chair it.

We've got, you know, just a lot of best-in-class techniques, including really robust training programs for our managers. I think we've talked about some of the examples of our initiatives, including the game creation, especially in the area of art. Our eInstant game launches are leveraging AI. Our game recommendation engine, which we believe is best in class, utilizes a fair amount of AI in its technology stack.

You know, we've done things like become more efficient and effective in an area such as field services, which utilizes a terrific amount of resources on a daily basis in each one of our major jurisdictions to canvas the state and be able to provide strong customer support in the area of troubleshooting and repair, as well as kind of a lot of the typical stuff that other companies are doing in the corporate areas. I think a big part of what we've been able to deliver in the first quarter in terms of incremental efficiencies and cost reductions, a lot of that is based upon innovation and AI. You know, as a team, each quarter is more and more engaged.

It's really been the team that's been super helpful in incrementally identifying opportunities for improved services as well as efficiency. Our Optima program, which Max continually updates that, you know, we continue to grow what our projected opportunity is over the next several years. Much of that is based on the utilization of AI, especially around the area of efficiency on software engineering, which is a significant part of our business, right down to the delivery and maintenance of the servicing. Those are the areas that we've primarily benefited, and we see, you know, benefits increasing over time as we get smarter and better at this and take on more projects and refine our execution.

That's great. Thanks, Vince. Last quarter, we opened up the window a little bit more in terms of M&A opportunities, whether it's iLottery or other areas of the business. Can you just kind of talk about your appetite in M&A given the second payment will be made in your free cash flow and cash position is maybe just a little bit more understood at this point? Thank you.

Yeah, sure thing. As we report, you know, every quarter, the growth opportunities and the growth, the high growth areas that we've experienced have, of course, been in the area of iLottery. You know, we are the leading global provider of iLottery platforms and content. Our games are performing great. We've got 11 or 12 platform customers out there. We have platform customers coming online in 2027, and we've also added our content to customers that don't deploy our platform. You know, we've invested for years. We feel like we've got, you know, the best-in-class team. Our acceleration, I think, of the delivery of top-performing games as well as platform refinement has been really impressive.

I think we've got the capabilities that we've built organically that have enabled us to, you know, achieve that, you know, 20+ to, you know, 30% iLottery growth, quarter after quarter. Now it's becoming more meaningful as the, you know, the absolute number is getting larger. Now, you know, we've got a couple of big deployments that are pretty exciting. We go online with São Paulo in July, and of course, it will take time before those numbers become meaningful, but I think it's exciting because it's a, it's a mobile-first community. It's got a decent amount of economic activity, and it's a place where you could see a different paradigm with digital exceeding retail right from the start.

The team's been actively involved in the development of that platform and is excited about that launch of eInstants in the third quarter. Of course, you know, the B2C area in Italy. You know, that's of course our home turf. You know, we've got a very good team of veterans that have been working on putting together the best-in-class platform and are excited to really launch full functionality around our MyLotteries app in Italy in this particular quarter, end of the second quarter, as well as all of the marketing that goes along with it. And we've increased our iLottery market share a couple of points from a year ago.

Still early days in terms of that focused activity around digital in Italy. As you know, we've been building up our game library there such that we've got about 500 iCasino games available now, including live casino games, skill-based games, and sports betting. I think we're in good shape. You know, if there's an area where we'd be looking to potentially engage in M&A, you know, I don't expect it would be anything massive.

You know, the ability to gain some incremental expertise or market share, you know, I think would be something that we would be open to, where we could, you know, quickly synergize and have both the cost opportunity and pick up some incremental market share. I think we're in fine shape with our balance sheet. I think we're, you know, even considering the, you know, the payment on Lotto. I think any M&A of that magnitude would not be significant in terms of the impact to the balance sheet. You know, those are things that, you know, we're currently evaluating.

Thank you very much. Appreciate it.

Your next question comes from Domenico Ghilotti with Equita. Your line is open. Please go ahead.

Good morning. Two questions. The first is on the retail same-store sales performance you were mentioning. The, the 3% target, I wonder if this is something that you see well balanced between Italy and the U.S., if you're expecting some kind of acceleration in the U.S. or any kind of additional acceleration in Italy. Second is a follow-up on the Italian B2C launch and activity. How are you going to exploit your retail network and your opportunity for a, say, omni-channel approach, if any? I'm interested in understanding how do you want to exploit this asset. Then, third, just a clarification on the LMA shortfall that you were mentioning in the previous comments. If you can just clarify, so the impact in Q1 and Q2, expected impact in Q2.

I can get started and hand it over to Max. As we mentioned, I think, you know, we got off to a decent start for the year. Global same-store sales were up just over 1%. You know, given the mix, you know, and neutralizing for FX, our revenue was up about 3%. Italy was the driver of the same-store sales growth. They were up about 3% in the first quarter. Really had a lot to do, you know, once again, just another quarter of great game innovation and great vitality of the Italian market. I think the product launches, our EUR 30 ticket was very effective. The multi-bet playslips, I think on lotto have been effective.

Certainly iLottery in that market being up almost 30%, continues to be a driver. In the U.S., same-store sales for the first quarter, you know, were flattish compared to the prior year. Again, you know, we had a good mix that enabled us to be up for the quarter. The driver there has also been iLottery. That was up about 30% for the quarter, actually more than 30% for the quarter. We've again got this scenario with a very weak multi-state jackpot. As Max mentioned, the number of hits was really remarkable for the first quarter this year.

Then the rest of the world was, you know, was fine. Actually, we were up between 5% and 6% in the rest of the world, including, you know, Belgium, Poland, Czech Republic. When we look out to the second quarter, you know, I think the trends are in line. With what we've seen, they're kind of, you know, in the flattish range to up a bit.

As we talked about, or Max really talked about, it's the second half of the year that we get excited about when we think about all the initiatives that are to take place, including not only the lottery ticket sales, but also the some of the categories in the product area that we feel very confident are imminent. Shifting on over to your question around Italy B2C. I'd say, you know, the numbers that we've achieved so far have shown really good progress with minimal marketing efforts so far.

A big part of the effort has been to assemble a group of games that we think is really optimizes the offering to consumers, as well as putting together features and functionality so that when we do the full launch, the full capabilities launch, the ability to take wagers on the My Lotteries app that consumers are impressed and view this as a viable alternative. The growth that we've had so far, as you'd expect, has been around the iLottery market share. That was really the design of the plan. That drives the success of the plan and then to a lesser extent, also offering consumers the ability to play iCasino games and sports bet.

I think what's most exciting about that opportunity is the ability to work with our retail network as well as leverage the folks that are using the app and the website on a daily basis. We've mentioned in the past, you know, the retail players primarily have used the app historically for checking winnings on tickets. You know, that number of monthly visitors here is somewhere around 1 million. We have a lot of, you know, outstanding leadership position touchpoints with consumers. I think, you know, when we get this full functionality in place, we'll be able to utilize all these channels, retail and digital, to drive brand awareness.

You know, our thinking is that will help to drive player acquisition. A lot of it has to do with the retailer engagement. All that is coming very, very soon. I'll hand it over to Max to handle the LMA question.

Thank you, Vince. Thank you, Domenico, for asking that question. Obviously, we are very frustrated with the recent performance of our contract, particularly in New Jersey. There are very specific reasons why, at the end of the day, this contract didn't perform. Some of those are related to some specificities associated with how relevant the multi-stage jackpot game is in New Jersey versus the rest of the country. We're talking about an exposure or a penetration of multi-stage jackpot games in New Jersey that is about 3 percentage point higher than the average of the United States. In addition to that, the payout on the multi-stage jackpot games is around 50% versus over 70% on instant games.

Any shortfall on sales to sales that comes to fruition as a result of lower multi-stage jackpots have a outsized impact to the net income generation for the state, and hence, that impact flow through 50% to the kind of incentive shortfall scheme. Having said that, these are very lucrative contracts. I mean, in the last 13 years, we went back and look at what have we generated. Over the last 13 years, we've been able to generate, on average, at least $10 million per year on the New Jersey contract. Here, the question is really how to structurally reduce the exposure of the contract to the jackpot volatility by structurally enhancing the underlying fundamentals of the business.

The initiatives that Vince and I have mentioned during the call, particularly the expansion of vending machines, the increase in retail point of sale, as well as the game rejuvenation, and also the combination of the modification of return to state, which have allowed us to effectively work around the payout. That transition is underway. We are probably in the midst of it. We completed 50% of that game transition, so there is another kind of few months to go to fully rejuvenate the portfolio game. We are confident that structurally, we will improve the sales performance of this contract overall, hence, reduce the exposure to the volatility of the jackpot games.

Once the jackpot games perform, there is definitely an opportunity to overachieve on that net income target and effectively generate an incentive overall down the road. Again, we remain positive and optimistic around the importance of this contract in our portfolio, and we continue to work on improving structurally the fundamentals of our business within that contract.

Thank you.

Your final question comes from David Katz with Jefferies. Your line is open. Please go ahead.

Hi. Morning, everyone. Thanks for taking my question, for all the details so far. I wonder if you could just talk about iLottery in the context of TAM, you know, longer term view. You know, are we talking about, you know, obviously growth within what's on your plate right now, but, you know, future states, is there any update that we can talk about there that's, you know, realistic? Some kind of a global, you know, walk-around would be helpful there too. Just get a sense for how big the opportunity could ultimately be for Brightstar. Thank you.

Yeah. Hey, David. Yeah, you know, it's difficult to say how quickly states will adopt iLottery and, you know, which ones they will be. Of course, we've, you know, we've got our board that we're, you know, constantly following and tracking. You know, it's clearly as we've reported out the growth, you know, for years now, quarter in and quarter out. It's been pretty impressive. You know, the research we've done shows it, you know, not only brings in existing lottery players, but brings in, you know, players that just don't have the habit of frequenting retail operations.

As you look at, you know, the courier services, for example, you know, they charge a pretty hefty premium for the convenience of digital purchasing tickets without having to go to the store, you know, versus the states that have full-fledged iLottery operations that don't charge an incremental premium. Yet, you know, the couriers have generated a fair amount of incremental sales. In fact, you know, part of our challenge, one of the things in the negative column for us over this past year, continuing to the first quarter, is the decline in sales of one of our big jurisdictions, Texas.

You know, we can attribute that largely to the reversal on couriers and the elimination of couriers, whereas courier sales had been pretty significant in that state that did not permit and still does not permit iLottery. You know, it's difficult for us to control that, so our focus has been to continue to deliver upgraded platform, including best-in-class game recommendation engine, to continue to prove our superior capabilities in the marketplace. We've got the 11 customers live right now in U.S. as well as in Europe. Also expand our content offering to the markets where we don't have the platform.

You know, we mentioned, we've launched in Virginia, as well as, you know, several other markets we expect to be online when Massachusetts launches, et cetera. I think we're, you know, we're positioned really well in terms of, you know, what else is going to be launched. We have the platform for, you know, a couple of markets, including New Jersey, you know, we think there's a good chance iLottery launches in New Jersey. Missouri, you know, is coming up, we believe, in the future. I think São Paulo is, you know, will be pretty interesting over time.

Also the development, I think, of the games, including progressive jackpot games and potentially multi-state games as well. You know, we're busy constantly innovating. We think that's, you know, that's the thing to do as we see how things progress. You know, as we've said in the past, You know, we believe the lottery directors around the country, you know, are very aware of the success that the states who have launched iLottery, the success they've had and, you know, the accelerated growth profile that they've enjoyed. Clearly that's I think that's something that they're very focused on. Exactly where the next ones come from, you know, we're not sure.

I would say one other item as well, you know, as you think about the digitization opportunity as being an area for growth for lotteries. Of course, you know, one of the reasons is it gives you in addition to convenience, which is what, you know, the couriers offered. What the couriers don't offer that we offer in a full-fledged iLottery market is the eInstant games, which, you know, are an experience that's very different from traditional scratch cards and pretty fun and exciting, different experience that players clearly enjoy. Just one other item around the area of I'm not even sure if I would call it innovation, but just, you know, how lotteries could have potential incremental growth opportunity, and that's been in the area of cashless.

You know, the cashless adaptation in markets is fairly low. You know, when you think about, you know, digital as the way that everybody's transacting, you know, most states aren't even permissive of non-cash transactions, which is, you know, astonishing given, you know, given it's 2026. Again, I know the lotteries are aware of the trend among consumers to embrace cashless. I think there's several states that are either adding or considering adding cashless, starting off with the machines, with the lottery machines. I think that will also has the opportunity to significantly increase purchases.

We've seen the states that do provide for cashless, you know, have had a significantly greater amount of sales per transaction as a result of that. You know, the numbers are difficult, but, you know, we also believe the number of transactions are greater as well.

All right. Thanks for all that. Appreciate it.

Sure thing.

We have reached the end of the Q&A session. I will now turn the call back to Vince Sadusky, CEO, for closing remarks.

Yeah, with a solid start to the year, based on the strength of our global portfolio and really good disciplined execution by the team. Again, we think that reinforces the continued resilience of lottery. As we look ahead, we're executing well against our strategic priorities. We're investing in our higher return growth initiatives such as iLottery and B2C in Italy. We also believe that we have good visibility in the second half of the year for good revenue and profit drivers. We remain focused on our execution and our strong cash generation, long-term value creation, we appreciate everybody continuing to support Brightstar and your interest in the company. Thank you.

This concludes today's call. Thank you for attending. You may now disconnect.

Ladies and gentlemen, thank you for joining us, and welcome to Brightstar Lottery’s Q4 2025 and Full Year 2025 Earnings Call. After today’s prepared remarks, we will host a question and answer session. If you would like to ask a question, please press star 1 to raise your hand. To withdraw your question, please press star again. I will now hand the conference over to James Hurley, Senior Vice President of Investor Relations. James, please go ahead.

Thank you, and thank you all for joining us on Brightstar Lottery’s Q4 and full year 2025 Conference Call, which is hosted by Vince Sadusky, our Chief Executive Officer, and Massimiliano Chiara, our Chief Financial Officer. After some prepared remarks, both Vince and Max will be available for your questions. During today’s call, we will be making some forward-looking statements within the meaning of the Federal securities laws. Forward-looking statements are not guarantees and our actual results may differ materially from those expressed or implied in the forward-looking statements. The principal risks and uncertainties that could cause our results to differ materially from our current expectations are detailed in our latest earnings release and in our SEC filings. During this call, we will discuss certain non-GAAP financial measures. You will find additional disclosures regarding these non-GAAP measures including reconciliations with comparable GAAP measures in our press release, slides accompanying this webcast, and our filings with the SEC, each of which is posted on our Investor Relations website. Our statements are as of today, February 24, and we have no obligation to update any forward-looking statements we make. Now I will turn the call over to Vince.

Pure play lottery leader. We strengthened our balance sheet, improving leverage to the best levels ever, secured the critical Italy Lotto license, and introduced a multiyear capital allocation strategy that both increases returns to shareholders and provides investment capital to fund Brightstar Lottery’s growth initiatives in digital, core technology, geographic expansion, retail points of sale, and printing. We generated $2,500,000,000 in revenue supported by the diversity of our global portfolio. Same-store sales grew nearly 4% for the quarter, and 2% for the year, underscoring the consistency and resilience of our global lottery operations. At the same time, we invested heavily in our teams, our technology, and our processes, enhancing the organizational capabilities that will support the next decade of growth. Our OPTIMA program delivered cost reductions enabling funds to be reallocated to growth initiatives. $1,100,000,000 of EBITDA in fiscal year 2025 represents a 45% margin even as we are investing for the long term. We also produced nearly $750,000,000 in cash from operations before funding the first two lottery license payments, returned over $1,000,000,000 to shareholders through dividends and share repurchases, and announced two consecutive dividend increases, including the new quarterly payout of $0.23, which is a 15% increase from the historical run rate. These actions reflect our confidence in the strength, durability, and long-term growth potential of our cash flows. 2026 will be another year of investment in several long-term growth initiatives. In Italy, securing Lotto for the next nine years provides the opportunity to execute a major digital expansion across iLottery, iCasino, and sports betting, leveraging one of the largest retail networks in the world with over 50,000 points of sale. This is an opportunity to extend our reach, broaden our B2C capabilities, and bring new digital experiences to one of the world’s most established lottery markets.

We are also investing in our US retail footprint by adding new points of sale, deploying self-service solutions, and partnering with national retailers to expand lottery access across the country. Internationally, one of the most exciting developments is in Sao Paulo. As the economic engine of Brazil and one of the largest global metropolitan regions, Sao Paulo represents a rare, large-market, full-service, new lottery launch. We are building this business from the ground up, combining our technology, operational excellence, and game innovation to create a modern, scalable lottery ecosystem across both retail and digital channels. Initiatives combined with ongoing expansion in iLottery content, new games, data-driven CRM tools, and advanced AI capabilities, position Brightstar Lottery to accelerate organic growth and extend our industry leadership.

Brightstar Lottery today is the largest and most advanced lottery operator and technology provider globally, across both retail and digital channels. Our core business is one of the most stable and predictable models in gaming or entertainment, and it has demonstrated remarkable consistency through all economic times. On top of this solid foundation, we are executing targeted growth initiatives in Italy B2C digital, iLottery, US retail expansion, and Brazil’s Sao Paulo greenfield opportunity, each of which enhances our long-term growth profile. Despite our leadership position, strong margins, and highly resilient cash flows, Brightstar Lottery continues to trade at a significant valuation discount to publicly traded lottery peers and an even larger discount relative to adjacent sectors such as sports betting and iCasino, which operate with far lower EBITDA and far greater volatility. Current valuation discount versus peers presents a compelling opportunity for investors. With durable cash flows and multiple growth catalysts underway, we are well positioned to realize the full value of our focused lottery platform. Now I will turn the call over to Max.

Thank you, Vince, and hello to everyone joining us on the call today. Fourth quarter revenue of $668,000,000 increased 3% from $651,000,000 in the prior year, beating expectations on an elevated US multistate jackpot activity and strong iLottery performance. 0.5% same-store sales growth included increases across all geographies, when normalized for a like number of Italy Lotto ball rolls. This was more than offset by the transition of the UK technology contract.

US multistate jackpot revenue rose year over year, driven by the $1,800,000,000 Powerball and the $980,000,000 Mega Millions jackpot that hit in the quarter. Other service revenue includes the impact of higher amortization related to the Italy Lotto upfront license fee. The new Lotto license commenced in early December and adds about €41,000,000 a quarter in additional amortization. It is treated as contra revenue under US GAAP. Favorable foreign currency rates also helped drive the year-over-year increase in revenue. Full year 2025 revenue of $2,510,000,000 was in line with the prior year and included the benefits of increased demand for instant ticket and draw games and favorable foreign currency rates, which mitigated some meaningful headwinds, including $51,000,000 from higher LMA incentive revenue in the prior year, and current year impacts of $18,000,000 from the UK technology contract transition, and $25,000,000 from the incremental Italy Lotto license fee amortization. We delivered adjusted EBITDA of $304,000,000 in the fourth quarter, a 5% increase compared to $290,000,000 in the prior year. Favorable foreign currency rates drove the year-over-year increase in profit. Operationally, the high flow-through of elevated US multistate jackpot activity was more than offset by the UK transition. OPTIMA cost savings, split relatively equally between service gross margin and other operating expenses, were partially offset by project expenses related to contract bids as well as enhancements of cloud-based solutions and point-of-sale optimization. For the full year, adjusted EBITDA was $1,120,000,000 compared to $1,170,000,000 in the prior year period, as growth in wager-based revenue was more than offset by higher LMA incentives in the prior year, the UK transition, and the timing of terminal and software service deliveries in our product sales vertical. We also incurred higher start-up costs associated with the new printing press. OPTIMA cost savings are tracking nicely to our target of around $50,000,000 by 2026 versus a 2024 baseline. These savings are not readily apparent on the face of the financial statements, as they are somewhat offset by the investments in the business that I just described, which we are incurring to drive growth in pursuit of our 2028 financial targets. Sustained cash generation funded key investments and significant shareholder returns in 2025. On a full year basis, both cash from operations and free cash flow included $926,000,000 related to the first two installments of the Italy Lotto upfront license fee, which were paid in July and December 2025. The full amount of the license fee is reported in cash from operations. Brightstar Lottery is only responsible for its 61.5% share, or $569,000,000, of the amount paid in full year 2025. Cash from operations as reported was a negative $193,000,000, or a positive $733,000,000 before the upfront license fee, exceeding the recently revised guidance. Free cash flow was negative $509,000,000, or a positive $417,000,000 when you make the same adjustment. As a reminder, the Lotto license renewal occurs every nine years, and these figures do not include the benefit of the pro rata contributions from our minority partners. The final installment of the upfront license fee is €1,430,000,000, or approximately $1,680,000,000, and is expected to be paid in 2026. Brightstar Lottery’s proportionate share of the final payment is €880,000,000, or approximately $1,000,000,000. As Vince mentioned, Brightstar Lottery delivered significant shareholder returns, over $1,000,000,000 in 2025, including $770,000,000 in cash dividends comprised of a $3 per share special dividend and regular quarterly dividends totaling $0.82 per share, and $271,000,000 in the form of share repurchases through a $250,000,000 accelerated share repurchase program and a 10b5-1 plan. To date, in 2026, we repurchased an additional 2,100,000 shares for a total cost of $30,000,000 via the 10b5-1. We have utilized to date 60% of the $500,000,000 share repurchase authorization that was approved in Q2 2025, repurchasing 18,600,000 shares, representing a 9% reduction in shares outstanding. $200,000,000 remains under this authorization. In addition, today, we announced a $0.23 per share regular quarterly cash dividend to be paid in March. This represents a $0.01 increase from the prior quarter when the dividend was raised by $0.02. In aggregate, these increases reflect a quarterly cash dividend that is 15% higher than the historical run rate. This reflects our confidence in future cash flows and reinforces our commitment to increasing shareholder returns. Net debt improved significantly to $2,700,000,000 at the end of 2025, compared to $4,800,000,000 at the end of 2024, mainly due to the allocation of $2,000,000,000 for debt reduction from the IGT Gaming sale proceeds. Net debt leverage was also reduced to 2.4x compared to 4.1x at the end of the prior year, providing room to absorb the Lotto upfront license fee and still maintain leverage at a manageable level. We expect net debt leverage to peak at around 3.5x following the final installment of the license payment in the second quarter, then begin to decline thereafter. Our target leverage ratio mid-cycle is at or below 3x. Our financial condition is strong with no significant near-term maturities, due in part to the successful issuance of $750,000,000 5.75% senior secured notes due in 2033, the proceeds of which were used to retire $750,000,000 6.25% bonds due in 2027. And we have over $3,000,000,000 in liquidity, which is more than enough to fund our portion of the remaining Lotto license fee. Now I would like to introduce our outlook for 2026. We expect to generate revenue of $2,500,000,000 to $2,550,000,000, which includes about $175,000,000 in incremental Lotto license fee amortization as a contra revenue item. This target represents a more than 5% organic growth rate on a year-over-year basis, led by expansion of our core business in Italy, our core business and Italy B2C digital efforts, and is in line with the three-year CAGR we expect to generate from 2025 to 2028. Adjusted EBITDA is forecasted between $1,160,000,000 and $1,190,000,000 as organic growth and OPTIMA savings more than offset an additional $50,000,000 of investments we are making in growth initiatives such as Italy B2C and iLottery expansion, R&D investments in technology, product and services, and project costs associated with the extensive contract renewal cycle recently completed and in progress. Our outlook assumes a euro-dollar exchange rate of 1.15 throughout the year. Cash from operations is expected to be a negative $900,000,000, or a positive $750,000,000 when you adjust for approximately the $1,680,000,000 related to the final Lotto license fee. CapEx is expected to be in the range of $450,000,000 to $475,000,000. About three-fourths of this investment is related to contractual obligations associated with wins and extensions we have already secured. The balance is primarily related to upcoming bids not yet secured. We recently communicated 2028 financial targets: revenue of approximately $2,750,000,000 and adjusted EBITDA of around $1,300,000,000. 2025 actual results, the 2026 outlook, and 2028 targets are laid out here to highlight we are on plan to achieving those goals. You can infer we believe the business can generate an average of $800,000,000 in cash from operations in the 2027–2028 period annually, excluding upfront license payment. As a reminder, following the 2025 to 2028 peak CapEx cycle, we expect CapEx to moderate to about $200,000,000 to $225,000,000 annually, yielding over $400,000,000 in annual free cash flow before or after license fees and after minority distributions. This would represent a mid-teens free cash flow yield at the current share price. Now, we would like to open the call for your questions.

Thank you. We will now begin the question and answer session. Please limit yourself to one question and one follow-up. If you would like to ask a question, please press star 1 to raise your hand. To withdraw your question, please press star 1 again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. First question comes from the line of Jeff Stantial with Stifel. Jeff, your line is open. Please go ahead.

Good morning. This is Jeff. Thanks for taking our questions, and congrats on a strong quarter and guide here. Maybe starting off on the quarter, so Italy, same-store sales up a half a percent. You normalize the timing of draws. It is a little bit below sort of the recent trend and historically, it has been about a low single-digit growth algorithm. So can you just maybe dig in a little bit further on what is driving that? And as we think about 2026, how you view that KPI shaping up based on the content launch and the online strategy that you laid out?

Yes. Sure thing. So when we reviewed 2025 and the fourth quarter, we would say we exited 2025 with really good momentum. And that was the great thing about being international and having strong operations around the world is, you know, certain quarters, you have got really good launches of products in certain markets in North America or Italy, other quarters, you do not. And so having that geographical and product diversity, we think, is really, really effective. So as you know, Italy has driven a lot of the growth for us. And it turned in the back half of the year where North America was a significant contributor. And I guess a couple of observations when we look at performance for the year and we think about our plans for 2026. When we look at the first half of the year versus the second half, there was a clear acceleration throughout the year in core sales. The first half of the year, as we know, was challenged as a result of the impact of really low jackpot activity and then the calculation around the LMA at the back half of the fiscal year, just the way the math worked out, unfortunately. In the second half of the year, though, we saw meaningful acceleration. We had strong same-store sales growth, and that came largely in North America. We had better multistate jackpot performance, which was more in line with the historical averages. And, again, continued double-digit iLottery gains in both the US and in Italy in our LMA jurisdictions. Showed a clear recovery as well. We had mentioned on previous conference calls that we had put some initiatives in place that we were hopeful would have an impact. And New Jersey was up, I think, in the 6% range or so for the back half of the year, which was driven by a long-standing effort by our government relations team to work with the lottery commission in the state to increase the payouts, as well as an incremental drawing. And in Indiana, we had some good game launches, and we also talked in previous quarters about the installation of our automated vending machine just to create more frictionless points of sale in the market. That seems to be having an impact as Indiana was up, I think, close to 7% in the second half of the year. And so I would say those things all bode really well going into 2026. On the Italy front, as you pointed out, the fourth quarter same-store sales normalized was just a little, had very low growth. But we had good iLottery growth. We did not have the product launches that we wanted. We are going to have those going. We have a pretty robust plan going into 2026. And then the rest of the world contributes less certainly, but the fourth quarter same-store sales in rest of the world were up about 5% driven by Poland and Belgium. So overall, I would say, despite a more challenging start to the year, we did have a strong second half of the year. And it just comes from different places depending on the timing of product launches, etcetera. When we look ahead to 2026, you know, we have seen we have been up around 1% or so in same-store sales versus the prior year. And that has been very similar to the way we exited 2025 in that it has been led by the US and the rest of the world. Italy is flattish. And we have some new product launches coming up and as well as we expect certainly in the back half of the year more significant contribution from the Italy B2C digital launch that we discussed. As well as we are increasing our network expansion and working with our customers on their development plans. So we think all those things have the capability to deliver growth especially as the year progresses. That is great. Thanks for all that color, Vince. And then maybe just one on, there was a note in the release. So, Max, you are stepping away from the Board. It sounds like to focus a little bit more on some strategic opportunities and M&A, focusing more on the M&A side of that equation. What sort of assets do you see as strategically additive to the business? What is the market like currently for assets being shopped around and how much of a priority here should we think about M&A being, call it, relative to executing on that multiyear outlook that you laid out for us last quarter?

Yes. So first of all, I would like to give a little bit of rationale behind the decision on not seeking reelection to the Board after a six-year tenure. This has been taken in conjunction with the conclusion of the Brightstar Lottery strategic portfolio transformation that has again just been completed with the sale of the IGT Gaming business, and then also as part of a deliberate governance evolution to strengthen the separation between management leadership and nonexecutive oversight at Board level. In this respect, I will continue to operate in close partnership with our Executive Chairman, Marco Sala, and with Vince on my CFO duties, as well as, as you said, on the additional responsibilities attributed to me in the areas of strategy and M&A. Speaking specifically on M&A, I would like to remind everyone that we have a very compelling plan with a significant step up in our growth rate to 5% organic. That plan, obviously, was drafted during the transition period on the gaming sale and entails significant strategic initiatives, primarily to develop that and favor that growth through various individual engine initiatives. So, fundamentally, our plan is commensurate with a significant portfolio of organic growth. But definitely, we continue to remain opportunistic on M&A, particularly if opportunities were to arise in the market in areas where we have opportunity to enhance our growth faster and accelerate our plan.

Yes. I would just add to that. You know, when you think about the unique space that Brightstar Lottery operates in and where it has significant right to win and significant strengths, it is in the area of digital, in the area of iLottery, this B2C expansion in Italy, our willingness to potentially partner with other joint venture partners internationally, as we have done in Italy and Sao Paulo, and, you know, we are currently looking in other parts of the world. So when you think about where we would potentially look to enhance what we believe is a strong opportunity for, like, you know, let us call it organic growth, but it is really product and geographical expansion that is built into our plan, which requires a significant amount of investment, and we expect a superior ROI, it would be in those particular areas.

That is great. Thank you both for all the color. If I could just squeeze in one more here on capital allocation. In case, Vince or Max, whoever wants to take this, how opportunistic do you plan to be this year with that remaining $200,000,000 or so left on the repurchase authorization? It seems, at least to us, that the market is pricing in a degree of cyclicality here that is pretty dislocated from the historical fundamentals that we witnessed for lottery. So just curious how you are approaching this pullback from stock relative to the capacity left of the authorization. Thanks.

Yes. So, as I said during my prepared remarks, we have significantly accelerated shareholder returns during this six-month period. We have achieved so far about 60% of our authorization on the buyback. But we have also increased the ordinary dividend and we paid the special dividend in July. So this represents more than 30% capital returns over 2025. And, again, the current yield, just on the ordinary dividends, is getting towards 7% at this point with the stock price of the last few days. Having said that, we continue to be disciplined in our evaluation of the opportunities going forward to continue to devolve and return cash to shareholders, both in dividends and buyback. We also obviously want to be mindful of the fact that we have significant commitments with respect to Lotto and other contracts that we need to take care of during the next few quarters. Thank you.

You know, I would just tie on to the buyback question. My sales pitch that I included in my script. You know, I think it is pretty incredible that there is such a meaningful disconnect between our intrinsic value and where our stock trades today. I know a lot of CEOs say that, but again, by every investor metric, whether it is EBITDA multiple, free cash flow yield, DCF, our valuation is below both direct lottery peers and comparable businesses, whether it is in gaming, travel, leisure, infrastructure-like businesses. We increased our dividend, and now that is, at the current trading levels, more than 6% yield, which is far above levels typically associated with companies that have our level of stability and multiyear contract visibility and the resiliency of the business. So, you know, we have engaged actively in share buybacks, and to Max’s point, we continue to think through the allocation on a go-forward basis and we and our Board certainly take a long-term view towards value creation for this business.

That is great. Thank you both. I will pass it on.

Operator, the next question, please.

Apologies for that. Your next question comes from the line of Barry Jonas of Truist. Barry, your line is open. Please go ahead.

Hey, guys. Good morning. Wanted to start with Brazil. Can you maybe talk a little bit more about the opportunity and how we should be thinking about both near-term and longer-term implications. Thanks.

Yes. So the Brazil opportunity is significant. We had to invest a significant amount upfront in order to obtain the license. It was a deal that is, as I mentioned, pretty rare. There is not a lot of meaningful greenfield opportunities left around the world. Brazil has been a challenging place politically. It certainly had its ups and downs. We were confident that it met our risk profile after spending a lot of time doing the analysis and the work to understand the stability and the potential and the potential competitive threats in that market. Sao Paulo is the crown jewel of Brazil economically. People can afford to buy lottery tickets. It has got a terrific amount of activity. The population really enjoys gaming and wagering. And this is, I think, an area that the government is very focused on and has done the right way, and has spent a lot of time in crafting the RFP and the potential bidder and bidder support. In fact, they already have the funds allocated for several hospitals in the area. So they have got a direct utilization of funds. And I think the public sees the direct benefit. In order to derisk both the financial commitment as well as the significant amount of operating start-up capital as well as intellectual property knowledge, we partnered up with Scientific Games on this venture. And between the two of us, this is going to be an incredible effort, an incredible entrepreneurial effort to start this lottery from scratch. The points of sale have got to be built out. The implementation and installation of all of the machines across the state has an iLottery component. Both of us will be printing tickets and contributing tickets to the venture for scratch tickets and game development. And it is a very long-term contract as well. So we are excited about it. It will, as usual, we have got plenty of experience with this, as usual, it will take some time to generate meaningful cash flow, but we do think this can generate meaningful cash flow. Because it is a fifty-fifty joint venture, we are excited about the cash flow potential. But, you know, this will be an entity that we will not consolidate.

Got it. That is helpful. And then just wanted to follow-up on the M&A angle. There has clearly been increasing deals across the global lottery space. You have addressed your M&A strategy. But how should we be thinking about implications from all the competitive M&A that has been out there for Brightstar Lottery, whether that is in a competitive operating or a bidding environment. And I would just note that one competitor is acquiring a company in the US doing prediction markets. So curious to get your thoughts on that deal. Thanks.

Yes. That would be All-In acquiring PrizePicks. So, I think each company in the lottery space, there is not that many of us, have their own strategic imperative and strategic direction. And, of course, everybody thinks it is the right one. We think ours is right, given our many years of experience being a leader in the digital gaming space with our PlayDigital segment, as well as being a leader in the land-based gaming area with IGT. We decided over many, many years that those businesses did not have significant synergies and did not help us win any more lottery contracts, and were not leverageable into incremental consumer sales. So we obviously reached a very different strategic conclusion from some of our competitors that have been active and more active in the M&A market and actually have been acquiring companies that are involved in the iGaming space, the iCasino space, the prediction markets. And we believe that is a completely different business. Now, they have their own strategic goals. Maybe that is a way to enhance growth even though it is not a good strategic fit. And then you also have the issue of geography, meaning many of these acquisitions that competitors made and the acquisition targets that are currently available do not overlap very well with our geographies. So we just do not believe that the smart thing to do is to go out and pay very high multiples for a business that potentially could grow with the potential of higher growth than lottery, but is not a good strategic fit. Again, as I mentioned earlier, if you see us interested in anything, it would be in the area of enhancing our iLottery game development, enhancing our platform. We are now in the B2C business, specifically in Italy, and so that is interesting to us if there is a good overlap with a strong provider of games and consumers in Italy. But we believe very strongly that the greatest value creation comes organically. And the fact is, we have built out an outstanding team in Italy to develop and deploy our iCasino and sports betting. We actually just on a limited basis started sports betting this week. We have had iCasino for a couple of months. We believe in the leverageable opportunity from the Lotto license in Italy that we can grow and build that business. We have been in that business before. We have been hard at work for many, many years on building out the best iLottery platform. Our games are now top performers in the world, in our game development studio for iLottery. So it is, I guess, a long-winded answer to we are not interested in overpaying for things just to potentially enhance our growth that are not a good strategic fit. It would have to be a very strong strategic fit for us. Thank you.

As a reminder to everyone who is dialed in, if you would like to ask a question, please press star 1 to raise your hand. To withdraw your question, please press star 1 again. Please limit yourself to one question and one follow-up. Our next question is from Domenico Ghilotti of Equita. Domenico, your line is open. Please go ahead.

Good morning. A few questions, first of all, on the Italian market. I am interested in your first thoughts on your iGaming launch you were commenting just a second ago. And, in general, I am also interested in having your thoughts on the potential launch of the tender for instant tickets in Italy in 2027. We are hearing about this. I want to understand your idea on that. And the last, if you could be interested, in case of, say, tender for retail concessions also on this kind of opportunity in Italy. And then more broadly, some color on the 5% organic growth that you are targeting for 2026. If you can give us a feeling on the contribution from the two key geographies.

Okay. I will get started, and then I will hand it over to Max to help with the building blocks of growth. So on the Italy digital opportunity, we are primarily administering the B2C experience through our My Lotteries app. We have made really good progress with very little marketing. We have been putting together our marketing channels and opportunities. The great opportunity, of course, is the folks that we touch, roughly a million consumers a month, or we have over a million interactions a month in Italy with people checking their lottery tickets winnings, etcetera. So, you know, we have not begun a significant marketing effort so far through that channel and with our retailers. But clearly, that is the opportunity. That all gets launched early this year. We recently hired a seasoned digital gaming executive, Victor Kukorian, to lead the business. You know, Victor has got great experience. We spent a lot of time together. You know, he has been with Flutter and Fortuna Entertainment Group and understands the opportunity to attract consumers and what it takes to have a competitive offering. So today, early days, it is possible you can play Lotto, you can play scratch and win games, you can play iCasino and skill games on our app, even though it has not been optimized. You will see a product that is every bit as good as the established leaders in the market as the year progresses. But having said that, in fiscal year 2025, our iLottery wagers in Italy were up over 20% as a result of, I think, continued really good game delivery in the portfolio. Our active users have increased significantly, and, again, early days, but we have gained three incremental points of My Lotteries market share since we launched the My Lotteries app, this kind of first iteration of the app, back in early January with limited marketing. So, yes, we are pretty excited about the long-term prospect and the opportunity for us to gain a reasonable share of the iCasino and sports betting market, which could, in our plan, result over the years in, I think, a meaningful contribution to our cash flow and profitability in Italy, and it naturally leverages our strength in operating the two largest lotteries in Italy. On the scratch and win front, we anticipate the process for scratch and win will be similar to Lotto where you have the law come out, then the RFP will be issued. Could happen at the end of this year. We are closely monitoring it, and we will see how things play out. And, yes, obviously, we are very excited about the opportunity to extend our relationship with the state.

In terms of the building blocks of the 2026 growth rate, I would say that we have the expectation for a couple of points coming from the core same-store sales, both in the retail lottery business. Probably a 1% on top coming from iLottery. Also, LMA, we expect LMA to be positive in the year, primarily in the first half. And then we have an initial contribution from the Italy B2C that is probably going to be in the range of 1% as well. Keep in mind, we have to complete the full circle of the UK transition started in August. That is going to be a headwind, obviously, on our top line. And then we have a little bit of product sales increases as back loaded into Q4. We typically season out the product sales in the last quarter of the year. So, again, all growth engines are expected to start cranking up on the 5%, the three-year 5% CAGR that we have laid out with our 2028 plan already in 2026.

The last comment I know you are focused on Italy. I would make, Domenico, is around the performance of Italy in 2025. So again, so much of the quarter-to-quarter performance is based on the timing and the cadence of new game launches in each jurisdiction. If you step back and you look at the full year 2025, same-store sales in Italy were up about 2%. And when you normalize it for the number of draws and selling days, the real organic growth that we view was 3%. So we feel very comfortable with the continued growth potential of the Italian market.

Thank you. If I may follow up on the guidance that you gave on operating cash flow, just to be sure. So if I take out the Lotto payment, you are guiding for $750,000,000. If I look at your EBITDA guidance, if I am not wrong, there is something like more than $400,000,000 cash leakage from, I presume, financial charges, cash taxes, or working capital. Can you give us a sense of what you expect on these items?

Correct. Yes. So the $750 is perfectly comparable to the $730 that we achieved this year. Obviously, you have to take a little bit of after-tax EBITDA improvement into consideration. When we talk about interest and taxes, interest we have been able to optimize the interest expense with the $2,000,000,000 debt repayment. And we do not see a big increase coming yet in 2026 despite the fact that we will have to make the $1,000,000,000 payment in the second quarter. There is going to be a little bit of increase, but not significant. And then instead, we expect cash taxes to come down significantly. That is really our focus going forward, is on the cash taxes. We paid more than $200,000,000 last year and expect to pay something in the range of $150,000,000 this year. There was some timing on Italy payments, about $20,000,000. And then, obviously, the incremental amortization upfront fee will depress a little bit earnings. And so that will be a positive for lower tax payment into 2026. And then we have a couple of other optimizations underway that will allow us to optimize that cash tax payment in that $150,000,000 range.

Your next question comes from Chad Beynon of Macquarie Capital. Chad, your line is open. Please go ahead.

Hi. Thank you. Vince, Max, good morning. Thanks for taking my question. Two-parter on iLottery. Focusing more on North America. I guess, what have you seen so far from a legislation standpoint as states are looking to expand products or bring in tax revenues for their state? Are you seeing movement there? And then secondly, on iLottery, thinking about it from an AI standpoint, I would assume maybe some of the content could become potentially cheaper just because it might be easier for some of these games to be created. Wondering if there could be margin improvements on iLottery as AI continues to be a bigger part of that development.

Thank you. Yes. So I would say on the expansion, US has been averaging one or two jurisdictions a year. This year, Massachusetts, part of the RFP that we won in Missouri, Kansas, Missouri, which our estimates are somewhere around 2026, will be implementing that iLottery system. You know, we have implemented iLottery on the draw side in Connecticut. We have implemented it in Tennessee recently. New Jersey is a state that will also go to iLottery draw from what I recall. We will be executing that as well. As far as new jurisdictions, it is difficult to tell. We did not see anything explicit in this legislative session across the US. But we anticipate perhaps Colorado will be a state that will look to bid out its iLottery. So there is not a lot on the horizon, but I think at this continued pace of one or two a year, that seems directionally where it is going. For Brightstar Lottery in particular, you know, we have got a strong platform. I believe we have got more platforms deployed than any other iLottery company in the business. So we continue to refine and strengthen our game recommendation engine, which has a lot of nifty AI tools incorporated in that, and we continue to work to improve and enhance things like game recommendations or, you know, what we used to call machine learning, but now AI-driven opportunities. And then certainly have talked in the past around game development. So we have been, with this current pace in North America of new jurisdictions putting out RFPs at this rate of one to two a year, focused a lot of attention on our content engine. We know that content from our PlayDigital iCasino experience is the area that builds credibility and reputation with our ultimate customers. So we have had a lot of focus in that area. And we have had really good success for some of the markets where we do not operate the platform. We have had really good uptake of our games because our games perform. So the team, I would say, has done a really good job in the last year and a half or so of focusing on and delivering top-performing games that are desired in the iLottery markets by states where we do not have the platform. We think that is an exciting opportunity to continue to grow, in addition to continuing to pursue the platform opportunities. And then finally, we have also talked in the past about the AI opportunity in game development. You know, when you find mechanics that work, and oftentimes the mechanics are, you know, there is a lot of work that goes into things like progressive games in particular that consumers really, really seem to enjoy. When you get a formula that works, to be able to leverage that into reskinning and slightly different look and feel of games allows you to increase the throughput and certainly bring down the cost. We have had some games that have performed so well, we have essentially translated them into other languages and changed the odds and tweaked with the math necessary for compliance in various jurisdictions. But it is by and large the same game. So our focus has been very, very heavy in the iLottery space on continuing to make advancements to arguably have the best platform, have the best games. And then over time, we have been able to free up resources to be able to continue to develop better games across the world. And I think over time, we do not see that we have hit the maturity stage for iLottery. Fortunately, it continues to grow at a significant pace. You know, over time, as you start to see the numbers get bigger, and the percentage growth slows down, I think we will have a more significant focus on taking out costs and reducing costs in the business. But right now, when we talk about investment in growth opportunities, clearly, iLottery is one of our top areas.

And just to top up the conversation on the margin expansion, as Vince mentioned, cost and investment in growth initiatives that we expect to entertain this year are obviously going to be a little bit of a drag overall. But again, the iLottery business, you have to look at the business as a staggering growing business as we add new contracts on top of existing contracts. As those contracts get to maturity phase, then the margin obviously goes up because it is at the end of the day scaling of an existing infrastructure that can be really deployed and benefited from as you grow the business down the road. So, as we are in this heavy growth mode, we will continue to add contracts. And so the margin will gradually improve, but the full margin deployment will happen over time.

Great. Thank you. And then lastly, just wanted to revisit the topic of the $5 Mega Millions increase which I believe happened in April. So it is eight or nine months ago. Good to see a bigger jackpot hit recently. I know that was something that we were all trying to figure out the evolution of play and customer adoption on that. Does it feel like 2026, based on what you are giving in your guidance and what you are seeing with activity, that 2026 could lead to more jackpots or higher jackpots driven by this Mega Millions increase so we are finally starting to see maybe a little bit more of a tipping point? Thank you.

Operator, we are in the middle of answering a question from Chad.

Apologize for that. Yep.

So just commenting first on Powerball. So the year-end run-up of Powerball was really great. The final jackpot ended up having the highest sales of any drawing since the first $2-plus billion jackpot all the way back in 2022. And the sales for the jackpot were nearly two times the sales of the last jackpot this size since October 2023. So we were very excited. It really confirmed our thesis when we look at the data over several decades that when there are multiple hits on the jackpot, you do indeed, from time to time, hit this jackpot fatigue syndrome. And then when there is not a lot of jackpots for a while, the interest from the general public, once the jackpot gets up to a significant number, really picks up. So that to us was really reassuring to confirm the sustained appeal of the game. With regard to Mega Millions specifically, the build has been slower than anticipated with the changes that have been made. As you pointed out, the game just got changed less than a year ago. And the jackpot hit four times, which is way more than statistically expected. So it is difficult to make any inferences around the play level. We did see a jackpot near $1,000,000,000 finally. And that jackpot did indeed grow slower than the $2 game, and we did not see a significant benefit from the occasional players that oftentimes come into the market and help to drive those jackpots once the jackpot becomes significant. So we continue to monitor it. And, you know, certainly, the committee that administers and is in charge of Mega Millions is very focused on it. And we feel like we need some time. We need to see where this run goes. Hopefully, knock on wood, this one continues to build. And, you know, I know the committee, with our helping where we can around research, etcetera, is taking a look at an assessment of the performance to make a determination as to whether or not there are some recommended changes and tweaking to the jackpot funding. So I think we will see those things play out in 2026 as we have a larger body of knowledge from which to draw upon.

Your final question now comes from the line of Joe Stauff of Susquehanna. Joe, your line is open. Please go ahead.

Thanks. Good morning, Vince. Good morning, Max. I wanted to come back to the Italian digital product offering. At least we think it is pretty significant sort of proof point for the stock, and just wondering, Vince, as you think about, say, the opportunity here, I assume, correct me if I am wrong, that the biggest opportunity is to certainly convert what is a retail sales lottery into a digital and therefore higher volume, and then two, iCasino. I guess, number one, is that, are those the most important inputs as you thought about the return and what you paid for the lottery renewal? That is the first question. And then the second question is, how do we think about when you are really starting to gain traction in that digital channel, maybe on those components? Is that something in terms of KPIs or any information that you will be releasing going forward? Thank you.

Great. Thanks for the question. And Joe, I would agree with you. I do think a lot of the enhanced growth profile of the business and the valuation has to do with growth, and a significant growth lever or enhancer is the Italy digital opportunity. It will take some time to build up the unique consumers and both convert players who are primarily retail players. I think that is one of the greatest opportunities as we have built an incredible relationship and a lot of touch points through those retail players. And some of those retail players have digital activity. But it is fairly limited to things like checking tickets and scanning tickets from their phone. So we think we have the ability to help promote and support movement of those people into more of a digital environment where they are actually purchasing iLottery tickets and, to a lesser extent, get them interested in playing iCasino games. The whole thought process around the iCasino games and to a lesser extent sports betting was to provide a fulsome entertainment experience for consumers in Italy. So they already love us for the lottery. They have built a relationship. I think our digital offering on iLottery, as witnessed by the share increase, is much improved and will continue to improve. And our goal is to provide a digital platform that is best in class and frictionless and a really nice, fun experience. We are not there yet. That development is taking place in 2026. And then also, why allow the consumer to, or why give the consumer a reason to leave that app and have a second app to engage in iCasino games, and, again, to a lesser extent, sports betting? Why not provide all those games altogether in one app? So, yes, your assessment is right in terms of the iLottery as the driver, and then we feel like we can pick up a decent amount of iCasino play, certainly nowhere near the leaders in the marketplace who are long established that have multiple brands. We do not have to in order to fulfill our long-range plan. And the same thinking around sports betting, like, why not also offer that in one place as well? We certainly will not be the leading sports betting platform. You know, that is a unique business. We do not have desires to, but again, really to offer players the convenience once they have established their wallets. So if they choose to, they can do everything through the My Lotteries app. And I will hand it over to Max to talk about the KPIs.

KPIs. So, again, the KPI opportunity is interesting because, obviously, we have to time and create the sort of leading indications of the successes of this venture. And we think that the first step is in growing market share in the iLottery space. And we have seen already in 2025 a very good development without significant investments on our end, with a three percentage point increase in market share. We have now turned on the eInstant as the second provider in the market.

There are no further questions at this time. I will now turn the call back to Vincent Sadusky, CEO of Brightstar Lottery, for closing remarks.

Yes. Thanks for joining us today, everyone. Brightstar Lottery’s core business is one of the stable and predictable models in gaming and entertainment, and it has demonstrated remarkable consistency through all these economic cycles. And we have talked about our growth initiatives that we think will enhance our long-term growth profile. Again, I make the pitch for our valuation discount no matter how you take a look at this and really appreciate your interest in Brightstar Lottery. We will see you in the next couple of weeks, many of you, and continue to update you throughout the year. Thank you.

This concludes today’s call. Thank you for attending. You may now disconnect.